Interview from 1/19/2009
Part: 1…. The shoe to drop in 2009 will be the doubt in investors eyes for governments to meet bulging obligations.
Part 2:….. Policy intervention will make current downturn longer..
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Berkshire Hathaway’s (BRK.A) Warren Buffett talk about his support for Barack Obama, the economy and what needs to be done..
So, the first half of the interview was obviously written by the Obama Press Team and is little more than a “isn’t our guy great” puff piece, only missing Brokaw and Buffett hugging and kissing as tears of unbridled joy steam down their faces. The middle two minutes of it actually has some value in economic terms. For those only interested in that, go to 2:50 of the interview. The last minute is more of the first.
It is unfortunate though that Brokaw had Buffett on and all that was gleemed from the interview was a recitation of what we have been hearing about Obama and two minutes of the current economic climate..
An opportunity missed…
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Washington Post Media CEO Katharine Weymouth speaks with Aspen Institute President Walter Isaacson about the future of The Washington Post and the news industry. Warren Buffett’s Berkshire Hathaway (BRK.A) is a majority shareholder of the Post.
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Bitches, Circuit City, Madoff, Leveraged ETF’s
– I can’t stand these two…
– Liquidation agreement
Circuit City Liqudation Agreement
– SEC Complaint
SEC complaint against Bernard L (Bernie) Madoff
– Here is a list
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As he said he would…
Privately held, clean bank and done in order to allow Wilbur to participate in the FDIC acions that are anticipated..
Bloomberg:
Fox Biz:
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More evidence global oil production is being shuttered…..
ConocoPhillips (COP), the third-largest U.S. oil company, said Friday it’s cutting 4 percent of its overall work force, reducing the number of contractors it works with, cutting capital spending by 18 percent and writing off $34 billion in noncash assets because of plummeting energy prices. These are the first announced job cuts by an oil major, about 1,300 in this case. ConocoPhillips said it has approved a capital spending program of $12.5 billion for 2009, down from the $15.3 billion it projected to spend in 2008.
Just last week, Schlumberger (SLB), the world’s largest oilfield services company, said it would eliminate up to 1,000 jobs in North America, or about 5 percent of its work force, and is looking at cuts elsewhere globally. Halliburton (HAL). also said it would begin laying off workers but didn’t say how many or when.
“We are positioning ourselves in the current business environment to live within our means in order to maintain financial strength,” ConocoPhillips Chairman and Chief Executive Jim Mulva said in the statement. “We’re doing this by reducing our cost structure, addressing our balance sheet and continuing to manage the company through prudent capital discipline.” Translation, “we aren’t drilling anywhere near what we were before.”
In November, ConocoPhillips and the state-run Saudi Arabian Oil Co. postponed construction of a multibillion-dollar refinery in Saudi Arabia because of the deteriorating global economic situation, which has eaten away at energy demand.
Oppenheimer & Co. analyst Fadel Gheit has said he expects spending cuts to average 10 percent for large producers and 30 percent for smaller companies.
Chevron (CVX) spokesman Don Campbell said Friday the company had no plans to cut its work force. Exxon Mobil (XOM) hasn’t announced any work force changes either.
In addition, ConocoPhillips said it likely would replace only about 25 percent to 30 percent of its 2008 production with new reserves. Reserve replacements represent the ratio of reserves found over production for a given period. Analysts typically say a company’s reserves replacement should average more than 100 percent over a three- to five-year period to indicate growth.
This is very bullish for oil prices longer term. When demand returns (you have to believe we are in a global depression for it not to) prices will spike as excess supply dries up and this shuttered production lags the upturn.
If you want to play oil other than the individual companies, the ETF symbols are (DBO), (USO) and (DXO)
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By Murray Rothbard, founder of the Mises Institute
America’s Great Depression – Rothbard
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Read it and weep…
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This reader idea has real merit for Microsoft (MSFT)
Reader submits:
“I have avoided MSFT for some time as too expensive. If you do the math, owner’s earnings have been 2-4% even though revenues have grown since 1997 and the stock was very flat. However, since 2006, they have been buying back stock and Net Income has risen so that 2009 is forecasted to be ~$2.20. With the stock under $20shr I began looking about for information and found that Ray Ozzie wants to remake MSFT into a start-up mode.
Ozzie looks like a man on a mission. The issue will be if Ballmer lets Ozzie have his way. Will Ballmer even be there? If I were a Board member I would be seriously concerned with Ballmer’s actions re: Yahoo. Offer $40Bill then back away with what appear to be immature negotiations.”
Just who is Ray Ozzie and what is the deal?
