Eduardo Kaplan and Paul Vigna discuss the significance of Disney’s merger deal with Marvel,acquisition of BJ Services, encouraging news from the and China’s equities sell off.
Archive for August, 2009
Consumer electronics, Social Networking, Technology / Comments Off
It’s that time of year when Apple unveils its next generation of the popular iPod music player. The company sent around the above invitation to members of the media saying an event would be held on Sept. 9. But in characteristic Apple fashion, you don’t learn what it is about until the day arrives.
That hasn’t stopped the bloggers who have been predicting recently that a camera could be added to the new iPods.
Slashgear.com cites rumors among suppliers that a camera is coming to the iPod. It also says there is speculation that iTunes will have some compatibility with social networks. Wired.com also gives a good rundown of what to expect at next week’s media confab.
Credit Crisis, Credit Markets, Economy, Federal Reserve, Treasury, U.S. Dollar, Uncategorized, Wall Street, Washington / Comments Off
A wrongheaded effort to exert more Congressional authority over the Federal Reserve unfortunately has gained momentum with the apparent support of a key House Democrat.
The Wall Street Journal quotes Rep. Ron Paul, R-Texas, as saying he has a commitment from Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, to push ahead a bill that would subject the U.S. central bank to more audits.
Even if the emerging legislation specifically carves out the creation and implementation of monetary policy from Monday morning quarterbacking, otherwise known as Government Accountability Office audits, there likely will be enough left in the bill to make people around the world wonder about the Fed’s independence of action, especially in reaction to a crisis.
Commodities, Crude Oil, Entertainment, Media, Mergers & Acquisitions, Natural Resources / 1 Comment
What do Disney’s bid for Marvel Entertainment and Baker Hughes’ bid for BJ Services have in common? Disney-Marvel is all about cartoon content; Baker Hughes-BJ is about oil services. Two very different worlds, the one fun, the other gritty – although Marvel will introduce grit to Disney’s Magic Kingdom. More on this below. There are some parallels in the two deals. In each case, a bigger company is filling a glaring gap, and is doing so at a crucial inflection point in the economy: assets in theory remain fairly cheap but possibly not for much longer as consumer confidence improves, manufacturing output increases and the price of oil gets support. First, let’s tackle Baker Hughes’s $5.5 billion acquisition of BJ Services. The cost savings should be fairly easy to pull off, assuming the merger is managed well: Baker Hughes estimates cutting overlapping corporate overhead costs will help achieve $75 million in savings in the first year, with more savings thereafter as other parts of the combined company come together. The goal is to create a more comprehensive one-stop provider of services to oil companies, especially those tackling major projects in far-flung locales where dealing with a single service provider is far easier than juggling several. Baker Hughes-BJ creates a formidable competitor to the likes of Halliburton and Schlumberger, as DJN colleague Angel Gonzalez notes. In the $4 billion Disney-Marvel pact, we have the owner of cuddly cartoon characters adding a world-class stash of edgy cartoon heroes. So, Disney aims to become a one-stop cartoon shop for the tender 3-year-old and tough pre-teen, male and female alike. (Disney tends to skew female at present.) There are differences in price. Disney is forced to pay a fat premium for Marvel because the latter has so brilliantly preserved its characters’ edge and freshness. At first blush Baker Hughes/BJ seems priced more reasonably – a reflection of the economy’s remaining vulnerability: manufacturing is improving but very slowly, so prices of commodities such as crude oil are still on the soft side. That said, the market thinks Baker Hughes may be overpaying and its shares are down today. Disney shares are down a bit, too, as people worry about its credit rating, among other things. Certainly, Baker Hughes and BJ are two peas in a pod compared with Disney and Marvel – two very different media firms. As my DJ Market Talk colleague Max Murphy points out, Disney’s traditional constituents may be in for a shock once Marvel is absorbed into Walt’s culture: In Marvel’s universe, they write, “people die, sometimes use drugs and occasionally reveal themselves as homosexual, among other scenarios meant to create a gritty true-to-life world for its heroes and villains to inhabit. Will topics like genocide and racism prove taboo for the Mouse House, and will DIS sanitize comicdom to the horror of legions of devoted readers?” I would guess Disney’s bosses are too smart to harm Marvel. Disney will change.
Television ratings on ESPN were reportedly up markedly from a year ago for the annual Little League World Series, which finished up a couple of weeks of play on Sunday with the team of youngsters from a California town taking home the annual baseball championship.
My son Kenny theorizes it’s because these actual boys of summer (almost all boys, a few girls) are playing only for the love of the game (and access to junk food and video games). Kenny says fans find it a welcome relief from the cyncism that affects professional sports, from the steriods use in baseball’s not-to-distant past to the seemingly constant falls from grace of individual athletes.
