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February 27, 2008
Create financial charts, track CEO pay on SEC Web site
The Securities and Exchange Commission just launched its "Financial Explorer" software giving Web users new options to manipulate and interpret financial information filed by U.S. companies.
"At the click of a mouse, Financial Explorer lets investors automatically generate financial ratios, graphs, and charts depicting important information from financial statements," the SEC says. "Information including earnings, expenses, cash flows, assets, and liabilities can be analyzed and compared across competing public companies. The software takes the work out of manipulating the data by entirely eliminating tasks such as copying and pasting rows of revenues and expenses into a spreadsheet."
Try it at www.sec.gov/xbrl.
This is the latest phase of the SEC's attempt to make corporate filings interactive. You can call up executive pay totals and rank fat-cat emoluments by industry, company revenue or market capitalization. The software measures stock-option values two different ways and adds up all the compensation. You can chart business results over time -- not just sales and earnings but a couple dozen metrics including fairly esoteric stuff such as equity income in unconsolidated affiliates.
It's fun, but it'll be a long time before Financial Explorer allows ordinary investors to "access vast quantities of statistics they can manipulate just like the pros do now." That's what Jack Ciesielski, publisher of the Baltimore-based Analyst's Accounting Observer, said would theoretically be possible when the SEC committed to this two years ago.
For the system to work, companies must electronically "tag" data when they file it. Tagging is voluntary and many filers don't do it. Even for the ones that do, data go back only a year or two, to judge from the companies I called up. And you can't play with mutual-fund data yet, that I could see. That may end up proving to be the most interesting tool for the common investor.
February 26, 2008
Provident to write off millions more real-estate investment
Baltimore's biggest remaining independent banking company has gotten whacked again by the real estate club. Provident Bankshares took a $47.5 million writedown in January and said it didn't anticipate any more. This just out:
Based upon newly available information, continued deterioration in market prices subsequent to year-end and its continuing analysis of the REIT portfolio, the Company may realize additional impairment charges on some or all of the remaining $32.8 million of the REIT portfolio at the end of the first quarter...In addition, based upon the ongoing credit analysis of the Company’s non-agency mortgage backed securities portfolio, the Company may realize additional impairment charges on some or all of $14.9 million of that portfolio at the end of the first quarter due to increased delinquency levels in the loans underlying these securities.
The default rates are impressive. Of Provident's $33 million Real Estate Investment Trust portfolio, the lowest of which is rated BBB, the Jan. 31 default rate was almost 12 percent. Of one $15 million package of "Alt-A" mortgage securities (better credit score than subprime, worse than prime), 9 percent were 60-days or more delinquent. Delinquencies for higher-rated paper are better, however. Overall, delinquencies for Provident's AAA paper were 1.84 percent; for AA paper, 3.79 percent.
Constellation gives more money to Shattuck
Filed this morning at the SEC. BGE's parent is giving CEO Mayo Shattuck pension credit for the time he spent on Constellation's board, before he became CEO in 2001. He is not yet vested in the plan but if/when he is this'll mean a lot more money. This is nothing, however, compared with the pension upgrade he was going to get in the FPL merger.
Effective February 21, 2008, the Compensation Committee of the Board of Directors amended the Constellation Energy Group Senior Executive Supplemental Plan, a non-qualified supplemental retirement plan, to allow participants to receive credit toward the service requirement for time spent in non-employee service to Constellation Energy Group, Inc. (“Constellation Energy”), including time spent as a member of the Board of Directors. Under the plan, a participant must be at least age 55 with 10 or more years of service to retire and be entitled to benefits. As a result of this change, Chairman, President, and Chief Executive Officer Mayo A. Shattuck, III, will receive an additional two years and six months of service under the plan relating to his service as a non-employee member of the Board of Directors prior to his appointment as President and Chief Executive Officer. As of February 21, 2008, Mr. Shattuck is age 53 and has been credited with 8 years, 10 months of service (including the years of director-related service) and remains ineligible for benefits under the plan.
The mortgage-refinancing sweet spot is gone
A couple weeks ago those with good credit scores could have gotten a 30-year mortgage at 5.5 percent. Not anymore. Wholesale inflation blasted off in January at twice the rate economists expected, the Labor Department said this morning. That should bump up long-term borrowing costs, because lenders demand higher rates to compensate for the erosion of capital caused by inflation. From AP:
Inflation at the wholesale level soared in January, pushed higher by rising costs for food, energy and medicine. The monthly increase carried the annual inflation rate to its fastest jump in a quarter century.The Labor Department said Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.
The January surge left wholesale prices rising by 7.5 percent over the past 12 months, the fastest pace in more than 26 years, since prices had risen at a 7.5 percent pace in the 12 months ending in October 1981.
