Monthly Archives: February 2012
Greece Burns the Mid Night Oil on Debt Talks; Just B4 ECB Meeting Tomorrow
Your Fucking Dead: European Debt Crisis Solved
Some how i missed this very important piece of news out of the ECB as reported by the WSJ. This proposed debt swap will dramatically change the European crisis…the bears are fucking dead.
Comments »BlackRock’s Fink: Investors Should be 100% in Equities
Investors should have 100 percent of investments in equities because of valuations and higher returns than bonds, said Laurence D. Fink, chief executive officer of BlackRock Inc. (BLK), the world’s largest money manager.
Investors who seek the safety of treasury bonds will have minimal returns and will not be able to meet their needs with the U.S. Federal Reserve expected to keep interest rates low, said Fink, who in 1988 co-founded the New York-based manager with $3.5 trillion of assets. By contrast, equities are trading at the lowest valuations in 20 or 30 years.
“I don’t have a view that the world is going to fall apart, so you need to take on more risk,” he said in an interview with Bloomberg Television in Hong Kong today. “You need to overcome all this noise. When you look at dividend returns on equities versus bond yields, to me it’s a pretty easy decision to be heavily in equities.”
Read the rest here.
Comments »ALERT: SHARES OF DMND ARE BEING “DE-COCKED”
Down $16 to $20.
Comments »Der Spiegel: I Feel Duped On Climate Change
The saga continues as Spiegel Online publishes an English translation from the prominent Social Democrat and former German Environment Minister and CEO of the renewable energy group RWE Innogy.
Excerpts from the interview are published below.
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Will reduced solar activity counteract global warming in the coming decades? That is what outgoing German electric utility executive Fritz Vahrenholt claims in a new book. In an interview with SPIEGEL, he argues that the official United Nations forecasts on the severity of climate change are overstated and supported by weak science.
SPIEGEL: You are an electric utility executive by profession. What prompted you to get involved in climatology?
Vahrenholt: In my experience as an energy expert, I learned that the Intergovernmental Panel on Climate Change (IPCC) is more of a political than a scientific body. As a rapporteur on renewable energy, I witnessed how thin the factual basis is for predictions that are made at the IPCC. In one case, a Greenpeace activist’s absurd claim that 80 percent of the world’s energy supply could soon be coming from renewable sources was assumed without scrutiny. This prompted me to examine the IPCC report more carefully.
SPIEGEL: And what was your conclusion?
Vahrenholt: The long version of the IPCC report does mention natural causes of climate change, like the sun and oscillating ocean currents. But they no longer appear in the summary for politicians. They were simply edited out. To this day, many decision-makers don’t know that new studies have seriously questioned the dominance of CO2. CO2 alone will never cause a warming of more than 2 degrees Celsius (3.6 degrees Fahrenheit) by the end of the century. Only with the help of supposed amplification effects, especially water vapor, do the computers arrive at a drastic temperature increase. I say that global warming will remain below two degrees by the end of the century. This is an eminently political message, but it’s also good news.
SPIEGEL: You make concrete statements on how much human activity contributes to climatic events and how much of a role natural factors play. Why don’t you publish your prognoses in a professional journal?
Vahrenholt: Because I don’t engage in my own climate research. Besides, I don’t have a supercomputer in my basement. For the most part, my co-author, geologist Sebastian Lüning, and I merely summarize what scientists have published in professional journals — just as the IPCC does. The book is also a platform for scientists who apply good arguments in diverging from the views of the IPCC. The established climate models have failed across the board because they cannot cogently explain the absence of warming.
SPIEGEL: You claim that the standstill has to do with the sun. What makes you so sure?
Vahrenholt: In terms of the climate, we have seen a cyclical up and down for the last 7,000 years, long before man began emitting CO2 into the atmosphere. There has been a warming phase every 1,000 years, including the Roman, the Medieval and the current warm periods. All of these warm periods consistently coincided with strong solar activity. In addition to this large fluctuation in activity, there is also a 210-year and an 87-year natural cycle of the sun. Ignoring these would be a serious mistake …
SPIEGEL: … but solar researchers are still in disagreement over whether the cycles you mention actually exist. What do you think this means for the future?
Vahrenholt: In the second half of the 20th century, the sun was more active than it had been in more than 2,000 years. This “large solar maximum,” as astronomers call it, has contributed at least as much to global warming as the greenhouse gas CO2. But the sun has been getting weaker since 2005, and it will continue to do so in the next few decades. Consequently, we can only expect cooling from the sun for now.
