bbby

Goldman Sachs (NYSE:GS) has raised $10 billion to invest in existing LBO loans. According to the FT, the investment house plans to make money by "taking advantage of a gap in the financing markets created by the credit crisis." In other words, Goldman believes that the problems in the lending market have driven leveraged buy-out loans below their logical values. Panic has created opportunity.

While the news may be good for banks that hold some of these loans and do not want to write them off if they fail, Goldman is making a bet beyond the fact that LBO loans may be selling at a discount now. Goldman is essentially betting the economy will get better in the fairly near-term.

For many of these loans to perform well, the economy has to avoid a deep recession. Even loans with reasonable credit ratings, debt in companies with strong prospects and earnings, could fail if the general business conditions deteriorate into a prolonged period of negative growth. Under such circumstances, Goldman could pick relatively safe debt and still get burned.

Someone at Goldman sees light at the end of the economic tunnel.

Douglas A. McIntyre is an editor at 247wallst.com.

It makes sense that if there are still large pools of undiscovered oil. Some of them would be under one or both polar ice caps. It turns out the Arctic is a great place to drill for crude.

According to The Wall Street Journal, "The Arctic contains just over a fifth of the world's undiscovered, recoverable oil and natural-gas resources, according to a review released Wednesday, confirming its potential as the final frontier for energy exploration."

The data from the study raises two questions. The first is who owns the rights? Russia claims some of them. So does Denmark. The U.S. is even making come claims for part of the territory.

The other issue is the standard environmental one. Will drilling in the Arctic endanger any wildlife, create oil spills, or disrupt the ice cap? Since the ice is melting due to global warming, that concern may not last for long.

As oil prices rise, it becomes more evident with each passing month there are deposits of oil off-shore, in protected lands, and in regions that could not be reached before because the technology did not exist.

Unfortunately, getting at the oil could involve years of legal battles. By then maybe the T. Boone Pickens windmill farms will be delivering vast quantities of energy and it won't matter.

Douglas A. McIntyre is an editor at 247wallst.com.

Perhaps no one should be surprised that the head of Microsoft (NASDAQ:MSFT)'s internet unit left the company. Its bid for Yahoo! (NASDAQ: YHOO) did not exactly work out well. Redmond will probably not have a big online empire to run without the buyout of the portal company.

According to The Wall Street Journal, "Kevin Johnson, 47 years old, will take a job as chief executive of Juniper Networks (NASDAQ: JNPR), a Silicon Valley maker of networking hardware." The new position sounds like a pretty large step down.

As part of the effect of the departure, Microsoft will separate its Windows group from its online operation.

At this point, who would want to run the Microsoft internet division? It now stands as a distant third in the search business. It competes with Yahoo! and AOL in the portal segment. Display advertising growth rates are slowing.

Microsoft chief Steve Ballmer may say otherwise, but his company has lost the online war. There is nothing left that he can do about that. Spending billions of dollars has yet to gain his company any ground. No executive with a brain is going to want the chance to run a fading business.

Douglas A. McIntyre is an editor at 247wallst.com.

No matter how good Qualcomm (NASDAQ: QCOM)'s earnings have been over the last two years, its stock has been capped to some extent by its long legal battle with its largest customer, Nokia (NYSE: NOK). The dispute is over now, news which is probably better for Qualcomm than Nokia. The legal threat hanging over the cell phone chip maker firm is gone.

According to The Wall Street Journal, "Under the settlement, Nokia will withdraw that complaint as well as other litigation. Besides getting licenses to Qualcomm patents, Nokia said it will assign ownership of a number of its patents to Qualcomm. The pact not only covers patents used in current cellphone networks but also emerging technologies that could succeed them -- including WiMax and LTE, which stands for long-term evolution."

The news sent Qualcomm's stock up over 18%.

Nokia had disputed the fees Qualcomm charged for its chips and the license fees for its technology. Qualcomm can now get substantial payments from its former nemesis. If Qualcomm had lost its battle, its long-term income could have been cut sharply. Nokia is getting access to patents, but it will still be making payments to the chip company.

The trouble has kept Qualcomm's shares from trading above the $52 level that they hit in mid-2006. Investors can expect that the ceiling on the stock will now be gone.

Douglas A. McIntyre is an editor at 247wallst.com.

Baidu (NASDAQ:BIDU) is up 12% on strong earnings.

Amazon (NASDAQ:AMZN) is up over 6% after reporting a good quarter.

LSI Logic (NYSE:LSI) is up 10% on improved results.

Conceptus (NASDAQ:CPTS) is down almost 20% after missing Wall Street forecasts.

Stocks may trade differently in the pre-market than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com

Morgan Stanley upgrades Citigroup (NYSE:C) to "equal weight" from "underweight", according to Briefing.com. The news service also reports that Deutsche Bank downgraded McDonald's (NYSE:MCD) from "buy" to "hold".

Standard & Poor's added Hansen Natural Corp (NASDAQ:HANS) and Chattem (NASDQ:CHTT) to its list of mid-sized companies that show the "highest growth characteristics.", according to the AP.

Boeing (NYSE:BA) Cut to Neutral at Cowen & Co, according to 24/7 Wall St. The financial website also reports AT&T (NYSE:T) Cut to Neutral at JPMorgan

Douglas A. McIntyre

Apple Inc. (NASDAQ: AAPL) says it sold one million 3G iPhones in its first three days on the market. Some analysts believe that company could sell 20 million of them in the next year.

One of the reasons some people waited for the new 3G version of the phone is that it runs on AT&T's (NYSE: T) faster wireless broadband network. The older version, which ran on the 2.5G network, could be very slow linking to the internet.

Now that over a million people have their faster phones, they may find that there are a lot of places they won't work. AT&T's 3G network is concentrated in large cities. Even in those urban areas and their suburbs, there are a lot of dead spots. At least a couple of those are within a short drive from the Apple and AT&T headquarters.

For people taking their iPhones to Las Vegas, the coverage is extremely good. Anyone taking a vacation to Vermont, New Hampshire, Wyoming, or Montana is out of luck. (For a more complete list of places the new 3G iPhone won't work, visit 247wallst.com.)

Douglas A. McIntyre is an editor at 247wallst.com.

Microsoft Corp. (NASDAQ: MSFT) has to deal with improving sales for the Sony (NYSE: SNE) PS3. Sony has been able to get a greater number of attractive games for its console. It has also added better features to play live over the internet with friends connected by broadband.

Now the Xbox 360 will add a feature that Sony cannot match, at least for now.

According to the FT, Microsoft "has struck deals with five horror movie directors for a series of short films in a move aimed at boosting the original entertainment content available on its Xbox console." If the first part of the experiment works, Microsoft will probably go forward with more short content which cannot be seen by owners of rival consoles.

The executives at Toyota Motor Corp. (NYSE: TM) must live in a world all their own. They have maintained the forecast for their worldwide vehicle sales in the face of a massive downturn in the US auto market and weakness in Japan and parts of Europe.

The big Japanese car company finally bowed to reality and cut its prediction for units sales, but not by much. According to MarketWatch, "The automaker forecast sales for the full year in the lower 9.5 million unit range, down from the previously targeted goal of 9.85 million cars and trucks."

While the revision is a defeat for Toyota, it is also an odd acknowledgment of how well its does with car sales around the world and how clever it has been in designing and marketing new cars. In the US, where most auto firms are dying, Toyota has had a smashing success with its Prius hybrid. It cannot make enough of the cars to keep up with demand.

Three of the commissioners of the FCC have voted on the Sirius (NASDAQ: SIRI) merger with XM Satellite (NASDAQ: XMSR). Two have voted in favor, and one has voted against. That leaves two other votes. In other words, the deal could still be killed.

One of the remaining commissioners has indicated that he would vote for the merger if the companies would agree to a six-year price cap on their services. According to The Wall Street Journal, "The offer was viewed as an attempt to start negotiations, but the companies so far are showing little interest in haggling."

Is it any wonder? The most recent earnings reports from the two companies indicate that, while their losses are getting smaller, their subscription growth rates are slowing. Each firm has more than $1 billion in debt and neither has ever had an operating profit. In other words, if the companies cannot raise their rates the chances of them becoming profitable are significantly curtailed.

The FCC may be putting Sirius and XM in an almost impossible position. If they are willing to make moves which could hurt their earnings longterm, they may get the votes they need for approval. If not, the merger could be scuttled.

The future of satellite radio is now based on two bad outcomes.

Douglas A. McIntyre is an editor at 247wallst.com

EMC (NYSE:EMC) is up 6% on strong earnings.

VMWare (NYSE:VMW) is down 14% on a weak forecast for the balance of 2008.

E*Trade (NASDAQ:ETFC) is off 15% after missing Wall St. estimates.

Broadcom (NASDAQ:BRCM) is off 5% on poor earnings.

Stocks may trade differently in the pre-market than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

Piper Jaffray downgraded Washington Mutual (NYSE:WM) to "sell" from "neutral", according to Briefing.com. The news service also reports that Citigroup cut VMWare (NYSE:VMW) to "hold" from "buy" and cut its price target to $33 from $52.

Deutsche Bank downgraded TRW (NYSE:TRW) to "hold" from "buy", according to MarketWatch.

Caterpillar (NYSE:CAT) Cut to Neutral at JPMorgan according to 24/7 Wall St. The financial website also reports Target Corp. (NYSE:TGT) Cut to Neutral at Credit Suisse.

Douglas A. McIntyre

When McDonald's (NYSE: MCD) reports earnings, it may be an indication for how badly the spending habits of the working class and middle class in America have been hurt by the current economic downturn. According to The Wall Street Journal, "McDonald's has advantages over its rivals. The omnipresence of its restaurants means customers don't have to go far looking for them, making them a convenient trade-down option that doesn't eat up gas."

That is only an advantage if people can go out to eat at all. It is highly likely that the rising costs of food and fuel are hurting the people at the bottom levels of the income pool much worse than everyone else. It is hard to imagine most families with incomes under $25,000 being able to manage their daily living costs at all.

Even if a meal for four at McDonald's costs less than $20, it may be that a cheaper meal can be made at home.

McDonald's is not the preferred restaurant for the upper classes and it may be moving beyond the reach of the spending habits of those with very modest incomes .

Douglas A. McIntyre is an editor at 247wallst.com.

Europe is not exactly a growth market for most US companies. The economy there is slowing much as it is in America. But, McDonald's (NYSE: MCD) may be an exception. According to Bloomberg, "McDonald's Corp., the world's largest restaurant company, may report a second-quarter profit after European sales rose twice as fast as in the U.S."

The news is unusually good because rising commodities prices are likely to squeeze the fast food company's margins. The costs of bread and meat have been up sharply over the last year.

Europe seems an unlikely savior for McDonald's numbers. It is often viewed as a region where good food and traditional cuisine are part of the culture. Who wants a hamburger from a fast food place when the local restaurant has crepe suzette?

But fast food, filled with fat and salt, is irresistible. McDonald's has proved that in every country where it does business.

Douglas A. McIntyre is an editor at 247wallst.com.

JP Morgan downgraded big China-based PC maker Lenovo. According to Reuters, the brokerage cut Lenovo "to neutral from overweight due to a near-term slowdown in revenue growth from weak China demand and a slower ramp-up of the U.S. consumer business."

That is not exactly good news for U.S. PC companies Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ) that already appear to be losing market share to the Apple (NASDAQ: AAPL) Mac. China is a critical market to both companies, and any sign of further stress in the U.S. market does not leave them many regions to make up for faltering demand.

Wall Street is already concerned that a recession in the U.S. and slowing economies abroad will hammer the PC market. Like most American companies, HP and Dell thought they could always rely on the rapidly expanding markets in Asia.

It turns out that the best laid plans are not working out.

Douglas A. McIntyre is an editor at 247wallst.com.