Archive for the 'Business' Category

Financial Crisis Is Absent From Candidates’ Agendas

Published
by
Doug
on August 27, 2008
in Banks, Business and Politics
. 0 Comments

For the past year, I have been bombarded with a steady stream of dire news and various statistics showing worst declines in decades. Bear Stearns and IndyMac have fallen and several huge financial institutions seem to be teetering, yet Bloomberg reports that neither of the political parties are addressing the current financial crises:

The U.S. is facing the worst financial crisis since the Depression. You would never know that from the Democrats’ platform in Denver or its Republican counterpart, or from listening to Barack Obama or John McCain.

While both candidates have bemoaned the ravages of the subprime crisis, they have yet to spell out steps for tackling it, such as using taxpayer money to shore up banks and housing.

“They fail to come to grips with the biggest danger that is going to hit the next president in his first few months in office: the crisis in the capital markets,” said David Smick, a Washington-based consultant to hedge funds and author of “The World is Curved: Hidden Dangers to the Global Economy.”

The Democrats’ platform, adopted at their Denver convention this week, labels the crisis a “debacle” and promises to jump-start the economy with a $50 billion stimulus package. It says nothing about helping banks or bailing out the mortgage-finance firms Fannie Mae and Freddie Mac.

The draft of the Republicans’ plank, to be adopted next week at their convention in St. Paul, Minnesota, supports “timely and carefully targeted aid to those hurt by the housing crisis” and opposes bailouts of private financial institutions. It doesn’t mention Fannie and Freddie.

The lack of attention to what has happened in the financial world in the past year most likely shows that this is not a winning political issue or that lots of people don’t really know what’s going on in the first place. I think this lack of attention is a serious mistake. Refusing to address and publicize the problems that gave rise to the crises decreases the likelihood that these problems will be solved in the future.

Who Wants a Hummer?

Published
by
Doug
on August 21, 2008
in Business and Cars
. 1 Comment

How is GM going to sell its Hummer brand? Who would be willing to buy it? I can’t help but think there are only two types of people who would want to own a Hummer: the rich or the insane. Or perhaps some combination of both. According to the WSJ (look at the link above):

The potential sale of the Hummer brand would be a minor part of GM’s plan to raise the $15 billion in additional liquidity by the end of 2009 that it needs to remain viable during a significant slowdown for the entire U.S. auto industry. GM will trim costs, pledge assets for new financing and sell assets to raise the needed cash.

Mr. Wagoner said Thursday that capital markets “have not opened up robustly” and are “moving in fits and starts.” He noted that GM anticipated the tough environment when it laid out its $15 billion liquidity plan.

How is GM even capable of raising $15 billion? The only thing going for GM is its long history in America. But, judging by its “next-generation of small cars” such as the Chevy Cruze,

things look good for GM if it can remain solvent. I have to admit I like the looks of this car, especially the Euro license plate.

Sears Showcase at NY Fashion Week

Published
by
Doug
on August 13, 2008
in Business, Fashion and Stocks
. 0 Comments

One does not associate Sears with fashion. The first thing that always came to my mind are large refrigerators and lots of tools. But perhaps Sears will be able to improve its image in the world of fashion after their upcoming showcase at New York’s fasion week in September.

Sears, Roebuck and Co., a subsidiary of Sears Holdings Corp. said on Wednesday that it will unveil a lifestyle exhibit on Sept. 10 in New York’s Bryant Park, where fashion’s biggest names parade their spring collections on catwalks set up under big, white tents.

The retailer, not known for fashionable clothes, faces a hurdle convincing shoppers of its chic factor. It is also following in the footsteps of discount retailer Wal-Mart Stores Inc., whose attempt to ratchet up its fashion credentials at the same event backfired, hurting profits in 2007.

Sears’ exhibit, open to the public, will showcase brands Sears already offers in its stores, like Kenmore appliances, as well as new brands that it is introducing, like a clothing line by rapper LL Cool J.

