DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Oil Prices Fall Before, During and After May 6 Market Panichttp://www.dailyfinance.com/2010/05/07/oil-prices-fall-before-during-and-after-may-6-market-panic/http://www.dailyfinance.com/2010/05/07/oil-prices-fall-before-during-and-after-may-6-market-panic/http://www.dailyfinance.com/2010/05/07/oil-prices-fall-before-during-and-after-may-6-market-panic/#commentsFiled under: , ,

It's been quite a week for oil investors. The price of crude oil fell 11% between Monday and Thursday, down from an 18-month high on Monday. The situation was exacerbated on Thursday, when, in the wake of the steepest intraday market sell-off on record, prices fell 3% to close at $76.44 per barrel. While the meltdown and partial rebound were dramatic, the dip was an even more so for oil investors given that prices had already taken a hit for the week. Still, some analysts say the price drop is temporary and it would be unwise to read too much into it.

"I think what happens is that you have so many electronic, algorithmic programmed trades, and the market tanked, and that triggered a lot of programs clued into crude. There was no news. You had thin liquidity, and you had a major, major panic, so that just spilled over," says Stephen Schork, president of the Schork Group and editor of energy industry newsletter The Schork Report.

Even if it was a bizarre fluke, many analysts and economists say it's high time that oil prices fall back down to Earth. Some believe that the premium prices crude has been commanding could be detrimental to the world economy. In March, for example, the International Energy Agency warned that the overheated oil market could threaten any sort of recovery.

"Oil at $85 per barrel just doesn't make any sense in this economy," says Schork. "Mind you, oil in the $70s is still too expensive. Oil should be closer to $65 per barrel than $75 per barrel." Schork estimates that a $65 per barrel price for crude loosely translates to gasoline at $2.60 to $2.75 per gallon. That's rather cheap, Schork says, but given that there are 15 million unemployed Americans, it's likely in line with the general economy.

Trying to Read the Texas Tea Leaves

Still, it's not clear whether lower prices will last. Early Friday afternoon, oil prices were down $1.74 at $75.37 even though they initially rose in early trading. At least one analyst thinks the oil prices could be poised to bounce back, regardless of the free fall in Thursday's session.

"Hard sell-offs usually end in about three days," says Mark Schultz, chief analyst of Northstar Commodity. "You should see some stability start to form."

The broader commodities market, on the other hand, could be taking its cue from stocks, even if there isn't normally a correlation between the markets. Assuming trading stabilizes in Friday's session, the commodities market could follow suit, says Schultz. If stock trading is volatile, Schultz says he wouldn't be surprised to see another late-day sell off on Friday.

"If there is more downside pressure on the stock market, then I think commodities will decline," says Schultz.

In Thursday's trading, commodities took a hard hit -- the CRB Commodity Index fell 2%, and well before the afternoon panic, wheat and corn prices in Chicago trading were down, largely on concerns about the U.S. dollar.

Right now, though, Schultz says one of his primary concerns is beef -- if European markets don't stabilize, demand for beef will likely decline given the inflated prices.

"Supply is tight in the meat sector. Prices are at high levels right now, and if the global economy starts hurting, then you'd see declines in demand and high prices," says Schultz.

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]]>commoditiesMay 6 Stock Market Plungeoil pricesBetsy SchiffmanFri, 07 May 2010 12:46:00 ESTSenators Push for a Cap of 50 Cents on ATM Feeshttp://www.dailyfinance.com/2010/05/06/senators-push-for-cap-of-50-cents-on-atm-fees/http://www.dailyfinance.com/2010/05/06/senators-push-for-cap-of-50-cents-on-atm-fees/http://www.dailyfinance.com/2010/05/06/senators-push-for-cap-of-50-cents-on-atm-fees/#commentsFiled under: , , ,

Banks make a tidy profit off ATM fees, as at the Bank of America cash machine in this photo, which can range anywhere from $1 to $7, but a proposed amendment to the financial reform bill would put an end to that by capping fees at 50 cents per transactionBanks probably make a tidy profit off ATM fees -- which can range anywhere from $1 to $7 -- but a proposed amendment to the financial reform bill would put an end to that by capping fees at 50 cents per transaction.

The amendment, introduced by Senator Tom Harkin (D-Iowa) and co-sponsored by Senators Schumer and Sanders, aims to "ensure that fees charged to consumers at ATMs bear a reasonable relation to the cost of processing the transaction."

Harkin says that based on the "best available data," the cost per transaction is 36 cents, therefore 50 cents per transaction is a reasonable upper limit.

Level the Playing Field for 'Average Joe'

"Under the current structure, banks charge consumers fees for using ATMs while also collecting fees from other banks. This amendment restricts the double-dipping that benefits banks and costs consumers," said Harkin in a prepared statement. "Our mission in financial reform is to level the playing field for the average Joe. My amendment goes to the heart of that mission, ensuring consumers are no longer victimized by unfair fees."

Bank of America (BAC), Citigroup (C) and JPMorgan Chase (JPM) all declined to comment.

Banks are easy targets for politicians in the current political climate -- consumer animosity and rage toward financial institutions is palpable -- still, it's not clear the amendment would serve everyone's best interest.

ATM Companies Will Go Out of Business

"It's outrageous," says Jeremy Inman, executive vice president of operations for Aptus Financial, a Portland, Ore.-based company that sells, places and services white-label ATMs. "Capping surcharges at 50 cents would mean that the industry would see a lot of [ATM] companies go out of business. They survive on, and their financial model and revenue share, is very, very dependent on ATM surcharges."

The result, Inman says, is that "Subsequently you'd see a lot of cardholders who no longer have quick access to cash. And you'd likely see companies like MasterCard and Visa take pretty significant hits. Any time somebody uses their cards, Visa or MasterCard gets paid."

Inman also argues that the amendment would hurt retailers who often not only take a percentage of the ATM fees, but who may expect a certain percentage of purchases to be paid for with cash. If customers could no longer take cash out at the retail location, some retailers would probably see a sharp increase in credit card transactions and credit card fees."

Unintended Consequences: Access to Cash May Be Limited

Another potential consequence of the amendment: Banks may close less-profitable ATMs, thus limiting consumer access to cash.

"Banks build ATM networks for a couple different reasons -- to provide their customers with access to their cash in a convenient way, and to generate revenue from non-customers who are willing to pay for the convenience of using ATMs in certain locations," says John McGuinness, an attorney with Kelley Drye & Warren in Washington, D.C. "There are extensive costs in building the network, ranging from system support to security cameras, and if the fees are capped, then I think it's foreseeable that banks would start closing certain ATMs or maybe ban non-bank customers from using those ATMs."

This isn't the first time politicians have tried to limit or ban ATM surcharges. In 1999, the city of Santa Monica, Calif., passed a measure that banned ATM surcharges. It was subsequently sued by a slew of banks, including Wells Fargo (WFC) and Bank of America, arguing that states didn't have the right to regulate nationally chartered banks. The measure was eventually overturned.

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]]>ATMBank of AmericacitigroupJpmorganChaseBetsy SchiffmanThu, 06 May 2010 14:45:00 ESTFreddie Mac Sees Home Prices Sliding and Asks for More Cashhttp://www.dailyfinance.com/2010/05/06/freddie-mac-home-prices-sliding-needs-more-govt-funds/http://www.dailyfinance.com/2010/05/06/freddie-mac-home-prices-sliding-needs-more-govt-funds/http://www.dailyfinance.com/2010/05/06/freddie-mac-home-prices-sliding-needs-more-govt-funds/#commentsFiled under: , ,

Freddie MacFreddie Mac (FRE) doesn't expect a housing recovery any time soon. In fact, the government-backed mortgage-finance giant thinks home prices will fall further before they start climbing back up. Worse, Freddie says it now needs an additional injection of $10.6 billion of government funding.

The primary force behind the price declines, according to Freddie's most recent filing with the Securities and Exchange Commission, is the April 30 expiration of the federal homebuyer tax credit. The mortgage guarantor thinks home sales will slow as a result of the expired government credit. It also forecasts a "significant increase in distressed sales," including foreclosed homes, preforeclosure sales and sales of bank-owned properties. And of course, unemployment will remain a "key risk," according to the filing.

"Our assumption for home prices, based on our own index, continues to be for a further decline in national average home prices over the near term before any sustained turnaround in housing begins," the company wrote in the document.

