Articles for the Day - December 14

AT&T Takes the Blame, Even for the iPhone’s Faults - By Randall Stross - The New York Times - "I LOVE my iPhone. I just wish it were matched with Verizon Wireless, the carrier with the most envied reputation as fast, ubiquitous, reliable, nigh perfect. Consumer Reports has just released its annual survey of cellphone service, and its respondents collectively agree with me about the rankings: AT&T occupies the bottom and Verizon, the top."

Exxon Mobil to buy XTO Energy in big U.S. gas bet - By Matt Daily and Anna Driver - Reuters - "Exxon Mobil Corp will buy XTO Energy Inc in an all-stock deal valued at about $30 billion, in a move that thrusts the U.S. energy giant to the forefront of North America's fast-growing natural gas industry."

President Meets with Bankers After Televised Blast - By Ronald D. Orol - MarketWatch - "President Barack Obama is sitting down Monday with the top executives of the nation's largest banks at the White House, with echoes of "fat cats" ringing in everyone's ears. On the eve of the meeting, Obama slammed bankers on network television, calling them "fat-cat bankers" on CBS's "60 Minutes" program."

Quick Notes for the Day - December 10

Initial Jobless Claims Rise - The Labor Department reported that the number of people filing claims for state unemployment benefits rose by 17,000 to a seasonally adjusted 474,000. This marked the first rise in initial claims in six weeks. The number of people collecting state benefits fell by 303,000 to a seasonally adjusted 5.16 million in the week ending Nov. 28.

Trade Gap Narrows in October - The Commerce Department reported that trade deficit narrowed by 7.6% in October to $32.9 billion since exports rose faster than imports during the month. Crude oil imports were down in the month and contributed to the decrease. The deficit for the year now totals $304 billion, down sharply from $610.8 billion in the same period one year ago.

Bank of England Leaves Rates Unchanged - The Bank of England left its key lending rate unchanged at a record low of 0.5%. The central bank said its Monetary Policy Committee made no changes to the bank's 200 billion pound ($324 billion) asset-purchase program.

Natural Gas Inventories Drop - The Energy Information Administration reported that natural gas inventories fell for the first time in nine months, down 64 billion cubic feet. On the news, natural gas futures spiked up 7%.

AT&T May Have to Limit iPhone Users - By Charley Blaine - MSN - "OK, you truly wild and crazy iPhone users.

You know who you are: the ones who check out every application, play every game, call up every piece of news and check out every restaurant within 100 miles.

You are causing AT&T (T) a big problem. You're swamping the system, and AT&T, which has an exclusive right to market the iPhone in the United States, wants you to get a life and dial back. "

Announcements - Quick Notes & Articles for the Day - September 4

Daily Emails - The daily emails for this week's posts have been sporadic. I received Monday's on Thursday, Thursday's on Friday morning, and Tuesday and Wednesday as normal. I have been working on the issue with Google, so hopefully it will be worked out today or at the latest over the weekend. Sorry for any inconvenience.

Labor Day Holiday - Rollins & Associates and Rollins Financial will both be closed on Monday, September 7 for the Labor Day holiday. We will reopen on Tuesday, September 8 for normal business hours.

Notes

G20 To Keep Stimulus Going - According to a report by Reuters, when the G20 finance leaders and central bankers meet over the weekend in London, they will promise to keep economic support packages in place until recovery is certain and seek to reassure financial markets they have credible plans to withdraw the stimulus when appropriate.

This stance is partly in response to a revised economic growth report from the IMF that now forecasts global shrinkage of 1.3% in 2009 (-1.4% in April) and growth of 2.9% in 2010 (2.5% in April). Policymakers are cautious about declaring victory yet, especially given most major economies are still shrinking this year and only expected to post sluggish growth next year.

"Unwinding the stimulus too soon runs a real risk of derailing the recovery, with potentially significant implications for growth and unemployment," said IMF chief Dominique Strauss-Kahn at a conference in Berlin on Friday.

"The biggest risk is to think that the job's done -- that recovery is guaranteed. No country can be complacent -- we've got to see this through," British finance minister and meeting host Alistair Darling said late on Thursday.

Still, with interest rates at record lows and trillions of dollars thrown into their economies to fight the crisis, policymakers are keen to show they have exit strategies in place lest financial markets take fright that inflation will rocket and public finances fall apart.

