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Is investing abroad because the U.S. is going through a rough patch a good idea? If so, why? What foreign markets are attractive? Investing abroad is a good idea -- but not because the U.S. is melting down. Instead, it turns out that emerging markets are outperforming developing ones because they are supplying the commodities that fuel demand for 10% annual growth in emerging markets like China and India.

Emerging markets are up 20% in the last year while developed markets like the U.S. are flat. The reason to invest in these markets is not so much because the U.S. is going through a rough patch but more because these other markets are doing so much better and they are going to continue to do well regardless of what happens in the U.S.

But the U.S.'s rough patch may not be as bad as people had thought. An economist at Wachovia Corp. (NYSE: WB) changed his estimate of the chances of a recession from 90% to 45%. So the U.S. may turn out to be a good place to invest if stocks are priced for a recession that doesn't happen.

A front page story on Edwards backing Obama in today's Financial Times had an interesting unattributed comment near the end. In it, a source suggested that a deal could be in the works to make Hillary Clinton give up her quest for the Holy Grail -- err Democratic nomination.

The final paragraph in the print edition (this paragraph actually didn't make it into the online edition of the story) quotes one of senator Clinton's Wall Street backers as saying that the "'ultimate peace pact' with Obama could involve some sort of support from him to pay off her debts, which are estimated at $20m or more."

I am not sure how Obama would help Clinton pay off her campaign debts. Would he divert money he's raised from his supporters to Clinton? I don't think Obama supporters would be too happy about that. Or would he start a new round of fund raising with the explicit understanding that the money would go to Clinton? It's no surprise really that someone from Wall Street would be suggesting such a deal. I don't know whether this kind of thing has been done before but my hunch is that it has.

Reuters reports that ExxonMobil (NYSE: XOM) CEO Rex Tillerson went on The Today Show this morning to discuss the price of gasoline. Why? I think it's because he wants to diffuse political pressure to raise taxes on oil companies. Tillerson said that the price of gas is so high that people are using less of it.

But the subtext, in my opinion, was to put a face on the industry in the mind of the public so that it would be harder for politicians to harness public anger into higher taxes. Some big oil companies now have "too much" money coming in, with oil prices as high as they are. One of them has recently been in low-level debates with investors over what to do with all their cash as in "they can't spend it fast enough," an irony when gas prices are so high.

But as I posted yesterday, not all oil companies think that they have too much money coming in. Many such as Exxon and Valero Energy (NYSE: VLO) have reported disappointing earnings in the first quarter because the price of a barrel of oil has doubled while the wholesale price of gasoline has risen only 39%.

The Associated Press reports that CBS Corp. (NYSE: CBS) is buying CNet Networks Inc. (NASDAQ: CNET) for $1.75 billion. This $11.50 a share deal is a 45% premium over Wednesday's closing price

CNet's Web sites include News.com, TV.com, Mp3.com, MySimon and GameSpot. And CBS expects to use CNet to tap into the Internet advertising market. This deal raises the question of whether any CBS competitors will decide to get into the game of buying Internet content companies.

Here are three possible targets:

• TheStreet.com (NASDAQ: TSCM) - This provider of business, investment and ratings content has $65 million in sales and a market cap of $236 million.
• TechTarget (NASDAQ: TTGT) - This provider of online content for buyers and sellers of corporate information technology (IT) products has $95 million in sales and a $531 million market cap.
• WebMD Health Corp (NASDAQ: WBMD) - This provider health information services to consumers, physicians and other healthcare professionals, employers and health plans has $332 million in sales and it's market capitalization is $1.7 billion

I think traditional media companies buying Internet ones could become a trend. It would only take two more such deals to make it one.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

CNNMoney reports that General Electric Co. (NYSE: GE) is selling its appliance business. Goldman Sachs Group (NYSE: GS) is running the auction for this maker of refrigerators, microwaves and dishwashers and expects to receive between $5 billion and $8 billion for this $7 billion division of GE's $17.7 billion (2007 revenues) Industrial business unit.

I have been advocating that GE shed its ancillary businesses and this is one that makes sense to sell. I have taught several cases on the appliance industry and one of them highlights the many problems that GE's Appliance business suffered from in the 1990s thanks to the growing bargaining power of mass merchandisers, significant competition from Chinese manufacturers, and some internally inflicted wounds.

If GE Appliances was valued at the same Price/Sales ratio as Whirlpool (NYSE: WHR) -- 0.3 -- it would fetch $3.5 billion. The appliance industry average price/sales ratio is 0.7 -- which would yield GE $4.9 billion. So it looks like GE believes its appliance business is worth well more than the average appliance industry competitor. I applaud the idea of selling GE Appliances but the real gem of GE is its infrastructure business which is capitalizing on the growth of developing countries like China and India.

Citigroup Inc. (NYSE: C) is unmanageable. That's my conclusion after trying to understand its latest quarterly report. The concept behind this 100-armed corporate octopus is that people like to buy all their financial services in one place and therefore it makes sense to be able to sell them a full line of products from stocks to bank accounts. But I suspect that customers don't want all their financial eggs in one basket, so the concept is fatally flawed.

