Daily Archives: December 23, 2008

Starbucks (SBUX) May Take Another Chance To Screw Employees

R218533_855025_2Merry Christmas you underpaid, overworked coffee barista boys and girls. Uncle Howard Schultz, your founder and CEO, has found another way to screw Starbucks (SBUX) employees, if he wants to. According to The Wall Street Journal, "Starbucks Corp. told employees the company won’t guarantee that it will make a company match to their 401(k) accounts next year."

Keep in mind that Starbucks still makes lots of money. In the last reported quarter, the coffee retailer improved revenue by 3% to $2.5 billion. Operating income was down to $14 million from $248 million in the same period in 2007. But, Starbucks did take a $99 million restructuring charge this year.

So much for Starbucks making the Fortune "100 Best Places To Work For" list again in 2009. As the company says "We are always focused on our people. We provide opportunities to develop your skills, further your career, and achieve your goals."

In the meantime, Starbucks does not mind fleecing its employees by cutting contributions to their savings if it wants to. Maybe it is because the firm pays them so well.

Douglas A. McIntyre

Posted on: December 23, 2008 – 4:41 pm in Food,

The 52-Week Low Club (KVA)(AM)(MNI)(BRY)(SSCC)

Sad_clown K-V Pharmaceutical (KVA) Suspends shipments of tablet-form drugs and expects earnings hit. Stock falls to $2.50 from 52-week high of $29.02.

American Greetings (AM) Says it lost money. Drops to $6.20 from 52-week high of $22.17.

McClatchy (MNI) Newspaper shares keep plunging. Someone may know something the general public has missed. Off to $.65 from 52-week high of $13.31.

Berry Petroleum (BRY) No news. Bad oil prices. Sells down to $6.15 from 52-week high of $62.15.

Smurfit-Stone Container (SSCC) Deutsche Bank downgrades shares. Drops to $.23 from 52-week high of $10.90.

Douglas A. McIntyre

Posted on: December 23, 2008 – 4:04 pm in HI/LOW, , , , ,

Profitable American Express (AXP) Gets $3.4 Billion In TARP Funds

TreasuryAmerican Express (AXP) is still paying its $.18 dividend. The company will fire about 7,000 people and chop other costs to save $1.8 billion next year.

Last quarter AXP did relatively well, making $815 million, down 24% from the same period a year ago. At that point, the American Express CEO Kenneth I. Chenault said, "Our business model is well positioned to generate earnings and excess capital even in an economic environment that is likely to be among the weakest in many years. We believe we have the capital strength, funding resources and comprehensive liquidity plans to manage successfully through difficult market conditions."

So, why did the company take $3.39 billion of TARP money today in exchange preferred stock and warrants to purchase shares of common stock for up to 15% of that amount? The preferred shares will pay dividends at a rate of 5% annually for the first five years and then 9% annually thereafter.

American Express doesn’t need the money. Maybe it should go to taxpayers who are delinquent on their Amex payments instead.

Douglas A. McIntyre

Posted on: December 23, 2008 – 3:51 pm in Banking,

Tell Us Something We Don’t Know: Consumers Deeper In Debt

AngrybearFrom the "not news" file comes a report from credit rating firm, Equifax, that consumers are falling more deeply into debt. According to Reuters, Dann Adams, president of U.S. Information Systems for Equifax Inc, said, "Consumers are missing payments on mortgages, credit cards, and auto loans."

What Adams was less clear about is that there is still no exit from losses for banks and that consumer credit issues will cause red ink at financial firms which may rival the write-offs from the subprime mortgage fiasco. Credit problems will not simply come from normal defaults. Wall St. built an entire class of derivatives around consumer debt pools just the way it did with mortgages.

Banking earnings have a lot further to fall.

