Will Microsoft Change Dividend or Share Buy Back Strategy with New CFO; $MSFT

Microsoft (Nasdaq:MSFT) is replacing their CFO. Some believe an announcement is coming within a week or so. $74.5 Billion of cash and investment balances are at stake. Regardless of who wins Windows division CFO Tami Reller or Office division CFO Amy Hood are top candidates. Online Services COO Rik van der Kooi is also said to be a candidate.

While everyone is curious to know the outcome I do not expect dividend or share buy back strategy to change much. Major shareholders are donating their shares to charity. The question becomes does the charity want to hold a dividend paying stock or will they sell into the market and stress the share buy back program beyond normal market dynamics.

Who ever wins the job will be marching as instructed.

George Gutowski writes from a caveat emptor perspective.

Jamie Dimon Imitates James Cagney $JPM $XLF “Why You Dirty Rat”

Jamie Dimon Chair and CEO of JP Morgan (NYSE:JPM) is beginning to resemble James Cagney in some of his film roles as an unyielding, unrepentent, tough guy who was not going to take anything from any body. You see? BTW I think Cagney robbed some banks as well.

Just to summarize some of the points which have not influenced Jamie Dimon

  1. London Whale debacle destroying shareholder wealth
  2. Publicly arguing with Governors of Central Banks
  3. Falling out of the running to be Secretary of Treasury under President Obama
  4. Trying to get cozy with the GOP to get the same possible job back
  5. Two major proxy solicitation services recommending Chair and CEO position be split.
  6. Public recommendations that certain independent board members not be re-elected.
  7. Independent board members meeting with third parties about some or all of the above.
  8. Federal Regulators saying they do not trust JP Morgan.
  9. Major institutional shareholders feeling very uneasy about it all. Thats not a vote of confidence.
  10. Warren Buffett making public statements of support indicate Jamie Dimon does not have the support you would think he should have as the Chairman/CEO

Regardless of where you stand on this issue; because it has become an issue of the tar baby variety it will not go away in a satisfactory fashion. It is a huge distraction.

If there is a final shoot out of the James Cagney fashion shareholder wealth will be destroyed. Who then will be the “Dirty Rat”

George Gutowski writes from a caveat emptor persepctive.

Googles Tax Problem; Uncle Sams Opportunity; Thank You Europe $GOOG, $YHOO, $FB, $TWIT

Google (Nasdaq:GOOG) is being hunted down by european tax collectors controlled by austerity starved politicians. Google and other American companies are seen as fat cows. Minimal local political consequences to extracting a few pounds of flesh.

Google rolls up the revenues to Google Ireland and then shunts the cash off to an affiliate in Bermuda. Pretty clever except UK, France and Germany feel they are not getting their fair share.

Come back to USA. Huge amounts of corporate cash are parked off shore. Corporations do not want to pay US income taxes on funds earned elsewhere. Not a bad argument if local taxes had been paid. But if the funds are in Bermuda and Ireland no one has paid something substantial.

So far the argument has been a classic push. Competing governments have not been able to break the logjam. Several corporations have huge off shore cash reserves with no immediate plans to deploy.

US politicians are under increasing pressure to resolve the issue. The uninformed electorate sees big buck off shore held by uber-large entities and joins the local Occupy Wall Street movement. End of electorates analysis. One person one vote does not equal sound financial/economic thought.

Corporations to be frank are motivated by stupid tax rules. Most of the key executives are  domiciled in the US and would probably prefer to see capital returned to US and then move globally without restrictions.

Congress will most likely mandate local state taxes be paid on internet transactions. Politicians also would love to be able to say they forced the repatriation of billions from overseas back to US. This will appease the Occupy crowds.

Watch for tax treaties between  the US and major European governments (EU as well) which will disadvantage off shore cash.

Investors after the initial sticker shock of increased tax rates will see cash coming into play more easily. Demands for effective economic deployment will grow. Investors did not buy to hold cash they can do that on their own.

George Gutowski writes from a caveat emptor perspective.

