GROSS DOMESTIC PRODUCT: FIRST QUARTER 2009 (ADVANCE)
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 6.1 percent in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP decreased 6.3 percent.
The Bureau emphasized that the first-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The first- quarter “preliminary” estimates, based on more comprehensive data, will be released on May 29, 2009.
The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, private inventory investment, equipment and software, nonresidential structures, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, decreased.
The slightly smaller decrease in real GDP in the first quarter than in the fourth reflected an upturn in PCE for durable and nondurable goods and a larger decrease in imports that were mostly offset by larger decreases in private inventory investment and in nonresidential structures and a downturn in federal government spending.
Motor vehicle output subtracted 1.36 percentage points from the first-quarter change in real GDP after subtracting 2.01 percentage points from the fourth-quarter change. Final sales of computers added 0.05 percentage point to the first-quarter change in real GDP after subtracting 0.02 percentage point from the fourth-quarter change.
Real federal government consumption expenditures and gross investment decreased 4.0 percent in the first quarter, in contrast to an increase of 7.0 percent in the fourth. Real state and local government consumption expenditures and gross investment decreased 3.9 percent, compared with a decrease of 2.0 percent.
Starbucks Corp. is hoping its Seattle's Best Coffee chain will be its growth engine during the recession.
Even as Starbucks shutters hundreds of namesake locations, cuts jobs and shaves other costs, it is seeking franchisees to open new cafes and kiosks of Seattle's Best Coffee nationwide.
Since Starbucks took over the chain in 2003, most new Seattle's Best Coffee cafes have opened inside Borders (BGP) bookstores and kept a relatively low profile. Many consumers don't know there's a connection: Seattle's Best Coffee's logo is red, Starbucks' is green, and there is no mention of Starbucks inside Seattle's Best Coffee stores.
Not only could opening more franchised cafes help Starbucks -- which reports its second-quarter earnings Wednesday -- expand without increasing its operating costs. Promoting Seattle's Best Coffee also could help Starbucks pursue two distinct streams of the coffee market simultaneously.
Seattle's Best Coffee's food, including ice cream and hot sandwiches, targets a broader market than the pastries and sandwiches and high-end juices and protein drinks at most Starbucks. And its much milder beans have been available since January in more than 2,800 Subway restaurants.
"It gives them an opportunity to reach out to a different audience," analyst Darren Tristano of Technomic Inc., a food industry consulting firm, said of the plan to open more Seattle's Best Coffees.
Starbucks says the slightly lower prices and milder taste of Seattle's Best Coffee make it an especially viable vehicle for growth now, though the company declined to say how many new stores it hopes to open or where.
"We believe that the Seattle's Best Coffee brand can play a unique role in helping capture a larger share of the coffee segment by providing options and a variety to a broader spectrum of customers," Starbucks Chief Executive Howard Schultz said in January when he announced the plan.
Global comparable sales were up 4.3%, operating income increased 5% in constant currency and EPS reached $0.87, a 17% increase in constant currency.
Our sales momentum is continuing with April comparable sales trending at least as strong or better than the first quarter in every area of the world. McDonald's is well positioned for continued growth. Our global system is aligned around the right strategies to manage in the current global economic environment and to seize future opportunities.
We remain focused on our customers and restaurants through our plan to win. Everyday, customer relevance is job one at McDonald's. We all know the state of today's consumers. They're scaling back and being more discerning about what they purchase. This means a strong value proposition is critical, from price to product, to experience.
McDonald's offers strong value across our entire menu board. Our value menus around the world offer predictable, every day affordability and our core menu, including iconic products like the Quarter Pounder provide great value at the mid tier. This tiered pricing across the board value means we are in a position to grow our market share not only in the near term but in the long term as well.
For the three months ended December 31, 2008, revenues at the Filmed Entertainment segment decreased $491 million, or 25%, as compared to the corresponding period of fiscal 2008. The revenue decrease was primarily due to a decrease in worldwide home entertainment revenue from theatrical and television products. The three months ended December 31, 2008 included the worldwide home entertainment release of Horton Hears a Who, the worldwide theatrical releases of The Day the Earth Stood Still, Australia and Max Payne and the domestic theatrical release of Marley & Me and their related releasing costs.
Also contributing to the three months ended December 31, 2008 were the pay television performances of Juno and 27 Dresses. The three months ended December 31, 2007 included the home entertainment performances of The Simpsons Movie, Live Free or Die Hard and Fantastic Four: Rise of the Silver Surfer and the theatrical releases of Alvin and the Chipmunks and Juno. For the six months ended December 31, 2008, revenues at the Filmed Entertainment segment decreased $814 million, or 23%, as compared to the corresponding period of fiscal 2008. The revenue decrease was primarily due to a decrease in worldwide home entertainment revenue from theatrical and television products, as well as a decrease in worldwide theatrical revenues as a result of the difficult comparisons to The Simpsons Movie and Live Free or Die Hard in the six months ended December 31, 2007.
