George gutowski

H&R Block Is Speeding Towards a Brick Wall

This company is in the repair shop. The new power at the top has integrity but the cure may be very painful. While there was a lot of focus on the mortgage market the whole tax preparation function was not firing on all cylinders. The situation is too unclear at the present and there are other situations which will present a more compelling picture. Check back with this stock after the patient is out of the operation room and assess if the amputations and transplants will take hold.

Boo-yah! Barron's Shorts Cramer

Say what you want about Cramer and his presentation style but do you not think this is an initial shot across the bow by a Rupert Murdoch (about to be owned property) against CNBC. Jim Cramer is closely associated with CNBC and seems to draw an audience that advertisers like. There is a perceived star quality about him. If News Corp can drop him down a peg or two their own business news offering will appear better.

In warfare the military shoots at dangerous targets. In business you pretty well do the same think.

Disney Acquires Penguin: Ridiculous

Mea culpa I got it wrong on the monthly pricing and I take responsibility for that. I still feel that given the very young youth metric there will be a lot of churn as kids grow up and move onto other things and the subscriber revenue will need to be replaced. Also for $350 million (perhaps $700 million) Disney clearly could have developed something on their own. They are acting as a financial investor and not as a content developer. That is why I doubt their own in house ability.

Penguin currently operates on a shoestring. As they develop more scale and attempt to become a platform for other Disney products the overheads will grow. Will they be able to maintain a positive margin with such a low price? Disney will want to protect their overall brand by not disappointing the user. Rapid growth in the petrie dish is very difficult to perpetuate in the real world large scale that Disney will need. I do not see this acquisition as a win.

St. Mary Land & Exploration Needs Regulations Refresher

My apologies for a tardy response. You are right that this is a grey area. The quiet period is more adequately defined in the context of IPO’s. However if you review many corporate investor relations web sites you will see that many companies have opted to implement quiet period policies before quarterly announcements. Many employees of publicly traded companies are frequently cautioned that their employer is about to enter this period and prudence is required if mentioning company affairs outside of the company. If you Google “quarterly quiet period” or “quarterly earnings quiet period” you will source numerous pages referring to quiet periods and how these policies are believed to relate to Reg. FD and Securities regulations.
The SEC appears to be remiss in not having issued regulations which have the necessary degree of clarity in the context of quarterly earnings. However many companies have adopted quarterly quiet period policies. Obviously the corporate lawyers have signed off on the policies as well as boards of directors. Corporate governance processes should therefore be reliant on these policies. The marketplace has developed a compliance practice in a regulatory context. The practice is uneven from company to company.
In the context of St Mary Land and Exploration. They are issuing guidance two weeks after the quarter is over but two weeks before earnings are announced. The announcement came out very late in the evening and was camouflaged by personnel change announcements. On their web site they claim to have a St Mary’s Fair Disclosure Policy however I could not find a copy of the document. Given their position in the disclosure time line a guidance update issued cryptically is not Fair Disclosure.
The criticism that may be directed at me is that the tone of my post assumed the 30 day period was a matter of hard regulation or even law. It is not.

American Express: Watch the Dividend

Agreed It should be American Express AXP Many Thanks

Heavy Executive Stock Sales At Boeing

I believe that we may all conclude that the three executives in question are selling and not acquiring any additional shares other than that which they receive through their compensation arrangements. Its nice to see that their required holdings as a multiple of their base salary are in adherance with internal employment requirements. It is also true that they are chosing to reduce their holdings when they are not beholden to their contracts. This is always a signal which needs to be viewed, noted, parsed and analyzed. I note your comment that Mr. McNerney needed to settle a tax obligation. Of all the options he may have availed himself of he sold Boeing shares. This is telling. My comments in the original post and this reply are in the context that Boeing has had a great run and that there is a natural inclination to ponder if the run will continue. Senior officers, who supposedly do not leave money on the table, are disposing of Boeing shares.

New York Times: Plenty of Potential Takers

The Sulzberger family will eventually have to do something. The idealogical perspective will be eventually overwhelmed by poor financial results. While they control the voting shares they do not control the conflicted cash flow.

