Lemley Yarling Management Co
15624 Lemley Drive
Soldiers Grove, Wi 54655
August 31, 2010
We are taking the next two weeks
off from regular posting. As in the past there may be some random posts and the
Model Portfolio value will be posted daily. The markets are the markets and the
big boys and girls will have their HFT fun whether we are sitting here or away.
We own good stocks at good prices and have cash on the sidelines if the markets
continue their black swan dive. We will return on Tuesday September 7.
August 30, 2010
On Friday we added to our Hewlett positions and also initiated a position in J Crew after it reported excellent
earnings but was cautious going forward. JCG’s share price dropped 15% on that
news. HPQ is priced at less than 10 times forward earnings.
Also on Friday (WSJ) Intel Corp. slashed its quarterly revenue forecast as economic weakness
undermines demand for personal computers, heightening concerns that a rebound
in technology spending may be petering out. INTC blamed its woes on
weaker-than-expected demand for mobile PCs in consumer markets in the U.S. and
Europe and said it now expects third-quarter revenue of $10.8 billion to $11.2
billion and a gross margin of 66%, plus or minus one percentage point.
Aug 25 (Reuters) - ... Coldwater
Creek Inc reported a surprise second-quarter profit, helped mainly
by higher direct sales and lower expenses, and forecast strong earnings for
fiscal 2010. The retailer, which competes with larger rivals Chico's FAS and
Ann Taylor Stores Corp, had forecast a second-quarter loss in June. For the
full year, the company expects to earn 8-12 cents a share, above analysts' view
of 6 cents a share. The company, which also sells gifts, jewelry and
accessories, earned $1.5 million, or 2 cents a share for the second quarter,
compared with net loss of $4.9 million, or 5 cents a share, a year ago.
May-July sales rose 13 percent to $253.5 million. Analysts on an average were
expecting a loss of 4 cents a share on revenue of $233.7 million, according to
Thomson Reuters I/B/E/S. Sales at stores open for at least a year increased 4.8
percent. Direct sales rose 39 percent for the quarter.
(MarketWatch) -- ... American Eagle Outfitters said Wednesday that its
second-quarter profit fell to $9.66 million, or 5 cents a share, from $28.6
million, or 14 cents, a year earlier. Sales in the quarter ended July 31 rose
to $651.5 million from $646.8 million with comparable store sales decreasing
1%. Excluding the closure of its Martin+Osa apparel business, the company said
it would have earned 13 cents a share in the latest period. That met the
average estimate of analysts surveyed by FactSet even though its sales fell
short of the $662 million Wall Street expected. Month-to-date August same-store
sales are up about 1%, consistent with the company's plan for the
back-to-school selling period, American Eagle said. The company forecast
third-quarter profit would drop to 23 cents to 26 cents a share from 32 cents a
year earlier. Analysts estimated an average of 27 cents a share, according to
FactSet. American Eagle shares fell 1.6%.
Medtronic dropped 15% on earnings news and is on a two year low priced at 9
times earnings. We added to some accounts that own Hewlett. The
medical device maker reported quarterly earnings on
Tuesday in line with Wall Street expectations, but weaker global
demand for medical implants led the company to slash 2011 earnings
expectations. Medtronic said it earned $830 million, or 76 cents a share, in
the quarter, up from $445 million, or 40 cents a share, last year, when
revamping charges and legal fees hurt performance. Excluding one-time items,
the company earned $868 million, or 80 cents a share, meeting the forecast of
analysts surveyed by Thomson
Reuters. Revenue in the period, which ended June 30 and was the
first quarter of Medtronic’s fiscal year, fell 4 percent to $3.77 billion,
partly because of an unfavorable foreign currency impact and a $200 million
benefit from an extra week in the year-earlier period. Revenue fell short of
the $3.94 billion expected by analysts and was weaker than expected across all
major divisions, including defibrillators,
pacemakers and spinal repair products. “A softer global health care market
impacted by decreased utilization and increased pricing pressure made for a
difficult first quarter,” the chief executive, William A. Hawkins III, said in
a statement. In light of the sales slowdown, Medtronic scaled back its
estimated 2011 revenue and earnings guidance. The company said it now expects
fiscal 2011 earnings to range from $3.40 to $3.48 a share, with revenue growth
of 2 percent to 5 percent on a constant currency basis. For the first quarter,
Medtronic reported that global sales of its cardiac and vascular products fell
5 percent to $2.03 billion. Those sales actually increased 1 percent when
adjusted for foreign currency and the extra week last year, the company said.
Sales of the company’s spinal products continued to slump, falling 9 percent to
$829 million as surgeons performed fewer back operations. Spinal devices make
up Medtronic’s second-largest franchise. Medtronic spent nearly $4 billion to
acquire the spinal implant maker Kyphon in 2007, though the unit has not
performed to expectations.
Job Losses over Drilling Ban Fail
to Materialize (NYT)
When the Obama administration called a halt to virtually all deepwater
drilling activity in the Gulf of Mexico after the Deepwater Horizon blowout and
fire in April, oil executives, economists and local officials
complained that the six-month moratorium would cost thousands of jobs and
billions of dollars in lost revenue. Oil supply firms went to court to have the
moratorium overturned, calling it illegal and warning
that it would exacerbate the nation’s economic woes, lead to oil shortages and
cause an exodus of drilling rigs from the gulf to other fields around the
world. Two federal
Yet the worst of those forecasts has failed to materialize, as companies
wait to see how long the moratorium will last before making critical decisions
on spending cuts and layoffs. Unemployment claims related to the oil industry
along the Gulf Coast have been in the hundreds, not the thousands, and while
oil production from the gulf is down because of the drilling halt, supplies
from the region are expected to rebound in future years. Only 2 of the 33
deepwater rigs operating in the gulf before the BP rig exploded have left for other fields.
Rest of story: http://www.nytimes.com/2010/08/25/us/25drill.html
We added Alcoa
to accounts at $9.98.
August 27, 2010
August 26, 2010
August 25, 2010
August 24, 2010
We are taking the next two weeks
off from regular posting. As in the past there may be some random posts and the
Model Portfolio value will be posted daily. The markets are the markets and the
big boys and girls will have their HFT fun whether we are sitting here or away.
We own good stocks at good prices and have cash on the sidelines if the markets
continue their black swan dive. We will return on Tuesday September 7.
And no we aren’t
going to the Tea Party/ Glen Beck miasma in Washington this weekend.
(Yahoo/Finance) Domestic stock futures currently point to a
sharply lower start that would put the S&P 500 at its worst level in over a
month. Meanwhile, Germany's DAX is already down 1.6% to a new one one-month
low. It is also below its 200-day moving average for the first time in more
than a month. The weak action follows the final second quarter GDP report,
which indicated that the German economy grew 2.2% quarter-over-quarter.
....Meanwhile, the yield on Germany's 10-year Bund is down to 2.18%, which is
its lowest level in more than a decade. In France, the CAC has fallen to a 2.0%
loss. Only Lagardere and Suez Environnement are in higher ground. Britain's
FTSE is off by 1.8%. Though all 10 major sectors are in the red, a 3.0% slide
by materials stocks has made them the session's worst performers. The British
pound is also under pressure; it is currently down 0.7% against the greenback.
Weakness in the currency comes after an official from the Bank of England
stated that there is real risk of a second recession.
In Asia, China's Shanghai Composite managed to put together a 0.4% gain. Hong
Kong's Hang Seng Shed 1.1% to settle below its 50-day moving average for the
first time in more than a month. In Japan, the Nikkei fell 1.3%
Swonk, Mesirow Financial Chief Economist:
Home Sales Plummet, Raises Likelihood of Additional Monetary Stimulus
Existing home sales sunk 27.2%
to 3.83 million units in July, after being revised down to 5.26 million units
in June, and its third drop in as many months. This is a record low for the
existing-home sales series, which was launched in 1999. Single family home
sales, which account for the lion's share of the sales, slid to their lowest
level since May, 1995, which was a year that almost resulted in a recession.
Many blame the end to homebuyer
tax credits, which expired in April. It is hard to justify the magnitude of the
decline on tax credits alone. Mortgage rates dipped to record lows during the
month and affordability soared.
The recent loss in jobs and
concerns about the sustainability of the recovery are more likely the culprits.
We have also seen a fairly significant tightening of lending standards since
the Fed ended its mortgage-backed security (MBS) purchases program last spring.
Banks are less willing to lend against the backdrop of uncertainty we face when
they can't offload at least a portion of that risk as securitized debt sales.
Concerns about whether housing
prices will fall further is also a problem for lenders and borrowers alike,
especially in light of the growing backlog of foreclosures that we are now
seeing. The rise in "strategic foreclosures" - those who can afford
but choose not to service their mortgage - is particularly disturbing, as it is
adding insult to injury to home values in neighborhoods which have already seen
30-40% declines in the value of their homes.
What could reignite demand?
Jobs are key. Few will lend or want to commit to a mortgage in a market where
income is uncertain. It would also help if Fannie and Freddie were buying more
MBS, which would allow banks to process more mortgages without worrying so much
about the risk.
That, however, would require
the Fed to resume its purchases of MBS, which many within the Fed system would
loathe to do. The Wall Street Journal reported today that at least seven within
the Fed system opposed the Federal Open Market Committee's (FOMC) decision to
offset any decline in the Fed's balance sheet due to maturing mortgages with
additional treasury bond purchases, let alone something more controversial like
This issue will be a hot topic
at the Kansas City Fed's Jackson Hole, Wyoming meeting, which I am attending
later this week. Fed chairman, Ben Bernanke, is slated to speak on Friday
morning, and widely expected to underscore the tools that the Fed still has to
further stimulate the economy, despite objections in his own ranks. Tom Hoenig
of the Kansas City Fed will be particularly interesting to watch, as he is not
only the host of the meeting, but has also been one of the most vocal in his
dissents to the Fed's current stance on interest rates and quantitative easing.
