Unstructured Finance

Check Out Line: Souped up

campbellsoup.jpgConsumers may be cutting back on restaurant visits and car purchases but they are still buying crackers and juice, as Campbell Soup raised its full-year profit forecast.

The maker of Pepperidge Farm cookies and V8 juice has raised prices to offset soaring commodity costs and announced a $1.2 billion share buyback program that should help boost shares.

In more news on consumer staples, UBS is recommending that investors look to price leaders such as Wal-Mart Stores and Kroger, saying they are poised to gain market share as consumers shop for the best deals. That firm downgraded shares of grocers Safeway and Whole Foods.

Also in the basket:

Spending less at the ballpark

Growth in negative equity pressures homeowners

Paineful Prospects

ubs1.jpgIf you are a giant Swiss bank, the one business you are supposed to do better than just about anyone is private banking. So news that UBS is considering selling Paine Webber, the heart of its U.S. wealth management business, which it bought for $10 billion nearly eight years ago, hasn’t gone down well at all. The stock sank more than 4 percent on the news. Though the name of Paine Webber disappeared from Wall St, the operations have remained more-or-less intact, making it relatively easy to hive off, analysts say. Senior bankers say the business could be an attractive buy for Bank of America or Morgan Stanley.

France Telecom has pulled its long-odds, $40 billion bid for TeliaSonera. The French suitor was restricted by its financial targets and Sweden, a big TeliaSonera shareholder, would have held out for a better price. TeliaSonera shares dropped 13 percent to 43.30 Swedish crowns, while France Telecom shares jumped 7.3 percent. The two companies held talks but TeliaSonera said the terms did not improve significantly and France Telecom said the deal-breaker was money.

Deutsche Bank launched its first special purpose acquisition company focused on Germany, Switzerland and Austria, a venture led by three high-profile executives. Germany1 Acquisition will be headed by co-Chairmen Thomas Middelhoff, chief executive of retailer Arcandor, and Roland Berger, founder of the strategy consultancy bearing his name. Florian Lahnstein, a former investment banker at Bear Stearns and UBS, is chief executive. Germany1 aims to raise 275 million euros ($432.9 million) in an offering of shares and warrants, said Deutsche Bank, which is the sole IPO bookrunner.

Check Out Line: Hostile Light?

budpic.jpgCheck out signs of possible acrimony in InBev’s takeover bid for Anheuser-Busch.

Could InBev be bringing a new flavor — Hostile Light — to the beer wars as it pushes forward with its $46.3 billion takeover bid for the maker of Budweiser?

On Thursday, InBev reiterated its preference for a friendly combination that would create the world’s biggest brewer but filed suit to establish that Anheuser’s shareholders could remove their entire board, possibly setting the state for a more contentious battle.

Herd on the Street

Men herd cows and calves belonging to the Hogan family after branding near BoulderOnce upon a time, bank analysts were uniformly upbeat on investment banks. “Sell” ratings were nearly unheard of, and potholes in balance sheets were never as big as the huge, routine earnings beats. Now, with Goldman Sachs’s sector u-turn perhaps at the apex, there is plenty of mud to go around. Today’s hit list includes Barclays, the recipient of 4.5 billion pounds in balance-sheet aid this week. Citigroup says Britain’s third-biggest bank may need to raise a further 9 billion pounds and could take more significant write-downs. Lehman Brothers analyst Roger Freeman took aim at Merrill Lynch, saying the big broker will probably see $5.4 billion of write-downs in the second quarter, mainly from its exposure to monolines. Freeman raised his write-down view by $3 billion for Merrill, making his estimate the highest among Wall Street analysts.

Merger activity in the United States dropped 29 percent in the second quarter, faring better than the 40 percent global slump, as corporations filled the void left by buyout firms and targeted big consumer brands such as Anheuser-Busch and Wrigley. “Strategic buyers see an opportunity here due to the absence of the financial buyers. For the last 24 months, prior to the downturn, strategic buyers were getting outbid by financial buyers. That’s not happening now,” said Bob Filek, a partner with PricewaterhouseCoopers’ transaction services. During the first half of the year, private equity deal volume dropped 85 percent in the U.S. and 76 percent globally, according to Thomson Reuters data.

