BUY OR SELL-Can Dell rebound as PC spending returns?

Dell Inc (DELL.O) shares fell 9 percent on Friday after the company posted weaker-than-expected quarterly profit and sales, as it lost share in the global personal computer market.

The results for the No. 3 PC maker came despite signs of improvement in the sector and ahead of a widely expected pick-up in corporate spending on hardware next year. [ID:nN19191886]

Does Dell represent a buying opportunity or is it too risky? Can the company bounce back in 2010, or do market share losses and margin worries signal more trouble down the road?

HP A SAFER CHOICE

"We have been recommending for some time to investors that they should be investing in HP as opposed to Dell," said Philip Alling, an analyst with London-based Atlantic Equities. He has a neutral rating on Dell and does not own shares in either Dell or HP.

Dell recently fell to third place in the global PC market, behind Hewlett-Packard Co (HPQ.N) and Acer Inc (2353.TW), which are both taking share as they grapple in a price war.

"We have had ongoing concerns about Dell as far as market share losses in its core PC space," Alling said, also noting unease about Dell's weaker margin performance, and a lack of diversity in its product portfolio.

The corporate PC upgrade cycle has "long been the investment case on the stock ... but they have much less exposure to the consumer sector and you've seen better strength there thus far this year," said Alling.

Pacific Crest Securities analyst Andy Hargreaves said Dell faced margin pressure on both component costs and falling PC prices, along with the cost of integrating the newly acquired Perot Systems. He rates Dell market perform.

"The problem with Dell is that there's a lot of risk and the risks aren't insignificant. The PC refresh story is fairly straightforward and in a static world it would be perfect ... but it's not a static world," Hargreaves said.

"They face a lot of competition, and right now they seem to be ratcheting up the price competition."

PATIENCE WILL BE REWARDED

US Senate Finance Focuses On China In Treasury Nominee Hearing

As the Senate Finance Committee considered the nominations of three senior Treasury Department appointments Friday, the U.S.'s policies toward China loomed large, especially China's currency policies.

The Finance panel considered the nominations of Lael Brainard, nominated to be Treasury's undersecretary for international affairs, Mary John Miller, the nominee to be Treasury's assistant secretary for financial markets, and Charles Collyns, nominated to be Treasury's assistant secretary for international finance.

Sen. Chuck Grassley, the top Republican on the Finance Committee, said he is "frustrated" that the Obama Treasury did not name China a currency manipulator in its foreign exchange report, adding that he was also critical of the Bush Treasury for avoiding this designation.

"I believe we should be calling a spade a spade," he said, adding there is little doubt that China manipulates its currency in ways that are harmful for the American and global economies.

Brainard said China's currency policy played a "stabilizing" role in the early phases of the recent financial crisis but now these currency policies are "getting in the way of global recovery."

She said working on this matter would be an "absolute top priority" if she is confirmed.

Brainard, in a clear reference to China, said the administration believes "domestic demand led growth" by other key nations is critical for a balanced global economy.

"They are going to have to reorient their economies fundamentally," she said.

Brainard said that the global economy is "coming back slowly and haltingly," adding there is now "the first signs of growth" emerging in the world economy.

Collyns said the yuan is "clearly undervalued" and that this is a "major concern" for the Treasury. The undervalued Chinese currency, he said, is "blocking the adjustment needed" to get the global economy back on track.

Collyns also said he sees signs of hope regarding the global economy.

"The global economy is beginning to emerge from a very difficult period," he said, adding that the administration wants "strong, sustained and balanced growth" internationally.

Miller said that if confirmed she wants to help rebuild the "confidence of investors large and small in our financial markets."

Sen. Kent Conrad, serving as the acting chairman of the panel because of the absence of Finance Committee Chairman Max Baucus, told the nominees that he hopes the Senate can "move your nominations expeditiously."

