One Page Annotated WSJ Summary, June 6th

by: David Jackson
David Jackson
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Summary of selected articles from this morning's Wall Street Journal with comments on related stocks. Links are to the original WSJ article, which requires a paid subscription. Use this summary as a starting point for research; check the summary against the original before trading. As always, you can click on a stock symbol to get a chart, quote and articles on that stock.

Cash Becomes a Hot Investment

  • Summary: Six month Treasury bills now pay 5%; so do some money market mutual funds, and CDs crossed the 5% line a while back. If Bernanke raises rates again (as his comments yesterday suggest), retail money market funds will also cross 5%. Investors have been better off in cash than long term bonds, and that's likely to continue.
  • Comment on related stocks/ETFs: Bullish for iShares Lehman 1-3 Year Treasury Bond Fund (NYSEARCA:SHY), bearish for iShares Lehman 7-10 Year Treasury Bond Fund (NYSEARCA:IEF)?

Google Advances Software Challenge With Spreadsheet

  • Summary: Google plans to release a web-based spreadsheet application today, based on technology from its Writely acquisition, that allows users to collaborate online. This release lacks some key functionality such as charts and drag-and-drop data movement, but does allow users to download the spreadsheets in Excel or CSV format. Google's product manager downplayed the threat to Microsoft, while Microsoft's product manager claimed there was nothing new here.
  • Comment on related stocks/ETFs: They would say that, wouldn't they? Probably no short term revenue generation for Google Inc. (NASDAQ:GOOG), but even more negative sentiment on Microsoft (NASDAQ:MSFT).

Brookfield, Blackstone to Buy Trizec

  • Summary: Brookfield Properties announced that it and a private equity partner would buy Chicago-based office REIT Trizec Properties for $4.8 billion, an 18% premium to Trizec's prior closing price. "Trizec Chairman Peter Munk, noting that a number of potential buyers prequalified for the deal, said the combination of historically low yields for high-quality property with so much available liquidity made this the perfect time to sell."
  • Comment on related stocks/ETFs: The iShares Dow Jones U.S. Real Estate Index Fund (NYSEARCA:IYR) rose yesterday, but Munk's statement suggests that Brookfield Properties (NYSE:BPO) and REIT investors generally may be overpaying.

Demographic Time Bomb Ticks On

  • Summary: At a private dinner recently Alan Greenspan suggested that if investors better understood the projections of US population aging and its impact on the Medicare and Social Security budgets, they'd demand higher bond yields to compensate for the risk. But the population aging problem is even more accute for China and Russia.
  • Comment on related stocks/ETFs: More bearish news for bearish for the iShares Lehman 7-10 Year Treasury Bond Fund (IEF)? And perhaps the China ETFs from Powershares (NASDAQ:PGJ) and iShares (NYSEARCA:FXI) are over-rated, as is the Templeton Russia Fund (NYSE:TRF).

Intel Plans to Sell Major Parts Of Its Communications Unit

  • Summary: In an attempt to focus on its core business, Intel is planning to sell its communication chips business, including its cellphone application processors and networking chips. Intel's Xscale chips for cellphones have failed to win significant market share, and the last time Intel broke out the results of its communication chips business -- 2004 -- it reported an operating loss of $791 million.
  • Comment on related stocks/ETFs: Although a sale of the money-losing communications chip business should boost Intel's (NASDAQ:INTC) profitability, this is a reversal of Intel's previous strategy to diversify out of processors. It may be seen as more evidence that Intel is retrenching, suggesting the stock hasn't bottomed. Unlikely to have any negative impact on competitor AMD (NYSE:AMD).

No. 1 Retailer in Britain Uses 'Clubcard' to Thwart Wal-Mart

  • Summary: Wal-Mart's expansion into the UK via its acquisition of Asda is running into challenges from UK competitor Tesco (Britain's largest retailer) and internal mismanagement. Tesco is using its club card to cross sell products to existing customers, and has expanded its groceries market share to 31% versus Wal-Mart's 16%. Asda accounts for 10% of Wal-Mart's total, and 45% of its international revenues.
  • Comment on related stocks/ETFs:Many investors in Wal-Mart (NYSE:WMT) view its international operations, which are more capital intensive and less profitable than its US business, as a free option on increased profit growth. Any evidence of international stagnation is incrementally negative for the stock.

Dollar's Drop May Move Stocks

  • Summary: Wall Street strategists are starting to recommend stocks of US companies with large foreign sales as a way to play the falling dollar. Stocks mentioned: Pfizer (NYSE:PFE), Nvidea (NASDAQ:NVDA), Eli Lilly (NYSE:LLY), Colgate-Palmolive (NYSE:CL), Chevron (CHX).
  • Comment on related stocks/ETFs: Don't mistake strong intermediate foreign sales for strong foreign end-sales -- they're not the same thing. Nvidia may sell to Taiwanese computer assemblers, but most of its chips end up back in the US.

India Raises Prices Of Fuel to Help Trim Losses at State Firms

  • Summary: India raised the state-set prices of diesel and gas in an attempt to catch up with the rise in global oil prices. The impact of the price hikes in New Delhi is forecast to be 9.2% on the price of gas and 6.6% on the price of diesel.
  • Comment on related stocks/ETFs: Is Tata Motors (NYSE:TTM) the best short play on this?

Full Disclosure: short IYR.

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