The article also mentions how Wal-Mart’s showcase at the fashion week in 2005 was a bit of a flop. By 2007, Wal-Mart scrapped its Fashion Week plans because “[i]ts shoppers proved more interested in basic, affordable clothes than trendy fashions like skinny jeans, leaving Wal-Mart with heaps of unsold clothing to mark down.”

Hopefully this will be a net gain for Sears.

Disclosure: I own Sears (SHLD)

Starbucks: Coffee Hut or Smoothie Shack?

Published
by
Doug
on July 14, 2008
in Business, Food and News
. 0 Comments

In late April, Todd at ValuePlays posted his thoughts on the news that Starbucks would be introducing smoothies this summer. Smoothies would not be a bad idea if they were reasonably priced below $4 a drink.

Well, here’s a news release with the pricing details, flavors, nutrition info, and name of the new smoothies:

(Crain’s) — Starbucks Corp. plans to introduce a new line of smoothies Tuesday called Vivanno.

The drinks are the latest push by Starbucks CEO and founder Howard Schultz to boost sluggish sales at the Seattle-based coffee chain. The smoothies illustrate Starbuck’s strategy of offering more healthy options to attract new customers. The 16-oz smoothies will sell for $3.75 to $3.95, and initially will feature two flavors: orange mango banana and banana chocolate.

The drinks will include a banana, whey protein and Naked juice. The orange mango banana blend will have 250 calories, 16 grams of protein and 2 grams of fat. The banana chocolate blend will have 270 calories, 21 grams of protein and 5 grams of fat.

The new drinks debut tomorrow. Good luck, Starbucks.

Steve & Barry’s: It’s cheap. It’s chic. Is it worth it?

Published
by
Doug
on July 14, 2008
in Bankruptcy, Business, Fashion and Retail
. 0 Comments

“It’s cheap. It’s chic. Is it worth it?” That’s the question a fashion article in The News & Observer asks regarding a $9 little black dress from discounter Steve & Barry’s. The story observes not even Walmart has a dress for that kind of price.

The reason why I’m even delving into the subject of female fashion is because Steve & Barry’s has recently filed for Chapter 11 bankruptcy and news stories have reported that Sears is interested in either the whole company or in just a selection of some of the brands.

Getting back to the original question, I think it could apply just as well to the company. A bankrupt company can certainly be had on the cheap. I’m willing to trust that its fashions are fashionable. You have celebrities like Sarah Jessica Parker and sports stars like Venus Williams and Stephon Marbury on record as backers of the store. But is Steve & Barry’s worth it?

Well, in the fashion article, the author deems the $9 little black dresses she tried on definitely worth the money. She even thought about getting two dresses and some other stuff while she was in the store. This point definitely stuck out to me as a big positive. I think most shoppers know they can’t expect a lot for a $9 dress, and when the store and clothing surpasses those expectations, shoppers will keep coming back and buying more.

Right now, there are reportedly 276 stores open. An article from Business Week leads me to believe that what got Steve & Barry’s into trouble was a focus on unreasonable and unsustainable growth. The article suggests that Steve & Barry’s could have been in a better position today than bankruptcy if it had not pushed for opening nearly 300 stores — almost ten times the number of stores it had five years ago — in such a relatively short time. “If the company had focused more on design and quality at super-low prices … instead of the number of stores, perhaps it could have found itself in a different position today.”

After learning a little bit more about this discount fashion retailer, I’m starting to believe that an acquisition by Sears (SHLD) would be worth it and also would be yet another indication that Sears is serious about becoming a retailer. As if trying to prove that it wants to be a retailer, Sears today named Craig M. Israel, a veteran retail executive, as senior vice-president and president of apparel, responsible for men’s and women’s clothing as well as the children’s and cosmetics divisions.

If the largest problem with Steve & Barry’s was simply that it focused too much on growth, I feel that Eddie Lampert and Sears management could turn Steve & Barry’s and its brands into a much more profitable enterprise.

