The New Editor - Business

Product Improvement is Good

tpelia@yahoo.com (Tom Elia) — Tue, 07 Aug 2012 09:41:57 -0600

In 1935, Northern Tissue advertised its toilet paper to be "splinter-free." Apparently, early production techniques managed to embed splinters in the paper.

Companies Sitting on Much Less Cash Than First Thought

tpelia@yahoo.com (Tom Elia) — Sun, 10 Jun 2012 11:26:00 -0600

Another downward revision to yet another government economic statistic.

The Wall Street Journal's Ben Casselman reports:

... in its quarterly "flow of funds" report on Thursday, the Federal Reserve sharply revised its estimates of how much cash companies are holding on their balance sheets. The bottom line: Corporations have nearly $500 billion less cash on hand than previously believed.

To be sure, companies are still holding onto an unprecedented amount of cash. As of the end of March, nonfinancial corporations had $1.74 trillion in liquid assets on their balance sheets, $12.6 billion more than at the end of the year. A decade ago they had barely $1 trillion on hand.

Perhaps more significant than the number itself, however, is how the revision affects the trend. Before the revision, the Fed showed corporations continuing to accumulate cash, with liquid assets rising nearly every quarter since the recession ended and reaching a record $2.2 trillion at the end of last year. Now, however, it appears corporate cash piles grew rapidly through 2009, then leveled off. Companies aren't spending their cash, but they aren't holding more of it, either.

...

The Fed routinely revises its data, but a change this large is unusual. The revisions appear to be the result of a combination of more updated data from the Internal Revenue Service, among other sources, and some methodological tweaks. The changes bring the Fed's data more in line with that of private firms, which had shown corporate cash reserves growing more slowly than the Fed.

I Tried to Open a Lemonade Stand

tpelia@yahoo.com (Tom Elia) — Sun, 26 Feb 2012 00:03:00 -0700

John Stossel:

Here's some of what one has to do [in order to open a lemonade stand in New York City]:

-- Register as sole proprietor with the County Clerk's Office (must be done in person)

-- Apply to the IRS for an Employer Identification Number.

-- Complete 15-hr Food Protection Course!

-- After the course, register for an exam that takes 1 hour. You must score 70 percent to pass. (Sample question: "What toxins are associated with the puffer fish?") If you pass, allow three to five weeks for delivery of Food Protection Certificate.

-- Register for sales tax Certificate of Authority

-- Apply for a Temporary Food Service Establishment Permit. Must bring copies of the previous documents and completed forms to the Consumer Affairs Licensing Center.

Then, at least 21 days before opening your establishment, you must
arrange for an inspection with the Health Department's Bureau of Food Safety and Community Sanitation. It takes about three weeks to get your appointment. If you pass, you can set up a business once you:

-- Buy a portable fire extinguisher from a company certified by the New York Fire Department and set up a contract for waste disposal.

-- We couldn't finish the process. Had we been able to schedule our health inspection and open my stand legally, it would have taken us 65 days.

Stocks Cheap? Not If You Look at Earnings So Far

tpelia@yahoo.com (Tom Elia) — Thu, 26 Jan 2012 10:50:00 -0700

CNBC.com's Jim Cox writes: (emphasis added)

Earnings season so far may look respectable, but a disturbing trend lurks below the surface: Companies for the most part are barely beating analyst expectations that already had been lowered substantially.
...

So far, about one-fifth of the S&P 500 has reported earnings, with 58 percent beating expectations, 30 percent missing and 12 percent matching, according to Thomson Reuters data. The numbers were even thinner for banks, with just 48 percent beating estimates.

Should the remaining 400 companies in the index meet estimates, that would equate to a 5.9 percent profit gain from the same period in 2010.

But the bar had been lowered in a big way heading into earnings.

Analysts who once expected profit growth of 14.6 percent had cut their estimates all the way down to 6.8 percent by the time Alcoa ... the traditional kick-off company for the quarterly profit reports, released its numbers on Jan. 9.

Just 54 percent of companies have beaten on revenue, while 46 percent missed. The average earnings growth is 1 percent above forcasts, according to Thomson Reuters.
...

[United-ICAP senior technical analyst Walter] Zimmerman points to metrics such as leading economic indicators from the Organization for Economic and Community Development showing readings indicating trouble head.

"The big risk to the U.S. economy really is not earnings but the situation in Europe," he says. "Current earnings are looking at the rearview mirror, at an economic situation that no longer exists. With Europe sinking back into recession, present earnings are highly unlikely to be indicative of future results."

Investors, then, simply could choose to disregard earnings until more economic visibility becomes available.

