Financial life in a big town

As proposed buyouts sweep through the drug sector, Pfizer’s failure in recent years to buy another big rival has surprised many investors, some of whom say its too late for a big acquisition to rescue the No. 1 drugmaker.

Investors had long expected Pfizer to acquire another large drugmaker or sizable biotechnology companies to gain rights to new medicines before it loses U.S. patent protection on its Lipitor cholesterol fighter in 2011.

“The hole created by generic forms of Lipitor will be so gapingly big that it’s hard to argue convincingly for an acquisition,” said Scott Richter, a portfolio manager with Fifth Third Asset Management. He noted that other Pfizer drugs will also lose patent protection soon after Lipitor.

The company, which rakes in $13 billion a year for Lipitor, also badly needs new products to offset sales declines for drugs already facing generic competition.

Pfizer, which became the industry leader by buying Pharmacia Corp and Warner-Lambert Corp over the past decade, is trading at 11-year-lows because its laboratories have failed to produce important drugs. Pfizer edged up 1 cent to $19.85 on the New York Stock Exchange on Monday.

Richter said other drugmakers are facing similar problems, including a poor record of developing new drugs or getting them approved. “So Wall Street would be super-skeptical about the success of bringing two problem children together.”

Moreover, Richter said, Pfizer would probably need to repatriate many billions of dollars in overseas profits to finance a big deal. That would greatly raise its tax rate, he cautioned.

Pfizer’s inaction has been underscored in recent weeks by Roche Holding AG’s (ROG.VX: Quote, Profile, Research, Stock Buzz) $44 billion offer for all outstanding shares of its U.S. partner, Genentech Inc (DNA.N: Quote, Profile, Research, Stock Buzz), and Bristol-Myers Squibb Co’s (BMY.N: Quote, Profile, Research, Stock Buzz) $4.5 billion bid for cancer-drug partner ImClone Systems Inc (IMCL.O: Quote, Profile, Research, Stock Buzz). 

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Fugitive hedge-fund swindler Samuel Israel turned himself to federal authorities in Massachusetts after nearly a month on the lam, the U.S. attorney’s office said Wednesday.

Israel turned himself into Southwick, Mass., police between 9:15 and 9:30 a.m. Wednesday, said Suzanne Anderson, police Chief Mark Krynicki’s assistant. She said he was being processed at Southwick Police headquarters and referred all further questions to federal authorities.

Southwick is 95 miles away from the federal prison in Ayer, Mass., where Israel was to report last month to serve his sentence.

Israel disappeared June 9 on the day he was supposed to report to prison. His car was found on a bridge over the Hudson River with the words "Suicide is Painless" - the theme song for the "MASH" television show - scrawled in dust on the hood.

Because no body was found beneath the 150-foot-high bridge where his car was abandoned, authorities believed from the start that he faked his disappearance.

The 48-year-old Israel, a co-founder and chief executive of the now-collapsed Bayou hedge funds, was sentenced in April to 20 years in federal prison for conspiracy and fraud. He was also ordered to pay $300 million to his victims.

Prosecutors said he and two other men persuaded investors to put $450 million into the Stamford, Conn.-based company by announcing nonexistent profits and providing fake audits.

Meanwhile, they made millions in commissions on trades that lost money for investors. The fund’s collapse prompted calls for stricter oversight.

Officials said that after Israel abandoned his car, he took off in a white recreational vehicle carrying a motor scooter and his belongings. He was believed to be staying at RV parks, campgrounds or highway rest areas.

Southwick, where Israel turned himself in, is near the Connecticut line about 100 miles southwest of Boston.

Israel’s girlfriend, Debra Ryan of Armonk, was arrested 10 days after his disappearance and charged with aiding and abetting his escape.

Authorities say Ryan confessed that on the day Israel was to surrender, she drove her car and he drove the RV to a rest area about 55 miles north of New York City. Israel parked the RV there, and the two drove back to their home.

Ryan could face as many as 10 years in prison if convicted in the scheme. 

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The clown trying to win your mother’s heart has a new rival and this guy’s royalty.

After watching its bigger rival McDonald’s Corp (MCD, Fortune 500). try to woo mothers and grab a share of the family budget, Burger King Corp. (BKC) — known for its edgy ads featuring a man with an oversize plastic king mask — is launching a new marketing and promotional campaign Monday targeted to moms.