Google Achilles Heel; European Income Taxes; Not so Good for Google $GOOG $YHOO $FB $TWIT

Google (Nasdaq:GOOG) pays next to no income taxes on European revenues. UK, France and Germany all have Google in their sights. Google currently designates units in those countries as providing marketing and support services to Google Ireland which in turn transfers most of its turnover to an affiliate in Bermuda.

The structure is legally sound for now. except the guys who make the laws no longer like it. Google is advertising for sales and marketing staff in UK, France and Germany. So if the sale becomes local because of the local sales and distribution arms taxes will become local as well.

European governments are all fighting austerity and other financial issues. Quite frankly they have no political choice but to increase tax revenues. Google is a fat cow which will be slaughtered as quickly as possible. The UK, France and Germany constitute and will always constitute the overwhelming bulk of Google European revenue.

While Google is currently in the tax mans sniper scope. Yahoo (Nasdaq:YHOO), Facebook (Nasdaq:FB) and Twitter (To be announced) who all will depend on European revenues will be treated in the same fashion.

Big increases coming to global income tax rates which means negative pressure on EPS and potential dividend rates.

Death and taxes are inevitable. Google is not on its death-bed so it must be taxes.

George Gutowski writes from a caveat emptor perspective.

Barrick Gold Conundrum; Commodities and Interest Rates Must Snake Correctly; Good Luck $ABX $GLD

Barrick Gold (NYSE:ABX) has a conundrum. Is it a commodity/interest rate train wreck waiting to happen. Or is a deep value play where buy ugly sell pretty applies in spades.

The stock has dropped dramatically and is just south of $20. Dividend yield is around 4% at depressed stock prices. Some talk about revisiting dividend payment seems to be dissipating given the recent $3 Billion dollar bank loan. Bond ratings still in toilet.

Barrick is a Gold producer with significant interests in copper and energy. Therefor they are a commodities company. Get over it. They may be selling off the energy assets and create a significant liquidity. Thats a good thing.

Barrick has successfully developed many gold properties. Pascua-Lama is one of the largest gold and silver resources in the world, with almost 18 million ounces of proven and probable gold reserves, 4,675 million ounces of silver, and an expected mine life of 25 years. The property is large but will eventually come on stream within a few years and will be a significant cash flow contributor.

Gold prices and interest rates are highly influenced by political influences which are out of the control of management and investors. The stock is deeply discounted with a pay while you wait 4% yield. Pascua-Lama when on stream is expected to have a $200 per oz extraction cost. Accretive cash flow is close at hand.

Interest rates are a wild card. Over time they can only go up. Barrick’s ability to generate wealth for shareholders will be more impacted by its ability to shed debt and or replace expense rates with low rates. Financial engineering needs to rule the board room.

Follow very carefully the temptation for off-balance sheet arrangement will be enormous.

George Gutowski writes from a caveat emptor perspective.

ISS recommends against 3 directors on JP Morgan Board. $JPM

International Shareholders Services (ISS) is recommending against re-election of three members of Board of Directors for JP Morgan (NYSE:JPM). Referring to last years London Whale debacle they are citing “material failures of stewardship and risk oversight” specifically they are recommending shareholders withhold votes for

David M Cote  is Chairman and Chief Executive Officer of Honeywell International Inc. Prior to joining Honeywell, he served as Chairman, President and Chief Executive Officer of TRW Inc., which he joined in 1999 after a 25 year career with General Electric. Mr. Cote was named co-chair of the U.S.-India CEO Forum by President Obama in 2009, and has served on the Forum since July 2005. Mr. Cote is a member of The Business Roundtable and serves on an advisory panel to Kohlberg Kravis Roberts & Co. Also sits on risk policy committee for JPM

James S Crown received his law degree from Stanford University Law School in 1980. Following law school, Mr. Crown joined Salomon Brothers Inc. and became a vice president of the Capital Markets Service Group in 1983. In 1985 he joined his family’s investment firm. He sits on the risk policy committee for JP Morgan.