Douglas A. McIntyre

Posted on: December 23, 2008 – 3:33 pm in Economy

Stocks Hitting 52-Week Highs (ALGT, AGNC, LOPE, ROCM, RGLD)

Money_stack_pic_2There are still some stocks doing extremely well despite all the interests outside against ythe economy.  Allegiant Travel Co. (NASDAQ: ALGT), American Capital Agency Corp. (NASDAQ: AGNC), Grand Canyon Education, Inc. (NASDAQ: LOPE), Rochester Medical Corporation (NASDAQ: ROCM), and Royal Gold (NASDAQ: RGLD) are all either on 52-week or all-time highs.  Here is a synopsis on each:

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Posted on: December 23, 2008 – 12:47 pm in HI/LOW, Trading Alert, , , , ,

Moody’s Outlines Default Risks For SIRIUS (SIRI)

Sirius_logoAs if you didn’t know there were problems at SIRIUS XM Radio Inc. (NASDAQ: SIRI), Moody’s has decided in its infinite wisdom to downgrade the company’s debt ratings.

This downgrade is showing an increased probability of a default. It lowered its corporate family rating to "Ca" from "Caa1."  The company’s rating outlook is negative and its speculative grade liquidity rating remains at SGL-4, indicating poor liquidity.

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Posted on: December 23, 2008 – 11:31 am in Analyst Calls, Media, Satellite,

Grey Wolf Nearly, Finally Merged (GW, PDS, BAS)

The shareholders of Grey Wolf, Inc. (NYSE:GW) have overwhelmingly chosen to accept cash instead of stock in Precision Drilling Trust (NYSE:PDS) as consideration for Precision’s buyout of Grey Wolf. We’ve been following the story for some months now, but Grey Wolf shareholders approved the merger this morning and the deed is now done.

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Posted on: December 23, 2008 – 11:28 am in Mergers and Buy Outs, Oil & Gas, , ,

No Gas Cartel in the Near Future

Energy industry publisher Platts is reporting that the Gas Exporting Countries Forum (GECF) is meeting in Moscow this week, and is expected to sign a framework agreement to set up a natural gas exporters forum. However, the GECF does not plan to form a natural gas cartel similar to OPEC.

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Posted on: December 23, 2008 – 11:25 am in Oil & Gas

Nortel Possible Unit Sale Adds Little Worth (NT)

Burning_money_pic_2Nortel Networks Corp. (NYSE: NT) is trading higher today on news reports that it has received three offers worth nearly U.S. $1 billion for the company’s Metro Ethernet unit.  What is interesting is that the company is apparently still trying to determine whether its best route to profitability would be to sell more of the company.

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Posted on: December 23, 2008 – 11:09 am in Management Change, Mergers and Buy Outs, Shareholder Issues, Turnarounds,

Wind Turbines, India, and Private Equity

Last summer, Suzlon Energy Limited had a nasty problem with its wind turbine blades. Blades shipped to the US started cracking. Then blades sold in the company’s home country, India, also started cracking. The WSJ noted that one customer said, "The machines are not fit to handle the wind." That stings.

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Posted on: December 23, 2008 – 10:26 am in Alternative Energy, Emerging Markets, Private Equity

Hosing Housing

For_sale_sign_2There was no way the November housing data was going to be good. There are too few people chasing too many homes. In some markets like Florida and Michigan, there are no people chasing too many homes.

Sales of new US homes fell 2.9% to 407,000. That is the lowest level since 1991.

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Posted on: December 23, 2008 – 10:10 am in Housing

PC Trends: Notebooks Pass Desktops & Disturbing Apple Trends (AAPL, HPQ, DELL)

The good news is that PC sales are not dead if the latest iSuppli data is accurate.  But there are some trends in which are going to revolutionize the PC industry.  We have harped on and on about all the low-cost notebooks that can be purchased for under $400.00 about this may wreck many PC and tech business models.  Apple Inc. (NASDAQ: AAPL) is also finding itself in a position it is not used to.

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Posted on: December 23, 2008 – 9:26 am in Consumer Electronics, PC Companies, Technology Companies, , ,

Legg Mason’s (LM) Bill Miller To Manage Another Fund…WTF?

Bill Miller is the Legg Mason (NYSE: LM) money manager, whose two funds have each lost more than 50% this year, has been asked to help run a third fund as the firm tries to halt record outflows.

Before we get into the minutiae of the fund that Bill Miller will assist in managing, I just wanted to remind potential investors of some of his recent top stock picks. He loaded up shares of Citi (NYSE: C) and Amazon (Nasdaq: AMZN), but where Bill Miller really fell apart is buying shares hand over fist of Countrywide, Yahoo (Nasdaq: YHOO), American International Group (NYSE: AIG) and Freddie Mac (NYSE: FRE).