The Bottom Line: The economy is
weak, and flirting with a double dip. Without a more demonstrative pickup in
growth in the next few weeks, the Fed could be back in the game of buying
assets soon, regardless of dissent in its ranks. The next FOMC meeting is
scheduled for September 21, 2010, and it is likely to be a market moving event.
(Bloomberg) -- The Federal Reserve will probably ease monetary policy further as the U.S. economy
weakens, said Jan Hatzius,
chief U.S. economist at Goldman Sachs Group Inc. in New York. “The Fed will eventually move to additional monetary
stimulus via asset purchases or other unconventional measures,” Hatzius said in
a radio interview today with Tom Keene on “Bloomberg Surveillance.” Should the Fed opt for more securities
purchases, he said, there is “no point in doing anything less than” $1
Fed policy makers on Aug. 10 made their first attempt to bolster the
economy in more than a year, saying they will maintain their holdings of
securities at $2.05 trillion to prevent money from draining out of the
financial system. The Federal Open Market Committee, in its statement, said
“the pace of recovery in output and employment has slowed in recent months.”
Sales of previously owned U.S. homes slumped 27 percent in July, the
National Association of Realtors said today in a report that pointed to further
weakening of the economy. Hatzius, speaking before the home-sales data,
predicted gross domestic product will expand at a 1.5 percent annual pace in
the second half of the year, and unemployment will rise to 10 percent next year from 9.5 percent currently.
We added to GE
and the Major Bank ETF (KBE).
(Bloomberg) Norfolk Southern, the fourth-largest U.S. railroad, sold $250 million of 100-year bonds in a
reopening to yield 5.95 percent, Bloomberg data show. The Norfolk,
Virginia-based company earlier marketed $100 million of the debt. “People take
comfort in the fact that railroad companies have been through many cycles of
ups and downs,” said David Tiberii, a money manager who helps oversee $20 billion investment-grade
corporate debt at T. Rowe Price Group Inc. in Baltimore. “For me, 100 years is
a little long.”
The old stockbroker’s clients made big money by buying at his
suggestion bankrupt railroad bonds for pennies on the dollar in the 1940s and
also the1970s. Back then the bondholder actually had a mortgage on railroad
property which gave the hordes standing in court when the bankruptcy was
adjudicated. Now railroads only issue debentures which pace the holders at the
rear in reorganization.
lost ground with the major measures down over 1% and breadth 3/1 negative.
Volume was light. The DJIA was down for the 9th time in 11 sessions.
Europe closed lower by 1.5% and more with Ireland down 6%. Gold was down large
and then popped to gain $4 to $1232. Oil lost $1.74 to $72/30.
August 23, 2010
Europe is higher, Asia lower and
U.S. futures higher this morning.
WSJ reports that interest rates continue
to tumble for the U.S. Treasury, companies and home buyers alike. But for a
large portion of 381 million U.S. credit-card accounts, borrowing rates have
been moving only one way: up. And average rates are likely to climb further in
the near future. New credit-card rules that took effect Sunday limit banks'
ability to charge penalty fees. They come on top of rule changes earlier this
year restricting issuers' ability to adjust rates on the fly. Issuers responded
by pushing card rates to their highest level in nine years. In the second
quarter, the average interest rate on existing cards reached 14.7%, up from
13.1% a year earlier, according to research firm Synovate, a unit of Aegis Group
PLC. That was the highest level since 2001.
Of course funding costs for banks
are near zero thanks to the Fed.
The Roger Clemens indictment is a
waste of time and resources- as is the Barry Bonds fiasco and the supposedly
coming indictment of Lance Armstrong. We are not enamored of famous athletes
but the government is wasting its time and our money. It reminds of the late
1990s when the FBI spent its time and resources investigating Clinton’s sex
life and missed the 9/11 terrorists.
(Bloomberg) -- Retail investors in the U.S., burned by two
market crashes in a decade, have shunned stocks for the longest stretch in more
than 23 years, upsetting the balance of power in the $10.5 trillion mutual-fund
industry. Bond funds attracted more money than their equity counterparts in 30
straight months through June, according to the Investment Company Institute, a
Washington-based trade group. .... Bond funds attracted $559 billion industry
wide in the 30 months through June, according to ICI. Investors pulled $209.4
billion from domestic equity funds and $24.4 billion from funds that buy
non-U.S. stocks. Stocks fell 26 percent including reinvested dividends during
the period, as tracked by the Standard & Poor’s 500 Index. Based on Bank of America Merrill Lynch
index data, bonds returned 16 percent.
The major market measures were positive most
of the day until the final half hour when they moved mildly negative. Volume
was summer Monday light and Breadth was negative. European stocks closed higher
and Gold and Oil were both down about $1.
August 20, 2010
Asian markets played follow the
leader last night and moved lower and European markets are lower at midday.
U.S. futures will head lower at the opening as Hewlett and Dell had good
numbers but disappointed analysts. So what else is new?
(WSJ) On Thursday, H-P said its
quarterly results were driven by growth across its product portfolio—which
includes personal computers, servers, services and printers—as well as across
geographies. H-P's income clocked in at $1.77 billion, or 75 cents a share, up
from $1.67 billion, or 69 cents a share, a year earlier. Revenue was $30.7
billion, up from $27.6 billion.
H-P had "solid growth," said Robert Cihra, an analyst at
Caris & Co. Still, Mr. Cihra added that investors are more focused on H-P's
"CEO void and the fact that Mark Hurd left some pretty big shoes to fill
with H-P, a company that's historically proved tough to manage." Some of
H-P's strongest quarterly growth came from its hardware businesses. H-P's
storage and server-computer business reported 19% revenue growth, while revenue
at its PC unit rose 17%. The printer business's revenue jumped 9%. H-P's
services revenue increased 1% while software business rose 2%. For its full
fiscal year, H-P projected revenue of $125.3 billion to $125.5 billion and
profits of $3.62 to $3.64 a diluted share.
Dell, meanwhile, said Thursday that the federal government, as well as
businesses, would help boost sales in the current quarter. Corporate customers
are also replacing aging fleets of computers, indicating a refresh cycle is
"well under way and that demand will continue through the next several quarters."
The world's No. 3 PC maker posted a profit for the quarter ended July 30 of
$545 million, or 28 cents a share, up from $472 million, or 24 cents a share,
in the same period last year. Excluding severance-related charges and other
items, earnings rose to 32 cents a share from 29 cents. Revenue rose 22% to
$15.53 billion. However, gross margin narrowed to 16.6% from 18.7%, spooking
investors. Shares declined 1.6% to $11.85 in after-hours trading Thursday.
Dell's report follows a rough period for the Round Rock, Texas, company. Both
the company and Chief Executive Michael Dell recently settled with the U.S.
Securities and Exchange Commission over allegations that the company had
improperly reported income. Earlier this week, a company filing said more than
25% of votes cast by Dell shareholders at its Aug. 12 annual meeting opposed
Mr. Dell's reelection to the board. In an interview, Brian Gladden, Dell's
finance chief, expressed support for Mr. Dell, saying the company's directors
remained committed to his leadership. "They publicly came out and
reaffirmed their unanimous confidence for Michael and his leadership," Mr.
Stores. swung to a
fiscal-second-quarter profit as the retailer's sales and margins increased,
though sales missed company forecasts due to weakness in its Loft brand.
While giving a third-quarter revenue view in line with analysts'
expectations, the company expects sales for the year "approaching"
$1.95 billion. In May, the company had forecast $1.95 billion to $1.98 billion.
For the quarter ended July 31, AnnTaylor reported a profit of $18.6 million, or
31 cents a share, compared with a year-earlier loss of $18 million, or 32 cents
a share. Excluding items such as restructuring charges, earnings surged to 32
cents a share from 6 cents, matching analysts' estimates. Revenue rose 2.8% to
$483.5 million. Same-store sales rose 6.1%, up 15% for its namesake brand,
including online and factory store sales, and flat at the Loft brand. The
company in May had predicted revenue approaching $500 million, with
double-digit growth in overall same-store sales. Gross margin rose to 55% from
52.4%. Looking ahead, the company forecast third-quarter revenue approaching
$495 million, reflecting a mid- to high-single-digit increase in same-store
We sold the rest of the Symantec for a plus scratch. We switched JCP for a scratch loss to scratch profit to Dell and raised cash in the process. The 15% drop in JCP last week
after we bought it and recovery this week on very low volume suggests quick
downside again if the market continues lower. Dell had a very good report and
the analysts are nit picking its financials.
major market measures traded lower all day but managed to recover about half
their losses by the close. The S&P 500 dropped 0.5%. Breadth was negative
and volume was summer Friday light. Europe ended the wake with another down day
and Oil closed at $73.45 and Gold lost $10.
August 19, 2010
Asia was higher overnight as is
Europe at midday.
The big news this morning is that Intel is buying McAfee
for $9 billion. McAfee is a direct competitor of Symantec and Symantec is higher on the news. We are using the pop
in SYMC to eliminate half the position
since we think analysts will posit that the Intel/McAfee merger is trouble for SYMC.
We are selling for a plus scratch. What the price paid by Intel (60% above last
night’s close) does say is that industry folks think that software stocks are
cheap. Intel is paying 3.5 times revenues for MFE. At that price Symantec would
be trading at $25.
Jobless claims for the last week
The Philly Fed Index was -7 in August and
the HFT computers went to town kicking the major measure down 1% in three
minutes. The Philly Fed Index?
The survey’s broadest measure of manufacturing conditions, the
diffusion index of current activity, decreased from a reading of 5.1 in July to
August. The index turned negative, marking a
period of declining monthly activity
for the first time since July 2009
(see Chart). Indexes for new orders
and shipments also suggest a slowing this month; the new orders
index fell slightly, to ‐7.1,
while the shipments index turned negative, declining to ‐4.5. Indicating weakness,
indexes for both delivery times and unfilled orders remained negative this
The percentage of firms reporting a decline in employment (23 percent) was higher than the
percentage (20 percent) reporting an increase. More concerning was the significant drop in the average employee
workweek index from 1.7 in July to ‐17.1
(thestreet.com) American Eagle Outfitters is the latest retailer in the midst of takeover chatter. The teen
retailer saw call trading reach a nine-month high on the speculation. One name
being thrown around as a potential acquirer of American Eagle is private-equity
firm Blackstone Group. Shares of
American Eagle jumped 4.2% to close on Wednesday at $12.84. The retailer is
scheduled to report its second-quarter earnings on Aug. 25. While this rumor
may catch some investors off guard, Wall Street
Strategies analyst Brian Sozzi says it could be a very real possibility.