SPIEGEL:It is undisputed that fluctuations in solar activity can influence the climate. Most experts assume that an unusually long solar minimum, evidenced by the very small number of sunspots at the time, led to the “Little Ice Age” that began in 1645. There were many severe winters at the time, with rivers freezing over. However, astrophysicists still don’t know the extent to which solar fluctuations actually affect temperatures.
Vahrenholt: Many scientists assume that the temperature changes by more than 1 degree Celsius for the 1,000-year cycle and by up to 0.7 degrees Celsius for the smaller cycles. Climatologists should be putting a far greater effort into finding ways to more accurately determine the effects of the sun on climate. For the IPCC and the politicians it influences, CO2 is practically the only factor. The importance of the sun for the climate is systematically underestimated, and the importance of CO2 is systematically overestimated. As a result, all climate predictions are based on the wrong underlying facts.
SPIEGEL: But you are doing exactly what you criticize climatologists of doing: Using a thin body of data, you make exact predictions. In your book, you estimate the sun’s influence on the climate down to the last 0.1 degrees. No one can do that.
Part 2: ‘Dozens of Solar Researchers Agree with Me’
Vahrenholt: I don’t claim that I know precisely whether the sun is responsible for a 40, 50 or 60 percent share of global warming. But it’s nonsense for the IPCC to claim that the sun has nothing to do with it.
SPIEGEL: On balance, you predict a global cooling of 0.2 to 0.3 degrees Celsius by 2035. Why such a risky prediction?
Vahrenholt: If you want to revitalize the deadlocked debate, you have to have the courage to name a number. And we derive this number from scientific studies on climate history to date.
SPIEGEL: So your contention that we are wrong about global warming is merely a provocation?
Vahrenholt: No. I mean it very seriously, and I know that dozens of solar researchers agree with me. I am perfectly aware of the defamation I will have to listen to in the near future. The climate debate also has some of the trappings of an inquisition. I’m curious to see which truth ministry will now initiate proceedings against me. Perhaps it’ll be the Potsdam Institute for Climate Impact Research, which is headed by Hans Joachim Schellnhuber, an adviser to the chancellor.
SPIEGEL: You claim that the standstill in global warming since 2000 has been caused in large part by a simultaneous decline in solar activity. But, in fact, the sun behaved relatively normally until the middle of the century, only becoming noticeably quieter after that. How does this fit together?
Vahrenholt: There are two effects: the declining solar activity, as well as the fluctuations in ocean currents, such as the 60-year Pacific oscillation, which was in a positive warm phase from 1977 to 2000 and, since 2000, has led to cooling as a result of its decline. Their contribution to the change in temperature has also been wrongly attributed to CO2. Most of all, however, the last sunspot cycle was weaker than the one before it. This is why the sun’s magnetic field has continued to weaken since 2000. As a result, this magnetic field doesn’t shield us against cosmic radiation quite as well, which in turn leads to stronger cloud formation and, therefore, cooling. What else has to happen before the IPCC at least mentions these relationships in its reports?
SPIEGEL: What you neglect to mention is that it hasn’t been proven yet that cosmic radiation, which is shielded by the sun at varying degrees of effectiveness, truly leads to more cooling clouds on Earth. So far, it is only a hypothesis.
Vahrenholt: It’s more than that. The Cloud Experiment, headed by physicist Jasper Kirkby, has been underway at the CERN particle research center near Geneva since 2006. The initial results of tests conducted in a chamber in which the earth’s atmosphere was simulated showed that cosmic particles do indeed lead to the formation of aerosol particles for clouds.
SPIEGEL: But the aerosols demonstrated in the Cloud Experiment are much too small. They would have to grow before they could actually serve as condensation germs for clouds. Whether this happens in nature is still an open question. You present this as a fact.
Vahrenholt: You will find many correlations between cloud cover and cosmic radiation in the book. I’d like to know why the IPCC doesn’t thoroughly examine this mechanism. My guess is that the answer to this question would jeopardize the entire foundation of the IPCC predictions.
SPIEGEL: Nevertheless, you should be more careful with prognoses on future solar activity. In 2009, US scientists predicted that there would be no sunspots for years. In fact, they returned in 2010. The truth is that we are experiencing rather normal solar activity at the moment.
