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Morning Links
Tweet Share on Facebook April 22, 2009 CommentSteve Case is econ-tweeting!
If you got excited about those surprisingly strong bank earnings, Minyanville reminds you why you're wrong.
And Morgan Stanley bucks that trend (while blaming improvement in credit markets that cost the bank $1.5 billion in revenue as credit spreads tightened).
Freddie Mac CFO found dead in apparent suicide.
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Failed Bank Tour!
Tweet Share on Facebook April 21, 2009 CommentNPR's Planet Money blog links to a photo essay of failed banks in Missouri, just a couple of the 25 U.S. banks that have failed so far this year.
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Why Twitter Advertising Could Be A Huge Success
Tweet Share on Facebook April 21, 2009 Comment (9)I've been using Tweetie's great Twitter app for the iPhone this week (check out the handy bookmarklet for super-easy linking) after moving up from Twitterrific. While I'm scrolling through my recent tweets, I actually notice: There's no advertisement.
And you know what? For the first time ever, in any medium, I sort of missed it. The arguments for and against hosting ads on Twitter are still raging, and the company still hasn't shown its hand when it comes to a real business plan. But I'm betting Twitter will surprise everyone if it can get its act together connecting users with advertisers for a couple of reasons:
It's honest. If you host an ad, mark it as such (Twitterrific does), and no problem. A (small) number of ads don't clutter up my feed and if free services mean a pitch or two, well, I'll suffer through it just like I do on Facebook and The New York Times. I'm not talking about experience-killing ads like Twitter spam or marketers pretending to be users to infiltrate my feeds. Well-defined, unobtrusive ads are a separate animal, and unlike banner ads, I actually notice them when they're mixed in with my tweets.
I can tell advertisers what I want. I'll warily admit it: Serving up advertising based on my hashtags might actually be welcome. If I'm getting excited about #susanboyle, an iTunes link to her (possible) duet with Elaine Paige would actually be a help. Since I'm the one having the conversation and choosing to join a group tweeting the same, why (again) would a single ad nestled amid my latest tweets and addressing something I'm legitimately interested in be a problem? The entire concept of Twitter is so specific and the discussion is so user-controlled that it should almost be a gift for advertisers. I'm telling them what I want. I have to pick the hash, and find out who else is using it. That weeds out inconsistent searches and should eventually wrap up my interests like a gift for anyone who wants to sell me something. So does using multiple hashes per tweet.
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IMF: Global Financial Crisis Cost $4.1 Tril
Tweet Share on Facebook April 21, 2009 CommentThe International Monetary Fund has released its latest Global Financial Stability Report, and guess what it doesn't show much of?
Pick a category, and you find signs of stress. Emerging markets? Check. Their banks face "liquidity and solvency pressures." Credit risk? Check. Lending standards are still tightening even after a global wave of looser money.
Government fixes help, but aren't doing enough. From the report: "Policy actions have prevented an even deeper crisis, but the limited market improvement to date has been insufficient to prevent the onset of the adverse feedback loop with the real economy."
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Oracle Buys Sun After IBM Balks
Tweet Share on Facebook April 20, 2009 CommentAfter merger talks with IBM disintegrated, the price for Sun Microsystems (which started at $10 billion before being reduced by IBM from $10 a share to $9.40) finally ended at $7.4 billion -- with Oracle as the buyer. Under the deal today, Sun shareholders will get $9.50 a share.
Early reactions:
- S&P cuts ORCL to hold and left its price target at $20 saying, "While acquisition of the Java programming language and Solaris operating systems would offer strategic benefits, we are concerned about ORCL's entry into hardware and the impact it could have on operating margins. We think that the company can afford the transaction, but are concerned by operational challenges."
- CNET's Gordon Haff says the industry's structure is changing: "To get the bigger picture here you have to view it in the context of what's going on within the system vendor landscape more broadly. At the risk of overstating things, the system vendor landscape is being reconstituted into big, highly integrated companies that can do it all. This is how essentially all computer companies used to be, but that way of business gave way to the horizontal industry structure epitomized by the likes of Microsoft and Intel."
- Microsoft CEO Steve Ballmer told Reuters he was "very surprised" by the deal.
- Larry Ellison's storied buyout machine is still whirring.
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Amazon Can Go Higher: Citi
Tweet Share on Facebook April 20, 2009 Comment (1)At least somebody is getting a V-shaped recovery.
Back in early November, Citi analyst Mark Mahaney downgraded the online retailer which made some sense at the time since its shares were slumping and the company was slashing guidance. He downgraded at $52, and by Nov. 20 shares had fallen to around $35.