"Now is not the time to exit. But I would like to make it clear that the ECB has a strategy, and we stand ready to put it into action when the appropriate time comes," said European Central Bank President Jean-Claude Trichet said in Frankfurt.

Unemployment Rises to 9.7% - The Labor Department reported Friday that the unemployment rate rose to 9.7% in August as nonfarm payrolls fell by 216,000. Payrolls have dropped by 6.9 million to 131.2 million since the recession began in December 2007, the government data showed. Unemployment has increased by 7.4 million during the recession to 14.9 million. The 216,000 decline in payrolls was close to market expectations of a 233,000 drop. It was the smallest decline in payrolls since August 2008.

Articles

Once and Future Taxes - The New York Times - "So far, the Obama administration’s plan for dealing with the budget deficit — an estimated $9 trillion over a decade — is to not dig the hole any deeper. That’s an important first step. President Obama deserves credit for proposing ways to pay for his two big initiatives to date: health care reform and energy legislation. Reducing the growth in health care costs, in particular, is vital to curbing future deficits."

Financial Stability Depends on More Capital - By Timothy Geithner - Financial Times - "We have sought to contain this moral hazard through regulation. We require financial institutions to maintain reserves and capital buffers in proportion to their risk so that they can absorb losses at their own expense, not at the taxpayer’s."

Customers Angered as iPhones Overload AT&T - By Jenna Wortham - The New York Times - I have an iPhone. It is a great tool with great functionality and applications. I have also said that if Apple ever figures out how to fix the "phone" on the iPhone, it will be the best (dropped calls in and outside 285). Now, an article somewhat explains my frustrations... "When thousands of iPhone owners descended on Austin, Tex., in March during South by Southwest, an annual technology and music conference, attendees were unable to send text messages, check their e-mail or make calls until AT&T installed temporary cell sites to amplify the service."

Quick Notes for the Day - July 22

Petroleum Inventories Rise Again - the EIA report on total petroleum inventories showed a continued rise from last week adding to what already is a 19-year high. Crude inventories fell by 1.8 million barrels in the week ended July 17. Gasoline inventories, however, rose 800,000 barrels, and distillate stockpiles gained 1.2 million barrels. Total petroleum inventories increased by 1.9 million barrels and stayed above the upper limit of the average range for this time of year. After the data, crude oil futures fell about 1.6% to around $64.50.

SEC Wants Rating Agencies to Register - According to the SEC, Congress should approve legislation that would require credit rating agencies to register and open up their books to the Securities and Exchange Commission. "This would be a significant step forward in making sure that this sector of the market is brought under regulatory oversight without the danger that some credit rating agencies may fail to register in order to avoid regulation," said SEC Chairman Mary Schapiro in testimony to lawmakers at a House Financial Services Committee.

Apple's iPhone Bolsters Earnings - Apple sold 5.2 million iPhones in the quarter, more than seven times what it sold a year earlier, as it released a new version of the iPhone and halved the price on an older model to $99. Revenue from the iPhone business tripled to $1.69 billion. The only real downside to the report was that iPod sales dipped 7% versus last year. With the rise in the iPhone though, it is hard to imagine that those sales have not cut into the iPod sales.

For its fiscal third quarter ended June 27, Apple posted a profit of $1.23 billion, or $1.35 a share, compared with $1.07 billion, or $1.19 a share, a year earlier. Revenue rose 12% to $8.34 billion from $7.46 billion.

Home Prices Rise in May - According to a report from the Federal Housing Finance Agency, home prices rose 0.9% in May and fell 5.6% over the past year. Prices rose in five out of nine regions and fell in four. April's decline of 0.1% was revised to a drop of 0.3%.

Quick Notes for the Day - June 22

Apple Sells More Than 1 Million New iPhones - Apple said Monday that it has sold more than 1 million iPhone 3GS models through Sunday, just three days after the phone's launch. Some 6 million customers have downloaded the new iPhone 3.0 software in the product's first five days, Apple said. In a statement, CEO Steve Jobs said the iPhone's momentum is "stronger than ever." The newest iPhone, which runs twice as fast as its predecessor, offers a 3-megapixel camera, the ability to capture video and other features such as new voice controls for making calls and playing music.

Treasurys Up on Fed Buys, World Bank Outlook - Treasury prices were higher Monday which pushed yields lower as the Federal Reserve was in the process of its continuing purchase of bonds. Also, a negative economic outlook from World Bank was creating a "flight to quality" to Treasurys which helped push the prices higher.