Read more…

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Posted on: December 23, 2008 – 9:11 am in Uncategorized

Q3 GDP Revisions Final Failure

Burning_money_picThe final revision for Q3 GDP is still indicative of a recession.  The NBER already declared a recession was in effect since last December, but this was the first quarter to actually show negative real GDP.  The final revision came in unchanged at -0.5%, and the estimate was -0.6%.

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Posted on: December 23, 2008 – 8:42 am in Economy

Top Analyst Upgrades & Downgrades (ACM, AXYS, CTAS, CVD, GILD, PPDI, VISN, EPG, VTIV)

Money_stack_picIt is getting pretty thin in major analyst coverage as firms are encouraged to go easy on major year-end calls barring anything unexpected.  These are the top analyst upgrades, downgrades, and new coverage calls we have seen this Tuesday morning:

  • AECOM (ACM) Started as Outperform at Baird.
  • Axsys Technologies (AXYS) Raised to Outperform at Morgan Keegan.
  • Cintas (CTAS) Started as Overweight at JPMorgan.
  • Covance (CVD) Started as Buy at Piper Jaffray.
  • Gilead (GILD) Started as Buy at Stanford Group.
  • PPD Inc. (PPDI) STarted as Buy at Piper Jaffray.
  • VisionChina Media (VISN) Strated as Buy at Piper Jaffray.
  • Environmental Power Corp. (EPG) Cut to Neutral at Merriman Curhan Ford.
  • inVentiv Health (VTIV) Cut to Hold at Jefferies.

Jon C. Ogg
December 23, 2008

Posted on: December 23, 2008 – 7:38 am in Analyst Calls, , , , , , , , ,

Madoff’s Holiday Gift

R218533_855025It is easy to see the Madoff affair as all bad. Regulators missed critical warnings. How many other cases like this are still hiding under rocks? Foundations and personal fortunes were wiped out. A number of financial firms will take large losses and the courts will be tied up with litigation for years.

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Posted on: December 23, 2008 – 6:31 am in Insider Activity

Consumer Despair Now Spans The Globe

95129cEvery economist worth his salt assumes that consumer confidence and consumer spending are hitting multi-decade lows in Japan, the EU, and the US. There has been some hope that the disease had not spread to emerging markets, especially India and China. They could still be good candidates to buy American goods.

Oddly, the central bank of China dropped interest rates yesterday for the fifth time in three months. The rapidity of the cuts seems odd for a country that is supposed to be "recession proof", but the action might just be prophylactic, a move to build a safe foundation. Or the Chinese government might know more than it is letting on.

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Posted on: December 23, 2008 – 6:11 am in Consumer Goods

M&A, One Of The Last Hopes Of Banks, Gives Up The Ghost

Cammonopoly_wideweb__430x3250The profitable businesses of granting mortgages and investing in related derivatives is gone now. So are the large, profitable loans given to major corporations and the equity and debt underwriting that was part of owning a big investment banking operation.

The value of credit card portfolios is dropping and the loses from them are spiking up as consumers’ ability to pay loans hits a wall and unemployment rises.

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Posted on: December 23, 2008 – 5:48 am in Banking

Does Surge In Mortgage Activity Mean More Defaults Down The Road?

For_sale_signLower interest rates on home loans are causing people to run to the banks. Thirty-year fixed-rate mortgages are as low as 5.2%.

According to several media accounts, banks cannot handle the influx of new mortgage business, especially as they work on helping people with troubled home loans bring down interest rates and monthly payments.

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Posted on: December 23, 2008 – 5:38 am in Housing

What Are The US Operations Of The Big Three Worth? Over $100 Billion

Batmobile512The easy answer to the question of what US operations of The Big Three are worth is that they are worth nothing. That assessment is entirely accurate based on the current encumbrances of union contracts, debt obligations, and supplier payables. Those are perfect calculations for a simpleton, but they don’t take into account the fact that based on the earnings of all the companies which have done business in the United States over the last two decades, the market is profitable.

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Posted on: December 23, 2008 – 5:23 am in Autos, , , ,