Moreover, its financial performance reveals that Citi is a complex mess whose many different businesses do not diversify its earnings streams. According to its quarterly report, Citi lost $5.1 billion. Most of the losses came from its Securities and Banking (-$6.4 billion), Alternative Investments (-$509 million), and U.S. Consumer (-$476 million) units. Two bright spots were $1.3 billion in earnings from International Consumer and $732 million in Transaction Services.

But wait, there's more in its huge, risky portfolio. Citi has $40 trillion in derivatives -- enormous bets on interest rates and currencies. And it has $1.2 trillion worth of off-balance sheet entities (remember Enron?). Nobody really knows what these are worth or how much they'll cost. And that doesn't even get us to the $262 billion in Level 3 assets -- illiquid, difficult-to-value securities -- which are 2.1 times Citi's $128 billion in capital. That's a pretty thin cushion for future write-downs.

The New York Times has turned into a crying rag for oil refiners. It reports that these defenseless creatures are not making as much money as they did last year. Their profit margins have dropped to an average of $12.45 per barrel of oil, down 60%. The reason? Oil prices have doubled in the last year but the refiners have only been able to raise wholesale gasoline prices by 39%.

I've posted about the problems at ExxonMobil (NYSE: XOM) and Valero Energy (NYSE: VLO), here and here. And the Times has done us a service by calculating these industry averages. It even quotes a a sobbing Lynn Westfall, the chief economist at Tesoro Corp. (NYSE: TSO), "We're just not able to pass along the increased cost of crude oil on the gasoline side." Someone hand Lynn a crying rag!

Thanks to declining U.S. demand -- it's down 300,000 barrels a day -- refiners are reacting by trying to reduce their refining capacity. That's right -- even though many people are paying over $4 a gallon for their gasoline, oil refiners are not making enough money so they are going to cut back on their refining capacity. The utilization rate has dropped from 90.4% last year to 81.4% now -- and if they take refineries off line, they can go back up above 90%.

The Wall Street Journal reports that Hewlett Packard (NASDAQ: HPQ) will spend $12.8 billion to buy Electronic Data Systems (NYSE: EDS). While this combination would make HP the second largest, behind International Business Machines (NYSE: IBM) in computer services, this may not be a good way to spend $12.8 billion.

That's because EDS and HP would under perform in services when it comes to profitability. EDS's bigger business earned a 1% net profit margin in the first quarter. But HP's services business generated a far higher 9% estimated net margin. Unfortunately -- for reasons described below -- the combined company will probably have lower margins.

Meanwhile, IBM's profit lagged HP's slightly -- it made an estimated 7% net margin in the first quarter in its services business. But IBM is and will remain a much bigger player. Combined, EDS and HP's services business will control 5.3% -- lagging IBM. That's because IBM controlled 7.2% of the tech-services market in 2007 while EDS was a distant second at 3% and HP was fifth, with a 2.3% share.

CNNMoney.com reports that gasoline hit a new record of $3.718 a gallon today. That's up 21% from a year ago when it sold for $3.06 (although I remember paying $2.20 a gallon in February 2007 for midgrade). The U.S. government could help out us poor gasoline consumers, but it refuses to do so. Meanwhile, in 2008, global oil supply is expected to grow more than global oil demand. So arguments that speculation has nothing to do with record oil prices fall flat.

Yet, this morning, the New York Times' Paul Krugman offered such an opinion. He concluded that oil is not a bubble. He doesn't really define what he means by a bubble, nor does he offer any numbers to back up his case that the price of oil is rising due to demand growth exceeding that of supply. He also throws in a comment about how if oil were a bubble, people would hoard it and they're not.

But numbers from the Energy Department suggest that global oil production will grow more than demand. Specifically, it expects global production to exceed global consumption by 0.8 million barrels a day (mmbbl/d). How so? The Energy Department forecasts global consumption in 2008 to rise 1.2 mmbbl/d from 85.4 mmbbl/d to 86.6 mmbbl/d. Meanwhile, it expects global oil production to grow 2.0 mmbbl/d from 84.6 mmbbl/d in 2007 to 86.6 mmbbl/d in 2008.

Today's Washington Post reports on the latest successful purchase of John McCain's services -- yielding a sweet real estate deal for an Arizona developer in the wake of his $100,000 campaign contribution. But that railer against the role of money in politics appears to have been bought many times before -- and American workers and taxpayers have paid the price.

The Washington Post reports that McCain pushed legislation that let an Arizona rancher trade remote grassland and ponderosa pine forest there for acres of valuable federally owned property that is ready for development, a land swap that now stands to directly benefit one of his top presidential campaign fundraisers. Specifically, Steven A. Betts, who raised $100,000 for McCain, got the job of developing rancher Fred Ruskin's land after McCain's legislation helped Ruskin pick it up at below market rates.

