"To venture causes anxiety, but not to venture is to lose one's self." - Soren Kierkegaard
Morning News of Note:
- Chinese Aquisitions: Heard on the Street: Meet China Inc.: Topping Japan Inc. of 1980s Corporate China Shows Muscle As Host of Global Bids Emerge, Marking Only Start of Deal Flow Four years ago, Goldman Sachs Group was trying to help PetroChina, a Chinese energy company, buy the Indonesian assets of Devon Energy. "At the time, nobody thought we were serious," recalls Johan Levin, co-head of mergers and acquisitions for Goldman Sachs in Hong Kong. Today, by contrast, "the first people on any buy list will be Chinese." In the past week, as two Chinese bids have emerged for companies in the U.S., one in manufacturing and one in energy, everyone is taking Chinese interest seriously. (Full Story) WSJ
- ELY: Callaway Golf Mulls Strategy Shots Amid Industry Downturn, Firm Gets a Buyout Offer; Shares Climb 15% on News Callaway Golf Co. said it is considering "strategic alternatives" for its future as insurance executive William Foley II said that he and a group including buyout firm Thomas H. Lee Partners had proposed taking over the golf-equipment maker. The value of the bid was put at $1.2 billion, according to a person familiar with the matter. Shares of Callaway, which has fallen on hard times amid a downturn in the golf industry and escalating competition, jumped 15% on the news in trading yesterday. (Full Story) WSJ
- 60 Dollar Oil: Oil, Pushing $60, May Rise Further on Fuel Demand Crude oil prices, which rose to $60 a barrel in New York this week for the first time, are more likely to rise than fall next week on speculation increasing fuel demand will drain U.S. inventories, a Bloomberg survey shows. Twenty-four of 50 analysts and strategists surveyed, or 48 percent, said oil prices will advance next week. Sixteen, or 32 percent said they will fall, and 10 forecast little change. (Full Story) Bloomberg
- ENER: Business Week reports that demand for hybrid vehicles is surging and the pros are buying stock in Energy Conversion Devices (ENER), the No. 1 U.S. maker of the nickel metal hydride (NiMH) batteries used in hybrids. ENER stock has soared from $10 in August to $19.69 on June 22. "We see it at 45 in a year,'' says Brion Tanous of Merriman Curhan Ford (MEM ), which has done banking for the battery maker. ENER will "dominate the market for years". Chevron (CVX), through a joint venture with ENER, is bankrolling production and marketing of the NiMH battery, notes Tanous. General Motors (GM) has placed orders for its Chevy Malibu and Saturn Vu hybrids, and by 2007, Tanous expects GM's order to soar. Also, Toyota (TM) plans to produce a Camry hybrid. Under a recent settlement of a patent lawsuit brought by ENER against Matsushita, which makes the battery for Toyota, hybrids made or shipped to America must use U.S. batteries. A special boost for hybrids: the new energy bill's $4,000 tax deduction for a hybrid purchase, up from $500 currently.
- LM C: Citigroup (C) announced that it has signed a definitive agreement under which it will sell substantially all of its Asset Management business in exchange for the broker-dealer business of Legg Mason, approx $1.5 bln of Legg Mason's common and convertible preferred shares, and approx $550 mln in the form of a 5-yr loan facility provided by Citigroup Corporate and Investment Banking. The total value of the transaction is approx $3.7 bln and will result in an after-tax gain to Citigroup upon closing of approx $1.6 bln, both of which are subject to adjustment. Citigroup will hold a conference call and audio Webcast to discuss the transaction at 8:30 ET.
Market Comments: The market is set for a slightly down open, on the heels of yesterday's weak close. This morning's economic reports included a strong durable goods report (+5.5% vs. +1.5% consensus) and the new home sales report (1298k vs. 1320k consensus). I am not expecting a heavy wave of buying ahead of the weekend, and would be happy to see the market just hang in there today.