But then a funny thing happened: Amazon shares came roaring back.
Since the start of the year, Amazon shares have already rebounded more than 50 percent to just above $78. After that run (which, compared to the rest of the market, could easily seem overheated) is it time to pare back? No, says Mahaney. Unlike other recent upgrades, he says Amazon isn't "things are getting Less Worse" call. Below we sum up his 3 reasons to keep buying AMZN:
1) Margins could recover faster than expected. Lower retail discounting, more efficient operations and a better return on marketing cash could all help push results above expectations.
2) Who else are you going to buy? Mahaney says Amazon's organic revenue growth is likely to hit 23 percent, about double Google's and a world away from falling revenue at eBay and Yahoo.
3) Top-line growth may be more sustainable. International growth, less competition (eBay again), and, yes, the Kindle, could all surprise on the upside, he says.
The stock is pricey, no doubt. But here's Mahaney's valuation case:
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Theme Park Wars: Disney Edging Out Universal, But Everybody Is Losing
Tweet Share on Facebook April 17, 2009 Comment (7)It's The Mouse Vs. The Movies in the theme park fight, and right now the rodent seems to have a slight upper hand (paw?).
On its blog (sub. req.), Pali Research analyst Richard Greenfield takes a look at theme parks through the lens of GE's earnings (home to the NBC Universal Studios park franchise), and sees Disney coming out ahead in what looks to be a very difficult 2009.
Pali says GE theme park attendance declined 11 percent year-over-year, while Walt Disney World managed to hold traffic flat with a year ago during the March quarter. Pali says Disney is stealing visitors from NBC Universal and Seaworld, and luring a good chunk of vacationers with aggressive promotions.
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Green Stocks: Are Things Looking Brighter?
Tweet Share on Facebook April 17, 2009 CommentIt has been an undoubtedly tough year for almost all green stocks, but a few recent stories show a more solid foundation for the industry is starting to take root in the U.S.
The broad future of green investing got a bit more secure today after the Environmental Protection Agency solidified its position on the dangers posed by carbon and several other pollutants. It declared greenhouse gasses a threat to public health and welfare. From the NYT:
The Environmental Protection Agency on Friday formally declared carbon dioxide and five other heat-trapping gases to be pollutants that threaten public health and welfare, setting in motion a process that for the first time in the United States will regulate the gases blamed for global warming.
The E.P.A. said the science supporting its so-called endangerment finding was “compelling and overwhelming.” The ruling triggers a 60-day comment period before any proposed regulations governing emissions of greenhouse gases are published.
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Rosetta Stone IPO Soars
Tweet Share on Facebook April 16, 2009 Comment (1)Shares of Rosetta Stone, the language instruction company, jumped almost 44 percent from an initial price of $18 to $25.55 in late-morning trade. It's the third IPO this month (but only the fourth this year), and the respectable performance by new entrants so far is an positive sign that solid companies can still raise capital in the skittish equity markets. Here's a look at April's IPO have trade on Day 1 so far:
Online education firm Bridgepoint Education (BPI) - IPO on 4/15 - 6 percent gain
Chinese game maker Changyou.com (CYOU) - IPO on 4/2 - 25 percent gain
Rosetta Stone (RST) - IPO on 4/16 - 44 percent gain
Numbers like those are definitely encouraging. Even if the above deals were conservatively priced at the outset (Bridgepoint did cut its IPO price before its debut), they show demand is slowly outpacing fear in another formerly shunned corner of the market.
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Today In Real Estate Mayhem
Tweet Share on Facebook April 16, 2009 Comment (2)A few quick notes from the latest phase of the real estate bust. The commercial sector is still getting worse.
1. Mall operator General Growth Properties files Chapter 11. The basics: $25 billion in mostly short-term debt was too much for the company, which runs 200 malls in 44 states. The filing, while not unexpected, says two things: Debt-strapped companies are still being squeezed thanks to a lack of lending, and the damage happening in the retail sector is not letting up.
2. JP Morgan's results. Dow Jones quotes CEO Jamie Dimon on the call: "In general, the losses [in commercial real estate] are going up and I think if you talk about the whole system...you are going to see rapidly rising charge-offs in real estate loans."
3. The problem is national. From the Fed's latest "beige book" economic conditions update (via FT Alphaville): Commercial real estate investment activity is being hampered by worsening credit availability “that is very close to a complete absence of lenders.”
Bottom line: Commercial real estate is going to be a bank headache for a long time (and will be mixed, or possibly eclipsed, by rising losses on credit cards).
