Financial News

Warren Buffet Agrees to Stock Split

Jan 20th

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Warren Buffett speaking to a group of students...

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Warren Buffet has always thought about value rather than price. The value doesn’t only relate to a business or a stock. It also relates to people.  In the past he refused a stock split for fear of attracting worthless traders rather than valuable investors as partners.  Is Berkshire Hathaway suffering or is Warren Buffet trying to do his part to help the economy?

Berkshire Hathaway Stock Split Could Put Warren Buffett Into the S&P 500

Berkshire Hathaway will hold a special shareholders meeting tomorrow (Wednesday) morning in Omaha to vote on a proposed 50-for-1 split of the company’s Class B shares.

Warren Buffett, who controls about a third of Berkshire’s voting rights, supports the move and it is widely expected to be easily approved.

Berkshire’s Class A shares, the ones that trade around $100,000 and give their owners voting rights, won’t be affected.

After the split, the price of Class B shares, often referred to as the Baby Bs, would go from around $3332 a share (tonight’s close) to somewhere between $66 and $67 a share. That would happen as soon as the split is made effective, which could be as early as Thursday.

The resulting increase in trading volume and liquidity may pave the way for the stock to be added to the benchmark S&P 500 index.

The lower entry price could also attract ’small’ investors who weren’t able, or were unwilling, to spend four-figures on a single share of stock. (That, in turn, may boost attendance at Berkshire’s regular annual shareholders meeting in May, since anyone owning even one share is entitled to attend the popular ‘Woodstock of Capitalism.’)    –more

Buy a Piece of Warren Buffett, Thanks to BNSF


It’s reported that Warren Buffett’s Berkshire Hathaway will likely approve a 50-to-1 stock split tomorrow in order to finance the company’s purchase of Fort Worth-based BNSF Railway. That’s supposed to drop the price of the company’s Class B shares (now $3,247) down to about $65.

That would enable “inferior” investors to afford the stock. Here’s what Buffett wrote in 1984:

Were we to split the stock or take other actions focusing on
stock price rather than business value, we would attract an
entering class of buyers inferior to the exiting class of
sellers. At $1300, there are very few investors who can’t afford
a Berkshire share. Would a potential one-share purchaser be
better off if we split 100 for 1 so he could buy 100 shares?
Those who think so and who would buy the stock because of the
split or in anticipation of one would definitely downgrade the
quality of our present shareholder group.

Buffett must believe in the long-term value of his deal with BNSF, to depart from a long-held strategy like this.

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Kraft Preparing To Take Over Cadbury

Jan 19th

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Warren Buffett speaking to a group of students...

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It looks like the deal is going to happen despite Buffet’s vocal disapproval.  Time will tell if there was any validity to Buffet’s concerns.

Kraft poised to make knockout bid for Cadbury

Kraft may increase its takeover offer for Cadbury by more than the market expects, to between 840p and 850p per share, I have learned.

At that level, Cadbury’s board may recommend the bid by the US food giant.

This would bring to an end the intense animosity between the companies that has been manifested since Kraft announced its desire to own Cadbury last autumn.

It would also end any doubt at all that Cadbury will lose its independence.

There would still be a theoretical possibility that the US confectioner Hershey would come in with a higher offer.

But if Cadbury’s board recommends Kraft’s bid, it means that the company will be taken over.

Negotiations between Cadbury’s bankers and Kraft’s bankers are taking place overnight.

If a deal is agreed between Kraft and Cadbury, which seems highly likely, it will probably be announced at 7 tomorrow morning.    –more

Kraft Makes Friends With Cadbury, Buffett Loses

The rumor mill is at work. Kraft (NYSE:KFT) may have entered friendly talks with Cadbury (NYE:CBY) to end the ongoing battle caused by the American company’s hostile takeover offer for the UK firm.

The news, if true, would be good for Cadbury’s shareholders because the premium to close the deal should be well above the current offer and should include more cash.