"Given American Eagle's valuation, in addition to the health of its
balance sheet, they [are] a prime takeover candidate," Sozzi said.
American Eagle's stock has been hammered, down 24% for the year-to-date period.
Aside from rival Aeropostale, it
also has the lowest valuation of the teen sector, Sozzi notes. The retailer
also has a lot of cash, no bank debt, viable concepts in its namesake and
children's brands and a management team that hasn't executed properly, all of
which add to a possible buyout, Sozzi said. "I see private equity as a buyer here," he said.
"Department stores shed teen apparel brands years ago and I am sure are
dealing with their own headwinds with the consumer spending backdrop and
bloated debt positions from years of over expansion."
the bears keeping baiting the bulls this may happen to them. http://gawker.com/5616591/raging-bull-to-bloodthirsty-spanish-crowd-im-outta-here
(WSJ) LG Electronics on Thursday confirmed that it would be
using a dual-core processor manufactured by Nvidia for its line of Optimus
smartphones later this year. That’s a coup for Nvidia, which has been pushing to enter the
smartphone market with its Tegra chip and expand beyond its traditional
business of providing graphics chips for PCs. So far, the most notable phone to
use Tegra was Microsoft’s failed Kin youth-centric device. But LG committing to
Nvidia gives the graphics-chip maker something to potentially boast about. Much
of the awareness of the faster generation of 1-gigahertz processors
for smartphones have focused on Qualcomm Inc.’s Snapdragon processor, found
in HTC’s Incredible and Evo, or Samsung Electronics’ Hummingbird
chip, found in its own line of Galaxy S phones. Nvidia, however, isn’t the
only company packing a dual-core chip. Qualcomm has also talked about a
dual-core Snapdragon chip. Nvidia wasn’t immediately available for comment. The
company has previously said it expects to have several smartphones, as well as hybrid
netbook-smartphones called smartbooks, using its Tegra chip by the end of the
Hi mom and dad.
(hullabaloo.com) If young people don't want to pay into
social security they probably need to start saving for a very big house with a
couple of extra bedrooms for mom and dad and possibly grandma and grandpa too.
That's how everyone used to live before social security was enacted --- with
most of those that didn't have kids able to take care of them living in
grinding, horrible poverty. Perhaps the prospect of that will make people
realize that social security is a very good deal.
We have a lot of Dragonflies this year; some facts about them:
WILLIAMSON COUNTY--At Crab Orchard National Wildlife Refuge, it's hard
to take a walk and not see brightly colored dragonflies buzzing about. As a
matter of fact, these flying insects are nice companions to have around!
"One adult dragonfly might eat hundreds of mosquitoes in a matter
of a few days. So a lot of dragonflies are actually good because it keeps down
the mosquitoes and other biting flies," says Park Ranger Kim King-Wrenn.
Since dragonflies' food sources live near water or grassland areas,
that's where you can find them catching their prey at more than 25 miles per
"When it gets hot and we head to the water, whether it's a pool or
a lake like here on Crab Orchard, we're in the same place that the dragonflies
are. So we get to see them and enjoy them," says King-Wrenn.
Females lay their eggs during summer, and hatched larvae survive winter
under water. During the following spring and summer months, larvae transform
into adult dragonflies; so the number of dragonflies you see does not
necessarily reflect on this summer's weather, but rather this past year's.
Some adult dragonflies live from spring to summer or summer to fall or
all summer long, making Southern Illinois a great place to see nearly one
hundred different species of dragonflies this time of year.
By Katie Walls
Say What? Americans increasingly are convinced —
incorrectly — that President Barack Obama is a Muslim, and a growing number are
thoroughly confused about his religion.
Nearly one in five people, or 18 percent, said they think Obama is
Muslim, up from the 11 percent who said so in March 2009, according to a poll
released Thursday. The proportions who correctly say he is a Christian are down
to just 34 percent. The largest share of people, 43 percent, said they don't
know his religion, an increase from the 34 percent who said that in early 2009.
(NYT)They were revered as the
brightest minds in finance, the “quants”
who could outwit Wall Street with their Ph.D.’s and superfast computers.
But after blundering through the
financial panic, losing big in 2008 and lagging badly in 2009, these so-called
quantitative investment managers no longer look like geniuses, and some
investors have fallen out of love with them. Read on at http://www.nytimes.com/2010/08/20/business/20quant.html?_r=1&hp
stock measures closed 1.5% lower. European bourse reversed midday gains to
close lower after the U.S. markets tanked. Gold closed up $2 at $1233 and Oil
ended at $74.43 down $1. Breadth was 5/1 negative and volume was all HFT;
investors are abandoning ship or on vacation.
August 18, 2010
(MarketWatch) European shares declined, with
commodity-sector stocks turning in the worst performance as investors took some
profits and eyed further developments on BHP Billiton's move for Potash. See Europe Markets for more. Asian stocks
ended mixed, with Japanese shares advancing as technology and automobile
exporters rose after strong earnings reports and U.S. industrial-production
data spurred a rebound on Wall Street.
(CalcualtedRisk.com) the Federal Reserve Bank of New York today
announced the release of a new Quarterly Report on Household Debt and Credit
and an accompanying web page. The report shows that households steadily reduced
aggregate consumer indebtedness over the past seven quarters. In the second
quarter of 2010, they owed 6.4 percent less than they did in 2008, the peak
year for indebtedness.
Additionally, for the first time since early 2006, the share of total
household debt in some stage of delinquency declined, from 11.9 percent to 11.2
percent. However, the number of people with a new bankruptcy noted on their
credit reports rose 34 percent during the second quarter, considerably higher
than the 20 percent increase typical of the second quarter in recent years.
The next quarterly reports are expected to be released on November 8,
2010, February 14, 2011, May 9, 2011 and August 8, 2011.
A week ago Goldman raised
its price target on gold to $1,300/ounce, an action which judging by the firm’s
historical record of putting its clients’ interest in its rightful last place, led us to be skeptical: “The report will likely result in a brief
pop in spot as the idiot money rushes into the latest Goldman trap. Alas, it
also means that GS is now offloading. Be very wary of market dynamics over the
next month.” Today we realize our skepticism was perfectly justified: in the
latest Perspectives from Goldman Sachs Asset Management (intended FOR
BROKER-DEALER, FINANCIAL INSTITUTION, OR INSTITUTIONAL INVESTOR USE ONLY. NOT
FOR DISTRIBUTION TO CLIENTS OR THE GENERAL PUBLIC), in addition to summarizing
all the other recent actions presented by the firm’s key departments, way in
the back, in very small print when discussing commodities, the letter author
notes: “Shifted our stance on gold
after years of being long; see gold as vulnerable to Central Bank inactivity in
the face of rising deflation risk.” Once again, those who bet
that Goldman does precisely the opposite of what it tells clients to do, win.
This guy is sure to unite republicans and democrats:
(Huffington Post) Chris Coons, a Democrat running for Joe
Biden's vacated Senate seat in Delaware, wants to freeze Senate pay and to ban
former senators from ever becoming lobbyists.
major stock measures were mildly higher in light trading. European bourses
closed lower and Gold was up $2 at $1230 while Oil was down 50 pennies at
August 17, 2010
Asian markets were mildly higher
overnight and European bourses are higher by 1% at midday. U.S. futures are
higher on takeover action.
(Bloomberg) China cut its holdings of Treasury notes and bonds by the most ever, raising speculation a
plunge in U.S. yields that sent two-year rates to a record low has made
government securities unattractive. The Asian nation’s holdings of long-term
Treasuries fell by $21.2 billion in June to $839.7 billion, a U.S. government
report showed yesterday. Total Chinese investment in U.S. debt declined 2.8
percent to $843.7 billion, the least in a year, following a 3.6 percent slide
Perceived wisdom suggested that
when China began selling Treasuries rates would skyrocket. The opposite is
(Bloomberg) -- Production in the U.S. rose more than
forecast in July, easing concern the industry that led the economy out of the
recession is beginning to slow.
Production at factories, mines and utilities climbed 1 percent after a
0.1 percent decline in June, led by a rebound in auto making, figures from the
Federal Reserve showed today. Factory output rose 1.1 percent after the biggest
drop in more than a year. Economists had forecast a 0.5 percent gain in overall
production, according to the median estimate in a Bloomberg News survey.
We switched our final lots of Barnes & Noble in our larger accounts to the Major Bank ETF (KBE).
From the NYT:
2 Zombies to Tolerate for a While
ANDREW ROSS SORKIN
Representative Barney Frank was furious.
The Massachusetts Democrat had been watching a morning news program
that had me on, and soon afterward he was calling my cellphone to fume about
that morning’s discussion. The topic? Why it has taken the government so long
to address the fate of the zombie mortgage giants, Fannie Mae and Freddie Mac.
It is an issue that has been talked about a lot of late. On Tuesday,
the Treasury secretary, Timothy
F. Geithner, will convene
a meeting of government officials and executives like Bill
Gross of Pimco and Lewis
Ranieri, the father of the mortgage-backed security, to delve into future
housing policy and the role played by Fannie and Freddie.
On the television program that had stirred Mr. Frank, “Morning Joe” on
MSNBC, the prevailing view was that any effort toward a resolution of Fannie
and Freddie — government-created mortgage companies that were taken over by the
government as the financial
crisis mounted — had been
put on the back burner during the overhaul of financial
regulation. The consensus
was that neither Democrats nor Republicans wanted to touch an issue that would
dredge up decisions made by both parties over the last decade that looked bad
in light of the financial crisis. Fannie and Freddie was now the third rail of
Mr. Frank was having none of that.