For the three and six months ended December 31, 2008, Fox News’ revenues increased 18% and 19%, respectively, as compared to the corresponding periods of fiscal 2008, primarily due to an increase in net affiliate and advertising revenues. Net affiliate revenues increased 37% and 32% for the three and six months ended December 31, 2008, respectively, primarily due to an increase in the average rate per subscriber, a higher number of subscribers and lower cable distribution amortization as compared to the corresponding periods of fiscal 2008. Advertising revenues increased 6% and 8% for the three and six months ended December 31, 2008, respectively, primarily due to higher volume and higher pricing as compared to the corresponding periods of fiscal 2008. As of December 31, 2008, Fox News reached approximately 95 million Nielsen households.
The Company’s revenues decreased 8% and 2% for the three and six months ended December 31, 2008 as compared to the corresponding periods of fiscal 2008. The decreases were primarily due to revenue decreases at the Filmed Entertainment, Television and Book Publishing segments. The decreases at the Filmed Entertainment segment were primarily due to decreased worldwide home entertainment revenues. Television segment revenues decreased primarily due to decreased advertising revenues as a result of general weakness in the advertising markets. The decreases at the Book Publishing segment were primarily due to strong title offerings in the corresponding periods of fiscal 2008 with no comparable titles in fiscal 2009.
These decreases were partially offset by increases in revenues at the Cable Network Programming and Newspapers and Information Services segments. Cable Network Programming segment revenues increased primarily due to increases in net affiliate and advertising revenues. The increases at Newspaper and Information services were primarily due to the inclusion of revenue from Dow Jones & Company, Inc. (“Dow Jones”), which was acquired in December 2007.
As a result of this impairment review, the Company recorded a non-cash impairment charge of approximately $8.4 billion in the three and six months ended December 31, 2008. The charge consisted of a write-down of the Company’s indefinite-lived intangibles (primarily FCC licenses) of $4.6 billion, a write-down of $3.6 billion of goodwill and a write-down of Newspapers and Information Services fixed assets of $185 million in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” As a result of the continued adverse economic conditions in the markets in which the Company conducts business, the Company will continue to monitor its goodwill, indefinite-lived intangible assets and long-lived assets for possible future impairment.
As of December 31, 2008, Cruden Financial Services was the beneficial owner of 306,623,480 Shares, constituting approximately 38.4% of the total number of outstanding Shares at such date. All of the 306,623,480 Shares beneficially owned by Cruden Financial Services are also beneficially owned by the Murdoch Family Trust. Cruden Financial Services has the power to vote and to dispose or direct the vote and disposition of the Shares owned by the Murdoch Family Trust. Cruden Financial Services, the sole trustee of the Murdoch Family Trust, is a Delaware limited liability company with six directors.
As of December 31, 2008, the Murdoch Family Trust was the beneficial owner of 306,623,480 Shares, constituting approximately 38.4% of the total number of outstanding Shares at such date. The Murdoch Family Trust is a trust governed by Nevada law whose trustee is Cruden Financial Services. Cruden Financial Services, as sole trustee, has the power to vote and to dispose or direct the vote and disposition of the Shares owned by the Murdoch Family Trust.
As of December 31, 2008, K. Rupert Murdoch was the beneficial owner of 317,290,709 Shares, constituting approximately 39.7% of the total number of outstanding Shares at such date. Of the 317,290,709 Shares beneficially owned by K. Rupert Murdoch, 306,623,480 of such Shares are directly owned by the Murdoch Family Trust. Cruden Financial Services has the power to vote and to dispose or direct the vote and disposition of the Shares owned by the Murdoch Family Trust. As a result of Mr. Murdoch’s ability to appoint certain members of the board of directors of Cruden Financial Services, the corporate trustee of the Murdoch Family Trust, Mr. Murdoch may be deemed the beneficial owner of the Shares beneficially owned by the Murdoch Family Trust. Mr. Murdoch, however, disclaims any beneficial ownership of such Shares.
This is much like my AutoNation (AN) purchase. A company doing well in a poor operating environment. 75% of operating profits are from very stable and growing segments of the company. The other 25% is cyclical and release date dependent which causes volatility. Currently shares are excessively being punished for that section of earnings and being given very little credit for the other 75%.
That gives us a ValuePlay...I'm getting very close to buying some at these levels...
Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.
Gap Inc.’s (GPS) founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years. Sales by the co-founders of Bed Bath & Beyond Inc. (BBY) were the highest since at least 2001.
While the Standard & Poor’s 500 Index climbed 28 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.