Bad news for Warren Buffett, who owns a piece of Kraft, but thinks the Cadbury offer is too rich. Hershey (NYSE:HSY), which spent a lot of money on investment banking fees is left holding bag. It just got into the action too late to count.    –more

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Cadbury Shares Rise as Talks Continue

Jan 18th

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A glass and a half...Kraft is increasing their bid for Cadbury.  I hope you got in last time I posted about this.  This will likely still increase as the talk continues.

Cadbury Shares Rise on Bid Speculation

Cadbury shares are up 1.7% at 807 pence (approx. $13.14) on reports Kraft Foods will raise its bid for the company to around 820 pence (approx. $13.36) a share.

“We agree with a number of press articles that suggest that Kraft will need to pay at least 850 pence (approx. $13.84) in order to have a serious chance of getting over 50% acceptances,” says Jeremy Batstone-Carr at Charles Stanley. Mr. Batstone-Carr says he still believes a rival Hershey offer “looks a long shot given how stretching we believe a credible offer for the company would be.” He reckons that Hershey’s main interest is to protect the status quo in global confectionery manufacturing rather than to seriously acquire Cadbury.

Hershey plans to bid at least $17.9 billion this week for Cadbury after concluding it has the financial muscle to top Kraft Foods Inc.’s $17.2 billion offer, people familiar with the matter told The Wall Street Journal.

On Friday, Hershey was putting the finishing touches on a financing package that could kick off the kind of international bidding war that has largely disappeared since the financial crisis of late 2008.    –more

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Consumer Prices Were Lower Than Reported

Jan 15th

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2 of 3 Coast Guard 47´ Motor Lifeboat performs storm exercises in wild surf at Morro BayConsumer prices where lower than expected in December leading many to believe that recovery is not under way quite yet.  There seem to be two differing beliefs about the economy. One of them says the economy is starting to improve and the other is basically saying we are entering wave 2 which means the worst is yet to come.

Consumer prices decrease slightly

The National Statistics Office has reported that in December, the Harmonised Index of Consumer Prices went down to 108.38 from 108.57 in November 2009. In December 2009, the Harmonised Index of Consumer Prices went down by 0.2 per cent over the previous month.

This primarily reflected a drop of 1.0 per cent in the Food and Non-alcoholic beverages Index, mainly due to a decrease in the price of vegetables. The Recreation and Culture Index went down by 0.5 per cent, mainly on account of lower prices for package tours. Downward shifts in the prices of some jewellery items and certain financial services caused the Miscellane- ous Goods and Services Index to decline by 0.2 per cent.

The Transport Index registered a drop of 0.1 per cent, mainly as a result of lower prices for motor cars. Seasonal price increases in garments caused the Clothing and Footwear Index to go up by 0.9 per cent. The Health Index increased by 0.2 per cent, mainly on account of higher prices for pharmaceutical products.

An upward movement in the prices of certain household textiles caused the Furniture, Household Equipment and Routine Maintenance of the House Index to go up by 0.1 per cent. A similar increase was registered in the Restaurants and Hotels Index, mainly due to seasonal price rises in accommodation services.    –more

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Beige Book Review

Jan 14th

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My Currency Trading KittyBeige Book came out and although it isn’t one of the announcements that can cause big swings in the market like Non-farm Payroll, it does give some insight as to what is happening in the economy.

Beige Book Review – Economic Outlook Improving But Still Slow

Federal Reserve Bank of Philadelphia Wednesday released the Beige Book based on information collected in late November through January 4, 2010. 10 out of 12 districts showed economic improvement in the reporting period, suggesting a broadening of recovery. However, over improvement remained at low level compared with pre-recession level in 2007.

Consumer spending grew in the recent 2009 holiday day from that in 2007 but still well-below 2007 levels. Shopping behavior was ‘cautious, price sensitive and focused on necessities, but sometimes willing to spend on discretionary purchases’. Auto sales were flat or up slightly.

Housing market saw increase in sales volume towards the end of the year, especially for lower-priced homes. However, housing prices were little changed since the previous report.Commercial real estate was still weak in nearly all districts with rising vacancy rates and falling rents. Loan demands were weak or even declined during the period and credit quality also deteriorated further.

