The Wall Street Journal-20080126-The Buzz- Best of WSJ-com-s Money Blogs
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The Buzz: Best of WSJ.com's Money Blogs
[From Deal Journal, MarketBeat and Wealth Report]
Apple No Longer
Stock Darling
---
Some Investors Begin
To Poke Holes in Status
Of a Shining Star
Message to Apple shareholders: Party's over.
That, at least, is what some doomsayers would have investors believe as the computer company's shares take a bit of a beating.
While long-term types may hold fast, momentum players look at it more pessimistically. "I still love Apple, but the stock no more," writes Howard Lindzon on the Wallstrip blog. ". . . Apple is in no man's land now."
The stock-price declines were triggered by Apple's guidance, which was apparently a bit more tepid than investors were hoping for. The company expects second-quarter earnings of about 94 cents a share, short of the average estimate of $1.09.
Todd Sullivan of Value Plays says the methods employed by Apple's Steve Jobs -- stick to conservative guidance and then blow past it -- may be coming back to hurt the company as shareholders have adjusted.
If the iPod frenzy is past its peak, "Apple is becoming a computer company again," writes Dan Frommer in Silicon Alley Insider.
Bernie Schaeffer of Schaeffer's Investment Research notes that Apple's stock had a similar drop, of 40% from its top, in 2006. Such a drop now would put the stock at $120 a share, where the "80-week trendline is now at $120 and rising."
So who knows? Apple has certainly defied expectations before. But if it doesn't, many are going to be disappointed.
-- David Gaffen, MarketBeat
wsj.com/marketbeat
Young Wealthy
More Diversified?
When you are young and rich, risk is your friend -- at least according to the conventional wisdom.
Yet a study from Northern Trust shows that millionaires in their 30s are better-diversified across all asset classes than millionaires in their 50s and 60s.
Generation-X investors between 28 and 42 with portfolios of $1 million or more allocated 23% of their portfolios to alternative investments -- hedge funds, private equity, real-estate investments and commodities. That compares with 14% for baby boomers (ages 43 to 61) and 10% for the Silent Generation (ages 62 to 77).
Even more surprising, Gen-X millionaires are keeping more of their portfolio in cash than older millionaires. Gen Xers had 17% of their portfolios in cash, compared with 13% for the Silent types.
Northern Trust says the findings show young people are more sophisticated and "at the forefront of adopting institutional approaches to asset management, an emerging trend among high-net worth investors."
But it can be argued that investing in hedge funds and private equity doesn't make you more "sophisticated." Given their high fees, liquidity issues and correlation with stock markets, alternatives can be more costly than cash.
-- Robert Frank, The Wealth Report
wsj.com/wealth
Will the Harrah's
Underwriters Fold?
The leveraged-buyout-funding losing streak may continue.
Speculation is that the sale of bonds and loans to investors to back the $17 billion leveraged buyout of Harrah's Entertainment will be put on hold. Standard & Poor's Leveraged Commentary & Data said in a note Thursday that some market participants expect the Harrah's deal "to move to the backburner."
Underwriters, led by Bank of America and Deutsche Bank, already had scaled back their ambitions, given how little appetite there is for high-yield debt now. They have been meeting investors trying to sell $3 billion of loan paper and as much as $5.28 billion of junk bonds, out of a total of some $20 billion of debt the buyout requires. Even a discount of 96.5 cents on the dollar for the loans might not be enough to entice.
The fates of other deals lately don't bode well. As S&P points out, the underwriters for industrial-products maker Solutia were unable to syndicate a $1.6 billion financing package. It appears that history might be repeating itself. In November, Chrysler was forced to shelve a $4 billion loan sale related to its buyout.
A bright side: The $90-a-share buyout of Harrah's by Apollo Management and TPG appears set to close, so at least the company's shareholders will win.
-- Dana Cimilluca, Deal Journal
blogs.wsj.com/deals
