Friday, June 04, 2010

Ma Bell -- Kills App World -- Creative Destruction

AT&T (T) finally came to its senses and stopped giving away unlimited data usage. They could see the financial pain coming and stopped the self abuse. As a marketing ploy to acquire initial market share they were brilliant. The financial guys reminded the board that they are a dividend paying stock.

Marketplace commentary, from app world, that complains users will become nervous about usage, are signs of weakness about the various product offerings. If your app has a compelling proposition it will attract users. If you are a junk app eating up broadband you deserve to die.
AT&T just helped to weak app die sooner. Creative destruction rules today.

Disclosure: No position in any stocks mentioned in this post.

Thursday, June 03, 2010

Whirlpool -- Maytag Recall Legal Sham

Whirlpool (WHR) hid behind its Maytag brand and announced a major recall of some 1.7 million dishwashers because of a fire hazard. They have identified twelve units that have had such defects.

Most dishwashers are built in. The average home owner, even if he/she is a pretty good handy person cannot just take out the dishwasher and bring it into a local store. If you bought the house with the appliance already installed you probably would not know where to bring it.

The recall is a legal sham as it is not practically possible. Yet lawyers will be able to point to the recall and say we tried your honour.

The stock has sold off on the news. Yet no announcements on potential costs and what would be picked up by insurance. Actually no word on how much insurance if any. Uncertainty provides the legal smokescreen. What burdens do investors carry on this one?

Disclosure: No position in any stocks mentioned in this post.

Wednesday, June 02, 2010

BP Independent Director Responsible for Safety & Environmental Assurance May Be Culpable

BP (BP) is now facing a criminal investigation from the Obama administration. The investigation is political posturing. Think through the legal ramifications. To be convicted you need to prove intent.

Never gonna happen.

BP did not intend to spill oil and lose tens of billions of dollars of shareholder wealth.

At the same time the federal government is trying to regulate with one hand. On the other it is pressing a criminal investigation. Any street cop will tell you it’s very hard to get a criminal to cooperate unless you give him/her something. What will Obama give BP to get them to co-operate?

The regulatory infrastructure is rotten. The rot started under the Bush-Cheney administration. Obama is in charge of a very late rescue team. Given his recent approvals of new off-shore drilling he must have spent some time thinking about the regulatory issues.

The thinking does not show.

The investment market place needs to ask itself why it wants to take these risks and what real safe guards are in place. Tony Hayward may be the next sacrificial lamb. But what about the board at BP? What do we know about these guys?

Well look at this

Sir William Castell, LVO is a non executive director and the senior independent director. He is also the Chairman of the safety, ethics and environment assurance committee, as well as a member of the chairman's and nomination committees.

Sir William according to the corporate bio spent his early career with the Wellcome Foundation, holding various positions. In 1989, he joined Amersham plc as chief executive. Following Amersham’s acquisition by General Electric in 2004, Sir William became president and chief executive officer of GE Healthcare, and a vice chairman and a director of the General Electric Company. He retired from GE Healthcare in 2006. Sir William remains a director of the General Electric Company. He was appointed as a member of the board of governors of the Wellcome Trust in 2006, subsequently becoming its chairman.

The senior board member in charge of safety does not have a drilling background much less a petroleum background. He is not suitable to the job.

Disclosure: No position in any stocks mentioned in this post.

Tuesday, June 01, 2010

Prudential Needs Heimlich Maneuver to Dislodge AIG

Prudential (PRU.LN) cannot swallow AIG’s (AIG) Asia unit. This is a hell of a time to need the Heimlich Maneuver.

Actually Prudential just wants to pay about $5 billion less because it cannot raise the money. AIG which was too big to fail and now relies on the charity of the American tax payer, refuses to give the house away.

Could you imagine the outcry? By the way AIG’s current market cap is just under $5 billion. So why give the discount and declare yourself worthless. AIG and the American taxpayer must stand firm.

AIA is too big to swallow. AIG is too big to fail. Prudential is not big enough and investors want to keep it that way. No one is arguing about the valuations for AIA. We just know Prudential cannot pull it off.

Adieu to Tidjame Thiam.

This may be the silver lining in AIG’s hurricane clouds. Will this be similar to General Motor’s last minute decision to not sell Opel when value was discovered?

Disclosure: No position in any stocks mentioned in this post.