Concerning employment, while a few districts reported modest pickup in hiring/hiring plans, the general outlook remained soft. Price pressures remained subdued in nearly all districts, suggesting minimal wage growth.    –more

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Dollar Gains Strength Off China Requirements

Jan 12th

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Community Area 15 - Portage Park

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With China being the secret power, any financial decisions they make effect the world financial markets.  Once you understand this you will be able to get in on trades when the big dogs do and way before other individual investors.

Dollar gains as China requires banks to hold more cash

The dollar rose versus most major rivals Tuesday, extending gains versus the Australian dollar and other high-yielding currencies after the People’s Bank of China said it would require banks to hold more cash in reserve as it attempts to restrain credit growth.

The PBOC, in a statement on its Web site, said it had raised its yuan-reserve-requirement ratio by 50 basis points, or half a percentage point, effective Jan. 18. The existing ratio stands at 15.5% for big banks and 13.5% for smaller ones, according to Bloomberg.

Earlier, the PBOC sold one-year bills at 1.8434%, a rise of 8 basis points from last week and the first rise since Aug. 11. Last week, the central bank lifted the yield on its three-month bills by 4 basis points. Economists said that move had limited market implications.

The Australian dollar slumped after the announcement to change hands at 92.47 U.S. cents in recent action, a fall of 0.7% on the day. The Aussie fell 1.2% versus the Japanese currency to change hands at 84.6107 yen.

Expectations had grown following strong Chinese export and import data over the weekend that the central bank would begin to move to rein in credit growth in an effort to keep the economy from overheating, said Mike Malpede, chief market analyst at Easy-Forex in Chicago.    –more

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Nexus One is Glitchy

Jan 11th

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Nexus OneI wrote a few days ago about the Nexus One and then came across this story today.  As expected there is a problem with the phone. It is most likely a software issue since other phones on the network have not been affected.

The problem will probably be resolved in the next day or two and then we will see how well the phone is after everyone has had a chance to play with it.

T-Mobile and Google investigating the spotty 3G coverage of the Nexus One

It seems as if the Google Nexus One is having some difficulty staying connected to T-Mobile’s 3G band. A countless number of new Nexus One owners are flooding Google’s support forums complaining that their new device bounces back and forth from Edge to 3G on a consistant basis where their old 3G device did not show the same behavior. We’ve looked into this a bit further and found that T-Mobile along with Google are looking into the problem.

“Google and T-Mobile are investigating this issue and hope to have more information for you soon. We understand your concern and appreciate your patience.”

The big question remains, is this a T-Mobile network issue or a software/hardware issue? Possibly a little bit of both but we are leaning towards the latter.    –more

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Unlocked Nexus One is Incompatible with AT&T

Jan 7th

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Nexus OneIn an effort to take over the business world Google release the Nexus One cell phone this week. It is supposed to be the first phone to rival the iphone.  When the iphone was released ebay was slammed with people selling the phone and as expected the same thing is happening with the Nexus One.

The interesting thing is the phones are selling on ebay for $600-$800 dollars.  Why is that interesting you may be asking.  It is interesting because Google is selling the phone for only $529, unlocked.

When people hear unlocked, they often think of what it meant with the iphone.  That it could be used on any 3G network including AT&T and Tmobile.  That is almost true with the Nexus One. This is from their site:

The Nexus One’s antenna supports four GSM radio frequencies (850/900/1800/1900) and three 3G/UMTS Bands – 1/4/8 (2100/AWS/900). These cover most major GSM mobile providers worldwide; however, the 3G band used by AT&T and Rogers is not supported. For questions about the bands supported by your mobile service provider, please contact your provider directly.

The unlock Nexus One is not compatible with AT&T. Many of the auctions on ebay are claiming the phone will work with AT&T and there will be several angry buyers when they find out their phone won’t work.

If you are interested in making a quick buck now is your chance.  Be sure to list the compatible frequencies and don’t say it will work with AT&T.

