Friday Finance Weekly 78TH Edition

Greetings folks and a warm welcome to the 78TH Edition of Friday Finance Weekly. My sincere apologies for the long delay. Ran into some technology issues earlier this year and the weeks got away from me. Let’s get right to business.

Business is good in the U.S. auto industry, but car dealers are starting to worry about the squeeze on new car margins and what could happen if interest rates change.  “We’re getting lulled to sleep by these Japanese-like interest rates which are barely positive. Dealer profitability is somewhat overstated in the long term” because of the current low interest rates, Earl Hesterberg, chief executive of Houston auto retail chain Group 1 Automotive, Inc., speaking at a conference sponsored by the National Automobile Dealers Association and consultancy J.D. Power and Associates ahead of the New York auto show.  “We’re at 5.6% margins,” on new vehicles, Mr. Hesterberg says. “Before the downturn we were running 7%.” While margins are considered to be low, keep in mind that these are dealership margins and not manufacturer margins. Dealerships make most of their profits (approximately 80%) by way of service and parts. Gas prices are also stable for now but if North Korea sneezes the wrong way things may change quickly. (Source: Wall St Journal)

American consumers are showing remarkable resilience.  Despite the weight of higher payroll taxes and pump prices, consumer spending rose a surprisingly strong 0.3% in February from the prior month, after adjusting for inflation. That prompted a number of economists to boost their forecast sharply for personal spending and economic growth for the first quarter.  Moreover, a major indicator of consumer confidence edged up in March to its highest level since November, confounding analysts’ projections that the University of Michigan survey would slip as consumers also took in the news of the new government spending cuts under sequestration. When we combine with the fact that credit card delinquencies (2.47%) are at an 18 year low it appears that consumers are being responsible. You know what else? So far the automatic spending cuts that went into effect have had no impact. (Source: Money & Co, and CNN Money)

EDC (Export Development Canada) a federal entity that promotes export related activity, provided a $260M working capital facility to Telefonica to help them purchase Blackberry Products. The credit facility will allow the Spain based company to purchase phones and infrastructure for BIS/BES systems. Blackberry has done fairly well on a year to date basis with their shares up 26.61% and currently trading at $14.93 a share. With the Samsung Galaxy S4 coming up, I think Blackberry will have a limited impact in North America. In fact there were reports that ATT in the states didn’t even actively promote the Blackberry Z10. Analysts will wonder if Blackberry’s sales would have been strong without quasi-government support. That being said, Bombardier has received assistance for years. All things considered Blackberry’s fortunes will lie in Asia and South America so it may not matter. Honestly I think they will do well by simply not changing the size of their phones. Samsung’s next phone has a 5 inch screen! Other than helping creepy people read over your shoulder on the subway it serves no purpose; unless of course they make fashionable battery chargers to go with your phone. (Source: TechCrunch)

As you all know I am fairly random with my blog comments. I thought it would be of interest to give a few 2012 internet facts:

  • 2.2 billion email users worldwide
  • 144 billion total emails per day
  • 68.8% of all email is spam
  • 246 million domain name registrations
  • 2.4 billion global internet users
  • 40.5 years, average Facebook user
  • 37.3 years average Twitter user
  • 1.2 trillion Google searches
  • Top trending question on Ask.com “Will Rob and Kristen get back together?”

Humanity my friends, is doomed when more people care about Rob and Kristen’s escapades over things like “What’s going on in Syria?” (Source: Gizmodo)

First-World Products: The DogTread Treadmill is a modification of the familiar exercise machine in homes and health clubs, with special features for dog safety — a helpful invention in a nation in which over half of all pet dogs are too fat. (A somewhat higher percentage of cats are overweight, but it is unlikely that marketing a cat treadmill has ever been considered.) The Association for Pet Obesity Prevention (yes it’s a real thing) points out that pets can develop type 2 diabetes, high blood pressure and osteoarthritis, and that the problem stems from insufficient exercise and overindulgent owners. (The DogTread Treadmills sell for $499 to $899.). (Source: Mother Nature Network)

Thanks folks and a fantastic weekend. Please don’t hesitate to forward this newsletter.

Many thanks,

Sam

Friday Finance Weekly 77TH Edition

Greetings folks and a warm welcome to the 77TH Edition of Friday Finance Weekly. Washington politicians hoping the end of the world would prevent them from having to deal with the fiscal cliff…will have to think again.

News from the economy in general:

  • It is apparent that Uncle Sam is getting strict with foreign banks. HSBC was fined $1.9B for money laundering. Nobody was arrested of course and the bank agreed to pay the fine and admitted to violating the Bank Secrecy Act and the Trading with the Enemy Act. Their shares are actually up over the last month and it is apparent that the bank is easily able to absorb the fine. ING also agreed to pay a $619M fine due to their dealings with Cuba and Iran. Even UBS was fined $1.5B for a single wire transfer that manipulated LIBOR. I sincerely hope these large fines are helping the US close the deficits!  In addition to the hefty fines, more than two dozen foreign banks with at least $50 billion of global assets face stricter U.S. capital rules under a Federal Reserve plan that’s aimed at lowering risks to the financial system.   The Fed proposed that most of the banks also be forced to comply with more stringent liquidity rules and pass stress tests analyzing how they would fare in a severe economic downturn.  Lenders with more than $50 billion of global assets and more than $10 billion in the U.S. will be required to house their U.S. businesses, including securities trading, within regulated holding companies. Yikes, its hammer time! Somehow I don’t think American banks face the same level of scrutiny. In fact during the financial collapse some banks were forced to take government bailouts even though they didn’t need them. (Source: WSJ, Bloomberg)
  • Americans swiped their credit cards more often in October and borrowed more money to attend school and buy cars. The increase drove U.S. consumer debt to an all-time high.  The Federal Reserve said that consumers increased their borrowing by $14.2 billion in October from September. Total borrowing rose to a record $2.75 trillion.  Borrowing in the category that covers autos and student loans increased by $10.8 billion. Borrowing on credit cards rose by $3.4 billion, only the second monthly increase in the past five months. Hey tis the season for giving so give consumers a break, and the more you give the more you get… Bailouts that is. (Source: Post Crescent)
  • Just when you thought the online coupon industry was dead, JP Morgan decided to get in to the game. This time however, I think it’s a good idea. J.P. Morgan is buying daily-deals startup Bloomspot Inc. as it looks to target customers with merchant offers to spur card spending. The deal could enable J.P. Morgan, the largest U.S. credit-card lender and a major processor of card transactions for merchants, to generate new sources of revenue by tailoring discounts and other deals for retailers to cardholders based on spending patterns. The bank will use your spending habits to generate customized coupon solutions. This was always the missing link in the online coupon market. (Source: WSJ)