At Microsoft, he says, there must be a shift from the traditional model of software to what he calls software plus services. As slogans go, it’s not particularly catchy. But the sentiment is clear: Just packaging software, collecting the money, and then producing a new version a few years later (whether people want one or not) is no longer a sustainable business plan.
The relationship with customers must be constant and continuous. Instead of discrete onetime transactions, the money—whether from subscription fees or advertising—will flow constantly. For the user, everything will happen when it’s needed, as if pulled down from a cloud. The metaphor has been around for years, along with the more recent spinoff, cloud computing. But the phenomenon is anything but ethereal. Billions of dollars are at stake.
According to Microsoft, one example of a successful service is Windows Update, which automatically installs patches and bug fixes on users’ operating systems. Hotmail, like all Web-based mail applications, is also a service. Virtual Earth? A service. Software, but not from a box. Still, Ozzie draws the line at the idea that you can do anything and everything in the cloud, that every application can become Web-based, that the desktop is dead. Some things, he says, still require local computation, offline persistence, and the control that only one’s own desktop processor offers.
This defense of the desktop dovetails nicely with Microsoft’s historic strengths. So, while Ozzie actively evangelizes for the disruptive move to services, he’s also saying that for many purposes the ideal software model is a hybrid: a heavy-duty application (known as client software) combined with an ongoing Internet service. A great example is Apple’s iTunes, which you install on your computer and use as an offline media organizer but which also serves as an Internet app that lets you buy songs, stream music, and get recommendations.
In Ozzie’s view, Microsoft must make this model the centerpiece of all its future efforts. The company must transform itself from a manufacturer that dumps out a big product every couple of years to a customer-obsessed enterprise devoted to continually producing, updating, and supporting a full panoply of services. In his speech, Ozzie puts it this way: “When packaged software ships, services go live. What was our end is now the beginning. The gold disk”—from which all retail copies of a new piece of software are made—”is now the grand opening.”
At that point, Ozzie unveils the new products that he’s been laboring over for more than two years: a top-secret set of initiatives designed to make Microsoft as dominant in the cloud era as it was in the days of the desktop. First up is a new operating system for Web-based applications, codenamed Red Dog—it’s Windows for the cloud. (See Editor’s update below.) Then comes a demonstration of Live Mesh, which will allow people to seamlessly synchronize all their information with as many people and places as they want, across as many devices (computer, phone, camera) as they want. Finally, another engineer demonstrates how Microsoft will make even its legacy apps accessible via the cloud. It’s a shocker. After years of Microsoft insisting that the desktop is the only proper place for its crown-jewel applications—the venerable Office suite—it appears that Word, Excel, and PowerPoint will levitate from the desktop and become services as well. In this demo, an Excel spreadsheet is running in the cloud with almost all its functionality intact, including features like auto-complete and auto-formatting as well as built-in collaboration and a way to link the spreadsheet results to emails and Web pages.
Now Balmer has been in charge at Microsoft for a while now and the time has come to take a real close look at things. The Yahoo (YHOO) deal was a fiasco for Yahoo but had the deal been accepted, it would have meant Microsoft paid $40 billion for a company worth $15 billion today. Not good..
The desktop software model is dying thank to Google (GOOG) and Balmer is being dragged into. Ozzie is already there, why not let him run the show?
It is a question the Board must begin to consider…
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35,000 folks will lose their jobs..they can thank former CEO Phil Schoonover. What is sad is that it did not have to happen, there were many opportunities to save it. What Schoonover did should be criminal…..criminal…
The News:
Circuit City Stores Inc. says it has reached an agreement with liquidators to sell the merchandise in its 567 U.S. stores after failing to find a buyer or a refinancing deal.
The second-biggest electronics retailer in the nation says in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators.
Calls to the Richmond, Va.-based company and the liquidators were not immediately returned.
Circuit City filed for Chapter 11 bankruptcy protection in November. U.S. Bankruptcy Judge Kevin Huennekens gave the company permission to liquidate if a buyout was not achieved.
In June of 2007 I said:
“As a trade, any good news could vault shares up immediately. But, I do not see the conditions that could create that good news anytime soon. Maybe they could get bought out and that would cause shares to jump, but, I am reluctant to invest on the prayer someone rescues them. An Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now. Why pay a premium to the current price when in bankruptcy he could get it for a fraction of it?
At their current rate CC will be out of cash before Thanksgiving and then the fun really starts. This assumes they do not start ramping up debt to pay for operations and also assumes no further economic slowdown. Should the economy slide even more, see ya…”
Then CEO Schoonover then fired good employees to save costs causing sales to plummet, ramped up debt, lowered bonus levels for his hand picked executives, Spurned a possible takeover, spurned an official offer from Blockbuster (BBI), was actually interviewed by the WSJ about “how to execute a turnaround”, tried some new platforms and had one of the most visited web site during the 2007 holiday season but due to high prices could not convert them to sales.
