Week in Review Part II: Street Bytes

Stocks edged up this week, with the Dow Jones adding 0.3% to 12982, crossing 13000 a few times before backing off, while the S&P 500 also added 0.3% to close at 1365, its highest mark since June 2008. Nasdaq added 0.4% to finish at 2963. Target was among the retailers reporting solid earnings vs. expectations, but for the most part the group’s profits were less than comparable periods a year earlier. Wal-Mart, for example, continues to suffer as its fourth-quarter earnings and sales were short of Street projections. Higher gas prices don’t help in its target market. Home Depot, though, not only handily beat expectations, it raised guidance.

U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.30% 10-yr. 1.98%   30-yr. 3.10%

No earth-shattering news in bond land. Treasuries once again finished basically unchanged.

China’s Premier Wen Jiabao is slated to target cutting pollution, while also addressing income inequality, at the upcoming National People’s Congress, where it is expected he’ll set a government growth target of 7.0%-7.5% for 2012. A preliminary purchasing managers’ index by HSBC has the PMI at 49.7 for Feb, with new export orders at just 47.4, further evidence of a significant slowdown. Home prices in January fell or were unchanged in all 70 metropolitan areas that are tracked, though the government will not waiver on its controls for the sector and efforts to bring prices down.

There was one positive; the leading economic indicators for January, issued by the Conference Board, actually rose 1.6%. Plus China’s central bank issued a report that concluded the country must open its capital markets to the rest of the world, giving foreigners far more access to Chinese stocks and bonds, a positive step that will nonetheless take time.

Britain recorded its biggest budget surplus in four years in January. In the first ten months of the fiscal year, the deficit narrowed to 93.5 billion pounds from 109.1 billion a year earlier. Government revenue increased 4.7% and spending grew 1.6%. This is pretty good.

London home prices continued to buck the trend, rising to another record level in February. The average asking price is now $710,300, or up 4.3% in January over a year ago.

A leading think tank in Ireland is forecasting growth in the economy of 0.9% for 2012, on top of estimated growth of a like amount in 2011. But this ‘think tank,’ ESRI, had forecast 2011 growth of 2.2% initially, which begs the question, why is it a “leading think tank” as described by the Wall Street Journal. What were they thinking?

[Separately, President Obama’s corporate tax plan could hurt business in Ireland in particular because he seeks a minimum tax on profits made by U.S. firms overseas and Ireland’s legal loopholes would be at risk, thus making it less attractive for U.S. companies to operate there.]

Tourism in Ireland rose from 6 million in 2010 to 6.5 million in 2011, but trips to the Emerald Isle declined 3% in the fourth quarter over the same period in 2010. Hmmm. Might have to get a pint of Guinness and ponder this for 20 minutes.

Thailand’s economy shrank 9% in the fourth quarter over the same period a year earlier owing to the worst flooding on record that severely disrupted manufacturing. The government expects the economy to expand 5.5%-6.5% this year, owing in no small part to flood-prevention infrastructure projects.

It is estimated that Indians have deposited $500 billion illegally in overseas tax havens, “which has led to a critical loss of revenue for the fast-developing country.” [TIME]

Editorial / New York Post:

“In a pre-nomination interview in 2008, now-Energy Secretary Steven Chu told the Wall Street Journal, ‘Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.’

“Mission accomplished?”

The U.S. Department of Agriculture confirmed an earlier report that it projects farmers will plant 2.3% more corn this year, hopefully easing price pressures on both food and fuel (think ethanol).

On the soybean front, China, the world’s biggest consumer, signed agreements in Iowa and California to purchase 13.4 million tons of the oilseed by Aug. 31, 2013, as part of Vice President Xi’s recent trip to both states. China’s corn imports are also expected to surge sevenfold by 2015-2016, another boon to U.S. farmers, as domestic production in China can’t keep up with rising demand. So this, ironically, may negate any potential price benefits from increased planting here.

From a piece in the High Plains Journal, a farm publication I subscribe to, we learn that “Agriculture is responsible for one out of every 12 jobs in our country. Each additional billion dollars of agricultural exports generates 8,400 more jobs for us.” [Adrian Polansky, USDA Farm Service Agency]

A big concern, however, is that there has been a 20% decrease in the number of farmers under the age of 25. The average age of a farmer overall is 57.

In an ugly case, Steve Wynn, CEO of Wynn Resorts, along with the board, removed long-time business partner Kazuo Okada from both Wynn Resorts and Wynn Macau amid allegations Okada made illegal payments to regulators, a super no-no in the casino biz which can impact one’s license. A suit filed by Wynn Resorts alleges Okada made at least $110,000 in unauthorized payments to gaming officials in the Philippines. Last weekend, the Wynn board moved to buy out Okada’s 20% stake in Wynn Resorts for $1.9 billion – a 30% discount to its market value. Okada is trying to block the move.

The battle between Apple and Proview Technology moved to Shanghai, with Chinese tech firm Proview arguing Apple infringed on its trademark on the mainland. Previous court rulings in favor of Proview covered specific retailers in smaller cities, so a Shanghai order would eat into one of Apple’s biggest markets. Apple’s lawyer argued, “Proview has no product, no markets, no customers and no suppliers. It has nothing.” Apple sold 1.3 million iPads in China in the third quarter. A ruling is expected soon.

Meanwhile, leading Apple contract manufacturer, Taiwan’s Foxconn Technology Group, said it was hiking wages by up to 25% in its second major salary hike in less than two years as Foxconn comes under further scrutiny for work conditions at its massive plants in China. Workers there currently earn between $285-$400 per month.

