Last week a rather important event occurred. The Ford F-Series trucks were overthrown from their throne of number one best selling vehicle after decades of sales dominance. In another sign of the times the cars that replaced the empty chair are fuel efficient vehicles. This is rather important since it appears that […]
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Last week a rather important event occurred. The Ford F-Series trucks were overthrown from their throne of number one best selling vehicle after decades of sales dominance. In another sign of the times the cars that replaced the empty chair are fuel efficient vehicles. This is rather important since it appears that we are reaching a tipping point in terms of fuel prices. Every year we hear consumers complain about fuel costs but rarely do anything to change their behavior. It appears the biggest motivator for changing behavior is simply making people go flat broke:
“(Ford) After decades of sales domination, the Ford F-Series was outdone as the best-selling vehicle in America in May by four Japanese cars — a development that symbolizes the difficulty Ford Motor Co.’s turnaround now faces.
The F-Series, which is built at factories in Dearborn, Kansas City, Mo., and Louisville, Ky., represents about one-fourth of the company’s total sales.
In May, F-Series sales plummeted 30.6%, to 42,973, as customers continued to reject trucks in favor of more affordable, fuel-efficient cars.
“It is a sign of the times,” said Jim Farley, Ford’s group vice president for marketing and communications. “But it is not surprising, given the fuel price. We have never seen $4.20-a-gallon gas.”
With the additional announcement that the Hummer line may be sold or discontinued, it seems like we are heading to a new landscape in the automotive industry. In today’s article we are going to examine this trend on how higher fuel prices are hurting places in the suburbs and the trend of buying bigger places in the boonies simply to own a piece of real estate in Southern California. This may be a thing of the past.
Commuting from Temecula to Costa Mesa
Temecula is a city in southwestern Riverside County. In recent years, it has been booming with new home construction. The population has been growing as well over this time:
Much of this population boom was also based on those in surrounding high priced areas that wanted the ability to purchase a nice large sized home, but were not able to afford it in expensive San Diego and Orange Counties. In fact, I know a few folks that make the commute from Costa Mesa and Irvine to Temecula everyday. Their desire was to purchase a new home for their growing family. They were willing to brave the arduous commute each day for the dream of having a large home.
Although these folks are doing well, many others are not. In our case example today we are going to examine how the commute from Temecula to Costa Mesa will cost someone who may have purchased a F-150 in previous years. Here are our basic assumptions:
Auto and Driving Details:
Year: 1999
F-150 XLT supercab
27 Gallon tank
Average MPG: 14
Full Tank Range: 378
Total Commute distance: 69 Miles One-way (138 Roundtrip)
Many of you not from the area may think this is absurd but this is actually a rather common occurrence. Since many folks were in the construction industry (and many simply like trucks) the F-150 is a very common auto here in Southern California. Some bought for necessity and others simply bought because they like the idea of having a truck. Yet this is another example on how people are learning to separate their wants and needs and that is why the F-Series is no longer the top selling line in the United States.
Now let us run the numbers for how much money is spent on fuel each month:
5-day miles driven: 690 miles
Weekend driving: 75 miles
Total Monthly miles driven: (690 + 75) * 4 = 3,060
Current Cost per gallon Riverside County: $4.40
Total Fuel Cost per month: (3,060/14) = 218 gallons needed per month
218 * $4.4 = $961 per month on fuel
Compare this number to one year ago when fuel averaged $3.14
218 * $3.14 = $684 per month one year ago
The cost to commute the same distance went up a stunning 40 percent in one year. At the same time, many of these folks were tied to the real estate industry so you have a double hit. First, more money is going out of the budget for fuel while income is quickly decreasing.
This is why it shouldn’t come as a surprise to you that 15 percent of homes in this area may be bank owned or in some stage of foreclosure:
“(LA Times) From the start — Temecula was incorporated in 1989 — the city was protective of its image.
Residents are prohibited from working on their cars, in most cases, in front of their own houses. Stores that sell spray paint are required to keep it under lock, though graffiti is almost nonexistent. Behind City Hall, there is a “sign jail” full of political ads and business ads that were yanked because they violated Temecula’s strict sign rules.