After the news was released at 8:30 the yield on the 10-year Treasury note briefly spiked and then calmed down. The 10-year is an OK proxy for the mortgage-rate trend (not the mortgage-rate level). Gold popped $8. With so many inflation signs, I doubt we'll see 30-year fixed mortgage rates under 6 percent for a while.
February 25, 2008
Economics in the movies
Economics in the movies is the topic of the Dallas Fed's high-school essay competition and this post from a WSJ blog. Two weeks ago in this space the topic was Insurance Movies. From the WSJ:
The Dallas Fed’s annual high-school essay contest, which boasts a $1,000 savings bond as top prize, last year asked students to write on the pros and cons of globalization. This year? Economics in the movies.The key questions for student hopefuls: “Do you recall any economic lessons or concepts lurking among the [movie’s] characters and storyline? … Does the film illustrate a truth about economics? How do economic concepts shape the characters’ decisions?”
Realtors' economist: Housing about to rebound
More lackluster housing news, as existing-home sales dipped in January. The National Association of Realtors, however, believes the worst could be over. From AP:
Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out with a rebound expected to start toward the end of this year. “Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales,” he said.
You almost want to believe him, until you recall that Realtor flacks have been saying the same thing for years.
Did a recession begin late last year?
The preliminary growth reading for the fourth quarter was barely over zero. When the gross domestic product result is updated this week, economist and investment strategist Ed Yardeni isn't ruling out a dip into negativity. From his note to clients this morning:
This week, we’ll get to see if a recession started during Q4-2007. The quarter’s revised growth rate will be reported on Thursday. The preliminary number was up 0.6%. It wouldn’t take much to push this number into negative territory. However, the Bloomberg consensus of economists is a slight upward revision to 0.7%. The economists at Macroeconomic Advisors, who track real GDP on a monthly basis, are expecting no change from the preliminary number.
February 22, 2008
Nissan chief: U.S. car market is in recession
From the Associated Press:
The head of Nissan Motor Co. said even if the United States is not in recession, its auto industry is."We are very lucid on the situation of the industry that there is a recession in the United States, at least in the car market," Chief Executive Carlos Ghosn told reporters, saying automakers face rising costs for iron ore, precious metals, aluminum and other materials.
"These represent risk for the industry," he said.
Ghosn, who is also president and CEO of Renault SA of France, expressed optimism that the market will improve. Renault owns 44 percent of Nissan.The American auto market "will not stay in recession for a long time," he said.
U.S. car and truck sales totaled 16.1 million vehicles in 2007, down from 16.6 million the year before, according to Autodata Corp. It was the worst performance since 1998 as rising gasoline prices and declining home values sapped consumer confidence.
For what's going on with Maryland auto sales, see here and here.
A brilliant masterpiece of financial verse
On the topic of financial poetry, check out this fabulous song on YouTube by Ferris, Baker Watts broker Gregg Somerville. The Subprime Mortgage Blues is the best 12-bar summary of the current financial crisis I have ever heard. You'll laugh. You'll cry. You'll learn why George Washington is about to trade his place on the dollar bill for Chairman Mao.
Food inflation heads higher, thanks in part to ethanol
Be sure to read Joshua Boark's story in today's business section of The Sun. It's about how the cheap dollar, foreign demand and huge corn purchases by government-subsidized ethanol producers are driving up the price of food for American families. Yesterday the government boosted its already-high forecast for U.S. food exports. Boark's opening sentence: "It's a standoff between fuel, foreign trade and American stomachs."
As economist and New York Times columnist Paul Krugman said of ethanol on his blog today: "Bad for the economy, bad for consumers, bad for the planet — what’s not to love?"
An even better name for operating cash flow
My financial-professional friend Sean doesn't think EBITDASO is quite precise enough to describe operating cash flow -- the kind of profits corporations present when they're trying to downplay certain costs. EBITDASO is earnings before interest, depreciation, amortization and stock options. A better term, he suggests is, EBITDAAMPOTA. Let it roll off the tongue. Earnings before interest, taxes, depreciation, amortization and my piece of the action. Other ideas are welcome.
The poetry of stock options
I promised to write a poem about United Therapeutics' Tuesday earnings report. It was at the end of today's column. This is it. EBITDASO is earnings before interest, taxes, depreciation, amortization and stock options. In other words, not exactly the bottom line.
Our profits took a hit, it's true,
But we wouldn't like to say so.
So we'll publish what you can't construe:
Our latest EBITDASO.
Sales rose by leaps and bounds, but sadly,
Our costs leapt even more.
But lest you curse our name too badly,
EBITDASO blurs the score.