“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”
If all of the legal requirements of a reorganization plan are met, with the exception of a successful confirmation vote by creditors, the plan may still be confirmed over the objection of a dissenting class. If the plan does not discriminate unfairly and is fair and equitable to the dissenting class, it can be crammed down on the impaired class that votes against the plan.167 In a cramdown, the debtor may (1) reduce the principal amount of the secured claim to the value of the collateral; (2) reduce the interest rate; (3) extend the maturity date; or (4) alter the repayment schedule.168 The debtor may also make a minimal payment on the unsecured claim. Under the Bankruptcy Code a cramdown is permissible when the plan provides a dissenting secured class with consideration equal to the amount of its claim or when no class below the dissenting unsecured class participates under the plan, the plan.169
Before a court confirms a cramdown plan, the court must, among other things, determine whether the plan is feasible. In other words the court must believe that the plan probably will not be followed by an unproposed liquidation or a need for further financial reorganization.188 According to the United States Supreme Court, "[h]owever honest in its efforts the debtor may be, and however sincere its motives, the District Court is not bound to clog its docket with visionary or impractical schemes for resuscitation."189 Although the feasibility requirement does not guarantee the success of the reorganized debtor, it does require that the plan enable the reorganized debtor to emerge solvent and with reasonable prospects of financial stability and success.190 The burden is on the debtor to prove that the plan is feasible.191
Generally, the factors that the court considers in determining feasibility include: (1) the earning power of the business; (2) the sufficiency of the capital structure; (3) the condition of the collateral and any deterioration that may have occurred throughout the bankruptcy process; (4) economic conditions; (5) management efficiency; (6) the availability of credit, if needed; and (7) the debtor's ability to meet capital expenditures.192 The court is obligated to evaluate past earnings to determine if they are a reliable criterion of future performance and, if not, to make an estimate of future performance by inquiring into foreseeable factors that may affect future prospects. To enable the court to evaluate past earnings and to estimate future earnings, the debtor must present competent, concrete, and reliable evidence.193
Therefore, although debtors may propose to restructure their debts, debtors have a significant burden to establish that they will be able to satisfy the payments proposed in their plans. In a single asset real estate case, the court will deny confirmation if the debtor cannot demonstrate the plan's feasibility based upon realistic and verifiable projections establishing the existence of adequate cash flow.
1111(b)(2) election: (1) the undersecured creditor loses the right to vote regarding the previously unsecured claim; and (2) the unsecured creditor must make the election before the conclusion of the hearing on the disclosure statement. Often, this second requirement forces the undersecured creditor to elect before adequate disclosure has been made concerning the plan and the proponent's intentions. By making a section 1111(b)(2) election, a creditor may significantly affect whether the amount of deferred cash payments proposed under a plan and the present value of those payments satisfy the cramdown confirmation standards of section 1129(b)
US consumers are growing increasingly stingy with their money and are becoming more and more likely to base their retail purchase decisions on price, according to a study from The Gordman Group, which reports that Wal-Mart stands to benefit most from this phenomenon.
According to Retailer Daily, The Gordman Group’s Spring “Retail Trend Tracker Survey,” reveals that 90% of respondents say the economy has affected how much they spend, and 80% say the economy has affected where they shop. In the last three months, 45% of respondents have spent less, and 31% expect to spend less in the next three months. More than half, 59%, believe the economy is getting worse, and almost half, 49%, say the economy has affected them directly.
More than half of respondents (54%) in the study plan to spend a larger share of their budget at Wal-Mart (WMT) in 2009 than they did in 2008. The next-most-popular response to this question, internet stores, was only selected by 27% of respondents as a destination where they will spend more money this year. Only 25% of respondents say they will spend more money in 2009 at chief Wal-Mart rival Target, the Gordman Group found.
For more than a decade, Target’s Board and management have been guided by our brand promise to our guests — to “Expect More. Pay Less.” — and this approach has produced outstanding results and a best-in-class retailer.
· Over the past 10 years, Target has grown its revenues at a compound annual rate of 11%, expanded its EBITDA margins by 200 basis points and grown EPS at a 14% average annual rate.
· Target has built a track record of disciplined management across all areas of its business including expense management, inventory control and use of capital.
· Target also has a history of returning cash to its shareholders through dividends (which have been paid every quarter since 1967, when we first went public) and a share repurchase program, all while maintaining a prudent capital structure as evidenced by its strong investment-grade credit rating, which we firmly believe is important to maintain.
Target’s Board and management are working to address the challenges of a deeply recessionary economy and remain firmly committed to the values and strategies that have driven Target’s success for nearly 50 years. By working as a team, delivering outstanding value, offering continuous innovation and an exceptional guest experience, Target believes it will enhance its position as a leading, world-class retailer and emerge from the current economic environment an even stronger company. Target’s future success depends on its ability to continue adapting to changes in the environment while fulfilling its “Expect More. Pay Less.” brand promise with passion and discipline, and delivering outstanding value for its guests, team members, shareholders and communities.
The median price of a new home dropped 12.2% to $201,400 in March from $229,300 in March 2008. The average price fell 10.3% to $258,000 from $287,600 a year earlier. In February 2009, the median price was $208,700 and the average was $255,100.
Foreclosures and a glut of unsold houses on the market have forced prices lower. At the end of March, there were an estimated 311,000 homes for sale. That's down the 328,000 for sale at the end of February. But the ratio of houses for sale to houses sold remained high, at 10.7. It was 11.2 in February.
Purchases of new homes in the U.S. last month were higher than anticipated, providing further evidence the market may be stabilizing.
Sales decreased 0.6 percent to an annual pace of 356,000 after a 358,000 rate in February that was stronger than previously estimated, the Commerce Department said today in Washington. The median sales price decreased 12 percent from March 2008, while inventories of unsold homes fell to a seven- year low.
Now another economist, Thomas Lawler, says Prof. Shiller's chart is "bogus." Mr. Lawler says Mr. Shiller cobbled together data that are inconsistent and sometimes unreliable. Mr. Shiller defends his work and accuses Mr. Lawler of making "wild allegations."
The clash is more than just a spat between two of America's most prominent housing mavens. It could affect the debate about exactly where the U.S. is in its housing cycle. The squabble also illustrates the paucity of reliable information on house prices.