The Fed is expected to purchase Treasurys maturing between 2026 and 2039. The previous purchases for this maturity range have been for $3.5 billion and $2.5 billion. The buyback is part of the Fed's continuing effort to keep borrowing costs low including mortgage rates.

Dollar Stronger, Gold, Oil Fall - As part of the "flight to quality" after the World Bank outlook, the dollar and yen moved higher against the euro. The dollar is still seen as the most secure currency in the world.

Gold fell Monday to $923, the lowest level in one month, as falling oil prices and a stronger U.S. dollar reduced the precious metal's appeal as a hedge against inflation and a weaker currency. Crude oil fell below $68 a barrel Monday, the weakest in nearly two weeks.

In other metals, platinum fell 1.6%, palladium 1.9%, silver sank 2.8%, and copper fell 3%.

Wal-Mart Becomes an iPhone Retailer

Wal-Mart said on Friday it will start selling Apple's iPhone on Sunday, but the popular cell phones that can surf the web will not be priced as low as some anticipated.

Wal-Mart plans to sell the black 8-gigabyte iPhone 3G model, which also holds about 2,000 songs, for $197. The 16-gigabyte model, in black or white, will be priced at $297. All of the phones require a new two-year service agreement from AT&T or a qualified upgrade, Wal-Mart said.

The move gives Apple the chance to reach millions of Wal-Mart shoppers who may not be as familiar with the company's products.

Wal-Mart typically appeals to a lower-income group of shoppers than those who buy Apple's Macintosh computers, iPods and iPhones, which are typically more expensive that other PCs and music players. But the world's largest retailer has also lured new customers seeking low prices in a recession.

Wal-Mart used discounts to draw in millions of cash-strapped shoppers during the holiday season. It was among the first to advertise its deals this fall, including hot electronics such as flat-screen televisions.

Numerous websites had previously speculated that Apple would offer a 4-gigabyte model of the iPhone for $99 at Wal-Mart stores. But the phones being sold at Wal-Mart are the same ones already on the market, for about $2 below the prices offered at other locations.

AT&T, the exclusive U.S. wireless service provider for iPhone, currently sells the cheapest version for $199 for a model with 8 gigabytes of storage, and $299 for the 16-gigabyte version. AT&T declined to comment.

Wal-Mart was one of few U.S. retailers whose sales fared well in the weeks after Thanksgiving and it is trying to keep shoppers coming back to its stores after Christmas. It ran a commercial on Friday morning showing a mother taking her son to Wal-Mart to spend the gift card he got for the holiday. While the commercial did not refer to iPhones, it did show the pair heading into the electronics section of a Wal-Mart store.

Wal-Mart's move may put pressure on Best Buy, the largest consumer electronics retailer. Until now, Best Buy had been the only retailer besides Apple's own stores and AT&T stores selling the iPhone.

Best Buy currently has the 8-gigabyte iPhone on sale for $189.99 and the 16-gigabyte version for $289.99, each priced $10 less than their usual price at Best Buy.

Wal-Mart also said its stores could match local competitors' advertised prices during a promotional period.

The phones will be available in nearly 2,500 stores beginning Sunday, December 28.

Apple posted a stronger-than-expected 26% rise in fiscal fourth-quarter profit in October, spurred by strong sales of the faster, next-generation iPhones. Apple sold 6.89 million iPhones during the quarter, which ended on September 27.

In the end, the move to open iPhone sales at Best Buy, already being sold, and now Wal-Mart, starts on Sunday, can only be viewed as positives for all companies involved. With the number of Best Buy and Wal-Mart gift cards (or returns that are now gift cards), how many of those will go towards the phones and accessories? For AT&T it is a new subscriber or continuing subscriber with a new 2 year agreement - with data and phone packages. For Apple, it is the sale of the iPhone, but also the connection with the end user that could open them up to notebooks, Macs, iPods, etc.

As long as Apple keeps making good consumer products with a cutting edge feel, the more retailers they have, the better the end results.

Source: Reuters

Paulson Sees Banking Consolidation; Oil Drops to $70 a Barrel; iPhone Delivers for Apple

Treasury Secretary Henry Paulson said on Tuesday that he expects to see consolidation within the stressed U.S. banking industry and indicated he sees that as positive, according to Bloomberg.