Bounteous options with few strictures
The boardroom does bestow.
But you'll always lack the full, fat picture
In the land of EBITDASO.
Although our boss took home a heap,
Don't sweat the small details.
If you'd rather think we bought her cheap,
EBITDASO tells no tales.
February 21, 2008
Another sign of Maryland's slumping economy
Car sales, as recorded and counted by the MVA, are one of the best, real-time tests of the state's economic strength. Maryland new-car sales fell 7.5 percent in January compared with the same month in 2007. Thanks to alert reader John for noting that the figures have been posted and also noting that the average vehicle sales price was down $700 for January. The number of used-car sales fell by 10 percent.
January sales may have been depressed because of the increase in the vehicle-titling tax from 5 percent to 6 percent that took effect after New Year's. That may have spurred people who otherwise would have bought early this year to purchase in December. But December sales weren't so great, either.
More on gay marriage
More comments about Wednesday's column. From the email inbox:
**** Normally I really enjoy reading your column on business and economic matters. But I must say that your article supporting the legalization of same sex marriage didn't rise to the level of your usually well reasoned positions.
I suggest that you do a little more research before you make statements that are completely unsubstantiated. The position that "nobody chooses to be gay" may be your personal opinion, but there is absolutely no credible scientific evidence to support that their is a genetic marker that predisposes an individual to be gay.
A simple google search would have provided a recent news article from MSNBC, where leading researchers in this area are starting new studies to try to find such a genetic marker(s).
http://www.msnbc.msn.com/id/21309724/
To firmly state that this is a fact, while researchers are spending federal tax dollars to try to prove it is so, undermines your supposition that tolerance is economically beneficial and would lead readers to believe that you have a personal bias in this issue.
**** I think it's not only NOT sensible, but the height of arrogance to want to change the definition of marriage, a definition which has been held by the human race for some 5000 years. Where do you get off doing that ? Marriage equals MAN + WOMAN, period. I have no quarrel with ANY two ( or more ) people who want to bind themselves together, legally or not, for whatever purpose under the sun---just don't call it " marriage ", because it's not.
There have always been such unions-----blood brotherhood oaths, mafias, corporations, unions, conferences---throughout history, but none of them ever had the effrontery or arrogance to call their arrangement something it obviously wasn't.
The rest of your arguments are a pastiche of irrelevancies and dead ends. So states wanting to stay ahead must keep their doors open to "everybody" ???---Please. Does "everybody " include animal lovers, pederasts, drug dealers, and incest duos ? So the end justifies the means ?
Every law we have stems from the laws of God, not the other way around......if not, then everything is moral, everything is legal, and who's to decide whose concept of good is the correct one ? ( I'm bringing in the moral angle because homosexual acts have been considered immoral by all religions on the planet, even though you didn't bring it up in your column.)
My point: you want a civil union ?--Fine, agitate and pass a law. But don't sneak around the back door by changing the definition of a word which has meant the same thing for 5000+ years. That's a cowardly thing to do, and you're lying to your readers.
**** People will say or write anything to prove a stupid point, and this column proves it. What's even worse, people will read this column and believe it. I can't believe The Sun printed this article. You should be ashamed of yourself.
February 20, 2008
More comments on economics & gay marriage
Elsewhere on The Sun's Web site (here), there's an extended discussion on today's column on same-sex marriage. Here are a few of the comments that have come via email.
**** Your idiotic opinion that same-sex marriage would be a good thing belongs in the funny pages not the business section.No wonder the Sun's circulation is plummeting.
"... increased wedding-hall rentals from same-sex nuptials would help generate a net gain for Maryland's budget ..." How silly. Along the same lines, coffin sales would surely increase if we emptied all our prisons. DUH! I hope Martin O'Money hears about this - more money for him to spend!
I would love for you to have had the opportunity to present your thesis to the returning veterans who saved this country in WW II. The laughter would have been deafening.
**** Thank you ! Thank you, thank you thank you ! I only wish my late partner who died 3 years ago was here to see the possibilities for legal marriage on the horizon. Even the conservative Examiner asked for civil unions (less than perfect). Instead of celebrating his life and mourning his passing, I was involved in a nasty estate battle even though he had a will (and am still settling it) and even though we were married in a Quaker meeting for worship in 2003 with nearly 300 witnesses. I know you’re going to receive all sorts of religious blather against what you wrote, but obviously you’re not worried about it too much. Neither is the Sun, for which I am also grateful.
**** Sorry, Jay, I'm not buying your 'economic' arguments to promote gay marriage.--What sort of future is there in a gay community which does not produce offspring, and in a sense has no real stake in the future of a community? (What business and investment decisions will be made there with an eye to the long-term future?)