Let’s get into some consumer news:

  • Bausch & Lomb Inc. has hired investment bank Goldman Sachs Group Inc. to explore a sale after receiving informal expressions of interest from several large health-care companies, said people familiar with the matter. The eye-care company is hoping to command at least $10 billion, people familiar with its thinking said.  The Wall Street Journal reported in July that Bausch & Lomb could be ready to go public at the end of this year if it didn’t receive an attractive offer first. The Journal also reported that Bausch had received informal takeover inquiries from larger companies.  The decision to formally explore a sale instead of an initial public offering came partly because Bausch executives felt the company would secure a price that would meet its expectations in a sale, the people said. The IPO market is lukewarm right now and the strategy of trying to find a purchaser is a smart one. I have a feeling a company like Johnson and Johnson will make a move to further strengthen their position in this sector. (Source: WSJ)
  • Hudson’s Bay Co. trumpets high-profile brands such as Coach as a big part of its turnaround efforts, but behind the scenes the retailer is building an arsenal of its own private labels to fight growing competition from its suppliers’ standalone stores.  While HBC and other department stores count on stocking well-recognized lines to draw customers, the merchants also contend with those same companies running their own shops nearby – often in the same mall or down the street.  Now, HBC, which reports its first quarterly results as a reborn public company, is putting a new push on its own labels. In-house brands give merchants more leeway in setting prices without having to match a competitor’s discount, while scaling back on middlemen. Retailers are betting they can generate higher profit margins from their own brands, while taking on their suppliers on their own turf. The stock has barely moved since its IPO indicating that it was actually fairly priced. What a novel concept, fair pricing. Results over the holiday season may give it a boost. (Source: Globe and Mail)
  • This isn’t really finance news, unless you use it as a bellwether for higher than expected revenue figures. The top 10 accessory designer list was released and it is as follows 1. Coach 2. Gap 3. Calvin Klein 4. Guess 5. Nine West 6. Liz Claiborne (tie) 6. Tommy Hilfiger (tie) 8. Ralph Lauren 9. Ugg 10. Fossil. Guys you can thank me later. (Source: Glamour – afraid to admit it)

Plastic surgeons in Turkey and France told CNN in November that mustache implants have suddenly surged in popularity as Middle Eastern men use their increased lip bushiness to convey power and prestige. Surgeons extract follicles from hairier parts of the body in procedures that cost the equivalent of around $7,000 and show full results in about six months. An anthropology professor told CNN that, by tradition in Arab countries, a man of honor would “swear on my mustache,” use mustaches as collateral for loans, shave off a vanquished foe’s mustache as a reward, and gravely insult enemies with “Curse be upon your mustache!” Okay, so how does Movember fit into all this? (Source: CNN)

Have a Merry Christmas and a Happy New Year. My next newsletter will be out in 2013. Please don’t hesitate to forward this newsletter.

Many thanks,

Sam

Friday Finance Weekly 76TH Edition

Greetings folks and a warm welcome to the 76TH Edition of Friday Finance Weekly. Hope your Christmas shopping is going well and that you are gearing up for the holidays.

Let’s expand on the economy and get a pulse for what’s happening:

  • The rate of student loan debt delinquency has leaped above the delinquency rate for all other consumer debt including those of cars and credit cards, according to a study done by the Federal Reserve Bank of New York.  Student debt in the U.S. is now at $956 B, which is an increase of $42 B since last quarter. That means 11 % of student loans are 90 days delinquent. In fact student loans are the only consumer debt category this is currently growing. Is it that school is too expensive or is the problem really the lack of good jobs? Well the good news is that there is a solution, default on your debt and after seven years its record gets wiped out. (Source: Deseret News)
  • Following up on my employment comments there is some good news coming out of the states. The unemployment in the US fell to 7.7%, the lowest since December 2008. During the month of November a total of 146,000 jobs were added and the forecast was 85,000. Unfortunately increased levels of employment didn’t translate to increased consumer confidence as the University of Michigan consumer sentiment index fell to 74.5, down from 82.7. Canada added 59,300 jobs and the unemployment rate fell to 7.2%, down from 7.4% in October. I am however skeptical about reading too much into the jobs report during November/December as retailers tend to hire temporary staff for the holiday season. Santa’s helpers for example are unemployed all year except for the month of December (okay I tried). (Source: Globe and Mail)
  • Also there is a lot of fiscal cliff talks and let me give a worst case scenario summary. On Dec 31 a number of laws are due to expire, unless the president and congress can work something out. If nothing is resolved then things get interesting. Taxes would go up for almost every taxpayer and many businesses. The Bush-era tax cuts, which tax relief for middle and upper-class tax payers, would be a thing of the past.  So would President Obama’s payroll tax cut which added about a thousand dollars a year to the average worker’s income. Government spending would be slashed.  That means less money for most military, domestic and federal programs.  $26B in emergency unemployment-compensation would be gone. Medicare payments to doctors would be reduced by $11B. Federal programs would take the biggest hit.  They stand to lose a total of $65B. No big deal right? So why aren’t the republicans getting serious? (Source: Yahoo Finance)

Retail therapy, as if you weren’t sick of shopping:

  • Online spending rose 17% after Thanksgiving, one of the busiest days of the year for Internet retailers, as tablets and smartphones let customers shop anytime and anywhere.  Consumers spent about $1.46B on so-called Cyber Monday, compared with $1.25B a year ago, making it the heaviest online spending day in history, research firm ComScore Inc.  said in a statement. U.S. retail e-commerce spending reached $16.4B in the first 26 days of the holiday season, a 16% increase from the same time last year.  The convenience offered by mobile devices, especially tablets, is boosting sales for online retailers such as Amazon.com Inc. and EBay Inc. Consumers are no longer waiting for Black Friday to shop and they’re starting as early as Thursday evening, which will help Internet sales reach $43.4B this holiday season, or 10% of U.S. retail spending, excluding gas, food and cars, according to ComScore. During this time of the year the only exercise most people get is fighting the crowds in malls, so with online shopping we can add to our obesity problem. Quick buy health care stocks. (Source: Bloomberg Business Week)
  • Daily deals company LivingSocial is getting more antisocial by the day. The Groupon competitor said it was laying off 400 people, or almost 9 percent of its staff, because of falling demand for its services.  LivingSocial isn’t the only one in its nascent industry to face pressure. Groupon’s board of directors is reportedly considering whether to fire CEO Andrew Mason, who effectively admitted this week that his performance merits scrutiny. The company’s directors appear to have decided to let him stay, at least for now.  Indeed, only a few years into its existence, the entire online coupon business is struggling, with top players still trying to learn how to grow quickly and profitably enough to satisfy investors. The question is not how much more consolidation can go on so much as how many companies might be left to consolidate. According to trade publisher Daily Deal Media, in the last six months of 2011 alone nearly 800 daily deal companies closed their doors. Hey maybe its time Groupon gave a coupon for its shares? Its got to be at least 50% – 60% off. (Source: CBS Money Watch)

Among the federally funded projects highlighted in the “2012 Waste Book” of U.S. Sen. Tom Coburn were a $325,000 grant to develop a “robosquirrel” (to help study the somehow-confusing interaction between squirrels and rattlesnakes) and a $700,000 grant by the National Science Foundation for a New York theater company to create a musical about climate change and biodiversity (which actually opened this year, in Kansas City, and included among its concepts, according to one critic, “flying monkey poop”). Abuses of the food stamp program were also detailed, such as by one exotic dancer who, while earning $85,000, drew food stamps in an amount roughly equivalent to the sum she spent on “cosmetic enhancements.” Now the only thing that would make this story better would be if the exotic dancer was part of the musical. (Source: Fox ‘News’)

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 75TH Edition

Greetings folks and a warm welcome to the 75TH Edition of Friday Finance Weekly. To all my American friends, I hope you had a Happy Thanksgiving.

Let’s start with some economic/tech news:

  • The S&P 500 index had its best weekly gain since June of this year. The index is up 3.6% for the week and this is primarily due to the increased confidence of positive retail data from the Christmas shopping rush. Germany also surprised the markets as their business climate index rose unexpectedly. Honestly I’ve never heard of this index, but it sounds good. For now the markets seemed to have forgotten about the fact that the 7 year EU budget is at a standstill (no one can agree on how to proceed). The positive news drove the TSX higher this week and the Canadian Dollar closed above par. Great for Canadian Black Friday shoppers. (Source: Toronto Star, Bloomberg)
  • American retailers are set to profit from the strong Canadian dollar and discounted pricing. While retailers like the Bay, are advertising Black Friday deals of their own, higher duty-free limits, lower U.S. prices and a currency near par with the U.S. dollar will lead to at least a 25 percent increase in lost sales abroad in November and December, said Douglas Porter, deputy chief economist at the Bank of Montreal. (BMO) He says the sales drain will total C$5 billion.  That translates to a loss of around 25% to Canadian retailers over November/December. (Source: Bloomberg)
  • Advent International, a Boston-based buyout firm that invests in Europe and the U.S., raised 8.5 billion euros ($10.8 billion) for its latest fund, the largest pool raised for private-equity investments in two years. Advent International GPE VII LP, which began gathering money in March, is the biggest since Blackstone Group LP (BX) closed on $16.2 billion in 2010, according to London-based researcher Preqin Ltd. Advent, which had originally set a target of 7 billion euros, in October increased the maximum amount it could raise to 8.5 billion euros, a person with knowledge of the decision said at the time. Out of all the positive economic data, I am most encouraged by this piece of news. The private equity market is generally known as smart money, so if capital is increasing in this sector it is a sign that things have bottomed out. That being said, Mark Twain has the best advice for investing “October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February.”(Source: Business Week)

Retail news is up next:

  • Clothing retailer Abercrombie & Fitch Co stunned investors with unexpectedly improved third-quarter results and a full-year outlook that exceeded Wall Street forecasts, sending shares up as much as 30 percent.  The company got a handle on excess inventories that had sparked a round of discounting that worried investors. It also had pockets of sales strength in places like Scandinavia and China that helped revenue exceed expectations. Even troubled markets like Spain were not as bad as expected.  Abercrombie & Fitch was “being highly disciplined” with inventory management, and was working to ensure sales growth outpaced that of inventory, Chief Executive Mike Jeffries said on a call with analysts.  For the third quarter ended October 27, Abercrombie earned $71.5 million, or 87 cents a share, compared with $50.9 million, or 57 cents a share, in the same quarter last year. Analysts were expecting earnings of 59 cents a share. This means that other retails such as the GAP and Nike may have equally good news to share in the coming months. Their secret to success isn’t with inventory management. They make their stores so dark that you don’t see what you’re buying and use model like salespeople to intimidate you. I however don’t mind the hot pink muscle tee-shirt I got.  (Source: Reuters)
  • Nike Inc. last week unveiled the Nike Studio Wrap, a footwear product targeted at women who favor studio workouts like yoga and pilates.  The new product retails for about $110/pair. Yoga over the past decade has morphed into a multi-billion-dollar industry, with much of the thanks going to Lululemon, by Nike’s approach is novel. Now other brands are getting involved. Outdoor products brand The North Face is in its second year offering a line of yoga apparel. Under Armour Inc., a Baltimore-based rival to Nike in athletic footwear and apparel, has also made a play for female consumers through yoga.  Nike, too, offers a line of yoga apparel, but so far none of these competitors has done much damage to Lulu’s place in the market. Wait a minute, isn’t Yoga supposed to be done barefoot? Nike you never cease to amaze me. That’s why Nike’s shares are up 4.81% for the week. (Source: Portland Business Journal)

Former U.S. Sen. Larry Craig of Idaho, who made the “wide stance” famous when he explained his alleged, notorious restroom encounter with another man in June 2007, has been sued by the Federal Election Commission because he used $217,000 in campaign donations to fund his legal defense to the resulting indecent exposure charges. Craig pointed out that visiting the restroom (irrespective of any alleged activities there) occurred during the ordinary course of Senate travel and thus that he was entitled to spend campaign funds. You be the judge. (Source: AP)

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,
Sam

Friday Finance Weekly 74TH Edition

Greetings folks and a warm welcome to the 74TH Edition of Friday Finance Weekly. Hope you didn’t miss me too much. My apologies for the 2 week absence as I was travelling a fair bit.