Vahrenholt: The solar cycle is everything but normal. NASA scientists predict that this cycle will indeed be the weakest of the last 80 years. Not only did it start two years too late, but it’s also very weak. And, besides, you can’t just count sunspots. Cosmic particles continue to rain down on us because the sun’s magnetic field is hardly shielding us.
SPIEGEL: It’s true that there will be a large solar minimum sometime in the next 500 years. But no one knows exactly when. The probability that this will occur in the next 40 years is less than 10 percent. But, in your book, you predict: “It is clear that the sun will be responsible for colder periods in the first half of this century.” Do you know more than all astrophysicists combined?
Vahrenholt: The probability of a large solar minimum, as it occurred during the Little Ice Age, is indeed less than 10 percent. But we are at the beginning of a lighter decline in solar activity of the kind we see every 87 and every 210 years. I’ve spoken with many solar physicists who expect this to happen.
SPIEGEL: We know many other solar scientists who question this. Another maximum is just as statistically likely as a minimum. Predicting what the sun will do in the coming decades borders on fortune-telling.
Vahrenholt: I know only one German solar scientist who has expressed such doubt. Various American and British solar research groups believe that weak solar cycles are ahead. I take this seriously and expect only cooling from the sun until 2050.
SPIEGEL: And what will you do if temperatures continue to rise, after all?
Vahrenholt: Then I’ll give SPIEGEL an interview in 2020 and publicly admit that I’ve made a mistake. But I’m convinced that it won’t be necessary.
SPIEGEL: Do you seriously believe that all 2,000 scientists involved in the IPCC are deluded or staying true to the official line?
Vahrenholt: It’s not like that. However, I am critical of the role played by the handful of lead authors who take on the final editing of the report. They claim that they are using 18,000 publications evaluated by their peers. But 5,000 of them are so-called gray literature, which are not peer-reviewed sources. These mistakes come out in the end, just like the absurd claim that there will no longer be any glaciers in the Himalayas in 30 years. Such exaggerations don’t surprise me. Of the 34 supposedly independent members who write the synthesis report for politicians, almost a third are associated with environmental organizations like Greenpeace or the WWF. Strange, isn’t it?
Read the entire piece here.
Comments »LISTEN: Akami’s Q4 2011 Conference Call
S&P’s Chambers Warns: US Faces Another Downgrade Without Budget Plan
Cisco Beats Both Top and Bottom Line Estimates; Company Raises Dividend
Akamai Leaps 9% on a Clear Top and Bottom Line Beat
Groupon Tanks in A.H. on HUGE Net Loss
Whole Foods Profits Jump on a 8.7% Increase in Same Store Sales
News Corp Profits Jump 65%
GUILTY: SHARES OF DMND ARE ABOUT TO TAKE A HIT
Diamond Foods: audit committee investigation announces findings – will restate 2010 and 2011 financial statements; announces appointment of new CEO and CFO (36.66 -1.00)
Co announced that the Audit Committee of its Board of Directors has substantially completed its investigation of the Company’s accounting for certain crop payments to walnut growers. The Audit Committee has concluded that the Company’s financial statements for the fiscal years 2010 and 2011 will need to be restated. Over the course of the last three months, the Audit Committee has carefully reviewed the accounting treatment of certain payments to walnut growers. The Audit Committee has concluded that a “continuity” payment made to growers in August 2010 of approximately $20 million and a “momentum” payment made to growers in September 2011 of approximately $60 million were not accounted for in the correct periods, and the Audit Committee identified material weaknesses in the Company’s internal control over financial reporting.
The Board of Directors is taking a number of corrective actions including the appointment of a new Chief Executive Officer and Chief Financial Officer. Effective immediately, the Board has appointed Director Rick Wolford to serve as Acting President and Chief Executive Officer and Michael Murphy, of Alix Partners, LLP, to serve as Acting Chief Financial Officer. The Company is commencing searches for permanent replacements for the CEO and CFO positions. The Board has also appointed Robert J. Zollars, who previously served as Lead Independent Director, to the position of Chairman of the Board. Michael J. Mendes and Steven M. Neil have been placed on administrative leave from the Company.
Diamond is working diligently to complete financial restatements for the affected periods and will file all required reports with the U.S. Securities and Exchange Commission as soon as possible. While the timing of the restatement is difficult to predict at this time, the Company will endeavor to provide updates on timing and other material developments.
