Randomly Noted

In the fast-paced financial market world, history gets started more quickly all the time.

Feb. 10. Twelve days ago. History.

So while enthusiasts for the growth of the U.S. economy surely want to take heart from the data on U.S. consumer confidence delivered earlier today by the Conference Board, the chilling reality is that date – Feb. 10. The Conference Board tells us in a press release: “The cutoff date for February’s preliminary results was Feb. 10, 2011.”

That means that the Conference Board’s Consumer Confidence Index, reported today at 70.4 for February, up from 64.8 in January, can’t take into account a particular lack of confidence expressed today through the price action in certain U.S. financial markets.

Continue reading…

BP PLC has reached the point in the Gulf oil spill crisis in which its responsibility for the environmental disaster permits outsiders to feel entitled to comment on every aspect of the oil giant’s business.

So a public debate ensues about whether BP should continue to pay a dividend to investors when the oil is still leaking and the eventual level of BP’s liability and costs can’t yet be known.

And, as cited in an article by Suzanne Vranica in today’s Wall Street Journal, a debate ensues about whether the company should have spent a reported $50 million for image-improvement advertising on television.

On that latter point, whether you think the spending ethically justified or not, it certainly is premature.

Despite the image experts Vranica lists as being hired by BP, the final line of the article to me is the most telling.

“Until the leak is stopped, no amount of advertising or PR will help,” said Chris Gidez, U.S. director of crisis communications at Hill & Knowlton NY, as quoted by the Journal.

For BP that stop has to happen before any image repair work can be successfully undertaken.

Nothing can compete with the images of the continually spewing oil from the ocean floor and the oil-drenched birds.

Fraud is fraud, so it’s silly to try to decide on degrees of venality amongst the various types.

Still, it seems particularly loathsome to try for ill-gotten gains off the back of disasters and the tragedies of others.

Case in point: the Securities and Exchange Commission today warned investors to be wary of scams that seek to exploit the big oil spill in the Gulf and the efforts, which no doubt will be expensive and time-consuming, to clean up.

“While some of the companies touting their role in the cleanup may be legitimate, others could be bogus operations that are only looking to clean out unsuspecting investors,” The SEC and market regulator FINRA said in a jointly issued press release.

It’s ghoulish enough that some investors, upon their hearing of some unexpected tragedy, quickly turn their attention to the business, and therefore investment, implications of the disaster.

That’s the way of the world. Still, scamming off tragedy seems beyond the pale.

The SEC and FINRA provided a list of what to look for in potential Gulf oil spill-related scams. The list includes:

Company claims to have products that effectively help clean up oil spills and/or fix  ecosystems. Company claims to have contracts or an expectation of contracts with BP for the cleanup. Or that claim some involvement with one of the federal government agencies on the scene.

The number of automobiles on the planet will double by 2050 to two billion and 40% of those cars at mid-century will be electric cars.

So said Peter Voser, the chief executive of Royal Dutch Shell, at the Wall Street Journal’s ECO:nomics conference in Santa Barbara, Calif.

Along the way there will be room for all sorts of alternatives, he said.

Airlines have a number of different financial variables they have to worry about to remain profitable – filling seats (not easy in a recession), controlling fuel costs (they try to at least partially hedge but when oil prices whip around, that’s problematic) and funding large pension plans.

Delta Airlines offered us a reminder this morning to the challenges of pension plan obligations when it said its pension costs are expected to rise by $450 million next year.

Continue reading…

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.