Pence Wealth Management’s Financial Market Report

US FINANCIAL MARKET

• Warren Buffett’s Berkshire Hathaway and 3G Capital are acquiring Heinz for $72.50 a share, or $28 billion, including debt. Berkshire and 3G will each put up $4.4 billion in equity for the deal, along with debt financing from JPMorgan and Wells Fargo. Berkshire is also buying $8 billion of preferred stock that pays 9 percent. The last time Buffett did a deal like this was in 2008, when Berkshire helped fund Mars Inc’s $23 billion purchase of Wrigley.
• AMR and US Airways Group unveiled an $11 billion all-stock deal that gives creditors of the bankrupt American Airlines parent control of the combined airline.
• GE expects to return about $18 billion to investors this year in share buybacks and dividends.
• Amazon.com shares climbed more than 4 percent yesterday after an analyst note fueled optimism about the company’s Kindle e-book business. Morgan Stanley’s Scott Devitt estimated worldwide e-book unit sales of 859 million in 2012, up considerably from a previous estimate of 567 million. With almost 45 percent of the e-book market, Amazon likely sold 383 million e-books last year, compared with an earlier estimate of 252 million. 
• PepsiCo reported a higher-than-expected fourth-quarter profit. 2013 forecast consistent with its ongoing turnaround plan. Net revenue fell 1 percent to $19.95 billion and profit fell 5 percent to $1.66 billion in the fourth quarter.
• Switzerland’s Nestle, the world’s biggest food and drinks maker, predicted another challenging year ahead but overcame tough global economic conditions to post a full-year net profit of $11.55 billion for 2012. Revenue was up about 10% to $100.5 billion in the year. With 330,000 employees worldwide and 461 factories in 83 countries, Nestle is a major buyer of food commodities such as wheat, sugar, milk and coffee and its results are a good indicator of consumer demand in various regions of the world.
• GM reported net income of $898 million, falling short of Wall Street’s expectations, and revenue grew 3 percent to $39.3 billion in the fourth quarter.
• Cisco quarterly results topped Wall Street views.
• Merck has agreed to pay $688 million to settle two U.S. lawsuits by shareholders who said they lost money because it concealed the poor results of a clinical trial involving the anti-cholesterol drug Vytorin. On March 31, 2008, shares of Merck fell nearly 15 percent and Schering fell nearly 21 percent, the first trading day after full results of the trial were released. Merck said it has recorded a $493 million after-tax charge for the settlements, reducing last year’s fourth quarter to 30 cents from 46 cents.
• Boeing said that it plans to bring its next-generation 777X jet into service by the end of the decade. Sources familiar with the design confirmed that the 777X design is expected to have folding wingtips, a novel feature that would allow bigger wings to fit into the same-sized airport parking space.
• Coach’s longtime CEO Lew Frankfort will step down next year.
• Toys R Us said its CEO will step down, just weeks after the world’s largest dedicated toy retailer reported disappointing results for the all-important holiday season.
• India’s Tata Motors has reported a sharp drop of more than 50 percent in its quarterly net profit.
• George Soros has gained about $1 billion since November betting against the yen, the WSJ reported. The yen lost nearly 20 percent against the dollar between November and early February.

US ECONOMY & POLITICS

• Initial claims for state unemployment benefits dropped 27,000 to a seasonally adjusted 341,000. The four-week moving average for new claims rose 1,500 to 352,500, which hit a near five-year low in the prior week. 
• Foreclosure filings in January plunged to their lowest level since April 2007. Regulations that took effect in California contributed to the dramatic decline. The state had long been recording the highest number of foreclosure filings of any state. On January 1, a Homeowner Bill of Rights became law, offering more protections for California borrowers in default. As a result, new foreclosure filings in California fell 62% in January.
• A combination of investment gains and worker contributions helped push the average amount stashed in a 401(k) to its highest level ever by the end of 2012, according to the latest Fidelity report.

EUROPE & WORLD

• Eurozone recession deepens as Germany falters. Germany contracted by 0.6 percent on the quarter. Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, following a 0.1 percent output drop in the third quarter. It marked the currency bloc’s first full year in which no quarter produced growth, extending back to 1995. For the year as a whole, GDP fell by 0.5 percent.
• Greek unemployment rate hits record 27 percent as recession rolls on. Worst affected are the young, with 61.7 percent of those in the 15-24 age group without a job. The economy contracted a further 6 percent in the fourth quarter. 3.9 million out of Greece’s total population of nearly 11 million will be officially living in poverty by the end of the year.
• The Bank of Japan leaves policy unchanged with the size of its asset purchase program.
• India’s economy falls short of lofty aspirations. India’s statistics agency is forecasting economic growth of only 5 percent for the fiscal. Two years ago, India was growing at 9 percent or more, as fast as China.
• India and France reviewed progress in a multibillion-dollar deal to build French fighter jets for the Indian air force and a separate agreement to construct the world’s biggest civilian nuclear power complex in western India.
• Japan’s economy shrank 0.4 percent in the fourth quarter. Its economy grew 1.9 percent in year 2012.

TODAY in HISTORY

• Oregon became the 33rd state in the United States (1859)
• Arizona became the 48th state in the United States (1912)
• VALENTINE’S DAY today!
  • Sometime during the third century, the conservative right thought there should be something else to do on this date than to observe the ancient pagan holiday of Lupercalia. For those who don’t remember — or can’t remember — Lupercalia was an ancient Roman fertility festival. Instead of revelry and sacrificing goats and dogs, it was determined that two Christian martyrs should be celebrated. Both were named St. Valentine. One of the saints was a priest and doctor who was beaten and beheaded while on the Flaminian Way, Rome, Italy in the year 269. A year later, the Bishop of Terni met the same fate in the same place.Something got lost in the translation and the two celebrations became one. St. Valentine’s Day, the most widely celebrated unofficial holiday, is a modern-day fertility rite.

Sources: Reuters, Yahoo Finance, Google Finance, Bloomberg, CNN Money.

This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S & P 500, are unmanaged and may not be invested into directly.