Recent Price Gains Have Evaporated

Freddie Mac's assessment mirrors the opinion of many housing experts who predict that residential real estate is headed -- or has already fallen -- into a double dip, that is, a second round of home price declines. The problem, according to many economists, is that unemployment is still lingering at a hefty 9.7%, and there's little hope for dramatic job growth in the near future (though hiring is now certainly stronger now than it has been since the Great Recession struck). As conventional wisdom would suggest, unemployed homeowners are less likely to make payments on their homes than those with jobs.

Last month, the S&P/Case-Shiller Index showed that price gains that had been achieved at the beginning of last November had evaporated, and in some cities had fallen to their lowest levels since peaking three or four years ago.

"These data point to a risk that home prices could decline further before experiencing any sustained gains," said David Blitzer, chairman of the Index Committee at Standard & Poor's, when the last report was released.

More Losses Ahead

Freddie Mac estimates that first-quarter home prices for its single-family guarantee portfolio slipped 0.9%, and overall, the company went from having a net worth of $4.4 billion for the fourth quarter of 2009 to a first-quarter 2010 deficit of $10.5 billion. Total equity slipped to a deficit of $11.7 billion.

Regardless of where home prices go, the company expects its credit losses will likely remain "significantly above historical levels for the foreseeable future," mostly because of all the "underwater" homeowners -- borrowers who owe more on their homes than their homes are actually worth.

As a result of the $10.5 billion deficit, Freddie Mac has asked the government to hand over some more cash -- roughly $10.6 billion. Freddie expects to receive the funds by June 30.

Since November 2008, Freddie Mac has accepted at least $50 billion in bailout funds from the government. By the Wall Street Journal's account, Freddie Mac and Fannie Mae have collectively asked for nearly $126 billion.

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]]>Fannie MaeFreddie Machome priceshousingBetsy SchiffmanThu, 06 May 2010 09:10:00 ESTU.S. Sperm Bank Donations Rise in Recessionhttp://www.dailyfinance.com/2010/05/06/sperm-bank-donations-rise-in-recession/http://www.dailyfinance.com/2010/05/06/sperm-bank-donations-rise-in-recession/http://www.dailyfinance.com/2010/05/06/sperm-bank-donations-rise-in-recession/#commentsFiled under: ,

mother with babyWith college tuition and fees up more than 440% over the past 25 years, according to the Center for Public Policy and Higher Education, it's not surprising that students are trying to make a buck any way they can. But jobs are harder to come by in the economic downturn, and that has had a peculiar side effect: In the U.S., more young men are turning to sperm donation as a part-time job.

It's the reverse of trends in the U.K. and Australia, which are seeing sperm shortages, largely as a result of laws that give children the right to seek out the identity of their donor fathers. In Australia, sperm banks are starting to advertise heavily in the hope of attracting more donors. A couple of years ago, when sperm banks in Sydney faced similar shortages, they imported sperm from the U.S. In the U.K., by contrast, some women are reportedly seeking out "viking" sperm from Denmark.

In the U.S., however, where most sperm banks allow donors to remain anonymous, some businesses say they've seen a dramatic rise in donor applications since the economy cratered a couple years ago. "I would say there's been a 15% to 20% increase in donors since the recession hit," says Kevin Foster, president of Sperm Donors Inc., an Idaho-based agency that matches donors and hopeful parents.

Donating Can Pay Off

Depending on the sperm bank, donating can be a fruitful enterprise, although it may take months to get accepted into a program. California Cryobank, a Los Angeles-based sperm bank, says its donors make an average of $1,000 per month.

It's not free money, says Scott Brown, head of communications. Donors must be at least 5 feet 9 inches tall and enrolled in -- or have a degree from -- a four-year university. Plus, they have to pass an assortment of genetic and medical tests, screenings, not to mention an investigation into their family's medical history to look for the early onset of heart disease, cancer, etc.

"We joke that it's easier to get into Harvard than to get accepted in our program," says Brown. That's funny because it's true -- Brown estimates that only 1% of all the applications are accepted. Harvard's acceptance rate this year was 6.9%.

Most of California Cryobank's donors stick with it for about a year and a half, donating once or twice per week, according to Brown. Each time they donate, they're asked to abstain from sex for 48 hours beforehand and they get $100 per donation. The sperm bank mostly recruits at colleges, and many of its donors are students at Stanford University, Harvard University, University of California at Los Angeles and so on.

Prices Remain Steady

The dramatic rise in applicants has not changed the compensation for donors, although one might imagine an increase in supply would lead to lower compensation. Many donors, though, are willing to be paid far less than the $100 per donation offered at California Cryobank. At Seattle Sperm Bank, for example, where donors (mainly students) are paid $60 per donation, applications have nonetheless doubled over the last couple of years.

Director Peter Bower thinks that's partly due to the fact that it's a new facility, so that applications would have grown organically, but he also believes the economy has played a part.

"The money makes a big difference for students, but we really like our donors to be motivated to help childless couples or single women, rather than motivated by the money. It's not something you do for quick cash," says Bower. "The application process takes two or three months and it takes a long time before you actually start donating. The guys in our program are dedicated and committed to doing a good deed."

Still, the beer money probably doesn't hurt.

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]]>collegeeconomyjobsBetsy SchiffmanThu, 06 May 2010 08:55:00 ESTPretty Picture for Art Sales as a Picasso Fetches a Record Pricehttp://www.dailyfinance.com/2010/05/05/art-sales-picasso-fetches-a-record-price/http://www.dailyfinance.com/2010/05/05/art-sales-picasso-fetches-a-record-price/http://www.dailyfinance.com/2010/05/05/art-sales-picasso-fetches-a-record-price/#commentsFiled under:

christie's auction of picassoThere's no shortage of cash flowing into the art market these days. That so-called bubble that burst a couple years ago? Not much evidence of the bust now. Multiple new price peaks have been set since the financial crisis began in 2008, most recently the record-breaking sale of Picasso's "Nude, Green Leaves and Bust," a painting from Mrs. Sidney Brody's collection, which fetched $106.5 million at a Christie's auction on Tuesday night.

It's not exactly the apocalyptic vision that was laid out back in 2008 when The Wall Street Journal warned that the "art market crash...threatens to remake the art world.... Auctioneers, dealers, artists and collectors have changed strategies and policies, and it's likely that future changes will be even more sweeping."

Art Heights in Depths of Crisis

Those "sweeping changes" haven't wiped out art dealers' or auction houses' profits. Among the most expensive paintings ever sold (that have been reported, anyway), quite a few went at or near the height of the economic crisis. Andy Warhol's "Eight Elvises," for example, was privately sold for $100 million in November, 2009; Claude Monet's "Le Bassin aux Nympheas" sold at a Christie's auction in June, 2008, for $80 million (it was only expected to fetch $47 million). And in the depths of the recession, Christie's sold designer Yves Saint Laurent's private collection for roughly $480 million in February, 2009, the largest-grossing auction for a private collection.

All those sob stories about America's wealthiest pulling back on luxury vacations and mansion purchases wasn't because they lost their savings to scam artist Bernie Madoff.

"Our client base was more cautious last year, but I don't think it was because of lost wealth," says Toby Usnik, Christie's head of communications. "[Our clients] were ensuring the stabilization of their businesses and affairs. And as the market has come back, they have been able to ensure the stability of their portfolios, and they've been eager to focus on collecting again."

European Action

Usnik also points out that many clients sought art as an alternative investment.

"We always counsel people to buy art because they love it. But as it happens, art is often a good, solid investment. I think to some degree we saw that last night -- there were people who wanted to put their money in an alternative asset class."

It probably also helps that the art market has been buoyed by cash from outside America. Usnik says of the overall bidders at Tuesday's auction, 36% were from the U.S.; 36% were from Europe or the Middle East; 4% were Asian; and 24% were "other" or chose to remain anonymous. And of the Picasso painting's eight bidders, quite a few were apparently of European descent.

"The difference between the pre-financial crisis market and the post-financial-crisis market is that the buyers are geographically more widespread than they were then," says Lucy Mitchell, president of the Art Dealers Association of America, who was at Tuesday night's auction. "There were six or seven people bidding [on the Picasso painting on Tuesday], and although the buyers aren't in the room -- they all had reps -- most of the reps were European. I didn't stay for the entire sale, but the people who really made a mark at the auction were not Americans. I would say they were Europeans or Russians."