"We're looking at earnings as indicators," Zimmerman says. "From an economic standpoint, that's not really relevant for the outlook from here."

Best corporate investor safe harbor statement ever

tpelia@yahoo.com (Tom Elia) — Fri, 06 Jan 2012 09:43:00 -0700

A friend sent this along:

From a Contango Oil conference call Wednesday, where the company's officers, including Chairman and CEO Kenneth R. Peak, gave a corporate presentation at the Pritchard Capital Partners Energize 2012 Conference in San Francisco:

Lawyer Stuff

The future is unknowable. We have good intentions but all of our projections and estimates will be wrong, and could be materially wrong. Wildcat exploration is expensive, speculative and potentially dangerous. An offshore spill or explosion would be enormously expensive. We have insurance but it may not be enough. You could lose your entire investment. Don't be lazy -- read our 10-Q's, 10-K's and press releases, and if you lose money -- please no tears.

"Don't forget about risk-free T-bills in your portfolio... After inflation and taxes you'll likely only lose 5-10% of your investment."
- Contango V.P. Investor Relations

Life is full of risks -- you pay your money, you take your chances -- it's nice to see someone with guts enough to acknowledge it.

A Grim Forecast for Corporate Earnings

tpelia@yahoo.com (Tom Elia) — Thu, 29 Dec 2011 10:29:00 -0700

Barron's Dimitra DeFotis writes, "With an unusually large percentage of companies revising their fourth-quarter estimates downward, prepare to see many results that miss the Street's current estimates."

DeFotis continues: (subscription required)

When earnings season begins in earnest during the second week of January, we may be looking for the grinch who stole fourth-quarter profits.

The number of companies in the Standard & Poor's 500 index that have made downward profit revisions is at a level not seen since the 2001 economic recession, making sell-side analyst projections look rosy. A total of 96 companies revised their fourth-quarter earnings estimates downward, while 27 companies revised them upwards.

MF Global trustee: $1.2 billion missing

tpelia@yahoo.com (Tom Elia) — Mon, 21 Nov 2011 10:49:00 -0700

Market Watch's Ronald D. Orol reports:

A trustee seeking to distribute customer securities overseen by bankrupt MF Global Inc. estimated Monday that $1.2 billion in client money may be missing, twice as much as previously expected.

Jobs Was the Best America Had

tpelia@yahoo.com (Tom Elia) — Fri, 07 Oct 2011 00:41:00 -0600

Jim Cramer:

[Steve Jobs] created an ecosystem that allowed all people to figure out everything. Sure, Intel and Microsoft harnessed power in smaller-form factors from the behemoths that were invented by IBM. But they harnessed them only in ways that were too difficult for so, so many.

Not Jobs.

He created them so that they were simple machines. It is as if Jobs invented the wheel, and the wedge, the screw, the pulley, the lever and the inclined plane.

We take them for granted now, like the iPod, the iPhone, and the iPad. But they were invented once, too. Can you imagine if one man invented all of them? Would you still think that he was only as good as Ford or Carnegie? Bell?

Of course it wasn't enough that the devices worked. They were brilliant to look at and attractive by nature. As if they were feats of nature, lyrical even.

It's as if he invented devices like Mozart and Beethoven wrote music. Even more so, Beethoven's best work was accomplished when he went deaf while writing the Pastoral Symphony. How much more did Jobs give us when he got his death sentence eight years ago? A fury of invention buttressed by a level of courage that is unimaginable given the pain he must have endured.

Oh, and just for the moment, let's talk about wealth creation -- $350 billion of it. He has paid for more tuition and more retirement and more vacations and more meals on the table than anyone ever, maybe more than Edison, Carnegie, Rockefeller, Walton and Bell combined. Empirically, as a commercial success? Best ever.

Apple Announces Former Apple CEO Steve Jobs Has Died

tpelia@yahoo.com (Tom Elia) — Wed, 05 Oct 2011 18:49:00 -0600

From the Chicago Tribune, very sad news:

Apple announced Wednesday that former Apple CEO Steve Jobs has died.

Jobs was perhaps the most important businessman of his time.

Here is Jobs' 2005 Stanford University commencement address. Read it.

"Stay hungry. Stay foolish."

Survey: CA, NY, and IL Three 'Worst Places to do Business'

tpelia@yahoo.com (Tom Elia) — Tue, 20 Sep 2011 10:49:00 -0600

The Chicago Tribune's Ameet Sachdev reports:

Illinois ranked among the three worst states for business, according to a survey of U.S. corporate executives released Monday.
...

Taxes and high costs were among the factors that contributed to the state's poor showing in the survey. California was deemed to have the worst business climate, followed by New York and Illinois.

