Under The Radar News - Thursday

• Some oil co.'s have all the luck. Petrobras (PBR) says it has struck more oil near the huge offshore Tupi field, at about 22K feet below the surface. CEO Jose Sergio Gabrielli de Azevedo said on a CNBC interview PBR is “finding very good results” at its newly discovered off-shore deposits. One unknown is whether Brazil will go after the company for more taxes.
• Gross's June Outlook. Pimco's Bill Gross says the U.S. is underestimating inflation by at least 1%. He suggests: 1) Avoiding Treasurys because of their "negative (unreal) real yields." 2) TIPS should offer investors CPI protection, but are also risky due to unnaturally low inflation figures. 3) Commodity-based assets and foreign equities denominated in currencies that demonstrate authentic growth and inflation rates. 4) Developing BRIC-like economies.
• Greenspan: Pimco's secret weapon. Bill Gross says Pimco's consultant former Fed Chairman Alan Greenspan has already made and saved Pimco billions of dollars though his "brilliance in terms of forecasting the potential for exactly what happened." Pimco signed Greenspan last May. He also advises hedge fund Paulson & Co. Gross started piling back into mortgage bonds earlier this year, and exited stakes in "overvalued" Treasurys. "You want to invest where the growth is," Gross said. "The growth is in Asia and the growth is outside the United States." And U.S. fixed-income puts you at a double disadvantage.
• Oil rally fuel by shorts. The wild-and-wooly oil rally is at least partially due to short covering. Open interest fell 8.1% in a week to 1.36M even as prices rose 2.6% -- a sign traders are buying to exit so-called short positions that would profit if oil fell, and lose money as they rose.
• Salesforce.com CEO disses competition. "I think the problem really is that Microsoft is trying to deliver a first-generation product in a time when we’re looking at third generation technology today... There is very little comparison between any technology they have on premise or online and what we’re able to offer customers. Also don't underestimate that customers want an open solution and Salesforce.com works with all of Microsoft’s products, and with all of Google’s products, and the Blackberry and we work with the iPhone. But when you choose a Microsoft you choose all Microsoft... In regards to SAP -- their whole on-demand strategy is a huge train wreck." -- CEO Marc Benioff during the company's earnings conference call (edited for length)
• Cadbury seeks sweet deal. Shares of Cadbury (CSG) rose as much as 5.8% on speculation of a takeover bid after Mars's acquisition of WM Wrigley (WWY). Analysts say Hershey (HSY) and Nestle (NSRGY.PK) are possible merger candidates. Kraft (KFT) (and its main investor Warren Buffett) is another potential partner.
• Google stretches search lead. Google (GOOG) extended its share lead in core U.S. web searches to 61.6% -- up from 59.8% a month ago. Yahoo (YHOO) ranked second with 20.4%, down from 21.3%. Microsoft (MSFT) slipped to 9.1% from 9.4%. AOL (TWX) 4.6%; and Ask (IACI) 4.3%.
• Shell nears settlement. Shell (RDS.A) is on the verge of settling a dispute over its Nigerian JV. Nigeria has already settled with two of the its other five partners, Total S.A. (TOT) and ExxonMobil (XOM). The government said on Tuesday Shell owed it $850M. Bloomberg reporting Nigeria military says it repelled an attack on the Shell facility and there was no damage to the site. Providence?

Comments

[RichardSchweitzer]

C'mon, if you're going to paraphrase Bill Gross, do so with more care. Here is what he wrote:

"What are the investment ramifications? With global headline inflation now at 7% there is a need for new global investment solutions, a role that PIMCO is more than willing (and able) to provide. In this role we would suggest: 1) Treasury bonds are obviously not to be favored because of their negative (unreal) real yields. 2) U.S. TIPS, while affording headline CPI protection, risk the delusion of an artificially low inflation number as well. 3) On the other hand, commodity-based assets as well as foreign equities whose P/Es are better grounded with local CPI and nominal bond yield comparisons should be excellent candidates. 4) These assets should in turn be denominated in currencies that demonstrate authentic real growth and inflation rates, that while high, at least are credible. 5) Developing, BRIC-like economies are obvious choices for investment dollars."

Note what he really said about TIPS.

Redo that please.

[SA EditorEli Hoffmann]

Richard,

You're absolutely right. Gross advises AGAINST TIPS because of the risk of unnaturally low CPI numbers. I have fixed the summary.

Thanks for your feedback!