In alphabetical order, here are some of the most newsworthy market news stories over the past month and my analysis of them.
Alexander & Baldwin
What do sugar plantations, condo developments and container shipping have in common? As it turns out, not as much as Alexander & Baldwin (NYSE:ALEX) once believed — A&B announced that it will split into two publicly traded companies. A&B shipping and logistics will become Matson Corp., and the agriculture and real estate business will become a second publicly traded firm, retaining the Alexander & Baldwin name. The split-up seems long overdue, and it should enhance shareholder value since the management team of each company can focus on its core business and allocate capital independently. The split-up should also generate more interest from shareholders who are interested in either the transportation business or real estate business, but not both. Hold your shares for now.
The Obama administration succeeded in preventing a merger between AT&T (NYSE:T) and T-Mobile. That was misguided since it is unlikely that T-Mobile will remain a viable competitor over the coming years. It appears as though it was the FCC’s decision to object to the merger that caused AT&T to step away from the transaction. The failed merger is a disappointment for both AT&T customers and shareholders, but AT&T shares shook off the disappointment and have traded up since the deal was canceled.
Banks Are Axing Thousands
Click to EnlargeHow can we all embrace a sustainable economic recovery while
Click to Enlargenonfarm payrolls stand 1,855,000 below the level that existed when President Obama took office? Some change! And Obama believes Americans need four more years of this? Do you know that banks — big and small — all over America are slashing payrolls? In just the third quarter, 2,500 banks axed more than 20,000 employees. Apparently, hope is neither a strategy nor a change for the good. You might think, with the Fed allowing banks to basically borrow at zero, the good times would be rolling in. Not quite. Take a gander at my scary charts on Consumer Confidence and U.S. New Home Sales.
Great News on the Energy Front
On a positive note, in the first nine months of the year, the U.S. sent more than 750 million barrels of petroleum products abroad while it imported just a little under 700 million barrels. As such, over that period, the U.S. was a net fuel exporter. Back in 2005, the reverse was the case, with the U.S. importing 900 million barrels more than it exported. Also comforting is that U.S. petroleum imports, as a percent of consumption, have fallen to 46% from 60% as recently as 2005. Finally, I like what I’m reading about a GM (NYSE:GM)/BMW hookup on fuel-cell technology, which combines hydrogen and oxygen to generate electricity.
Recession? Not Quite
The Commerce Department originally reported third-quarter GDP growth at a none-too-hot 2.5%, then revised growth down to 2.0% and now has revised its estimate down to only 1.8%. This is no surprise as the country continues to struggle. The freefall is the worst of the century and totally unmasks the fraud of a sustainable broad-based U.S. economic recovery.
Even with that said, though, we are not in a recession yet. I like the short-term upswing in both consumer confidence and U.S. New Home Sales previously mentioned.
Vanguard Leads the Way
With the S&P 500 flat in 2011, the Nasdaq down 1.8%, well-known funds like Magellan and Legg Mason Capital Management down and the Shanghai down a staggering 22%, 2011 was a bummer for many investors. I am pleased to report that my own three biggest holdings — Vanguard Wellesley (MUTF:VWINX), Vanguard GNMA (MUTF:VFIIX), and Vanguard Short-Term Investment Grade (MUTF:VFSTX) — were all up. I strongly suggest investing in all three.