Rick Wolford previously served as Chief Executive Officer, President and Chairman of Del Monte Foods. Michael Murphy is currently a Managing Director at Alix Partners, a leading financial consulting firm.
Comments »Why has GOP turnout been so bad?
Comments »(CNN) — Beneath Rick Santorum’s stunning three-state sweep on Tuesday stands another stubborn sign of dissatisfaction with the status quo: Republican turnout is down.
I’m talking embarrassingly, disturbingly, hey-don’t-you-know-it’s-an-election-year bad. It is a sign of a serious enthusiasm gap among the rank and file, and a particularly bad omen for Mitt Romney and the GOP in the general election.
Here’s the tale of the tape, state by state, beginning with Tuesday night: Minnesota had just more than 47,000 people turn out for its caucuses this year — four years ago it was nearly 63,000 — and Romney came in first, not a distant third as he did Tuesday night. In Colorado, more than 70,000 people turned out for its caucus in 2008 — but in 2012 it was 65,000. And Missouri — even making a generous discount for the fact that this was an entirely symbolic contest — had 232,000 people turn out, less than half the number who did four years ago.
Even with months of pre-primary hype and attention solely devoted to the Republican field, turnout in this election cycle essentially flat-lined. In Iowa, a little more than 121,000 people voted, compared with nearly 119,000 four years before, when action in the Democratic caucuses absorbed most of the attention.
John AvlonIn New Hampshire, the same dynamic applied — 245,000 voters turned out in 2012, compared with 241,000 four years before, despite Republicans being the only game in town and independents making up 47% of the total turnout in 2012, according to CNN exit polls. Take out the independent voters and you’ve got a deep net decline.
Always proudly rebellious, South Carolina has been the great outlier in this election cycle. With Newt Gingrich making an all-out push for conservatives in a conservative state, turnout was up almost 150,000 over four years before.
But in Florida, the decline became unmistakable. Maybe it decreased because the Romney and Gingrich campaigns, plus super PACS, spent more than $18 million in the Sunshine State on TV ads, of which 93% were negative in the last week alone, according to the Campaign Media Analysis Group. After all, negative ads depress turnout. But after all the mud was thrown, 1.6 million people turned out in the nation’s fourth largest state, which might sound impressive until you compare it with the nearly 2 million who turned out in 2008.
Nevada was even worse, with 32,894 people turning out to vote in a state with more than 465,000 registered Republicans. Four years before, more than 44,300 participated in the caucus. Turnout was down more than 25% despite the GOP caucuses being the only game in town. Party officials were expecting a turnout of more than 70,000.
Santorum trifecta shakes up GOP race All this should be a wake-up call for the GOP. Despite an enormous amount of national media attention devoted to each of the states to date, the response has been a notable yawn among the Republican rank and file.
The turnout numbers are even worse when you compare them with the number of registered Republicans in each state that has voted to date.
The caucuses in particular bring out an unrepresentative sample of a state’s Republican Party. For all the grass-roots romanticism, there has got to be a better way to pick a presidential nominee.
But the news is worst for Romney, long the presumptive front-runner in a party that tends to reward the man next in line.
“Reluctantly Romney” could be a bumper sticker, even for his supporters. The former Massachusetts governor has found it difficult to climb above 35% in national polls, meaning that a majority of Republicans still support someone else in a notably weak field. His vote margins and totals lag behind those of four years before, when he lost the nomination to John McCain in a crowded and comparatively competent field, although Minnesota is the first state he won in ’08 and lost in 2012.
You reap what you sow, and part of the reason turnout is down is directly related to the problem of polarization. The Republican Party is more ideologically polarized than at any time in recent history. Therefore, it put up more purely right-wing candidates than it did four years before, when center-right leaders such as McCain and Rudy Giuliani were also in the race. A bigger tent inspired bigger turnout.
But the other reason is simple dissatisfaction with the candidates.
Republicans seem united in their anger against the president — like the Democrats in 2004 — but they are uninspired by their options. Draft movements for fantasy candidates ranging from Chris Christie to Mitch Daniels to Paul Ryan and even Jeb Bush have started and failed. Some party leaders show more enthusiasm for a hypothetical 2016 crop of candidates, including Marco Rubio and Bobby Jindal, than they do for the flawed choices before them in this election. Divided and dispirited is an odd place for the Republican Party to be so soon after the enthusiasms of the 2010 tea party-driven election.