A couple more European banks have increased their China exposure. Deutsche Bank signed a deal with Shanxi Securities to set up an investment banking venture, a source with knowledge of the deal said on Friday. Deutsche planned to take 33 percent of the envisioned Beijing venture, the most allowed. Beijing this year re-opened its coveted but shuttered securities industry to foreign firms after a hiatus of more than a year to let local players merge and strengthen. Several banks, including BNP Paribas, have since expressed an interest in setting up local ventures. Chinese stock markets have shed nearly half their value this year, but foreign banks remain keen on securing a foothold there with an eye on the longer term. Royal Bank of Scotland has won approval from Chinese regulators to buy a nearly 20 percent stake in Suzhou Trust as it expands in corporate banking and wealth management services in China, sources with direct knowledge of the situation said. Suzhou Trust is a mid-sized trust and investment firm.

Check Out Line: Nike’s U.S. hurdle

nike.jpgCheck out Nike just not doing it in the U.S.
The athletic shoe and apparel maker apparently is not immune to the sluggish U.S. economy. The company said Wednesday that U.S. orders for goods through November were flat.
It also said sales in the fourth quarter rose 4 percent in the U.S., compared with a 16 percent increase for the entire company. U.S. apparel sales rose only 2 percent.
Nike said it will focus on more premium merchandise that is better distributed and can stand out. It also stressed that U.S. profit margins are not eroding.
For Nike, getting through the tough U.S. economy might just be an invigorating workout.
“Strong companies who are able to navigate through those tough times can come out even stronger,” Nike CEO Mark Parker said in a conference call.
Ooh, feel the burn!
Also in the basket:
Anheuser-Busch to reject $46.3 billion InBev offer
The road runs out: Streetwear adapts as market implodes (WWD)

Steve & Barry’s Hits Trouble: Hyped clothing retailer hires turnaround help (WSJ)

Ice cold rejection

Anheuser-Busch is set to reject InBev‘s $46.3 billion takeover offer, a source tells Reuters. After a few weeks of stonewalling by the company and posturing by Missouri politicians, is that really such a surprise? The company’s defensive strategy will hinge on restructuring  the workforce and spinning off non-core assets like the SeaWorld theme parks, but as DealZone’s David Jones notes, those same strategies have alreclydesdales.jpgady been offered up by InBev as a justification for its bid. Might as well crack open a few icy cold Budweisers — looks like this is going to take a while to sort out.

Fortis shareholders might also be in need of a Stella six-pack, as the Belgian-Dutch financial services group announced plans to shore up its finances with measures worth more than 8 billion euros ($12.54 billion), including issuing new shares, hitting its stock on dilution worries. Fortis will issue 1.5 billion euros in new shares plus up to 2 billion euros of non-dilutive preference shares, save 1.3 billion euros by not paying an interim 2008 dividend, and will also sell non-core assets and sell and lease back real estate. “We believe that 2008 will be a difficult year for our industry and we do not expect an improvement in the economic environment soon,” said CEO Jean-Paul Votron. “The measures announced today will help Fortis navigate through the current challenging market circumstances.”

Goldman analyst William Tanona has pulled a page from the Meredith Whitney playbook, questioning the viability of the Citibank‘s dividend, predicting $8.9 billion in second-quarter writedowns, and adding its stock to the “conviction sell” list. He also said that the bank may have to issue common stock or sell assets to raise capital because regulators may forbid it from issuing more preferred or convertible securities. Citi shares were down 3.7 percent in pre-open trading.

Ralph Cioffi signed Bear Stearns holiday card makes eBay debut

ciofficard.jpgThe market for scandal-ridden finance merchandise keeps getting pricier.

Among the littany of Bear Stearns golf balls, teddy bears, and tote bags on eBay, one of the top price getters is a holiday card signed by recently indicted former Bear Stearns hedge fund manager Ralph Cioffi, with the bidding now at $81.

Cioffi, was arrested and arraigned on charges of conspiracy and securities fraud last week after a federal criminal probe into the collapse of two funds he oversaw.

The disintegration of Cioffi’s funds helped kick off the credit crisis last summer, but we’re stumped at what’s behind the high bid for the holiday card.

Pier 1 comes to its senses

pier-1.jpgPier 1 Imports Inc finally came to its senses and dropped its much-criticized bid for Cost Plus Inc, prompting a nearly 12-percent jump in its stock price and an upgrade by an analyst.

