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Tuesday, August 26, 2014

Could this study be a huge impediment to fracking?

As many of you know I have a PhD in epidemiology and work in policy for one of the world's most influential Health Departments. We are constantly barraged by supporters and opponents of fracking. For me, it is about the data. It works to extract energy, but the harmful side effects are unclear. While the technique allows companies to pad the bottom lines. any involved could be hurt by fracking bans.

Well, bad news. The first research into the effects of oil and gas development on babies born near wells has found potential health risks. Government officials, industry advocates and the researchers themselves say more studies are needed before drawing conclusions.

While the findings are still preliminary, any documented hazards threaten to cast a shadow over hydraulic fracturing, or fracking -- the process of blasting chemicals, sand and water deep underground to extract fuel from rock that's helped push the U.S. closer to energy self-sufficiency than at any time since 1985.

"It's not really well understood how the environment interacts with genetics to produce these birth defects," said Lisa McKenzie of the Colorado School of Public Health, who conducted research published in January in the journal Environmental Health Perspectives. "We really need to do more study to see what the association is, if any, with natural gas development."

McKenzie and her colleagues discovered more congenital heart defects in babies born to mothers living near gas wells in Colorado. Two studies, which have not been peer reviewed, showed infants born near fracking sites in Pennsylvania were more likely to have low birth weight, a sign of developmental problems. In Utah, local authorities are investigating a spate of stillbirths after tests found dangerous levels of air pollution from the oil and gas industry.

Mitigate Risks

"The question isn't are there risks, the question is are there rules and regulations in place that effectively mitigate these risks and deal with problems should they occur, and the answer is yes," said Steve Everley, a spokesman for Washington-based Energy In Depth, an industry-funded group that promotes fracking. "The body of scientific knowledge has to advance gradually and you have to look at all of these things and the full spectrum. You can't just look at this one individual or this group of studies."

In published research, McKenzie and her colleagues found that babies born to mothers living with more than 125 wells within a mile (1.6 km) of their homes showed a 30 percent increase in congenital heart defects compared with those with no wells within 10 miles. The abnormalities, based on 59 available cases in Colorado, ranged in severity and could have resulted from genes or environmental causes other than fossil-fuel extraction, according to McKenzie.
Mothers' Genetics

The study wasn't conclusive because it didn't account for different types of wells, water quality, mothers' behavior or genetics, the Colorado Department of Public Health and Environment said in an e-mailed statement. The state's oil and gas rules are the most stringent in the nation, said Larry Wolk, the department's director and chief medical officer.

"I would tell pregnant women and mothers who live, or who at the time of their pregnancy lived, in proximity to a gas well not to rely on this study as an explanation of why one of their children might have had a birth defect," Wolk said in the statement. "Many factors known to contribute to birth defects were ignored in this study."

McKenzie said she's starting another four-year study, funded by the American Heart Association, that focuses on a subset of the cases to determine their precise exposures to pollutants and other risk factors, such as the parents' occupations.

"I think it's up to each individual to look at the data and make their own decision on whether or not they're concerned," McKenzie said. "The data do tell us with more wells in the area there are more congenital heart defects, although there are a lot of limitations in the data and when we start looking at it more closely, that may or may not stand up."

Separate Investigation

A separate investigation into 22 anomalies in unborn children in Garfield County, Colorado, in 2013 found no underlying cause after examining factors including proximity to active oil and gas wells, the state's public health department said in May. The county has more than 2,000 oil and gas wells, according to, an industry-sponsored website.

Kathleen Sgamma, a spokeswoman for the Western Energy Alliance, an industry group whose members include Anadarko Petroleum Corp. (APC) and Pioneer Natural Resources Co. (PXD), said exploration and production companies are funding more research on health effects and are working to reduce emissions by installing equipment and adjusting practices.

"It's way too early to jump to conclusions," Sgamma said. "It's a real big leap that I don't think you can draw at this time at all, if ever, to say that because air pollution can cause birth defects, that's exactly what's happening."

Birth Defects

Two Pennsylvania studies, however, found increases in low birth weight near gas drilling. They haven't been published in peer-reviewed journals.

Infants born within 2.5 kilometers (1.6 miles) of fracking sites were about 60 percent more likely to have low birth weight, according to a review of Pennsylvania birth records from 2004 to 2011 by researchers from Princeton University, Columbia University and the Massachusetts Institute of Technology. The study was presented at the annual meeting of the American Economic Association in January.

