Oppenheimer: Teva will have no problem funding Barr buy

Oppenheimer's analysts give Teva price of $58 per share, reflecting a premium of about 44% above the market value. They expect Teva to reach its target price and that the company will report profits of $2.95 per share on a non-GAAP basis in 2009.
Teva announced its acquisition of Barr 3 months ago and said it planned to complete the transaction by the end of 2008. The Barr shareholders meeting to vote on the acquisitions is one of the important stages in the acquisition.
Oppenheimer does not see Teva having any problems in raising the required funds to complete the deal - about $2.7 billion based on an overall transaction of $7.5 billion. The funds are expected to be raised near the closing of the deal at the end of 2008.
IBI Investment House analysts Yuval Zehira and Noa Weisberg estimate that Teva will need to raise $3.5 billion to complete the acquisition of Barr, and that the capital will be raised by issuing bonds and convertible bonds. IBI sees Teva raising the capital in early 2009 even though the deal is to be completed by the end of 2008.

The Next President's Impact on Stocks

Which candidate will help the markets more?

http://online.barrons.com/article/SB122393406055230261.html?mod=b_hpp_9_0002_b_online_exclusives_top

Australia tops prosperity index

Australia has topped the rankings in a prosperity index of more than 100 countries, with its quality of life and economic strength pushing it into number one spot.
The Legatum Institute's Prosperity Index of 104 nations measures the material health of a country, including wealth, quality of life and life satisfaction.
Australia has topped the 2008 index, ahead of Austria and Finland in that order.
While Asian powerhouses Singapore, Taiwan and Hong Kong scored well economically, their livability dragged down their performance.
True prosperity consists of more than money - it also includes happiness, health and liberty.
The Prosperity Index shows that in addition to economic success, a society's prosperity is based on strong families and communities, political and religious liberty, education and opportunity, and a healthy environment.
The Australian government earns high scores on corruption control and overall effectiveness, supporting the country's quality of life in many areas.
Bottom of the list was Yemen, with Zambia and Zimbabwe not faring much better.
The financial crisis-racked United States was rated equal fourth, alongside Germany and Singapore.

Orica Limited (ORI)

ORI continues expanding into mining services around its leading global market share in explosives. It still has minor chemicals after selling its fertiliser business. It plans demerging its consumer product businesses. Key medium-term driver is the length of the resource boom. ORI is generally well managed with sound financial disciplines. Competitive advantages include its duopoly Australian explosives business, global explosives distribution and proven capital investment discipline. Messy hybrids subdue ordinary dividends. It is more suitable for growth portfolios with private equity appeal. The yield is lightly franked with a large rights issue completed.

ORI completed its rights issue, raising $899m.
Business Impact: Retail shareholders who did not subscribe at $22.50 - around 50% - will receive 10c for their lapsed entitlements after the bookbuild at $22.60 – please refer our last update. Will ORI trade back up to the theoretical ex-rights price of $26.90 before the de-merger?

P/E 11
Dividend Yield 5% (32% franked)

UBS & Deutsche Bank rate ORI as Buy

Credit Suisse & Macquarie Bank rate ORI as Outperform

Bought some shares of ORI today

Commodities slide far from over

The record 39% decline in commodities since July 3 is nowhere near finished, if history is any guide.
http://business.theage.com.au/business/commodities-slide-far-from-over-20081013-4zly.html?page=fullpage#contentSwap1

World May Be Lucky to Escape With Worst Recession in 25 Years

A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.
``It's certainly going to be the worst since the 1980s,'' says Bradford DeLong, an economics professor at the University of California at Berkeley who worked at the U.S. Treasury Department from 1993 to 1995. ``The hope is that it won't become the worst unemployment business cycle since the Great Depression.''
Of special concern: The two big bulwarks of the global economy in recent years -- U.S. consumer spending and the rapid growth of emerging markets -- may be finally giving way in the face of the 14-month-old financial turmoil.
That raises the odds that the coming economic decline will be long and deep, despite U.S. Treasury Secretary Henry Paulson's $700 billion financial rescue plan, similar efforts by European leaders and the coordinated interest-rate cuts engineered by Federal Reserve Chairman Ben S. Bernanke and other central bankers last week.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a294aImYI_mw&refer=home