"A large part of our customer base is parents with children," said Russ Klein, president of global strategy, marketing and innovation. "As a parent, the challenge is always trying to get the kinds of things you want to but have some dimension of fun."

The centerpiece of the effort, Klein said, is a new kids’ meal featuring a four-ounce serving of Kraft macaroni and cheese, lowfat milk and the company’s "Fresh Apple Fries", which are uncooked apple slices shaped like french fries and served with low-fat caramel dipping sauce. The meal will go on sale Monday for $3.49 and will be a permanent fixture on Burger King’s menu.

The launch will be followed by an in-restaurant merchandising and television ad campaign, with the first commercial airing July 7. That spot will introduce "Little King" meant to be the masked king’s young son.

The company will be offering free samples of its apple fries through July in New York, Los Angeles, Chicago, Miami and Houston. Burger King will also give away samples at Jonas Brothers concert tour sites. Burger King is an official sponsor of the group’s "Burning Up Tour" and will be offering some free tickets to the concerts.

Klein declined to specify the value of the advertising and marketing effort, saying only that the company will spend millions "supporting this vehicle."

Burger King certainly isn’t the first fast food restaurant to try to convince moms to listen to the pleas in the backseat for fast food. McDonald’s launched a public relations campaign targeted to mothers last year in a bid to neutralize criticism that the company’s food is a contributor to childhood obesity.

The McDonald’s approach included adding a bevy of healthier menu items to its menu meant to entice both kids and parents, including "Apple Dippers" — pre-cut slices of apples similar to the new Burger King version. The chain also started a "mom’s quality correspondence" campaign in which six mothers got a behind-the-scenes look at how the chain operates. The moms write about their experience on the company’s Web site.

Zack’s Investment Research senior analyst Anne Northrup said McDonald’s has been "a trailblazer" in changing the perception that fast food is an indulgence that will likely lead to gaining a few extra pounds.

But convincing parents to correlate healthy eating with the home of the Whopper may not so be easy, particularly since Burger King has been lambasted by critics for not switching to trans-fat free oil as fast as some of its competitors. The chain has committed to making the switch in all of its restaurants by the end of the year. Wendy’s International Inc (WEN)., meanwhile, cut out trans fat oil in August 2006.

Northrup said getting parents to take their families to Burger King may also be dependent on the pace of the chain’s remodeling campaign. Burger King has been attempting to turn around its sales partly by renovating its restaurants.

Northrup said a large number of the chain’s unit are still more than 30 years old.

"That’s a key driver of earnings growth in the next few years," she said. 

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NYSE Euronext said Tuesday it will pay $250 million for a 25% stake in Qatar’s Doha stock market, as the operator of the New York Stock Exchange moves to build a financial hub in the Middle East.

Established in 1995, the Doha Securities Market (DSM) began operations in May 1997, and currently has 43 listed companies. Its market capitalization has climbed to $136 billion from $5.2 billion in 2000.

The deal, which represents NYSE Euronext’s largest investment ever in a foreign exchange, is expected to close early in the fourth quarter.

NYSE Euronext will receive three of 11 seats on the DSM’s board. It will be the technology provider for both the cash equities and derivatives markets, and will manage the new exchange’s operations, including naming senior management.

"This represents a hugely significant development for Doha’s financial markets," said Sheikh Hamad bin Jassim bin Jabor Al-Thani, Prime Minister and Minister of Foreign Affairs of Qatar. "It’s a significant endorsement of Qatar’s importance in the world’s capital markets and will provide considerable opportunities for our future generations."

NYSE Euronext (NYX) said it will base a number of its growing Middle East region operational and technology support functions in Doha, growing its financial hub there.

Qatar is retaining a 75% stake in the DSM, but said it plans to sell a minority share of the DSM in a domestic initial public offering within the next three years. 

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Citigroup offered some investors an unwelcome dose of deja vu on Friday.

The largest bank in the United States presented its most comprehensive turnaround plan since Morgan Stanley banking and trading veteran Vikram Pandit took over as chief executive in December, but many of its key plans sounded all too familiar.

Pandit said on Friday that Citigroup Inc (C.N: Quote, Profile, Research) businesses would work together, allowing them to squeeze more revenue from individual products by selling them across multiple units. He also said he would cut costs and invest overseas.

If all this sounds familiar, there’s a good reason: it’s exactly what was promised at Citi’s last analyst day in December 2006 by the then-CEO, Chuck Prince, before he was succeeded by Pandit a year later.