Casualties, Still

Despite the eyebrow-raising sales figures, Mitchell thinks it's premature to call a comeback for the art market: "It's still too early to get a read on the market."

One indicator that the market has definitely not returned to its former extravagant glory, according to Mitchell, is the bankruptcy of Carlson & Co., a San Fernando, Calif-based fabricator known for producing extremely expensive pieces for well-known artists, including Jeff Koons.

"I found it interesting that it took this long for [Carlson] to go bankrupt," says Mitchell. She adds: "It also tells me that expensive fabrication has come to a halt. Artists have to find less expensive ways to fabricate. In this market, dealers are not financing expensive fabrications of sculptures or projects for artists."

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]]>artart auctionart marketchristiespicassosothebysBetsy SchiffmanWed, 05 May 2010 14:25:00 ESTIf You Can Forget About the Spill, BP Could Be a Buyhttp://www.dailyfinance.com/2010/05/04/if-you-can-forget-about-the-spill-bp-could-be-a-buy/http://www.dailyfinance.com/2010/05/04/if-you-can-forget-about-the-spill-bp-could-be-a-buy/http://www.dailyfinance.com/2010/05/04/if-you-can-forget-about-the-spill-bp-could-be-a-buy/#commentsFiled under: , ,

As British energy company BP struggles with one of the worst financial and PR challenges in recent history, its shares have been royally pummeled. Still, there are plenty of technical reasons why BP may look like a buy right now, too.As British energy company BP (BP) struggles with one of the worst ecological, financial and PR challenges in recent history, its shares have been royally pummeled.

The sell-off of BP began on April 21, the day after a BP-operated oil rig caught fire in the Gulf of Mexico, which eventually led to a spill so large, it's expected to exceed the Exxon Valdez spill of 1989. Thus far, the stock has lost 17% of its value, dropping to to $50.19 (Monday's closing price), down from $60.48 on April 20.

There are plenty of reasons why investors should avoid BP: It's not clear how much the company will have to pay in damages (estimates range anywhere from $3 billion to $15 billion), nor is it clear when the stock is going to bottom out. Wall Street is relentlessly negative on it. In fact, two banks, Argus and Benchmark, have downgraded the stock since the spill started.

Too Many Unknown Variables

Argus analyst Philip Weiss cut his rating on the stock to hold primarily because of all of the unknown variables.

"We know that . . . BP's stock recovered 19% and outperformed the market and the sector following the Texas City refinery fire in 2005," Weiss says in a note to clients. (The Texas City refinery fire of 2005 was also at a BP-owned facility and resulted in 15 fatalities.) "However, we also think the level of environmental awareness and scrutiny is much greater now than it was at the time of those earlier accidents," he says.

But it may not be the end of the world for the company previously called British Petroleum. BP's response to the spill has been aggressive, by most accounts. The work on the relief well, which is meant to stop the spill, began on Sunday, so the company is working toward a solution. And some environmentalists even think the net result of the spill may not be as bad as Exxon Valdez.

Years of Legal Wrangling to Come

It could also be years of legal wrangling before the courts decide who is responsible for the accident. Right now, BP argues that it should be held responsible for clean-up costs, but that Transocean (RIG), which owned the equipment, is ultimately responsible for the accident. Even if the courts decide BP must pay for the whole shebang, it could be a long time before the company drops a dime to cover the disaster.

There are plenty of technical reasons why BP may look like a buy right now, too.

"Both price-to-sales and price-to-cash earnings are very nearly at the low end of the historically normal range for BP," says Ned Douthat, head equity analyst at Ockham Research. "This valuation is likely appropriate given the huge downside potential given the cost of the spill. But if an investor wants to hold onto a stock for a long time, they could do worse than BP with a yield approaching 7%," Douthat wrote in an email.

Although Douthat doesn't think the risks associated with the spill are built into the stock yet, the price is starting to "become appealing in spite of the risk." Similarly, Philip Weiss of Argus said he would consider buying BP again if shares fell below $50.

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]]>bpGulf of Mexico oil spilloil spilloil spill louisianaBetsy SchiffmanTue, 04 May 2010 15:45:00 ESTSenate Set to Begin Voting on Financial Reform Billhttp://www.dailyfinance.com/2010/05/04/senate-set-to-begin-voting-on-financial-reform-bill/http://www.dailyfinance.com/2010/05/04/senate-set-to-begin-voting-on-financial-reform-bill/http://www.dailyfinance.com/2010/05/04/senate-set-to-begin-voting-on-financial-reform-bill/#commentsFiled under:

Senate Set to Begin Voting on Financial Reform BillThe financial reform bill is the most hotly contested piece of legislation since the health care reform bill, and it goes to the floor of the Senate on Tuesday afternoon, when voting is expected to begin on amendments to it. The bill, which aims to create a new consumer protection watchdog agency within the Federal Reserve; increase federal bank supervision; and end "too big to fail" bailouts, among other goals, was written by Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and is based on a similar proposal by President Barack Obama.

From the get-go, the regulatory overhaul of the financial system has been short on support from Republican senators and fraught with drama. There are more than a few contentious issues: specifically, an amendment that says taxpayers won't have to foot the bill for future bailouts -- the idea is that if the government seizes an institution, it will be liquidated. An equally controversial proposed amendment from Sen. Jim Webb (D-Va.) would impose a 50% tax on bonuses of $400,000 or more at financial firms that accepted $5 billion or more in government bailout funds over the last couple of years.

"Prospects Are Good for Passage"

After blocking deliberation of the bill on the Senate floor for a few days, Republicans gave in so as not to appear too closely aligned with Wall Street. While passage of the bill is hardly guaranteed, some Washington insiders are betting that further filibuster attempts against it will fail.

"My sense is that the reform of the derivatives market will be largely successful," Obama adviser Paul Volcker recently said. "The prospects are good for passage of a reform bill along the lines in the approach set out by the Senate Finance and Agriculture Committees, paralleling in large measure the bill passed by the House last year."

Banking executives seem equally optimistic that some sort of reform will be signed into law. JPMorgan (JPM) CEO Jamie Dimon recently said he agrees with "80%" of the financial overhaul legislation.

To read more of DailyFinance's coverage and analysis of the bill, check out our recent stories, starting with the June 2009 unveiling of President Obama's plans to overhaul the financial system:

  • Obama Reveals Plans to Overhaul Financial Regulation (6/17/09): The president unveiled plans to reform the financial industry, calling it a "sweeping overhaul" designed to remedy a series of "mistakes and missed opportunities" that have hobbled the U.S. economy.
  • Dodd Unveils a Massive Financial System Overhaul (3/15/10): The 1,336-page bill would change how the industry is regulated more dramatically than any law since the Great Depression.
  • Where Dodd's Financial Overhaul Seems Likely to Miss the Mark (3/15/10): With Dodd is retiring from office this year, that pending departure frees him from the need to kowtow to the financial services firms or to the lobbyists who shape the rules that oversee their industry.
  • Obama to Wall Street: We Need 'Basic Safeguards That Prevent Abuse' (4/22/10): The president called on lawmakers to take swift action on financial regulatory reform and change the way Wall Street does business. The most sweeping changes since the Great Depression would break up too-big-too-fail institutions, cast light into some of the darkest corners of the financial system, and create new consumer protections.
  • In Financial Reform Drama, Industry Displeasure With Obama's Speech (4/23/10): It's no surprise financial services companies aren't happy with President Obama's tough speech at Cooper Union in New York on April 22, in which he called on them to support his financial reform efforts. "He completely demagogued the industry. I don't know a single company that opposes legislation, and he runs around saying Wall Street's opposing this. . .I think it's unconscionable," said one industry lobbyist.
  • How Financial Reform Could Benefit Wall Street (4/26/10): Despite some rumblings, many traders say they like what they've heard so far. Ultimately, its aim is to benefit both Wall Street and Main Street by ushering more transparency and faith into the markets.

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]]>Chris Doddfinancial overhaulGoldman Sachs fraudgovernmentgovernment bailoutSenateWall Street reformBetsy SchiffmanTue, 04 May 2010 12:08:00 ESTIn Spite of Oil Spill, Wall Street Still Likes Halliburtonhttp://www.dailyfinance.com/2010/05/04/oil-spill-halliburton-investor-reaction/http://www.dailyfinance.com/2010/05/04/oil-spill-halliburton-investor-reaction/http://www.dailyfinance.com/2010/05/04/oil-spill-halliburton-investor-reaction/#commentsFiled under: , ,

Oilfield services company Halliburton (HAL) has garnered plenty of unwanted attention from the event in the Gulf of Mexico. While the company's role in the Deepwater Horizon oil spill remains unclear, investigators are including the company in an inquiry about the cause of the spill and CEO David Lesar is scheduled to testify before Congress later this month.

