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Category Archives: Consumer Sector

Starbucks and Green Mountain make a deal

HedgefundLIVE — With the noticeably sharp spike of GMCR many are wondering why. Since the open, it has spiked 37.23% to about cents below $60. Yesterday, GMCR closed at about $43 dollars. It is reported that Starbucks and Keurig single cup brewer parent Green Mountain Coffee Roasters Inc will sell Starbucks coffee and its Tazo tea in Keurig’s K-Cup portion pack. Starbucks has been working to expand their corporation with the addition of new desserts and other assorted goods. Now, its next move is to sell the amount of a single cup of coffee which it tried doing almost two years ago. This attempt hit the market in October 2009 with the instant coffee line Via.  I tried the instant coffee and to me that was a no go ever again. This single cup strategy, although, could be very useful for virtual offices and places of work to distribute the single cups.

Mmmm that's hot

On the other hand, how many families actually have individual machines in their homes to accommodate the new line? This means on top of adding the sales of the single cup packages, sales of Keurig’s brewer will also go higher. Green Mountain’s Keurig in-home and workplace appliances dominate the single-cup-brewer market.  In the fall, the cup portion packs will be sold at supermarkets, wholesale clubs, drug stores, and department stores throughout the U.S. and Canada. Also, the brewers and K-Cup packs will be sold in Starbucks stores in the U.S. and Canada.

I think this rise is going to be short lived. I think everyone else thinks Starbucks is on a roll that’s why they are expanding but it very well could be the opposite; they aren’t doing as well as expected so they are revamping their image to meet the higher expectations. Most think everything associated with Starbucks is golden, but like what Jeremy said, when no one’s making money they’ll run to Dunkin Donuts for a quick, cheap coffee.


Facebook vs Netflix

HedgefundLIVE.com -News came out this week that Facebook will give its users the ability to view movies by paying a small fee. With this news, Netflix investors looked for the closest exit because Facebook is once again making moves no one can stop. Netflix dropped almost 6% intraday losing $635 million in market cap value and since mid February, the stock is down almost 20%.

Five Day Chart of NFLX

Facebook makes their revenue, now, from three things: advertising, sending virtual gifts and buying credits to spend on games and other applications. With Warner Brother’s deal to stream it’s movies and the release of The Dark Knight to kick off the new era, it seems as though Facebook is unstoppable. This is definitely not a good thing for Netflix or any other movie renting company. Two months ago, Goldman Sachs invested $500 million into the company giving Facebook a value of $25/share. Now, only two months later, in a private market auction Facebook shares were sold at $33/share which is a 48% increase in market cap.

I know for me I thought what’s the big hype with Facebook, I only see it as being a way to communicate with others; but with the news of streaming videos comes the endless possibilities this power house can pursue. Having the ability to view a movie for 48 hours for $3 on the most visited website on the internet is going to be very popular. Not only is it convenient but cheap which most consumers value over any other option.



Boeing Deal with Asian Airlines

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This morning, Boeing reached a deal to sell 43 aircrafts to two Chinese airlines. Air China, which is the country’s flag carrier agreed to buy five Boeing 747-8 aircrafts which can carry up to 460 passengers. With another soon to be signed deal, Hong Kong Airlines is planning to purchase 38 Boeing aircrafts including 30 of the new Dreamliners and 6 freighters. All together, the aircrafts are worth about $60 billion. To me this shows how much China is growing and growing - and it doesn’t look they are going to stop. I was talking to my friends the other day about this, there were rumors they were going to put those bullet trains like the ones in Japan from NY to Boston. I questioned, if Japan has the high speed trains in many areas for their workers and civilians… why doesn’t the US? We are supposed to be the most powerful country in the world.. so why do other countries have more revolutionized technology, especially transportation and not us… At least Boeing corporate headquarters is located in Chicago.

