Boeing Co. unveiled its new 747-8 passenger jet

Feb. 14 (Bloomberg) -- Boeing Co. unveiled its new 747-8 passenger jet to customers, employees and investors yesterday in Everett, Washington. Boeing has targeted the end of March for the first flight of the aircraft, which it calls the Intercontinental. Bloomberg's Maryam Nemazee reports in this video:

Related Story:

• Boeing 747-8 Passenger Jet Gets Lift Toward Delivery From Freighter Tests      

Media Monguls and Respectability Do Not Go Together.

Media companies represent a large chunk of the global economy and a big piece of the world's stock market capitalization.  Unless you consider Apple a media company, the only one to make the list of the top 100 most respected companies by professional investors was Walt Disney, which went from #20 to #12.

Read the story in Barron's:


Most Respected Companies 2/12/2011 3:03:01 AM

Barron's presents its annual ranking of the most respected companies in the video below. Apple comes in first for the second year in a row. Johnson & Johnson fell from last year's ranking.





What explains this lack of respect in one of the business world's largest sectors?

The Curse of the Media Mogul

The media hold a peculiar place in the business world, for they are the natural habitat of that most peculiar species, the media mogul.  We do not speak of car moguls or utility moguls, yet the media sector is dominated by huge international companies run by over sized personalities.  A media mogul even provides a James Bond flick with its villain.  In "Tomorrow Never Dies," Elliot Carver is a caricature of News Corporation's Rupert Murdoch.

Three Columbia Business School professors, Jonathan Knee, Bruce Greenwald and Ava Seave, also see media moguls as villains but in their case they see the shareholders as the victims.  Jeremy Philips summarizes their argument in his Wall Street Journal review of The Curse of the Mogul (New York: Portfolio, 2009)  "that media conglomerates as a whole have underperformed since the advent of the Internet. The Web has eroded the barriers protecting traditional businesses without improving the competitive position of even one incumbent. For a new competitor, of course, lower barriers mean opportunity, but they will mean opportunity for still newer competitors, too, making it difficult to establish a sustainable advantage. Citing Warren Buffett, the authors say that companies should be 'continuously digging the moat around their business.' But media companies have often done just the opposite, 'inadvertently construct[ing] bridges for competitors when they think they are strengthening the moat.'"

Glitz, Ego, or Value?

Do you agree with the Columbia dons that media moguls are obsessed with growth and overlook true competitive advantage?

And Then There Is Italy

Italy is the only country to entrust its government to a media mogul (Silvio Belursconi) and now finds the office of the presidency embroiled in a sex scandal. For movie stars, scandal sells. That same principle may not hold for Italian politics.

The Financial Times reports: "On Tuesday a Milan examining judge accepted a request from prosecutors, who said they had sufficient evidence concerning a “significant” number of prostitutes, to proceed to an immediate trial of the 74-year-old prime minister without holding a preliminary hearing. The case will begin on April 6." 

“Ruby,” a Moroccan nightclub dancer named Karima El Mahroug is "alleged to have joined erotic 'bunga bunga' parties last year..." She, then "aged 17, denies having had sex with the prime minister. Mr Berlusconi says he has never paid for sex and also denies pressing a Milan police chief to free the teenager from detention last May." His excuse is diplomatic: he wished to avoid an incident. He thought her to be "the niece of Hosni Mubarak." The people went to the streets of Mubarak's Egypt to oust him. The Italians have mostly headed to the espresso bars. Then again, they have the ballot box to deal with their media mogul.

A Historic Day for the 10-year U.S. Treasury Note

In this video (4m 25sec), the FT's Michael Mackenzie takes to the floor during the final 20 minutes leading up to the sale of $24bn in 10-year treasury notes as the bond market passes a key test of investor sentiment with record demand for the new issue:  

http://video.ft.com/v/786844760001/A-historic-day-for-the-10-year-treasury-note

Uncle Sam can still sell paper.   But for how long?

Should Your Investmests Be In Stronger Currencies?

Inflation is being manifest in commodity prices. Food prices topped the high they reached in 2008. Producer prices were up 4.1 percent over a year ago driven by commodity prices. An oversupply of dollars is behind the global commodity boom as we export our inflation to the booming BRICs.


Portfolio manager, Bill Gross manages more bonds than anyone in the world.  Pimco's founder talks to Barron's Michael Santoli  on the improving economic outlook for 2011. Problems loom with declining dollar, government debt and high unemployment:




Meanwhile, the Reserve bank of India has raised its benchmark rates, yet prices may be outpacing the increases in rates. Dow Jones Newswires' Mark Cranfield reports:

Jamie Dimon is our favorite banker. His bank, JP Morgan-Chase, is one of three banks that come out big winners from the financial crisis. The other two are Toronto Dominion (TD Bank in the U.S.) and Wells Fargo. (Bank of America made most of the right moves and was forced into the Merrill Lynch merger and the jury is still out whether they should be added to the list.)

If you want to hear the world's top banking talking fast and not hiding under a grey flannel suit, fire up this interview with CNBC:





In the interests of full disclosure, the Harris family owns modest amunts of JP Morgan stock, some of which was bought in March, 2009.

America's unemployment rate dropped from 9.8% to 9.4%.

The Bureau of Labor Statistics released its employment report for December. America's seasonally adjusted unemployment rate dropped from 9.8% to 9.4% in December. Is this proof that the household survey is inherently unreliable or that this is a reversal of trend?

Neither!

The unemployment rate has been following a slow downward trend since the fall of 2009. Now looking at the seasonally unadjusted data, we also see it has been falling for five straight months relative to the same month last year (SPLY in postalese.) This trend has been masked by the seasonal adjustment process (see the previous post.)

No doubt analysts will be disappointed by the small increase in jobs (103,000) reported by the establishment survey. Do not give it too much weight. These data will be revised, perhaps drastically in February, leading also to substantial revisions to the GDP series. This will cause the whole history of the recovery to be rewritten.

The good news is that the establishment data may become a more useful real time cyclical indicator. The BLS announced, "Effective with the release of January 2011 data on February 4, 2011, the establishment survey will begin estimating net business birth/death adjustment factors on a quarterly basis, replacing the current practice of estimating the factors annually. This will allow the establishment survey to incorporate information from the Quarterly Census of Employment and Wages into the birth/death adjustment factors as soon as it becomes available and thereby improve the factors. Additional information on this change is available at www.bls.gov/ces/ces_quarterly_birthdeath.pdf."

And that is very good news. Tracking the next cycle with the jobs data will be more accurate.

On a sour note, the BLS will update the household estimates with new population data in February. Historically the gnomes resident in the Postal Square Building have not been time series friendly in their population updates.

Maybe America's Employment Malaise Is Not as Bad As It Seems

Tomorrow we get to see the December employment data.  It may well show that things are not as gloomy as we have been seeing.    Certainly America's 9.8% unemployment in November was depressing and in that vein, I wrote "A quick survey of the numbers demonstrates that the national economy is mired in a malaise worse than in any previous postwar U.S. recession."

Wall Street has grasped at any number of straws in the wind to convince itself that things are looking up.  Unemployment claims are down, manufacturing purchasing mangers are saying things are up.  Can the stock market's upbeat tea reading be right?  Yes, it can.  

Whatever tomorrow's data show, the employment scene may not be as bad as it now looks.  I am mostly looking at the household survey data.  The last two recessions demonstrate that the establishment data is an unreliable real time guide to cyclical trends.   The survey is badly biased during downturns and perhaps recoveries.  It misestimates the cyclical impact of births and deaths of firms on employment.  

Why might the data paint an overly gloomy picture?  I have come to believe that the seasonal adjustment overcompensates during cyclical swings.  Consider these data:  while the seasonally adjusted unemployment rate is 9.8%, the unadjusted rate for November is 9.3%.  Not surprising.  Retailers hire going into the Christmas season. On a seasonal adjusted basis, retail employment was down from October (establishment data); yet that same survey shows retail employment was up over November, 2009.  Curious.  Moreover, the national seasonally unadjusted unemployment rate (household survey) is down from a year ago for four straight months.

The seasonal adjustment process averages data over thirty years.  It is a blunt instrument for dealing with the massive impact household deleveraging is having on retail sales, the structure of the retail sector, and thus seasonal retail employment.  Indirectly, this affects the estimate of the seasonally adjusted national unemployment rate as well.

Before you break out the champagne,  note my favorite long term cyclical indicator, the employment rate peaked in April.

While I am backtracking on what I said about the national employment picture a little, I stand by my two conclusions on our long term prognosis and Wichita's prospects:

"The fundamental dislocations that led to the recession of 2007 to 2009 have not been addressed." and

"We have three significant strengths on which [to buck the national] trend...: exports, energy and entrepreneurship."

Future of Investment Banks & Bonuses

On December 17th, 2010, the Financial Times asks: As regulators and politicians seek to tighten their grip on bonuses and leverage, what does the future hold for investment banks after the financial crisis? and how do food and clothing companies, as well as governments, react to rocketing input prices? 

In the chair, analysis editor Frederick Studemann debates the issues with FT colleagues Megan Murphy, investment banking correspondent, Martin Sandbu from the leader writing team and consumer industries editor Louise Lucas.

The video runs 16 minutes and 28 seconds.

Kraft: 3.6% Yield + Plus Emerging Market Synergy

Kraft will be absorbing its acquisition of Cadbury. Should you buy the stock?

It yields 3.64% and sells about 13 times 2011 estimated earnings according to
Barron's Dimitra DeFotis. Is the stock undervalued or is the market discounting lousy prospects? Cadbury certainly offers opportunities for synergy. Kraft is strong in countries Cabury is not and vice versa. With the emerging market econnomies providing the world's economic growth, this is important. Hanging over that rosy scenario is the question of whether Kraft can digest iCadbury's sweets. Managements in more than one industry have gotten indigestion from such major mergers.


Still DeFotis explains that mixing Kraft cheese with Cadbury chocolate should sweeten investor returns in this video.