Today is the result….sad for those losing jobs..
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Highlights of the latest OMR
dated: 16 January 2009
**Forecast global oil demand in 2009 is revised down by 1.0 mb/d, following a halving of assumed GDP growth to 1.2%, given the worsening outlook. Global oil demand is now projected at 85.3 mb/d in 2009 (‑0.6% or -0.5 mb/d year-on-year). The 2008 estimate is revised down 70 kb/d to 85.8 mb/d (-0.3% or -0.3 mb/d versus 2007). The expected two-year contraction in oil demand would be the first since 1982 and 1983.
**Global oil supply was flat in December at 86.2 mb/d, with curbed OPEC output offset by gains elsewhere. Non-OPEC supply for 2008 and 2009 is forecast at 49.5 mb/d and 50.0 mb/d, lowered by 60 kb/d and 30 kb/d versus last month’s report. 2008 output declined by 150 kb/d, partly due to the first fall in Russian supply since 1996. 2009 growth is forecast at 0.5 mb/d, in addition to a 0.6 mb/d increment in OPEC NGLs.
**December OPEC crude supply was 30.9 mb/d, down 330 kb/d versus November. This was 1 mb/d below September 2008 levels, and nearly 2 mb/d below mid-2008 highs. OPEC agreed a new target of 24.8 mb/d from January, equivalent to OPEC-13 output of 28.2 mb/d versus a reduced 2009 ‘call’ of 29.5-30.0 mb/d.
**1Q09 global refinery throughput is forecast at 72.3 mb/d, 1.2 mb/d lower than last month’s report. Weaker global demand and poor economics continue to hamper crude runs. Evidence of more structural changes to the refining industry is emerging in addition to reduced plant operation rates.
**OECD industry stocks fell by 2.0 mb to 2,658 mb in November, as a US build was offset by lower European crude and Pacific distillates. Despite a downward revision to October data, end-November forward demand cover remains high at 56.4 days on lower OECD demand. Preliminary December data indicate an OECD draw of 8.0 mb.
**Crude oil prices rose to nearly $50/bbl in early January, supported by cold weather, the Russian/Ukrainian gas crisis and fighting in Gaza. Subsequently, weak global refinery demand and an increasing crude overhang have pressured Brent futures to currently around $45/bbl, while WTI was at $35/bbl, distorted by record-high Cushing stocks.
So, the key here is that despite the global recession currently underway, supply demand is still about equal. That means any increase in economic (particularly manufacturing or infrastructure work) activity will tilt the balance and any geopolitical event could cause a run on oil (DBO), (USO), (DXO).
Is oil going back to $147, not without a major event (but, is that so far out of the question?). But to think it could double from here this year is within the realm of reasonableness. Global gov’t stimulus is going to be tilted towards “shovel in the ground” projects and that means oil demand rises. Supply is down and both OPEC and Non-OPEC production has been curtailed also. Production increases will lag and demand increase so price pressure will be upwards.
Regarding production the report says:
“Forecast non‐OPEC production is trimmed by 290 kb/d for 4Q08 and 345 kb/d for 1Q09, then by
around 150 kb/d for the remainder of 2009. Longer‐than‐expected outages affecting the GOM and
Azerbaijan curb early 2009 supply, as do weaker expectations for the North Sea and Australasia.
Forecast 2009 production from Russia and Canada is trimmed on fiscal and investment barriers and
field underperformance, while weaker expectations also now prevail for Malaysia and Vietnam.”
“OPEC‐11 production, excluding Iraq and Indonesia, fell by 825 kb/d in November, representing apparent compliance with the 1.5 mb/d cuts in target output agreed on 24 October of around 55%. However, as noted above, further reductions are also scheduled for December supply. OPEC Ministers gathered in Cairo on 29 November, ahead of their next scheduled meeting in Algeria on 17 December. In the end, no further decision on output policy was taken, due apparently to uncertainties over upcoming winter weather and the fact that it was too early to judge the impact of production curbs only put in place from 1 November.”
The December meeting resulted in further production cuts..
FULL REPORT:
1/16/2009 IEA Report
Disclosure (“none” means no position):Long DXO
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New Mac, Bin Laden, Geithner,
–
Apple Introduces Revolutionary New Laptop With No Keyboard
– Boosts sales of cassette players
– Bootleg Turbo Tax
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The blog has just been added to the kindle store at Amazon (AMZN). Follow this link to get it
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A new CEO always makes some changes. Will Steinhafel look closer at Pershing Square’s proposal?
