« April 02, 2006 - April 08, 2006 | Main | April 23, 2006 - April 29, 2006 »
Wal-Mart may not be big on giving generous benefits to employees. But apparently, CEO Lee Scott gets a fair amount of vacation time. From the AP, via the Wall Street Journal:
BENTONVILLE, Ark. -- Lee Scott will take an unusually long one-month vacation in May from his job as chief executive officer of Wal-Mart Stores Inc., his first break of that length since taking over the helm of the world's largest retailer by sales in 2000, Wal-Mart said yesterday.Mr. Scott, 57 years old, will remain in touch while he is away, a spokeswoman said. He will return for the June 3 shareholders meeting. His duties will be shared while he is gone by Vice Chairman Mike Duke, the head of Wal-Mart's international division, and Vice Chairman John Menzer, who runs the domestic-stores division.
I wonder how much paid vacation Wal-Mart associates get per year.
Posted by dan at 09:43 AM
Danielle Reed reports in the Wall Street Journal on rising foreclosure rates, especially in the Midwest. This has more to do with the decline in wages and the trevails of manufacturing than any housing bubble. The states where delinquencies and foreclosures are highest are states where housing prices have generally been muted.
As home-price appreciation has tapered off and mortgage rates have risen, foreclosures have started to pick up, with the Midwest region hit hardest.The rate of foreclosure -- the process by which banks can ultimately take back the properties that secure mortgages -- is a key indicator that real-estate analysts and investors use as a signal of market distress.
In the past several years, foreclosures across the U.S. have been hovering around historically low levels, as home prices have risen nearly 50% in five years. This appreciation enabled borrowers to sell their homes relatively easily to resolve mortgage difficulties.
Now, a survey of the latest data confirms, that is starting to change, with an uptick across the U.S. in foreclosure rates and mortgage delinquencies (or late mortgage payments). But even the new higher rates of foreclosure and delinquencies are still low in historic terms.
Nationally, the number of mortgage loans that entered some stage of foreclosure rose to 117,259 in February, up 68% from the same month a year earlier, according to Irvine, Calif., online foreclosure-data service RealtyTrac.
Delinquencies are up as well. Data provider LoanPerformance, a subsidiary of First American Real Estate Solutions, reported that 3% of the most vulnerable loans -- those made to borrowers with less than a stellar credit history -- were 90 days delinquent in February. That is up from 2.84% in February 2005. Meanwhile, 90-day delinquencies for loans made to borrowers with better credit were up to 0.76% in February, from 0.67% a year earlier.
The rise in delinquencies isn't surprising, according to Doug Duncan, the Mortgage Bankers Association chief economist. In its own quarterly survey, for the fourth quarter of 2005, the association showed a 0.26 percentage point uptick in the rate of mortgage delinquencies as well as a 0.01 percentage point increase in the foreclosure rate from the third quarter.
The MBA has "been expecting an uptick in delinquencies due to a number of factors," Mr. Duncan said in the release, including greater prevalence of riskier adjustable-rate and subprime mortgages, as well as higher interest rates and energy costs.
Digging a little further into the data shows that three states in the Midwest consistently have among the highest rates of loan foreclosures and delinquencies: Indiana, Ohio and Michigan.
The reasons behind the higher rates of foreclosures and delinquencies vary somewhat, but there are two primary drivers, said Lou Barnes, a partner with mortgage banking firm Boulder West Financial Services in Boulder, Colo.
One is family economic distress, often related to job loss or divorce. Another is a slowing pace of home-price gains. And what the states hit hardest by mortgage foreclosures have in common is relatively low home-price appreciation (compared with the national average) over the past few years, typically combined with below-trend job growth.
In Ohio, 3.22% of loans were in foreclosure at the end of the fourth quarter, according to MBA data. The national level was 0.99%. Indiana had 2.75% of loans in foreclosure, and Michigan 1.75%. The entire "East North Central" region of the country, which includes Indiana, Ohio, Michigan, Illinois and Wisconsin, had 2.05% of its loans in foreclosure, the highest regional level in the nation, according to the MBA.
Posted by dan at 09:40 AM
My latest in Slate, on the dread Alternative Minimum Tax.