That research echoed a December working paper by Elaine Hill, then an economics graduate student at Cornell University in Ithaca, New York, which found that babies born to mothers living within 2.5 kilometers of a gas well during pregnancy had lower average birth weights after drilling than before. The results were consistent between piped public water and well water, suggesting the exposure came from air pollution or stress, Hill said in the paper.

Birth Weight

Low birth weight leads to higher health-care expenses and greater likelihood of needing special education, amounting to a total cost to society of about $96,500 per child, according to the paper. Previous research has shown a link between air pollution and low birth weight in general, Hill said in the study.

In Utah's Uintah Basin, where at least 17 drillers operate, the air has dangerously high levels of ozone and other toxins from oil and gas emissions, according to measurements by researchers at the University of Colorado at Boulder in the first two months of 2012 and 2013. The basin has more than 11,000 oil and gas wells, with proposals for almost 25,000 more, the researchers said in the study, published in March in the journal Environmental Science & Technology. The area sits atop about 1.32 trillion barrels of oil, one of the largest oil shale deposits in the world, according to the U.S. Geological Survey.

Summer Smog

The rural area's air pollution was equivalent to the annual exhaust of 100 million cars and worse than Los Angeles's smog in the summer, according to the article. High ozone levels are known to cause breathing problems and early death, the researchers said.

Concerns surfaced this summer that the pollution might contribute to infant deaths in Vernal, a city of about 10,000 in the Uintah Basin.

Last year, a midwife named Donna Young delivered a stillborn baby for the first time in 19 years. At the funeral, she said she noticed the cemetery had a number of recent graves with single dates.

Official figures on infant mortality in 2013 aren't yet available, according to the state's Office of Vital Records and Statistics. So Young examined obituaries, counting 12 deaths in 2013, up from four a year earlier, three in 2011 and two in 2010. The rate appears to be six times the national average, according to Utah Physicians for a Healthy Environment.

"Whenever you see a pollution nightmare, if you look hard enough you're going to have a public health nightmare," said Brian Moench, a Salt Lake City anesthesiologist and president of the physicians' group. "There's enough evidence to suggest that this is a serious problem."

Besy buy--nice earnings but revenues terrible and the company issues warning.

First best buy (BBY) reported:

  • Comparable online sales +22%.

  • International comparable-store sales -6.7%.

  • Domestic gross profit rate -390 bps to 23.4%, overall -340 bps to 23.1%.

  • Domestic SG&A expense ratio -180 bps to 20.1%, overall -160 bps to 20.4%.

  • Inventory +2.7% to $5.583B.

