Filed under: Law, Exxon Mobil (XOM), Venezuela

Lawyers for the Venezuela state-owned oil company PDVSA are back in court in London. They are trying to convince a judge there that the $12 billion that Exxon (NYSE: XOM) has seized through the courts in exchange for its assets that have been nationalized is excessive.

According to Reuters, “PDVSA lawyer Gordon Pollock said the amount frozen was excessive. He said a claim that PDVSA would try to hide its assets was not credible and the English court which awarded the freeze had exceeded its jurisdiction.” PDVSA’s argument is based partially on a theory that the calculation Exxon has used for reparations sets the face value of its property too high.

The legal challenge from Hugo Chavez’s government has one significant flaw. His country has no right to take the Exxon assets in the first place. There would be no court hearing at all if Venezuela had not violated international law.

Several courts have agreed that the $12 billion in PDVSA overseas assets that Exxon has been able to seize is based on rational calculations. If the Venezuelan government does not want to pay fair value, then it should give the property back or reap the financial whirlwind.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Deals, Berkshire Hathaway (BRK.A)

To borrow a phrase my high school Latin teacher (whom I absolutely loathed) used to toss around, “Even Homer nods.” That said, it’s rare that an executive will write openly and with a touch of humor about the worst acquisition of his career. Then again, Warren Buffett is a rare executive.

In his latest letter to shareholders (PDF file — may take awhile to load) of Berkshire Hathaway (NYSE: BRK.A), Buffet wrote about his 1993 purchase of the Dexter Shoe Co.

Finally, I made an even worse mistake when I said “yes” to Dexter, a shoe business I bought in 1993 for $433 million in Berkshire stock (25,203 shares of A). What I had assessed as durable competitive advantage vanished within a few years. But that’s just the beginning: By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business — one now valued at $220 billion — to buy a worthless business. To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future — you can bet on that. A line from Bobby Bare’s country song explains what too often happens with acquisitions: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.”

Continue reading Warren Buffett on his worst acquisition ever

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Filed under: Analyst upgrades and downgrades, Management, Industry

Ambac Financial Group (NYSE: ABK) may have kept its Moody’s “Aaa” rating, but its shareholders paid a big price. The muni-bond insurer cut its dividend from $.07 to $.01. According to a release from the company it will also be “suspending structured finance writings for six months is expected to free up approximately $600 million in capital.” The means it is exiting underwriting financial guarantees using credit default swaps. The firm believes that this will save $600 million.

The announcement highlights the fact that muni-bond insurers will save themselves by undercutting almost all of the value of their shareholder’s investments. Ambac’s stock has fallen from over $96 to about $11 over the last year. A cut in the dividend nearly eliminates a 2.4% yield.

The danger has not passed for investors. If Ambac is split into two entities, as many experts have proposed, one of the new arms will have the good muni-finance underwriting business and the other will have the weak structured finance operation. It is not clear what current stockholders would end up owning.

Shareholders in Ambac had been hammered and there is probably nothing they can do about the fact that management made awful bets.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Law, Bank of America (BAC), Countrywide Financial (CFC)

Countrywide Financial (NYSE: CFC) shareholders may be able to take some level of comfort in the fact that apparently they’re not the only ones being treated like crap by the beleaguered mortgage giant.

According to the Associated Press, “U.S. trustees in Georgia, Ohio, and Florida on Thursday asked the courts to enjoin ‘Countrywide’s sustained bad faith conduct’ in its treatment of distressed consumers trying to save their homes in bankruptcy court, according to a complaint filed by U.S. Trustee Donald F. Walton.”

Walton wrote that “Countrywide’s failure to ensure the accuracy of its claims and pleadings has resulted in an abuse of the bankruptcy process.” The company is accused of filling bankruptcy proceedings with mishandled payments, unexplained or erroneous fees, and inaccurate paperwork.

Courts in Pennsylvania, Texas, and North Carolina have previously imposed punitive damages on the company for misconduct in bankruptcy cases.

The Wall Street Journal reports (subscription required) that the Countrywide deal has been a lightning rod for Bank of America (NYSE: BAC), which is set to close the deal in the third quarter.

The possible legal, regulatory, and financial hassles aside, I think that Bank of America has to wonder what exactly they’re getting here. Countrywide Financial is being acquired presumably for its strong brand and network, but you have to think all these accusations of sleaze and extremely negative media coverage (I’m proud to say I’ve contributed my fair share) are doing a lot to hurt the brand.

And from this latest bit of news, it doesn’t seems like those problems are going away anytime soon.

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Filed under: Consumer experience, Citigroup Inc. (C), KB HOME (KBH), Toll Brothers (TOL), Economic data, Comfort Zone Investing, Housing, Federal Reserve

Ted Allrich is the founder of The Online Investor and author of the recently released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he’ll offer advice to investors who are just getting started.

It’s not all bad out there. Some stocks are doing much better with individual results carrying them higher. Others are being carried by a sea change in the industry. Here are the news and stocks that provide some of the light in the current darkness.

(please note, this column was written Wednesday, Feb. 27).

On Monday, the rumor that started the rally on Friday continued. Several banks were going to form a consortium to save the insurance company AMBAC. On top of that there was a renewed bid for Take Two by Electronics Arts, this time with a higher price tag. Take Two rejected the new offer, but it sparked a rally. The market went up over 100 points. That was on top of the almost 100 point rally from last session, one that saw a 200 point turnaround in an hour.

Continue reading Comfort Zone Investing: Sparkles of light in the gloom

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Filed under: Earnings reports, Sirius Satellite Radio (SIRI), Viacom (VIA), Netflix, Inc. (NFLX), CBS Corp ‘B’ (CBS), Amer Intl Group (AIG), Nortel Networks (NT), salesforce.com inc (CRM)

Here are a few highlights from this past week’s earnings coverage from BloggingStocks:

• American International Group Inc. (NYSE: AIG) posted a big loss and warned of more to come.
• CBS Corp. (NYSE: CBS) beat expectations even though its fourth-quarter profit fell.
• DreamWorks Animation Inc. (NYSE: DWA) 2007 earnings and revenue soared, lifted by Shrek the Third.
• HJ Heinz Co. (NYSE: HNZ) posted solid third-quarter earnings and revenue.
• Koppers Holdings Inc. (NYSE: KOP) beat fourth-quarter expectations and approved a share buyback plan.
• Netflix Inc. (NASDAQ: NFLX) raised its first-quarter and full-year guidance on subscriber growth.
• Nortel Networks Corp. (NYSE: NT) missed expectations due to rising operating costs.
• Origin Agritech Ltd. (NASDAQ: SEED) 2007 earnings sank, missing analysts’ expectations.
• Salesforce.com Inc. (NYSE: CRM) beat fourth-quarter estimates and offered revised guidance.
• Sirius Satellite Radio Inc. (NASDAQ: SIRI) narrowed its loss due to a surge in subscribers.
• Swiss Reinsurance Co. (OTC: SWCEY) quarterly EPS plunged but 2007 decline was less than expected.
• Viacom Inc. (NYSE: VIA) reported strong fourth-quarter and full-year results.

Also, analysts predict that bank losses will be the highest in 20 years. Timothy Sykes recommends investors not become starstruck by superstar companies such as Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG).

Upcoming results to watch for include Staples, Inc. (NASDAQ: SPLS), Costco Wholesale (NASDAQ: COST), and Blockbuster Inc. (NYSE: BBI).

Visit AOL Money & Finance for more earnings coverage.

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