Thursday AM December 14th, 2006
by: Ed Mayberry, December 14, 2006 5:12:00 am
OPEC may keep production steady, according to the organization's president. Some oil ministers have renewed calls for new cuts to shore up prices, as they prepare for their year-end meeting. Until recently, the OPEC president, who is also Nigeria's oil minister, had been a firm backer of cuts. But now he says the Organization of Petroleum Exporting Countries first has to "look at the facts'' before making a decision. The group's top producer Saudi Arabia, whose voice carries proportionate weight, has also indicated there's less sentiment to cut than just a few days ago.
Exxon Mobil says world energy demand is likely to climb an average of 1.6 percent per year, to reach about 325 million barrels of oil equivalent a day by 2030. The Irving-based company's general manager for corporate planning told analysts in Washington that global energy demand will be up about 60 percent from 2000 levels. Jaime Spellings says much of that growth will be from cars and trucks in the developing world. But he disputed suggestions that the world may be running out of oil. Exxon Mobil estimates that at least 2.2 trillion barrels can be recovered through conventional means, and new technologies will enable producers to tap reserves from more difficult deposits.
Retail sales rose dramatically last month, by the largest amount in four months and a lot more than expected. The Commerce Department says sales were up by a full one percent last month, following three straight months of lackluster performance. Sales were flat in August and had fallen in September and October. And excluding auto sales, the increase was even greater: 1.1 percent. Economists were forecasting gains of just two-tenths of a percent in overall retail sales last month, and three-tenths of a percent in non-auto sales. The much stronger results are evidence that the retail sector came roaring back last month after being battered by a multitude of economic woes. And the big gains were coming at a critical time as the holiday shopping season was getting under way.
This week's decision by the Federal Reserve to hold interest rates steady leads at least one analyst to speculate there could be a cut next year. Quicken Loans Chief Economist Bob Walters says the central bank seems to have taken a more "dovish'' stance. He says the governors are "moderating their view on inflation'' and recognizing that economic growth is slowing. Walters says keeping the rate at 5.25 percent for a fourth straight meeting benefits consumers in that it will lower the absolute borrowing costs on things like home equity lines of credit.
America's budget gap is a bit smaller, but it's still into 11 figures. According to the Treasury Department, the federal deficit was $7.6 billion last month, which is $7.5 billion less than a year earlier. The last budget year ended in September with the deficit at a four year low. But despite last month's drop, the White House is estimating that at the end of this fiscal year, the budget gap will be up by more than a third.
A new survey has found that state governments are on their strongest financial footing since the start of the decade. According to a report by the National Governors Association and the National Association of State Budget Officers, the fatter coffers are giving lawmakers and governors more choices. Fees and taxes were cut by more than $2 billion overall in the fiscal year that began in most states in July. That's the first aggregate tax and fee reduction after five straight years of tax and fee increases that totaled $24 billion. The healthy position comes from revenues that came in above expectations or on target last year in all 50 states, and an easing of the rate of growth for Medicaid. The survey also found that state spending grew by nearly nine percent in the last fiscal year and is projected to grow by seven percent in the current fiscal year.
A decade after the idea flopped on Capitol Hill, one lawmaker is getting ready to try again to push a health care plan for all Americans. Senator Ron Wyden wants all companies to end their existing health plans, and pay workers the amount saved. Employees then would have to buy health coverage from a large pool of private plans. After two years, companies would stop paying the extra money to workers, and instead pay into an insurance pool. Wyden says the time has come. The Oregon Democrat warns health insurance at work is "melting away like a popsicle on the sidewalk in August.'' The plan would cover everyone except those on Medicare and those getting military health coverage. And Wyden says a consulting firm that reviewed the plan finds it would save more than $1 trillion on health care spending over the next decade.
A majority of large employers have retained their retiree drug coverage this year despite the new Medicare drug benefit. A study found 82 percent of companies opted to take the subsidy offered by the government for companies that retain drug coverage in 2006. And 78 percent said they plan to continue offering retiree drug coverage in 2007. The study was conducted by the Henry J. Kaiser Family Foundation and Hewitt Associates. Not all the news from the survey is good for retirees. About three-quarters of the companies surveyed raised premiums for retirees under age 65 and 58 percent raised premiums for Medicare-eligible retirees. Retiree contributions rose 15 percent for those under age 65 and nearly ten percent for those 65 and older.
Checking into a top rated hospital doesn't necessarily improve your chances of walking out. That's the warning from researchers at the University of Pennsylvania. They took a closer look at more than 3,600 hospitals nationwide. All are listed on a federal Web site that's supposed to help people comparison shop. Examining heart attacks, heart failure and pneumonia cases, the study finds death rates for those patients are only slightly lower at the top-ranked hospitals than at those near the bottom. Researchers say there need to be better ways of measuring a hospital's performance, so savvy shoppers can make meaningful choices. The study appears in the latest Journal of the American Medical Association.
Another major restaurant chain is joining the move away from trans fats. Darden Restaurants says it'll transition to trans fats-free frying oil at all of its Red Lobster and Olive Garden restaurants by the end of next November. More than 100 of Darden's 1,267 Olive restaurants already use the new canola oils. The company says it took 18 months of testing and consumer feedback to create the new oil, which is high in monounsaturated and polyunsaturated fats and low in saturated fat. Other restaurant chains are cutting artery-clogging trans fats, which are believed to lower "good'' cholesterol and increase "bad'' cholesterol, and have been linked to heart disease. Denny's says it'll cut trans fats from its menu as early as the first half of next year, Wendy's introduced a zero-trans fat oil in August, and KFC and Taco Bell say they'll do the same. Last week, New York became the first city in the country to ban all restaurants from using artificial trans fats.
Dynegy said it hopes to complete its acquisition of rival LS power group's generating capacity by the end of March. The Houston-based power provider also says it expects its 2007 earnings to be in line with analysts' forecasts. Dynegy announced in September plans to buy the power generating assets of the privately held East Brunswick, New Jersey-based company for $4.1 billion. At Dynegy's current share price, the deal would be valued at $4.5 billion. The deal is subject to approval by Dynegy shareholders and regulators. The two companies also plan to become joint-venture partners in nine power plants already under development. In a presentation to analysts today, Dynegy chairman and chief executive Bruce Williamson said the pending combination will give the company more stability in the volatile industry. It says it'll provide greater diversity in terms of geography and the fuels used to generate electricity. It'll also allow the combined entity to generate more megawatts of power with minimally increased costs.
Dynegy says it expects to achieve earnings in 2007 between $190 million and $255 million on cash flow of $415 million to $515 million, according to the Houston Business Journal. The estimates are based on Dynegy's pending acquisition of New jersey-based LS Power Group generating assets at the end of the first quarter of 2007.
Several Dallas business executives have formed a political action committee to oppose TXU's plan to build 11 coal-fired power plants. Governor Rick Perry last year signed an executive order to speed up state approval of the plants. TXU says the plants are needed to meet the state's growing energy demands. It has also committed to cut total coal emissions by 20 percent, even after the plants are built. But leaders of Texas Business for Clean Air say pollution from the proposed plants would hurt economic development. The group's leaders are seeking legislative support to slow down the coal plant permitting process and give regulators time to consider cleaner energy technologies. About 20 prominent Dallas business leaders have endorsed the group. Group members include Garrett Boone, chairman of the Container Store, real estate developer Trammell Crow and David Litman, chief executive of Consumer Club.
Hewlett-Packard still must cut costs, despite its massive restructuring that reduced its workforce by ten percent. HP Chief Executive Mark Hurd told analysts in New York that the California-based company will continue looking for expense reductions while it retools its sales strategies. Beginning in July 2005, HP cut 15,300 jobs and overhauled its retirement plan. HP has more than 8,000 employees in Houston.
IBM and Yahoo! are teaming up to offer a free data-search tool for businesses, challenging Google and other corporate-search specialists in growing market. Big blue already sells a business-focused search product, Omnifind, that lets organizations thumb through internal documents. The new edition, which is free, will be limited in the number of documents it can query. But it'll combine the results with Web searches powered by Yahoo! IBM hopes the service, which it's introducing Wednesday, will strengthen its overall efforts to improve its dealings with small companies.
IBM says it will offer consulting services designed to help companies organize and protect sensitive data. Big Blue says the new service, IBM Data Governance Maturity Model Assessment, will assess how businesses govern data such as customer information and financial details, measure the value of the data and calculate risks of data loss. The company says its criteria for assessing a company's data governance practices were based on input from 47 organizations.
They're large, rectangular and target consumers from high above the nation's roadways. But they are not your father's billboards. Digital billboards resemble ballpark jumbo video displays—but scroll through several static ads each minute. They're helping to draw advertisers back to the outdoor medium as one of the world's oldest forms of marketing is undergoing a renaissance. The computer-controlled LED displays allow advertisers to change their message as often as they'd like. Paul Meyer with San Antonio-based Clear Channel Outdoor Holdings says businesses are getting more creative with how they use outdoor advertising. Clear Channel recently tried interactive bus shelters in some of its European markets--enticing commuters to download information to their cell phones. Clear Channel Outdoor's first foray into digital billboards was in Cleveland, where it launched a network of seven billboards.
San Antonio-based AT&T has launched a trial in three cities of free directory assistance service paid for by advertisers, rather than caller charges. The trial is scheduled to run through February in Bakersfield, California; Oklahoma City; and Columbus, Ohio. Callers must dial a toll-free number instead of 411. The phone company says callers will hear brief advertisements specific to the business category they're searching but can avoid the usual service charges. The ads will not run more than 20 or 30 seconds and will be rotated if there is more than one advertiser in a category. The free service is accessible by calling 1-800-YELLOWPAGES--or 1-800-935-5697.
Santa has good reason to rock around the Christmas tree this year. His hypothetical sack of 2006 investments has recorded a year-to-date return of 21 percent--or so say analysts at Amegy Bank of Texas in Houston. For the fifth consecutive year, the bank's Investment Management Group tracked yearly performances of stocks they assume Saint Nick would hold. His five-year average return--an impressive 18.8 percent. At the top of Santa's "nice'' list this year was Gamestop, which rose 81 percent on sales of its video game hardware, software and accessories such as Sony's Playstation Three and Nintendo Wii. Other winners were retailers Sears and Kohl's. Santa's holdings that saw losses included Dell, Hershey and Tractor Supply Company. St. Nick's year-to-date return of 21 percent was off slightly from last year's 23 percent return.