If they rely too heavily on house-price gauges, politicians may get a distorted view of the severity of the slump and support overly drastic measures, says Kenneth Rosen, a housing economist at the University of California, Berkeley. Mr. Lawler says the Shiller chart also appears to understate the long-run rate of increase in home prices.
No one has found a precise way to measure changes in house prices. Because no two homes are exactly alike, changes in the price of one won't necessarily be matched even by apparently similar homes nearby, much less those hundreds of miles away. Though some indexes track price changes in the same set of houses over time, those can be distorted by major improvements in some of the houses and deterioration in others. The publicly recorded transaction prices, used to create indexes, often are distorted by incentives given to buyers that aren't tallied in the price.
For 1890 to 1934, Mr. Shiller used data from a trio of economists led by Leo Grebler. Because he found no index for 1934 through 1953, Mr. Shiller wrote, "I had my research assistants fill that gap by tabulating prices in for-sale-by-owner ads in old newspapers," covering just five cities. For 1953 through 1975, Mr. Shiller used an index compiled by the U.S. Bureau of Labor Statistics, or BLS. An index from the regulator of Fannie Mae and Freddie Mac covers the period through 1986, after which Mr. Shiller uses the S&P/Case-Shiller index he created with another economist, Karl Case.
"In other words," Mr. Lawler wrote in a recent edition of his daily housing-market newsletter, "the long-term chart is based on a concatenation of different time series of home prices which use different methodologies, have different samples, measure different things, and all in all are, well, different."
Mr. Lawler, a former Fannie Mae economist who now is an independent consultant in Leesburg, Va., says the BLS data used by Mr. Shiller was based on a "very small sample" and so isn't reliable. Mr. Shiller's chart shows that home prices from 1940 through 2000 rose at an annual real, or inflation-adjusted, rate of 0.7%. Data from the Census Bureau, however, puts the real rate at 2.3% for that period. Part of the difference may be due to improvements in the quality of homes, Mr. Lawler says, but he doubts that accounts for the whole gap.
Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) are coordinating talks with underwriters to roll over at least 65 percent of the company's credit line to June 22, 2012, said the people, who declined to be identified because terms aren't set.
JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Wells Fargo made commitments to extend Sears's revolver, one person said. The company is unlikely to extend its debt by the proposed $2.6 billion, or the full amount, according to the person, who said Sears might be able to get $2 billion.
Sears (SHLD), acquired by Edward Lampert-led Kmart Holding Corp. for $12.3 billion in 2005, plans to replace the existing five- year bank line due March 2010 "at a capacity more in line with our historical borrowing practices," the retailer said in its annual report dated March 16.
If lenders approve the proposal, Hoffman Estates, Illinois- based Sears would join more than 75 companies that have amended credit terms this year at higher interest rates as banks increase borrowing costs.
Higher Interest Rate
The company is proposing to pay lenders that extend the loan an interest rate four percentage points more than the London interbank offered rate, the people said. That compares with the 87.5 basis-point spread the company currently pays, according to data compiled by Bloomberg. One basis point is 0.01 percentage point.
Kimberly Freely, a Sears spokeswoman, declined to comment on the negotiations, as did Wells Fargo's Susan Stanley, Louise Hennessy of Bank of America and Tasha Pelio, a JPMorgan spokeswoman. Danielle Romero-Apsilos, a Citigroup spokeswoman, didn't immediately return a message left at her office.
The extended revolving line would have a 100 basis-point fee on the unused portion of the loan, which would drop to 75 basis points if at least 50 percent of the facility is drawn, the people said. Sears's current facility fee is 17.5 basis points, Bloomberg data show.
Sears borrowed $435 million from the $4 billion revolver and had $968 million of letters of credit outstanding under the facility as of Jan. 31, according to the annual filing. The company presented its proposal to roll over a portion of its credit line to individual lenders two weeks ago and held talks with banks this week, according to one person.
IRVINE, Calif. – April 16, 2009 – RealtyTrac® (http://www.realtytrac.com/), the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q1 2009, which shows that foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 803,489 properties in the first quarter, a 9 percent increase from the previous quarter and an increase of nearly 24 percent from Q1 2008. One in every 159 U.S. housing units received a foreclosure filing during the quarter.
Foreclosure filings were reported on 341,180 properties in March, a 17 percent increase from the previous month and a 46 percent increase from March 2008. The March and Q1 2009 totals were the highest monthly and quarterly totals since RealtyTrac began issuing its report in January 2005 despite a decrease in bank repossessions (REOs), which were down 13 percent from the fourth quarter of 2008 and 3 percent from February totals.
“In the month of March we saw a record level of foreclosure activity — the number of households that received a foreclosure filing was more than 12 percent higher than the next highest month on record. Since much of this activity was in new foreclosure actions, it suggests that many lenders and servicers were holding off on executing foreclosures due to industry moratoria and legislative delays,” said James J. Saccacio, chief executive officer of RealtyTrac. “It’s also likely that the drop in REO activity can be attributed to these processing delays, rather than to any of the foreclosure prevention programs currently in place. It’s very likely that we’ll see the number of REOs increase again now that most of the moratoria have been lifted.