Let’s get the party started:

  • There is a lot of Google related news and I think I can dedicate the entire posting to these guys. I’ll keep it short though. This week Google officially launched their own internet services called Google Fiber. No big deal right, but wait its 1Gbps. Let’s put that into perspective it is 5x – 10x faster than your home internet. You think they would launch in a large urban area but instead they picked Kansas Also there are reports that Google is planning to provide wireless services to the rest of the US by partnering with the Dish Network. And if that wasn’t enough, Google has completely sold out of their phone the Nexus 4. Even with all this positive news Google is down 2.2% for the week and is trading at $647.67/share. That being said the market in general has been very unstable. In my opinion the biggest boost in terms of value will probably be with the Dish Network. Their shares are down 1.39% for the week and presently trade at $35.36/share. If an official announcement is made, Dish Network will get a boost. In case you are wondering big brother is already watching and it’s too late to stop now. I for one don’t care as long as my Netflix speeds increases. (Source: CNN, Techcrunch, Boy Genius Report, Google Finance)
  • Nokia has lost about half of its market value since the beginning of the year. Presently it is trading at $2.77/share. Most analysts are convinced that they are following Nortel to extinction, but I think they may become a force in the future. Windows 8 phones are only now coming into the market and Nokia did a good job of aligning themselves with Microsoft. This had the added benefit of automatically making them an acquisition target. On top of that, they are looking to capitalize on the Apple’s map debacle by launching a new mapping service called Here. You can try it out at www.here.net. After playing with for a bit, I am excited about its future prospects. This isn’t well publicized, but Nokia purchased a mapping company called Navteq. No big deal right? Except that they supply over 80% of the data for all in-car mapping systems. Cars are becoming increasingly connected and I see a future for Nokia. That being said this fantasy may end if Apple produces the iCar. (Source: Gizmodo, Google Finance)
  • Priceline.com Inc., the most valuable online-travel agency, is buying Kayak Software Corp. for $1.8 billion, adding profitable search tools to its services that helps consumers book flights and hotels online.  Shareholders of Kayak, which held an initial public offering in July, will receive $40 a share, the companies said in a statement. That represents a 29 percent premium over Nov. 8th’s closing price at $31.04 in New York, and includes about $500 million in cash as well as $1.3 billion in equity and assumed stock options. The deal is the biggest to date for Priceline, which has been using acquisitions to add customers as it works to increase sales and fend off competition.  Kayak, which raised $91 million in the July IPO by selling 3.5 million shares at $26 apiece, processed 302 million queries across its Web and mobile products in the third quarter, up 31 percent from a year earlier. William Shatner will need a new tagline for Kayak and maybe it will be ‘beaming you up for less than you think’. Not my best joke. (Source: Bloomberg)
  • Amazon launched a wine marketplace on its website, with more than 1,000 domestic brands available.  For now, wines will be shipped only to a dozen states, including California, and to Washington, D.C. Bottle prices range from less than $10 to more than $100; shipping costs $9.99 for up to six bottles of the same wine. Amazon has been making moves on several fronts lately to expand its dominance as the country’s largest online retailer and has been interested in getting into the wine business for years, analysts said. Winemakers and industry groups cheered the news, saying Amazon’s reputation and scale would help get the word out about buying wine online. Currently, only about 2% of wine purchases are made via the Internet, said Rich Bergsund, Chief Executive of wine e-tailer, Wine.com.  Because the wines will be shipped from individual wineries, consumers won’t be able to combine bottles from different labels to save on delivery costs. Wonder if an increase to online liquor sales will translate to an increase in underage drinking? Hey at least they will be getting the best deal. (Source: LA Times)

Retail news (don’t worry I will keep this section short):

  • An eventual bid for Best Buy by founder Richard Schulze could come below his initial proposal of around $8 billion and is now not expected to be made before December, sources familiar with the matter said, in a new twist to the months-long saga at the struggling electronics retailer.  At least three private equity firms – Apollo Global Management, TPG Capital and Leonard Green & Partners – are considering joining Schulze in the bid, the sources said. This news didn’t help the company’s stock price which was down 10% for the week and is trading at $13.75. Based on the level of interest this may be a good time to get into the stock. I don’t get it, the company isn’t mismanaged, it’s in a dying industry; I am not sure how much value a private equity firm can add.  (Source: CNBC)
  • We are officially in the era of pop-up stores. Luxury department store chain Nordstrom Inc. will open six pop-up shops in February stocked with wares from up-and-coming designers.  The shops, including one at the Grove shopping mall in Los Angeles and another in San Francisco, will feature 10 designers who are finalists for the CFDA/Vogue Fashion Fund, which awards $300,000 every year to the winner and is intended to nurture young design talent. Nordstrom has obviously got through the rocky trading week and is up a marginal 0.15%. I really get the sense that Nordstrom has a good pulse on the market place. (Source: LA Times)

America now has about 700 pet “aftercare” facilities, providing funeral services to the nation’s companion animals, according to a September NBC News report. Oakey’s, in Roanoke, Va., performs 800 to 900 pet cremations annually and provides about 20 customers a year with pet caskets, part of the estimated $53 billion America spends on pets (higher than the Gross National Products of more than 100 countries). The basic charge of Heartland Pet Cremation of St Louis is $275 for a private cremation, including a “basic” urn and memorial video slideshow. (For the more upscale, other facilities offer deluxe urns, taxidermy, freeze-drying pets and creating a synthetic diamond out of pet ashes.) Did you read that? Nothing says romance like a diamond ring made from your dead cat.(Source: NBC)

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 73RD Edition

Greetings folks and a warm welcome to the 73RD Edition of Friday Finance Weekly.