Shares of Pier 1 surged after the home furnishings company withdrew its bid, saying it was unlikely it would be able to acquire a majority interest in Cost Plus “at a price that would make sense” for shareholders.

D.A. Davidson upgraded Pier 1 to “buy” from “neutral” after the news. Since revealing its bid on June 9, Pier 1′s stock had plunged 23 percent through Tuesday.

When will InBev’s offer for BUD get stale?

bud2.jpgInBev NV hesitated on Wednesday to put an expiration date on its $46.3 billion offer for Anheuser-Busch Cos Inc, but hinted that its bid may not have an indefinite shelf life.

The Belgian brewer reminded Anheuser-Busch that “time is of the essence” for the offer and that it remains available to discuss its $65 per share offer. InBev said it had commitment letters for the deal’s financing from 10 banks, so it’s ready to pull the trigger on a deal at any time.

Without putting a definitive walk-away date on the offer, InBev kept its friendly demeanor. But the reminder makes clear that its interest in a cold Bud may not last forever.

SENSEX – From looking at the Long Term Trend to looking at the Long Term Support

image013.gifSo much for the short-term indicators, what about the longer term ones? We are currently sitting right on the 38.2 pct Fibonacci retracement of the entire low to high move of the BSE as you can see from the second chart. From a technical point of view this Fibonacci level is not that strong, as the trend had some good corrections on the way up. Nevertheless, we need to watch it carefully for signs of further support. It will be interesting to see if this level holds in the coming days. We have a market which is short-term bearish but has some good supports, although one very strong one has broken.
The general expectation is that inflation will peak sometime in H2 but we have to be cautious of that view changing as it will have a significant impact on the market. Money market rates are starting to show a worrying uptrend and if the view shifts that the inflation peak is further out, the market will get more negative.
It’s interesting that on Wednesday the stock market moved higher the day following a significant monetary tightening by the Reserve Bank of India.
Was it a relief rally that the bad news was out of the way, or a market that was feeling more comfortable that a challenging problem was being dealt with? In my experience elsewhere in the world, financial markets react well to strong and decisive action by central banks and governments and punish any signs of weakness.

*Parabolic SAR (Stop and Reverse) study gives signals for going long or short. While the study, the dots, is below the price action it indicates a long position but as the trend slackens the study touches the price action and indicates a switch to a short. It is supposed to be a constant position trading system.
**Moving Average Convergence Divergence (MACD) is a type of oscillator that can measure market momentum as well as follow or indicate the trend. MACD consists of two lines, the MACD Line and the Signal Line. MACD oscillates above and below a zero line without upper and lower boundaries. Signals are generated when the MACD Line and the Signal Line cross. A buy signal is generated when the MACD Line crosses from below to above the Signal Line, the further below the zero line that this occurs the stronger the signal. A sell signal is generated when the MACD Line crosses from above to below the Signal Line, the further above the zero line that this occurs the stronger the signal.
***Alpha-Beta Trend analysis is an attempt to avoid some of the false signals associated with crossing moving averages. Three lines are plotted: Upper band, Lower band and Trading filter. Together, the upper and lower bands define the uncertainty channel for trade decisions; the width of the channel varies with volatility.
If the trading filter moves from within the bands to below the lower band, this is a signal to buy or enter a long position. If the trading filter moves from within the bands to above the upper band, this is a signal to sell or enter a short position. If the trading filter lies between the bands, no trend is indicated. An uptrend is when the trading filter is below the lower band. A downtrend is when the trading filter is above the upper band.
****The RSI is a price-following oscillator that ranges between 0 and 100. The name “Relative Strength Index” is slightly misleading, as the RSI does not compare the relative strength of two instruments, but rather the internal strength of a single instrument. Because you can vary the number of time periods in the RSI calculation, you may want to experiment to find the period that works best for you. (The fewer days used to calculate the RSI, the more volatile the indicator.)
An overbought or oversold market is one where prices have risen or fallen too far and are therefore likely to retrace. If the RSI is above 70 then the market is considered to be overbought, and an RSI value below 30 indicates that the market is oversold. 80 and 20 can also be used to indicate overbought and oversold levels.