Brainard's nomination has been delayed by a months-long investigation by the Finance Committee into her tax returns that revealed several late payments of property and unemployment insurance taxes.

Grassley said Brainard's tax problems makes her part of a "growing list" of administration nominations with tax problems.

Foreclosures will keep rising through 2010, report says

Mortgage Bankers Assn. says delinquencies and home repossessions have hit a new high. Blaming job losses for most of the pain, it sees a continued surge in foreclosures through all of next year.



Home foreclosures are likely to keep climbing through all of next year despite stabilizing housing prices in some areas, a major lender group said Thursday as it reported that the level of delinquencies and repossessed homes had jumped to a record.

One in seven U.S. home loans was past due or in foreclosure as of Sept. 30, putting that quarterly delinquency measure at its highest level since 1972, when the Mortgage Bankers Assn. began reporting it. At the beginning of this year, 1 in 10 loans was past due or in foreclosure.

The continued surge in delinquencies suggests that a recovery in the housing market could be stalled by the worsening job picture as well as by further fallout from the easy-money lending that prevailed during the boom years.

Signals about housing have been decidedly mixed. On the bright side, median home prices appear to have stabilized -- for the time being, anyway -- in hard-hit areas of California such as the Inland Empire, and have begun to inch up again in San Diego and Orange counties and in San Francisco.

But recent negative indicators, in addition to rising foreclosures, include the home lender group's report Wednesday that applications for mortgages to buy homes have declined for six straight weeks despite interest rates below 5% on 30-year fixed-rate loans. Also Wednesday, the Commerce Department said the seasonally adjusted rate of housing starts fell more than 10% in October from the previous month.

Overall, 14.41% of all U.S. home loans were in foreclosure or at least 30 days past due at the end of the third quarter -- 1 in 7 -- and up from 13.16% in the second quarter.

As it has for some time, the group's report on delinquencies blamed job losses, not tricky adjustable-rate loans, for causing most of the recent pain.

The mortgage group's chief economist, Jay Brinkmann, said he expected the delinquencies to keep rising until the unemployment rate tops out in the first or second quarter of next year.

Normally, foreclosures would continue rising for two quarters past the peak in delinquencies, he said. However, given the extreme decline in home prices, Brinkmann predicted the foreclosure rate would continue to rise longer than usual past the peak in delinquencies.

Four Sun Belt states where the housing bubble inflated the most and exotic lending was most prevalent -- California, Florida, Nevada and Arizona -- accounted for 43% of the foreclosures started in the third quarter.

Prime loans -- those made to the borrowers with the best credit -- continued to make up a growing percentage of troubled mortgages. Such loans accounted for nearly 33% of new foreclosures last quarter, compared with 21% a year earlier, when high-risk subprime loans made during the housing boom were the main reason for default.

In California, 4.62% of fixed-rate prime mortgages, considered the safest home loans of all, were in foreclosure or 90 days delinquent.

Jason Gorowitz, a 34-year-old attorney laid off by a Woodland Hills law firm in September, fears his loan is headed in that direction because the job market is so bad.

Gorowitz said he and his wife took out two loans to buy a two-bedroom Sherman Oaks condominium for $427,500 in 2006, fearing they'd otherwise be priced out of the then-booming housing market. He had paid off one loan, a home-equity credit line for 10% of the purchase, when he lost his job.

Gorowitz said the condominium was now worth less than his remaining $328,000 debt. He has been trying to persuade his lender, JPMorgan Chase & Co., to temporarily lower his payment, giving him some breathing room until he finds a new job to support his wife and toddler son.

His repeated calls to Chase employees have proved fruitless, he said, because the bank insists it won't talk about a loan modification until his bank accounts drop below $6,000.

"If something isn't done soon, I'm going to be in default," he said.

"I've tried to do it the way you're supposed to -- pay down your mortgage, be responsible, don't walk away from your obligations. But I can't get anyone even to discuss lowering my payment."

