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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7873)	5/20/2007 9:02:22 PM
From: robert b furman	Respond to of 33421

Hi John, One thing I believe is a credible threat: In a world of massive liquidity - inflation of equity prices has so far been tame - that may not last. When foreign trade reserves can chase after brand equity - a shift in valuation will be inevitable. Over all of the years of massive advertising ,current valuations merely approach the expenditures incurred to create the brand image - certainly not the costs of the intitial or replacement investment made. Classic example: Cerberus buys 80% of Chrysler for 7.4 billion. I'll bet 7.4 billion is less than the advertising budget for the last 5 years (half of Daimlers ownership period). If private equity gets funded by foreign currency reserves, we'll enjoy an equity valuation explosion that will dwarf all past bull market rallies. Example:LLTC sold a secondary that was declared to be used for stock buybacks.The buyer of the secondary was an already established equity firm that held a substantial position.MORE OF THIS TO COME IN MY OPINION The result: Message 23558226 You guessed it - it ocurred at the gap up.<smile> There ARE after all, declining amountS of equity shares out there. Now if only we can get the Arabs chasing after the Chinese who are all buying stocks - We'll get us an equity Cartel going. Sounds outrageous or does it? Bob

To: John Pitera who wrote (7873)	5/21/2007 11:57:26 PM
From: John Pitera	Respond to of 33421

Bear Sterns to Become Largest "Physical" Energy trader on Wall Street as Williams Cos. to Sell Power Assets To Bear Stearns' Energy Unit By KEVIN KINGSBURY May 21, 2007 9:46 a.m. Williams Cos. agreed to sell substantially all of its power assets to a unit of Bear Stearns Co.'s for $512 million, getting the company out of the electricity business. Williams, a Tulsa, Okla., natural-gas explorer and transporter, is selling about 7,700 megawatts of gas-fired tolling capacity, 1,800 megawatts of power-supply contracts and an associated trading book. "Our exit from the power business is a natural step forward in Williams' strategy to further increase shareholder value by focusing on and growing our core natural-gas businesses," said Williams Chairman and Chief Executive Steve Malcolm. "We expect one of the chief benefits this sale will produce for Williams is lower-cost capital. That, in turn, drives our market valuation and continued ability to pursue value-creating opportunities." Williams' power business had a 2006 loss of $211 million on revenue of more than $7 billion. The company said getting out of that sector will reduce Williams' business and financial risk and liquidity needs. At the same time, the firm said its credit profile will "significantly" improve as the sale allows Williams to eliminate nearly $2.4 billion of debt and related interest. "This transaction marks a substantial leap forward for our energy business," said Bear Stearns Chairman and CEO James E. Cayne. "We have taken our presence in the energy markets to a new level in a way that is consistent with our prudent approach to building businesses. This acquisition provides us with strategically located generation capacity in key markets that will position us to take advantage of improving market and regulatory dynamics." Bear Stearns is positioning itself as the largest "physical" trader of energy on Wall Street at a time when other banks, hedge funds and private-equity firms have been trading energy "financially." The distinction between the two is that physical trading involves the movement of actual power, natural gas and other commodities between buyers and sellers. Financial traders buy and sell energy derivatives -- futures, options, swaps and other complex contracts -- but don't take possession of the product itself. In November, Bear Stearns increased its presence in the power sector with its acquisition of Delta Power Co., a private power-plant developer with 1,380 megawatts of capacity under management. Bear Energy President Paul Posoli said in March the company managed 8,000 megawatts of power generation for clients. Mr. Posoli, who was a senior executive at Calpine Corp., came to Bear Stearns in April 2006 following Calpine's slide into bankruptcy in December 2005. Bear Stearns and Calpine had been working to set up a joint energy-trading venture. The venture fell apart after Calpine, San Jose, Calif., filed for bankruptcy-court protection, and Bear Stearns started its own business, hiring Mr. Posoli and a number of former Calpine traders. The Williams deal is set to close within six months and add to Bear Stearns' fiscal 2008 earnings. Williams expects the sale's proceeds to be largely offset by income taxes, resolution of retained liabilities, the deal's costs and near-term cash-collateral postings. After a serious liquidity crunch several years ago when energy trading imploded, Williams repositioned itself as a natural-gas exploration company with numerous interstate-pipeline assets. Since, the company has been the subject of sporadic takeover talk. Shares of Williams jumped to $30.50, or 5.3%, in early composite trading on the New York Stock Exchange. Bear Stearns fell 65 cents to $148.92.

To: John Pitera who wrote (7873)	5/22/2007 12:23:15 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

When One Bubble Invests in Another Bubble Posted by David Gaffen May 21, 2007, 3:30 pm If bubbles get together, do they create some kind of unholy matrimony between them, a mega-bubble that feeds on itself like the fusion reactor created by Doctor Octopus in Spider-Man 2? MarketBeat can’t help but wonder this when seeing China (that has the most insane of all stock markets, having gained 70% in the last two months) plunk down $3 billion into Blackstone, one of the largest private-equity groups (an industry responsible for approximately 3,372 mergers over the weekend). Blackstone Group said earlier today that it plans on raising $4.75 billion – which would make it the year’s largest U.S. initial public offering — a day after agreeing to sell a $3 billion stake to China. The IPO would value the firm at about $33.6 billion, or about one-third of the market value of Goldman Sachs Group, which has been around since “The Canterbury Tales” and has lately been the most effective money-printing machine among America’s public companies. These kinds of things don’t end well. (Columbia Pictures) “To think that the Chinese government has come to the point where it isn’t happy with the returns that it can get in U.S. government securities and traditional investments may mean that money flow into operations like Blackstone could further fuel what may becoming a buyout bubble,” says Paul McIntyre of Bloggingstocks.com. With China holding about $1.2 trillion in foreign-exchange reserves, money typically held in low-yielding instruments such as U.S. Treasurys, the reason for such an investment is simple — better returns. Dirk Van Dijk, head of research at Zacks Investment Research, surmises that this investment is a “toe in the water” before the Chinese government seeks other vehicles for a larger portion of their reserves. But plunking down a huge sum of money into an industry generally regarded to be running at full capacity, at a time when China’s own equity market has ballooned, strikes some as folly. Breakingviews.com’s Edward Chancellor notes that asset bubbles have often burst just after foreign investors jump into the fray – Scottish investors getting soaked in the Mississippi bubble in the early 18th century; Bern, Switzerland’s investment in the South Sea Company, Japan’s acquisition of Rockefeller Center in the 1980s. “In this case, there may be no greater fools than the Chinese bureaucrats who are taking this buyout bet on the private-equity firm’s non-voting stock,” he writes. Permalink \| Trackback URL: blogs.wsj.com