But this is at least the fifth transaction where a campaign contributor has benefited from McCain's power. Here are five others:

One oft-repeated phrase from Washington is that there is "no magic wand" that can lower oil prices. This has proven to be comedic gold for some. But for people who find themselves paying nearly $4 a gallon to fill up their tanks, the joke is not so funny. After all, with an "oilman" in the White House, it should come as no shock that the price of a barrel of the gooey stuff has risen 5-fold since January 2001 -- hitting a record $126 today.

I noticed that every time the Fed cut interest rates, the dollar dropped in value and the price of oil rose. As I posted, this dynamic is as sure of a bet as you can get in the real world. That's why traders are shorting the dollar and going long oil. And they're betting enough on that trade to drive up the price of oil consistently. As I discussed last night on New England Cable News (NECN), the European Union decided yesterday to keep its interest rate at 4% to fight inflation. Ours is a mere 2% so investors are selling dollars and buying Euros.

This brings us to how Washington can cut gas prices fast. All it has to do is to raise interest rates. This little move requires no Congressional approval and the oval office occupant doesn't have to sign a bill. If our Fed got serious about fighting the rampant inflation it has unleashed, it would raise the Fed funds rate, the dollar would strengthen, the price of oil would drop, and you would pay less at the pump. It's as simple as that.

Reuters reports that Citigroup (NYSE: C) is poised to announce today the sale of $400 billion worth of assets -- that's 18% of the total. We'll need to wait to find out which assets it plans to sell and how much of a loss (or profit) Citi will take when it sells them. But the New York Times reports the company's deciding based on industry growth trends, market positions, geographic growth rates, business plans and financial results.

I worked for a global bank during a credit contraction and part of my job was to figure out which assets to sell. From that experience, I know that Citi's challenge is to find assets that don't fit with Citi but are worth more to another owner. That's because often the assets that make the most sense to sell strategically are the ones that nobody else wants to own. And the ones that make the most sense to keep are the ones that could generate the biggest profit, if sold. Citi's challenge is to sell the $400 billion worth of assets that make strategic sense to sell and will fetch an attractive price. In today's market, that is a challenge.

So what Citi assets could be on the block? Reuters notes that Citi's U.S. student loan business may make sense to sell, after recent legislative changes and turmoil in the securitization market have made it less profitable. Citi may sell Primerica, a consumer sales network for life insurance and investments. And Citi should sell assets on its trading books, which have contributed to much of the $45 billion write-downs that Citi has taken so far.

Bloomberg News reports that Securities and Exchange Commission (SEC) Chair Christopher Cox made a speech about requiring investment banks to disclose their capital and liquidity. (I was interviewed this morning on Marketplace radio about it.) He thinks this requirement somehow would have prevented the meltdown of The Bear Stearns Companies (NYSE: BSC).

There is less here than meets the eye. Cox said, "One of the lessons learned from the Bear Stearns experience is that in a crisis of confidence, there is great need for reliable, current information about capital and liquidity." He said that data on capital and liquidity will be required this year "in terms that the market can readily understand and digest."

This is Washington and there is a power grab going on. In March, Treasury Secretary Hank Paulson announced a financial regulation overhaul plan which defanged the SEC. And the SEC is now trying to present itself as relevant so it can continue to exist. The SEC already gets real-time liquidity and capital information without giving it to the public.

Reuters reports that Wal-Mart Stores, Inc. (NYSE: WMT) posted better-than-expected revenue growth in the first quarter. As I suggested last month, this makes sense to me because Wal-Mart is the beneficiary of the recession diet.

The details suggest that Wal-Mart is becoming more popular than analysts expected thanks to its low prices and the squeezed consumer. Specifically, Wal-Mart sales rose 3.2% rise in April boosted by demand for basic items like groceries and medicine. Analysts, on average, were expecting same-store sales to rise 2.1%, according to Reuters Estimates; Wal-Mart had forecast a gain of 1% to 3%.

Why is this happening? People need food, shelter, medicine, and gasoline to drive back and forth from their jobs. And the price of all those items is rising. I estimate that the median family takes in $838 a week after tax. If that family fills up two tanks of gas a week -- that amounts to 40 gallons times $3.62 a gallon or $145 a week. That's 17% of the weekly budget compared to 15% a year ago when gasoline was $3.10 a gallon. Food prices have skyrocketed as well with rice prices tripling this year.

Bloomberg News reports that consumer borrowing -- as measured by credit card receivables -- grew much faster than expected in March. Specifically, the 9% growth to $2.56 trillion was twice the rate of increase that economists had expected (the actual increase was $15.3 billion vs. 34 economists who expected $6 billion). The March figures brought U.S. consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession.

And as consumers are increasing their indebtedness, they are also having more trouble paying it back. Overdue payments at the six largest U.S. credit-card lenders reached the highest level since November 2004, according to data compiled by Bloomberg. It found an average of 4.11% of loans were at least 30 days late in February and March.

Bloomberg quotes Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York who says it all: "incomes are not keeping up with inflation and this is leading them to rely increasingly on credit to see them through the worst housing downturn since the Great Depression. The days of extracting cash from one's home to spend on goods and services are long gone."

With consumer spending accounting for 70% of GDP growth, that's why I suggested selling into the sucker's rally that peaked last week.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.