“I take offense at the idea that we’ve done nothing,” he told me. Far
from dragging its feet, he insisted, the government took the bold step of
putting Fannie and Freddie into conservatorship in 2008. “There was no
political fear to not do it.”
I asked the question that I hear from so many Americans: Why hasn’t the
government tried to unwind and replace Fannie and Freddie, which have so far
cost taxpayers $145 billion, more than any other bailed-out firm?
His response was counterintuitive — and as unsatisfying as it may
sound, he’s right.
“There is no urgency,” he said.
“We’ve already abolished Fannie and Freddie,” he said, referring to the
government takeover. “Yes, we waited too long to fix it. But the money is not
being lost by anything they are doing now.”
In other words, the sinkhole that is Fannie and Freddie — Freddie just
said it needed an additional $1.8 billion and the Congressional Budget Office says the combined companies could cost
taxpayers $389 billion over the next decade — is not a function of those firms
making new loans that have gone bad, but the continued “bleeding,” as Mr. Frank
put it, from previous loans made before the crisis that are still going
More important, shutting down Fannie and Freddie and having the private
market step in, as politically popular a sound-bite as that may be, is
economically unfeasible. For better or worse, Fannie, Freddie and Ginnie Mae were
behind 98 percent of all mortgages in this country so far this year, according
to the Mortgage Service News. Pulling the rug out from under them would be
pulling the rug from under the entire housing market as it continues to
“Nobody in the private market thinks we’re ready,” he said, adding that
whatever legislation is developed, it will be “for a postrecession world.”
That reality, however, is not changing the minds of many who are
calling for a return to a private system that doesn’t depend on the government
to subsidize housing.
One of the more interesting ideas being floated is that the
government-sponsored enterprises, Fannie and Freddie, would subsidize loans
only for low-income families by lowering the size of a so-called conforming
loan. At the moment, Fannie and Freddie are buying up single-family mortgages
for up to $417,000, and in some high-cost areas as much as $729,750, clearly
benefiting families that don’t need the subsidy. Even if the size of a
conforming loan were reduced — a prospect that troubles Mr. Frank — there will
still need to be some sort of support for that marketplace because the big
banks say they won’t service it.
“A clear government role will be necessary to support lending to
lower-income borrowers because it is likely that underwriting standards will
become more rigorous and funding for mortgage lending more difficult and
costly,” the deputy general counsel of Bank
of America, Gregory A.
Baer, wrote in a letter to the Treasury. (Critics of the banks will point to
language like that to show why the bailouts are not helping ordinary Americans.)
No matter what the ultimate plan, the transition to get there will be
“Were the G.S.E.’s to cease buying mortgages or guaranteeing
mortgage-backed securities, financing for buying homes today would be virtually
nonexistent until the banks got back up on their feet. This would result in
mortgage prices increasing, causing demand for housing to decrease, taking the
value of homes even further down,” Anthony Randazzo, director of economic
research of the Reason Foundation, wrote in a letter to Mr. Geithner.
Nonetheless, Mr. Randazzo, whose foundation leans toward libertarian
views, takes a much bolder step. “This means that prices have not been allowed
to reach their natural bottom, from which a sustainable recovery could begin.”
And Mr. Randazzo wants to see housing prices truly bottom out.
But allowing the housing market to collapse simply so it can rise again
— a very free-market approach — is politically unpalatable, especially as the
nation’s unemployment number still hovers near 10 percent.
“It’s intellectually pretty difficult,” Mr. Frank said.
The major market measures closed off their
best levels but were up 1% and more on Tuesday in light summer August trading,
breadth was better than 2/1 to the good. European bourse held their early
morning gains to ended 1% higher and Gold was up $1 while Oil gained 50 pennies
August 16, 2010
prince and princess are gone and summer vacation is over for them. We are going
to take a few days next week but with the change in the weather here at the
farm from hot and humid to autumnal we know that fall and market gyrations are
on the way.
(MarketWatch) European shares reversed early gains to
trade lower Monday. Asian markets ended mixed, as disappointing economic growth
weighed on Japanese stocks, while banks in China advanced.
Conditions for manufacturing in the New
York region improved a bit
in August from July but still remained well below levels of earlier in the
summer, the New York Federal Reserve Bank said. The bank's Empire State
Manufacturing index rose to 7.1 in August from 5.1 in July. While positive, it
is well below the high of 31.9 in April and 19.6 in June and suggests growth at
only a modest pace. The details of the report were fairly weak. The index for
new orders and shipments dipped below zero for the first time since June 2009.
Bank of America Corp. (BAC) may reduce its 34% holding in New York
asset manager BlackRock Inc. (BLK), according to a report in The Wall Street
Journal. Bank of America decided that the 64.7 million common and preferred
shares of BlackRock that it holds aren't a core asset, the report said, citing
people familiar with the matter.
Dell Inc. (DELL) said it will pay $18 a share in cash to
buy storage technology firm 3Par Inc. (PAR). The deal, which is worth about
$1.15 billion, values 3Par at an 86% premium to Friday's closing price of $9.65
month, J.C. Penney Co. is launching
a new Liz Claiborne clothing, home and accessories line in all 1,100 of its
stores, its biggest brand launch ever.
while the exclusive collection is considered a coup for Penney, it could mark
the final chapter in the story of the 34-year-old Liz Claiborne brand.
Claiborne, once the No. 1 vendor at American department stores, has effectively
ceded control of its iconic brand to Penney as part of the deal. The
agreement--which calls for Claiborne to give up production and marketing and
convert the label into a mass market line in exchange for royalties--was struck
only after Macy's Inc. slashed its Claiborne orders last year. The deal gives Penney
the option to buy U.S. rights to Liz Claiborne's name in five years.
The Hindenburg Omen is once again predicting a stock market crash, and
we don’t know whether to ignore it and relax because (even) the Wall Street Journal has
picked up on it this time, or to instead batten the hatches because sometimes
even lousy indicators can be right. Over time, the indicator, invented by a blind
mathematician named Jim Miekka, has compiled an unimpressive
track record. While virtually every crash since 1987 has indeed been signaled
by the Omen, there have been so many false signals that the indicator’s overall
accuracy has been a dismal 25
percent. Now, according to Miekka, the Omen is signaling a crash
in September, having registered two key statistical events. For one, NYSE
highs and lows both exceeded 2.5%; and for two, a rising 10-week moving average
for the NYSE diverged relative to a negative McClellan Oscillator.
We never heard of it. A coin flip call has a 50% probability. Why the
WSJ and Bloomberg also wrote about it is a mystery to us.
With the markets having failed at 1125 on the S&P 500
we raised some cash in our large accounts by selling the income stocks we had
purchased for scratch losses and also reduced positions in Intel, Nvdia, Symantec and Walgreen.
The National Association of Home Builders (NAHB) reports the housing market index (HMI) was at 13 in August. This is down slightly
from 14 in July and below expectations. The record low was 8 set in January
2009, and 13 is very low ...Note: any number under 50 indicates that more
builders view sales conditions as poor than good.
August 15, 1057,
Macbeth the King of Scots (Mac Bethad mac Findlaích) was killed in battle by
King Duncan’s son Malcolm, likely in retaliation for Macbeth’s having killed
King Duncan. Macbeth of course became the subject of William Shakespeare’s
great tragedy “Macbeth.”
Since no star has been arrested recently-
or politician’s girl friend killed- the Ground
Zero Mosque will have to do as the summer obsession of the media. The NY
Daily News has an interesting take on the controversy.
Opponents of a proposed lower Manhattan mosque and community center speak in hushed tones about the sanctity
of the "shadow of Ground Zero."
Tell that to the patrons of the Pussycat Lounge, a strip club where a
photo of a nearly naked woman marks its location just two blocks from where the
Or the Thunder Lingerie and peep show next door, where the marquee
sports an American flag above a window display of sex toys and something called
a "power pump."
Many come to the scene of the worst terrorist attack on American soil
to pay tribute to pain and unspeakable tragedy. They're welcomed by solemn
memorials and a visitors center amid the noise of reconstruction.
If they're so inclined, they can also buy porn, play the ponies and
take care of all manner of personal business within steps of the former World
In a walk of the streets within three blocks of Ground Zero, the Daily
News counted 17 pizza shops, 18 bank branches, 11 bars, 10 shoe stores and 17
separate salons where a girl can get her lady parts groomed.
"There is something for everyone downtown, from mom-and-pop
establishments to luxury retailers such as Tiffany's and Hermes," said Jeff Simmons of the Alliance for Downtown New York.
There are at least 10 churches in lower Manhattan south of Canal St.,
three synagogues, one Buddhist community center and a Hare Krishna facility.
There's also a Muslim prayer house that, on its website, denies any connection
to "any other organization trying to build anything new in the area of
It may be sacred ground, but the streets surrounding Ground Zero are
also a place where New Yorkers work, eat and buy shampoo.
Read more: http://www.nydailynews.com/ny_local/2010/08/16/2010-08-16
The major market measures closed flat in
light summer Monday trading. Breadth was negative. European bourses closed
flat. Oil closed at $75.22 down $7 from last week and Gold ended at $1226 up
$20 from last week.