Posted by dan at 09:39 AM
From the Financial Times "Observer" column:
It is hard out there for a bond fund manager. Or rather, it is hard for the Bond Market Association, which yesterday told the world that Bill Gross, of PIMPCO, would be speaking at its annual meeting.The typo is all the more wince-worthy since Gross's PIMCO is arguably the biggest and most famous bond fund in the world, and it is no small kudos for the BMA that it has enticed the Newport Beach, California resident all the way to New York for the conference next month, along with Alan Greenspan, Timothy Geithner of the New York Fed and SEC commissioner Cynthia Glassman.
The BMA is celebrating its 30th birthday, but it could be its last if plans go ahead for a merger with the Securities Industry Association. John Snow, treasury secretary, is also speaking. With any luck, chatter about the merger will overshadow speculation about his own job.
Posted by dan at 08:58 AM
It was one thing for France's unpopular government to try to tackle the ingrained cultural habit of laziness. It's quite another to tackle the ingrained cultural habit of smoking. Martin Arnold reports ($ required) in the Financial Times:
The French government yesterday postponed legislation banning smoking in public places, less than a week after a humiliating climbdown over labour reforms.Dominique de Villepin, prime minister, who has seen his popularity hit a record low after his battle over labour reform, asked Xavier Bertrand, health minister, to carry out more evaluations on the impact of a smoking ban after a meeting to finalise plans for a new law.
Mr Bertrand said only last weekend he wanted to go "as fast as possible" to pass a law protecting people from passive smoking at work, in bars and in restaurants.
While the idea of a smoking ban in public places is supported by 80 per cent of French people, it is likely to face fierce opposition from powerful business groups, including tobacconists, restaurateurs and bar owners.
"Once again the government is backing down. It is total confusion," said Claude Evin, an anti-smoking advocate and opposition Socialist deputy.
Mr de Villepin seems to have balked at the risk of introducing a ban so soon after being forced to back down in the face of street protests by millions of students and workers against his youth labour law.
Posted by dan at 08:52 AM
From today's Financial Times: "Italy enters period of political uncertainty."
Posted by dan at 08:51 AM
Rank and file employees may be losing benefits and are frequently forced to pay more for their own helath insurance. But there's one group of workers that doesn't have to worry about bearing the high cost of health care: top executives. Ellen Schultz and Theo Francis report in the Wall Street Journal:
At a time when companies are scaling back health benefits for other retirees, former top executives at many corporations are receiving partial or full lifetime medical coverage on top of pensions valued at millions of dollars, a Wall Street Journal analysis of dozens of recent securities filings indicates.The trend spans industries, and it is common at airlines, which have been among the most aggressive in scaling back retirement benefits for the rank and file. Continental Airlines, for example, provides health care "at no cost" for retired Chairman Gordon Bethune and his dependents, the company's proxy statement notes. That's in addition to other perks, including a lifetime of free flights and a decade of free office space, plus a lump-sum pension payout of $22 million. A Continental spokesman says other retired executives have to pay 20% of the cost of coverage but then declines further comment. Mr. Bethune, who retired on Dec. 31, 2004, didn't return calls to his office seeking comment.
Companies often provide their top executives with more generous health-care plans than other full-time employees get and then continue to provide the richer benefits through retirement. AT&T Inc. pays up to $100,000 per family per year for its top executives' out-of-pocket health-care costs through a separate insurance policy, and executives who joined the former SBC Corp. before 1999 get to keep that coverage in retirement. An AT&T spokeswoman says AT&T gives other retirees and employees "very good medical benefits" compared with other companies.
Citigroup Inc. promised to pay the premiums and out-of-pocket expenses for both health and dental care for Chairman Sanford I. Weill and his wife now, and it will continue to provide those benefits for the rest of the Weills' lives, the company's proxy statement says. Citigroup will also continue to pay for any taxes Mr. Weill owes on the imputed income arising from these benefits. A company spokeswoman says the benefit dates back to a 1980s contract and isn't available to other executives.
Companies are most likely to promise lifetime health benefits when hiring midcareer or older executives, especially if their prior employers offered similar perks, says Steven Hall, managing director of Steven Hall & Partners, an executive-compensation firm in New York. But Mr. Hall says it's often hard to tell what retiree health benefits companies offer their top managers. "You read the proxy and then scratch your head -- they didn't say they have it, but that doesn't mean they don't have it," Mr. Hall says.
The practice angers retirees who face rising health-care premiums and co-payments and, in many cases, are losing their retirement health benefits entirely. "Executives are receiving multimillion-dollar pensions and are in a position to easily pay for their health care," says Jane Banfield, a retired AT&T manager. "Instead, they want the icing on the cake by also guaranteeing themselves free health care," she says.