Based largely on that image, the population has nearly doubled again this decade, rising from about 57,000 in 2000 to 101,000 today — 14 new residents a day.
Today, said Rich Johnston, Temecula’s deputy director of building and safety and code enforcement, as many as 15% of Temecula’s 22,500 single-family homes are bank-owned or in some stage of foreclosure.”
Now you understand why Temecula is down nearly 30 percent on a year over year basis:
Median Price April 2007: $459,000
Median Price April 2008: $329,000
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Posted by: admin in Goog news
Filed under: Forecasts, Deals, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)
Overnight, Yahoo! (NASDAQ: YHOO) signed several cell carrier deals in Asia that will put its mobile search onto a large number of new phones. According to the company, it now reaches 600 million handset customers worldwide.
Maybe mobile search will be a big market, but maybe it won’t. Reuters writes that “the mobile advertising market is expected to rise to $16.2 billion in 2011 up from $1.5 billion in 2006.”
Yahoo! may want to avoid counting its chickens too early. Despite the firm’s upbeat tone, Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT) are having success getting into the same market. In China, where there are well over 300 million handsets in use, Baidu (NASDAQ: BIDU), the county’s largest search company, does not want to give up market share to US-based companies.
If Yahoo! gets 20% of the market in 2011, it would pick up $3 billion in additional revenue. Is that a nice chunk of change? Yes, but that is a long time for Yahoo! shareholders to wait.
Douglas A. McIntyre is an editor at 247wallst.com.
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Filed under: Forecasts, Management, Competitive strategy, Recession
 KeyCorp (NYSE: KEY), which is the third largest bank in Ohio, has survived many challenging market environments. After all, the bank’s roots go back to 1825.
However, the latest credit crisis has been particularly tough. Over the past year, the stock price has plunged from $37 to $11.46.
Well, this week, KeyCorp raised $1.65 billion from a common and preferred stock offering. Actually, the company was able to sell 10% more than expected.
Like other banks, KeyCorp binged on loans over the past few years. In fact, a big piece of the lending was for residential real estate construction (especially in California and Florida). Needless to say, those loans are shaky now.
Something else: KeyCorp needs to take a sizable charge for an adverse court ruling because of leveraged lease transactions.
As a result, KeyCorp expects to report a $1.1 billion to $1.2 billion loss for Q2. And, after 43 years of increases in dividends, the company also had to slash its payout by half.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements . He also operates MergerBook.com.
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Filed under: Microsoft (MSFT), Apple Inc (AAPL), Technology
A recent study by Evans Data Corporation shows that developers don’t like Vista any more than the rest of us. Six times as many are clinging to XP than switching to Vista. Only 8% of developers are working on programs to run on Vista, compared with 50% who are writing for Windows XP. That’s not good news for Microsoft (NASDAQ: MSFT), who hopes that its customers will grudgingly tolerate the withdrawal of XP on June 30.
Many are begging Microsoft to relent, especially InfoWorld. The developers do plan on doing more work for the troubled operating system next year, but still not as many as are hanging onto XP. Next year, 24% of developers expect to target Vista while 29% will still work with XP.
Evans data doesn’t say how much the Vista disaster has helped Linux and Apple (NASDAQ: AAPL), but it’s clear Vista has sent many fleeing. eWeek reported last week that Apple now has a 14% market share — nearly four times what it had in 2005. Using data from NPD Group, eWeek points out that Apple sells two out of three computers in the $1,000 and above category. That’s largely because Macs are still way, way more expensive than PCs. If Apple ever got around to offering a computer at a price the masses were willing to pay, Microsoft might be in trouble. Microsoft may not hear the complaints about its operating system, but it understands that people want to pay less for computers.
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Filed under: Goldman Sachs Group (GS), Initial public offerings
 With the slowing US economy, it’s been tough for retailers. Yet, there are some that are bucking the trend.
An example is Metropark, which is a fashion-conscious retailer focused on the 20 to 35 year-old demographic. Metropark believes that its market segment is underserved - and poised for much more growth, so today the company has also filed to go public.
In fact, the Metropark store environment is much like a stylish night club with regular live performances by disc jockeys and the sales personnel that are called “Style Consultants.”