Upgrade from Subways, it is about time

On top of those orders previously stated, HNA Group which owns Hong Kong Airlines also announced orders for several business jets from Dassault Aviation and Gulfstream Aerospace. These announcements from the Asian carriers show how much of an important region Asia-Pacific is for manufacturers like Boeing and Airbus. Over the next 20 years, it is estimated 8,560 new aircrafts will be delivered to the Asia-Pacific region at a value of about $1.2 trillion. With this added statistic it is clear this region will overtake North America and Europe as the largest air transport market.

“We are clearly at the begining of an aviation upcycle,” a reporter from NYTimes claims. With the sharp increase in Crude prices the share prices of airlines have also risen. (Even though oil is trading off its high overnight- $104 is very high)Fuel prices represent a large part of operating costs so with any increase in crude it will cost more money to fly from NY to LA or any area rather than a month ago. I heard this morning on the news, crude prices aren’t actually rallying because of the oil companies; it is going up because more and more hedgefunds and investment companies are buying shares causing demand to go up. These gas prices are killing lots of drivers who daily commute to work and around for their family so these bullet trains would reeeally be a help right now…


Consumer Confidence - No Impact on Milan Fashion Week

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Besides for the financial world interesting me my mind gets taken over by the fashion world also. Fashion Week in Milan opened Wednesday and will close Tuesday March 1st. So far, some of my favorite designers have premiered their collections including Emilio Pucci, Roberto Cavalli, Giuseppe Zanotti, and my favorite, Gucci, premiering opening day with back to back fashion shows. The over all feel of going to a fashion is amazing. The music is blasting and the production takes over you. Lots of hard work goes into a fashion show but at the time of viewing it’s crisp, clean, and flawless… unless a model falls which would suuuuck to be that girl..

Hedge Fund Live - We love Gucci

When Fashion Week was in New York, I went to Richie Rich’s Villionaire show which was my first show I’ve ever gone to. Besides for the fact JWoww from the Jersey Shore was in it, I was so impressed. I’m not that creative so seeing some of the work that goes into making a new line is unreal.. If anyone has read or watched the Devil Wears Prada that sweater from TJ Maxx did not just come out of thin air but levels upon levels of different designers stemming from 5 years back.

Hedge Fund Live - Versace is what real traders wear

Fur around the neck in bright turquoise was definitely shown in Milan. Fat gold buttons and blown out baroque curlicues by Versace was what most remembered from her show.  Versace also showed belted wool coats (so UES) mini shifts and skirts with cropped jackets that were as strict and maybe as monotonous as a girls’ school uniform Cathy Horyn reviewed.

Hedge Fund Live - Dean prefers Fendi

Prada went for a a simple more straight forward look with seductive cut out of the back dresses and coyly seductive colors. Most were bright red, light tan, pale blue, and bisque.

Monday Ill give an update of the rest of Milan along with Grammy’s fashion also! And although its not Prada (a girl can dream), I’m glad I’ll be out in my pale blue dress tonight with cut outs in the back so I can be as chic as any of the other models out there..





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The Richer goes green

The Rolls-Royce’s commitment to be green has taken one more step. Now the green conscious millionaires are able to cruise in their new all electric Rolls-Royce Phantom. This model is expected to be unveiled on the March 1st at the Geneva Motor Show. But there are no plans to have this at the production level yet. This is merely an “Experiment”. It is still unclear whether the new electric vehicle would have all the luxury items that its gasoline counterpart has but it is something to look forward to.

Let it be green!

I’m all for the environment. Reduce, Reuse and Recycle. I sometimes think myself to be going overboard with the idea when I notice that I focus on the amount of gas burnt by vehicle rather than the attractive lady driving it. I was overjoyed to see the shift in the american automobile manufactures towards a greener more efficient engines. My ideal car would be a green vehicle; A simple conversion from electricity to mechanical energy.