Back in 2005, hedge fund operator Eddie Lampert took control of Sears by merging it with Kmart. It’s been a disaster ever since and on Thursday, Sears disclosed it lost more than $3 billion ($2.4 billion in the fourth quarter), with sales continuing to slide.

But Sears shares soared 34% over three days (beginning Wednesday) as Lampert took pains to assure analysts that he was not taking the company into bankruptcy and that suppliers had no reason to worry as the company has ample liquidity. In turn, Sears will sell down its vast real estate holdings, spinning off 1,200 smaller stores in a rights offering that’s expected to raise $500 million, while 11 department stores will be sold to a mall developer for $270 million.

The thing is, you’re still left with drab Sears and many now believe the shares, after this week’s rally, are incredibly overvalued.

Procter & Gamble Inc. said it planned to eliminate 5,700 positions over the next 1 ½ years, or about 10% of the company’s non-manufacturing workforce The U.S. Postal Service is pushing ahead with plans to close 260 mail processing centers around the nation as part of a billion-dollar-cost-cutting effort that will slow first-class delivery. The consolidations are expected to result in a loss of 35,000 jobs.

Johnson & Johnson CEO William Weldon announced he is stepping down in April after a slew of product missteps, recalls and court settlements over improper marketing practices tarnished its once pristine image, though Weldon is remaining as chairman. Alex Gorsky, who has overseen J&J’s medical device business, takes over.

According to the Radio Advertising Bureau, ad spending was up 1% in 2011, the first increase after three down years. Campaign spending will help in a big way later in the year. As I’ve said before, having some experience in radio and online advertising related to StocksandNews, radio is superior. Online advertising blows, plus its ripe with fraud.

The U.S. and Mexico reached a significant agreement that would allow oil and gas drilling on more than 1.5 million acres in the Gulf of Mexico, resolving a decade-long dispute.

For 2011, the Transportation Department says U.S. airlines set a record for fewest mishandled or lost bags since the agency began keeping track in 1988. Also, fewer passengers were bumped than ever before.

Americans are holding onto their cars for a record average of six years vs. the old pattern of flipping every three or four. Improving quality is definitely among the factors pushing the trend.

Warren Buffett has famously called for the nation’s wealthiest to pay more taxes, to which New Jersey Republican Gov. Chris Christie replied this week that Buffett should “just write a check and shut up.”

In an interview with CNN’s Piers Morgan, Christie said, “I’m tired of hearing about it. If he wants to give the government more money, he’s got the ability to write a check. Go ahead and write it.”

Later, in a town-hall meeting, Christie said, Democrats “want you to be angry because your neighbor makes more than you do. That’s not the New Jersey I know, and it’s not the America that I know.”

Related to the preceding, an AP-GfK survey found that 65% of the people favor Obama’s plan to require people making $1 million or more pay taxes equal to at least 30% of their income. Just 26% opposed Obama’s idea. 2/3s of independents support the idea.

[An AP-GfK poll found that 72% of Americans support raising taxes on people with incomes over $1 million a year.]

But, by a 56-31 margin, more embraced cuts in government services than higher taxes as the best medicine for the budget, according to the same survey.

Left unsaid is that if Americans were told their benefits were being cut, we’d go, “Whoa…now just wait a second, pardner!”

Goldline International Inc., one of the nation’s largest gold retailers, agreed to refund as much as $4.5 million to former customers over “unfair sales practices,” including the accusation the company was running a “bait and switch” operation. Goldline hadn’t been disclosing markups on telephone calls with customers.

San Miguel is in talks to buy 49% of Philippine Airlines Inc. San Miguel is also the Philippines’ biggest beer maker, so this would give stewardesses an easier job.
“Do you have Coors Light?” “No, just San Miguel.” “Do you have Miller Lite?” “No!!!! Just San Miguel!!! Didn’t you hear me?!!!” [Stewardesses aren’t real patient these days.]

The Fuller Brush Co. filed for Chapter 11. About 37 years ago I sold Fuller Brush one summer. I think I was the worst salesman in the history of the company. A few years later, I then sold books for the Southwestern Book Co., going door-to-door in Oklahoma and Kansas. I was the worst salesman in the history of that company, too, and almost starved to death. But then I later became national sales manager of a leading mutual fund shop and the company survived. Go figure.

While Jeremy Lin finally came down to earth against the Miami Heat on Thursday, going just 1-for-11 from the field with 8 turnovers, unless this becomes a new pattern, sales of Lin merchandise should continue to soar. As of Feb. 16, Modell’s sporting goods had sold 50,000 units of Lin paraphernalia and had 168,000 on order. “It’s like Christmas in February,” said Mitchell Modell, CEO of the 150-store chain.

Linsanity has also been a godsend to bars in the New York area, with fans flocking to watch each Knicks game. I myself haven’t missed any of the last 9, after not watching a full contest in about a year. MSG Network’s television ratings have been the highest for the regular-season since the 1988-89 season.

Norwegian artist Edvard Munch did four versions of his best-known image, “The Scream,” and one is going on auction May 2 at Sotheby’s with an expected sale price of around $80 million. This is the only one of the four versions left in private hands. It has been in the Olsen family of Norway for 70 years and proceeds will be used to build a new museum and art center on the family farm. Two other versions were stolen in 1994 and 2004, but later recovered.

Australian miner Rio Tinto said it has found a 12.76-carat pink diamond, the largest such find ever in the country. It’s worth somewhere in the millions and evidently will be sold later this year after being shown around the world, including in New York and Hong Kong. More than 90% of the pink diamonds in the world come from Rio’s Argyle mine in Western Australia’s East Kimberly region. [Just added this factoid for my Aussie readers.]

And for the record, in 2010, a rare 24.78-carat “fancy intense pink” diamond sold for a record-breaking $46 million, the highest price ever paid for a jewel.