The bottom line is that voter turnout matters. And what should be most troubling for Republicans is that this enthusiasm gap among the conservative base is accompanied by a lack of candidates who might appeal to independents and centrist swing voters in the general election. It is a double barrel of bad news for the Republican Party. The numbers can be spun and rationalized by professional partisan operatives all day long, but the fact remains — voters just aren’t turning out to cast their votes for this crop of conservative candidates in 2012.
After altercation with powerful politician, Chinese crusader seeks American asylum
Comments »BEIJING — The former top cop of a major Chinese city has dropped from sight amid unconfirmed reports he is seeking U.S. asylum following a quarrel with one of China’s most powerful local politicians.
Wang Lijun, a crusading lawman who made his name busting crime gangs and inspired a drama on state TV, has taken leave to recover from anxiety and overwork, the city government of Chongqing said in a statement Wednesday.
Wang, who also is a vice mayor of Chongqing, was shifted out of his role as police chief last week, prompting speculation of a falling-out with the city’s powerful Communist Party secretary, Bo Xilai, who is widely believed to be seeking national office.
The police chief may have fallen out of favor because his 2008-2010 crackdown on criminal gangs strayed from standard procedures and clashed with the central government’s current campaign to strengthen the rule of law, Beijing-based political analyst Li Fan said.
Days of speculation about his situation spiked Wednesday with online reports that he sought asylum at the American consulate in the nearby southwestern city of Chengdu on Tuesday after quarelling with Bo.
Employees of businesses near the Chengdu consulate reported large numbers of police vehicles in the area on Tuesday night, but said the area was quiet on Wednesday.
Richard Buangan, a spokesman for the U.S. Embassy in Beijing, declined to discuss those reports, but said there had been “no threat to the consulate yesterday, and the U.S. government did not request increased security around the compound.”
Buangan said there would be no comment on the reports of an asylum bid. Chinese Foreign Ministry spokesman Liu Weimin told reporters he had no information on the matter.
A city government spokesman, who like many Chinese bureaucrats would give only his surname, Ye, said he could neither deny or confirm the reports of Wang’s asylum bid.
“We saw that on the Internet, too. I don’t have relevant information now,” Ye said.
In a sign of the sensitivity of the matter, search results for Wang and Bo were blocked on China’s hugely popular Sina Weibo microblogging service and the comments sections attached to online reports about Wang were disabled.
Bo, who sits on the Communist Party’s powerful 25-member Politburo, appointed Wang in 2008 to clean up the force and take on organized crime in a campaign that drew national attention, as well as criticism that it ignored proper legal procedures.
Wang, a 52-year-old martial arts expert, entered law enforcement in 1984 and served more than two decades in northeast Liaoning province, where Bo was once governor. He won a reputation for personal bravery in confronting gangs and was once the subject of a TV drama called “Iron-Blooded Police Spirits.”
His law enforcement success led eventually to high political office and a seat in the national parliament, while his association with Bo gave him countrywide name recognition.
A former commerce minister, Bo is considered a leading “princeling” in the party, a reference to the offspring of communist elders whose connections and degrees from top universities have won them entry into the country’s elite.
Bo garnered huge publicity for his anti-crime campaign and an accompanying drive to revive communist songs and poems from the 1950s and 1960s, spurring talk that he was seeking a promotion. Those campaigns have since fizzled, leading analysts to pull back on speculation that he might be elevated to higher office when the party begins a generational change in leadership later this year.
Chinese political analysts say Bo has been cutting ties with the advisers behind the “red songs” and anti-crime drives in hopes of reviving his political fortunes.
Has Wallstreet lost its mojo?
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Comments »Is Wall Street over? Done?
In the months since the Great Panic of 2008, investors, regulators, politicians, and the culture at large have given Wall Street banks a series of kicks to the groin. And while the stock market may have recovered some of its lost swagger, the Wall Street investment banks haven’t. That’s the thesis of Gabriel Sherman’s New York cover story, “The Emasculation of Wall Street.”
And he’s right — to a large degree. Surveying a world in which structured products have disappeared, new capital standards have reduced the ability to take on leverage, regulations have prohibited once-profitable practices like proprietary trading, Sherman concludes that Wall Street is “afflicted by a crisis it would not be flip to call existential.” Indeed, the widely documented decline of bonuses — combined with the high cost of living — has many bankers wondering what the point of the whole thing is.
