Since Apple (NASDAQ: AAPL)'s iTune virtually rules the music download business, it is not surprising that some people in the music industry would challenge its dominance from time to time. One of those times is now.
Artists are beginning to realize that the iTunes process of selling individual songs is hurting their album sales. According toThe Wall Street Journal, "Label executives, managers and artists chafe against the iTunes policy that prevents them from selling an album only." Indeed, some artists like Kid Rock have stayed away from iTunes and their sales have done quite well.
The plan of selling music without iTunes is only likely to last so long. Apple's 99 cents per song format has proved irresistible to most customers. Bands that make a great deal of money may be able to risk staying off iTunes, but if they have one or two albums that do poorly, they will come back.
Perhaps the only way that labels and artists will break Apple's hold on music is to bring an antitrust suit. Apple does control enough of the market to make a case. Who knows?
Douglas A. McIntyre is an editor at 247wallst.com.
A sluggish U.S. economy that grows at 3.3% in Q2? What's going on here?
The U.S. Commerce Department Thursday revised its Q2 GDP growth estimate to 3.3% from the previously-estimated 1.9%, but economist David H. Wang remains a skeptic regarding the appearance of an economic recovery.
"Don't write home or e-mail home that we have 'blue skies' ahead regarding the U.S economy because the skies remain uncertain and stormy looking. If you take away the export gains, the economy is still pretty weak," Wang said. "Also, one quarter does not a recovery make, and we'll get final data on Q2 GDP in September [September 26]."
Economists surveyed by Bloomberg News had expected the preliminary Q2 GDP statistic to total 2.7%. The U.S. economy grew at a 0.9% annualized pace in Q1 and contracted 0.2% in Q4 2007. Q2 GDP data fleeting?
Wang said an improvement in exports and inventory accumulation strengthened GDP in Q2, but other factors suggest "it will be difficult, if not impossible to match that GDP growth rate in Q3 and Q4."
TheStreet.com's Jim Cramer says the only action in the sector is that the rumor mill is spinning overtime.
There are tons of ridiculous stories that can be written in the Naked City. Notice that every day we are blessed with a story about how there are three private-equity firms examining Lehman Brothers (NYSE: LEH) (Cramer's Take) and Neuberger Berman (NYSE: NEU) (Cramer's Take). I think I have read that story a dozen times now.
You can list them, too: Blackstone (NYSE: BX) (Cramer's Take), KKR (NYSE: KFN) (Cramer's Take), Apollo (NASDAQ: AINV) (Cramer's Take), maybe Cerberus. What are they going to do, deny it? "No, we are not looking at it?" Their investors would love that: "Well what the heck are they doing with our money?" would be the reaction of investors if they issued denials. I predict weeks more of phantom tire-kicking of Lehman by nonexistent private-equity firms.
How about private equity about to swarm over collateralized debt obligations? Usual cast of characters there. Right? Come on, those stories are a penny a dozen. Every day I read about them. But nobody, other than Lone Star, is doing anything, anything at all on this front. If there were buyers, you can bet that Lehman and AIG (NYSE: AIG) (Cramer's Take) wouldn't be in the woods, lost, hopeless, with tons of bad European paper.
It's a policy wonk truism arguing that when uncertainty abounds, sometimes the best action is no action. And, one could argue, today's potential home buyers and sellers would be wise to heed the Beltway axiom.
A case of the Case-Shiller jitters
Economist Peter Dawson was hoping for Case-Shiller house price statistics in July that were easier on the eye. Dawson was disappointed: the Case-Shiller Index of 20 major metropolitan areas plunged 15.9% from July 2007 (pdf). Prices in the 10-city index plummeted a record 17.0% from July 2007.
"The July Case-Shiller data is about as bad as it gets. It shows a housing sector where prices remain in free-fall in just about every market, save a few, such as Charlotte, North Carolina and Dallas," Dawson said. "The housing bottom has not occurred and it's not near."
So given the above, what's the best stance regarding housing? For sellers, Dawson said if one has to sell for a job relocation, a sale invariably has to occur. But for those who have a three-year or longer sales horizon, postponing a sale may net a better price, providing the U.S economy recovers in 2009, he said.