August 13, 2010
(Bloomberg) -- Germany’s record-breaking
(positive) performance in the second quarter is making life harder for European
Central Bank President Jean-Claude
Trichet. While Europe’s largest economy
expanded at the fastest pace since the country’s reunification, the region’s southern periphery is
still struggling to recover from a sovereign debt crisis. Greece’s recession
deepened, Spain expanded less than economists forecast and investors are turning their
attention to their budget deficits again. “This is going to become a very
serious headache for the ECB,” Marco
Annunziata, chief economist at UniCredit
Group in London, said in a Bloomberg Television interview. “If the ECB were the
Bundesbank it would be raising rates very quickly. But Spain, Greece, Italy --
they can’t afford it.” Trichet is trying to steer a course that will prevent
Germany from overheating while also keeping the euro region’s sovereign debt
crisis at bay. In a sign that investors are again questioning the ability of
the most deficit-laden countries to cut their budgets, the extra yield that
investors demand to hold Greek
bonds over benchmark German bunds
today rose to the highest since May 7. Today’s reports highlighted the scale of
the growth divide in the euro region, which expanded 1% on the quarter. Germany, which grew 2.2 percent, was
responsible for almost two thirds of the bloc’s second-quarter expansion even
though it only makes up about one quarter of the economy. In Spain, whose
government is pushing through the toughest austerity measures in three decades,
the economy expanded just 0.2 percent after economists predicted growth of 0.3
percent. Greece contracted 1.5 percent.
wisdom has been
that Europe is a drag on the world since there was a lack of growth. Now we
learn that 2% growth in Germany is a cause of concern and would necessitate
raising interest rates. Yet 2% plus
growth in the U.S. has been cited in the media and by the Pooh-Bahs as a cause
for alarm in that it means that growth is too slow and the Fed has to keep
interest rates at 0 to help the U.S. economy. We don’t think gurus can have
it both ways. Moreover the Euro Zone should be looked at as an economic whole,
a cooperative of countries with some doing better than others. That is the way
the U.S. is considered. There are some states doing better than others but the
overall U.S. GDP number is the figure that every trader and commentator uses
when considering the U.S. economy. The Euro Zone was created so that economic
cooperation in bad times would be available as well as celebrating success in
The reality is that there is an election coming in
November and that talking points for the folks out of power are doom and gloom
and deficit reduction. The folks in power take the opposite side of every
The economy is
Unemployment is too high. But the difference between full employment and the
current stage is 4% not 9% since full employment is considered to be 5% unemployment.
Go figure. And if unemployment were 5% the out of power folks would still be
carping. Our suggestion remains to stop watching portfolios- that is our job-
and the skewed news and begin reading books again.
Fed minutes: According to the Fed, the economic recovery is likely to be more
modest in the near term than had been anticipated. The latest statement
also indicated that the target range for the federal funds rate will
remain at 0.00% to 0.25% and that low resource utilization and subdued
inflation are likely to warrant exceptionally low levels of the fed funds rate
for an extended period.
Perhaps more surprisingly, the
FOMC will keep constant the Fed's holdings of securities by reinvesting
principal payments from agency debt and agency mortgage-backed securities in
longer-term Treasuries. That plan has sent Treasuries sharply higher, such that
the yield on the benchmark 10-year Note is down to 2.75%, which marks a 16-month
markets open down 200 points. We sold XLF for cash to buy
more aggressive BankAmerica.
An hour into the trading day
declining volume is 20/1 advancing volume and down versus up issues at 10/1.
The HFT computers are having fun today. investors aren’t but then the SEC is
more interested in keeping Wall Street happy and profitable.
The major measures closed almost
3% lower as Friday August 13 approaches.
(MarketWatch) Barnes & Noble is
expected to soon announce the settlement of a lawsuit filed by investor Ronald
Burkle, who challenged the legality of a "poison pill" plan that
would have prevented the company from being sold. As part of the settlement,
Barnes & Noble will add two independent directors to the board, in addition
to a director affiliated with Yucaipa Cos., the investment
firm run by Mr. Burkle.
We are trying to
sell Barnes & Noble over $15 for a scratch profit after sitting on a loss because we
aren’t interested in a soap opera and we think maybe the three groups that own
control of the company will make an agreement to forego fighting to buy the
company on the cheap. The settlement may be the first step in that process.
Later in the day it was announced
that the settlement of the law suit fell apart. That may mean that Burkle
didn’t want to give up the ability to make an independent bid. We were able to
sell some shares before the stock price backed off on the second announcement
but we will keep trying to sell.
Cisco beat last night and revenues
were up 27% but that want’ enough and the shares are down $2 in early trading.
It is that kind of market this week. We
purchased CSCO in our very large accounts. We also added more Dell in those accounts. Dell earnings come
Monday and we are waiting till then to see how the stock reacts before adding
Dell shares to more accounts.
(WSJ) Initial jobless claims rose by 2,000 to 484,000 in the week ended Aug. 7, the highest level
since mid February, Labor Department figures showed today in Washington. The
number of people receiving unemployment benefits dropped, while those getting supplemental
benefits surged by 1.34 million reflecting the government’s extension of
We repurchased GT
at $10.15 in accounts from which we were able to sell at $12.05 on July 29 when they
reported earnings. The low on the shares this year is $9.65 with an $18 high.
We sold General Mills in large accounts. We bought as a cash replacement for income
and the one week gain is greater than two quarters of dividend income
The major market measures closed
13 August 2010: (Reuters) - Slowing demand for graphics processors and hefty charges for defective
products deepened Nvidia Corp’s
quarterly loss, but the chipmaker said profit margins would recover in the
third quarter thanks to a new range of products. Nvidia shares, which have
fallen 15 percent since the company warned of weakening business conditions
last month, rose 1 percent to $9.05 in after-market trading on Thursday.
"Think about the sentiment for the stock going into earnings; I'd have to
say it pretty much hit rock bottom," said Wedbush Securities analyst
Patrick Wang. "In terms of the competitive landscape, the economic status
out there, they're in some tough times." Investors are concerned about the
broader health of the personal computer market, spooked by weak economic data
from around the world and growing evidence seen by analysts of a slowdown in
chip demand. And competition is intensifying. Nvidia's business providing
graphics chips for PCs is facing stiff challenges from rival Advanced Micro
Devices. Investors also worry that a new crop of microprocessors from AMD and
Intel Corp that come with integrated graphics capabilities could further hurt
demand for Nvidia's standalone graphics chips.
Nvidia's top brass offered a bleak assessment of economic conditions
during a post-earnings conference call on Thursday, citing weakness in Europe
and China and noting that the company assumes business conditions in the
consumer PC market will remain uncertain going forward.
But executives said the company's line-up of higher-end products aimed
at corporate customers -- including chips for workstations -- would help boost
Nvidia said fiscal third-quarter gross profit margins would bounce back
to 46.5 to 47.5 percent, surpassing an average estimate of about 46 percent,
and well above the 16.6 percent margin the company posted in the second
quarter. "The reality is Nvidia is winning at the high end," said JMP
Securities analyst Alex Gauna. Nvidia said it expected revenue in the third
quarter to increase 3 percent to 5 percent from the prior quarter, suggesting a
range of $835.5 million to $851.8 million. That's below the average analyst
expectation of $884 million, according to Thomson Reuters I/B/E/S. But TK's
Wang noted that the third-quarter consensus revenue estimate was artificially
high because several analysts had not adjusted their numbers after Nvidia warned
of weakening business conditions last month.
Revenue in the three months ended Aug. 1 totaled $811.2 million. Nvidia
said last month it expected revenue for the second quarter of $800 million to
$820 million, well down from a previous forecast for $950 million to $950
million. Nvidia posted a net loss of $141 million, or 25 cents per share, in
the second quarter, compared with a net loss of $105.3 million, or 19 cents a
share, a year earlier. The company said the loss included $193.9 million in
charges related to problems with the die and packaging material of an older
generation of chips. Nvidia also said it took a large inventory write-down in
the second quarter, but executives refused to disclose the size of the write
down during the conference call.
(WSJ) J.C. Penney Co. reported a fiscal-second-quarter profit
Friday but lowered its full-year forecast. Penney, of Plano, Texas, posted a
profit of $14 million, or six cents a share, for the quarter ended July 31,
compared with a loss of $1 million, or break-even per share, a year earlier.
Sales fell 0.1% to $3.94 billion. The company said the most recent quarter
included a five-cent charge related to its debt tender offer completed in May.
Penney forecast a third-quarter profit of 16 cents to 20 cents a share and cut
its full-year forecast to $1.40 to $1.50 a share from a May projection of $1.64
a share, citing its "conservative approach to the second half of the year
in what continues to be an uncertain consumer climate."
Nvdia is on its low for the year as
is JCP and JCP has a 3.8% yield. We added JCP to accounts that own it
and are holding both.
(WSJ) The euro-zone economy grew at its fastest
pace in four years in the second quarter, driven by an unexpectedly strong
surge in Germany, preliminary data showed Friday. The combined gross domestic
product of the 16 countries that use the euro grew 1.0% compared with the first
three months of the year, the strongest quarterly expansion since the second
quarter of 2006, the European Union's Eurostat statistics agency said. GDP,
which measures the total value of goods and services in the economy, was also
1.7% higher than in the second quarter of 2009, the sharpest annual increase
since the first three months of 2008.
retail sales rose 0.4% in July, the first increase in three months. The narrow
gain was driven largely by higher sales of automobiles and gasoline, while many
other merchants continued to fight the sluggish economy.
consumer prices in the U.S. rose a seasonally adjusted 0.3% last month.
However, the underlying inflation rate that is more closely watched by the
Federal Reserve barely rose. Core consumer prices, which strip out changes in
volatile energy and food prices, rose by just 0.1%.
We added Micron
Tech and KBE to our large
August 12, 2010
August 11, 2010
August 10, 2010
Two articles while
we are away:
Mark Hurd's Excesses Were in Plain Sight
Eric Jackson, the street.com
PALO ALTO, Calif. (TheStreet) -- Almost one year ago, I wrote here
that former Hewlett-Packard (HPQ)
CEO Mark Hurd was the emperor with no clothes. Most on Wall Street have revered
Hurd as the consummate guy who would execute and meet Wall Street's
expectations. He sounded good -- always in control -- and he certainly seemed
much more together than his predecessor, Carly Fiorina.
In my article, I laid out the
case for why Hurd was not as dazzling a CEO as many thought and also why he was
a risky asset for Hewlett-Packard moving forward.
Although most observers seemed to
agree that Hurd did a great job turning around Hewlett-Packard, I pointed out
that Hurd's magic really ran out after his first two and a half years on the
job. In those early years, HP's stock went up 137%. Over the last two and a half
years, however, H-P's shares are down 20%. Although that performance beats the
S&P 500, it badly trails rival IBM(IBM), where shares are up
20% over the same period.