CA, NY, and IL are three of the five largest states; they have the three largest cities; all are dominated by the Democratic Party; and together, they accounted for about two-thirds of President Obama's 2008 popular-vote victory margin.

Cisco Said to Plan Cutting Up to 10,000 Jobs to Buoy Profit

tpelia@yahoo.com (Tom Elia) — Tue, 12 Jul 2011 08:40:00 -0600

When you're cutting jobs to revive income growth, it doesn't speak highly for your confidence in the economy going forward.

Bloomberg's Ashlee Vance, Olga Kharif and Zachary Tracer report:

Cisco Systems Inc., the largest networking-equipment company, may cut as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to two people familiar with the plans.

The cuts include as many as 7,000 jobs that would be eliminated by the end of August, said the people, who asked not to be identified because the plans aren't final. Cisco is also providing early-retirement packages to about 3,000 workers who accepted buyouts, the people said.

LinkedIn's P/E Over 500

tpelia@yahoo.com (Tom Elia) — Sat, 21 May 2011 13:50:00 -0600

After LinkedIn's highly-touted IPO on Thursday, the stock closed at about $93 Friday. That's a market cap of around $8-$9 billion.

As the Los Angeles Times' Tom Petruno notes: (emphasis added)

At Friday's closing price the stock was trading at 547 times the 17 cents a share LinkedIn earned last year on $243 million in sales. ...LinkedIn's stock market value now is $8.8 billion. ... worth more than many much older non-tech brand names, including Harley-Davidson ($8.6 billion), Textron Inc. ($6.3 billion) and Whirlpool Corp. ($6.2 billion).

Wow.

GM Continues To Stuff Dealers With Its Cars

tpelia@yahoo.com (Tom Elia) — Wed, 05 Jan 2011 08:34:00 -0700

Zero Hedge quotes the following from GM's press release on December sales:

"For the calendar year, total sales for GM's four brands increased 21 percent to 2,202,927, while retail sales rose 16 percent for the year. GM's four brands sold 118,435 more vehicles this year than the company did with eight brands in 2009, and will gain total and retail market share for the year."

However, this doesn't tell the whole story, as Zero Hedge notes: (emphasis added)

... on the surface this is pretty: after all the comparison is between a number of 193,824 from a year ago, and 223,932 as of December. But shouldn't the comparison actually be between 385,000 and 511,000? These are the numbers that show what GM's dealer inventory was for the months of December 2009 and 2010. In other words, there was an increase of 30k in sales... accompanied by a 125k increase in "stuffed" vehicles held at dealers.

Gotta keep that stock price up, right?

More Brilliant Financial Reporting from the US Media

tpelia@yahoo.com (Tom Elia) — Mon, 27 Dec 2010 14:21:00 -0700

The headline from the Christian Science Monitor reads: "Mexico buys corn futures to ensure tortilla prices remain flat."

The Christian Science Monitor's reporter writes: (italics added)

... [Mexico] has purchased a form of corn insurance to safeguard prices into next year, reported the Financial Times.

The futures, announced by Economy Minister Bruno Ferrari, should allay consumer concerns, he says. "The prices are guaranteed," he said to the local media. "The supply necessary until the third quarter of next year is covered."

Problem is, the Financial Times' Javier Blas actually reports: (emphasis and italics added)

The Ministry of Agriculture later said in a statement it had bought call options -- contracts that give the holder the right to buy at a predetermined price and date -- for 4.2m tonnes corn at the Chicago Mercantile Exchange. The ministry said it bought the calls on behalf of domestic processors, such as tortilla makers.

Another report from Commodities Now reads: (emphasis and italics added)

"Right now the derivative we use is the most conservative with the smallest risk ... futures options in Chicago," ASERCA's director of financial operations Jose Miguel Palacio said in an interview with Reuters. Mexico has bought 315,000 options contracts for different products through October this year and expects to reach 400,000 by the end of 2010, Palacio said. That represents double the number of contracts bought in 2008 as the program rapidly expands.

Options and futures, often referred to more broadly as 'derivatives,' are two totally different financial instruments, something any journalist covering futures and options markets should know -- especially considering all the ink that has been spilled by the media in the last few years about derivatives trading...

Options, futures, you know...

Just more evidence of the woeful state of US journalism. Does this profession really serve as the country's 'filter,' or 'referee' on what is happening in the world?

God help us all.

No Jobs? Young Graduates Make Their Own

tpelia@yahoo.com (Tom Elia) — Wed, 15 Dec 2010 00:02:00 -0700

Good!

"The lesson may be that entrepreneurship can be a viable career path, not a renegade choice..."

Precisely.