It didn’t hurt this year’s viwership comparions that the year-ago numbers competed against the summer Olympics.
Some high school football games are already broadcast on ESPN channels. After the television success of the Little League World Series, will television show us more kids competing in sports?
Back in the day when I was a police reporter at a small daily newspaper, one of the continuing stories we wrote about was the battle within the Philadelphia crime family that had been run by Angelo Bruno. Like Don Corleone in the movie “The Godfather,” Bruno didn’t believe in the family getting involved in narcotics and instead kept the business focused on bookmaking and loansharking, with the occasional shakedown of local business people for protection money.
I hadn’t heard much about the Philly crime family until recently, when reports indicated that it had somehow gotten itself involved in a troubled subprime mortgage lender from Dallas – one that recently went into bankruptcy for the second time in about ten or so years. The Philadelphia Inquirer had a nice piece in the Sunday paper that begins to unravel this tangled tale. Click here to read the story.
Credit Crisis, Credit Ratings, Regulation, Securities & Exchange Commission / Comments Off
If you had any doubt there was (and may still be) a problem with U.S. government regulation of credit-rating agencies, this will convince you: An in-house watchdog for the Securities and Exchange Commission says the regulator approved some unfit rating firms. As DJN colleague Sarah Lynch reports, at least one rating outfit had inadequate managerial resources and may have provided inaccurate information in its application for SEC approval, among other things. What this means is some investors received assessments of credits from wobbly rating agencies which bore the SEC’s approval imprimatur. It’s not a shock but it is another disappointment in the financial system. The report from SEC Inspector General H. David Kotz doesn’t name the firm or firms he feels shouldn’t have received the SEC’s okay. Sarah notes there are only 10 nationally recognized credit-rating agencies.
Initial Public Offerings, Investment Banking, Mortgages, Real Estate, Wall Street / 2 Comments
Once upon a time when financial services companies needed to shore up their capital base, they tapped the public markets. But the near meltdown of the financial system last year that felled some banks and brought others to their knees have made that old-fashioned approach very difficult. Particularly for banks that don’t have initials like “J.P.” in front of their names. And especially for little banks that might want to go public.
Enter Plains Capital, a small financial institution based in Texas that hopes to test market acceptance of the small, regional bank looking to do an initial public offering. Plains is an interesting company. It is the 10th largest bank in Texas (and while Northeasterners might scoff at that, the company does say in its preliminary prospectus that if Texas were its own country, it would be the 11th largest economy in the world). Assets are $4.2 billion and it sees decent growth potential. It has a mortgage origination business and the bank is quick to note that it sells all of the mortgages it creates, which reduces the investment exposure in bad mortgages that crippled many banks and mortgage banks. It was the number six mortgage lender in Texas.
And it is in the advisory business through First Southwest Securities. The crux of that business is public finance and related advice to municipalities. First Southwest ranked number two in the number of municipal bond offerings for the five-year period ended last year, it said in its prospectus.
Economy, Japan, Technology, Tomorrow's News Today Video, Unemployment / Comments Off
Paul Vigna and Madeleine Lim discuss the increase in consumer spending, thte higher sales forecast from Intel and the consequences of Japan’s rise in unemployment.
Consumer Products, Economy, Luxury Goods, Retailing, Technology / 1 Comment
It’s become clear the past few weeks – as retailers, gadget-makers and food producers have revealed financial results – that Americans are buying three things – and eschewing much else: cheap trendy clothes and accessories for their teenagers (Aeropostale, Buckle); cool mobile and light-weight devices (Dell); and basic food staples (Heinz, Hormel.) Otherwise, they’re saving money, and that’s good. Americans need to save. Thanks to advances in healthcare, we’re going to live longer, G-d willing, and enjoy (or endure) long retirements. For that, we’ll need money. Our kids will go to colleges that seem hellbent on raising tuition fees each year, and for that we most certainly will need money. And we need to stop eating out, for the sake of our wallets and waistlines. Buying food at supermarkets and cooking it at home makes sense, and this is what Americans are doing. It’s also emerging that companies are generally beginning to spend, or think about spending – witness Intel’s ability to forecast better-than-previously-expected third-quarter sales. As I noted yesterday in a blog about home builder Toll Brothers, Americans are also dipping a toe into the housing market – but they’re doing so at beaten-down levels, which is prudent. One hopes mortgage loan purveyors are requiring 20% downpayments this time around… Being a contrarian, I’m not particularly pleased by the fact that people are inching back to Tiffany & Co. It’s good for Tiffany, of course, but I’m not sure Americans should feel ready to buy luxury goods just yet. Continue reading…