Posted by dan at 08:31 AM
Jad Mouawad reports in the New York Times on Exxon-Mobil Chairman Lee Raymond's obscene retirement package.
Mr. Raymond received a compensation package worth about $140 million last year, including cash, stock, options and a pension plan. He is also still entitled to stock, options and long-term compensation worth at least another $258 million, according to a proxy statement filed by Exxon with the Securities and Exchange Commission yesterday.The total sum for Mr. Raymond's golden years comes to at least $398 million, among the richest compensation packages ever. The record was the payout of $550 million to Michael D. Eisner, the former head of Walt Disney, in 1997.
Exxon's board also agreed to pick up Mr. Raymond's country club fees, allow him to use the company aircraft and pay him another $1 million to stay on as a consultant for another year. Mr. Raymond agreed to reimburse Exxon partly when he uses the company jet for personal travel. "It begs the old question again, When is enough, enough?" said Brian Foley, an executive compensation consultant in White Plains. "This looks like a spigot that you can't turn off."
Posted by dan at 08:21 AM
Carla Hoyos and Kevin Morrison in the Financial Times warn ($ required) that we might be expecting too much in the way of oil supply from Russia.
Claude Mandil, executive director of the International Energy Agency, the energy watchdog of the world's biggest economies, told the Financial Times that expectations for Russian oil supply growth were too optimistic and that the Organisation of the Petroleum Exporting Countries, the cartel that controls 40 per cent of the world's oil supply, would have to make up the difference in the next four years."To 2010, Opec would have to fill a higher gap. I am not sure that non-Opec supply will be that high and I mainly have in mind Russia, but also some othernon-Opec suppliers," he warned.
Mr Mandil's comments coincided with the release of a Standard & Poor's report yesterday that questioned the reliability of gas supplies from the Russian gas group Gazprom.
Gazprom would continue to play a prominent role in European energy supply but "several factors could hamper the group's ability to continue supplying gas", the report said.
Capital expenditure needed to increase significantly for Gazprom to maximise opportunities, it added.
"The key issue for Gazprom's production is the large amount of capital spending needed to monetise its huge reserve potential and to achieve stable and slightly growing production," S&P said. However, concerns about the stability of gas supplies to Europe are unlikely to affect Gazprom's ratings.
Mr Mandil would not say by how much the IEA would reduce its Russian growth forecasts for oil, but other analysts have slashed their expectations by as much as half in recent months.
Russia is the world's second largest oil producer. Until a few years ago, it enjoyed double-digit supply growth, which was critical in helping to meet the recent surge in Chinese demand.
The caution over its future growth comes amid a surge in oil prices on fears of a US attack on Iran and supply cuts in Nigeria and Iraq.
Posted by dan at 08:17 AM
Richard Gibson reports in the Wall Street Journal on "negative traffice numbers" at several restaurant chains last quarter.
"Negative traffic numbers are expected to have hurt several big casual-dining names in the period, among them Applebee's International Inc., Brinker International INc., Cracker Barrel Old Country Stores owner CBRL Group Inc. and P.F. Chang's China Bistro. . .Cracker Barrel, for exapmle, saw March comparable sales slip 2.1%, after a 2.2% price increase, implying that without it, sales could have been down twice as much. Merchandise dsales during the month fell 13%, continuing a trend.
Avondale Partners analyst Matthew Laing said the chain's 'traffic continues to be negatively impacted by tight discretionary spending due to higher fuel prices as well as aggressive price increases taken by the ocmpany in recent years."
Posted by dan at 08:11 AM
Jim Carlton in the Wall Street Journal alerts us to promising news about paper recycling, courtesy of the American Forest and Paper Association.
"The amount of paper recovered from recycling in the U.S. reached a record 51.5% of all paper products in 2005, helping to meet growing global demand for recovered paper fiber and easing pressure on overloaded landfills."
Posted by dan at 08:08 AM
Talk about monetizing intangible assets. Julie Bosman reports in the New York Times in the latest effort to monetize acehivement and celebrity.
The media entrepreneur who controls the rights to Elvis Presley, "American Idol" and the soccer star David Beckham has added another star to his roster: Muhammad Ali.Robert F. X. Sillerman, the chief executive of the entertainment company CKX, announced yesterday that his company had paid $50 million for an 80 percent stake in Mr. Ali's name, image and likeness. The other 20 percent will be retained by Mr. Ali and his company, GOAT (short for the "greatest of all time").