"There will be some situations where it's best for the economy and for the banking system for there to be a consolidation," Paulson was quoted saying by Bloomberg.

Oil Falls to $70 a Barrel

Oil prices slumped back below $71 a barrel Tuesday as a stronger dollar overshadowed expectations of a sizable OPEC output cut and led investors to shed commodities bought as an inflation hedge (investors often buy commodities like crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises).

At the pump, consumers got another price cut as a gallon of regular gasoline lost 3.4 cents overnight to a new national average of $2.89, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices have fallen 30% from their July 11 peak of $4.11 a gallon and are quickly closing in on year-ago levels.

The dollar muscled higher against rival currencies as credit market conditions eased some and on speculation that the U.S. government might roll out another stimulus package in an effort to jump start the economy.

Light, sweet crude for November delivery fell $3.36 to settle at $70.89 on the NYMex. On Monday, the contract rose $2.40 to settle at $74.25 a barrel. Crude oil is down 52% from its all-time peak of $147.27 reached July 11.

Alarmed by the rapid slide, the Organization of the Petroleum Exporting Countries (OPEC), which controls 40% of the world's oil supply, is holding an extraordinary meeting Friday in Vienna. OPEC's president, Chakib Khelil, said Sunday the group is planning to announce an output reduction that analysts believe could total at least 1 million barrels a day.

But experts are divided over how much impact on OPEC cut will have on prices. Some believe waning global demand for energy will push prices as low as $50 a barrel, while others say a significant supply reduction could halt the downward the momentum.

"If OPEC does cut production, prices could return to the upside over the next three to six months," said Costanza Jacazio, an oil analyst with Barclays Capital in New York. She said tighter global supplies could eventually push prices back toward the $90 range, a level believed to be favored by several OPEC members including Iran and Venezuela.

Oil-producing countries are facing steep serious budget shortfalls as oil prices come down from record levels. Khelil has said OPEC may cut output again at a meeting in December, and that the group considers the oil market oversupplied by about 2 million barrels a day.

Investors are also keeping a close eye on whether non-OPEC producers, such as Russia, will reduce supply as analysts lower price expectations for next year. Deutsche Bank on Monday cut its 2009 oil price forecast to $60 a barrel from $92 and predicted $57.50 for 2010.

Oil market traders are also closely watching economic conditions in the U.S.

Federal Reserve Chairman Ben Bernanke told the House Budget Committee on Monday that a fresh round of government measures might help ease the country's downturn. There were also signs Tuesday of a reviving credit market as bank-to-bank lending rates eased further.

In other NYMex trading, heating oil futures fell 3.24 cents to settle at $2.1975 a gallon, while gasoline prices lost 2.82 cents to settle at $1.6919 a gallon. Natural Gas for December delivery rose 10.1 cents to settle at $7.312 per 1,000 cubic feet.

iPhone Delivers for Apple

Apple (AAPL) said its profit jumped 26% in its fiscal fourth quarter as the newest iPhone 3G outsold the market-leading BlackBerry from Research in Motion (RIMM).

For the three months ended Sept. 27, Apple's profit climbed to $1.14 billion, or $1.26 per share, from $904 million, or $1.01 per share in the same period last year. Sales jumped 27% to $7.9 billion from $6.22 billion in the year-ago quarter.

Cupertino, Calif.-based Apple's profit topped Wall Street's expectations, but the sales revenue missed slightly. Analysts had expected the company to sell $8 billion worth of Macintosh computers, iPods, iPhones and other gadgets, for a profit of $1.11 per share, according to a Thomson Reuters poll.

Peter Oppenheimer, Apple's chief financial officer, said in an interview Tuesday that Apple set records for Macintosh sales and for iPod sales in a non-holiday quarter, but that iPhone results marked the brightest spot. The company sold 6.9 million of its next-generation iPhone 3G in the quarter -- more than the 6.1 million total first-generation iPhones sold.

Research in Motion reported it sold 6.1 million BlackBerry smart phones in the quarter that ended Aug. 30.

"We blew it out on the iPhone," Oppenheimer said. Apple said it sold 2.6 million Macs and 11.1 million iPods in the quarter, allaying fears that the sluggish economy would weigh on Apple's back-to-school sales.