“On a positive note, it appears that demand is up in some of the harder-hit areas, particularly on bank-owned REO properties that first time homebuyers and investors see as bargains,” Saccacio continued. “But it’s unlikely that this increased demand will be enough to offset the growing number of foreclosures in the pipeline, accelerated by rising unemployment rates.”
The net unrealized loss on securities available for sale declined to $4.7 billion at March 31, 2009, from $9.9 billion at December 31, 2008. Approximately $850 million of the improvement was due to declining interest rates and narrower credit spreads. The remainder was due to the early adoption of FAS FSP 157-4, which clarified the use of trading prices in determining fair value for distressed securities in illiquid markets, thus moderating the need to use excessively distressed prices in valuing these securities in illiquid markets as we had done in prior periods.
The research found that while 76% of Millennials ages 13-29 feel it’s very important or important for brands to get involved in the green movement, 71% of teens (ages 13-17) surveyed say if they had to choose between a less expensive product or one that “gave back” to the environment, they would choose the less expensive product.
In contrast, the older Millennial demographic would choose the more expensive brand that gave back in a green way.
Moreover, the majority of Millennials surveyed found it confusing as to why products that are better for the environment are more expensive. Generate Insight noted that the extra cost - without consistent explanation - discourages the majority of shoppers from embracing and contributing to the green movement.
The study also found several other deterrents to Millennials living greener lives. These include products that require too much effort, are too time consuming and are not convenient; products that are confusing and difficult to understand, and families that are not involved in, supportive of or knowledgeable about the green movement
Additional findings from the survey:
74% of Millennials believe they can make a difference in helping Earth, but the number decreases significantly among the 13-17-year olds. Only 48% of 13-17 year olds feel they can make a difference because the problems are too huge for them to move the needle.
In terms of contributing most to living green, 87% of Millennials recycle; 84% turn off lights when not in use; 80% reduce water use; and 73% use energy-efficient light bulbs
The top three biggest hurdles for this generation faces when embracing the green movement are cost (41%), proof that they’re making a difference (24%), and ease of use ( 12%).
In short, the company’s geographic footprint virtually mirrors the housing boom, which we believe boosted highly profitable truck sales and historical earnings well above realistic levels for any 2010 or 2011 recovery. While housing sales may experience a “V” shaped recovery in some of these markets – we do not believe that truck sales to contractors and housing professionals will immediately follow.
We believe AN should trade in-line with the group based on what we view as an inferior brand and geographic mix and already lean cost structure, offset by relatively less leverage (more owned properties) and better stock liquidity.I cannot understand the logic for this. Yes, 35% of revenues are from domestic brands as of 12/31. BUT, AN is also the #1 BMW dealer in the US and soon to be the top Mercedes dealer. How they conclude this mix is "inferior" to other dealer groups to me makes little sense. Additionally, the "geographic mix" argument falls flat when one takes into account that as of 12/31, AN suffered sales declines in all sales categories LESS than the national average. Were Weisel's geographic mix scenario true, these numbers would have been worse.
• 1Q09 included the following items, all recorded in our corporate treasury/other unit:
– $1.9 billion pre-tax gain on sale of partial ownership in China Construction Bank
– $2.2 billion pre-tax FVO positive adjustment on Merrill Lynch structured notes
– $1.5 billion gain on sale of debt securities
The unprecedented explosion of the US fiscal deficit raises the spectre of high future inflation. According to the Congressional Budget Office, the president’s budget implies a fiscal deficit of 13 per cent of gross domestic product in 2009 and nearly 10 per cent in 2010. Even with a strong economic recovery, the ratio of government debt to GDP would double to 80 per cent in the next 10 years.
There is ample historic evidence of the link between fiscal profligacy and subsequent inflation. But historic evidence and economic analysis also show that the inflationary effects can be avoided if the fiscal deficits are not accompanied by a sustained increase in the money supply and, more generally, by an easing of monetary conditions.
The deep recession means that there is no immediate risk of inflation. The aggregate demand for labour and goods and services is much less than the potential supply. But when the economy begins to recover, the Fed will have to reduce the excessive stock of money and, more critically, prevent the large volume of excess reserves in the banks from causing an inflationary explosion of money and credit.
This will not be an easy task since the commercial banks may not want to exchange their reserves for the mountain of private debt that the Fed is holding and the Fed lacks enough Treasury bonds with which to conduct ordinary open market operations. It is surprising that the long-term interest rates do not yet reflect the resulting risk of future inflation.
Texas oil billionaire T. Boone Pickens on Monday reiterated his prediction that crude oil prices would hit $75 a barrel this year as producers scale back production. Pickens said about OPEC producers: "They told you they want $75 by the end of the year, I would count on that, I believe them."
OPEC has scaled back output to help support crude prices, which have dropped from record highs over $147 a barrel in July to around $47 a barrel on Monday.
"I think you are going to clean up the stocks because the people who have the oil are cutting supply," Pickens said at an alternative fuels and vehicles conference, referring to the nearly 19-year high on U.S. inventories of crude oil reported last week by the federal government. The United States would likely burn through its supply overhang in three months, he told reporters.
Each barrel of oil contains about 5.8 million BTUs. Each American uses about 25 barrels of oil every year. Considering that it takes an adult one hour of work to generate about 300-500 of their own BTUs, our lives are clearly transformed each day by a “helper” known as oil. That oil is dirt cheap even at 100.00 dollars a barrel is pretty obvious.