Central Banks Coordinate Global Cut in Interest Rates

In a move of unprecedented scope, the world’s major central banks lowered their benchmark interest rates Wednesday, a coordinated effortto halt a collapse of share prices and a freeze in credit markets that threatens to set off the first global recession since the early 1970s.
The action failed to calm gyrating markets, however, amid the growing realization that a serious and prolonged recession may be difficult to avoid.
http://www.nytimes.com/2008/10/09/business/09fed.html?bl&ex=1223611200&en=6c2c0d7539595be6&ei=5087%0A

The Fed’s benchmark short-term rate now stands at 1.5%.
The European Central Bank’s is 3.75%.
Australian Central Bank is 6%.

What's an Investor to Do - Patience or Panic?

What is causing the market to sell off at such alarming rates?
Does the rate of decline reasonably reflect the economic problems going forward?
Are these problems likely to be long lasting or even permanent?
http://seekingalpha.com/article/99033-what-s-an-investor-to-do-patience-or-panic

Now Is the Time to Think Long Term and Buy Stocks

No two financial crises are exactly the same. There are times to be an observer, watching from the sidelines. And there are times to act.
A week ago Monday, when the Dow Jones Industrial Average plunged 777.68 points, the Nasdaq Composite dropped through my latest buying target, which was 2025. So I stepped in with a list of banking stocks and did some buying. The next day the market rallied, rising above the 2025 threshold. I was pleased by gains in my recent purchases, but hardly euphoric. By Thursday the Nasdaq was below the threshold. My gains were wiped out. On Monday, the index dropped so much that it was time to begin thinking of the next buying threshold, which is 1750.
So why am I buying when the market is plunging? When we're in the worst financial crisis of my lifetime? The answer is simple: That's when stocks are cheap.
Regular readers know that I follow a disciplined system of buying on 10% declines in the Nasdaq, and selling at intervals of 25% gains. These are based on historical averages for corrections (an average 20% decline) and bull markets (an average 50% gain.) The goal is simple: Buy lower and sell higher.
http://online.wsj.com/article/SB122342570193613559.html

Fed Will Lend Directly to Corporations

Fed to Lend Directly to Companies for First Time Since Great Depression, Hints at a Rate Cut; Stocks Fall as Dow Hits 5-Year Low
http://online.wsj.com/article/SB122339483324611667.html?mod=special_page_campaign2008_mostpop

Stock Market Cycle

Economic crisis a 'return to normality', ANZ CEO says

According to Smith, the credit crunch could re-establish a divide between ‘good’ and ‘bad’ businesses -- a divide that he said has blurred due to Australia’s strong economic growth in recent times.“If you think about Australia, for 15 years, we’ve had very good credit growth and access to equity has been extraordinary,” he said. “That has meant that good businesses have been doing well, but so have bad businesses.”“What we’re seeing is a return to normality. Good businesses will continue to do well, but bad businesses may not,” he said.“Access to credit should not be a problem for a good project -- if it stacks up, it will work,” he said. “If you’re a good customer of the bank, there should not be an issue. You should have access to credit.”
http://www.crn.com.au/News/86171,economic-crisis-a-return-to-normality-anz-ceo-says.aspx

As Dire as the Times May Seem, History Isn't About to Repeat Itself

A long streak of speculative lending got out of hand as banks and even staid industrial companies made a stream of risky loans. Consumer spending on cars and clothes was slipping, but no one was paying attention. The stock market grew shaky in September, and then in October, the bottom fell out.
Suddenly, everyone seemed to want to sell. But there were few buyers, and over six bleak trading days, the Dow Jones Industrial Average lost a third of its value. It was a panic, said a senior New York Stock Exchange official, "where all at once, the inconceivable terrors of the unknown and the unfamiliar are thrust upon the public mind; confidence is paralyzed, and until it is restored, chaos reigns."
The year, of course, was 1929, though it sounds just enough like today to make us wonder if we should stock up the pantry, take the cash out of the bank and hunker down for a 21st-century Great Depression. No doubt, the parallels are stark and frightening.
http://online.wsj.com/article/SB122342462353813461.html