Here is the news:
Target Corp. said chairman Bob Ulrich will retire at the end of the month, and will be succeeded by Chief Executive Gregg Steinhafel, completing a transition that began when Mr. Steinhafel was tapped for his current post a year ago.
Mr. Ulrich will become chairman emeritus, the retailer said.
The 53-year old Mr. Steinhafel joined Target in 1979 and became president in 1999. Target announced last January that he would succeed Mr. Ulrich as CEO, although he didn’t take the reins until last May. He was named to the board two years ago.
Mr. Ulrich has spent his entire 41-year career at Target and its predecessor company, Dayton’s, starting as a merchandise trainee. He became its president in 1984 and chairman and CEO three years later. Mr. Ulrich is credited with creating Target’s “cheap chic” marketing strategy some 20 years ago.
Like so many other retailers, Target has been struggling with slackening sales as shoppers rein in discretionary spending in the face of the housing-market collapse, the financial-markets meltdown, gyrating gasoline prices and tight credit. Last week Target said its December same-store sales fell 4.1%, in line with its expectations. But it said that markdowns “pressured profits.”
In addition to slowing sales, Target’s profits have suffered as an increasing number of its shoppers default on credit-card payments.
“As we look to the future, we are completely confident in Gregg’s leadership and his ability to build on Bob Ulrich’s legacy by continuing to deliver a superior guest experience,” said Vice Chairman Jim Johnson.
Now, let’s look back at the proposal from Ackman:
The plan was endorsed by Lazard.
Target (TGT) is facing increasing credit card losses on it portfolio. It should be noted that these losses are smaller that would have been had they not listened to Ackman and sold 1/2 the portfolio to JP Morgan (JPM).
What the transaction proposed by Ackman does (listen to the presentation for more detail) is frees up a very valuable commodity right now for any retailer….cash. It lowers land acquisition costs for expansion, increases cash flow to the retailer, lowers capex costs and more.
What is not clear was why the Ackman deal was really declined. Here is the press release put out at the time.
Here is the interesting part. When this was issued, Ackman’s reply was that he would “wait until after the holiday’s to address concern’s with management”. Now we see Ulrich retire. Are the two actions related? Was Ulrich standing in the way of the deal and did he hold sway over management and the rest of the board? Did Ackman know this was coming and was this the reason for his dropping the issue for the time being?
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Jim Goldman had a tough (deservedly so) 24 hours. Watch. After essentially mocking and condescending blogger’s reports Apple’s (AAPL) Steve Jobs was sick, Goldman now has explaining to do.
CNBC’s own Dylan Ratigan takes him to task.
“Fake Steve Jobs” says he got “punked” by the Apple spin machine. The comment got Fake Steve banned from the network.
Notable Statements:
Dennis Kneale says “The dirty secret of journalism is that you have to believe most of what you are told”
There was a very interesting exchange later in which Goldman says “Until I am privy to Steve Jobs’ medical record all I am telling you is what my sources tell me who I trust and what the company tells me.”
Then Kneale pipes back in and says “Goldman reported what he was told and that’s what a good journalist does”.
Fake Steve make the best point when he says “If your just going to repeat press releases, why have the press, why not just let Apple put out press releases and why have a Bureau out in Silicon Valley?”
Here is the problem. If you had just listened to Goldman for the past 8 months you would have believed until last week everything with Jobs was fine. Had you read blogs, doubt would have crept into your mind. What you did with that information would have been up to you. The point is that you would have had more information to make a decision.
The same could be said of CNBC’s Phil LeBeau in his coverage of the automakers Ford (F), GM (GM) and Chrysler.. Both Goldman and LeBeau are careful to protect their access to those they cover by not being overtly critical of them. When they are critical is is posed as “there are those who say……” and then “how do you respond to that……”
Fake Steve was right in saying why have the press there and why not just let them put out press releases. The only purpose Goldman and LeBeau serve in their respective jobs is to publicly disclosed those release and allow those they cover to strategically leaked information they want out in the public. They are information conduit for the company’s they cover, they are not doing a public service to viewers.
LeBeau’s coverage is especially aggregious as he covers an industry that one would be hard to find has been more mismanaged for the past three decades the US automakers. Yet, if one goes back and looks at the coverage of Detroit from LeBeau, it is painfully apologetic to them and his defense of theory need for bailout funds could only have come from the PR departments of the auto makers.
Now, if that is what they are supposed to be then that is fine, but let’s not pretend we are doing something else and more importantly, lets not talk so dismissively about those who are not acting in that role and who are raising questions that ought to be answered.
If the MSM wonders why they become less relevant on a daily basis, they need only look at these examples…
for ore on the Jobs angles, please read The Ponderings of Woodrow
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