The Obama administration is all out for the greener future. Their effort to put 1 million electrical cars on the road by 2015 which is quite possible. So the administration has proposed a plan to give $7500 discount directly for the customers on the spot. There are existing tax credits  between $2500 and $7500 which are only can be claimed after the tax credits come in. So in this effort the dealers and the finance companies can claim the tax credit for themselves and pass on the credit to the consumers directly. This looks really good for the consumers but the dealers remains skeptic after “Cash for Clunkers” programs.

With the sales of Chevy Volt and Nissan Leaf going well the future looks good for the green cars. GM CEO also promised to build a $7500 cheaper Volt which is definitely going to help. From a fundamental point of view this is a good buy.

Future of Handheld Gaming Consoles

I’m a gamer. I’m being playing games since I was 5 years old. From the very simple Tetris and GameBoy to the Sony PSP  and Nintendo DS I’ve enjoyed every stage of their progress. But during the last couple of years I’ve wondered how they would survive in the electronic consumer market which seems to be converging day by day.

Within the next few years every consumer electronic would be able to make calls, browse the Internet, social networking, play music and video and play games. So what would happen to these big names in the gaming consoles in the future? We would have to take some time to analyse this situation.

Sony just came out with the announcement of its newest handheld code named “NGP” which looks quite the same as its predecessors. It specs are fantastic with quad-core ARM Cortex-A9 processor, 5-inch touchscreen OLED display with 960 x 544 resolution, dual analog sticks (not nubs as on the current generation), 3G, WiFi, GPS, a rear-mounted touch-pad, accelerometer / gyroscope motion sensing , an electronic compass, and cameras on both the front and back. Well is it impressive enough? If you look at some of the other types of consumer electronics you can see that you have quite the same specs as this except for the processor. How can they really make distinction between the other consumer electronics? I’m not sure if there is a clear cut line. If there was it is surely fading.

During iPhone 4G announcement it was told that the number of games purchased in the iPhone actually is much greater than the games purchased for any other gaming console. I’m sure the android platform is also able to give a similar comment. Apart from them the tablets are making their way killing off the market held by netbooks. These devices can afford to have much powerful processors and would surely rival the handheld gaming consoles. I was under the impression that the gaming console market would be safe with the younger generation until I heard a 10 year old asking for a iPad for Christmas.

This is what I believe. Sony and Nintendo would have to make a decision soon whether to kill off the devices or to join the game that is very much inline with the smartphones and tablets in the market. Smartphones and Tablets will be the future of gaming. They would cease to be called as Smartphone or Tablets but would be just larger and powerful or smaller and less powerful version of the same type of devices. I just cannot wait to see how things will turnout.

How I cut cable TV subscription

The exorbitant cable TV service charges recently grabbed my attention. Throw in the mix of south Asian channels and it gets even more expensive. We always have the choice of Dish TV or DirectTV. But that comes with installation charges and the need to get two Dish Antennas; one for regular channels and other for South Asian. Notwithstanding the installation charges, the monthly service charges are not trivial either.

 So the new year’s’ resolution was to act on reducing our cable bill. We started by writing down all the programs that we ever watch.   I heard from friends about how set-top boxes like Wii, Roku, PS3 could be used to stream a/v data to the television. However, there were certain South Asian channel packages that were not available on Wii or PS3. Also, Roku seemed to be an inexpensive option. So we paid $59.95 (one-time fee) and got the “little” box in 2 days.  Once Roku was setup with our home wireless network (took less than 10 minutes), we were set to go.

 We started by adding the South Asian channel package for $14.95 and it was a breeze activating it. Next were YouTube (which was free) and Netflix for $7.99 (first month free). Netflix allows us to watch all the TV programming that we ever watched, including seasons from Nick Jr. We can search and play Asian movies, other videos right on TV. It is very easy to add new channels and the setup works very well. We get to see entertainment the way we want and on our time.  All in all we shaved off $95 a month for all the packages (on cable) that Optimum offered (we kept the broadband for $49.95). A great way to start the year!

 Roku and similar services like Wii, PS3, got me thinking on the future of cable.  I don’t think the monopoly of cable companies like Optimum and Comcast will last very long. So what is the future of cable? Educated consumers will probably drop the cable service and opt for these alternatives (Roku TV, Apple TV, Google TV). I anticipate major changes in the cable sector in the next couple of years. The cable firms will need to find a niche area to survive this competition (which they are probably not used to). This is analogous to the close demise of ISPs with the advent of wireless technology.  It will be interesting to watch the P&L, R&D and growth trend of firms like Optimum, Comcast etc,.  Perhaps there are opportunities for mergers and acquisitions in this area. With increasing broadband speeds, these set-top boxes will gain popularity.

November Same Store Sales: Discounts, Discounts, Discounts

Today retailers reported their same store sales (sales at stores open for at least one year) as they always do on the first Thursday of every month.  Below is a quick recap of the numbers turned out:

- Avg increase of 6%, better than the 3.6% estimate, across 27 retailers that reported comp sales today
- Best gains in four years
- About 75% of the retailers reported gains in sales
- Sales were driven by discounts and analysts warn that the continued discounting that is needed to drive shopper traffic may hurt margins
- Teen retailers beat expectations by a solid margin with the exception of ARO and AEO

You can find an interactive spreadsheet on our site that shows the comp sales figures since January 2009.  There is a graph that allows you to display sales data for whichever companies you select (useful to see how comps fared against each other).  Below is a snapshot:

Strong Black Friday sales helped boost revenues.  Analysts, however, seem to be stressing that sales were very clearly driven by discounts.  While this discounting is greatly needed in order to drive customer traffic, it will of course hurt profit margins.  So that is the current dilemma, if you will, in the retail space, in my opinion.  Tracking sales numbers and how retailers are performing is important in gauging the health of the economy as consumer spending does account for 70% of the economy.  Also, as a last point, note that much of the strength in sales was expected and had been baked into retail stocks.

The Luxury Market is Dead

Make no mistake about it.  The luxury goods market is dead.  At least that’s the way I see it for now in the current economic times.  High end retailers are increasingly catering to value conscious consumers with the most recent example being Neiman Marcus (NMG) launching their Last Call Studio outlet stores in November (including a location in our very own neighboring town of Paramus, NJ).  CNNMoney.com has a Luxury section and their featured articles are from early February 2010.  Can anyone say lack of activity in the luxury market?  It’s either that or CNNMoney is doing a terrible job updating this portion of their site.

Apparently, stock investors do not agree with me on this point as names like COH and BID have rallied hard in the recent months.  Don’t get me wrong- consumer spending has certainly picked up as evidenced in same store sales figures.  However, I still am not convinced of a solid growth in comp sales as the past couple of months have not necessarily painted a clear picture of an uptrend for me.  And going back to my main argument, I don’t foresee the luxury market going back to what it was like in pre recession years anytime soon.  If sales are to improve for these upscale retailers, I’d attribute the growth to increased focus on price conscious shoppers through outlet stores, for example.  This strategy has gone from a top line boosting advantage to a necessity for these companies.  CapEx at Saks Fifth Avenue (SKS) has been going into remodelling their lower end version, Off 5th.  Nordstrom (JWN)’s discount stores, Nordstrom Rack, have seen 15 new openings this year alone, including one over the summer in designer-obsessed Manhattan.  Nordstrom and Neiman Marcus have even turned to the internet to launch websites for their outlet stores this month, a move that is largely avoided in the retail space given the challenge of selling the limited stock of items that are all already on clearance.

With the trend in high end consumer retail moving towards outlet stores and any other methods of pushing discounts, the luxury market will not look like what it used to back in the heyday for many more years.  Until then, looks like a life of luxury can only be dreamt of outside of reality like in this $2 million dollar gold version of the board game Monopoly.