The stock market has a little bit of an idea of how long it will take the U.S. to mobilize against Syria now and although the President is seeking Congressional approval for any foreign excursion we still think that the markets are going to see some headwinds moving forward. First, Assad is now feeling empowered and barking - saying that any move to weaken his regime could throw the entire Middle East into turmoil. Second, there is no united front against Syria and right now it appears that only the French are serious about using force.
Most troubling to U.S. is the fact that the U.S. is testing missiles in the area and this morning (reports unconfirmed at this time) they test fired to ballistic missiles which they had land in the Mediterranean. Stuff like that riles markets and worries investors. It can also lead to misunderstandings. This situation is very fluid and has everyone's attention moving forward.
Chart of the Day:
Our attention in regards to the economic data due out today is focused upon the construction spending. With housing in a recovery we would like to see gains year-over-year and month-over-month if possible, however the numbers tend to fluctuate based upon rates and other external economic factors so we look for these numbers to potentially soften moving forward.
We have economic news today and it is as follows:
- ISM Index (10:00 a.m. ET): 53.6
- Construction Spending (10:00 a.m. ET): 0.5%
Asian markets finished higher today:
- All Ordinaries -- up 0.21%
- Shanghai Composite -- up 1.18%
- Nikkei 225 -- up 2.99%
- NZSE 50 -- up 0.23%
- Seoul Composite -- up 0.46%
In Europe, markets are lower this morning:
- CAC 40 -- down 0.06%
- DAX -- down 0.25%
- FTSE 100 -- down 0.08%
- OSE -- up 0.11%
We finally saw the Verizon (VZ) and Vodafone (VOD) saga come to a close as Verizon agreed over the weekend to buy Vodafone's 45% stake in Verizon Wireless for $130 billion in cash and equity. It is a rich price, but not so rich as to say that Verizon is overpaying for the asset. The question now is what is the next move for Vodafone and shall the company become an acquirer again or due to its liquid balance sheet become prey to other industry players and/or private equity?
Verizon shares have fallen in recent months as the 10 year treasuries have risen, but our guess is that this acquisition will not only boost the bottom line but also lead to higher buybacks and dividends in the future. That means a higher stock price moving forward. Long-term bullish on this name for conservative portfolios.
Source: Yahoo Finance
Our guess is that Vodafone reverts back to acquiring wireless networks across the map and beefing up its product offerings in Europe. It is a highly regulated market, Europe is, but Vodafone has a lot of assets there and adding to those holdings offers economies of scale and plays into the company's core competencies developed over the years. The only thing that could stop this is an offer from another big player who would not be interested in cable or other fixed line assets.
The interesting news today is that Microsoft (MSFT) is buying Nokia's (NOK) handset business and licensing patents for $7.18 billion in a deal which will see not only the handset business come under the Microsoft umbrella but a large core of Nokia executives as well, including CEO Stephen Elop (The Wall Street Journal article here). Now it had been speculated since Mr. Ballmer's announced retirement that Mr. Elop would be a prime candidate for the Microsoft CEO position and although we paid it little attention the deal does make that a distinct possibility now.
Microsoft comes out the loser again in this deal with Nokia. This will be just another losing bet in a long string of bad Microsoft acquisitions...a long string of BIG acquisitions which were bad.
Source: Yahoo Finance
Paying $7 billion+ for access to a CEO from a key customer seems out of left field to us, however Microsoft has been known to do some odd stuff. Embarking on a large expansion into a field the company has little to no experience in while also searching for the next CEO would fall under that 'odd stuff' category, but it only increases the odds that the next CEO is already within the company and approving some of these moves. The buyout probably shuts the door on any premium Blackberry thought they were going to get for their assets because how many more buyers are out there willing to overpay for old dumbphone technology? To put it simply there were very few from the beginning and after this announcement there is one less.
Investors in CBS (CBS) can rejoice after it appears that the company won its battle with Time Warner Cable over the fees it charges for its content. Currently we do not know what the company will receive for its broadcast channel and cable offerings, but Time Warner Cable's CEO did say that his company did not get everything that they wanted, namely the digital rights, so all indications this morning are that the CBS was able to hold out for the deal they wanted. With the NFL season fast approaching and some big sporting events on the horizon Time Warner was beginning to get overwhelmed with anxious customers and although the blackout affected mostly a handful of large cities the fact that Showtime was not on across the country was becoming a serious issue as the premium cable channel's various acclaimed series were kicking off (with Dexter having already started). It will be interesting to see if the details of the deal trickle out over the next few weeks/months and whether we can see the price CBS was able to extract from the cable operator, because this might very well rewrite the book on how to negotiate for broadcasters.