I considered selling them myself, but there are over 800 listings and then I discovered it is incompatible with AT&T and thought it would be better to let you all know what is going on.

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Kraft Could Dilute Stock

Jan 6th

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KraftKraft may dilute their shares by adding more than 300 million shares. Warren Buffet isn’t thrilled about that.  This will be one to watch.

Commodity stocks send TSX higher; U.S. up on jobs, service sector data

Consumer discretionary stocks were also supportive as Astral Media (TSX:ACM.A) gained 55 cents to C$34.23 and Magna International (TSX:MG.A) advanced $2.76 to $62.29.

Markets racked up major gains at the first of the week but activity has been sluggish since then.

Many analysts said investors were holding back while they wait for Friday’s U.S. Labour Department report on employment.

Ahead of that data, the ADP National Employment Report on private companies showed that 84,000 private sector jobs were lost in December. While an improvement over the 169,000 jobs lost in November, it missed expectations of 73,000.

The ADP report is often used as a forecast for the government’s report, which economists expect to say that the U.S. unemployment ticked up to 10.1 per cent in December from 10 per cent in November.

And the Institute for Supply Management’s U.S. non-manufacturing index came in at 50.1, up from 48.7 in November. A reading of 50 marks the dividing line between growth and contraction in the service sector, which includes more than 80 per cent of U.S. economic activity.

“This is encouraging and brings this indicator over to the bright side of indicators showing a generally improving tone,” said BMO Capital Markets senior economist Jennifer Lee.
“Now, while this reading is just barely above the ‘expansion’ mark and is hardly reason to celebrate… well, I’ll take it.”
The Federal Reserve will also release the minutes from its December meeting at mid-afternoon.

The TSX Venture Exchange moved 13.01 points higher to 1,564.69.

New York markets were higher with the Dow Jones industrials ahead 12.1 points to 10,584.1 after shedding 12 points on Tuesday.

The Nasdaq composite index rose 1.12 points to 2,309.83 while the S&P 500 index moved up 0.7 of a point to 1,137.2.

In corporate news, Kraft Foods Inc. announced Wednesday that holders of 1.5 per cent of shares in chocolate and gum maker Cadbury PLC have so far accepted its hostile takeover offer. But the U.S. conglomerate stands to gain support as the offer price moves closer to Cadbury’s market value. The gap narrowed on Tuesday as Swiss food company Nestle said it would not make an offer for Cadbury, Kraft offered more cash, and billionaire Warren Buffett, Kraft’s biggest shareholder, warned against offering any more stock to sweeten the offer.    –more

Related Kraft Foods articles
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Jobless Claims Show Hope

Dec 31st

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An Ex-Mas Story - Part 1

Image by Jack's_Smirking_Revenge via Flickr

Fewer people have filed for unemployment benefits last week which is a good sign for the economy.  The Christmas season generally provides more jobs because of the extra shopping that is done around that time.

Whether or not the trend will continue into the new year is another story that only time can tell, but for now we will take any bit of good news we can about the economy.

New Jobless Claims Fall Unexpectedly

The number of newly laid-off workers filing claims for unemployment benefits dropped unexpectedly last week, a sign the job market is healing as the economy slowly recovers.

New jobless claims have dropped steadily since September, raising hopes that the economy may soon begin creating jobs and the unemployment rate could decline. That, in turn, would give households more money to spend and add fuel to the broader economic rebound that began earlier this year.

The Labor Department said Thursday that new claims for unemployment insurance fell by 22,000 to a seasonally adjusted 432,000, the lowest since July 2008. That’s much better than the rise to 460,000 that Wall Street economists expected.

The four-week average, which smooths fluctuations, fell for the 17th straight week to 460,250, the lowest since September 2008, when the financial crisis intensified. The crisis led to widespread mass layoffs, which sent jobless claims to as high as 674,000 last spring.

Analysts cautioned that the weekly data could be artificially low due to seasonal factors, such as the Christmas holiday and recent snowstorms.   –more

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