It is because of their idealogical perspective that I feel they will do a big money deal with someone like the companies I have suggested. They will negotiate caveats to continue journalistic integrity and their own personal;/family agenda. The acquirer will provide a viable strategy to monetize the content and a lot of trees will not be cut down. It is a short step from mass aggregator to controller of news content. By yanking NYT content off of everyone elses aggregation model you throw a very serious and disruptive punch.

Citigroup's Dividend Announcement Strategy

The established practice is rooted in the past when technology was slower. This is not a good reason to continue. The financial impact would be one time but in favor of the investor who can earn at least the relatively low risk money market rates. My real concern is the hang time until the x date. The opportunity to slide out negative news under the dividend umbrella is tempting. In a post Enron era we should shorten up the hang time and remove the potential for problems. If the dividend is to be paid why have this long ball sailing across the scene for long periods of time.

Goldcorp: There Are More Efficient Ways To Capture Gold

My concerns with Goldcorp or any Gold producer are always the corporate event risks. While Goldcorp is based in the America's the geo-political risks are muted but still existent. They are currently undertaking huge developments which offer completion risks, potential cost over runs issues as well as the day to day difficulties of extracting economically.

I have always been skeptical of the what if gold goes to $1,000 scenario. Yes the number appears highly leveraged. But then you probably need catastrophic world events to drive that price. If catastrophic events do occur and gold becomes a more important medium of exchange then you will want it in hand and not held as a financial asset in a stock portfolio.

Finally as a gold producer Goldcorp is naturally depeleting its reserves. It must continue spending money to expand existing reserves if possible and economic and or find entirely new reserves. Hence my comment about very low levels of exploration expenditure.

To my way of thinking gold companies at the exploration stage represent attractive leverage. As they transition from exploration and become mature producers the risk premium is not warranted and I feel actually owning gold either physically or in tradeable form is preferable.

A bar of gold will not ask you for anything. A mine manager will always have a capital expenditure budget that needs to be closely managed.

LSI's Logic Flawed on Agere Systems Acquisition

Interesting viewpoint. But why is management not making these points? Why did the stock drop so dramatically after the announcement?

Teamsters Gain Ground Within FedEx - New Reality for Overland Shippers?

I agree that the union needs to get a foothold and make it easy for management to roll over. But if they are successful in organizing a few key strategic hubs they can strangle the system. If the teamsters could shut down New York City or a few other choice points management would more than roll over; they would sit up and beg for bones like a good little dog.

Avon Misdirects Ad Spending

Since this post I have had a flurry of emails from retired AVON types many of whom claim to have been pushed aside and or forced out. While the sour grapes were a factor it remains clear that AVON is channel conflicted. Since going public senior management have lost their understanding of direct marketing and want to act like a more traditional consumer products company.

If consumers are switching from Avon to supposed better products in the mall large Advertising campaigns will not stop them. Other cosmetics companies have huge ad budgets and vast experience in managing ad campaigns.

Say It Ain't So: Moody's Corp. Announces Dividend Before Earnings Release

I have sent an open letter to the SEC which I have also posted on my blog. The gist of it is as follows

Does declaring a dividend before an earnings announcement constitute an implied but ambiguous form of disclosure?

Rationale

Dividends are typically paid from net earnings. Usually corporate directors adopt a dividend pay out policy, which is predicated upon the boards view of earnings. Consistent and or consistently increasing dividends are viewed as excellent indicators of corporate financial health making ownership that much more desirable. Therefore dividends as declared quarterly are an implicit form of guidance emanating from the Board of Directors.

Allstate Setting a Dangerous Precedent With Handling of Katrina Claims

Allstate has also had the temporary advantage that many lawyers in Alabama have had their own homes and places of business destroyed or severely damaged. It takes a while to pick up the pieces but the tide does roll back eventually.

Darden's Rising Labor Costs Cause For Concern

Most wait staff resist reporting tips. But given Dardens large system approach to payroll and HR the IRS can easily lean on them and force out the bigger numbers. If this persists Darden will develop a bad reputation with wait staff. The good ones usually have other wait staff options.