But when oil was trading at 35.00 earlier this Winter, the price barely reflected the global average costs of extraction and transport. This average cost level often appears to some as a complex issue, because oil comes out of the ground so cheaply in the Middle East, and more expensively elsewhere. But it’s frankly not that complicated. The journey to 35.00 dollar oil was part of a supply crash that caused voluntary cuts in OPEC, and involuntary cuts in non-OPEC production. When the world offers 35.00 dollars for a barrel of oil, that is simply not enough value-in-exchange to keep global oil production at a steady level. Let alone growing.
Because I regard 35.00 as the level where oil is essentially free–the level where the supply chain recoups its costs and then hands you 5.8 million BTUs of black stuff as a free stub–it’s now appropriate to mark the oil price from that starting point. Should there be a new dislocation in the purchasing power of the USDollar, this could change my 35.00 dollar level. Probably to high side. Until then, you should generally view the spread between 35.00 and the trading price as the price of oil.
General Growth Properties Inc. (NYSE: GGP) was the Titanic of the Real Estate Investment Trust ocean that Morgan Stanley (NYSE: MS), Fidelity Investments and Pershing Square Capital Management L.P thought they could save from sinking. The three put their money into the Chicago-based REIT over the recent near term when its stock continued to swan dive, which culminated in a Chapter 11 filing last week. Now, Morgan Stanley, Fidelity Investments and Pershing Square have nothing to show for their stakes in General Growth but regret.
Pershing led by Bill Ackman owned a minority stake in General Growth of 7.4%. Mutual find company Fidelity owned a 13.4% share while Morgan Stanley reportedly owned a 5.1% stake.
So, what did all three as well as many others see in General Growth, whose $27.3 billion in debt, caused its knees to buckle to fall into bankruptcy?
The three likely thought that General Growth would be able:
1- to significantly lower the REIT's massive debt load payments because they thought refinancing was a strong possibility
2- to use bailout money to payoff its existing debt and act as collateral
3- to maintain or increase revenue from retail tenants in its 200-plus malls to sustain its debt payments.
As of December 31, 2008, we acquired approximately 25% of the outstanding common shares of AmeriCredit Corp., a company listed on the NYSE (symbol: ACF) for aggregate cash consideration of $405.3 million. ACF is an independent auto finance company that is in the business of purchasing and servicing automobile sales finance contracts, historically for consumers who are typically unable to obtain financing; this segment of the business is known as subprime. At December 31, 2008, our investment in ACF is classified as an investment in an Associated Company and is carried at fair market value of $249.9 million.
Years ago we owned a similar business and as a result carefully followed ACF. We observed that their large volume and efficient processing and underwriting abilities made them a fierce competitor. We also observed that when a recession hit ACF went through a period of poor results, but when a recovery began they were able to make very large profits by being able to select more credit worthy customers and to charge more for loans.
Much of the above remains true; however, we began to buy the stock too soon and paid too much. The recession has been much harder and much deeper than we anticipated, though ACF is succeeding in acquiring more credit worthy customers and is able to charge higher rates. The fly in the ointment has been that it has been almost impossible to secure additional funding to make loans. Securitizations, which were the lifeblood of their financing, are in rigor mortis. The Federal Reserve has announced a program to restart consumer lending known as TALF, but as yet ACF has not been able to access it. Perhaps that will change. ACF has adequate financing to operate at a much reduced volume and is committed to preserving its net worth of $15.03 per share. We have a high regard for its management.
Out of prudence we have a pessimistic view as to when this recession will end. To think otherwise would be to gamble about the beginnings of good times whereas by imagining a bleak future we will most likely survive for the good times to arrive.
In the case of General Growth, Mr. Ackman was clear from the start that the company should file for protection from its creditors. He invested last fall, as the financial crisis reached a fever pitch, and for months urged the company to seek bankruptcy. (Pershing has not disclosed the price at which it bought its General Growth stock.) General Growth controls Faneuil Hall Marketplace in Boston and the South Street Seaport in New York, and Mr. Ackman argues that its properties are worth far more than they are valued on its books.
In the five months since it has been in effect, HOPE has helped exactly one homeowner to avoid foreclosure. This despite Congress having made $300 billion available to back these loans and estimating that the program would benefit as many as 400,000 families.
"As it stands now, we've only gotten 752 applications," said Federal Housing Authority spokesman Brian Sullivan. "And only insured one loan. Needless to say, the program isn't working terribly well."
Rep. Michael Castle (R - Del.), who sits on the House Financial Services Committee, agreed, calling HOPE "one of the most failed programs we've had in a long time."
Nonetheless, the House of Representatives recently approved an updated version of HOPE as part of the bankruptcy-reform bill that is a keystone to President Obama's Homeowner Affordability and Stabilization Plan. But it was no overhaul to the program; the changes are very subtle.
Castle is concerned that the new program will also be a waste of time and money. But Sen. Chris Dodd (D - Conn.), one of the chief architects of the earlier version of HOPE, supports keeping it in the bankruptcy bill, according to a source close to the negotiations. He hopes the changes will help convince more servicers to use the program.
