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Saturday, December 2, 2023

Mega-Merger Monday – T Can Be “Heard Now” by 40%

Didn't we break these guys up?

Oh anti-trust, anti-trust, wherefore art thou anti-trust?  Don't get me wrong, I love T as an investment, we just made a play on them last week with their big, fat, 6% dividend.  Now they are using debt to finance a $39Bn purchase of DT's T-Mobile division as the German-based company is sick and tired of getting paid in worthless dollars, which add nothing to their Euro-based earnings.  Although one may think regulators would actually wake up and say "Huh?" to this deal – AT&T was confident enough to put up a $3Bn breakup fee and you don't do something like that unless you've already spent $300M buying all the votes you need ahead of time.  

"AT&T anticipates regulators will require it to divest wireless spectrum and subscribers as a condition for approval," said a person with knowledge of the situation.  These things are all worked out long before they are announced but let's hear it from the little guy anyway:  "The combination of the second-largest wireless carrier with the fourth-largest is 'unthinkable',” Gigi Sohn, president of Public Knowledge, a Washington-based advocacy group, said in a statement. “We know the results of arrangements like this — higher prices, fewer choices, less innovation.”  Isn't he cute?

In addition to surpassing Verizon Wireless, AT&T could leave Sprint Nextel Corp. (S) as a far weaker No. 3 player in the industry, said Rebecca Arbogast, an analyst for Stifel Nicolaus & Co. in Washington. “AT&T was broken up and now it’s back with a vengeance,” said Bert Foer, president of the American Antitrust Institute, a Washington-based non-profit researcher that challenges what it sees as abuses of concentrated economic power. “We have to decide if we’re happy with the idea of going back to monopolistic treatment of the telecom industry. AT&T has come back to monopolistic power just like the Terminator.”


Is T calling a bottom to the dollar?  Probably.  You don't spend $39Bn to buy a 40% market share in a country with declining revenues.  T is also calling a bottom to lending rates and probably making a bet on inflation as well – all in all, pretty much exactly what we're playing the market for so, from a T shareholder perspective – I love this acquisition.  Nothing makes money like a monopoly (just ask Carlos Slim) and, as Steve Colbert illustrates above, AT&T has already proven to be an unstoppable monstrosity of a Corporation that cannot be killed by earthly means.  So we may as well learn to love them.  

Another monster that's hard to kill is our friend Qaddafi, as our very strange logic in aiding Libya's rebels is that we will ground his air force (mission accomplished already, by the way) but we won't aim our little guided laser pointers at the big man himself – bad form I guess.  

We will not leave our oil to America or France or Britain or the enemy Christian states,” Qaddafi, who has ruled since 1969, said yesterday. “We will fight for every inch of our land and liberate every inch of it.” 

That was the $270M statement of the day as crude oil shot up $3, back to $104 per barrel so, if you think you don't care about this little police action – keep in mind that Global Consumers buy 89Mb of oil daily so every dollar oil climbs is almost $100M PER DAY out of the pockets of already-suffering Global Consumers and diverted away from other businesses – which was a major topic of discussion in this Weekends Reading Post.  

UK Defense Secretary, Liam Fox, is far less shy about the objective than we are, saying Colonel Gaddafi himself could be targeted by air strikes if there is no risk to civilians.  He told BBC Politics yesterday: "There's a difference between someone being a legitimate target and whether you would go ahead with targeting.  You would have to take into account what might happen to civilians, we don't simply – with a gung-ho attitude – start firing off missiles."  In other words – "we'd love to kill him – we just don't have a clean shot…"

Corporate takeovers, regime changes – are you sensing a theme here?  As we learned from Highlander – in the end, there can be only one!

economists_survey2.top.gifThe one concern that topped a poll of economists surveyed by CNNMoney was "High Oil Prices" but number two will surprise many Conservatives (and no liberals) as the second biggest risk facing the US Economy is "Cuts in Government Spending," chosen as the #1 threat by 6 of 23 economists and #2 by 7.  Strangely – the threats of "More Government Spending" or even "Higher Taxes" didn't make the list at all.  

This mirrors what we observed in our weekend post as we looked at "what's really wrong with the economy" and, according to 30% of small businesses surveyed – LACK OF SALES is the problem the face – and that is up 200% from August of 2008.  The Fed worries about labor cost but labor costs don't bother small businesses, who hire 70% of US Workers – labor costs bother big businesses – who put 70% of small businesses out of work by outsourcing their labor and manufacturing.  

I don't know how many different ways I can explain that the Fed's policies are pretty much the exact opposite of what our country needs to get back on it's feet.  Perhaps this chart from Toby Connor will help as we see what is now a potentially MASSIVE technical breakdown in the Dollar as not even G7 intervention last week has managed to get the Dollar back over the 77 line and, in fact, this morning we are all the way down to 75.75 – the lowest value of US currency since early November and, before that, November of 2009.  

Not surprisingly, the markets are flying on the doomed Dollar, with 1% gains across the board pre-market and the prior Dollar dives gave us our November spike to S&P 1,227 (were were down 50 by the 16th) but did the trick of punching us through 1,100 in November 2009 where we gained another 50 points by January before falling 100 points back to 1,044 in Feb of last year.  

So it looks like we'll be taking the money and running if we can't take out our levels (again) as a weak dollar is a pretty poor long-term investing premise – especially when commodity prices have consumers on the ropes – which was not the case in last November, when oil was $85 a barrel and not in November of 2009, when oil was $80 per barrel.  Today we are STARTING at $104 – that's up 22% over $85 and we've already seen the reports that tell us that worker compensation is actually losing ground to even Uncle Ben's CORE CPI – so imagine the pain being felt by the bottom 90% as we ratchet up energy by 25% on top of the 30% increase in food prices they've already been socked with.  

Recovery?  I think not…



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