Monthly ArchiveFebruary 2007



Investing 28 Feb 2007 05:02 pm

Computer Meltdown “Star” of Stock Market Plunge

Bad stock market days happen. When you get runs like we’ve been watching these last few months we shouldn’t be surprised to witness a considerable drop like yesterday’s. Two groups who have egg on their faces are the NYSE (NYE) and Dow Jones (DJ). The stock exchange couldn’t handle the massive volume leaving many trades unprocessed. Today the NYSE asked specialist firms to remain open after the closing bell to finish processing trades. Tuesday wasn’t a shining moment for the now publicly-traded exchange.

For Dow Jones their credibility to communicate vital market data took a huge hit. Tuesday, Dow Jones’ computers couldn’t keep up with the massive volume. Their index calculations fell behind what was actually happening. When technicians switched to a backup system the data caught up causing a 178-point drop. That set into motion automatic computer trades linked to the Dow Jones index.

I expect trading houses to build their own DJIA calculators on their own computers so prevent this from happening again. That will cut into Dow Jones’ subscription revenue. I also expect a few trial lawyers to launch a few suits to recoup clients’ losses.

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Food 26 Feb 2007 07:36 am

Schultz: Starbucks Everywhere Isn’t So Hot

Endless Starbucks

Last week, a memo from Starbucks (SBUX) founder and chairman Howard Schultz leaked onto the internet. The title briskly states: “The Commoditization of the Starbucks Experience.” In it he writes about “Some people even call our stores sterile, cookie cutter;” automatic espresso machines ruining the site lines to the baristas, and even the lack of coffee smells due to freshness packaging. The “commoditization” of the brand has opened it up to “small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers.”

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Private Equity 25 Feb 2007 12:57 am

Texas Utility in Private Equity Crosshairs

TXU logo

Private equity’s thirst can’t be quenched. Kohlberg Kravis Roberts and Texas Pacific Group are reportedly working on buying Texas utility TXU Corp (TXU). Depending on the finally agreed upon stock price the deal could be worth $44 billion making it the largest leveraged buyout in U.S. history. It would top the $33 billion purchase of HCA last year.

In order to get regulatory approval TXU will scrap plans to build eight coal-fired plants and join a corporate group urging carbon dioxide emission regulation. They hope to keep environmentalists off their back.

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Personal Finance 23 Feb 2007 09:52 pm

Millions Forgetting Phone Tax Refund

"Where's my refund?" picture

When the IRS lets you keep more of your money don’t be like the ten million who have filed already neglecting to get an easy thirty bucks minimum:

More than 10 million taxpayers who have filed their federal tax returns so far this year failed to claim the telephone excise tax refund, a one-time refund that’s worth up to $60, the IRS said Friday. And about half of those returns were filed by a tax preparer, the IRS said.

Last year, Treasury announced it would stop collecting the tax on long-distance service and would refund taxes billed from Feb. 28, 2003, to Aug. 1, 2006. The government decided to issue refunds after federal courts ruled the telephone excise tax was illegally applied to long-distance service.

Taxpayers who paid excise taxes on long-distance or “bundled” service have the option of claiming a standard amount, based on the number of personal exemptions on their tax returns, or the actual amount of taxes paid.

To claim the standard amount — which ranges from $30 to $60 — all taxpayers have to do is check a box on their tax return. But as of Feb. 16, about 30% of taxpayers who had filed didn’t claim the refund, the IRS says.

And IRS Commissioner Mark Everson says the IRS was surprised that many tax preparers failed to request the refund for their clients. “We want all taxpayers entitled to this refund to get it, whether they are using a tax preparer or doing the return themselves,” he said.

Make sure you check that box. You don’t need to have a mortgage, have kids, or any other loophole tucking away in the massive U.S. tax code. You just need to have paid for long distance (and the illegal tax). If you already filed you’ll need to file an amended return. Yes, it’s more paperwork, but it’s your money. Who would you rather trust with the cash, you or someone in Washington buying “Bridges to Nowhere?”