The media kept showering Hurd with
the "halo effect" reputation of being a turnaround genius long after
his actual performance had stopped keeping up with what he accomplished at the
start of his tenure with the company.
There are lots of good CEOs who
suddenly lose their touch. What alarmed me about Hurd last year was the piggish
behavior he and his executive team were exhibiting at the expense of H-P
What was worse, they were gorging
at the trough of lavish compensation and excess perks at the same time that
they were hypocritically turning the screws on H-P employees (who remained
after a series of layoffs) to accept pay cuts and reduced benefits.
HP's Securities and Exchange
Commission filings of the past few years have -- in plain sight of investors
and journalists -- detailed this excess:
- Mark Hurd's total compensation
for 2008 (when the global economic crisis reached its nadir) was $43 million,
making him the fourth-highest-paid CEO that year, even though H-P's shares lost
29% that year.
- CIO Randy Mott's total compensation
jumped 400% that year to $28 million.
- Imaging executive vice president
Vyomesh (VJ) Joshi's total compensation increased 83% in 2008 to $22 million.
- Personal Systems EVP Todd
Bradley's total compensation went up 263% that year to $21 million.
- Technology Solutions' EVP Ann
Livermore's compensation went up 31% that year to $21 million.
- Now-interim CEO Cathie Lesjak got
a 49% bump in total compensation in 2008 to $6 million.
This management team mandated
that year that all Hewlett-Packard staffers would take a 5% pay cut for the
year, and they boasted that they -- as executives -- would stand shoulder to
shoulder with the staff by taking 10% pay cuts. They forgot to say that the
executive cuts would be only on base salary and that they would more than make
up for that on options, restricted stock units and other bonus goodies.
In 2008, H-P shareholders paid
$7,472 for travel expenses for Mark Hurd's family to accompany him on business
meetings. They paid $256,000 for Mark Hurd's personal security detail that
year. And each executive was able to use $18,000 worth of financial advice that
year on the shareholders' dime.
Where it gets really interesting
is that shareholders paid $136,000 for Mark Hurd's personal use of the H-P
private plane fleet in 2008. Furthermore, H-P "grosses up" this
taxable benefit, so that Hurd -- the guy who made $43 million in 2008 alone --
didn't have to pay any taxes for that private aircraft use. The filings also
show that Hurd could take his spouse on the H-P aircraft whenever it was
"requested by H-P" and that she got "grossed up" for that
Michelle Leder of Footnoted also
first reported in 2008 that Hurd had been "grossed up" $79,814 for
taxes he had to pay as a benefit on meals with his family that were paid for by
HP. Leder estimated that, in order to be "grossed up" by such a high
amount, Hurd would have had total restaurant bills paid for by HP shareholders
of more than $243,000.
Now, we find out that H-P's board
uncovered a pattern where Mark Hurd inflated his personal expenses that
involved a series of trips involving him and a female contractor, who worked
for the company between fall of 2007 and fall of 2009.
Although I cheer anytime I see a
corporate board wake up from a deep slumber and take action where it suspects a
violation of ethics, I have to emphasize that this is -- by and large -- the
same board of directors that approved all of the egregious compensation and
perks laid out above. And those are only the ones relevant for 2008.
We are now hearing that Hurd will
receive $40 million to $50 million in compensation as part of his exit because
he voluntarily resigned, instead of the $27 million he would have gotten had
the board fired him for cause.
It sure seems like the board had
plenty of ammunition to fire Hurd. Instead, it chickened out and the played the
"it's not you, it's me" golden handshake game to make it all go away
as quickly and quietly as possible. H-P's board of directors is getting good at
that game: It played it with Carly as well.
The warning signs of Mark Hurd
having an entitlement issue have been around for some time. It's just that most
people didn't want to believe they mattered. Nothing matters to most investors
as long as the guy or gal is delivering the numbers.
Sometimes charisma and tough talk
isn't enough. Mark Hurd did good work in getting Hewlett-Packard back on the
rails. Yet we were all blinded by that initial success, and we stopped asking
Ironically for the H-P
shareholders who loved Hurd's execution skills, he's not going to be around to
integrate EDS, 3Com or Palm. That could spell "one-time" charges in
In my books, if you're piggish
about the small stuff like expense reimbursements, you're going to be piggish
about the big stuff. Mark Hurd flashed us warning signs predicting Friday's
debacle. Most of us decided to ignore them.
Matt Taibbi http://www.rollingstone.com/politics/matt-taibbi/blogs/TaibbiData_May2010/189565/83512
Denver Schools Get Whacked
Gretchen Morgenson of the New York
Times is single-handedly resurrecting the Gray Lady's reputation as
a muckraker of the first order. Having already blown a big hole in the side of
Goldman Sachs with her December, 2009 story exposing its crooked deal with hedge fund king John Paulson, Morgenson
this week took an ax to Colorado's Democratic Senator Michael Bennet,
uncovering a Jefferson-County style scam he helped perpetrate on the Denver
School system on behalf of several Wall Street banks (including primarily
JeffCo villain JP Morgan Chase) while acting as Denver's school superintendent
The essence of this deal is that Bennet arranged for the Denver school
system to raise $750 million for its pension fund using an exotic transaction
that involved interest rate swaps. Had the schools raised money using
traditional fixed-rate bond issues, the debt would have featured 7.2% interest
rates. Instead, Bennet and JP Morgan worked together to raise bucketloads of
cash from investors using variable-rate debt with interest rates of about 5%.
The banks then slapped an interest-rate swap on the deal that allowed the
Denver school system to mimic a fixed-rate loan -- for a fee, of course.
Again, just like in Jefferson County, Alabama, the basic idea here was similar to a homeowner who buys a house with an
option-ARM mortgage instead of a traditional fixed-rate loan. You pay less in
interest up front, but you're more exposed if the rates change in the future.
So to protect against rate changes, you enter into the interest-rate swap, by
which a bank like JP Morgan assumes your variable-rate risk in exchange for a
Imagine Satan's very own credit card contract agreement and you get a
sense of how much this borrowing is costing the citizens of Denver; so far, the
school system has already paid over $115 million in interest and fees since the
deal was struck, or about $25 million more than originally anticipated.
And just like the Alabama sewer deal, where JP Morgan slapped an absurd
$750 million termination fee on Jefferson County when the deal went south, in
Denver the only way out of the deal is an $81 million termination fee, which
Morgenson notes would be roughly 19% the size of Denver's annual payroll.
In Jefferson County, local politicians took bribes to sign off on these
crappy deals. There's no such allegation of bribery in the Bennet case per se,
but instead what ended up happening is that Bennet, after he left the Denver
school system, collected campaign contributions from many of the banks
involved, including JP Morgan and Bank of America.
Back in February and March when I wrote about Jefferson County I was
told by one federal investigator that there were multiple cases involving toxic
interest rate swaps similar to the Alabama deal that were still under
investigation. In her piece, Morgenson lists some of the municipalities that
are cracking under the strain from these deals -- they can be found in major
cities all across the country, and there are hundreds of similar deals in
Europe, Italy in particular. Morgenson writes:
Last March, the Los Angeles City Council told its treasurer and city
administrative officer to renegotiate interest-rate deals the city had used to
try to lower its debt payments with the banks that sold them. “If they are
unwilling to renegotiate, then those financial institutions should be excluded
from any future business with the City of Los Angeles,” noted a report by the
In Pennsylvania, some school districts have unwound interest-rate
deals, and the state’s auditor general, Jack Wagner, has urged other issuers to
follow suit. “For the sake of Pennsylvania taxpayers, I call on the other
school districts that have entered into similar swaps contracts to get out of
these risky agreements as soon as they possibly can,” he said in a statement in
Financial stress from these deals could not come at a worse time for
cities, towns and school districts already saddled with high costs and falling
revenue. Although it is difficult to tally how many public entities entered
into interest-reduction deals, a recent analysis by the Service Employees
International Union estimated that over the last two years, state and local
governments have paid banks that arranged these transactions $28 billion to get
out of the deals, seeking to avoid further crushing payments.
Many transactions remain on public issuers’ books. S.E.I.U. estimates
that New Jersey would have to pay $536 million to get out of its derivatives
contracts, while California faces $234 million in such payments. Chicago is
looking at $442 million in termination fees to unwind its transactions, and
Philadelphia would have to pay $332 million.
It's not hard to figure out why these deals are popping up all over the
place. X or Y politician gets into office and is faced with budgetary problems.
He is then approached by Wall Street hustlers who make him a fancy offer that
sounds impossible to refuse: sign on for a bond-and-swap deal now, we'll give
you upfront cash to help your immediate budget problems disappear. And if the
deal blows up, the blowing up will happen on someone else's watch, long after
you've left office. In the meantime, here's a bribe/batch of campaign
contributions/donation to your favorite PAC to help soften up your conscience.
It's a formula that allows current politicians to look like heroes even
as they're sticking future politicians with irresolvable financial burdens. The
problem mimics the bonus issue on Wall Street, where bankers look to score big
bonuses this year by doing deals that may look good now, but in the long run
may go south, affecting not them, but their company's bottom line. The geniuses
at AIG who made millions in bonuses building up the world's biggest gambling
debt is a classic example of this phenomenon. And when you get politicians and
bankers who are both mercifully free from the ravages of conscience and are
both operating on the same pitifully short time horizons, the result will be
deals like this Denver thing, where it's a temporary win-win for the dealmakers
and an unspeakably huge loss for taxpayers down the road.
At least in Jefferson County the principals on the government side --
in particular then-County Commissioner Larry Langford -- had the excuse that
they didn't understand these intricate swap deals, as most normal human beings
do not. They could at least say they thought it might all work out in the end.
Not so with Bennet; he worked for years as a structured finance guy under loony
Phillip Anschutz (who is probably best known for having helped fund religious
films like the Sam Rockwell instant non-classic Joshua and the Christ-as-lion
epic The Chronicles of Narnia).
So he should have known better, but clearly did not.