That's because the company was responsible for an oil drilling process known as "cementing," which regulators had already identified as a frequent cause of well blowouts. The company says it's premature to speculate on the cause of the disaster, but it has confirmed a few things: It had four employees stationed on the rig at the time of the accident; cementing was one of several services the company performed on the rig; it completed the cementing of a casing string roughly 20 hours before the accident; and the cement slurry design had been used in other similar applications without problems.

This isn't the first time Halliburton has been in the spotlight, of course. The company, which former Vice President Dick Cheney previously chaired, several years ago took heat for winning no-bid government contracts for its work in Iraq and for moving to Dubai.

Wall Street Supports Halliburton

Wall Street has been quick to defend Halliburton, at least based on the limited information available so far. The stock traded up 74 cents, or 2.4%, to $31.39 on Monday as analysts expressed confidence that the company was not to blame.

"We believe a confluence of events outside the control of either Halliburton or Transocean may have contributed to the blowout," said Robert MacKenzie, an FBR Capital Markets analyst, in a report. "Given this analyst's former experience as a cementing engineer and the evidence available today, we can find no fault so far with anything Halliburton may have done and are thus more confident that the stock should gradually recover as investors gain a similar confidence."

It might help that BP (BP) CEO Tony Hayward, who last week told Reuters that his company was taking "full responsibility for the spill," now seems to be shifting responsibility for the accident to drilling contractor Transocean.

On Monday, Hayward told ABC's "Good Morning America" that his company was not responsible for the accident, instead blaming failed equipment belonging to Transocean. Hayward did say, however, that BP would still pay for the costs associated with the cleanup. Meanwhile, a Transocean spokesman told the Associated Press that the company will "await all the facts before drawing conclusions."

MacKenzie isn't as bullish on Transocean as he is on Halliburton. "We believe less clarity is available surrounding the operation of the rig and thus believe that Transocean may be faced with a larger overhang of investor worry," he wrote in his report.

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]]>analystBPoilstocksBetsy SchiffmanTue, 04 May 2010 09:00:00 ESTGas Prices Creep Up After the Spill, Despite Weak Demandhttp://www.dailyfinance.com/2010/05/03/gas-prices-rise-after-spill-despite-weak-demand/http://www.dailyfinance.com/2010/05/03/gas-prices-rise-after-spill-despite-weak-demand/http://www.dailyfinance.com/2010/05/03/gas-prices-rise-after-spill-despite-weak-demand/#commentsFiled under: , ,

Gasoline prices May 2010It's not clear if BP's massive oil spill in the Gulf of Mexico is the reason for rising costs at the pump, but the average price of regular gasoline has already crawled up five cents per gallon over the last week, according to the American Automobile Association. And prices could keep rising, given that Memorial Day weekend is just around the corner, and gas demand will likely increase over the course of the summer as American families take to the road for summer vacations -- perhaps more so than they did last year when the economy was far more fragile.

Before the extent of the oil spill became evident last week, some analysts projected that any gasoline price hikes would likely be "modest" and that there was little concern about a supply squeeze.

However, prices in many states -- such as California and New York -- are starting to move past the $3 mark. While high, that's still well below the July 2008 peak when regular unleaded gas went for upwards of $4 per gallon. Some analysts still believe that weak demand may still contain price increases, along with the not-yet-robust economy and high unemployment. And crude has been fairly stable lately, trading in the low to mid-$80s. In early trading on Monday, oil prices barely budged after China increased its bank reserves ratio to cap inflation.

"There's Plenty of Crude Around"

Opinions are mixed as to whether the spill is the root cause of gasoline price increases, but at least some analysts think oil companies may need to rethink the entire oil production process because of the spill, which could limit output and lead to higher prices. Of course, others say if gas prices rise, it's because energy companies are using the spill as an excuse.

"The retail gasoline market had an upward momentum independent of the oil spill, and the oil spill psychologically keeps that momentum going," says Ben Brockwell, Oil Price Information Service director of data pricing for the spot market. "I don't think from a supply standpoint [the spill] will have any impact on prices. There are only a couple platforms down, and there's plenty of crude around."

Brockwell thinks the upward momentum will likely push gas prices to $3 per gallon (they were most recently at $2.90) and oil prices to at least $90 per barrel (were most recently at $86). "My personal view is that this market is probably a bit overdone. I don't know that things are as rosy as oil investors think, but there has been no news to spook the market or to get investors to sell oil."

Conflicting Forces

Other economic indicators point to higher gas prices, though. Consumer confidence in March rose to its highest level since September 2008. The more optimistic consumers are about the economy, the more likely they are to hit the road and shop, and that means more fuel will be needed to transport those purchases.

And some economists point to weak job growth (despite slowing job claims) as an indicator that gas prices simply can't go up much higher if demand really isn't there. Still, pump prices are known to not always follow the logic of economic fundamentals.

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]]>BPExxon Mobilgas pricesgulf oil spilloil pricesoil spillBetsy SchiffmanMon, 03 May 2010 09:40:00 ESTHow Much Will BP Have to Pay for the Oil Spill?http://www.dailyfinance.com/2010/04/30/how-much-will-bp-have-to-pay-for-the-oil-spill/http://www.dailyfinance.com/2010/04/30/how-much-will-bp-have-to-pay-for-the-oil-spill/http://www.dailyfinance.com/2010/04/30/how-much-will-bp-have-to-pay-for-the-oil-spill/#commentsFiled under:

If history has taught oil companies anything, it's that cleaning up a major spill doesn't really have to cost much. Sure, there are legal fees to pay, clean up costs to cover and lawsuits to settle, but oil companies know how to minimize those costs. In the case of BP's Deepwater Horizon oil spill in the Gulf of Mexico, it's still not clear how severe the damages are or how hefty the final bill will be; the company is already paying roughly $6 million per day to cover cleanup and containment costs. And BP will surely be dealing with reputational damage.

Given Wall Street's reaction, it appears that investors are betting that BP (BP) will get away with paying a nominal sum. The company's shares recovered in Friday's trading after one financial analyst estimated that the disaster could cost the company as little as $3 billion. (O.K., $3 billion isn't insignificant, but for a company that raked in a $6.1 billion profit in a three-month period, it basically amounts to a minor setback.)

Lawyers seem to disagree with Wall Street, though.

Expect Hefty Damages, Say Lawyers

"I can tell you this: It's going to cost them multibillions of dollars. Anywhere from $10 billion to $15 billion," says Daniel Becnel, who filed the first class action against BP and others on behalf of Louisiana shrimpers, fisherman and commercial boaters on Thursday. "We're getting calls at the rate of 200 an hour. People say they're nauseated and have throat irritation. That class is probably going to include 1 million people."

Another attorney, Jerrold Parker, of Parker Waichman Alonso, who has worked on cases concerning another oil spill around New Orleans, thinks the disaster could be "catastrophic."

"Exxon Valdez cost $4 billion or $5 billion dollars -- this could be bigger than that," says Parker. "You've got fisherman who are out of work. Oil workers who can no longer work on the rigs because of the danger of fire. How about tourists on cruise ships that can't port? Or taxi drivers who aren't giving rides? The devastation to the New Orleans area is going to be incredible."

Lessons From Exxon Valdez

But in past cases, corporations have been able to talk their way out of hefty damages. In the case of the Exxon Valdez oil spill of 1989, for example, Exxon spent more than a decade weaseling its way out of paying $5 billion in punitive damages to plaintiffs, which included more than 34,000 fishermen, natives, local governments, etc.

Exxon appealed a 1994 verdict in which an Anchorage jury awarded $5 billion in punitive damages to the plaintiffs; the damages were then halved to $2.5 billion. Then the company appealed to the Supreme Court, which capped damages at a little more than $500 million. (The Ninth Circuit Court of Appeals later ruled that the company was still obligated to pay $470 million for interest on the damages.)