Let’s get the party started:

  • Google dropped almost 9% this week as their results were less than market expectations. The shares are trading at $678 and the market cap is $221.66B. On a year to date basis they are up a marginal 4.94%. Most market analysts decreased their outlook, but Barclays increased their price target to $780/share. I agree with Barclays and while I think their target is a little aggressive the company results weren’t that bad. They still earned $2.18B (in spite of the losses attributed to the Motorola acquisition), compared with $2.73B over last year. Also monetizing the mobile space has been a mystery to many companies, but Google generated $8B (on an annualized basis) in revenue in this segment. Come on Google, let’s have a stock split now! (Source: Reuters)
  • US stocks fell broadly as disappointing news came from both Microsoft and GE. Microsoft slid 2.5% after it was reported that there was a 22% drop in Q1 net income. No need to hit the panic button, as people are holding out for Windows 8. In addition, reports have indicated that Microsoft’s tablet, Surface, has completely sold out on online orders. GE lost 2.7% and McDonalds slid 3.9%. I must admit that the markets look grim. That being said the holiday season should boost the economy. In addition more financial assistance to Spain wasn’t discussed by the EU and this impacted the markets. While the above news is disappointing, I am really concerned about the drop in burrito sales! Chipotle Mexican Grill is down 14% as their net-income was below expectations. Honestly I didn’t know that Chipotle was an S&P500 company. Go figure. (Source: Bloomberg)

Retail at its best:

  • This is taking “dressed to kill” to a whole new level.  Massif – a supplier of combat clothes to elite US military units – is launching a mens wear line at Bloomingdale’s.  The details of the items are drawn from the high-tech outfits it makes for SWAT Teams, CIA operatives and war snipers.  That means stylish shirts, sportjackets and trousers are battle-tested for boardrooms and bars – with moisture-wicking technology, stretch fabrics, and stealth pockets in unusual but useful places (great for hiding drugs).  “Snipers can’t be crawling around getting caught on branches and rocks,” said Scott Branscum, Massif’s general merchandise manager, noting the company’s high-tech sniper suits typically hug the wearer’s frame. Wait, don’t we already have this in Spandex? FYI, Bloomingdales is actually owned by Macy’s. (Source: NY Post)
  • Puma will be launching a collection of shoes, apparel and accessories that are either biodegradable or recyclable when consumers return them to Puma’s Bring Me Back Program at the end of their lifecycles. With the Puma InCycle collection, coming into stores in Spring/Summer 2013, Puma takes a first step in addressing the environmental footprint of its consumers’ disposal, helping them to reduce their personal waste generation.  Puma is taking on the challenge of launching an entire line that is either biodegradable or recyclable and 100% Cradle-to-Cradle Basic CertifiedCM. The Puma InCycle collection includes among numerous others the lifestyle sneaker Basket (biodegradable), the legendary Puma Track Jacket (recyclable), shirts (biodegradable) and a backpack (recyclable). I just hope that my clothes don’t start falling off while I am working out. That being said, cardio pole dancing will be interesting. (Source: Sports One Source)

For some reason, South Korea (with about one-sixth the men that America has) is the world’s largest consumer of male cosmetics, with its leading company approaching $1 billion a year in sales. According to a September Bloomberg Business Week dispatch, South Korean males became fascinated with the country’s 2002 World Cup soccer team’s “flower men,” who had smooth, flawless skin, and the craze took off from there. Said a male college student, “Having a clean, neat face makes you look sophisticated and creates an image that you can handle yourself well.” Makeup routines include drawing “thicker, bolder” eyebrows and, of course, expert application of lipstick. Said one admiring woman, “I feel like I have more to talk about with guys who use makeup.” Somebody stop this madness. We should telecast nothing but Expendables 1 and 2 for a whole year! (Source: Bloomberg Business Week).

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 72ND Edition

Greetings folks and a warm welcome to the 72ND Edition of Friday Finance Weekly. Hope you didn’t miss me too much. It’s tough coming back from 30 degree weather, but such is life.

Let’s get right to business, excuse me as I may be a little rusty:

  • I am going to dive right into the US Presidential debate and hopefully not open a can of worms. Mitt Romney (MR) proposes a 20% income tax cut and he says that he would pay for it by limiting tax deductions, credits and exemptions. What a great idea right? Well a nonpartisan group has calculated that even if they repeal every single deduction it would only pay for 4% of the income tax cut. Not a big deal right? Andrea Saul from team MR stated “This self-described ‘experiment’ says nothing about the pro-growth tax reform proposed by Mitt Romney. It has different assumptions and different revenue goals. It’s simply irrelevant to any analysis of his plan.” Okay MR, so what is your pro-growth tax reform, details please? But I thought about it for a bit and realized that MR has figured all this out. Two words for you. Mormon Bucks! (Source: Bloomberg)
  • Paypal isn’t doing too well and as a result it is cutting 400 jobs or 3% of its workforce. As an FYI, Paypal is owned by EBay. Most of the job cuts are in the product and technology division. This is an obvious mistake, as innovation is key to a technology company. Get rid of the sales force! EBay shares are down a marginal 1.81% for the week, but on a year to date basis they are up a solid 57.76%. Paypal is facing some tough competition as MasterCard, AMEX and Visa now have highly effective online payment mechanisms. On a macro-level I think Paypal missed the boat by not becoming a full-fledged online bank such as ING. (Source: Reuters)
  • Workday, a company that makes cloud based software products for the HR industry, soared 74% on its IPO. Shares IPO’d at $28 and closed at $48.69. Revenues have doubled every year since 2007 and the company is on track for a solid future. There is heavy competition in the cloud space, but Workday day truly has a niche as they focus on HR issues. HR is an area where companies want to cut costs and moving services to the cloud makes sense. In the future I seek a strategic partnership with a group like LinkedIn, but let’s see. (Source: NY Times)

Retail therapy at its finest:

  • Japanese fast-fashion retail giant Uniqlo has launched a new hybrid store in Tokyo that combines fashion and electronics, reported Yomiuri Shimbun last week.  The new store is called Bicqlo, a mash-up between the casual clothing chain Uniqlo and Bic, for Bic Camera, one of Japan’s leading electronic chains.  The new 4,000-square-meter mega store is eight stories high and has three basement floors. The Shinjuku store features some 80 mannequins dressed in Uniqlo apparel while holding cameras and other home electronic products such as vacuum cleaners.  Uniqlo, which has more than 1,100 stores worldwide, announced that there are plans to open more Bicqlo stores in New York and Paris. I can’t wait for Apple to start designing clothes. (Source: NY Daily News)
  • Best Buy buyout rumors are back. Best Buy Inc. Co. founder Richard Schulze and at least four private equity firms are examining the books of the Minneapolis electronics retailer in what could possibly lead to an $11 billion buyout proposal, Reuters reported, citing people familiar with the matter.  Among firms cited as conducting due diligence, together with Schulze and his financial adviser Credit Suisse Group AG, are Apollo Global Management LLC, Cerberus Capital Management LP, TPG Capital LP and Leonard Green & Partners LP, the report said. The markets are sick of these rumors as the shares are down 2.05% for the week and down 24.42% for the year. The market cap is only $5.95B. (Source: Fox Business)
  • Staples better watch out. Louis Vuitton is branching out into luxury pens and stationery as the upmarket leather bag maker looks for new ways to retain its exclusive image, after it launched high-end jewelry and hired an expert to create a perfume.  The world’s biggest luxury brand by sales, owned by LVMH, aims to start selling alligator-skin fountain pens, customized writing paper and brightly colored inks in time for Christmas, industry sources close to the matter said.  “Press releases should be sent out in about a month,” one of the sources said of the new business.  Louis Vuitton, which like many of its luxury sector peers is facing slower growth in big markets such as China, will take on penmakers Montblanc and S.T. Dupont, albeit on a small scale at first. Considering the retail market LVMH has done fairly well and is up 12.29% for the year. That being said I am shocked that they would make luxury paper, better not make a mistake. (Source: Reuters)

Dakoda Garren, 19, was arrested in Vancouver, Wash., in September on suspicion of stealing an antique coin collection in May that was estimated to be worth $100,000. Garren and his girlfriend were identified after spending some of the coins at a movie theater and a pizza restaurant, using rare Liberty Head quarters (worth from $5 to $18,500) at their face value. Hey at least it’s not Vancouver, BC right? (Source: The Daily News – Longview, WA)

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 71ST Edition

Greetings folks and a warm welcome to the 71ST Edition of Friday Finance Weekly.

Let’s start with some tech news:

  • As much as I try to avoid writing about Apple, they are in the news again. Also like every Apple monkey, I waited last night and ordered an iPhone 5 online as soon as it was available. News reports have indicated that sales are unprecedented and Apple shares hit a record high. Apple shares closed up 1.2 percent at $691.28 on the NASDAQ. The shares earlier touched an all-time high of $696.98. Shares are up 70.69% for the year! For a well-established company these numbers are astounding. What really got missed in all this hype is that Apple basically destroyed the mobile payments market. By not including NFC technology the mobile phone wallet concept is now going to slow down. NFC is supposed to stand for Near Field Technology (tap your phone on a reader and the payment is made), but eBay CEO stated that it is Not For Commerce. I totally agree, how else will people know you have a Black American Express card? (Source: Reuters, CNBC)
  • Yelp the company that lets users review neighborhood businesses, and is mostly used to review restaurants; has benefitted from integrating with Apple. Yelp climbed 23% to $22.37 at the close in New York. The stock has gained 49% since its’ March 1st initial public offering. Inside investors are eligible to sell about 53 million shares of the company 180 days after its IPO, a period that extended through yesterday. They seemed to have beaten the trend of other sites such as Groupon and Facebook. Their revenues are up 67% and the market has obviously responded well. That being said on a long-term basis this is a risky stock. They don’t have the market size of Facebook and there is really nothing unique about their service. I personally think Yelp is one idea away from being extinct. (Source: Bloomberg)
  • In a direct challenge to Apple Inc.’s dominance of the tablet market, the online retailer Amazon.com Inc. unveiled more powerful versions of its Kindle Fire tablet on Sept. 6th. Including one nearly as large as the iPad but priced hundreds of dollars less and a version of its e-reader that feature a next-generation screen from E Ink Corp.  The new Kindle Fire HD will be available with either a 7-inch screen for $199 or an 8.9-inch screen, at prices ranging from $299 to $599. By contrast, Apple’s iPad has a 9.7-inch screen and is priced from $499 to $829.  Top-of-the-line units will include the ability to access 4G LTE wireless Internet services at $49 a year; previous versions were offered with Wi-Fi and 3G cellular connectivity. No company has managed to effectively compete against Apple in full-size tablets; only smaller devices like the Kindle Fire and Google Inc.’s Nexus 7 have done well. One reason is that all other full-size tablets have cost as much as or more than the iPad. Shares are up a marginal 0.82% for the week and 50.94% for the year. (Source: Boston.com)

Retail therapy as always:

  • Walgreens reported August sales of $5.9 billion, a decrease of 4.5% as compared with the same month in fiscal 2011.  Prescriptions filled at comparable stores decreased 6.8% in August. Higher incidence of the flu positively impacted comparable store prescriptions filled by 0.4% points. The negative impact on comparable-store prescriptions filled due to not being part of the Express Scripts pharmacy network was 10.7 percentage points in August. Prescriptions processed by Express Scripts comprised 12.6% of Walgreens prescriptions in August 2011. August pharmacy sales decreased 7.2%, while comparable-store pharmacy sales decreased 12.4%. Okay I admit that was a little confusing. Wondering how they plan to prop up sales? By becoming a drug dealer (“the bad kind”). The DEA actually shut down their distribution center in Florida for endangering the public. They were accused of selling prescription painkillers in the black-market. (Source: USA Today, Drugstore News)
  • Two of the oldest department store chains in North America are on the verge of a public stock listing.  Plans for an initial public offering are in the works for the Hudson’s Bay Company, the parent of The Bay stores in Canada and Lord & Taylor in the United States, according to two people briefed on the talks.   A successful I.P.O. would be a windfall for Richard Baker, the New York real estate developer-turned-retailer. In 2006, just before the markets seized up, Mr. Baker acquired Lord & Taylor for $1.2 billion. He later acquired Hudson’s Bay and merged the two into a single company. It will be interesting if Bloomingdale’s makes an effort to acquire The Bay as they were rumored to be partnering. (Source: NY Times Deal Book)
  • The year’s strongest performances by Honda and Volkswagen helped lift U.S. auto sales to their fastest pace in three years last month.  American Honda sales soared 60 percent and Toyota Motor Sales’ volume jumped 46 percent for the month as the Japanese automakers continued to bounce back from severe quake-related product shortages last summer. The Detroit 3 and Hyundai-Kia posted double-digit gains, while Nissan North America was up 8 percent.  U.S. sales rose 20 percent to 1.28 million light vehicles in August. That produced a seasonally adjusted annual selling rate of 14.5 million, fractionally the highest SAAR this year and the best pace since August 2009’s 14.6 million. That’s when the U.S. cash-for-clunkers program rescued an industry from its free-fall. Yeah we actually forgot that the US government gave you cash for your car, regardless of its state. So old unused cars were traded for cash which was used to purchase new cars, which in turn increased oil consumption. Why are we still confused about high gas prices? (Source: Autonews)

The Treasury Department’s inspector general reported in August that the IRS doled out more than $5 billion in fraudulent income tax returns in 2011 (owing to its mission to provide refunds promptly without first vetting the claims). The agency “refunded” $3.3 million to a single address in Lansing, Mich. (supposedly the home of 2,137 different tax filers) and nearly $4 million to three Florida addresses (518 to one in Tampa, 741 to one in Belle Glade, and 703 to a post office box in Orlando). In all, refunds were claimed by, among others, 105,000 dead people. So the department of vital statics doesn’t speak with the IRS. (Source: Associated Press, South Florida Sun-Sentinel)

Have a fantastic weekend folks and don’t hesitate to forward this newsletter. I am going on vacation for 3 weeks, so you may not hear from me until I’m back…hope you enjoyed the extra-long Friday Finance Weekly.

Many thanks,

Sam

Friday Finance Weekly 70TH Edition

Greetings folks and a warm welcome to the 70TH Edition of Friday Finance weekly.

I rarely comment on non-finance related topics, but what was wrong with Clint Eastwood at the Republican Convention? He spoke to an empty chair (to represent Obama) and was nonsensical. “I think the Romney camp was probably as horrified as everyone else. They were probably assuming they would have their version of George Clooney,” Piers Morgan told the Hollywood Reporter. Why am I bringing this up you ask? Simple, Obama’s chances of winning the next election just went up tenfold.

Let’s get back to finance:

  • Big news last week about Apple winning the case against Samsung. This is far from done and while Samsung took a hit, Apple’s shares reached towards the heavens. Some news that may have got missed from Apple’s end is their leaked training manual. I had a chance to review a few things and it’s like a psychological war manual. They even have a non-verbal section that ensures that sales staff considers all angles. For example, a customer is cooperating if they are ‘sitting on the edge of a chair, hand-on-the-face gestures (whatever that means), unbuttoning their coat or have their heads tilted. They even have words that can’t be used and biggest no-no is ‘crash’. For curiosity sake, I recommend reading this. This level of detail is why Apple will continue to be a dominant force. The iPhone 5 is around the corner so expect shares to continue their ascent. The shares are up an eye popping 62.26% for the year and presently trade at $665.24/share. I am honestly scared to go into Apple now; their new tag line should be ‘May the force be with you’. (Source: Gizmodo)
  • American Airlines (AA) and US Airways have signed a non-disclosure agreement (NDA) as they discuss a potential merger. They signed a NDA to discuss details on a publically traded company; I am just as confused as you are. As a side note AA is still under bankruptcy protection and creditors are essentially running the company. British Airways (BA) is also in discussions to acquire AA. US Airways / AA have complementary skills and if US Airways focuses on domestic routes AA can work on the long-haul flights. That being said US Airways is on Star Alliance and AA is on the One World Alliance. Their ticketing systems are different and there will be significant integration issues. BA on the other hand is already a One World member and operates code share flights with AA. In addition Virgin doesn’t have a strong UK competitor so BA acquiring AA seems like the best option. Politics may get in the way of this deal and the unions will have a very loud voice. (Source: Reuters)

Retail therapy is next:

  • Sales of men’s skin care products are on the rise as we grow increasingly concerned with looking good from head to toe and show a willingness to invest in high-end skin care, according to a recent research study by market research firm the NPD Group.  On track with the sales in the men’s current retail business, men’s skin care sales increased 6% year-to-date (January through July) 2012, compared with the same time last year, generating $45.5 million. In addition, NPD found that at least seven out of 10 men are buying facial skin care products for themselves. I am looking forward to cosmetic companies actually making something useful like spray on abs (not that I need it). (Source: Drug Store News).
  • CVC Capital Partners Ltd. has explored taking Marks & Spencer (M&S) Group private as the U.K.’s largest clothing chain’s sales slump amid a lack of demand for its fashions, people close to the matter said.  CVC approached executives both inside and outside the company about a possible management role under private equity control, said the people, who declined to be identified as the talks were confidential. The buyout firm has not moved beyond a preliminary examination of the U.K. retailer and is not currently thought to be pursuing a bid. M&S shares didn’t react to the news as they moved up a marginal 0.36%. The brand needs a refresh and with some marketing dollars this will be a good turnaround. Especially as M&S has prime retail locations in the UK under long-term leases. (Source: San Francisco Chronicle)
  • Hertz Global Holdings is close to signing a deal to acquire the Dollar Thrifty Automotive Group for nearly $2.5 billion, according to a person briefed on the transaction; ending a fierce and protracted merger battle among the nation’s largest car rental companies.  Under the terms of the deal, Hertz would pay $87.50 a share for Dollar Thrifty, according to this person, who spoke on condition of anonymity.  The news has driven the share price 7.6% over the course of the week. Great strategic buy for Hertz as they can control all market segments. (Source: NY Times)

