PPI UP WHOPPING 2.0% IN NOVEMBER

The Producer Price Index experienced a 2.0% gain in November, the biggest monthly advance since 1974. PPI is a measure of wholesale prices. Core PPI, which excludes energy and food, rose 1.3%, the biggest increase since 1980. The big jump in PPI caught economists and experts by surprise as the consensus estimate was for a 0.5% increase.

According to Kirk Shinkle of Investor's Business Daily, investors should not be overly concerned with the big jump as the majority of the increase in prices was due to volatility in the auto sector. Wholesale car prices rose 2.2%, while light truck prices jumped 13.7%.

Bureau of Labor Statistics

ILLINOIS RAISES MINIMUM WAGE

Governor Rod Blagojevich signed a minimum wage increase into law that will raise minimum wage to $7.50 per hour starting July 1, 2007. The minimum wage will then be increased three times by one quarter each, growing to $8.25 per hour in 2010. Democrats have pledged to increase the federal minimum wage next year. Currently, 29 states have minimum wage laws that require payment of more than the federally mandated $5.15 per hour.

International Herald Tribune

UNUSED GIFT CARDS = BIG PROFIT

Best Buy earned $43 million in fiscal 2006 from gift cards that have not been used for two or more years. Limited Brands reported $30 million in revenue in 2005 from the unused cards. Consumer Reports estimates that 19% of gift cards go unused. Keane Co. has a lower estimate of about 6%, or $4.8 billion.

AP at Yahoo!

NYC BOARD BANS TRANS FATS AT RESTAURANTS

The Board of Health in New York City voted unanimously to ban artery-clogging trans fats at restaurants. The ban will go into effect in July of 2007, at first eliminating trans fats only from cooking oils, then in July of 2008 the full ban eliminating trans fats from all foods will begin. From the AP article at Yahoo!:

Mayor Michael Bloomberg, who banned smoking in bars and restaurants during his first term, has dismissed cries that New York is crossing a line by trying to legislate diets.

"Nobody wants to take away your french fries and hamburgers — I love those things, too," he said recently. "But if you can make them with something that is less damaging to your health, we should do that."

Chicago is also considering its own trans fat law, which wouldn't ban the fats outright but would severely restrict the amount that kitchens can use. The measure would apply only to large restaurants, defined as those that make more than $20 million in sales per year.

Here is a pie chart from the U.S. Food and Drug Administration that shows the major sources of trans fat for American adults:

COMPETITION FOR CABLE AND SATELLITE TV?

Before satellite TV, most cable companies enjoyed a monopoly, typically regulated by the municipality in which they operated. As such, cable providers were guaranteed a "reasonable" profit, but without competition, prices climbed steadily over the years.

When satellite TV entered the picture, most believed that the competition would be good for consumers and that increases in prices for cable would slow. That has not been the case. In fact, cable and satellite TV providers have settled into a cozy duopoly, not so much competing as coexisting without much competition.

Prices for cable TV between 1995 and 2005 shot up 93%. In municipalities with only satellite and one cable provider, the average price for cable was $43.34 per month. In municipalities where there was more than one cable provider, the average price was $35.94, demonstrating that the increased competition was good for consumers.

The FCC wants to increase competition nationwide by adopting new rules that would make it easier for phone companies to compete directly with cable TV companies. Verizon already provides TV service in 300 municipalities, while AT&T does so in 24.

The problem in rolling out TV service via phone lines has been the requirement for the phone companies to seek permission and agreements one at a time from local governments. This is time-consuming and inefficient. The U.S. Congress could pass a law eliminating the tedious one-at-a-time agreement requirement, but has failed to do so thus far. Three states - Texas, California, and New Jersey - have passed laws allowing speedy rollout and competition, and their consumers have benefited.

The new FCC proposal would speed things a bit by requiring municipalities to act on applications by phone companies to provide cable TV services within 90 days in most cases, 180 days in the remainder of cases.

As we know, capitalism thrives on competition and the consumer benefits. The sooner new FCC rules or a new law can be passed, the sooner we will all see lower cable and satellite TV bills.

USA Today

NOVEMBER AUTO SALES RESULTS

Here is the list of winners and losers for November U.S. light-vehicle sales (includes light trucks and SUVs). The comparison listed is November of 2006 to November of 2005.

Winners
Acura +24.0% (division of Honda)
Toyota +15.9%
GM +6.1%
DaimlerChrysler +4.7%
Chrysler Group U.S. +2.9%

Losers
Ford -9.7%
Honda -3.0% (Honda brand only)
Nissan -1.6%

This was only the second month ever that Toyota sold more vehicles in the United States than Ford. Toyota sold 196,695 vehicles to Ford's 181,111.