For buyers, Dawson said "time is on the buyer's side" in most markets. "At this stage, lease or rent through at least June 2009," Dawson said. "In most major markets, prices are likely to be lower by next spring than they are today."
The economic downturn has meant lower sales for retailers such as department store chain Dillard's Inc. (NYSE: DDS) and apparel retailer Talbots Inc. (NYSE: TLB). On Wednesday both companies reported wider second-quarter losses.
Little Rock, Ark.-based Dillard's said it it lost $38.3 million, or 51 cents a share, in the quarter, compared with a loss of $25.2 million, or 31 cents a share, in the second quarter of the previous year. Same-store sales fell 4%, and overall revenue dropped to $1.65 billion from $1.69 billion a year ago.
Results included a gain of 15 cents per share, mostly from the sale of a company airplane, and store closing and other charges of 8 cents per share.
Analysts surveyed by Thomson Financial had expected a loss of 54 cents per share on revenue of $1.62 billion.
Dillard's said cost-cutting efforts in the second quarter were insufficient to offset disappointing results, but that the company would continue to close under-performing stores and cut back on advertising and general expenses.
Shares of Dillard's jumped 48 cents, or 4%, to $11.85 in early trading, before settling back down. Shares are down about 38% year to date.
The auto industry is deep in the weeds right now, particularly in the United States. American manufacturers are hemorrhaging money -- General Motors (NYSE: GM) alone has lost $30 billion in the last three years -- as high gas prices and an (unofficial but very real) recession forces consumers to abandon their American-made trucks and SUVs by the millions.
Even with the pronounced shift toward smaller and more efficient cars, the overall auto market in the U.S. is shrinking thanks to the poor economy, and most manufacturers are selling fewer vehicles. But one company stands out as an exception to the rule of declining sales: Honda Motor Ltd. (NYSE: HMC). In the first seven months of 2008, Honda increased its sales by over 3%. By comparison, Chrysler lost 22%, GM fell 17%, Ford (NYSE: F) lost 14% and even mighty Toyota (NYSE: TM) saw a decline of 7%.
An interesting quote in The New York Times from Tetsuo Iwamura, the president of Honda's North American operations, sheds light on how Honda has managed this impressive feat. Honda, Iwamura said, "is a philosophy-driven company." And what is Honda's philosophy? According to Iwamura, "we want to make Honda the company that society wants to exist."
From an American perspective, this is an extraordinary statement. American automakers have followed a very different philosophy for many years, one in which fat and easy profits from poorly designed and hopelessly wasteful SUVs take precedence over the long term health of both the auto industry and society as a whole. But Detroit is suffering now for its short-term approach, while Honda is showing both consumers and investors the value of planning for the long run. And at $32 a share and a P/E of 10, Honda looks like a good long-term buy.
TheStreet.com's Jim Cramer says this bank on the FDIC's problem list is big enough to matter.
How much was made of the FDIC's "problem bank" list yesterday? Frankly, a little too much -- the list could be 200 banks long and be insignificant or it could be five banks long and be of incredible importance.
Is there any doubt that that the FDIC can handle 100 banks of the $1 billion to $2 billion variety? There shouldn't be. They can look the other way on most of them if they have to, or close them sequentially while asking for more capital along the way.
But if BankUnited (NASDAQ: BKUNA) (Cramer's Take) with $7 billion in deposits goes under, that'd makes headlines. It would be particularly newsworthy because it is in a visible location (the Miami area) and would cause a flood of stories about older people worried about their deposits -- pensioners -- and a big round of stories about how horrible Florida real estate really is. Then you get stories about how IndyMac and BankUnited represent the "system," and when you add that to the woes of Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) -- which are now directly making it harder to get cheap mortgage money because they are paying through the nose for their own money and buying fewer mortgages, just want we don't need -- and you get headlines galore about how bad things are. When you couple that with the inaction of Treasury on the FNM/FRE front, you are going to be in for a test of the July 15 lows.
From the end of March to the end of June, problem banks, as they are defined by the FDIC, rose from 90 to 117. These are banks with a high percentage of "non-current" loans.
The trouble is that the agency may not have enough money to cover the possible upcoming bank closings. So the FDIC said it "might have to borrow money from the Treasury Department to see it through an expected wave of bank failures," according toThe Wall Street Journal.