--What about "backlash" from stable, traditional families who will choose to re-locate to a more family-friendly locale?
--What does the prevalence of partners-without-children (and higher incomes) do to housing prices, and the availability of middle-income homes?
-- How does the prevalence of a politically liberal citizenry (I'm assuming most gays associate themselves with liberal or leftist political values) affect tax policy and business climate?
-- You might also note the effect that higher-income communities, such as San Francisco, have on attracting young-married couples with children, and in fact, young people with lower incomes. According to recent census data, San Francisco is about last in the country in its percentage of residents under age 18.
-- From a non-economic point-of-view, I would dispute your assertion that promoting gay marriage is "the right thing to do." There is a moral issue involved which isn't answered simply by repeating the pc buzzwords, "diversity"..."tolerance".
**** I just want to say that character and morality are more important than money or the economy! Matthew 16:26 says, "What good will it be for as man if he gains the whole world, yet forfeits his soul? Or what can a man give in exchange for his soul?"
**** I really enjoyed reading your article, "Legalizing same-sex marriage is sensible". My husband and I support gay marriage. Our reasons were more for equality and fair treatment. To show respect to all. It never really occurred to me that our economy as a state could be positively affected. It makes sense. You look at places such as San Francisco that is open to gay people, and the environment there is different. It's active, healthy, and well-established financially. Not that San Fran doesn't have it's problems but overall, they do well for themselves. It's a thriving city. Compare it to a place such as Dayton Ohio and you see divide, segregation, dead downtown area, and less opportunity for employment. Companies are not jumping to move there. We recently moved to Frederick Maryland about 18 months ago. We love living here in Maryland and hope that the economy will improve. I hope gay marriage will be legalized here in the state of Maryland. I agree that we can be a state where people will feel welcome and will want to live here.
**** Wonderfully written piece! The approach helps ease people into an expansion of consciousness and embrace of interdependence. Your calm rendering of the benefits of true equity and vibrant diversity help us all release fear of change, venturing into the new with confidence that we have strength enough to welcome the future. Bravo!
**** THANK YOU, THANK YOU, THANK YOU, Mr. Hancock, for such a wonderfully written, sensible and accurate article on legalizing same-sex marriage in Maryland! As the mother of a fine young man who happens to be gay -- and lives in Baltimore -- it is so encouraging to see articles like this appear. Your information is absolutely accurate and seems to me to be with no argument!!! We are encouraged this year as folks like our esteemed Attorney General bravely spoke out in favor of marriage equality. I am proud to be a Marylander and would be more proud if our state did the RIGHT thing and passed this law! Thank you for a beautiful article!
**** Historically, homosexuality has signaled decay and the dissolution of societies.
This does not indicate tame inflation or a weak world economy
Thanks to Ferris, Baker fixes Dain Rauscher typo
The copy editors have arrived. The Web page now says:
February 14, 2008
RBC/Dain Rauscher to aquire FBW.
Click here for press release.
Confidence in economy grows dim and dimmer
This does not bode well for political incumbents. According to the Gallup Organization, the gap between people who say the economy is "excellent" or "good" and the people who say the economy is "poor" just keeps getting wider. 35 percent say the economy is in poor condition -- the highest portion in at least two years. 77 percent say the economy is getting worse, and 16 percent say it is getting better. 
February 19, 2008
The very latest in earnings-report gibberish
You're heard of earnings. You've heard of non-GAAP (generally accepted accounting principles) earnings. You've heard of free cash flow. You've heard of EBITDA (earnings before interest, taxation, depreciation and amortization.) But have you heard of EBITDASO? The shareholders of United Therapeutics have. From today's report:
“We are pleased to report that United Therapeutics' revenues for the year ended December 31, 2007, totaled $210.9 million,” said Martine Rothblatt, Ph.D., United Therapeutics’ Chairman and Chief Executive Officer. “This is the sixth straight year our revenues have grown by more than 30%. Our EBITDASO (earnings before interest, taxes, depreciation, amortization and stock option expense) for the year were $85.5 million, or $4.03 per basic share.”
I promise to write a poem about EBITDASO if you, the readers, don't beat me to it.
China's inflation hits 11-year high
This is not good news for U.S. inflation, which is not good news for long-term interest rates, which is not good news for the Fed's efforts to avoid/get out of a recession. Cheap Chinese imports have kept U.S. inflation low for 10 years. If import prices start rising substantially, so could American inflation. From Reuters:
BEIJING (Reuters) - Chinese consumer inflation rate surged in January to an 11-year high of 7.1 percent and looks set to rise further, cementing expectations that Beijing will stick to a tight monetary policy despite