Visit msnbc.com for Breaking News, World News, and News about the Economy
Visit msnbc.com for Breaking News, World News, and News about the Economy
Some of the nation's largest mortgage companies are stepping up foreclosures on delinquent homeowners. That will likely lead to more Americans losing their homes just as the Obama administration's housing-rescue plan gets into gear.
J.P. Morgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Fannie Mae (FNM) and Freddie Mac (FRE) all say they have increased foreclosure activity in recent weeks. Those companies say they have lifted internal moratoriums which temporarily halted foreclosures.
Foreclosure sales had dropped in the second half of 2008 as mortgage companies delayed taking action against delinquent borrowers. But sales have been edging up this year, according to LPS Applied Analytics, which tracks loan performance. Foreclosure-related filings increased by nearly 6% in February from the month earlier, and were up almost 30% from February 2008, according to RealtyTrac. The backlog of seriously delinquent loans has been growing.
Completed Foreclosures Jumped 44% in March
In California, notices of trustee sales, which are preludes to foreclosure sales, climbed by more than 80% to 33,178 in March, from February, according to data from ForeclosureRadar.com and the Field Check Group. The increase reflects both the expiration of foreclosure moratoriums and a California law enacted late last year that temporarily delayed default and foreclosure notices, says Mark Hanson, president of the Field Check Group, a research firm.
Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can't meet their loan payments, up from about 1.7 million in 2008, according to Moody's Economy.com.
Mortgage-servicing companies, such as J.P. Morgan Chase and Wells Fargo, collect mortgage payments and work with troubled borrowers, both for loans they own and those held by investors.
J.P. Morgan Chase has increased foreclosure actions since the expiration of a moratorium on new foreclosures that began on Oct. 31, and a later moratorium put in place at President Obama's request. The Oct. 31 moratorium delayed foreclosures on more than $22 billion of Chase-owned mortgages involving more than 80,000 homeowners.
Visit msnbc.com for Breaking News, World News, and News about the Economy
In the first quarter of the year, 271 auto dealers in the U.S. went out of business, according to the National Automobile Dealers Association, as car buyers stayed away from showrooms and credit remained tight.
At the end of the quarter, there were 19,738 auto dealers in the U.S., the dealer group said, down from 20,009 at the end of last year. It said it expects about 1,200 dealers, mostly sellers of domestic brands, to go out of business in 2009, roughly 20% more than last year.
Many dealers closed as their lenders tightened terms and costs outstripped revenue, while some consolidated stores or closed up shop voluntarily. Light-vehicle sales in the first three months of the year were down 38%, with sales of domestic brands down 46%, compared with declines of 31% for Asian auto makers and 27% for European brands.
General Motors Corp. (GM) said 198 of its dealers closed in the first quarter, bringing its total to 6,177 at the end of March.
Chrysler LLC said it shaved dealer numbers by 82 during the first quarter to about 3,218 at the end of March. In the last quarter of 2008, Chrysler, majority-owned by Cerberus Capital Management LP, lost 74 dealers. In its viability plan in February, Chrysler estimated that 27% of its dealers were in financial trouble.
Ford Motor Co. (F) declined to provide the number of dealers the company had at the end of March. Last year, 269 dealers of all of Ford's brands closed, bringing the company's total at the end of December to 3,787.
Some brands are expanding their dealer networks even in the current depressed environment. BMW AG's Mini, for instance, plans to open 13 outlets this year.
Now I am seeing the same pattern in natural gas (or as traders sometimes call it, “natty”), only the danger of constrained supply is possibly even greater, since about 84% of US natural gas consumed is produced domestically and there is very little storage throughout the system.
Gas prices have plunged 72% from their record of over $13 per Mcf1 to $3.75 on Monday, taking it all the way back to 2002 pricing. (The spot price for natural gas has only fallen below $4 once since 2002, in September 2006.)
We are a global market leader in the full service natural gas compression business and a premier provider of operations, maintenance, service and equipment for oil and natural gas production, processing and transportation applications. Our global customer base consists of companies engaged in all aspects of the oil and natural gas industry, including large integrated oil and natural gas companies, national oil and natural gas companies, independent producers and natural gas processors, gatherers and pipelines.
We operate in three primary business lines: contract operations, fabrication and aftermarket services. In our contract operations business line, we own a fleet of natural gas compression equipment and crude oil and natural gas production and processing equipment that we utilize to provide operations services to our customers. In our fabrication business line, we fabricate and sell equipment that is similar to the equipment that we own and utilize to provide contract operations to our customers.
We also utilize our expertise and fabrication facilities to build equipment utilized in our contract operations services. Our fabrication business line also provides engineering, procurement and construction services primarily related to the manufacturing of critical process equipment for refinery and petrochemical facilities, the construction of tank farms and the construction of evaporators and brine heaters for desalination plants.
In what we refer to as “Total Solutions” projects, we can provide the engineering design, project management, procurement and construction services necessary to incorporate our products into complete production, processing and compression facilities. Total Solutions products are offered to our customers on a contract operations or on a turn-key sale basis. In our aftermarket services business line, we sell parts and components and provide operations, maintenance, overhaul and reconfiguration services to customers who own compression, production, gas treating and oilfield power generation equipment.