Beer and An Old Closed End Fund (Oh, and Indy Mac Goes Under)

Published
by
Doug
on July 11, 2008
in Banks, Business and News
. Closed

George Will correctly states we wouldn’t be where we are today without beer.

Did you know that Adams Express was started in the 1800s, became a closed-end fund in 1929, and has paid a dividend every year since 1936? (via Investingfromtheright)

Oh, and did you know that the FDIC just took over Indy Mac, a bank with $32 billion in assets? (via FDIC, Marketwatch)

Blockbuster Gets Smart For Once

Published
by
Doug
on July 1, 2008
in Business, M&A and News
. 0 Comments

Jesus, sometimes I think I could run some companies better than some current management teams. When Blockbuster announced in April that it wanted to acquire Circuit City, I thought to myself they must be stupid idiots. If that deal actually was consummated, it would be like Dumb and Dumber. Two companies destined to go down in flames separately would now go down in flames together.

However, Blockbuster just announced it has dropped its bid for Circuit City. BB’s CEO said it wouldn’t be in the best interest of the shareholders. Ya think? I bet his wife knocked some sense in to him…

Starbucks Gets Serious

Published
by
Doug
on July 1, 2008
in Business, Investing and News
. 0 Comments

Starbucks gets serious about increasing profitability: Starbucks announces it will close 600 stores.

The company, the world’s largest coffee chain, said Tuesday that it would close 600 stores in the United States beginning this year. It will lay off more than 12,000 employees in the process, the most in its history.

The plan builds on an earlier decision to close 100 stores, which are included in Tuesday’s numbers. Starbucks is retrenching in an effort to recapture the once-mighty growth it built upon venti soy lattes.

When I started reading Todd Sullivan’s blog ValuePlays a couple of years ago, he was harping about everything Starbucks was doing wrong and how they were losing to McDonald’s and Dunkin’ Donuts. The increase in commodity prices also contributed to the decline in profitability.

Now that Starbucks has its old leader, Howard Schultz, back, management might be able to turn things around a bit. Hopefully Starbucks will be able to return some lost value to shareholders. Just look at the chart…

GE’s Surprise Profit Shortfall

Published
by
Doug
on April 11, 2008
in Business, News and Trends
. 0 Comments

My put positions love the sound of this news: General Electric’s quarterly net off 6%; outlook cut.

LONDON (MarketWatch) — General Electric Co. pulled an unpleasant surprise on investors Friday, reporting a 6% drop in first-quarter net profit — largely over trouble in its financial-services businesses — and revising lower its 2008 outlook.

General Electric said net income dropped to $4.3 billion, or 43 cents a share, from profit generated during the first quarter of 2007, while revenue rose 8% to $42.24 billion.

Though GE’s financial-services businesses may be the main culprit, I’m going to go out on a limb and say that the economy is slowing down, people are spending less, and the price of basic materials and commodities are growing. Look out below.

Apple’s Grand Plan For Its Billions

Published
by
Doug
on March 31, 2008
in Business, Management, Recession and Technology
. 0 Comments

Chad Brand at The Peridot Capitalist points out one reason why Apple may have refused to return any of its $18 billion in the form of stock buybacks or dividend payouts: to come out ahead after an economic downturn.Steve Jobs

Fortune senior editor Betsy Morris interviewed Apple CEO Steve Jobs in February, and this is what he said in regards to managing the company during an economic downturn:

We’ve had one of these before, when the dot-com bubble burst. What I told our company was that we were just going to invest our way through the downturn, that we weren’t going to lay off people, that we’d taken a tremendous amount of effort to get them into Apple in the first place — the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that’s exactly what we did. And it worked. And that’s exactly what we’ll do this time.

Sounds like an excellent strategy to me. When most companies are probably skimping on R&D and trying to cut costs during a downturn, Jobs’ plan seems to guarantee Apple will be further ahead with new products and services that people will want.