Chase executives, citing privacy laws, said they couldn't discuss an individual customer's finances.

But a Chase spokesman said the bank, in considering loan modifications, complied with all aspects of the anti-foreclosure program sponsored by the Obama administration.

The spokesman also said banks often were reluctant to modify loans when a borrower's woes appeared to be temporary.

I'll leggo my Eggo...for a price

The ways people try to make money never cease to amaze me.

Recently, the Kellogg Co. announced there will be a nationwide shortage of Eggo frozen waffles until next summer because of production issues. According to a report by the Associated Press, the public is already noticing near-empty Eggo shelves on the freezer aisle at many grocery stores.

And you know what that means, folks? The opportunists are already trying to cash in. There's talk on Twitter and Facebook that people are trying to sell their boxes of Eggos on eBay. Sure enough they're a few people trying to profit from the shortage. One person is auctioning off a box of waffles for $49.99, another for $65. If you are a bargain shopper, you can grab a box of blueberry Eggo waffles from one seller for 99 cents. Last I checked, there were no bids for any of the sellers.

¿Se Habla Dinero?

Ready to talk money today?

Please join me at noon for a discussion about my latest pick for the Color of Money Book Club, "¿Se Habla Dinero? The Everyday Guide to Financial Success." This book provides side-by-side Spanish and English translations of advice on basic money management. Here's the review, if you missed it.

My guests for the chat today will be Lynn Jimenez, author of "Se Habla Dinero?" and Randy Grindley, a certified financial planner who consulted on the book.

Even if you haven't read the book, join us. We'll be available to take your personal finance questions. If you can't join me live, you can submit a question early or read the transcript later.

Follow-Up on Colombia - Colombia To Sell Up To 15% Stake In Ecopetrol-Finance Minister

The Colombian government plans to sell as much as 15% of state-controlled oil company Ecopetrol SA (ECOPETROl.BO) to finance construction of new roads and other projects in the country, Finance Minister Oscar Ivan Zuluaga said Wednesday.

The Energy and Mines Minister Hernan Martinez is currently drafting a bill to be sent to Congress that would allow the government to sell as much as 15%, up from the 10% previously announced, Zuluaga said.

"There is a group of legislators ready to support the proposal," Zuluaga told reporters.

(She's Colombian so I thought it was appropriate)

The Colombian government owns 89.9% of Ecopetrol, and the remainder floats on the local stock market after the company sold a 10.1% in an initial public offering in 2007 to raise fresh capital to speed up its investment program.

The company has been allowed by Congress to sell another 9.9% in new shares to raise fresh capital. Ecopetrol's Chief Executive Javier Gutierrez has said the company won't sell before late 2010 or 2011.

Shares of Ecopetrol ended 1% down at 2,605 Colombian pesos ($1.33), while the benchmark IGBC stock index fell 1.1%.

A 15% stake in Ecopetrol would be worth about COP16 trillion at current market price.

Colombia Sells Y45B In 10-Year Samurai Bonds -Finance Minister

The Colombian government sold 45 billion yen ($500 million) worth of 10-year bonds in Tokyo to finance its 2009 budget, Finance Minister Oscar Ivan Zuluaga said Wednesday.

The new bonds, which were sold at par, will yield 2.42%, Zuluaga said in a press conference in Bogota. The sale is part of a plan to diversify financing sources, he added.

The government will swap the proceeds of the bond sale into dollars, but won't change the dollars into pesos, he said.

"We don't want to take the currency risk," Zuluaga said. The government needs dollars to pay its dollar-denominated expenditures such as interest payments and weapons, he added.

Last month, Zuluaga had said the government was halting peso purchases to limit the currency appreciation.

Yen-denominated bonds issued in Japan by foreign borrowers are called Samurai bonds.

The bonds are guaranteed by the Japan Bank for International Cooperation and were lead managed by Mitsubishi UFJ Securities and Daiwa Securities SMBC.