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Technology 23 Feb 2007 07:30 pm

Apple and Cisco Learn to Share

Apple iPhone

Apple (APPL) and Cisco (CSCO) decided spending oodles on lawsuits would get in the way of making better tech. So they agreed to share the iPhone name and “will explore opportunities for interoperability in the areas of security, and consumer and enterprise communications.” Isn’t that what Cisco wanted? So Steve Jobs caves, right? Maybe, but he wins in the end. Look at the two iPhones. Which one would you buy? Sleek and sexy versus a 1993 remote control. And how are you going to watch a movie on Cisco’s gadget?

Retail 22 Feb 2007 07:38 am

Whole Foods/Wild Oats Form Organic Superpower

Wild Oats logoWhole Foods logo

Organic foods have gone a long way from being sold in cooperatives near college campuses by ex-hippies. The idea that the industry wouldn’t become as big business as the mainstream food chain had that buried years ago when Whole Foods (WFMI) started raking in billions. Yesterday, the natural-foods chain announced it would buy competitor Wild Oats (OATS) for $565 million. Whole Foods thinks the purchase will get them back on the growth track. Missing analysts’ targets have hurt the stock. With leadership shakeups Wild Oats has been in some turbulence which gave John Mackey’s Whole Foods the opportunity to grow via acquisition. It will take about two years to integrate the Wild Oats stores into the larger Whole Foods.

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Private Equity & Uncategorized 21 Feb 2007 10:34 pm

Party Man Steven Schwarzman at the Top of the Mountain

Stephen Schwarzman

Blackstone Group CEO Steven Schwarzman has been declared the poster boy of private equity by Fortune. A little of it might be the lavish party he threw for 500 of his friends. But most of it comes from the billions Blackstone is raising and spending to buy companies like Pinnacle Foods and Equity Office Properties. When you’re king of the hill it’s not a surprise people take you seriously even though you don’t really know what you’re talking about.

The Fortune article peers into the Monday Blackstone meeting where all their deals are examined. From buyouts to real estate to hedge funds everything is poured over. With $124 billion in purchasing power Blackstone’s weekly meetings won’t get boring anytime soon.

For more private equity goodness here’s Fortune’s “Private Equity Power List” which just ranks firms’ money-raising power along with peHUB’s Dan Primack complaining about the magazine’s methodology. Then there’s John Carney who’s tired of business mag lists.

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Airlines & Uncategorized 21 Feb 2007 09:30 am

Midwest Can Withhold Shareholder List

Midwest Airlines logo

Midwest Airlines (MEH) scored a minor victory in fighting off AirTran’s (AAI) $345 million bid. A New York judge ruled Midwest didn’t have to hand over a list of shareholder names to AirTran. In the spin Midwest sees it as Wisconsin corporate law taking precedence while AirTran yelped about “full disclosure.”

It won’t matter how many names AirTran gets. If they don’t up their offer from $13.25/share there will be no deal. Midwest closed yesterday at $13.80/share.

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Technology 21 Feb 2007 07:43 am

London 2.0

London is hot in the tech world again. It’s so hot it’s called “London 2.0.” To me that sounds like the local visitors bureau trying to sound too hip. Still, London is hosting the Future of Web Apps conference this week featuring Digg’s Kevin Rose and Michael Arrington of TechCrunch. There’s fire to that heat.

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Economy 20 Feb 2007 06:41 pm

Adam Smith Graces New British Note

Adam Smith's pin factory on British banknote

Adam Smith and his pin factory will grace the 20£ British banknote. What, you don’t know about the pin factory? It’s Smith’s example of the power of the division of labor:

To take an example, therefore,*19 from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade),*20 nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.*21 I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.

Without the division of labor or knowing the importance of the division of labor our modern world wouldn’t exist. We’d still be in huts trying to find enough hours of daylight to put food on the table. Smith’s image on money is a tremendous and appropriate honor.

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[Image via newscast.]

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