As we discuss in the accompanying video, this delayed reaction has been a long time coming. Any time a sector blows up and inflicts damage on the economy, its financial and cultural footprint shrinks. The dotcom sector quickly went from massive hero to much smaller goat in 2000 and 2001. But Wall Street was spared a good deal of the pain associated with popped bubbles because the taxpayers and the Federal Reserve rushed to their aid. Ironically, investment bankers and traders were among the biggest short-term beneficiaries of the emergency efforts that reflated credit and stock markets in 2009 and 2010.
But time has been less kind to the bankers. And the Occupy Wall Street movement is the least of its problems. Turmoil in Europe and volatility has helped tamp down the pace of trading and dealmaking. The businesses of mortgages and their associated products, which fueled so much growth and easy profits in the past decade, have dwindled and are unlikely to return. “Certain products are gone forever,” J.P. Morgan Chase CEO Jamie Dimon told Sherman. “Fancy derivatives are gone forever. Prop trading is gone. There’s less leverage everywhere.” Dodd-Frank forbids banks from risking depositors’ capital on proprietary trading. The low-yield environment makes it tough to generate returns. And so banks are left with the boring, lower-margin, lower-octane of making commercial lines, advising big companies, and managing assets. All that translates into lower profits, less risk, and, worst of all, smaller bonuses.
It would be premature to write Wall Street off completely. Over the past 30 years, investment banks and financial players have shown an ability to transition, almost seamlessly, from one boom to the next — bond-trading in the 1980s, dotcom and telecom stocks in the 1990s, mortgage-backed securities in the 2000s. The industry has generally viewed regulations as obstacles to skirt through fancy maneuvering, or to tear down through lobbying. There’s always a bull market somewhere, as the saying goes.
Of course, when the next boom does come, Wall Streeters are going to find it more difficult to cash in on it. For while the industry has felt its share of pain from Washington, there’s likely more to come. Low tax rates on capital gains, dividends, and massive bonuses are likely to rise in coming years. Mitt Romney’s presidential run has brought heightened focuses to one of Wall Street’s most absurd advantages — the carried interest rule, which applies long-term capital gain tax rates to money private equity firms earn for managing other people’s money. The Masters of the Universe, who were held aloft by cheap money and favorable regulation, are increasingly floating back to earth. As Sherman writes, “The system is being designed so that Wall Street grows as fast as Main Street.”
That may be a bad thing for young Wall Streeters with visions of private jets — and for the real estate brokers and restaurateurs who cater to them. But it’s not a bad thing for the rest of us, or the economy at large.
The STOCK Act: It’s a start
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Comments »You would think members of Congress would realize, on their own, that trading stocks based on inside political information they may possess is wrong. But it turns out they may indeed need a law to telll them so. Ever since 60 Minutes exposed the ways in which some lawmakers, and their staffers, have profited based on privileged insider knowledge, the public has clamored for action.
President Obama heeded those cries in his State of the Union Address in January.
“I’ve talked tonight about the deficit of trust between Main Street and Wall Street. But the divide between this city and the rest of the country is at least as bad — and it seems to get worse every year,” Obama said. “Send me a bill that bans insider trading by Members of Congress, and I will sign it tomorrow. Let’s limit any elected official from owning stocks in industries they impact. Let’s make sure people who bundle campaign contributions for Congress can’t lobby Congress, and vice versa — an idea that has bipartisan support, at least outside of Washington.”
Earmarks are another prime example of how politicians can wield their influence for personal gain. The Washington Post on Tuesday published the results of a comprehensive investigation into pork-barrel spending on infrastructure projects that conveniently took place close to property that Congressional members own.
“Thirty-three members of Congress have directed more than $300 million in earmarks and other spending provisions to dozens of public projects that are next to or within about two miles of the lawmakers’ own property,” reports the Washington Post.
The STOCK Act
In a rare example of Congress responding with alacrity to a call from the president, the Stop Trading on Congressional Knowledge (STOCK) Act has been moving its way quickly through Congress. The Senate passed the bill in a sweeping 96 to 3 bipartisan vote last Thursday. The House is working to take up the legislation this week but has pledged to strengthen the version passed by the Senate.
