Today's economic news being of course of high interest since sooner or later the truth must be told as to the MESS the global financial market is in.
Not looking for doom and gloom, folks, but just REALISM as the system falls to shreds and a ghost of its previous self.
Veeger
Gold rises for third day to near $830 on weaker dollar
5:10pm 12/26/2007
Delayed quote data
4:01pm 12/26/2007
Gift Cards Cover Fuel, Living Costs, Help Consumers (Update2)
By Heather Burke
Dec. 26 (Bloomberg) -- Gift cards aren't just last-resort purchases by baffled holiday shoppers anymore. They're becoming the presents of choice for Americans who want to help friends and relatives cope.
Spending on holiday gift cards may climb 25 percent to $35 billion this year, according to Archstone Consulting LLC, boosted by cards that aid consumers contending with higher food and fuel costs and the deepest housing slump since 1991. That tops some estimates for holiday sales on Web sites.
Gift cards that pay for gasoline at Exxon Mobil Corp. stations, groceries at Wal-Mart Stores Inc. or medical bills through health-insurer Highmark Inc. will help increase the category to 5.9 percent of total U.S. holiday spending this year, according to Stamford, Connecticut-based Archstone. That's up from 4.9 percent in 2006.
``The practical usage of gift cards is the biggest story this year, due to economic fears of many consumers and tighter budgets,'' said Heather Dougherty, director of research at Experian Group Ltd.'s Hitwise in New York, which measures Web traffic. ``We see people who are searching for things like gas and grocery gift cards.''
Gift cards -- credit card-sized pieces of plastic with the prepaid amount readable by a scanner -- represent one of the few bright spots for retailers this holiday season. The National Retail Federation in Washington says total retail sales may increase 4 percent in November and December, the smallest gain in five years.
`Cultural Shift'
``We've seen a cultural shift in how we view gift cards, from a thoughtless, lazy person's gift to a thoughtful gift,'' said Scott Krugman, a National Retail Federation spokesman. ``It's becoming a practical gift for practical purposes.''
Gift-card sales also have been spurred by their increased availability in supermarkets and drugstores. Cards for Applebee's restaurants, Omaha Steaks, Visa Inc. and AMC movie theaters were among the selection at a Duane Reade Inc. drugstore in New York last week.
Prepaid debit cards such as those from Visa and MasterCard Inc. may be the most popular type of gift card this year, Archstone estimates, accounting for 16 percent of the total market. Cards for discounters such as Wal-Mart and food and beverage providers such as Starbucks Corp. probably will be the next two most popular categories, Archstone says.
Gift cards from credit card companies are gaining popularity because they can be used for many purposes, including living expenses, Hitwise's Dougherty said.
Utilities, Health
Gasoline station operators including BP Plc, Chevron Corp. and Exxon Mobil offer cards. Shoppers can buy gift certificates for customers of Portland General Electric Co. in Portland, Oregon, and Equitable Resources Inc. in Pittsburgh to pay utility bills.
Highmark, a Pittsburgh-based health insurer, on Nov. 1 introduced the Healthcare Visa Gift Card. The card allows people to pay for items such as prescriptions, Lasik eye surgery, facials, gym memberships and fertility clinics. Purchasers can buy cards worth $25 to $5,000.
``It gives the liquidity of cash, but it's more targeted to that recipient's needs,'' said Kim Bellard, a Highmark vice president. Interest in the card was ``higher than expected,'' he said, declining to disclose details.
Help With Co-Pays
Marie Kubovsak learned about the health-care gift card at the doctor's office where she does billing. She bought a $25 card last month as a Christmas present for a co-worker with fibromyalgia to help her cover co-pays or prescriptions.
``In a day and age where money is tight and everything, it's better to buy something that they're going to use,'' said Kubovsak, 53, of Reading, Pennsylvania.
Some Web sites offer philanthropic gift cards. TisBest.org allows card recipients to choose from 220 charities for a donation. Since the Nov. 1 introduction, the Web site has received about $170,000 in donations, said Erik Marks, founder of the Seattle-based site.
Traditional gift cards for apparel, accessories and electronics from retailers including Macy's Inc., Gap Inc., and Best Buy Co. remain popular.
Sixty-one percent of U.S. consumers plan to give gift cards this year, an American Express Co. survey found. Respondents said doing so made shopping faster and easier, and allowed recipients to get what they wanted.
`Makes More Sense'
Cyndi Mayon, a 56-year-old travel agent from Gilbert, Arizona, is sending a gift card to her grandson on the East Coast for Christmas. ``It just makes more sense,'' she said in an interview. Mayon didn't want to buy something that ``he has to return,'' she said.
Wal-Mart and Home Depot Inc., the two largest U.S. retailers, offer gift cards in various colors and styles. Lowe's Cos., Best Buy and Toys ``R'' Us Inc. allow consumers to add photos or personal messages to their cards.
Gift cards have helped retailers' holiday sales continue into January because consumers have ``fresh new money'' to spend, said Patricia Edwards, who helps manage $13.4 billion in assets, including Wal-Mart shares, at Wentworth, Hauser & Violich in Seattle.
Retailers have added merchandise right after the holidays and can often sell it at full price, Edwards said. Gift cards help reduce returned items, and people often spend more than the card amount, she said.
This may be the biggest day for gift-card spending in December, January and February, Burt Flickinger, managing director at Strategic Resource Group in New York, said in a Bloomberg Radio interview. Malls in Florida and Virginia reported 25 percent of purchases coming from gift cards today, Taubman Centers Inc. said in a statement. The company operates 24 shopping centers.
``It drives the consumer into the store after the holiday period, not before,'' Marshal Cohen, chief industry analyst at NPD Group Inc., said in a Bloomberg Radio interview.
To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net .
Last Updated: December 26, 2007 16:17 EST
Commentary by Jonathan Weil
Dec. 26 (Bloomberg) -- Look at almost any major homebuilder's balance sheet these days, and it practically screams at you: ``Don't believe Mr. Market. Trust me!''
Either homebuilders as a class are grossly undervalued, or their assets are worth much less than their financial statements say. Odds are it's the latter. Home prices still show no sign of bottoming. And next month may bring lots of new confessions, when most of the companies report year-end earnings.
Take Pulte Homes Inc., for instance. The Bloomfield Hills, Michigan, company showed $8.1 billion of inventory at Sept. 30, namely land and houses. The company's book value, or assets minus liabilities, was $5.2 billion. Yet Pulte's stock-market value is only $2.7 billion, after a 68 percent drop in its shares this year.
That raises the question: Is Pulte's inventory, by itself, really worth three times more than the company as a whole? Probably not.
Pulte spokesman Calvin Boyd says the company tests its asset values quarterly, though he declined to comment on whether it might write them down more this year. Pulte reported a $787.9 million net loss last quarter, including $1.2 billion of pretax writedowns, about half of which were for inventory.
Eight of the nine U.S. homebuilders with market values of at least $1 billion now trade for less than their book values. Some like Pulte already have taken large writedowns on everything from real estate and joint ventures to goodwill. Yet their plunging stock prices indicate bigger charges to earnings may be needed.
Big Gap
While the stock market isn't the final word, a large gap between a company's book and market value is a strong indicator that writedowns are needed.
Under the accounting rules, companies mainly use internal estimates of future cash flows to test whether assets such as real estate may be impaired. If the values aren't supportable, companies must write down the assets to their so-called fair values, though these may be only loose guesses.
Pulte is one of five companies in the Standard & Poor's 500 Homebuilding Index; the others are Centex Corp., D.R. Horton Inc., KB Home, and Lennar Corp. While the five companies have a combined book value of $22.7 billion, the stock market says they're worth just $15.2 billion. Put another way, the market is signaling that their net asset values are inflated by more than $7 billion, mostly because of frothy inventory values.
Oddly, Wall Street analysts covering the stocks appear to be rejecting the market's hints. Pulte, for instance, is expected to post a $153.2 million fourth-quarter net loss, according to a Bloomberg survey of seven analysts. That suggests no one is counting on major writedowns. The loss would be much larger if Pulte were to mark its assets in line with what its stock price implies.
Lennar, Toll
At $317.2 million, only Miami-based Lennar is expected to post a bigger fourth-quarter net loss, according to a Bloomberg survey of six analysts. Lennar showed $6.7 billion of inventory at Aug. 31 and a $5.1 billion book value; its market value is $2.8 billion. Lennar spokesman Marshall Ames declined to comment.
Toll Brothers Inc., based in Horsham, Pennsylvania, reported an $81.8 million net loss for the quarter ended Oct. 31, driven by $314.9 million of pretax writedowns. Among major homebuilders, the gap between its book and market value is one of the smallest. Toll's inventory was $5.6 billion, and its book value was $3.5 billion, compared with its $3.3 billion stock-market value.
``If I thought I had something that required an impairment, I would have already taken it,'' says Joel Rassman, Toll's chief financial officer. ``If I didn't take it, it's because, based on today's market and our estimate of future market conditions, it doesn't require it. But if the markets continue to decline, it may change the calculation.''
Keeping Mum
Fort Worth, Texas-based D.R. Horton showed $9.3 billion of inventory and a $5.6 billion book value at Sept. 30. Its market value is $4.4 billion, down about half this year. D.R. Horton spokeswoman Jessica Hansen didn't return phone calls.
Dallas-based Centex showed $7.8 billion of inventory and a $4.2 billion book value at Sept. 30. Its market value is $3.2 billion. Centex spokesman Eric Bruner declined to comment.
KB Home, based in Los Angeles, showed $4.4 billion of inventory and a $2.7 billion book value at Aug. 31, compared with its $2.1 billion market value. KB Home spokeswoman Heather Reeves declined to comment.
Hovnanian Enterprises Inc. last week reported a $466.6 million net loss for its fiscal fourth quarter ended Oct. 31, including $382.7 million of pretax writedowns. The Red Bank, New Jersey-based company said it had $3.5 billion of inventory at Oct. 31 and a $1.3 billion book value. Its market value is just $448 million. Hovnanian spokesman Jeff O'Keefe declined to comment. The company's stock is down 79 percent this year.
You Gotta Believe
So, to believe Hovnanian's balance sheet, Hovnanian's inventory is worth almost eight times more than the stock- market value for the entire company.
One investor on Hovnanian's Dec. 19 earnings call asked: ``Can you believe the book value?'' Hovnanian's chief financial officer, Larry Sorsby, replied: ``We are just not in a position that we are going to make a projection.''
If Sorsby really believed the book value, my guess is he would have said so.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in Boulder, Colorado, at jweil6@bloomberg.net
Last Updated: December 26, 2007 00:05 EST
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