Southwest Pushes Fares Higher, Blaming Fuel Costs (Washington Post)
For the past few years, Southwest Airlines has been able to avoid the pressure of high energy prices due to some well-timed and massive hedges it had put in place a few years earlier. But murmuring had started earlier this year that the hedges were slowly about to expire, and that the airline would soon face a host of issues. Not only are energy prices on the rise for the company, but its fleet and staff are aging as well. And it's not the only player in the discount arena anymore. So now the company, citing fuel costs, have put in a major price hike -- up to $20 on a round trip ticket. The big winner is the rest of the industry, as this gives them some breathing room on their own prices. For the last year, jetBlue has been saying they just wish they could squeeze a few more dollars per seat. Now maybe the can. For the incumbents, their prices now look incrementally more attractive.
Ken Lay Dies of a Heart Attack (White Collar Crime Prof Blog)
In writing about the death of Ken Lay on a blog like Dealbreaker there's an inner monologue that goes on in the writers head. Do I play it straight? Do I crack a joke? There's what Woody Allan said, that comedy is tragedy plus time. It's not tragedy plus snark. Was this even a tragedy? Well this is a blog, the Journal can do the serious post mortem.... and so on. Well, either way, here's a fascinating bit of legal exotica for you. Turns out that because the case may still have been appealed, Lay's death expunges the conviction from his record. This is a big deal. It means that any orders to vacate his wealth are annulled, and his family gets to keep millions of dollars that they likely would have lost had he gone to jail. That's got to soften the blow. And get this; because the conviction was expunged, any civil suit against the state gets that much harder. The plaintiff can't use the conviction in the argument.
Fancy investing in a wine fund? (Finance Asia) (via Dealbook)
We love funds like this. As everyone knows, we were recently, if not still, in a climate in which holding material assets of any stripe was in vogue. Land and gold have been quite hot. Last year there was the launching of an art fund, whereby investors pooled their money together to buy great paintings, store them in a vault, and then sell them in ten years. The managers seemed to go out of their way to argue that they were not art connoiseurs (though they had them on staff) and that they didn't care at all whether the paintings looked nice. It was all about the money. So the launching of a wine fund, in which select vintages will be purchases for resell at a later date almost seems quaint. Not only is it hard assets, but it has that certain faux-sophistication that appeals to people with too much money. Little do they know that casually dropping "I currently have 17% of my portfolio in wine" at a party could only make them look like a fool. And of course, the stuff is talked about as if it were houses. People are always going to need to get drunk off their ass in any economic environment... Wine has always gone up over time. Just make sure that the fund manager isn't an alkie.
GM's Board Holds the Cards (BusinessWeek)
In case you were looking for a nice summary of some obvious points, check this out. For example, despite Kerkorian's large stake and enthusiasm over a deal with Renault, it's really the GM board that has the final say over any deal with GM. We figured as much though, that's what boards do. The deeper problem is that it's not clear how Renault could actually help GM out of its problems, such as high legacy costs, and an intractable situation with labor. Insiders also don't see Ghosn & co. as being able to reverse the slide in many GM brands. But this last part doesn't seem obvious. Slides in brands can be reversed, and Ghosn seems to have a knack for this stuff. And it may be that the only way deal with the legacy issue is to climb out of it by making a lot of money. That has to start by raising sales. It almost seems silly to blame these other issues at a time when sales continue to plummet. Or is that the union's fault too.
Top concert promoter buys rival House of Blues (Chicago Sun-Times)
Unlike the Hard Rock Cafe, the House of Blues is actually a venue, and there is actually music performed there. Still the chain evokes the same je ne sais quois, and it's fair to speculate we may be seeing a boomlet in the cheesy, chain, music-themed establishments. Surely, the private equity sharks are smelling blood. Who's next?
Agents Arrest 3 in Plot to Sell Coca-Cola Secrets to PepsiCo (NYT)
When this story broke yesterday, it was exciting because it seemed that three men were aware of the Holy Grail of intellectual property: the secret ingredient in Coca-Cola. The fact that they were trying to arrange an illicit sale to Pepsi only made the story better. Turns out, no such luck. The trade secrets weren't about the classic, secret Coke formula, but of some new, heretofore unreleased beverage. And because it's a beverage in development at Coke, we can be pretty sure it's going to be a flop. No wonder Pepsi wasn't interested.
Macquarie/DUET-led consortium to buy Duquesne Light (Reuters)
The hottest investment theme continues to be infrastructure and entrenched monopolies. We've seen plenty of deals for ports, power grids, massive pub chains, etc. The latest move is that Australia's Macquarie, which has been battling Goldman in Europe has made a play for Pittsburgh' Duquesne Light, offering a large 20% premium over its recent close. That's pretty good for a power utility. So have the American banks, in their pursuit of European assets, failed to protect their backyard. This announcement follows a spate of foreign companies buying up American utility assets. From an economic standpoint, it hardly makes a different of course, but from an ego difference it's a really big deal.
Expanded toy, baby offerings on Amazon (Seattle Times)
Amazon remains the question mark from the top tier of the internet class of '98. They were obviously no fly-by-night operation, cause they didn't fold or implode when the going got tough. But they're not really of the same caliber as Yahoo or eBay, companies that mint their own money. If Amazon has a strength, it's that they're good at facilitating e-commerce for various partners. As for their own sales, there continue to be doubts surrounding a business model that offers free shipping and sharp discounts on so many goods. For the last 8 years, people have been asking whether you can ever turn a profit by selling a $1 bill for $.95. Now Amazon has lost a major partner, in Toys 'r' Us (sorry, didn't have a backwards R key on my keyboard). Can they actually make money selling toys themselves? Could be an interesting quarter to watch, though the company's results tend to be rather opaque.
ThyssenKrupp Buys Stock for Possible `Major' Purchase (Bloomberg)
This is from Tuesday, but worth noting; ThyssenKrupp, Germany's largest steelmaker, announced that it would be buying back its own stock, possibly to make a major purchase. Coming on the heals of the Mittal/Arcelor agreement, this is some pretty rapid consolidation activity in the space. Who is out there of the proper size to constitute a major purchase for the company? The company already has plans to merge with Canada's Dofasco.
Mexican Peso Soars After Calderon Moves Ahead in Vote Recount (Bloomberg)
Just a quick check-in with our friends to the south. Early recounts had shown Calderon trailing his competitor, but as the votes have come in, it appears he has moved back into the lead, causing the Peso to jump on the news. Calderon promises to promote the business initiatives put forth by his predecessor-to-be Vicente Fox.