The sale is the first bond offering by Colombia in Japan since 2005, when the country also issued bonds in a similar JBIC-backed private placement.

The new bonds will replace borrowing from multilateral lenders that was scheduled this year.

Zuluaga said the government doesn't plan to carry out this year any more borrowing for its 2010 needs.

The Fed is foolishly weakening the dollar

Has America's Federal Reserve become the single greatest obstacle to global economic recovery? Central bankers around the world are increasingly asking this question as the American greenback continues its Fed-inspired decline and damages the export-driven growth of countries from Latin America and Asia to Europe.

Historically, the Fed has responded to economic downturns by cutting interest rates to stimulate domestic business investment and consumer purchases of "big-ticket" items, like automobiles and housing, that are sensitive to the cost of loans. However, in the current crisis, this traditional formula is simply not working.

It's not working in part because the Fed's "solution" has been a concentrated dose of the problem. After years of promoting the easy money and loose credit that fueled asset bubbles, it has responded with even easier money and even looser credit. It's like fighting fire with gasoline.

American consumers are not responding to the Fed's liquidity surge because high employment, high oil prices, bottoming home prices, and stagnant wage growth have squeezed their purchasing power. Business investment has likewise failed to fill the recessionary gap because much of the investment US corporations used to make on American soil is increasingly being sent off shore.

Despite this lack of responsiveness, Fed Chairman Ben Bernanke continues to throw monetary stimulus at the problem – and thereby has created an international dollar crisis now threatening the global recovery.

The declining dollar story is one of weakening demand for, and a massive oversupply of, the greenback. It is a sad and sordid tale scripted almost entirely by the Fed.

During the worst months of the global financial crisis, investors flocked to the dollar as a haven amid the storm. But since March 2009, when economic policy under the Bernanke Fed and the Obama administration became clearer, they have fled the greenback. In that time, the dollar index has fallen 16 percent.

You can't blame investors for selling. By first driving, and then maintaining, short-term interest rates near zero, the Bernanke Fed has made it far less attractive for them to hold dollars.

In a desperate effort to break the back of the credit crisis, the Fed has also engineered the most massive increase in the money supply in US history. Since 2007, the Fed has roughly doubled the monetary base. This, however, is only half of the oversupply story.

The other half of the tale involves the willingness of the Bernanke Fed to help accommodate the rapidly rising, and historically unprecedented, US budget deficits. Such accommodation involves the Fed's willingness to print new money to purchase many of the government bonds being issued by the Treasury Department to finance the budget deficit.

The practical effect of the Fed's easy money policies has not been to stimulate the US economy through traditional channels of domestic consumption and business investment. Rather, it has debased the dollar and thereby, in true beggar-thy-neighbor fashion, helped to stimulate demand for US exports while discouraging imports from the rest of the world. To the rest of the world, this policy seems cynically aimed at bootstrapping the American economy through exports at the expense of its trading partners.

This beggar-thy-neighbor effect is further complicated by the Chinese government's pegging of its currency to the falling greenback. Because of this peg, every time the dollar falls, the Chinese yuan falls with it. The steadily weakening yuan has further boosted the already formidable competitive advantage of Chinese manufacturers in markets across the globe.

In response to sluggish export demand in their home countries and the loss of market share to China, central bankers around the world are beginning to retaliate with large-scale interventions in the currency markets designed to brake the dollar's decline relative to their own currencies. The clear danger is that this tactical retaliation will devolve into a longer term strategy of competitive devaluations that will ultimately pit nation against nation and destabilize the already fragile international monetary system.

Washington officially supports a strong dollar. But its policies suggest otherwise. To avoid this destructive cycle, it is critical that the Fed and the Obama administration find the courage to end easy money and the accommodation of ever-larger budget deficits. This certainly won't be easy, but the road to global economic recovery must ultimately be paved with both fiscal and monetary discipline in the US – not with Great Depression-style competitive devaluations.