Economy 27 Apr 2007 11:38 am

Economy Slumps, Stagflation Watch Begins

by Sean Hackbarth

The faltering housing market placed its stamp on the overall economy with the news that GDP slowed to 1.3% growth in the first quarter of 2007. The negative effects of the housing slump are understandable. What should concern is the possibility of stagflation, inflation plus a stagnant economy:

An inflation gauge tied to the GDP report and closely watched by the Fed showed that core prices — excluding food and energy — rose at a rate of 2.2 percent in the first quarter, up from a 1.8 percent pace in the fourth quarter. Another measure tracking all prices jumped by 3.4 percent in the first quarter, compared to a 1.0 percent decline, on an annualized basis in the fourth quarter.

With President Bush’s troubled the last thing he wants is a slumping economy

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Personal Finance 26 Apr 2007 07:52 am

Schwab Offers New High-Interest Checking Account

by Sean Hackbarth

Earning interest on your checking account no longer requires you to have tons of money sitting in the bank. (That whole “you need money to make money” vicious circle.) Charles Schwab is offering a no-fee checking account paying 4.25% no matter what your balance is.

Moving to a new checking account can be a pain. If you have direct deposit–and why not?–you have to make sure your paycheck gets into the new account. Then if you do electronic bill paying or have automatic withdrawals you have to change those. That will keep Schwab from stealing a lot of customers from traditional banks. If you’re about to change banks take a look at what Schwab is offering. Now, if you’re a Schwab customer you have a way to earn some interest on your non-invested funds while having greater liquidity.

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Investing 28 Feb 2007 05:02 pm

Computer Meltdown “Star” of Stock Market Plunge

by Sean Hackbarth

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

by Sean Hackbarth

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

by Sean Hackbarth

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

by Sean Hackbarth

"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

by Sean Hackbarth

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

by Sean Hackbarth

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

by Sean Hackbarth

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

by Sean Hackbarth

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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