Opening Bell: 8.3.06

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Earnings: Demand for icy drinks cools Starbucks stock (Seattle Post-Intellegencer)
It’s hard to know where to begin with this one. You’d think from the headline, and the reaction of Starbucks stock, that the company was hit due to weak demand for icy drinks. No no no. Turns out, at least according to Starbucks management, that demand was actually too high. Yes, the national heat wave sent so many people into Starbucks in the last quarter, all ordering icy drinks, that employees were simply unable to keep up and thus sales sagged. Is there anyone out there that believes this? We find it strange, since we've never seen anyone actually give up their place in line at a Starbucks, even if its really busy. This is almost as rich as when Burger King reported an unexpected loss, earlier in the week, due to expenses related to its IPO.
Amid Heat Wave, Wall Street Dims the Lights (Dealbook)
There have been calls to turn air conditioners down during the heatwave. At Dealbreaker HQ, we took that literally, and turned our air conditioner down from 68 to 65 63 yesterday, as the mercury cracked 101 outside. But apparently the ghost of Hank Paulson lives on at Goldman Sachs and elsewhere on the Street, as several firms did their part to conserve the juice. At Goldman Sachs they actually raised the air conditioner (what!?), turned down lights, and completely turn off lights on under-used floors. At J.P. Morgan, they took themselves off the grid, and operated solely on backup power, so as to ease ConEd's burden. Thanks for doing your part and taking the pressure off of us.
G.M. Hopes a Line of Pickups Will Lead Back to Prosperity (NYT)
In thinking about GM's problems, nobody would ever accuse them of lacking in pickup trucks or SUVs. Most people would say, probably, that they would be better off, were they to have more of the sporty, fuel-efficient cars made by the Asian automakers. Unfortunately, you can't just launch a new design in a few months, so what they're coming out with now is still the product of a years of pipeline work, and what they've been working on, apparently is more trucks. Starting on Oct. 13th, the company will have new Chevy Silverados and GMC Sierras in dealer lots, and the company's hoping that these lines will revive auto sales. CEO Rick Wagoner called the introduction, "The most important part of our North American turnaround plan". Somehow that seems really depressing.
Casinos Emerge as Winners In Wake of Hurricane Katrina (WSJ)
To some people, the devastation wrought on places like Biloxi during Hurricane Katrina was no accident; it was a direct message from god to get rid of those casinos. For awhile, there was talk about using the moment to get rid of gambling in the state of Mississippi altogether, to start fresh if you will, with a clean moral slate. Well, ultimately ideals, morals, religion, and god are bound to fall by the wayside if you can't balance the state budget. So not only are the casinos rebuilding, but the state has lifted the on-water requirements, and now they can be built inland. The state is not admitting that the move is out of desire to help the casinos, just that it's too dangerous to have them right next to water. It's hard to see how they can believe that an inland casino is any safer though; doesn't god have the power to conjure a hurricane above land?



California Vioxx jury finds in Merck's favor (Marketwatch)

8 down, 9,992 to go. Score another victory for the Merck legal team, which again defeated a lawsuit over Vioxx. Once again, we have to think that the plaintiff's case was hampered by the fact that the plaintiff was alive and kicking. Given that it's impossible to determine these things on medical facts alone, the prosecution really needs all of the sympathy points it can get, and a living plaintiff is a big minus. At this point, Merck's compiling a pretty good track record -- are these prosecuting attorneys, who one assumes are only working on commission, going to keep fighting losing battles?
Homeowners in default rise sharply (San Jose Mercury News)
Will the housing bubble that everyone's forgotten about eventually sink the economy? It's been a slow trickle of news on that front, with only the occasional datapoint or regional anecdote to satisfy our curiosity. So at least in one area, California's Bay Area, there's been a sharp rise in defaults of late -- 37% more than their were at this point last year. The actual numbers don't seem like a whole lot (over 2000 homes) but either the slowing economy or rising rates or some combination of something is causing this number to weaken.
A Bill Payer Falls Behind, Like Clients (NYT)
After so much talk about options, backdating options, unexpired options, and spring-loaded options, a plain-vanilla insider trading case seems really quaint. Today, Times all but accuses the CEO of CheckFree of dumping sock after knowing about learning about bad news several months before it would be disclosed to the shareholders, causing the stock to plunge. CheckFree, which manages online bill pay is in a strange quandry -- a lot of people seem to have stopped paying their bills. Yep, just stopped. In April, there was a major dropoff, which the company believes is due to people needing money for taxes. But in the months since then, the numbers have been below normal, and the company can't explain why. And then sometime between April and now (well, June), the CEO sold 5% of his shares, ostensibly to buy a winery. But of course, if he knew the April numbers were bad, it certainly looks like insider trading. Still, the interesting part is why people aren't paying their bills. That would seem to be a bad sign.
Ford doubles loss; hires M&A expert (CNNMoney)
It doesn't get as much attention as GM, but you've probably noticed that Ford isn't doing so hot either. Apparently, that's news to the company as it announced, after fresh losses, that the company is going to do a review of the whole business, and that it has hired on an M&A expert to advise the CEO. Ford's already said that it's open to some sort of arrangement. It's openly jealous that GM gets to hang out with Carlos Ghosn and has Kirkorian on its board, while Ford just has Bill Ford. The company's losses were due in part to "pension curtailment expenses", which sounds like paying people today to avoid paying them down the road. But their problems aren't just due to stuff like legacy costs. It recently ceded the #2 spot in US sales, to Toyota, and now it says that its Premier Automotive Group, which includes Volvo, Jaguar, Aston Martin and Land Rover, will be unprofitable. No excuses there; they're just not selling.
Puma 2Q Profit Falls on Marketing Costs (AP)
As sneaker connoisseurs (on the weekend), we're getting a little tired of hipsters thinking that Pumas are somehow cool kicks. The company hasn't had a fresh design in years, and instead it just changes the color of the logo and the background. Yet it's popularity never seems to fade, which is baffling. Finally, maybe, the company is showing some weakness. It laid a lot of chips down on the table during the World Cup, in terms of marketing expenses, but it doesn't seem to have paid off much. Perhaps that's because anyone watching the World Cup wanted a real athletic shoe -- or a shoe worn by real athletes. It seemed like Adidas pretty much dominated the marketing scene, at least here. Still, the Germany-based Puma did show growth of 17%, which isn't shabby at all for the footwear business. It seems there's a lot of work left to be done to take 'em down.

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