Some of the premium brands offered include: Acrylic, Affliction, Ed Hardy, English Laundry, Monarchy, Obey, Rock & Republic and True Religion.
No doubt, Metropark’s growth has been particularly strong. In 2004, the company launched with four stores. Now, there are 43 stores in 17 states. From 2005 to 2007, revenues have gone from $11.5 million to $71.6 million.
Metropark also has a stellar management team. The company’s CEO and founder, Orval Madden, was the mastermind behind Hot Topic Inc. (NASDAQ: HOTT).
The lead underwriter on the IPO is Goldman, Sachs & Co. (NYSE: GS) and the proposed ticker symbol is “MTPK.” You can locate the prospectus at the SEC website.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements . He also operates MergerBook.com.
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Filed under: Analyst upgrades and downgrades, Bad news, General Electric (GE), Options, Technical Analysis
 General Electric (NYSE: GE) shares are falling after a JPMorgan analyst downgraded the stock to Neutral from Overweight, adding in a note that GE will face challenges in its aviation unit and real estate operations due to market difficulties in both sectors. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on GE.
After hitting a one-year high of $42.15 in October, the stock has hit a new one-year low today. This morning, GE opened at $28.69. So far today the stock has hit a low of $27.87 and a high of $28.99. As of 12:15, GE is trading at $28.89, down $0.26 (-0.9%). The chart for GE looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $34 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade, we will make a 6.4% return in three months as long as GE is below $34 at September expiration. GE would have to rise by more than 17% before we would start to lose money.
GE hasn’t been above $34 since April and has shown resistance around $30 recently. This trade could be risky if the company’s earnings (due out in mid-July) are a positive surprise, but even if that happens, this position could be protected by resistance GE might find at its 50 day moving average, which is currently around $33 and falling.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent owns and controls bullish hedged positions in GE. Both those trades and the one above can close profitably independently.
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Blown Mortgage received a trusted tip this morning that banking giant HSBC closed 82 branches of Household Finance Corporation (HFC) and Beneficial . Both HSBC companies are players in the non-prime markets and specialize in mortgage refinancing and debt consolidation. Beneficial has also done it’s fair share of “personal loans” using a lien on title, which can show up as a 3rd mortgage on title reports.
HSBC has been pulling back by closing branches of HFC and Beneficial over the last several quarters and closed another one of its subprime lenders, Decision One (or D-1 as it was known, or D-Last as it was referred to in my company for their penchant for approving loan files that weren’t approved elsewhere) , back in September of 2007.
HSBC’s ownership in HFC and Beneficial have put it smack in the middle of the US housing meltdown. One top HSBC investor claimed that the company undervalued losses by $30 billion, after announcing first quarter losses of $3.2 billion in mortgage-related writedowns.
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Posted by: admin in Goog news
Filed under: Deals, Rumors, Management, Rants and raves, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)
 If you have read BusinessWeek’s latest story on the Yahoo! Inc. (NASDAQ: YHOO) saga, then you cannot really know what to believe!
According to the story, Microsoft Corp. (NASDAQ: MSFT) remains highly interested in re-entering talks to acquire Yahoo!, and it also says those talks may already be in progress.
Then it says Microsoft may want the whole company, but also might just be interested in the search element.
To this the magazine adds that if none of this works, Yahoo! might go ahead and work out a deal to give Google Inc. (NASDAQ: GOOG) a non-exclusive right to either sell its search results or include it in its auctions — or none of the above.
It concludes that sources think there is a 50% chance a deal will happen. Now that’s strong conviction! If a deal happens, they go on to say that the buyout price might be $33, $35, or $37 per share (it closed yesterday at $26.15) but that some compromise might be reached. Gee whiz, a 50/50 shot and projecting some sort of compromise.
Carl Icahn is rumored to be deeply involved in making something happen, but then again management is not interested in his input. “Something will definitely happen soon,” says one of the people involved in solving Yahoo’s conundrum.
This is all as clear as mud and any investment in Yahoo! is highly speculative unless you are actually at the table, whatever table that may be.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares in the stocks mentioned in this story.
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