BP claims it intends to pay for all rightful damages resulting from the spill: "We are taking full responsibility for the spill and we will clean it up and where people can present legitimate claims for damages we will honor them. We are going to be very, very aggressive in all of that," BP chief executive Tony Hayward told Reuters on Friday. Still, the company doesn't have the cleanest track record.

After the company was fined $87 million by the Occupational Safety and Health Administration for failing to correct hazardous practices related to a 2005 chemical explosion in Texas City, BP contested the fines. The company also appealed $100 million in damages which were awarded to 10 employees as a result of the chemical release. (Last month a federal judge overturned that verdict.)

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]]>BPenvironmentExxon Mobiloil spillBetsy SchiffmanFri, 30 Apr 2010 16:00:00 ESTRights to Old Comic Strip Characters Worth Millionshttp://www.dailyfinance.com/2010/04/29/rights-to-older-comic-book-characters-worth-millions/http://www.dailyfinance.com/2010/04/29/rights-to-older-comic-book-characters-worth-millions/http://www.dailyfinance.com/2010/04/29/rights-to-older-comic-book-characters-worth-millions/#commentsAnyone under the age of nine who is familiar with Charlie Brown probably wasn't introduced to the mopey character in the newspaper. More than likely, he or she has watched Charlie Brown TV specials or seen Peanuts-branded merchandise.

In fact, the readership for most of the classic, syndicated comics doesn't necessarily include children. The majority of newspaper readers are 55 or older. While many newspapers have eliminated less popular sections of the newspaper, most continue to run syndicated comics for fear of alienating their older readers.

"The whole newspaper industry is antsy," Tom Daning, managing editor for United Media, told CNN in 2006. "Many are scared to do anything to hurt circulation." Daning added that it's easier to drop a new comic strip than an old standard like Peanuts.

That doesn't mean some newspapers aren't trying. The San Francisco Chronicle said last month it planned to revamp the comics page in its weekend supplement, which includes a roster of indie comics including Friendship Town, instead of the predictable lineup of syndicated comics.

"You won't find any Family Circus or Marmaduke in here," the newspaper said in a blog post announcing the change. "This page of full-color comics will also include several fun activities for people who hate comics."

The reason for including indies in the weekend supplement, says Matt Petty, art director at the San Francisco Chronicle, is that the section is meant to appeal to a younger readership -- those for whom the decades-old syndicated comics does not appeal.

Comics as Profitable Brands

In the meantime, brand managers and marketers are having a heyday selling vintage comic-related merchandise. Earlier this week, E.W. Scripps (SSP), owner of the beloved Peanuts brand, said it is selling United Media Licensing to brand management company Iconix (ICON) and the estate of Charles Schulz in a $175 million cash transaction. Under the terms of the deal, which is expected to close at the end of the second quarter, Iconix will own 80% of the business, while the Schulz estate will hold the remainder. Though United Media owns the licensing rights to an array of brands from Dilbert to Good Night Moon, the majority of its licensing revenue is generated from deals involving the Peanuts characters. Retailers sell more than $2 billion worth of merchandise featuring United Media's licensed brands annually.

Although the news probably doesn't come as a surprise to many -- Scripps made it clear a couple of months ago that it was "exploring strategic options" for its licensing business -- the price might seem a tad low given that Iconix thinks it can generate $75 million in royalties a year from United Media Licensing. The implication is that the acquisition will completely pay for itself in a little more than two years.

From the looks of it, the potential upside for Iconix is great. There may be no shortage of merchandising opportunities for the Peanuts brand, even if few kids have ever read the comic strip. Betty Boop, the 1930s comic character who last made an appearance in the 1989 television special "Betty Boop's Hollywood Mystery," is alive and well and featured in print and TV ads for a range of products including Mercedes Benz and Coca-Cola. She even has her own set of banking products at Bank of America. Similarly, Popeye, who last appeared in a daily comic strip in 1994, is pitched by King Features Licensing (which also owns the licensing rights to Betty Boop) as the "No. 1 licensed character food brand in the world." King Features wasn't available to comment for this story, but it's fair to guess that both characters are quite profitable.

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]]>Betsy SchiffmanThu, 29 Apr 2010 16:20:00 ESTForeclosure Rates Rise in Most Citieshttp://www.dailyfinance.com/2010/04/29/foreclosure-rates-dip-in-hardest-hit-cities-but-rise-overall/http://www.dailyfinance.com/2010/04/29/foreclosure-rates-dip-in-hardest-hit-cities-but-rise-overall/http://www.dailyfinance.com/2010/04/29/foreclosure-rates-dip-in-hardest-hit-cities-but-rise-overall/#commentsFiled under: , ,

Foreclosure Rates Dip in Hardest Hit Cities, But Rise Overall Less than a month after President Barack Obama announced plans to revamp the federal mortgage assistance program, foreclosure rates in some of the country's hardest hit locales are finally showing signs of a slowdown, according to first-quarter numbers released by RealtyTrac.

Predictably, cities in California, Florida, Nevada and Arizona topped the list of metropolitan areas with the highest foreclosure rates, and California dominated with 10 of the 20 cities suffering the most foreclosure activity. But in 14 of those top 20 metro areas, foreclosure activity dropped on a year-over-year basis.

"The decreasing foreclosure activity in some of the nation's top foreclosure hot spots in the first quarter is largely the result of government intervention and other non-market influences, and not a sure signal that those areas are out of the woods yet when it comes to foreclosures," said James Saccacio, chief executive of RealtyTrac, in a statement.

But although most of the worst-suffering metro areas saw declines in foreclosure rates, the large majority of U.S. cities saw increases. Foreclosure activity rose in 77% of the markets tracked by RealtyTrac (159 of 206 metro areas), and nationwide, first-quarter foreclosure activity climbed 16% from the same period last year. Some cities experienced far more dramatic increases, including Columbia, S.C., where first-quarter foreclosure activity was up 171% from last year. And in Chicago, more homeowners reportedly lost their homes to foreclosures during the first quarter than in any other three-month period over the past five years. Less than three weeks ago, another report from RealtyTrac found that first-quarter bank repossession rates jumped 35% from 2009.

One possible reason for the localized declines in foreclosure activity, according to Saccacio, is a federal government program announced in March and launched on April 5 which is meant to encourage short sales and stem foreclosures. The program, which essentially pays homeowners to sell their underwater homes, may have caused lenders to delay foreclosures in areas where a short sale might cost them less, Saccacio suggested.

Meanwhile, there has been a rush of real estate activity ahead of the April 30 expiration of the federal home buyers' tax credits, but the increase in home sales has not driven prices up -- in fact, they are still slipping. Some analysts' projections suggest the housing market may not bottom out until 2011, while other economists think project that it may be a year or two before the residential real estate market regains some semblance of normalcy.

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]]>arizonacaliforniafloridaForeclosureshousingmortgagesnevadarealtytracBetsy SchiffmanThu, 29 Apr 2010 11:05:00 ESTBoycotts Over Immigration Law Could Hurt Arizona's Shaky Economyhttp://www.dailyfinance.com/2010/04/29/boycotts-over-immigration-law-could-hurt-arizonas-shaky-economy/http://www.dailyfinance.com/2010/04/29/boycotts-over-immigration-law-could-hurt-arizonas-shaky-economy/http://www.dailyfinance.com/2010/04/29/boycotts-over-immigration-law-could-hurt-arizonas-shaky-economy/#commentsFiled under:

There aren't a lot of people outside of Arizona who seem to support what is likely the nation's toughest immigration law.There aren't a lot of people outside of Arizona who seem to support what is likely the nation's toughest immigration law. The outrage over the legislation, which allows state police to check the immigration status of any suspicious-looking resident, has been widespread. Already, cities across the nation are calling for boycotts of Arizona after the law was passed on Friday. It's possible the Grand Canyon State may have done irreparable damage to both its reputation and the tourism industry, one of its largest revenue sources.

Criticism of the law has been both loud and resounding. President Barack Obama called it "misguided." Meghan McCain, daughter of Arizona Republican Senator John McCain, said the law is a "license to discriminate." Karl Rove, the political strategist behind former President George W. Bush, conceded that there could be "constitutional problems with the bill." And as another political strategist noted, the law makes "Arizona of 2010" look like "Alabama of 1963."