CBA buys BankWest for $2.1b

Let It Flow $700 Billion

$US700 billion bail-out through Congress will help to stabilise money and credit markets that have threatened to cripple economies worldwide.
The tightness of the credit markets is only likely to improve once the US Government starts actually buying the toxic debt, which could take months.
Businesses need to borrow capital to invest, expand and employ people; without it, factories close, unemployment lines grow, and spending dries up. And unfortunately the problem is not just confined to the so-called titans of Wall Street.

The package does not deal with the underlying problems of the massive oversupply of US housing or the country's contracting economy and falling employment.

The financial-market rescue package is a step in the right direction, but further steps are necessary to get credit flowing again.

$700B financial market rescue approved

Congress passed and President George W. Bush signed a $700 billion financial-market rescue plan designed to unlock credit markets and restore confidence in the nation's banking system.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTRUXZrt.eMY&refer=home

'Paulson plan' is not a panacea
Analysis: A $700 billion 'first step' down long road to economic recovery
http://www.marketwatch.com/news/story/now-thats-here-paulson-plan/story.aspx?guid=%7B5A73C777%2DB063%2D4C58%2D9369%2DF9B3C7B24444%7D

Will the bail-out work?
http://www.economist.com/finance/displayStory.cfm?story_id=12367649&source=features_box1

Job Losses Pushing U.S. Economy Into `Significant' Recession

The U.S. may be heading for its worst recession in at least a quarter century as the credit crisis forces employers across the country to cut workers and ratchet back spending. Labor Department figures showed yesterday that payrolls fell by 159,000 in September, the biggest reduction in five years. While the unemployment rate held at 6.1%, that's up from 5% as recently as April.

The D-word

Teva Pharmaceutical Industries Ltd.

Merrill Lynch sees Barr solidifying Teva's 2009-10 growth
Merrill Lynch today reiterated its "Buy" recommendation and $54 price target for Teva.

Merrill Lynch today reiterated its "Buy" recommendation and $54 price target for TEVA reflecting an 18% premium on yesterday's close of $46.77 on Nasdaq. Analysts Greg Gilbert and Haim Israel cut their earnings per share (EPS) forecasts for Teva to $2.69 for 2008 from $2.71. This revised figure does not include any contribution from Teva's acquisition of Barr Pharmaceuticals Inc. (NYSE: BRL). They also cut their EPS forecasts to $3.03 from $3.17 for 2009, but raised their 2010 forecast to $3.68 from $3.60 to account for Barr's contribution.
Gilbert and Israel assume that Teva will complete the Barr takeover during 2009, and that Teva will have to deal with its assumption of Barr's $1.88 billion debt and that Teva will issue $1.3 billion of new debt for the deal.

Will accumulate more shares if the stock goes below $45

Macquarie analysts dongraded iron ore prices going into 20090, meaning a 0% change.

Australia's Trade Turns to Second-Biggest Surplus on Record

Strong demand for coal and iron ore exports has pushed Australia's August trade surplus to the highest in 11 years, highlighting the country's outlook as a beneficiary of Asian growth.The nation's trade surplus grew to $1.36 billion for August, the highest since June of 1997, from a revised deficit of $697 million in July, the Australian Bureau of Statistics said. Analysts had expected only a $200 million surplus.The growing demand for coal and iron ore drove exports up 6% to $24.6 billion in August from $23.1 billion in July, boding well for future exports revenues.Imports slipped 2% to $23.2 billion from $23.8 billion, as global oil prices retreated from their all-time high of US$145 in early July. The trade balance numbers were helped by falling oil prices and a weakening Australian dollar.The Australian dollar has lost 19% against the US dollar since mid-July. The price of a barrel of crude oil has dropped almost a third since hitting a record high of $US145 in mid-July.
China's demand for iron ore is helping Australia's $1 trillion economy outpace other developed nations, which are being buffeted by the global credit squeeze.The economy expanded 2.7% in the second quarter from a year earlier, a report showed last month. That compares with 2.1% growth in the US, 1.5% in the UK and 1.7% in Germany.Australia's terms of trade, a measure of export income, surged 13.1% in the three months through June 30, the most in 35 years, according to a September 3 government report.