Sources: Reuters, Bloomberg, AP, Yahoo

A Clarification From Saturday & The Latest News On The iPhone

First, in Saturday's post, there was a statement that needed to be clarified based on a couple of e-mails. The post should have made it clear that if oil continues to stay at the current level or moves lower, the threat of inflation becomes smaller and consumer spending will keep growing - thereby powering the economy along. Sorry for any confusion.

With that behind us, on to today's post...

The Apple (AAPL) iPhone 3G has been a hit selling millions of handsets and with the slow supply lines, continues to be a much wanted item. In fact this week, Apple signed an agreement with Best Buy (BBY) to become the exclusive "independent" distributor of the iPhone. Now you can get it on-line, at any AT&T store, at any Best Buy, or of course, at an Apple Store. This is great news for Apple, AT&T (T), and now Best Buy. The stronger demand should translate into higher earnings in coming quarters.

It has not all been fabulous news though. There have been problems with activations, upgrade eligibility, and speed from the 3G service. The 3G service seems to work much faster than the old "Edge" service, but according to several reports, even when the phone could use a 3G network, sometimes it opts for the Edge network. When this happens, you are still surfing at the slower speeds.

The biggest issue though seems to be the reception/dropped calls. Apple has acknowledged the issue, and they have said the Infineon (IFX) chip and its software are the root of the problem. Later this next week, Apple has said a new update to the software will be released, and they/we hope that it will fix the problem.

From personal experience, the iPhone is a great phone most of the time. The tools, the apps, the phone itself seem to be very good. Unfortunately, when a call is dropped 3 times in 5 minutes or you have no service in an area that no one else has problems with, the situation does become frustrating. Overall though it is a really good phone.

On the financial front, the sales of Apple's 3G iPhone are projected to reach 3.8 million units by the end of September (Apple's fiscal year end). Also, the new "App Store" has been a huge hit. The first month saw 60 million apps "purchased" on revenues of $30 million. While many of these are free apps, Apple believes it has a current revenue stream that will continue to grow from the store. When you add in iTunes, Apple has really worked to allow itself to continue to generate revenue from is customers.

If you think back, before the iPod, iTunes, and the iPhone, did you really want to buy an Apple product? With the performance and "coolness" of these products though, can you imagine not wanting to have one of these? Apple has turned these products into more sales of PowerBooks and Macs. Apple has definitely figured out how one product can turn into purchases of their other products. This turns into brand loyalty and future profits.

As long as Apple fixes the iPhone issue quickly with just a simple software update, Apple, AT&T, and Best Buy should reap the benefits for quarters to come.

A Weird Day In The Market

On Wednesday, the market had a weird day with the Dow dropping more than 100 points, but the NASDAQ and S&P 500 finished down only single digits. The Russell 2000 (an index that measures small cap stocks) finished higher.

The market was fighting all of the problems that had pressured it in recent weeks all day. It started with weak economic data, oil data that showed a surprising drop in the supply, and the all too familiar credit crisis. The day began with a retail sales report that was disappointing, then a jump in oil prices when the supply data came in down more than expected, and finally, the financials succumbed to pressure after the write-down of assets by JP Morgan Chase (JPM). The tidbit missed by everyone it seems is that JP Morgan Chase wrote-down the assets because Merill Lynch (ML) sold them for 22 cents on the dollar. Since that is the current "value", that is what JPM wrote them down too. Once again, a write down but not a write off.

On the bright side, the tech heavy NASDAQ finished essentially flat for the day with Apple (AAPL) leading the way. Apple announced that it would expand sales of its new 3G iPhone in an deal with Best Buy (BBY). Apple shares shot up 1.5% to $179.30 on the news.

Thursday's market action will be guided by the Consumer Price Index (CPI) report. The CPI is a guage of inflation that many in the market point to on how it affects the consumer.

Sources: Yahoo, Reuters

iPhone Mania!

Apple (AAPL) announced on Monday that it has already sold 1 million of the 3G iPhones which went on sale Friday. Compare these sales figures with the fact that it took Apple 74 days to sell 1 million of the original, also highly anticipated, version of the iPhone.

Now there have been system problems associated with the stampede of folks trying to activate their new phones, but it still is a great accomplishment for the company. Considering the high price of gasoline, issues with the banking industry and general economic dissatisfaction, it would appear that Apple’s customers represent some underlying strength in the U.S. and world economy.

No bread lines just incredibly long lines to buy the magical iPhone.