Money & Investing - Banks.com

Many people have been watching the markets with trepidation. And, of course, looking at some of the deals that went down earlier this year. Some of them were real losers. CNN Money offers 3 deals this year that really should have been done differently:

1. Cash for Clunkers: While many people got a new car, the program created unintended consequences, such as benefiting foreign automakers, creating a huge cleanup for junked clunkers and running up prices. On top of that, Cash for Clunkers diverted discretionary income from other spending and directed it toward more consumer debt. Not to mention the fact that it didn’t actually boost consumer confidence in a meaningful way.
2. Citi undersold Phibro: Instead of driving a hard bargain on its sale of Phibro, Citi basically got the shaft as it only went for book value just to unload. And, of course, with the U.S. government owning 34% of Citi, that means that the taxpayers got a bum deal as well.
3. How to sell TARP warrants: CNN Money analyzes the way TARP warrants worked — and how they cut us out of some potentially valuable earnings: “The smartest part of the Troubled Asset Relief Program, as far as taxpayers are concerned, was the Treasury’s getting stock purchase warrants from the institutions that borrowed TARP money. The dumbest: Forcing the government to immediately sell back the warrants to institutions that repaid TARP loans and were willing to go through a complex pricing procedure.

   Consequently the strongest borrowers, with the most attractive stocks, repaid the loans early and got their warrants back just as their stocks were rising. In the real world, the idea is to cut your losses short and let your profits ride. At TARP our gains were cut short.”

But it’s not all horrible. GM plans to return its bailout money, and that means the bailout isn’t as expensive as we thought:

Image by Getty Images via Daylife

Kraft has been trying for several weeks now to take over Cadbury. However, the company has been repeatedly repelled. And today marks another attempt as Kraft launches a $16.5 billion hostile bid for the British chocolate maker. MarketWatch reports on the offer price for the deal:

The offer price is a 29% premium to the 90-day average price before Kraft first announced a potential bid in early September.

However, Cadbury shares have been trading above 750 pence since Kraft first proposed a deal and the stock, after an initial move lower, rose 1.2% to 767 pence.

Kraft, of course, believes that Cadbury could also benefit from a merger with the company, and Kraft believes that it could benefit from a well-known name. Kraft claims that Cadbury could remain relatively independent, and that the infusion of cash from  Kraft could help Cadbury.

Cadbury, however, remains convinced that Kraft is undervaluing the company. Cadbury believes its prospect for the future are quite bright, and that Kraft is not offering enough to reflect the current value and the future possibilities for the company.

It will be interesting to see how things turn out in this particular case, and whether Kraft will succeed. Cadbury remains adamant for now, and it could be that Kraft may increase its offering. However, the fact that Kraft is launching a hostile bid indicates that the foods giant is not ready to concede and offer more.

Cadbury stock is higher on the announcement of hostile bid, but that could just be due, in part, to the fact that equities around the world are higher this morning, including the FTSE 100.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Image by afagen via Flickr

It’s an interesting day today on the financial markets. U.S. unemployment has breached the 10% mark, and that is driving things. However, it isn’t resulting in the rout that some might have expected on the stock market. Indeed, the Dow, Nasdaq and S&P 500 are all barely in the black, holding tenaciously to gains made yesterday.

Another interesting result has been the sky-rocketing of gold prices. Just after the unemployment announcement, gold prices surged to $1,100, a new record high. Gold is back below $1,100, at around $1,093, but gold bugs are anticipating that the news means that pressure will be on the dollar going forward, as the Fed adheres to quantitative easing measures. MarketWatch reports on interest rate expectations:

Bets that the Federal Reserve will eventually lift interest rates from near zero fell slightly after the report. Fed fund futures indicated traders pared bets the Fed would raise its target rate by mid-2010 to 0.31%, compared to a 0.33% rate before the data.

On Wednesday, the Fed left its target rate in a range of between 0% and 0.25%, and repeated its commitment to keep rates low for the foreseeable future, citing slack in the economy and little reason to worry about inflation.

Helping the stock market is the commitment by Congress to prop up the housing market by extending the first time home buyer tax credit, and expanding it so that even some current home owners can take advantage of a tax credit. The news reinforces the idea that the government plans to continue propping up the economy as much as possible.

So, while the unemployment rate remains high, there are still indications that economic recovery will roll forward, albeit slowly. As a result, it doesn’t hurt to begin thinking about how you plan to invest in an economic recovery.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.