USA Today
WSJ.com
BusinessWeek

MIXED RETAIL SAME-STORE SALES RESULTS FOR NOVEMBER

Retailers have reported mixed same-store sales results for the important pre-holiday shopping month of November. Overall, same-store sales rose 2.1%, the weakest increase since March. Comparisons of same-store sales are made only for stores open more than one year and compare November of 2006 to November of 2005.

Losers
Wal-Mart -0.1%
Ann Taylor -4.3%
Abercrombie & Fitch -5.0%
Gap -8.0%
Pier One Imports -15.3%

Winners
Kohl's +3.7%
Costco +5.0%
Nordstrom +5.4%
Target +5.9%
CVS +8.4%
Federated Department Stores +8.5%
Limited Brands +12.0%

MSN Money
BusinessWeek
MarketWatch
Trading Markets

GDP GROWTH REVISED UPWARD

United States third quarter gross domestic product was revised upward from 1.6% to 2.2% for the July through September period of this year. That is a positive sign, but according to an article in The New York Times, other signs, bulging corporate inventories and the deteriorating housing market, point to a steep decline for the rest of the year and economists believe the slide is not over as the economy cools from hot first quarter growth rate of 5.6%.

SAN DIEGO CITY COUNCIL VOTES TO BAN SUPERCENTERS

The San Diego City Council voted to ban any retail store with more than 90,000 square feet with at least 10% of that space devoted to selling groceries and other merchandise that is not subject to sales tax. The average Wal-Mart Supercenter is 185,000 square feet and sells groceries. The vote was 5-3 for the ban. Mayor Jerry Sanders has vowed to veto the ban, but the City Council can override a veto with five votes.

AP at Yahoo!

NEW HOME SALES FALL, MEDIAN PRICE INCREASES

Sales of new homes fell 3.2% in October, after increasing the previous two months, according to the Commerce Department. Over the past year, sales have fallen 25.4%. The median price for a new home rose 1.9% from October 2005, the biggest increase since February. In October, there were 558,000 new homes for sale, a seven-month supply.

Forbes

MIXED RESULTS FOR EXISTING HOME SALES

The National Association of Realtors by 0.5% in October, the first increase since February, as buyers were lured by falling prices, the third consecutive monthly price drop. The median price for all existing homes fell 3.5% when compared to October of 2005, the largest decrease since the NAR began keeping records in 1968. This is also the first time that existing prices have fallen for three consecutive months.

Prices in the South fell the furthest, dipping 7%. Florida caused a huge drag on the region with a whopping 22% decrease in prices from October 2005.

USA Today
Reuters
WSJ.com
Forbes

ONLINE SALES TRAFFIC INCREASES

The Monday after Thanksgiving, when workers return to their offices and speedy Internet connections, has become a big day for online retailers. Traffic this year was up 19% according to Akamai Technologies, a company that helps other companies send content over the Web. At 1:00 p.m. Central, traffic reached 2,145,558 visitors per minute and was still over 2 million at 8:00 p.m. last night.

The online shopping season has been very good, but some companies were not prepared. Wal-Mart's site was down for at least two hours on Black Friday. Wal-Mart said traffic was up 700% when the servers crashed and the company had only expected a 200% increase. Macy's site was down for an hour the same day, but the company claimed it was due to a bad server, not too much traffic.

USA Today
WSJ.com

FORD RAISING $18 BILLION MORE DEBT, $15 BILLION SECURED

In an effort to raise capital to help finance a turnaround of its North American operations, Ford Motor Company will be taking on another $18 billion of debt, $15 billion of which will be secured by core automotive assets. Ford will be pledging nearly all of the company's North American automotive assets as collateral, marking the first time in its 103-year history that such a move has been made and underscoring the severity and seriousness of the problems Ford is facing. The announcement of the move caused the three main credit rating agencies to slash Ford's existing debt further into junk, or non-investment grade, status.

SmartMoney
WSJ.com
Reuters

WAL-MART GAINS ACCESS TO INDIA THROUGH JOINT VENTURE

Wal-mart has signed a pact with Bharti Enterprises Ltd. to create a 50:50 joint venture aiming to open retail stores in the rapidly growing Indian market. In India, foreign companies are not allowed to open retail stores that stock more than one brand, so Wal-Mart will handle the technology, logistics, and wholesale operation, while Bharti runs the retail stores using a franchisee model. Bharti is exploring the possibility of opening hypermarkets (giant retail stores that sell consumer goods and food), supermarkets, and even smaller stores to gain a piece of the $300 billion Indian retail sector. The goal is to have the first store open in August of 2007.