Bennet now looks dead as a national political figure. It will be
interesting to see what other consequences this story might hold for the
Democratic Party, as (and this seems mainly to be a coincidence) is this just
the latest in a long line of similar rate-swap scandals that have all in one
way or another been tied to Democratic pols. The bigger question is, how
exactly do we stop these deals from happening? If Wall Street keeps making it
easy to push today's debts into the laps of tomorrow's politicians, when
exactly does that stop being a tempting situation for our current leaders?
August 9, 2010
August 6, 2010
August 5, 2010
August 4, 2010
We will be taking
the next ten days off returning to posting on August16. The Prince and Princess
and Dave and Gerald are arriving for a week at the farm.
Asian markets were lower as are
European bourses at midday. U.S. futures indicate a slightly higher opening as
the ADP reported that 50,000 non government jobs were added in July.
The HFT computers are active
today. They helped the major stock measures pop higher with the release of the
July ISM Service Index, which came in at a better-than-expected 54.3 (a sample
of economists polled by Briefing.com had expected, on average, a reading of
53.0 following the prior month's reading of 53.8). The rally lasted all of ten
minutes as the e HFT computers then went the other way.
“It’s called the American Dream because you have to be asleep to
believe it.” (George Carlin)
Morning walk thought: What did redwing blackbirds do before there were
telephone and electrical wires to sit on?
The static kill seems to working. That is good for investor psychology..
We added XLF,
the financial ETF. Rather than picking individual banks and brokers we feel it
is safer to use the ETF.
Barnes & Noble has put
itself up for sale.
(NYT Dealbook) Now that Barnes & Noble has officially put itself up for sale, it’s time to ask: who may place a bid for
America’s biggest brick-and-mortar bookseller?
Barnes & Noble’s market value is now just $755 million, its shares
having slid almost 37 percent since June when it warned that its 2011 profits
may suffer. (It was that stock drop that propelled the board to finally
consider running a sales process, a person briefed on the matter told
DealBook.) Its shares jumped 24 percent in premarket trading on Thursday, to
A battle for Barnes & Noble may come down to two of its wealthiest
shareholders, who happen to have clashed repeatedly over recent months: Leonard
Riggio and Ronald W.
The most obvious bidder is Mr. Riggio, Barnes & Noble’s founder and
its largest shareholder with a roughly 30 percent stake. Mr. Riggio will
probably seek backing from private equity to mount a bid, this person said,
though he hasn’t yet hired advisers.
“Regardless of whether I participate in an investment group that buys
the company, I, as well as the entire senior management team, am willing and
eager to remain with the company and see it through the challenging years
ahead,” Mr. Riggio said in a statement.
But then there’s Mr. Burkle, the billionaire whose efforts to buy up
Barnes & Noble stock in huge chunks have alarmed the company’s board and
management over the past year. He currently holds about 19 percent.
After the bookseller instituted a shareholder rights plan intended to
stop anyone from acquiring a stake of more than 20 percent without board
approval, Mr. Burkle sued the company in Delaware’s Court of Chancery to force the removal of the poison
At the trial this month, Mr. Burkle testified that in November, he had
considered making a $25-a-share bid for Barnes & Noble, which was then
trading above $16 a share. But he deemed it “a waste of time” — because of Mr.
Riggio’s blocking position. (Mr. Burkle also said he was considering nominating
three directors for the company’s board.)
While Barnes & Noble didn’t put itself up for sale specifically to
address Mr. Burkle’s campaign, it could be trying to call what it sees as the
activist’s bluff, a person close to the company said.
Private equity firms may also see value in Barnes & Noble, which
still retains a strong brand name despite losing market share to bigger
competitors like Amazon.com and Walmart.
probably get the company but the problem is that Burkle’s cost is about $20 per
share so Riggio would have to pay $30 to take him out unless he lets Burkle in
on the deal. Riggio did himself a favor two years ago by selling the Barnes
& Noble College Book operations back to Barnes & Noble for $500
million. That $500 million is now the only long term debt on Barnes & Noble’s
balance sheet. Riggio knew that notebooks
were coming and that college kids will be the first to abandon expensive
textbooks for the notebook.
But Riggio now has
$500 million plus retains 30% of the company so he is in the driver’s seat. He
can take it private for $20 a share and wake the magic and then bring it public
in a few years. There is no risk for him and there is the potential to double
our triple his money if he can make the Nook
a popular item.
At $30 per share
Riggio would only have to come up with $1.2 billion (BKS has $5 billion in
yearly sales). A hedge fund called Athena owns 16% and if they go along with
Riggio in the buyout the money needed drops to under $1 billion and if Burkle
went along for the ride the money needed drops to less than $700 million at $30
per share. If Burkle and Athena go along then Riggio would probably offer only
$20 per share which would mean only $400 million in new cash.
We are holding for now since they're 12
million shares (half the float) short at the present time and we think the
minimum price on a buyout is $20.
major market measures closed higher. Breadth was positive and volume light.
European stock markets finished a little higher Wednesday, with the help of
better-than-expected economic data from the U.S. The dollar battled back from
recent lows. Oil ended down 5 pennies at $82.55. Gold gained $11 to $1197.
August 3, 2010
(MarketWatch) Asian markets were
higher overnight while European bourses are lower at midday. U.S. futures
indicate a lower opening after yesterday’s big day. Consumer spending, adjusted
for inflation, rose 0.1% in June, the Commerce Department reported. Personal
income was flat in the month. Wall Street economists had expected a 0.2% gain
in income and a 0.1% rise in spending.
GE is acting well and so we are
repurchasing for accounts owing BKS.
We need an industrial stock. We also are buying Intel in those accounts. Both GE and Intel yield 3% (cash yields
0%) and will participate in any broad move higher while being solid enough to
own in a downturn. We bought to own.
In a few very large accounts we added General Mills, AT&T, Verizon, and Proctor& Gamble to go with the Kraft and BB&T Bank they already own. Our view now is since all have 3%
to 6% yields we may as well sit in them for the duration as in cash. Long
Treasuries have a 3% yield and we think there is much more long term risk in
Treasuries at current yields than in these stocks. We expect the markets to
move higher eventually and these are all blue chip entities.
is reporting that if you visit a web page and load a simple PDF file, you may
give total control of your iPhone, iPod
touch, or iPad to a
hacker. The security bug affects all iOS 4 devices and the iPad. The
vulnerability is easily exploitable. In fact, the latest one-click,
no-computer-required Jailbreak solution for iOS 4 devices uses this same method
We have always thought that the
reason Apple devices haven’t had the security/crash problems that Microsoft has
is that Apple was about 10% of installed computer base and thus not worth it
for hackers to mess with. Moreover, Apple was the David to Microsoft’s Goliath
and the geeks were on Apples side. Now Apple is becoming a second Goliath and
its installed base of computer/ iPhone, iPads is approaching 100 million
devices. It is now large enough for hackers to feel hacking is worthwhile.
Who believes Trump?
(NY Daily News) The Donald trumped his SoHo Grand with great
fanfare on the last episode of The Apprentice in 2006, but condo buyers now say he snookered them.
Lawyers for 15 buyers contend Trump lied about how many of the units
were sold in a federal lawsuit filed in Manhattan Tuesday morning.
They claim Trump and his three famous children owe the buyers millions
after claiming the condo/hotel was as much as 60% sold, when only 15% of the
units have been sold.
The buyers want the $175 million they put down for deposits, punitive
damages - and to get out of the purchase contracts.
The Trumps, according to the lawsuit, told buyers the 46-story hotel on
Spring Street that opened in April was much more popular that it actually is.
"The defendant's false, deceptive and misleading statements were
aimed at inducing consumers to enter into purchase agreements," the
"Had the defendants not engaged in these fraudulent and deceptive
practices, the plaintiffs would not have entered into their purchase agreements,
would not have made their initial deposits, and would not have made their
The 391 units start at more than $1 million for a small studio - and go
up from there.
Organization is not the
developer of the project but merely the manager of the hotel, which has done
exceedingly well since opening four months ago," Trump said in a statement
"Despite this, I know that numerous people have closed on their
units and this case is simply a matter of buyers' remorse."
Donald Trump, his three children, and the project's "sponsor" - a company
owned by Trump and two business partners - are all named in the 180-page
The building is "a signature project of Trump's three children,
Donald Trump Jr., Ivanka Trump and Eric Trump, who have both an equity interest in the project and have publicly
used the project to try to establish some independent credibility in the real
estate business beyond their mere status as Trump's children," the lawsuit
"The Sponsor and its affiliates and sales agents - the defendants
- stood to make substantial profits if large numbers of the Condominium Units
could be sold, but could face disaster if they went unsold," the suit
- Ford, Lincoln and Mercury July sales
totaled 166,092, up 5 percent versus strong year-ago sales; year-to-date sales
up 24 percent
- Fiesta eclipses 3,000 sales in its second
month in America
- New 2011 F-Series Super Duty and Mustang
continue impressive starts; Super Duty sales up 63 percent in July versus year
ago; Mustang retail sales increased 43 percent year over year
- Last year’s new products also post sales
gains; Fusion nearly matches last July’s sales record, Taurus sales up 187
percent, and Transit Connect posts best sales month ever
- Ford’s retail market share appears to
have increased for the 21st time in 22 months as buyers turn to Ford’s fresh
lineup of high-quality, fuel-efficient vehicles
Ford’s newest vehicles helped the
company continue to grow as Ford, Lincoln and Mercury dealers delivered 166,092
new vehicles in July – a 5 percent increase versus a year ago, when “Cash for
Clunker” sales started to surge.
Year-to-date sales totaled 1.12
million, up 24 percent, with growth across Ford’s full family of cars (up 21
percent), utilities (up 19 percent) and trucks (up 32 percent).
“Customers are rewarding Ford for
providing the performance they want and the fuel economy they need,” said Ken
Czubay, Ford vice president, U.S. Marketing, Sales and Service. “New
class-leading powertrains are the ‘secret weapon’ in every new product we are
bringing to market.”