But it's not just public humiliation that Arizona could suffer. There are several boycotts underway, including one proposed in San Francisco, another in Los Angeles and one in Washington D.C. (Who knows how many more may be in the works.) Over the last 40 years, special interest groups have often mobilized to organize large boycotts. But the Arizona boycotts have the potential to deliver a serious financial blow to the state, partly because of Arizona's economic vulnerabilities and partly because of the scale and organization of the boycotts.

San Francisco May Cancel Contracts with Firms

In the case of the proposed boycott in San Francisco, the city's board of supervisors is reportedly planning on canceling any contracts with Arizona-based companies and prohibiting city employees from conducting business there.

"We know that we won't be sending any city employees to conferences in Arizona," San Francisco supervisor David Campos told the San Francisco Chronicle.

The chances of a boycott succeeding are greater when the buying decisions are in the hands of institutions as opposed to consumers, according to Brayden King, an assistant professor at the Kellogg School of Management, who has studied the effectiveness of boycotts.

"Consumers have a hard time changing their behavior," King says. "In as much as large-scale organizations are able to boycott, then it could impact the state's revenue because it doesn't leave anything up to consumers. If an association that planned to hold a convention in Phoenix or Scottsdale decides to cancel that convention, then that decision is being made for consumers."

Arizona Isn't in a Position to Lose Business

In general, though, King says consumer boycotts tend to be more harmful to the images of targeted organizations, but they can still have an indirect, long-term effect on sales.

And Arizona isn't really in a position to lose any business. The real estate market in Phoenix was among the hardest hit in the wake of the housing bubble. Not to mention, two of its most significant revenue sources -- income taxes and sales taxes -- are down by one-third since they peaked in 2007. And they aren't expected to return to 2007 levels until 2015. After the economy cratered a couple years ago, Arizona also saw a steep decline in its hospitality business as corporations cut back on conventions and trade shows.

"Right now our messaging is pretty simple: We're encouraging people not to boycott Arizona," says Debbie Johnson, president and CEO of Arizona Hotel & Lodging Association. "It's going to harm the 200,000 people who work in the hospitality industry in the state. Arizona has already been hit very hard over the last two years. We're just trying to protect the workers in the middle of this political decision."

If the boycotts don't work, the state still may be vulnerable to a labor drain if immigrants leave as a result of the new law. As recently as 2008, the state was estimated to generate $2.4 billion in tax revenue from immigrants.

Impact of Hispanic Residents on State Could Be 'Huge'

"You have to imagine the impact of Hispanic residents on that state is huge," says Larry Chavis, an economist and assistant professor of strategy and entrepreneurship at the University of North Carolina Kenan-Flagler Business School. "If people decide to up and move that could be serious."

So what can Arizona to do to repair the damage?

"I'm not sure they can," says King. "It's hard to imagine how they can do effective PR given that so many people disagree with the policy and the perceived wrong is so clear."

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]]>arizonaboycottsimmigrationBetsy SchiffmanThu, 29 Apr 2010 09:00:00 ESTAfter Tornado, Victims Fear Insurers Will Spin Themhttp://www.dailyfinance.com/2010/04/28/after-tornado-victims-fear-insurers-will-spin-them/http://www.dailyfinance.com/2010/04/28/after-tornado-victims-fear-insurers-will-spin-them/http://www.dailyfinance.com/2010/04/28/after-tornado-victims-fear-insurers-will-spin-them/#commentsFiled under:

As the nation's insurance adjusters descend on Mississippi and Alabama to assess the damage of last weekend's deadly tornado, one question that worries its victims is whether insurers will try to avoid covering claims related to the disaster.As the nation's insurance adjusters descend on Mississippi and Alabama to assess the damage of last weekend's deadly tornado, one question that worries its victims is whether insurers will try to avoid covering claims related to the disaster.

The tornado, which has already resulted in at least 12 deaths and destroyed nearly 1,000 homes, was given a rating of EF-4, the second highest tornado rating based on damage. Until insurers fully investigate the damage caused, it's not clear how they can avoid paying for it. But if previous disasters are any guide, insurers are adept at finding clever escape clauses.

Five years ago after Hurricane Katrina ravaged the southern coast of the U.S., many insurers denied homeowners' claims because the losses were caused by flooding rather than by wind and rain. (Wind and rain damage were covered, but flooding was not.) As a happy coincidence, many insurers posted record profits that year, thanks to snazzy little deals they made with European-based reinsurers, under which they were covered or reimbursed for their Katrina-related losses.

Similarly, the Eyjafjallajökull volcano in Iceland reportedly caused an estimated $1.7 billion in collective damages for airlines, but it's not clear how much of that will be covered by insurers. Turns out, most airlines' policies specify that the carriers must cover the cost of canceled flights, while insurers are responsible for damaged equipment.

Moody's, a credit ratings agency, said the financial impact of the volcano on the insurance would likely be muted for a variety of reasons. Agricultural losses probably won't be covered because the concentration of ash in the air is too low. Business interruption claims that result from undelivered packages will likely be denied because the damage must be material to trigger coverage. And airlines and airports probably won't be reimbursed for volcano-related losses since there wasn't any physical damage to their properties.

Increasing the Number of Exclusions

Another way insurers have learned to avoid payment, according to Amy Bach, executive director of consumer advocacy group United Policyholders, is that they've dramatically increased the number of exclusions in any given homeowners policy. "Homeowners policies used to look like blankets -- now they're more like Swiss cheese," Bach says.

Damages that might have been regularly covered even 10 years ago have probably tossed out in the wake of Hurricane Katrina. To make matters worse, the policies are often so confusing that homeowners may not understand their coverage. "Forget about normal people -- not even judges can make heads or tails of some of the language in these policies," Bach says.

As for deductibles, Bach says insurers have been known to low-ball the cost of repairs and tell homeowners that the damages aren't high enough to meet deductibles. A homeowner with a $10,000 deductible, for example, might be told by an insurer's contractor that the cost of replacing a repair is only $5,000, well below the homeowners deductible. Therefore, the insurer avoids responsibility for covering the repair.

Moving to Percentile Deductibles

Insurers have also increasingly switched policy holders to percentile deductibles as opposed to fixed dollar rates. Someone who might have had to pay a $500 deductible in the past, might now have to pay a 5% deductible. On a $25,000 repair, that would mean the homeowner pays significantly more out of their own pocket than they might have with a fixed-dollar deductible.

"It used to be a lot safer to trust insurance companies," says Bach.

But if it's nerve-wracking and frustrating for homeowners, it can be challenging for insurers, too. All it takes is one beefy natural disaster to wipe out a decade's worth of premiums, says Insurance Information Institute spokesman Michael Barry.

Private Insurers Wary of Disaster-Prone States

"If you look at states like Alabama, they've had problems getting private sector insurers to write down there since Hurricane Ivan [in 2004]. In disaster-prone states private insurers are reluctant to write there unless regulators let them share more of the risk with the policyholder," says Barry.

Although policyholders in high-risk locations may pay more for coverage and repairs, Barry says the alternative is not having coverage at all. Besides, he doesn't think last weekend's tornado will be nearly as problematic for homeowners or insurers as Hurricane Katrina.

"In many respects policyholders in Mississippi will be covered because this was a wind event," he says. "With Katrina, the issue was that a lot of policyholders weren't covered for flooding damage."

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]]>natural disasterstornadoBetsy SchiffmanWed, 28 Apr 2010 10:00:00 ESTIt's the Great Sale, Charlie Brown: Iconix Buys 'Peanuts' Licensinghttp://www.dailyfinance.com/2010/04/27/its-the-great-sale-charlie-brown-iconix-buys-peanuts-licensin/http://www.dailyfinance.com/2010/04/27/its-the-great-sale-charlie-brown-iconix-buys-peanuts-licensin/http://www.dailyfinance.com/2010/04/27/its-the-great-sale-charlie-brown-iconix-buys-peanuts-licensin/#commentsFiled under: ,

It sure looks like a sweet deal: E.W. Scripps (SSP), owner of the beloved Peanuts brand, is selling United Media Licensing to brand management company Iconix (ICON) and the estate of Charles Schultz in a $175 million cash transaction. Under the terms of the deal, which is expected to close at the end of the second quarter, Iconix will own 80% of the business, while the Schultz estate will hold the remainder. Though United Media owns the licensing rights to an array of brands from Dilbert and Good Night Moon, the majority of its licensing revenue is generated from deals involving the Peanuts characters. Retailers sell more than $2 billion worth of merchandise featuring United Media's licensed brands annually.