At least two implication arise from this. The most obvious is that the credit crisis is spreading. More banks are having trouble with mortgage, business and commercial real estate loans. Given the spreading effects of the recession, that is not odd.
The other is the extent to which the taxpayer will be hit because of lax bank management. Money from the Treasury is eventually money from every man, woman and child in the country. But who cares? After bailouts of banks and brokerages and possible help for car companies, what is a few more billion?
Douglas A. McIntyre is an editor at 247wallst.com.
Today's housing news on new home sales in July sounds eerily similar to the post I wrote yesterday about July existing home sales. In both cases, we are given a quick headline that sounds like good news, but once you dig into the details a little deeper you realize that the news is just not as pretty as it first sounds.
Let's first take a look at the positive headline: New home sales rise in July. Great, this is exactly the sort of news that the market needs to hear. After all, weakness in the housing market has been a major catalyst to the current economic slowdown, so any good news is like a breath of fresh air. During July the market saw a jump of 2.4%. Not too shabby.
In the margins of Barron's this week there was a smallish note about the government of Venezuela nationalizing Cemex's (NYSE: CX) operations in that country. For some reason the government of Hugo Chavez thinks that stealing all of the private companies in 'his' country will lead to greater prosperity for 'his' people.
While it is a long journey from Venezuela to Zimbabwe, with its exponential inflation rate and a near-total economic breakdown, every journey begins with a first step. Mr. Chavez will move much closer to this inevitable outcome if he continues on his chosen path.
Motley Fool has a good write-up on the subject in which they detail the sour relations between Chavez and foreign businesses. Chavez recently offered to re-open negotiations with Cemex, but since he has already decided to take the company, that offer is suspect -- you can't negotiate with a gun pointing at you. To date, Chavez has nationalized the telecommunications industry, electricity, and oil. How many steps down the road is that? Why would anyone want to invest in Venezuela?
This story may sound quite strange to some people, as the perks at the Google campus have been known to be among the best in the industry, if not the best. But the blogosphere was abuzz after Valleywag reported on Sunday that Google Inc. (NASDAQ: GOOG) will be taking dinners off the menu. Not just that, but while breakfast and lunch will remain free, the rumor had it that there would also be "No more tea trolley. No more snack attack in the afternoon."
The initial reaction to this may be, really, this is what they're whining about? Don't they know many Americans would love to trade with them and "worry" about such things instead of worrying about paying their mortgage or losing their jobs? Why concentrate on a story of "less riches"?
Well, one possible reason this has grabbed the attention of many after all is because of the scary signal it may give. Could this be a sign that the economic hardship has reached even tech darling Google? Are there no safe havens? And with recent concern that the dollar rally could hurt Google's result, the 'no dinner' story has indeed been blown out of proportion.
Dell (NASDAQ: DELL), a PC maker whose rivals include Apple (NASDAQ: AAPL) and Hewlett-Packard (NYSE: HPQ), is due to report second-quarter numbers on Thursday, August 28, after the market close. It's going to be interesting to see what the company says about demand levels for its PCs. We're still working our way through a tough economic period, so in some respects, this will be a sign of how the consumer is faring.
Of course, Dell has been trying to stage a comeback lately even without regard to the economy. As with any once-hot growth stock, there comes a time when the capital appreciation starts to slow and gains are digested. Dell's shares have cooled over the last several years. Dell's stock has decreased over 21% over the five-year timeframe, and 29% over the last three years.
Lately, though, the stock has been stronger and, appreciating over 20% in the past six months, and nearly 7% in the past month alone.
Dell is expected to report a double-digit increase in the bottom line this Thursday. The call is for 36 cents per share, according to Earnings.com. Last year at this time, Dell posted earnings of 32 cents per share. Looking at the history of Q2 results, I'd say it's a decent bet that the company meets expectations. If management were to blow the estimates out of the water, it would be impressive, but my gut says that won't happen. According to Trey Thoelcke, top-line revenues should expand by roughly 8%.
The dollar's rally resumed Tuesday, but for reasons that may give stock investors cause for concern, at least short-term.