“We thought Citi was going to start on a new road, and lo and behold, we’re down the same road again,” said Helena Ocampo, an analyst covering financial stocks at Sentinel Investments, which manages $5.6 billion of assets and owns Citi shares.

Skepticism helped push Citi’s stock down 2.8 percent to $23.63 on Friday, bringing its loss this year to nearly 20 percent.

To be sure, Pandit is making some bold moves. He said Citi would shed some $400 billion of non-core assets within three years, scale back in businesses like bond trading and ramp up in prime brokerage and electronic trading.

But by and large, Pandit is not proposing massive strategic changes, and is focusing instead on making sure Citi doesn’t see a repeat of the last two quarters, when it posted more than $15 billion of losses. 

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Defense contractor General Dynamics Corp. said Wednesday that its first-quarter earnings rose nearly 32 percent.

The Falls Church, Va.-based firm said it earned $572 million, or $1.42 per share, up from $434 million, or $1.06. Sales totaled $7 billion, up 11 percent.

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So, you want to open a discount brokerage account and manage your own investments.

Which discount broker do you choose? How do you compare them all?

Luckily, you can find a wealth of Canadian information online.

You can start your virtual tour with Surviscor, a consulting firm that regularly reviews and ranks the discount brokerages.

Its winter 2008 survey, posted at www.surviscor.com, compares 16 online brokers operating in Canada.

As well as overall rankings, there are separate rankings for investors and traders. This recognizes they have different needs.

Credential Direct, owned by Canada’s credit unions, gets the top score for catering to investors (7.59 out of 10).

It’s followed by BMO InvestorLine (6.85), Qtrade (6.56), National Bank Direct Brokerage (6.42) and TD Waterhouse (6.37).

Your next stop is the Stingy Investor website. (Go to www.ndir.com and search for Canadian discount brokers). It’s run by Norm Rothery, chief investment strategist at Dan Hallett & Associates Inc.

Here you can find up-to-date comparisons of the fees and commissions charged by 15 Canadian online brokerages (as well as phone numbers and email addresses).

What you pay usually depends on how many trades you make per quarter or year, how many shares you buy at a time and how many dollars you have in assets at the firm.

In the past year, most discount brokers have introduced lower fees for active traders. That’s the good news.

But many brokers also charge penalties – called maintenance fees – for inactive traders, especially those with smaller accounts. So, watch out and ask questions.

The Stingy Investor doesn’t rank discount brokers. But when you read its listings, one firm stands out for simplicity and low fees.

Questrade charges one cent a share, $4.95 minimum to $9.95 maximum, and calls this "democratic pricing."

Maybe you want to hear about other investors’ online trading experiences.

You want to eavesdrop on their conversations.

Thanks to a proliferation of Canadian personal finance blogs, you can have access to other people’s experiences and opinions. But you do need to exercise judgment.

Start with CanadianCapitalist.com, one of the longest-running and active personal finance blogs. Scroll down the right hand side to Categories, then find Investing and Discount Brokers.

You’ll find out why this blogger went to Questrade for rock-bottom trading commissions and then returned to TD Waterhouse to consolidate all his accounts with one broker.

Another blog worth an investment of your time is Million Dollar Journey, which has a chart comparing eight Canadian discount brokers (www.milliondollarjourney.com).

Besides fees and commissions, he looks at such factors as: What is the margin rate? Can you get real-time quotes free? What is the minimum required to open an account? Is there a maintenance cost? How much interest is paid on cash? Can you use a dividend reinvestment plan? What is the foreign exchange fee or spread charged?

This blog also publishes reviews of individual brokers and critical comments from readers.

"It took a total of 5.5 weeks for my RRSP to get transferred from Tradefreedom to Questrade," says one investor. "I saw that my RRSP positions were incorrect. I’m pretty frustrated with the overall experience."

In case you think it’s all one-sided, you can find responses from Lynn Suderman, communications manager for Questrade, to some of this negative feedback.

Next week, we’ll look at how to put together a portfolio of exchange-traded funds that needs little oversight or supervision.

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new york — Most stocks gained Monday as record oil and gold prices spurred a rally in commodity producers, outweighing declines in technology and financial shares.

Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. helped the Standard & Poor’s 500 index recover from a decline of 0.8 percent and rise for the first time in four days. Goldman Sachs Group Inc. and Apple Inc. fell after analysts lowered profit estimates.

