Wednesday, December 20, 2006

Market Tidbits

Today I'm going to clear out a few notes. Tomorrow will be more substantial, and visit counts suggest people really like Tidbits like these..

== Ford's new ride ==
Generally, investors are wary of companies that pile on debt, especially those already struggling with mountains of interest payments to begin with. Ford Motor is one of these companies. But after the auto maker sold more than $4.5 billion in convertible notes and secured the largest loan in Wall Street’s history at up to $18.5 billion — the kind of record you’d think Ford wouldn’t want to set right now — three analysts have upgraded the stock.

The jury is still out as far as the investing public is concerned. Shares are down 11% since the beginning of the month. But Merrill Lynch, Morgan Stanley and KeyBanc Capital Markets have all boosted their ratings on the stock, in part because of the added funds Ford has secured.

The changes represent the first real shift in the analyst community’s opinion on the stock in some time. According to Zacks Investment Research, prior to Merrill’s upgrade last week, there were seven “hold” ratings on the stock and six “sell” ratings. Now that Morgan has upgraded shares to “overweight,” the tally shows one “buy” rating, nine “hold” ratings, and four “sell” ratings.

But the reports are sort of damning with praise — KeyBanc says it’s upgrading the name “although fundamentals are unlikely to show any meaningful improvement in 2007.” It says the deterioration in earnings in 2006 “should begin to taper.” Morgan Stanley was more effusive, saying there was “ample liquidity” to turn the operation around, adding that the recent employee buyouts, dividend cut and change in CEO are signs that the company management “finally see the gravity of the situation.”

Perhaps they do — but investors aren’t convinced yet.

== Random News Bits ==

We’ve already missed the Santa Claus rally. Analysts at Birinyi Assoc. note that the seasonal patterns in the market — which indeed do exist — are moving up on the calendar. Going back to 1950, the poor performance in the summer traditionally bottomed out around July 30, but in the past five years, that’s moved up to around June 29. Meanwhile, they note the best three-month period for stocks used to begin around Oct. 28 — but over the past five years, it has begun around Oct. 9.

David Rosenberg, chief North American economist at Merrill Lynch, wonders about the wisdom of listening to the Federal Reserve as it continues to pound the table on inflation. The term “recession,” he notes, shows up in Fed-meeting minutes a total of four times in the August, October and November meetings in 2000 — but then is mentioned 31 times in December 2000, when policy makers finally got the hint.

Volatility is low, but this isn’t unprecedented, says Peter Polanskyj, derivatives strategist at Morgan Stanley. “The 1998-2002 period is a clear outlier in terms of high prevailing realized volatility levels,” he notes, pointing out that volatility was consistently lower than today’s level through most of the 1960s and the early 1970s.


== What folks are talking about ==
It’s not surprising that the Chinese yuan is appreciating against the dollar, however slowly. But Menzie Chinn of Econbrowser points out, through the help of a few charts, that the currency is doing well against others, too. “Interestingly, the pace of appreciation against the currencies of China’s trading partners is roughly the same as that against the dollar, over the past 16 months. That is something that is not often heard,” he writes.

Yaser Anwar, in a lengthy post, explains why he likes Apple Computer’s stock right now. “While other PC OEMs [original equipment manufacturers] have struggled with running their own retail operations, AAPL stores have been highly successful and their productivity has been nothing short of stunning,” he writes. “AAPL has devised a retail strategy that uniquely complements the company’s strengths in product innovation and marketing, making it a model not imitable by other PC OEMs.”

John Austin smiles at the attempt by Express Scripts to one-up CVS in bidding for Caremark Rx. “Just as was the case with last year’s Boston Scientific acquisition of Guidant, the winners here are current Caremark shareholders,” he writes. “If CVS wins the bidding, they will likely overpay. If Express Scripts wins, they will likely be burdened with a significant debt load. Sit back, pop some popcorn, and watch the bullets fly.”

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