Ellen V Futter was a director of the Federal Reserve Bank of New York (1988–1993) and served as its Chairman (1992–1993). She is a member of the risk policy committee for JPM.

Say what you want the team blew it and shareholder wealth was destroyed. With these resumes and responsibilities its hard to have confidence in these individuals to stay as members of board.

JP Morgan and Jamie Dimon has already heard from Fed regulators that JP Morgan is not trusted. What will probably happen is this team will quietly resign and skulk away through the back door.

The real problem is how does Jamie Dimon go home.

George Gutowski writes from a caveat emptor perspective.

 

Can an Oracle be a Twitter $TWIT $BRK.A $BRK.B #SEC #REGFD

Warren Buffett is now in the Twitter house. Good luck with that. His every world and gestured are analyzed and parsed to death. He has even applied to the SEC to exempt him from reporting standards claiming he is so famous when he reports an acquisition the stock jumps in value in anticipation. (He had a point but rules are rules)

So if he wants to camouflage his buy and sells why the hell do you think he will say something decent on Twitter. No actionable intelligence coming here. If you follow him as some 130K already do it will be to see what he does not say.

Warren is in the house like a fox in the hen-house.

George Gutowski writes from a caveat emptor perspective.

Warren Buffett Joins Twitter. Look who he is following! $TWIT $BRK.A $BRK.B

Warren Buffett of Berkshire Hathaway fame (NYSE:BRK.A) has joined the twitterverse and gained around 130K followers in rock star record time. In a little  lot of hubris he declared he is in the house.

Well that’s just swell Warren. But who is Warren following. So far just one guy. Kyle Baumgartner @kbaum11. The picture is of a young man pointing I think a sniper rifle right at the viewers forehead. Real friendly like. Kyle is retweeting some Warren Buffett quotes.

Why am I gonna follow a guy pointing a weapon at my head. Really. This is not a gun control thing. I’m not too sure I like weapons pointed at me. But maybe that’s just me.

We’ll see if the Oracle keeps up with it. This could be tricky.

George Gutowski writes from a caveat emptor perspective.

Herbalife New Auditor Needs to be Evil in a New Way or Just Suicidal $HLF

Herbalife (NYSE:HLF) is looking for a new auditor. They are not exactly a plum account and may find it impossible to engage new auditors. Either way the deal will be expensive. The auditor knows they will have lawsuits and lots of post opinion trouble.

The company that accepts the deal reminds me of Slim Pickens in Dr Strangelove. Remember the air force guy who went down sitting on fat boy, waving his cowboy hat and screaming for the heavens to hear. Who fits that profile? In the meantime the accounting firm who take the audit will miss on the trustee in bankruptcy work which will be more lucrative and safer from a legal point of view.

George Gutowski writes from a caveat emptor perspective. If all those powders and shakes really worked how come we have an obesity and diabetes epidemic.

Alibaba Short Term Loans=Long Term Problems. IPO Hysteria Pending $ALIBA

Alibaba who wishes to become a publicly traded company has convinced about nine big banks to lend it $8 Billion in supposedly US Currency. Normally companies prepping for an IPO do not find it helpful to become mega-borrowers. This logic is not in play for Alibaba. The tranches are all very short-term or revolving

Some of the funds are to repay existing payables and indebtedness. The press releases also speak of anticipating an IPO where the banks would be repaid from proceeds raised. This may be sound thinking on the part of the banks but if I was an investor I would not be motivated knowing that my precious capital will repay bank loans. I would be impressed if capital would go directly into some asset of wealth generation. Basics such as R&D, product expansion, accretive acquisitions come to mind.

The pump has already begun. Investors are expected to be impressed that so many large sophisticated banks are backing this horse. The whole “China is enormous” thing will be mentioned several times.

Just remember an $8 Billion dollar short-term loan is incredibly motivating in many ways.

Alibaba coming to your broker soon.

George Gutowski writes from a caveat emptor perspective.