The S&P 500 swung between gains and losses at least 37 times as a smaller-than-forecast drop in manufacturing offset a decline in construction spending. The S&P 500 added 0.71 point to 1,331.34. The Dow Jones industrial average slid 7.49 to 12,258.9. The Nasdaq composite index lost 12.88 to 2,258.6.

Commodity producers rose as oil climbed to $102.45 a barrel and gold advanced to as high as $992 an ounce.
Exxon added 74 cents to $87.75. ConocoPhillips increased 73 cents to $83.44.

Freeport-McMoRan, the world’s second-largest copper producer, climbed $2.59 to $103.45. Copper futures closed at the highest price ever as global inventories declined and China, the world’s biggest user of the metal, boosted imports. Newmont Mining Corp. rose $1.21 to $52.38.

General Electric Co., Honeywell International Inc. and Danaher Corp. climbed after Deutsche Bank AG analysts said U.S. industrial companies that generate more than half their revenue from abroad may boost earnings by 5 percent during the first quarter as the dollar weakens. The U.S. currency on Monday touched a record low of $1.5275 per euro.

GE added 26 cents to $33.40. Honeywell increased $1.01 to $58.55. Danaher added 11 cents to $74.26.

Northrop Grumman Corp. rose the most since July 2003 after the third-largest U.S. defense contractor and European Aeronautic, Defence & Space Co. beat Boeing Co. for an Air Force tanker order. Northrop added $3.96 to $82.57. Boeing lost $2.12 to $80.67.

Exelon Corp., the largest U.S. owner of nuclear power plants, added $2.70 to $77.55. Entergy Corp., the second-biggest, increased $2.71 to $105.45.

Supervalu Inc. rose $1.84, or 7 percent, to $28.09 for the top gain in the S&P 500. The second-biggest U.S. supermarket chain forecast profit for next year that exceeded analysts’ estimates.

Goldman dropped $4.55 to $165.08. Bear Stearns lost $2.54 to $77.32. Lehman fell $2.38 to $48.61. Citigroup Inc. retreated 62 cents to $23.09.

Berkshire Hathaway Inc. said fourth-quarter profit declined 18 percent on falling insurance rates. Berkshire’s Class A shares lost $3,500, or 2.5 percent, to $136,500.

Apple declined $3.29 to $121.73.

Google dropped $14.16 to $457.02, the lowest in almost a year. EBay slumped 51 cents to $25.85.

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General Motors Corp. says it will stop output at its truck plant in Oshawa on Monday if a strike at a parts maker in the United States doesn’t end soon.

The auto giant said yesterday one U.S. truck assembly operation is already down and three similar operations, including one in Oshawa, would be idle after a shift last night because of the strike at American Axle & Manufacturing south of the border. The strike has stopped production of critical axle parts. Most GM assembly plants have only small inventories to maintain vehicle output.

A senior union official said the walkout at the parts maker wouldn’t affect production of Chevrolet Silverado and GMC Sierra pickups in Oshawa until early Monday because the Oshawa truck plant doesn’t operate during weekends. The plant employs about 2,300 workers.

"It wouldn’t really have an effect until then here," said Keith Osborne, plant chair for the Canadian Auto Workers in Oshawa.

GM said the other affected truck plants would be in Flint, Mich., and Fort Wayne, Ind. They employ several thousand workers.

Earlier this week, GM idled its truck plant in Pontiac, Mich., because it had run out of parts.

Other GM assembly plants at risk due to their reliance on American Axle parts include operations in Arlington, Tex.; Janesville, Wisc.; and Silao, Mexico. They make sport-utility vehicles.

GM’s moves follow the temporary closing of the big Chrysler minivan plant in Windsor because of a shortage of parts from TRW Automotive Holdings Corp.

Members of the Canadian Auto Workers walked off the job at TRW in a contract dispute earlier.

Analysts have said a short work stoppage could allow GM to reduce high inventories of trucks and sport-utility vehicles, but have cautioned that a longer disruption could be costly.

About 3,600 members of the United Auto Workers union in Michigan and New York walked off the job on Tuesday against American Axle in a dispute over wages. Talks between the two sides had not resumed yesterday.

American Axle had stockpiled parts for GM in advance of the strike, and most analysts had projected that it would take a week or so before shortages began to slow GM down.

With files from the Star’s wire services

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