People With Too Much Money: The dogs could not care less, but the luxury doghouse market is thriving, according to a June New York Times report. “Many of them have carpeting, heating and air-conditioning, indoor and outdoor lighting, elaborate … entertainment systems,” wrote the Times, and some even have solar panels. But, said one owner, “Maggie’s never been in (hers). She’s a house dog.” Although walmart.com offers upscale houses for $4,400 to $4,600, the more tony ones can go for more than $25,000. Top-shelf interior designers have created dog beds suspended from the ceiling and houses in which the music kicks on only as the dog enters (meaning that it almost never kicks on). Well at least one element of the US housing market is doing well. Wonder if these luxury doghouses have mortgages? (Source: NY Times)

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,

Sam

Friday Finance Weekly 69TH Edition

Greetings folks and a warm welcome to the 69TH Edition of Friday Finance Weekly.

News from the economic/market front is as follows:

  • Ben Bernanke (BB) said a few words which contributed to the lift in the market on Friday. A letter from BB to Rep, Darrell Issa stated “There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery’. Oh wow, fantastic, can we have a few details please? The Dow increased 100.51 points, S&P rose 9.05 and the NASDAQ was up 16.39. Marginal increase to say the least and I am confused as to why there was such a fuss. Reminds me of a few years ago when Alan Greenspan was in charge. He was like a messiah, bold words with little substance. Perhaps he should have been more honest “We can probably do something, but the Republicans and Democrats are drawing battle-lines so we are going to see who wins”.
  • The durable goods order report was up a seasonally adjusted 4.2% for July, but after adjusting for aircraft/other transportation goods, orders are down 0.4%. This is an extremely weak report and a sign that the retail sector may take a hit. Perhaps there is surplus inventory and some discounting is required.
  • Software maker Autodesk skidded more than 15%, falling $5.58 to $30.13, after weaker-than-expected second-quarter results. The company is restructuring to shift to cloud and mobile computing, but it also blamed an “uneven” global economy. Autodesk produces design software for buildings and industrial uses. The lower results may be a bellwether for the economy as construction slows down.
  • Drug maker Eli Lilly jumped more than 3%, rising $1.46 to $43.86, after reporting promising signs about a possible treatment for Alzheimer’s disease. We are close to their 52 week high of $45.01 and given the positive news, it may set a new high.
  • The above is taken from Reuters, LA Times and Google Finance

Retail as usual:

  • Gap is cool for the first time since Bill Clinton was President.  A number of design and marketing initiatives (translation we copied the competition, especially in athletic wear) finally seem to have paid off and the stock is again trading at levels last seen around the turn of the century.  Shares for the retailer have more than doubled in the past year, and Gap is reporting great sales month after month.  Their marketing campaigns, such as profiling rising music stars, have given the retailer credibility with the young crowd.  So how did Gap do it?  A year ago, Chief Marketing Officer Seth Farbman said the company would be focusing on millennials (generation Y). Gap also worked on its identity crisis and went back to the t-shirt and denim look consumers loved.  Executives also recruited tons of talent from successful brands like J. Crew to make the overall product better.  Piper Jaffray believes Gap is one of the best-positioned retailers for the next year. So expect things to get even better. Shares are presently trading at $35.12 with a market cap of $16.82B. Looks like we no longer have to mind the gap (get it? Yeah I am stretching a big) (Source: Business Insider)
  • Dick’s Sporting Goods topped Wall Street expectations for the second quarter and boosted its outlook for the year, but an impairment charge tied a stake in a troubled European retailer dragged down earnings and jolted investors.  Dick’s Sporting Goods made an investment in the U.K.’s JJB Sports in April.  They acknowledged that the company’s performance has deteriorated in part because of the economic crisis in Europe.  Chairman and CEO Edward Stack said that the JJB Sports investment was high risk from the outset and that Dick’s has no further funding obligations to JJB and will continue to monitor the situation.  Nonetheless, the company took a 22 cent per-share charge from the investment for the quarter.  For the period ended July 28, Dick’s Sporting Goods earned $53.7 million, or 43 cents per share. A year earlier it earned $73.8 million, or 59 cents per share. (Source: Bloomberg Business Week)
  • The private-equity owners of Neiman Marcus Group Inc. are looking for an exit after holding on to the company for an unexpectedly long seven years. The trick is avoiding selling at a bargain price.  Warburg Pincus LLC and TPG paid $5.1 billion during the credit boom for a company that analysts now say probably isn’t worth much more than $4 billion. The century-old department store chain and its investors have been talking more seriously about laying the groundwork for an eventual initial public offering, people familiar with the matter said. Neiman’s private-equity owners paid $5.1 billion for the chain in 2005.  An IPO isn’t imminent, but Neiman is working to dress itself up as a company with potential to grow by beefing up its online sales efforts, venturing overseas and wooing analysts at Wall Street banks, according to the people familiar with the matter. I think a company like Nordstrom’s should make a move for Neiman and make them an ultra-luxury brand with a few flagship stores. (Source: Wall St Journal)

With budget cuts top of mind for many American politicians, let’s look at some easy options:

  • USA Today, quoted a Pentagon official, reported in July that, during the last decade, the Pentagon had paid “late fees” totaling $610 million for not returning leased shipping containers by the due dates. (Source: USA Today)
  • A Government Accountability Office report in July revealed that the federal government’s vast properties include about 14,000 offices and buildings that are vacant (or nearly so), but which the government still pays to maintain (at about $190 million a year). (A large building in Washington, D.C.,’s Georgetown — among the most valuable real estate in the city — has sat mostly unused for more than 10 years.) We should at least ask the homeless to move in. (Source: ABC News)
  • The Miami-Dade County, Fla., government confirmed in April that it had discovered, in storage, 298 brand-new vehicles that had been purchased in 2006-2007, but which had never been used. Seriously, how was this missed in the audit? (Source: El Nuevo Herald)

Have a fantastic weekend and please don’t hesitate to forward this newsletter. Many thanks,

Sam