The Times of India
WSJ.com

TRAFFIC DOWN, SALES UP OVER HOLIDAY SHOPPING WEEKEND

The National Retail Foundation estimates that 140 million shoppers hit stores over the "Black Friday Weekend" this year, 5 million fewer than 2005, but the average shopper spent $360.15, up 18.9% over last year. Here are some interesting stats:

• High-ticket electronics sales were the likely reason for the overall 18.9% spending increase this year. 39.5% of men and 27.5% of women bought consumer electronics or computer-related accessories.
• Men outspent women by 38.1% per shopper.
• 49.2% of the men surveyed purchased books, CDs, DVDs, videos or video games compared to only 34.1% of women.
• The most popular item category purchased was clothing or clothing accessories, and books, CDs, DVDs, videos or video games, with 41.4% of shoppers making a purchase from either category.
• As of Sunday, November 26, the average person has completed 35.6% of their holiday shopping, showing no change from last year.
• Only 8.6% of consumers have finished their holiday shopping.

The NRF estimates that overall holiday sales for 2006 will be up 5% over 2005.

The National Retail Foundation Black Friday Weekend Survey
Reuters
WSJ.com

WAL-MART PREDICTS SAME-STORE SALES DECLINE FOR NOVEMBER

After lowering expectations for November in late October with an estimate of flat same-store sales, Wal-Mart Stores Inc. reported Saturday that a same-store sales decline of 0.1% for November is likely. Same-store sales measure sales at retail locations open more than one year (comparing November 2006 to November 2005) and are a favorite Wall Street metric. The company will release an official detailed breakdown of sales on Thursday, November 30.

If sales do decline, either the company's Sam's Club or flagship Wal-Mart Stores will have experienced a decrease in same-store sales. If there is a decline in sales at Wal-Mart Stores, the traditional U.S. Wal-Mart retail stores, it will be the first since the company began reporting sales data in 1979.

Wal-Mart has struggled to produce good results in same-store sales this year and November could prove troubling as the company slashed prices on electronics and toys earlier and much deeper than usual. For example, a 42" Panasonic plasma television that retailed for around $1,700-$1,800 at Wal-Mart was cut to $1,294 on November 3. A similar Panasonic television sold for $1,708.99 on Best Buy's Web site the same day. In addition, the company has now rolled out its highly publicized $4 generic prescription plan in 38 states in an effort to lure customers in to the stores to purchase other items. Yet, despite these efforts, it appears as though Wal-Mart sales are heading south.

WSJ.com
Reuters
Wal-Mart Press Release

SONY LOSING $240 PER PLAYSTATION 3

After taking apart one of the devices, iSuppli Corporation estimates that Sony is losing approximately $240 on every sale of the new Playstation 3 video game console. This figure will lower as time passes and the bleeding-edge technologies the company used become more commonplace and reasonably priced, as happened with the Microsoft Xbox 360. When the Xbox 360 was released, Microsoft was thought to lose $150 per console, now iSuppli estimates the company makes $75 per unit on sales of the Platinum System.

WSJ.com

AN EXAMPLE OF STOCK OPTIONS SCANDAL

I've intentionally avoided posting about the stock options dating scandal that has erupted due to the difficulty of explaining it properly in a short post. I'm still not able to explain it in a short post, but if you check out the USA Today links below, you will see an example of how executives at a medical device company made a questionable $50 million with oddly-timed stock options.

USA Today Special Report - Pay special attention to the interactive chart at the top of the article.
USA Today Article - Details how a former U.S. congressman and current Cyberonics board chairman received below-market stock options three years before joining the board. This smacks of scandal, on top of the scandal the company has recently been through.

LONDON STOCK EXCHANGE REJECTS NASDAQ OFFER

Nasdaq Stock Market Inc. made a $5.1 billion offer for the London Stock Exchange, but the offer was quickly rejected as inadequate. Nasdaq has accumulated 28.5% of shares of the LSE. Nasdaq and NYSE Group are locked in a race to create the first trans-Atlantic exchange.

Reuters

CRUDE OIL SETTLES BELOW $56

Light sweet crude for December delivery settled and closed at $55.81 on the New York Mercantile Exchange Friday, the lowest settling price since June of 2005. January crude, which becomes the front-month contract on Monday, settled at $58.97.

From USA Today:

Analysts said the unusually wide spread between the December and January contracts signals buyers' comfort with the near-term supply fundamentals but concern about the heart of winter, when heating demand typically peaks.

If the weather remains mild, "we're looking at a supply glut," said James Cordier, president of Tampa-based Liberty Trading. Cordier, who views the OPEC cuts as bearish for prices because it signals weakening demand, believes Nymex crude futures are headed toward $52 this winter.