The U.S. economy didn't propel the dollar higher -- the economy is in its worst condition in at least a decade. Nor did the prospect of rising interest rates strengthen the dollar -- the U.S. Federal Reserve has taken a pause in its rate-cut cycle, but may have to cut rates again this fall, if the U.S. economy weakens further.
The catalyst for the dollar's renewed rally? Concern that Europe's economy will fall into a recession, compelling the European Central Bank to cut interest rates, which would make the dollar more-attractive.
Traders increased their positions in the dollar Tuesday after Germany's most-widely followed index of business confidence, the Ifo institute's business climate index, fell to a three-year low of 94.8 in August from 97.5 in July, Bloomberg News reported Tuesday.
On the heels of the above report, the dollar strengthened 1.5 cents versus the euro to $1.4593, and 1.8 cents versus the British pound to $1.8352. The dollar also rose about one-half yen to 109.79 versus Japan's yen.
Currency trader Andrew Resnick, a dollar skeptic due to the dollar's many false breakouts to the upside, told BloggingStocks Tuesday he'll become a dollar bull if the rally holds through the U.S. Labor Day holiday period. Resncik added that he's presently flat, or has no open currency trading positions.
TheStreet.com's Jim Cramer says that even in lousy markets -- and this is one of them -- you can find stocks to buy.
When nothing's working, something's working. I know sounds counterintuitive. but there is simply no reason to think, as bad as this market is -- and it is really, really bad -- that there isn't something to buy.
But are they really hurting General Mills (NYSE: GIS) (Cramer's Take)? Can I see selling Procter & Gamble (NYSE: PG) (Cramer's Take) because of them? After we know the price increases are all baked in? And don't hit me with that strong-dollar stuff, because GIS doesn't have that much overseas exposure. Same with Pepsi (NYSE: PEP) (Cramer's Take): This is a national company with an international arm that is generating oodles of cash and doesn't have as much bad commodity exposure as it did a few months ago.
Two organizations, one projection: a forecast of 86.9 million barrels of oil per day consumed in 2009.
The International Energy Agency and OPEC arrived at the same projection, suggesting that, in economist Peter Dawson's interpretation that "2009 is going to be a year of a slowdown in oil consumption growth, which is significant."
Moreover, Dawson is quick to highlight what's important in the above: slowing oil consumption growth in emerging markets. Oil consumption in the United States has been falling for more than two years -- it's projected to drop 3.1% in 2008 and another 2.3% in 2009. It's oil consumption in the developing world, primarily China and India, that really moves prices, Dawson said. Oil Monday closed up 52 cents to $115.11 per barrel.
'A small victory, that we'll take'
Right now it appears, for the first time in more than five years, consumption growth (not to be confused with a consumption decline) will slow, he said.
"It's a small victory, that we'll take, regarding the oil markets," Dawson said. "For the first time in a while we'll see some demand relief internationally, and that has to help lower oil prices."
Since Apple (NASDAQ: AAPL)'s iTune virtually rules the music download business, it is not surprising that some people in the music industry would challenge its dominance from time to time. One of those times is now.
A sluggish U.S. economy that grows at 3.3% in Q2? What's going on here?
There is an old axiom among lobbyists 
The economic downturn has meant lower sales for retailers such as department store chain 
The auto industry is deep in the weeds right now, particularly in the United States. American manufacturers are hemorrhaging money -- 
From the end of March to the end of June, problem banks, as they are defined by the FDIC, rose from 90 to 117. These are banks with a high percentage of "non-current" loans.
Today's housing news on 
In the margins of Barron's this week there was a smallish note about the government of Venezuela nationalizing 
This story may sound quite strange to some people, as the perks at the Google campus have been known to be among the best in the industry, if not the best. But the blogosphere was abuzz after Valleywag reported on Sunday that 
The dollar's rally resumed Tuesday, but for reasons that may give stock investors cause for concern, at least short-term.
Two organizations, one projection: a forecast of 86.9 million barrels of oil per day consumed in 2009.
Apple (AAPL) iTunes loses artists - an antitrust problem?
U.S. Q2 GDP of 3.3% likely to be fleeting
Cramer on BloggingStocks: Don't bother with the private-equity chatter 