Marketers said CKX could reap a fortune in advertising and marketing deals with Mr. Ali. His famous boxing opponent, George Foreman, has been successful as a celebrity product endorser. (George Foreman grills were so popular that the company manufacturing them, Salton, decided to buy Mr. Foreman out for $137.5 million in 1999 rather than keep paying him royalties from sales.)
Mr. Sillerman said it would be premature to discuss how the company would use Mr. Ali's name and likeness, but whatever his company did would be "respectful, methodical and impactful."
"It is not our plan to involve him in any way personally," Mr. Sillerman said of Mr. Ali, who is suffering from Parkinson's disease.
Mr. Ali, 64, joins other names under Mr. Sillerman's control that have one thing in common: they are instantly recognized around the world. But CKX also has an eye for big names that are not making big money. When CKX acquired a controlling interest in Mr. Presley's name in 2005, the company that controlled the estate, Elvis Presley Enterprises, had brought in about $40 million in annual revenue in the previous five years.
Posted by dan at 12:01 PM
Bust out those piggy banks. Individuals may soon be able to practice precious metal arbitrage. Kevin Morrison reports in the Financial Times:
It could soon be worth Americans melting down their pennies for scrap, if zinc and copper prices continue their current rate of increase.Copper prices have risen 30 per cent so far this year, and zinc is up 55 per cent - a rise of about $550 a tonne in a little more than three weeks.
A rise by the same magnitude would make the metal content in the US one cent coin worth more than its face value.
The weight of 160 pennies - also known as a one cent coin - comes to a pound, worth a face value of $1.60. But - with each penny made of 97.5 per cent zinc and 2.5 per cent copper - based on current prices, the metal value is worth about $1.36. Therefore another 25 cents-a-pound rise in zinc, or about $551 a tonne, would see the metal value of the US penny worth more than the monetary value.
Market analysts do not rule out such a rise in the zinc price. "Zinc prices have already risen further than what most people had ever though but that isnot to say there cannot be further gains," said Ingrid Sternby, analyst at Barclays Capital. "Could we see another $500 on zinc? It's possible," she said.
However, Ed Yardeni, chief investment strategist at US fund manager Oak Associates, who drew attention to the penny'srising scrap value said: "Don't bother melting the penniesjust yet.
"However, at the rate that metal prices have soared since the end of last year, there might soon be an arbitrage play between pennies and zinc," Mr Yardeni said.
Posted by dan at 10:32 AM
My latest in Slate, on the run-up in gold.
Posted by dan at 10:31 AM
Michael Luongo reports in the New York Times on growing air traffic between the U.S. and Latin America, especially Argentina and Mexico:
Mexico, whose economy has long been integrated with the United States, has had continued increases in business traffic. The North American Free Trade Agreement, which went into effect in 1994, solidified the trend. "Before Nafta, we flew to 12 destinations in Mexico," Mr. Garcia of Continental said. "We fly into 30 now, and we'll probably add a couple more this year."He said that the new cities are "not typical leisure markets" but industrial cities like Saltillo, which he called "the Detroit of Mexico," where General Motors and Ford have plants. These business cities "require more frequent travel and tend to produce more revenue than the leisure market," he said.
Patricia Capetillo, the meetings manager for the Mexico Conventions Bureau, said Mexico ranked as 27th in the world in the number of conventions in 2003, according to the International Congress and Convention Association. In just a year, it had climbed to 11th, according to data from the association.
Ms. Capetillo said convention planners choose Mexico for the same reason as leisure travelers, looking for "destinations that are colorful and have gastronomy" but the impact of business travelers on the economy is greater. "Business travelers spend seven times more money than leisure people," she said.
Posted by dan at 09:43 AM
The notion that what governments around the world need, above all, are strong executives with backgrounds in business, has been a powerful one. But there are signs that it's not working out so well. Wayne Arnold reports in the New York Times that it's failing in Thailand. Italians yesterday appear to have cashiered their CEO Prime Minister. And here in the U.S., the stock of our MBA President continues to slip.
Posted by dan at 09:39 AM
The FT's op-ed page, called Comment, is brilliant today. Adam Posen on the age of economic ennui; Wolfgang Munchau rubbishes the proposed European Institute of Technology; John Gapper makes the case for foreign ownership of domestic assets; and David Skeel compares utility builder/crook Samuel Insull to the Enron guys.