Although the news probably doesn't come as a surprise to many -- Scripps made it clear a couple of months ago that it was "exploring strategic options" for its licensing business -- the price might seem a tad low given that Iconix thinks it can generate $75 million in royalties a year from United Media Licensing.

One possible reason for the seemingly low price: The future value of the brand may be diminished by the fact that young people no longer read traditional comic strips like Cathy and Family Circus. Though Peanuts characters are still beloved by children, it's not because they read the comic strip in the newspaper every day as they might have in decades past. The majority of newspaper readers are 55 or older and newspaper circulation is steadily dropping. If children are familiar with Peanuts, it's more likely because they've seen the TV specials or the Peanuts-branded merchandise.

While many newspapers have nixed their stock pages and eliminated less popular sections of the newspaper, most continue to run decades-old syndicated comics for fear of alienating their readers, but young people aren't reading them.

"The whole newspaper industry is antsy," Tom Daning, managing editor for United Media, told CNN in 2006. "Many are scared to do anything to hurt circulation." Daning added that it's easier to drop a new comic strip than an old standard like Peanuts.

That doesn't mean some newspapers aren't trying. The San Francisco Chronicle said last month it was dropping the predictable slate of syndicated comics in its weekend supplement in favor of a roster of indie comics including Friendship Town.

"You won't find any Family Circus or Marmaduke in here," the newspaper said in a blog post announcing the change. "This page of full-color comics will also include several fun activities for people who hate comics."

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]]>charles schulzE.W.Scrippsiconixmergers and acquisitionsnewspaperPeanutsCartoonUnited MediaBetsy SchiffmanTue, 27 Apr 2010 12:26:00 EST'Avatar' DVD Sales Are Out of This World: Is It the Last Hurrah for Discs?http://www.dailyfinance.com/2010/04/26/avatar-dvd-sales-are-out-of-this-world-is-it-the-last-hurrah/http://www.dailyfinance.com/2010/04/26/avatar-dvd-sales-are-out-of-this-world-is-it-the-last-hurrah/http://www.dailyfinance.com/2010/04/26/avatar-dvd-sales-are-out-of-this-world-is-it-the-last-hurrah/#commentsFiled under: , , ,

'Avatar' DVD Sales Are Out of This World: A Last Hurrah for Video Discs?Hollywood has been sitting a death-bed vigil for DVDs for a long time now. Once a ridiculously high-margin, fat-profit business, sales of discs have tumbled hard over the last few years. The decline has been so severe and so rapid that many industry watchers say the technology is waltzing toward extinction -- and some think it could happen as early as this year.

While it seems a little morbid (and premature) to call the demise of DVDs by year's end, studios have good reason to worry. DVD sales fell nearly 7% in 2008, according to information firm SNL Kagan, and in 2009, the decline in DVD sales has been pegged at 13% by Adams Media Research.

Despite those grim numbers, however, at least one movie is selling furiously, regardless of the format. Avatar sold 2.7 million Blu-Ray discs and 4 million DVDs in the four days after it hit shelves on April 22, generating roughly $130 million in revenue. This comes more than three months after the movie's theatrical release and more than two months since high-quality pirated copies became available on file-sharing sites, The Blu-Ray sales of Avatar are poised to topple the previous record set by The Dark Knight, which has sold 2.9 million Blu-Ray discs since December 2008.

Ironically, Avatar's DVD release happened to coincide with the slowest box office weekend of the year, in which U.S. movie ticket sales totaled an estimated $100 million, or 23% below Avatar DVD sales. (As an odd side note, ticket sales of Avatar enjoyed a modest boost after the DVD was released.)

"People Aren't Building DVD Libraries Anymore"

Although one could argue that the success of Avatar on DVD proves that moviegoers will indeed buy discs, at least one analyst thinks this disc-buying frenzy is a one-time freak event that may not hold much significance beyond its weirdness.

"Avatar is really one of those once-in-a-blue-moon films that everyone is excited about and interested in. Titanic was probably the last movie to do that and that was in 1997. It's an anomaly. I expected the movie to do well on Blu-Ray," says Wade Holden, an analyst at SNL Kagan. Once Avatar DVD sales dry up, the market for DVDs is likely to return to its anemic norm, says Holden.

"People aren't building DVD libraries anymore. They aren't going back and buying old titles [on DVD] ... And I think one area where you're really going to see a huge effect early is in the rental business. You could see more people rent movies on-demand through their cable provider. It's an easy, one-off transaction," says Holden.

But until broadband and storage technology has advanced enough to make digital distribution of movies easy and efficient for most Americans, DVDs aren't going anywhere.

"It's going to be a long time before DVDs go away," says Holden. "I'd say it will be another 10 years' time. Fortunately for the DVD, there's a lot of technology catchup involved with digital distribution. Right now, it takes half a day to download a Blu-Ray-quality film. If a collector with a large library of DVDs were to convert that library to digital, those DVDs have terabytes and terabytes of information. You would need to have fiber to the home and a way to download movies in a reasonable amount of time to make that work."

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]]>AvatarBlockbusterBlu-Raybox officedvdrentraktime warnerBetsy SchiffmanMon, 26 Apr 2010 10:25:00 ESTWorried About a Double Dip in Housing? It May Be Here Alreadyhttp://www.dailyfinance.com/2010/04/23/worried-about-a-double-dip-in-housing-it-may-already-be-here/http://www.dailyfinance.com/2010/04/23/worried-about-a-double-dip-in-housing-it-may-already-be-here/http://www.dailyfinance.com/2010/04/23/worried-about-a-double-dip-in-housing-it-may-already-be-here/#commentsFiled under: ,

House for sale with reduced priceWhile many home sellers fret over the possibility of a double dip in the real estate market, at least one economist thinks there's no sense in worrying -- it's too late. The double dip is here, says Paul Dales, of Capital Economics, an investment research firm.

Existing home sales are up -- they climbed nearly 7% in March -- but prices have dropped over the last three months, culminating with a 3.4% decrease in February, according to the Federal Housing Finance Agency. All told, prices are down 2.7% from November and 13.3% below the market peak in April 2007.

A double dip, according to Dales, would likely entail another round of price declines over a sustained period, perhaps a year or two of modest drops. The dip would be spurred by the lack of income and job growth. (Last week jobless claims unexpectedly jumped -- possibly because of the Easter holiday, while personal income is stagnant.)

Busy Market but Lower Prices

Dales doesn't expect all doom and gloom -- he thinks the home buyer tax credits may have created a frenzy of home buying activity, which could result in higher home sales from April through June -- but as soon as those transactions are cleared, "the combination of weak demand and high supply (due to around 6 million newly foreclosed properties) will mean [prices] fall back further, perhaps by at least 5% by the end of next year," Dales wrote in a note to clients.

Oddly, though, all signs point to a bustling market: new home sales in March unexpectedly shot up 27%, marking the biggest monthly increase in 47 years. Earlier this week, the Mortgage Bankers Association said that its Market Composite Index, which measures loan application volume, jumped 13.6% from last week. Of course, much of the activity could be a last minute rush to take advantage of home buyer tax credits before they expire at the end of the month.

The prospect of a double dip is discouraging, but it's not certain. And the National Association of Realtors, a trade group with a bullish leaning toward real estate, thinks the premise is all wrong.

"All of the major price measures have shown a broad stabilization of home prices for the past few months," says Walter Molony, spokesperson for NAR. "Fourteen out of twenty metro areas reported in March are showing price gains. If it weren't for the fact that 35% of sales were distressed, typically selling at a discount of 15% relative to traditional homes in the same area, we'd be seeing broad gains."

Molony says that based on NAR's "middle-ground" assumptions, the group expects modest price growth by the second half of the year.

And even if the housing market does experience a longer-term decline in home prices, it may not signal yet another Great Depression or a spiraling financial crisis. According to Dale, another drop in house prices will "undermine the strength and sustainability of the already fragile economic recovery."