“Members of Congress want to keep their jobs, so that is why I think the vote was so lop-sided,” says Peter Schweizer, author of Throw Them All Out who was featured in the CBS 60 Minutes interview. He joined The Daily Ticker’s Daniel Gross to discuss the bill, which “by no means is perfect.”
In its current form the Senate’s version of law does the following:
#1 Makes insider trading illegal: “It says that it is a federal crime to use congressional inside information to trade on stocks to gain an informational advantage,” says Schweizer, a fellow at the Hoover Institution. “There would be penalties for that for congressmen but also for their staff members.”
#2 Changes financial reporting requirement: “Right now they only have to report their finances — that is their assets and their trades — once a year and they only do it on paper,” he says. “The STOCK Act says they now need to report every 90 days, rather than just once a year.”
#3 Regulates political intelligence: “It would regulate the people who collect political intelligence” and then sell it to the financial community, says Schwiezer.
The three regulations above have Washington spinning, but the last point has caused the most uproar from political insiders. The provision introduced by Sen. Chuck Grassley (R-Iowa) would require those who collect political intelligence to register in a similar manner as lobbyists.
But the bill overlooks several items Schweizer believes are necessary. “It does not deal with options trading, it does not deal with members of Congress who get these sweetheart IPO deals and it doesn’t deal with land deals and other forms of enrichment,” says Schweizer. It is hard to know how pervasive this issue is “but [the bill] is a first-step forward and I think there are other steps we need to take to make sure this practice ends completely.”
Can Groupon handle margin compression?
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Comments »In his Twitter photo, Groupon CEO Andrew Mason is on the floor, in pajamas, looking like a giddy five-year-old on Christmas. Yet his accomplishments are anything but juvenile. He has built a 10,000-person organization operating in 45 countries that is expected to have 2011 revenue of roughly $1.6 billion. And he has done it all since October 2008.
For the fourth quarter, to be reported on Wednesday, analysts expect sales of $473 million, up nearly threefold from a year ago. Still, as Mr. Mason leads his first earnings call, the hard work may just be starting for the newly public company. Groupon has to prove its business isn’t just a fad and, as important, that it can make money. Otherwise, its $15 billion market value makes little sense.
Slowing revenue growth is a potential concern. Groupon chopped marketing costs in the third quarter. While that got the company closer to profitability, it may have been a reason sales growth versus the prior quarter slowed to 10%. Analysts expect Groupon maintained that pace in the fourth quarter. A related worry is churn. Groupon doesn’t disclose how frequently users are clicking “unsubscribe” on its emails. As users drop off, it gets harder to replace them with new subscribers, especially given how large Groupon has already become. Groupon has done well to launch new products to existing subscribers. In addition to the core business of spa and restaurant coupons, product and travel deals appear to be growing nicely. But the share of revenue Groupon gets to keep—its “take rate”—is lower than with the core business. Another new product—instant deals delivered to users based on their location—is one Groupon has touted as distinguishing it from smaller rivals. But it isn’t clear instant deals are catching on.
Rival LivingSocial may be pressuring margins. The private company’s 2011 financial results were outed in the annual financial filing of an investor, Amazon.com, showing $245 million in revenue. A person familiar with the matter says LivingSocial did about $750 million in gross billings. That translates to a 33% take-rate, undercutting the 37% Groupon reported last quarter, itself down from 44% at beginning of the year. Add it up, and Mr. Mason still has to convince investors Groupon can handle any growing pains.
Market Update & Earnings Ahead
Comments »Stocks have moved up to afternoon highs as they enter the final hour of the session. Overall gains are only modest, though.
So far this week market participants have gone without any data to trade on, but tomorrow brings the latest weekly initial jobless claims count. The European Central Bank and the Bank of England are also expected to make announcements regarding their respective monetary policies.
After the close, Akamai Tech (AKAM 34.28, +0.63), News Corp (NWSA 19.57, +0.07), Prudential (PRU 60.11, -0.32), Visa (V 107.75, +0.77), Whole Foods (WFM 77.87, +2.07), and Dow component Cisco (CSCO 20.32, +0.11) are slated to announce earnings results. PepsiCo (PEP 66.76, +0.00) reports tomorrow morning. DJ30 +4.12 NASDAQ +10.43 SP500 +2.63 NASDAQ Adv/Vol/Dec 1260/1.39 bln/1220 NYSE Adv/Vol/Dec 1545/465 mln/1415