On August 20, 2007, our board of directors authorized the repurchase of up to $200 million of our common stock through August 19, 2009. In December 2008, our board of directors increased the share repurchase program, from $200 million to $300 million, and extended the expiration date of the authorization, from August 19, 2009 to December 15, 2010. See further discussion of the stock repurchase program in Note 15 to the Financial Statements. Since the program was initiated, we have repurchased 5,416,221 shares of our common stock at an aggregate cost of approximately $199.9 million. See Part II, Item 5 (“Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”) of this report for information regarding our fourth quarter 2008 repurchases.
The time it takes to raise capital for new drilling, deploy rigs, and start producing again after gas prices rise is a golden window of opportunity for investors. As long as marginal capacity remains in a razor-thin range, prices will stay high and low-cost producers will be rolling in profits again.
While it’s impossible to say when the US economy will recover and bring natural gas prices back into sustainable territory, I am confident that for those with at least a one-year investing horizon, there is no better time than now to begin accumulating those positions.
.gif)
.gif)
"We can no longer stand by and watch others walk off with our work under misguided legal theories," Dean Singleton said at a meeting this week of the Newspaper Association of America (NAA) in San Diego, California.
Singleton's battle cry came just a few days after News Corp. chairman Rupert Murdoch launched a broadside against Internet giant Google (GOOG), whose Google News website is one of the most popular news aggregators on the Internet.
"Should we be allowing Google to steal all our copyrights?" asked Murdoch, the owner of newspapers in Australia, Britain and the United States, where his holdings include The Wall Street Journal and New York Post.
"Thanks, but no thanks," the News Corp (NWS). chairman said.
Robert Thomson, the managing editor of The Wall Street Journal, used even harsher language than his boss in describing the situation.
"There is no doubt that certain websites are best described as parasites or tech tapeworms in the intestines of the Internet," Thomson said in an interview with the newspaper The Australian.
"It's certainly true that readers have been socialized -- wrongly I believe -- that much content should be free," he said. "And there is no doubt that's in the interest of aggregators like Google who have profited from that mistaken perception."
Bill Kiss, the divisional vice president of marketing planning and program development at Sears Holdings talks about today’s challenges.
PROMO: How have you positioned the Sears brand to deal with this economy?
KISS: We really think we struck a chord with the new tag line by being very mindful of the economic condition, but in an inspiring way. We think the tag line builds off our brand equities. Even in today’s economy, people have dreams for a better life. We think that’s where we can intersect and not just be the low priced guy out there.
P: What is the most effective type of promotion you use to get people into stores?
K: It’s getting at that value proposition within the different categories and understanding what that customer driver is and making sure we deliver against it to get customers in the door. At the end of the day we think that’s the richer way of getting people in stores.
P: Can you offer an example?
K: In home appliances we’re price matching and we have brag statements. We just bought Bosch and their line of refrigerators and we’re doing a presale online before it hits the store. We’re using multiple executions against that, but TV is probably one of the most powerful ways of getting that message out there.
P: How has you Blue Appliance Crew campaign working?
K: About the time the Blue Appliance Crew TV spots began, we started seeing results and we have reported our third consecutive quarter where we have taken market share. It’s beyond just what is the price and what is the product. It’s a more engaging story told in an interesting way to get people to engage in the experience.
P: What is the most effective type of promotion you use to drive people online?
K: Static banner ads are yesterday. Coming up with engaging interesting things in digital advertising is the most compelling way to draw people into the franchise. We test multiple messages and that’s the beauty of online. On one end of the spectrum we may go with a price and product static ad and at the other end something very visually stimulating, like the Sears Blue Appliance Crew waving you in or rich video that was part of the commercial campaign. Something disruptive to catch your eye, then pull you in and then draw out the proof points of the campaign. That’s an emerging best practices of ours we think works.
P: What are your top methods for determining marketing ROI?
K: It does depend on the vehicle. When you have direct mail, we know who you are and can track you in a wide range from voice of customer to actual results. When we do research or when we get customer feedback we take that into consideration. Everything comes down to how she behaves and how does that translate into sales in store and online.
P: Have the demographics of the audience you target changed at all?
K: We have a clear understanding of who our target is, but we’re describing them as today’s American family, whose focus is on home and family. Being able to articulate that with a robust description that the entire organization can rally around we think is power. It hasn’t changed all that significantly, but this is our way of expressing our customer.
P: What is Sears’ position on social marketing?
K: We do have an appetite for the social marketing space because it’s customer centric. There’s great conversation out there and we’re looking for meaningful ways to engage. We have the Sears2go capability that allows people to buy off their mobile phones and then pick up at the store. All these things are what customers are showing us. If they’re on the phone, how can we be there too?
P: When talking about marketing the Sears brand today, what have been the biggest challenges?
K: It is really about how do we adapt and be nimble and quick. That’s been the challenge. How do we listen and react in our messages and promotions to make sure we are really relevant.
P: What keeps you up at night?
K: If you really want to stay in lockstep with your customer, it’s about understanding our customer and how do we move fast enough to respond. It’s read and react. If there’s something that’s pressuring them, how do we as an organization respond? During the last holiday season, Kmart had a phenomenal success with layaway. Part of the strategy was we came out with it early and based on that success we knew that something had broken through with the customer. We quickly adapted that program at Sears and brought it to life. What’s the next mouse trap? That’s what keeps us up at night as marketing leadership.