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]]>housingBetsy SchiffmanFri, 23 Apr 2010 12:00:00 ESTWhy Hulu's Plans to Cut Off Freeloaders Is a Bad Ideahttp://www.dailyfinance.com/2010/04/22/why-hulus-plans-to-cut-off-freeloaders-is-a-bad-idea/http://www.dailyfinance.com/2010/04/22/why-hulus-plans-to-cut-off-freeloaders-is-a-bad-idea/http://www.dailyfinance.com/2010/04/22/why-hulus-plans-to-cut-off-freeloaders-is-a-bad-idea/#commentsFiled under: , ,

Hulu has long considered switching to a subscription-based model in the wake of very sluggish online ad sales.The thing about Hulu is that the online video service always seemed a little too good to be true. (Really, it is possible to watch "Ishtar" in its entirety for free online.) The venture, funded by NBC (GE), Fox (NWS) and Disney (DIS), is reportedly planning to change that, with the introduction of a trial subscription service, which would cost roughly $10 per month.

After the subscription roll out, which could happen as early as May 24, Hulu will continue to make five of the most recent episodes of TV shows such as "Glee" or "Saturday Night Live" available. But for older episodes, viewers must pay for the premium service, according to multiple reports.

As DailyFinance reported last year, Hulu has long considered switching to a subscription-based model in the wake of very sluggish online ad sales. Although the privately held joint venture claimed in March that it's been profitable for six months, that hasn't stopped network television execs from griping about the pitiful profits squeezed out of online video.

'Time to Start Getting Paid'

"It's time to start getting paid for broadcast content online," News Corp. deputy chairman Chase Carey reportedly said at a trade conference late last year. "I think a free model is a very difficult way to capture the value of our content."

The perplexing part of Carey's statement is that free works just fine for broadcast television. In fact, free content had been -- and continues to be -- pretty profitable on TV, even if broadcast television ratings are on the decline. Meanwhile, online advertising should be significantly more targeted, effective and valuable to advertisers, but it doesn't sell as well. (As Jeff Zucker famously said, the networks are trading in "analog dollars for digital dimes.")

But if networks can't figure out a way to profit online from the same content that's being broadcast on TV, the answer is not bullying viewers into paying up. Market prices aren't determined by how much a seller wants to profit. They're determined by how much the buyer is willing to pay. And it's not clear that people will be all that jazzed to pay to watch content on Hulu, especially if the website isn't really offering much additional value for the monthly fee.

Problem With Packaging and Selling

The fact that networks can't sell ads for their online content suggests they're not packaging or selling it right. Therefore, it seems silly to punish viewers for the networks' own lack of imagination. (Anyone who has watched programs on the ABC website, for example, has probably noticed that almost all the ads are house ads for other ABC programs.)

A Hulu spokesperson wasn't available to comment.

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]]>freemiumhuluNews CorpBetsy SchiffmanThu, 22 Apr 2010 19:00:00 ESTMicrosoft Earnings Jump 35%, Topping Estimateshttp://www.dailyfinance.com/2010/04/22/microsoft-earnings-jump-35-topping-estimates/http://www.dailyfinance.com/2010/04/22/microsoft-earnings-jump-35-topping-estimates/http://www.dailyfinance.com/2010/04/22/microsoft-earnings-jump-35-topping-estimates/#commentsFiled under: , ,

Microsoft earnings CEO Steve BallmerMicrosoft (MSFT), the world's largest software company, said Thursday its fiscal third-quarter net income shot up 35% from last year, buoyed by the most recent release of its Windows operating system.

Net income for the third quarter ended March 31 was $4 billion, or 45 cents per share, up from $3 billion, or 33 cents per share last year. Revenue for the quarter was $14.5 billion, up 6% from $13.6 billion for the year-ago period.

That beat analysts expectations, which on average called for earnings of 42 cents per share on $14.4 billion in revenue, according to a Thomson/Reuters survey. Looking forward, the company said it expects operating expenses of $26.1 billion for the full year ending June 30, 2010.

Microsoft was widely expected to benefit from a rebound in PC sales as well as the October release of its Windows 7 operating system. A recent study from market research firm IDC found that first-quarter PC sales jumped 20% from last year. Similarly, early indications suggested Windows 7 sales were strong -- in fact, the its first weekend they were up 234% over first-weekend sales of Windows Vista.

Signs of Increased IT Spending

"Windows 7 continues to be a growth engine, but we also saw strong growth in other area like Bing search, Xbox LIVE and our emerging cloud services," said CFO Peter Klein, in a prepared statement.

Microsoft execs hinted that they've seen broad signs of an economic recovery in increased IT spending, but much of the company's growth during the quarter was generated by the Windows division. Windows-related revenue grew to $4.42 billion, up 28% percent from $3.45 billion last year.

Another area where Microsoft said it has seen signs of beefed up spending is in online advertising. "The outlook for online advertising appears to be improving and we expend the trend to continue," said CFO Peter Klein on the earnings conference call.

Struggling in Mobile OS Competition

The numbers don't necessarily reflect a dramatic improvement, though. Revenue for the online services segment grew to $566 million, up 12% from $507 million last year.

Although Microsoft has long enjoyed a dominant market position for PC operating systems, it's struggling to maintain its 15% market share for mobile-phone operating systems, according to market research firm comScore. And after investing heavily in its Bing search engine, Microsoft has made little progress in taking market share from search giant Google (GOOG).

"The shares are seeming attractive from a valuation perspective, but I have a hard time getting behind this stock given that Microsoft is generally a loser in every segment it competes in," says Curtis Shauger, an analyst with Caris & Co. "It's minor, and its glacial, but over the long-term, I struggle with it as an investor. The company is losing share in servers, browsers and databases. Basically, the only two segments where it's holding or growing its market share is search and video games, and it's unclear how sustainable that is."

Indeed, despite the strong earnings, investors clearly expected better, and pushed the shares down in after market trading by about $1.40 to $30, or 3.5% lower, in after-hours trading.

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]]>Bingsoftwarewindows 7Xbox360Betsy SchiffmanThu, 22 Apr 2010 17:00:00 ESTGreek Deficit Is Worse Than Expected, Debt Downgradedhttp://www.dailyfinance.com/2010/04/22/greek-deficit-is-worse-than-expected-debt-downgraded/http://www.dailyfinance.com/2010/04/22/greek-deficit-is-worse-than-expected-debt-downgraded/http://www.dailyfinance.com/2010/04/22/greek-deficit-is-worse-than-expected-debt-downgraded/#commentsFiled under: ,

Greek debtJust when it seemed like the financial crisis in Greece couldn't get any worse, it did. Eurostat, the Luxembourg-based statistical agency for the European Union, revised its deficit forecast for Greece to 13.6% of gross domestic product, up from 12.9%. Greece's deficit is exceeded in the eurozone only by Ireland, where the deficit is 14.3% of GDP.

Eurostat also hinted that the 2009 data could be worse still as the numbers may not reflect off-market swaps and the surplus of social security funds for 2009.

The ripple effect of the news was immediate: oil prices tumbled; the dollar rose; gold fell; and Greek civil servants staged a 24-hour strike against expected job cuts and recently announced austerity measures. Goldman Sachs (GS) warned that Greece may cut or delay payments to bond investors even if the government decides to accept a bailout package from the European Commission and International Monetary Fund.

Also on Thursday, Moody's Investor Services downgraded its rating on Greece's sovereign debt and warned that further downgrades could be in the offing. The credit ratings agency says that the reduction in its rating to A3 from A2 is based on the view that there is a significant risk that the country's debt may only stabilize at a higher and more costly level than previously thought.

Bailout Uncertain

Earlier this month the 16 eurozone nations pledged to chip in nearly $30 billion to provide Greece with a lifeline in an effort to calm the markets over Greece's spiraling deficit. The IMF said it would throw in another $10 billion. The hitch was that the Greek government had to ask for the cash, and Greece did not express any interest in a bailout. At the time the lifeline was offered, Greece's finance minister said it was more interested in a market solution.

"The Greek government has not asked for the activation of the mechanism even though this is already immediately available," George Papaconstantinou reportedly said. "The aim is, and we believe we will continue to borrow unhindered on the markets." According to one report, the proposed eurozone bailout package might not even be legal under European Union rules.

Athens was reportedly interested in raising anywhere from $1 billion to $4 billion from U.S. investors, which was scaled-down from the original wish to sell $10 billion in bonds.

Hypothetically, if the Greek government were to accept the bailout offer, all leaders of the eurozone nations would have to agree to it, which would require an emergency meeting.

In the meantime, Greece requested talks with the IMF and the European Union to open talks on aid. Those talks started on Wednesday.

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]]>debtgreecegreece crisisGreeceCrisissovereign debtSovereignDebtBetsy SchiffmanThu, 22 Apr 2010 11:00:00 EST