Archive for December, 2005

Home sales

Thursday, December 29th, 2005

BusinessWeek Online has an interesting article about the difficulty of predicting US real estate prices (although they do think that 2005 is the peak). Some will argue that the decline is starting, considering recent data, US-wide sales for single-family home and condos were soft, down 1.9% and 0.8%, respectively.

However these predictions have been made erroneously for each of the past several years.

Pfizer

Tuesday, December 20th, 2005

Having gained some ground last week after boosting its dividend, Pfizer had more good news for investors: a win in their lipitor patent suit. This means that there shouldn’t be any generic competition until 2010.

However, investors worry about issues like patent expirations, stagnating sales, competition for key products, and a pipeline that may not be strong enough to propel growth. Investors have to weigh the expected lack of growth and the risk of negative news with the fairly nice dividend. AP Business shares the two opposing views:

“It’s not like they (Pfizer) got a huge windfall of revenues we didn’t expect, said Jason Napodano, an analyst at Zacks Investment Research. He predicts Pfizer’s revenue will decline this year and jump only 1 percent in each of the next two years.

But Bert Hazlett, an analyst at SunTrust Robinson Humphrey is upbeat about the company’s long-term prospects. He noted that Lyrica, a pain medication launched earlier this year is off to a strong start. Next year, he expect Pfizer to introduce Sutent, a cancer drug. Exubera, which is inhaled insulin, and Indiplon, a sleeping aid, may also hit the market.

Still Hazlett concedes he doesn’t see noteworthy earnings growth until 2008, even though the dividend may prompt investors to buy the stock. “You are being paid to wait for growth,” he said.

As for me, I’m holding. I see no need to dump the stock at a loss (though I would strongly consider doing this if I needed to offset capital gains) because I can live with the risk of negative news, and like the dividend.

Tepid 2006 outlook for stocks

Tuesday, December 13th, 2005

AP Business Writer, Ellen Simon writes that investors have too many fears for there to be a bull market despite strong 2005 corporate earnings:

Strategists’ 2006 predictions for stocks range from tepid single-digit increases to a handful of highly qualified hopes for a mid-teen jump.

Of course the fears are significant:

1. Short-term interest rate hikes could lead to recession.
2. Budget and trade deficits.
3. Consumer debt.
4. The possibility of another Enron.
5. Exogenous shocks like terrorist attacks.
6. Little room for growth (An early 2006 end to interest rate hikes is already priced into the market, Tim Hayes, global stock strategist at Ned Davis Research, said. And stocks fourth quarter increase has left little room for growth).
7. Energy prices.
8. The mess in Iraq.
9. The dollar could fall further than expected.
10. Health care and pension costs for retirees may impact earnings.
10. Expensing options could hurt companies’ returns.
11. What if the government raises trade barriers?
12. What if consumer spending falls off a cliff?

Korean labor unions

Sunday, December 11th, 2005

Not too long ago, Citi Bank bought one of the largest Korean banks and then quickly ran into problems with the unionized workers. Their demands didn’t make sense to a US based company: Don’t rename the acquired Korean bank, Pay based on seniority rather than performance, etc.

So I was interested to find an editorial by a Korean on the unions here in Korea. The writer identifies some problems:

“Labor circles are so closed that violence is the only answer whenever social dialogue is mentioned.” It’s true that strikes turn violent more often in Korea than in America.

“The unions are moving away from the noble cause of protecting and forming solidarity among the socially weak. They are losing their legitimacy.” This is because the unions don’t protect workers in smaller companies and irregular workers. “In 2002, the hourly wage of irregular workers was 80.5 percent that of regular workers. The rate fell to 70.5 percent this year”.

This is closely related to the “crisis of representation”:

Among the 5.48 million irregular workers, only 1 percent are members of a union, yet the proportion of unionized workers in big corporations with 500 workers or more is as high as 71.2 percent. Overall, Korean unions are organizations of regular workers in major businesses. That structure makes it impossible for trade unions to represent the interests of all workers.

It’s an interesting read if you’d like to look at the full article from the Chosun Ilbo.

Korean companies to use English disclosure

Wednesday, December 7th, 2005

Korea’s Financial Supervisory Service (FSS) will be requiring Korean companies to adopt an English disclosure system to attract more foreign investors into the Korean market.

Under the guideline, 34 companies like Kookmin Bank whose stocks are also listed on the overseas stock markets, will be required to adopt the English disclosure system as early as in October next year. The local stock market will fully adopt the English disclosure system by March 2007.

Energy and growth?

Tuesday, December 6th, 2005

Centerpoint Energy (CNP) is a US utitlity with unispiring numbers: PE = 17.69, 1 year forward PE = 13.29, estimated PEG (5 year) = 2.13, dividend yield = 1.8%.

However, it is experimenting with what may be the next big internet growth area:

BPL, or broadband over power line, uses a unique new technology that provide a customer with the ability to access the Internet and receive other Internet-related services, over existing power lines that are BPL enabled. Due to the emergence of this exciting and viable new technology, BPL is being tested for commercial and utility purposes by a number of entities across the United States….

Given that BPL technology uses existing electric power lines, it has the potential to reach every customer that is connected to the electric delivery grid. That

US deficit

Sunday, December 4th, 2005

The soon to retire Greenspan reissued an old warning: