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AT&T and Dish Network: M&A Match Made In Heaven?

by Mike Kapsch, Investment U Research
Friday, December 23, 2011

AT&T (NYSE: T) created a stir on Wall Street last month when its nine month pursuit to acquire Deutsche Telekom AG’s (PINK: DTEGY) T-Mobile for $39 billion epically failed.

The deal could have catapulted AT&T to the top spot of the telecommunications industry… knocking out current champ – Verizon (NYSE: VZ).

But instead, the botched trade only left AT&T on the hook to hand $1 billion of its own broadband spectrum over to Deutsche Telekom and an additional $3 billion for backing out of the deal. (Note: Opposition from the FCC and the Justice Department were the main reasons the deal was cut short.)

And that’s very unfortunate… Because boosting AT&T’s spectrum was the only reason it wanted to buy T-Mobile in the first place.

Now The Wall Street Journal reports, “AT&T has said it faces a potentially crippling shortage of airwaves, or spectrum, as customers clog the network with video and music downloads to their iPhones and tablet computers. Yet, without the T-Mobile deal it has few remaining options to help bolster its capacity.”

So how can AT&T quickly recoup its spectrum losses and get back on track? The solution may lie in Dish Network (Nasdaq: DISH)…

The Dish on Dish Network

With a $12 billion market cap and a solid price-to-earnings ratio of just 8, Dish Network has recently become a potential takeover/merger target for the telecom industry. For the past few years, it has stockpiled $3 billion worth of wireless spectrum in the hopes it will soon begin expanding its business in the telecom space.

Yet with so many major players in the industry already, its unlikely Dish can become telecom’s next big thing on its own. In fact, Dish even knows this. That’s why it’s hoping to partner up with a telecom provider to get its foot in the door as an alternative.

AT&T looks like a perfect fit. But there’s one problem….

During AT&T’s T-Mobile fiasco, Dish was one of AT&T’s main critics.

And even though Dish and AT&T would certainly benefit each other by joining forces… they currently see each other more as direct competitors than partners.

A chance for big profits may soon change that though…

The Telecom Industry’s Spectrum Scramble

All five of the major telecom players – Verizon, AT&T, Sprint (NYSE: S), MetroPCS (NYSE: PCS), and T-Mobile – admit they’ll need more spectrum within the next three years. Currently, Verizon is estimated to have as much as 56 percent more spectrum than its closest competitor AT&T.

But Dish Network could change all of that. Forbes reports, “AT&T could quickly gain a sizeable lead over Verizon by buying Dish Networks or Dish’s spectrum.”

Plus, as an added bonus, AT&T likely wouldn’t have to worry about all the regulatory issues it ran into trying to buy T-Mobile.

According to Tim Farrar, an analyst at TMF Associates, “Dish doesn’t have an operating wireless network so there are none of the same concerns about competition [as the T-Mobile deal].”

Will AT&T and Dish squash their egos and join forces for the better part of their businesses?

Only time will tell. But investors will certainly want to keep a close eye on this potential takeover/merger in 2012.

Good investing,

Mike Kapsch

Article by Investment U

Dec. 23 (Bloomberg) — Peter Chatwell, a fixed-income strategist at Credit Agricole SA, discusses the outlook for German bunds as the European Central Bank buys government debt of other euro-zone nations. He speaks from London with Mark Barton on Bloomberg Television’s “On the Move.”

London Gold Market Report
from Adrian Ash
BullionVault
Fri 23 Dec., 09:45 EST

WHOLESALE PRICES to buy gold were little changed in London on Friday, ending the short pre-Christmas session at $1607 per ounce, some 0.6% higher against the Dollar from last week’s finish.

Silver prices also held flat, moving in a tight range below $29.50 per ounce and recording a London Fix almost 1.9% down for the week at midday.

Thursday’s series of attacks in the Iraqi capital Baghdad, which killed perhaps 200 people, were followed today by the murder of 40 people by two suicide car bombers in Damascus, Syria – blamed by the government on al-Qaeda. But global stock markets ticked higher overall in what equity dealers called “very thin” trade.

US crude oil prices extended their strongest week since October, up more than 6.5% from last Friday.

“Our Hong Kong office observes that the gold price has gone up during the period between Christmas and New Year in eight of the last nine years (2004 being the exception),” said Mitsui’s London note today, “[rising] by just over 2% on average.

Dealing in London’s bullion market will re-open Wednesday after the Christmas and Boxing Day holidays.

“If [the] trend continues,” says Mitsui, “gold would stand around $1,650 by the year’s end.”

“[But] the 200-day moving average, currently at $1624, continues to provide strong resistance,” says Russell Browne at Scotia Mocatta in New York.

“We still stress the vulnerability of precious metals to a tightening of Eurozone money market liquidity,” says Standard Bank’s London team, “which might result from the region’s sovereign debt problems.”

European Central Bank member Lorenzo Bin Smaghi – who leaves the ECB this month to avoid “over representation” of Italy after Mario Draghi became president in November – says in a Financial Times interview today that he sees “no reason” not to use quantitative easing “if the economic outlook deteriorated and deflation became a risk.”

Spanish and Italian government bonds ticked lower in price on Friday, nudging the interest rate on 10-year debt above 5.4% and 7.0% respectively.

The ECB should “use as much constructive ambiguity as possible” Bin Smaghi says, adding that the ECB “has a duty of action” to help struggling governments where the issue is liquidity, not solvency.

Meantime in India – the world’s No.1 physical gold consumer – “A sharp drop in the gold price is required to boost the demand,” MoneyControl today quoted a Chennai-based wholesaler, as the Indian Rupee gold price continued to hold near historic highs thanks to the currency’s record low exchange rate.

“Jewellery demand is very weak…gold investment demand is also weak,” the Reuters news agency quotes a spokesperson in Ahmedabad for Zaveri and Co, one of India’s largest jewelry retail chains, who attributes low sales to the current period of Kharmas observed by some Hindu calendars, when there are no “auspicious” festivals or events.

Across in Tehran, however, “Iranians are rushing to buy gold and Dollars,” reports Bloomberg, “sending the national currency plunging.”

The Rial has lost some 15% vs. the Dollar this month, and bureau de change are charging 15,300 Rials per Dollar, says Bloomberg – almost 39% above Tehran’s official rate.

“State television this week showed lines of people camped out overnight in front of state banks, with sleeping bags and blankets, saying they were waiting to buy gold coins,” the newswire goes on.

Faced with new US and EU sanctions – plus inflation running near 20% per year – the Central Bank of Iran suspended deliveries of gold coins on Dec. 20, imposing what it calls a “just distribution” system by delaying settlement of new purchases by four months.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Dec. 23 (Bloomberg) — Norman Chan, head of investment at Calibre Asset Management in Hong Kong, talks about the outlook for global stocks. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

The Coming Solar Trade War Threatens Progress

by Ryan Fitzwater, Investment U Research
Tuesday, December 20, 2011

Solar power is finally becoming a viable renewable energy resource. This was accomplished by major achievements from different parts of the world over the past two decades and a rapid reduction in solar modules over the past two years.

The solar market reached the point at which generating solar power (with no subsidies) costs less than the electricity purchased from the grid – better known as grid parity.

Sounds like great news right? Not so fast…

What has taken decades of global collaboration and competition, to finally create affordable solar power, might be spoiled by a trade war between China and the United States.

Can’t We All Just Get Along

In November of 2011, the U.S. Commerce Department opened a trade case against Chinese solar module manufacturers. The Commerce Department opened its case acting on a filing by six American solar companies and SolarWorld’s (a German manufacturer) U.S. branch.

The main argument – China is dumping panels here for less than their total shipping and manufacturing cost, and they could be using billions of dollars in subsidies on exported panels, which is against international trade rules.

U.S. solar companies are arguing that all these factors are giving Chinese manufacturers an unfair position in American markets.

So here come the tariffs…

According to The New York Times, the Department of Commerce is considering tariffs of 50 to 250 percent on Chinese solar panels.

But the United States isn’t the only one threatening to impose tariffs on imported solar products – China could fire back with similar import taxes on U.S. solar products.

The recent U.S. trade case has sent Chinese companies into retaliation as they’re supposedly considering filing their own trade case with China’s Commerce Ministry.

The Chinese trade case would most likely focus on American exports of a key component in solar panels – polysilicon.

The United States is currently one of the world’s largest producers of the product, with manufacturing big in Washington and Tennessee due to their access to hydroelectric power.

Access to hydroelectric power is key because it takes massive amounts of energy to create polysilicon. It typically takes a whole year of solar panel operation to capture and even out the energy it took to make it. And since hydroelectric power is cheap, American manufacturers have the advantage.

In China things are less efficient, worse for the environment and much more controversial. China’s polysilicon manufacturers greatly rely on coal-fired power plants. And due to weak environmental controls, the polysilicon industry in China has seen numerous toxic spills that have polluted rivers and streams.

Environmental concerns aside, the Chinese manufacturers’ move to file with China’s Commerce Ministry is a logical retaliation. The American polysilicon industry exported around $873 million to China last year, almost matching what China shipped in solar panels to America over the same period of time.

Please Don’t Cloud Our Future

The potential development of a solar trade war between the United States and China will only hurt the industry in a time when it could finally start to flourish due to more affordable solar power.

According to Martin Green, the Executive Research Director at the Photovoltaics Centre of Excellence at the University of New South Wales in Australia, it takes more than one country or company to improve solar efficiency and drive down costs – totally global collaboration is necessary.

International advancements and collaboration is one of the reasons that recent costs for solar modules have dropped to around $1 per watt. And just look at the drop in price of polysilicon in the graph below, this is one of the factors has pushed the price of solar panels down over the past few years.

Trade barriers will only undermine recent developments, and increase the price of solar products and electricity.

And if prices rise due to solar tariffs, you could see political support for the solar industry fall even more.

Chinese solar manufactures have already put plans on the table to move production sites to Taiwan, South Korea and the United States in order to dodge any American tariffs that could arise in the future.

And let’s not even go into the fact that India has stated it may begin an anti-dumping probe of its own on imported Chinese solar products. Multiple countries imposing tariffs on one another will further impair the development of cheaper solar power.

Investors should keep an eye on developments in trade barriers between the United States and China. If any tariffs are imposed on exported or imported solar products, this could hurt an industry that has been struggling for decades to bring investors profits and provide a cleaner, renewable energy source for the planet.

Good investing,

Ryan Fitzwater

Article by Investment U

Dec. 23 (Bloomberg) — European Central Bank Executive Board member Lorenzo Bini Smagh said policy makers shouldn’t shirk from using quantitative easing if deflation becomes a danger to the euro region. He commented in an interview published by the Financial Times. Linda Yueh and Mark Barton report on Bloomberg Television’s “On the Move.”

The World’s Greatest Uptrend for Income Investors

by Dan Ferris, Investment U Special Contributor
Friday, December 23, 2011

I get more crazy feedback about one issue than any other…

Many of my readers – I think mostly ones who are new to investing – complain that a few of the stocks I’ve been recommending “haven’t gone anywhere for a long time.”

They’ll read my recommendations, which are often about the world’s best, safest businesses… and then write in to tell me I’ve lost my mind.

Take Microsoft, for example. Microsoft is a safe, dividend-paying cash-generating powerhouse. It dominates its industry. In 1998, it was selling for about $25 a share. Where is it today? About $25.

Or take Wal-Mart. Wal-Mart is the King of Retail. It, too, is a steady, dividend-paying, cash-generating business powerhouse. Toward the end of 1999, it had climbed to $60 a share. Today? It’s just under $60.

For my new readers, that’s proof we shouldn’t own these stocks. They’ve been “dead money” for folks who bought in 2000. All that matters to them is the where the share price has been over the past decade.

If you’re in this camp – where past price performance is all that matters to you – it’s extremely unlikely you’ll make money as a long-term investor.

What should matter to folks is how much cash the company is capable of earning and distributing in dividends… and how sustainable that cash-generating ability is over the long term.

If this idea doesn’t immediately make sense to you, try thinking of it like a private business investor would.

Let’s say the owner of a successful, sustainable, cash-generating business wants to sell that business and retire. If you’re looking to buy that business, would you devote your time to figuring out the right price to pay – say seven times annual earnings – or would you devote your research to what the previous owner paid for the business eight years ago?

I imagine that when you look at buying stocks (which are pieces of a business) this way, you’ll agree with me that studying the quality and sustainability of the business is 100 times more important than studying what the business changed hands for more than a decade ago.

And when you understand this concept, you’ll understand why we have a fantastic opportunity today to buy super-high-quality stocks. Let me show you why…

In 2000, shares of Wal-Mart peaked at $70, when it was trading for more than 50 times earnings. Remember, this was during the peak of the 1998 to 2000 stock mania. Stocks were incredibly expensive back then.

Since that time, as I explained, Wal-Mart’s share price has basically gone nowhere. Meanwhile, the value of the underlying business has soared. Take a look…

Last year alone, Wal-Mart produced $23 billion in cash earnings, bought back $14 billion in stock and paid out more than $4 billion in cash dividends.

It’s the same story with Microsoft. In 2000, Microsoft peaked at $58 a share and just over 68 times earnings. Like they did with Wal-Mart, folks had bid Microsoft to insanely overvalued levels.

The share price fell more than 65% that year and has gone nowhere ever since. Meanwhile, the value of Microsoft’s business has soared…

Last year, Microsoft produced $24 billion in cash earnings, bought back $9 billion in stock and paid out more than $5 billion in cash dividends.

I could tell the same story about Intel, Abbott Labs and Coke. When my readers look into the past and focus only on a business’ share price, they figure these stocks are lousy trends to buy into.

But all three companies are also World Dominating Dividend Growers. All three companies have grown cash earnings over the last decade. And all three are increasing the amount of cash they’re paying out to shareholders, just like Wal-Mart and Microsoft.

Those are the trends I care about. Those are the trends that will take a small investment today and compound it into a sizable retirement account down the road. Those are the trends that will keep your capital safe… and reward you for investing it. Those are the trends that turn small current income streams into large annual payouts.

So when a knowledgeable long-term investor talks trends, he talks about business results… not historical share price performance. Now more than ever – with the market whipsawing up and down – the long-term investor must be a buyer of strong businesses… not a predictor of future share price movements… and not someone obsessed with past share price movements.

New investors get caught in this trap more than any other. They get stuck on what has happened with a stock in the past. They think buying a stock like Wal-Mart that has drifted sideways for many years is a bad idea. They don’t understand that past price action has nothing to do with buying a great business at a great price.

And they’re not alone. Right now, the market is stuck looking into the rearview mirror on these super-high-quality stocks. Since many elite businesses have grown their underlying values and cash-generating ability – while watching their share prices drift nowhere – they are now extraordinary values. I recommend buying them before it’s too late.

Good investing,

Dan

Article by Investment U

Senior Strategist Ib Fredslund Madsen outlines the overall themes for 2012 and give his view on the different asset classes.

Legal information

Video courtesy of en.jyskebank.tv

Ever wondered why price quotes from brokers vary or why a trading system return profits on one broker and loses money on another broker account?

Most fellow traders think it is connected with the spread, the execution time or the brokers which manipulate the price feed. Well, some may manipulate the price quotes but the main reason is the decentralized structure of the foreign exchange market.

Let me show you how the “4 trillion USD chaos” is structured, how the hierarchy looks and how you can benefit from it.

Before examining the major “patient,” the Forex market itself, let’s get to probably the world’s first monopolist in prices – stock markets.  It is a whole public entity (a loose network of economic transactions) for the trading company and derivatives at an agreed price.

Exactly, the price agreed. This is where jack-in-the-box leads to total centralization! All of stock trades MUST go through the single specialist. It totally controls the trades and prices being able to manipulate the quotes it is offering to accommodate its needs. For example, too many seller’s VS few buyers and there is a big chance that stocks left unsold. No deal here for the specialist who here widens a spread or increases the transaction cost to please the sellers. And yes… new sellers are unwelcome in the market.

Stock market = centralized, Forex = decentralized

Stock market counts many “team players” across the Globe: the New York Stock Exchange, that one in London, Hong Kong and other million-citizens-cities. Though different nations, there is only one price that each stock deals with.

The Forex market structure is quite different: there is no single price for a given currency at any time. As result, quotes from currency dealers vary.

In this globalized economy where many businesses have an international exposure the currency exchange does matter for completing transactions.

For example, Honda makes cars in Japan. Then it ships those certainly brilliant machine pieces to the U.S. were common Americans will exchange those cars for their green dollars. And there are the Japanese workers in the country of the rising sun – they expect those dollars to be exchanged for Yens and be paid in their national currency.

And so the companies turn to Forex. Basically, it makes up the whole currency trading “galaxy” where there is a tough struggling between dealers for the best deal.

And there is a big chance to catch a good fish with a daily Forex market turnover of about $4.0 trillion.

That is more than $500 a day for every man, woman and child on this planet.

The huge trading volume represents the largest asset class leading to very high liquidity. The variety of factors affecting exchange rates really struck the mind. And again, in comparison to stocks, you can trade Forex wherever you are – with Internet at hand.

The Forex Hierarchy

Even such looking chaos can sometimes be put into order and have its levels. It is also about Forex market.

The “top level” party of the FX hierarchy belongs to the major/smaller banks and securities dealers. They trade with each other, directly or via the Electronic Brokering Service (EBS) or Reuters Dealing 3000-spot Matching. This two electronic trading has always been struggling for clients and getting bigger market share. Leaving the technical issue behind you as a trader could be interested in what they are offering in pair’s trading.

EBS platform provides high liquidity on majors while Reuters excellent market depth on cross pairs.

Like in real life, the rates will be largely dependent on the established credit relationship between the trading parties. The better your credit standing and reputation with them, the better the interest rates and the larger loan you can avail.

The next Forex hierarchy level belongs to market makers, hedge funds and retail Electronic Communication Networks (ECNs). As these institutions provide speculative operations, they don’t have tight credit relationships with the participants of the interbank market. So, their rates are slightly higher and more expensive.

The bottom Forex hierarchy level is occupied by the retail traders. They can become a part of this Forex herd indirectly through brokers or banks. As the Internet, electronic trading platforms and retail brokers saw the light of the day, Forex is kindly opening its doors to practically everyone who wants to be a trader.

At the bottom are we retail traders who deal through Market Makers and ECN Brokers on the Forex market.

Different brokers = different quotes = different results = bee in the pants?

Because of the very specific Forex market structure we traders have to deal with different price feeds. This spring I tested the same system with the same settings, on the same VPS on 3 different broker platforms and “surprise”. The results were quite different.

On the first account the system banked +296 Pips, on the second +210 Pips and on the third -47 Pips. It has to be said that I used a short term trading system for testing. Those kind of trading systems are in general more sensitive but even with a long term system the results will vary from broker to broker.

To avoid bad surprises I suggest that you trade with minimal lot size whenever you start using a new system or switch to new broker.

Although the fact of different price feeds are somewhat like an unwelcome bee in the pant, there is one awesome way, we can make them work for us to bank large profits. And I mean REALLY LARGE. I will share my “detailed insider knowledge” in one of my next blog posts. So, make sure you subscribe to the blog and stay tuned.

Read more about Forex market structure and Forex Hierarchy on Pipburner blog.

Source: http://www.opportunitiesplanet.com/forex-trading/structure-of-forex-market/

PipBurner on Google+: https://plus.google.com/114299061993276296858/

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.