The Ford Fiesta, which offers 40
miles per gallon EPA highway fuel economy, eclipsed 3,000 sales in its second
month in America and has been well-received by California customers. Highly
acclaimed in Europe, Asia, and North America, the Fiesta is the first car
developed under the ONE Ford global product development system.
Sales for the 2011 F-Series Super
Duty were 63 percent higher than a year ago, capturing more than 50 percent of
the heavy duty pickup segment. Ford announced today it will begin production of
the most powerful diesel engine ever installed in a heavy-duty pickup
(best-in-class 800 lb.-ft. of torque and 400 horsepower). In addition, the
Super Duty’s 6.7-liter Power Stroke diesel will provide improved fuel economy –
a full 20 percent better fuel efficiency than the 2010 model.
“In an industry-first customer
loyalty program, Ford will provide the power upgrades free of charge to all
current owners of a 2011 Super Duty diesel pickup,” said Czubay.
Retail sales for the Mustang were
43 percent higher than a year ago. Since the arrival of the 2011 model
featuring new V-6 and V-8 engines with more horsepower and improved fuel
economy, Mustang’s share has climbed to levels not seen since January 2009.
“With our broad range of products
– from Fiesta to Super Duty – Ford is connecting with consumers,” said Ken
Czubay, Ford vice president, U.S. Marketing, Sales and Service. “Ford and its
dealers continue to offer customers the strongest value proposition in the
industry – class-leading fuel economy, quality and growing resale values.”
In July, Ford retail sales were
up 5 percent versus a year ago, and Ford appears to have gained retail market
share for the 21st time in the last 22 months. Fleet sales were up 2 percent,
reflecting higher sales of Ford’s hard-working trucks to commercial customers.
Other Sales Highlights
- Demand for the Ford Fusion, Motor Trend’s
Car of the Year, remains strong as sales of 17,406 nearly matched last July’s
sales record. Ford Taurus sales totaled 5,046 in July, up 187 percent.
- With sales of 50,449, Ford’s F-Series
posted a 39 percent sales increase in July. It was the first time since March
2008 that F-Series sales eclipsed 50,000. Year-to-date, F-Series sales totaled
290,794, up 35 percent.
- Ford Edge set a July record with sales of
9,342, up 19 percent versus a year ago. The redesigned 2011 Ford Edge and
Lincoln MKX now are in production, featuring new powertrains and MyFord and
MyLincoln Touch driver connect technology.
- Lincoln retail sales were up 7 percent
versus a year ago with higher retail sales for the Lincoln MKZ sedan, Lincoln
MKT crossover and Lincoln Navigator sport utility. Soon, Lincoln will offer a
hybrid version of the Lincoln MKZ at the same price as the gas version, making
the MKZ the most fuel-efficient luxury vehicle in America.
major market measures closed lower in light trading. Breadth was 3/2 negative.
Oil ended at $82.55 up $1.18. European stocks closed mildly lower. Gold gained
$4 to $1189.
August 2, 2010
Asian and European markets were
plus 1% and higher overnight and U.S. futures are also indicating a higher
opening. And then traders will begin obsessing over Wednesday’s ADP employment
number and Friday’s government employment number and the trading range will
resume or so we presume.
1115 (200DMA) on the S&P 500 (now at 1114 on the futures) is the
line in the sand. Stocks pulled back from it last week but the bulls must leave
that number in the dust to move higher. We don’t think the test will be over
till Friday at the earliest.
(Yahoo Finance) Impressive earnings growth from both BNP
Paribas and HSBC (HBC)
has helped send Europe's shares sharply higher. As such, Germany's DAX is up
1.8%. Commerzbank is among the bourse's primary leaders, but materials stocks
(+3.0%) make up some of the strongest movers. In France, the CAC has climbed to
a 2.2% gain. BNP Paribas is a primary leader there; the stock is currently
testing multimonth highs on the French index. HSBC has been a leader in
Britain, where the FTSE is up 1.9%. Lloyds
Banking Group (LYG) has benefited from the interest in banks.
Solid European PMI readings have also helped prop up the tone of trade -
Norway, Hungary, France, Germany, and Britain all had solid to
stronger-than-expected PMI readings for July. In China, financial issues led
the Shanghai Composite to a 1.3% gain. Declining issues were limited to less
than 2% of the index's 911 members. As for data, China's PMI came in
weaker than expected, but the number still showed expansion in the country's
manufacturing sector. Almost all 42 members of Hong Kong's Hang Seng climbed -
Ping An Insurance was the primary laggard as it finished flat. Such broad-based
strength helped the index put together a 1.8% gain. In Japan, the Nikkei booked
a 0.4% gain, even though advancers and declining issues traded in near even
balance. Honda Motor
(HMC) and Fast Retailing were key leaders in the session, but Shionogi and
Konica Minolta represented an offsetting force.
Link to image http://www.discoverynews.org/wildlife-monkeys-hear-no-evil-see-no-evil-speak-no-evil1.jpg removed
of the mouth of babes.... a stopped clock is right twice a day.... why would
anyone pay money for this guy’s opinion when he was so wrong?.....
(Huffington Post) Former Fed Chairman Alan Greenspan said that
the push by congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere
could end up being "disastrous" for the economy.
In an interview on NBC's "Meet the Press," Greenspan
expressed his disagreement with the conservative argument that tax cuts
essentially pay for themselves by generating revenue and productivity among
"They do not," said Greenspan.
"I'm very much in favor of tax cuts but not with borrowed money
and the problem that we have gotten into in recent years is spending programs
with borrowed money, tax cuts with borrowed money," he said. "And at
the end of the day that proves disastrous. My view is I don't think we can play
subtle policy here."
The comments from the former Fed chief were an elaboration of a
position he outlined in an interview earlier in the week. Speaking with PBS'
Judy Woodruff, Greenspan expressed his opposition to passing legislation that
would hold tax rates steady (under law the tax cuts Bush passed ten years ago
are going to expire, thereby bringing rates back to Clinton-era levels).
President Obama has pledged to continue the tax breaks for those
individuals making under $200,000 and those families earning less than
But Republicans want the entire package kept in place. Even so, they
have declined to say how they would pay for it, saying, in part, that keeping
the Bush tax cuts in place will pay for itself.
In addition to throwing cold water on that theory, Greenspan also
weighed in on broader economic issues and trends. The former Fed Chairman
relayed some sobering economic predictions, saying he expected the nation's
unemployment rate to remain at its current level, mainly because there were few
tools left to change it.
An hour into the trading day and
stocks remain strong with the S&P 500 at 1120. The bulls need to hold this
(Yahoo Finance) The ISM Manufacturing Index for July was
just released. It came in at 55.5, which is greater than the 54.2 that had been
expected, on average, by a sample of economists polled by Briefing.com.
However, the latest figure marks a pullback from the 56.2 that had been posted
Separately, construction spending for June increased 0.1%, which is
stronger than the 0.8% decline that had been widely forecast. Spending figures
for the prior month were revised downward to reflect a 1.0% decrease.
September, Barnes & Noble will
begin an aggressive promotion of its Nook
e-readers by building 1,000-square-foot boutiques in all of its stores,
with sample Nooks, demonstration tables, video screens and employees who will
give customers advice and operating instructions.
By devoting more floor space to promoting the Nook, Barnes & Noble is
playing up what it calls a crucial advantage over Amazon in the e-reader war:
its 720 bricks-and-mortar stores, where customers can test out the device
before they commit to buying it.
“I think that’s everything,” William Lynch, chief executive of Barnes
& Noble, said in an interview. “American consumers want to try and hold
gadgets before they purchase them.”
Amazon’s Kindle e-reader is for sale on Amazon.com and in Target and
Barnes & Noble has already installed small counters in its stores
where customers can test out the Nook. The new display space would be much
larger, and it would be located next to each store’s cafe, to encourage
customers to stop by the Nook space, coffee or tea in hand. It would also sell
more than 100 accessories for the Nook, like padded covers designed by Kate
Spade and Jonathan Adler.
While in the store, Barnes & Noble customers can read entire
e-books free, just as they can with print books. “We’ve tried to replicate the
physical bookstore experience,” Mr. Lynch said.
To make room for the new Nook displays, Barnes & Noble plans to
clear out some of its music merchandise, which in its superstores takes up
3,600 square feet, and to arrange its books more efficiently. Mr. Lynch said
that the number of books on display in Barnes & Noble stores would not
All summer, Amazon and Barnes & Noble have been locked in a fierce
battle over their competing e-reader devices. In June, Barnes & Noble
lowered the price of the Nook to $199 from $259, and Amazon quickly cut the
price of its Kindle to $189 from $259. On Wednesday, Amazon announced plans to
introduce two new versions of its Kindle e-reader, one for $139, the lowest
price yet for a Kindle. Barnes & Noble also sells a version of the Nook,
without free 3G and Wi-Fi, for $149.
According to the Codex Group, a consultant to the publishing industry,
nearly two million Kindles had been sold as of mid-June and more than 600,000
Nooks. The Nook has been on sale since October 2009 and the Kindle since
December 2007. Of course, both Nook and Kindle are looking over their shoulder
at iPad, the newest e-reader on the block.
Analysts said the 2010 holiday season might be the first time that most
consumers become aware enough of e-readers to seriously consider buying one,
given their greater visibility and lower price.
“Most people have never read an e-book,” said Michael Norris, senior
analyst at Simba Information, which provides research and advice to publishers.
“Most people still don’t know much about these devices.”
were higher all day but don’t get too excited since tomorrow is Turnaround
Tuesday and the HFT gals and guys are the only ones paying attention to the
market these days. At the close the major measures were up 2% with the S&P
500 closing at 1125 thus closing above 50% of the bear market move which was
1120. Only the 1130 level needs to be surmounted for our guru to have to
rethink his bearish tendencies. But that is a large hurdle. Breadth was very
positive and volume was summer Monday light.
Europe closed higher and Oil gained $2.50 to $81.47 while Gold closed
unchanged at $1185.
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Summary of Business Continuity Plan