The Bottom Line

General Motors Goes Bankrupt

The only way Comcast can ensure it doesn’t become an afterthought is if it buys some proprietary programming itself. Comcast blew it when it failed to get NFL Sunday Ticket, which took satellite TV from the minor to the major leagues. Now that CBS is separating from Viacom, Comcast gets another chance to buy a television network and distinguish itself as the owner of must-have TV. Actually Comcast can pick and choose, because the Viacom portion, with MTV, VH1, Comedy Central, and Paramount Pictures and Home Entertainment, could make a nice fit, too. By the way, it wouldn’t surprise me to see Comcast or a phone company, either AT&T or Verizon, buy Electronic Arts, to crack into video-game programming and stay relevant with younger people. One might do it just for those cool ringtones EA now offers. Anything for the young demo, which seems to be drifting away from everything but Xbox.

In 2007, after the common stock is wiped out and the bondholders get the company, the new GM will emerge—lean, mean, small, and profitable.

RUPERT MURDOCH WILL BUY ‘THE WALL STREET JOURNAL’
In 2006, newspapers will discover what it’s like to be General Motors, if not Bethlehem Steel. That’s because classified and display ads and even inserts will continue to gravitate, en masse, to the Net. The bargain that Google offers is so great to local and national advertisers (far more targeted ads, fewer wasted eyeballs) that I think it will double its share this year (Internet ad spending already makes up 5 percent of all ad dollars). Meanwhile, I believe 2006 will be the year that newspapers begin to see double-digit declines in both ads and circulation. For some, like the New York Times, this just means making less money in 2006 than it did in 2005—nothing new there (and I suspect it will make even less money in 2007 than it does in the coming year). But for Dow Jones, in the last years of Peter Kann’s stewardship (he’s retiring), finally enough is enough in the stagnant share-price business, and the Dow board will decide to take Rupert Murdoch’s offer of, say, $50—some $20 less than he would have offered five years ago. News Corp. will promptly close all but the editorial board and merge the news staff with that of the New York Post (don’t think Rupert doesn’t have it in him). Murdoch will also give a joyful Roger Ailes the staff he needs to set up a full-blown TV-business-network competitor to CNBC.

PFIZER AND BRISTOL-MYERS SQUIBB WILL MERGE, AND MERCK WILL SNAP UP SCHERING-PLOUGH
My crystal ball sees no end to the turmoil afflicting the pharmaceutical industry. With the government as the biggest payer in the system, courtesy of the changes in Medicare, the drug companies will be forced to discount drugs well below where they thought they might have to. That combination of price squeeze and endless overhead will force Bristol-Myers and Pfizer to merge, and Merck and Schering-Plough will get together. The latter will occur only if Merck can escape bankruptcy from a spate of Vioxx-trial losses that I see happening. The rapacious tort bar may just insist that the equity be given to those who took Vioxx, something that an aggressive federal judge held over from the Clinton era may countenance. No matter, I expect all the growth and performance in the drug industry to come, once again, from Amgen, Genentech, Gilead, Genzyme, and Celgene, as the biotechs seem to be the only companies capable of making blockbusters anymore.

THE U.S. STOCK MARKET WILL GO NOWHERE
Okay, so that standard Wall Street gibberish isn’t entirely useless. It’s true that our clueless president, huge deficits, and the like will act as an anchor, as they did in 2005, on U.S. stock averages. Unless a U.S. company has big exposure to BRIC (Brazil, Russia, India, and China), you can’t expect its stock to make much headway. Those companies that are able to crack into BRIC—companies like Boeing, Caterpillar, Procter & Gamble, and Altria—will make worthy but boring gains that will exceed the averages. But you’ll do better to just pick among the potential takeovers with good fundamentals and keep the rest in cash, earning 4.5 percent by the time the Fed’s done lifting rates. That, as they say on the Street, is better than a sharp stick in the eye.

James J. Cramer is co-founder of TheStreet.com . He often buys and sells securities that are the subject of his columns and articles, both before and after they are published, and the positions he takes may change at any time. At the time of this writing, he owned Altria, Boeing, Intel, Microsoft, Procter & Gamble, Qualcomm, Schering-Plough, and Yahoo. E-mail: jjcletters@thestreet.com.

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