BHP cleared for Rio bid by Australian regulators
http://www.marketwatch.com/news/story/bhp-cleared-rio-bid-australian/story.aspx?guid=%7B20EB438F%2DCD03%2D4E1C%2DA6FC%2DB61C8D4F9D1B%7D

Earnings Estimates Still Too Lofty
Analysts have cut 2008 views but investors want them even lower.
http://link.brightcove.com/services/link/bcpid452319854/bctid1827959996
There are a few bright spots. Health care and consumer staples remain the furthest removed from the recent financial unrest and should continue to generate steadily growing profits. The rest of Corporate America, however, faces stiff headwinds, particularly financials, technology and industrials.

The U.S. Senate set a vote for tonight on a $700 billion financial-rescue plan, tying it to an increase in bank-deposit-insurance limits and tax breaks to win support from Republicans.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoJ7Et81o4c8&refer=home

Roosevelt 1932 campaign speech on Depression economy oddly prescient for today's crisis
Roosevelt understood the importance of making citizens feel their leaders were handling the situation.
http://biz.yahoo.com/ap/081001/financial_meltdown_roosevelt.html

Changing the rules on bank accounting, the fix is in
http://www.bloggingstocks.com/2008/10/01/changing-the-rules-on-bank-accouting

Why Mark-to-Paulson Accounting Won't Save Banks
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=aK6vnh_5ZknM

Sonic Healthcare Limited (SHL)

Technological innovation has cut the cost of a general pathology test, translating to fatter profit margins. SHL leverages this know how into overseas markets to deliver the next leg of growth. The US, Germany and UK offer scope to deliver efficiency through acquisitions. International scale will further enhance SHLs buying power. Management believes its franchisee business model by empowering its operators to share in profits delivers sustainable earnings growth.

NPAT increased 24% to $245.1, the result inline with our forecast of $246.8m. Acquisitions distort the result a fairer view is diluted EPS growth which increased 12% to 73.5cps. SHL guidance for FY09 is for revenue growth to be greater than 15% and EPS higher than 10%.

Australian pathology grew its revenues by 8%, higher than market growth. Turmoil caused by the consolidation of Primary and Symbion is leading to market share growth. The current Memorandum of Understanding (MOU) in the pathology industry is set to expire at June 2009. The new government is in the process of a strategic review to determine future funding for both radiology and pathology. The pathology industry doesn’t know what will be the outcome of this review. SHL says it is the most efficient provider of service so will cope better than most if fees fall. SHL USA delivered strong organic revenue growth of 8%. The alignment of the two largest US health funds with two different pathology providers has opened the door to third parties. Third parties can offer pathology services to all. This market development has led to a rapid revenue growth for Sunrise, SHL’s New York business. Germany is half the size of NSW with a population of 80m. Population concentration means SHL is able to optimise its regional infrastructure through consolidation. SHL is developing centres of excellence and folding overlapping acquired infrastructure into these. Closing collection centres, laboratories and pushing more volume through a single facility lowers unit cost and increases returns.

Fair Value for the stock is around $15 Current $12.94

Excluding dividends expect a growth of 14%

A 2H fully franked dividend of 32cps will be paid on October 9

Ratios

P/E 17

P/E Growth 1.17

Dividend 4% (100% franked)

Betta 0.76

The House of Representatives rejects the $700 billion bail-out plan. 7% drop

http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=12326538&source=features_box1

A new bail-out plan will be done and send to Congress for approval, but untill then stocks will be under pressure.