Posted by dan at 10:41 AM
George Parker reports ($ required) in the Financial Times that Europe recently simulated a financial meltdown.
Europe's financial regulators have held a "war game" exercise, simulating a continent-wide financial crisis, amid fears they are ill-prepared to stop a problem in one country spreading across borders.The exercise involved simulating the collapse of abig bank with operationsin several large countries to see whether the European Central Bank, national central banks and finance ministries could work toget-her to contain the crisis.
It is understood the exercise took place at the headquarters of the ECB in Frankfurt at the end of last week. One person involved said: "It is like checking whether a nuclear power plant can survive a plane crashing into it."
The exercise took place on the eve of a meeting of European Union finance ministers and central bank chiefs in Vienna, at which the bloc's financial stability was high on the agenda. Officials at the meeting confirmed that ministers had discussed the ECB crisis management exercise.
The aim was to test the ability of national regulators to share information with other national bodies in a crisis and to overcome "differences in culture" and other practical obstacles. The results are being analysed and will be reported to the Ecofin council in June.
That's good as far as it goes. But Euro-crats should really be running simulations on how to deal with gigantic economies at the heart of Europe with calcified political systems that refuse to grow, create jobs, or reform. Wait, they already are: France & Italy.
Posted by dan at 10:36 AM
In general, the overall narrative seems to hold that the economic fall-out of Hurrican Katrina was (a) contained to the affected regions; and (b) nothing more than a blip. So it was surprising to see this nugget in Bhushan Bahree's article in the Wall Street Journal today about the persistence of oil prices.
"The fundamental trouble is that the global energy system for the past three years has been operating close to its ability to pump and refine crude. And with demand continuing to grow, output sagging in troubled oil regions and another hurricane season appraoching, the industry has failed to restore a large cushion of spare capacity.One big laggard: the U.S. oil patch. More than half a year after the 2005 hurricanes, almost 23% of oil ouput in the U.S. gulf is still shut down -- about 340,000 barrels a day."
At today's prices, that's $204 million of oil per day that's missing.
Posted by dan at 09:50 AM
From today's article in the Wall Street Journal by Ann Zimmerman and Kris Hudson on Wal-Mart's efforts to overhaul its stores.
This month Wal-Mart is rolling out a new electronically driven pilot program for matching employees' work shifts more precisely with customer traffic patterns. Mr. Castro-Wright has said it will improve customer service markedly, but critics worry it could undermine morale because employees will have little say over what days and hours they work.Wal-Mart executives have acknowledged that the retailer will also shift to a heavier reliance on part-time workers, who now account for roughly 20% of the work force, higher than the national average for retailers. A recent JP Morgan report said Wal-Mart plans to increase the ratio of its 1.2 million-member U.S. hourly work force on part-time schedules to 40% from 20%, meaning the hours of as many as 240,000 workers could be cut below 34 a week, the threshold to be considered full time. Wal-Mart spokeswoman Mona Williams says the company has no "predetermined target."
Posted by dan at 09:48 AM
Gretchen Morgenson has a good take-out today in the New York Times on executive compensation consultants.
Posted by dan at 09:46 AM
A funny article ($ required) in Business Week on bad-boy P.R. guy Eric Dezenhall.
In a June, 2002, engagement involving ExxonMobil, Dezenhall Resources arranged a pro-Exxon demonstration on Capitol Hill, according to people familiar with the situation. At Dezenhall Resources' behest, the several dozen demonstrators were brought together by the conservative Washington nonprofit Americans for Tax Reform, these people say. Participants waved signs reading "Capitalism Rocks" and "Stop Global Whining." Their aim was to counter an environmental protest at an Exxon station near the Capitol.Dezenhall resources has provided financial backing to Americans for Tax Reform, say people familiar with the communications firm. But ATR says it has no indication that the Dezenhall firm paid for the 2002 demonstration. "The staff here I spoke with said they don't have any recollection of payment for this specific event," says ATR spokesman John Kartch.
In an e-mail answer to questions about the incident, Eric Dezenhall doesn't comment on any ties to ATR but says: "We routinely support think tanks and other experts whose positions are consistent with our clients' views, and will continue to do so unapologetically." He declines to say whether Exxon has been a client.
I love Kartch's non-non-denial denial.
Posted by dan at 09:32 AM