Friday, June 18, 2010

BP Chapter 11 Blow Out Risks

BP (BP) is wrestling with the financial fall out of the Gulf deep water well disaster. The Obama administration just made arrangements for $20 Billion in claims. It has been called extortion. Credit Default Swap costs for BP debts are astronomical. BP is no longer a financial model. BP is most definitely a political model.

Some call for BP to enter Chapter 11 and blow off critical responsibilities. If they attempt Chapter 11, Obama’s posse will intervene and meddle. The shareholders may loose everything. BP will be made to honour obligations and not run away. Shareholders that are pension funds may see some interesting legislation enacted to protect widows and orphans.

The blow out may follow the law of unintended consequences and give Obama the political leverage in many other area’s it has been looking for.

Corporate America needs to buckle up.

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

Thursday, June 17, 2010

Winnebago Has It Really Changed?

Winnebago (WGO) announced improved numbers and popped its stock price quite nicely. Looks like investors were surprised. But wait lets take a quiet read and think about the numbers. The order backlog has increased but even the company admits orders can be cancelled at any time.

Chairman, CEO and President Bob Olson let investors know this is the first time in two years that they have printed black ink on an operating basis. That’s good Bob. Now tell us about sustainable changes that you have made in your break even points and operating leverage. If sales go into the toilet again how fast can you cut expenses? How fast can you start to conserve cash?

None of these fundamental issues were dealt with by management. They just feel they can excite the dealers with the new models for 2011. Same old thinking will bring the same old problems. Next time will be faster and harder.

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

Wednesday, June 16, 2010

Budweiser Ambush in South Africa

Budweiser (BUD) is hiding behind the skirts of FIFA World Cup organizers. Bud paid large sums for the exclusive advertising rights for Beer. During the Holland - Denmark match last Monday approximately 36 incredibly attractive Dutch women attended the game wearing bright orange mini skirts. If you have any testosterone you took a very good long look.

The ambush marketing ploy was orchestrated by another beer company called “Bavaria” which is Dutch based. (As reported by NYT) The colour orange plays a very big role in Bavaria’s branding. The girls seemed to be having a really good time. They cheered enthusiastically for Holland who did win the match.

But South African police arrested some of them for unlawful commercial activities. Not sure why only some ladies were arrested, they all were wearing bright orange. Hard to miss. South Africa has come a long way since Apartheid when colour made you wrong. Colour still makes you wrong, but now it’s a money thing. How civilized!

Budweiser is depending on FIFA to vigorously protect it against Bavaria. If FIFA and the South African police get this wrong, Budweiser will lose out. Who do you want to bet on?

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

Tuesday, June 15, 2010

Sara Lee Disclosure Failure

Sara Lee (SLE) finally came clean and reported that their CEO had suffered a stroke and needed to take a leave of absence. I am sure that everyone wishes Brenda Barnes all the very best in her recovery. The medical condition goes back to at least May 14 when Sara Lee announced a temporary medical leave. She must have been suffering well before that point. There have been health issues going back to Oct 2006 when she missed an annual meeting.

The health of the CEO is of major concern to shareholders. Incapacitated CEO’s cannot create shareholder wealth. Incapacitated CEO’s can easily destroy shareholder wealth. Critical information was withheld from the investor community. CEO health is material information. There is something called Reg FD. Sara Lee has failed miserably.

Where is the SEC investigation? Where are the class action lawsuits?

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

Monday, June 14, 2010

BP Tricks Clean Up Costs

BP continues to be the American Whipping Boy. The public debate focuses on how BP will pay. Most politicians have missed this critical fact “The clean up cost will be tax deductible”.

So if BP kicks in say $20 Billion the American taxpayer really foots half that amount. The BP tax accountants are laughing at American Politicians and their zombie like response.

Financial engineers are buckling up and starting to work the new algorithms.
Disclosure: No position in any stocks mentioned in this post.