  • Revenue Q2 FY15 Q2 FY14
    Revenue ($ in millions) $8,896 $9,266
    Comparable sales % change1 (2.7%) (0.6%)
    Domestic Segment:
    Comparable sales % change (2.0%) (0.4%)
    Comparable online sales % change 22.0% 10.5%
    International Segment:
    Comparable sales % change (6.7%) (1.8%)
    Operating Income Q2 FY15 Q2 FY14
    GAAP operating income as a % of revenue 2.7% 4.5%
    Non-GAAPoperating income as a % of revenue2 2.9% 2.2%
    Diluted EPS Q2 FY15 Q2 FY14
    GAAP diluted EPS from continuing operations $0.42 $0.69
    Impact of net LCD settlements3 $0.00 ($0.43)
    Impact of non-restructuring asset impairments $0.02 $0.03
    Impact of restructuring charges $0.00 $0.01
    Impact of gain on sale of investments $0.00 ($0.03)
    Benefit of income tax impact of Best Buy Europe sale $0.00 $0.05
    Non-GAAP diluted EPS from continuing operations2 $0.44 $0.32
    Hubert Joly, Best Buy president and CEO, commented, "In the second quarter, we delivered $8.9 billion in revenue and $0.44 in non-GAAP diluted earnings per share versus $0.32 last year. The ongoing benefits of our Renew Blue cost reduction and other SG&A cost containment initiatives drove these better-than-expected results. On the topline, as expected, sales in the NPD tracked Consumer Electronics categories declined 2.5%4, in line with our Domestic comparable sales decline of 2.0%.
    Joly continued, Like other retailers and as reflected in this quarters performance, we continued to see a shift in consumer behavior: consumers are increasingly researching and buying online. As a result, traffic to our brick and mortar stores continued to decline, yet our in-store conversion and online traffic continued to increase due to the execution of our Renew Blue strategy which is in direct alignment with this shift. Our Renew Blue strategy is designed to (1) grow our online business; (2) enhance our in-store customer experience; and (3) leverage our multi-channel capabilities; all to deliver to our customers great advice, service and convenience at competitive prices in the channel they want to be served.
    During the quarter, we continued to make progress against this strategy, including (1) increasing our Net Promoter Score across channels by 400 basis points year-over-year; (2) improving our in-store experience by rolling out over 800 new Samsung and Sony home theater, 18 Pacific Kitchen and Home and 7 Magnolia Design Center stores-within-a-store; and (3) leveraging our new ship-from-store and digital marketing capabilities to drive a 22% increase in Domestic comparable online sales.
    Joly concluded, Looking ahead, our goal is to continue to create a differentiated multi-channel customer experience such that every interaction customers have with us, regardless of channel, makes them a promoter of the Best Buy brand. In support of this, we will be intensifying our investments in customer-facing initiatives across both channels in the back half of the year.
    Sharon McCollam, Best Buy EVP, CAO and CFO, commented, As Hubert remarked, industry-wide sales are continuing to decline in many of the consumer electronics categories in which we compete. We are also seeing ongoing softness in the mobile phone category ahead of highly-anticipated new product launches. Therefore, absent any change in these declining industry trends and with limited visibility to new product launch quantities, we continue to expect comparable sales to decline in the low-single digits in both the third and fourth quarters. From an operating income rate perspective, we are expecting the following business drivers versus last year in the third and fourth quarters: (1) a similar promotional competitive environment, with better internal promotional effectiveness; (2) a greater mix of online revenue that will put pressure on the overall operating income rate due to a higher mix of lower-margin hardware sales and lower attach rates on services and accessories; (3) continued industry softness and higher promotionality in Canada and China; and (4) a net positive impact from our Renew Blue SG&A and COGS expense reductions which will more than offset our structural pricing investments, the remaining negative impact of our new credit card agreement, and the new incremental investment of $10 to $15 million in Q3 and $30 to $35 million in Q4 versus our original plan to intensify the investments in customer-facing initiatives that Hubert just referenced (a total of $40 to $50 million or $.07 to $0.09 per diluted share in the second half of FY15). As such, and particularly in light of the fixed cost deleverage that would accompany an expected low single-digit comparable sales decline, we are expecting the non-GAAP operating income rate in Q3 and Q4 to increase in line with the year-over-year improvement that we saw in the first half. Additionally, the estimated diluted earnings per share impact of the known discrete tax items that we discussed last quarter continue to be in the ranges of flat to negative $0.01 in Q3 FY15 and negative $0.09 to $0.10 in Q4 FY15.
    Domestic Segment Second Quarter Results

    Domestic Revenue

    Domestic revenue of $7.59 billion declined 2.4% versus last year. This decline was primarily driven by (1) a comparable sales decline of 2.0%; and (2) a revenue decline of $20 million, or 25 basis points, due to the less favorable economics of the new credit card agreement.
    Domestic online revenue was $581 million and comparable online sales increased 22.0% due to (1) substantially improved inventory availability made possible by the chain-wide rollout of our ship-from-store capability that was completed in January 2014; (2) a higher average order value; and (3) increased traffic driven by greater investment in online digital marketing.
    From a merchandising perspective, growth in gaming, computing, appliances and televisions was more than offset by declines in other categories, including mobile phones, tablets, and services.
    Domestic Gross Profit Rate

    Domestic gross profit rate was 23.4% versus 27.3% last year. Excluding prior year legal settlements discussed in the Q2 FY14 earnings release, non-GAAP Domestic gross profit rate was 23.4% versus 23.9% last year. This 50-basis point decline was primarily due to (1) a mix shift into the lower-margin gaming and computing categories; (2) structural investments in price competitiveness, particularly in accessories; and (3) a 20-basis point negative impact related to the less favorable economics of the new credit card agreement. These declines were partially offset by (1) an increased mix of higher-margin large screen televisions and (2) the realization of our Renew Blue cost reductions and other supply chain cost containment initiatives.
    Domestic Selling, General and Administrative Expenses (SG&A)

    Domestic SG&A expenses were $1.52 billion or 20.1% of revenue versus $1.70 billion or 21.9% of revenue last year. On a non-GAAP basis, Domestic SG&A expenses were $1.51 billion or 19.9% of revenue versus $1.66 billion or 21.3% of revenue last year. This 140-basis point (or $147 million) rate decline was primarily driven by (1) the realization of Renew Blue cost reduction initiatives; and (2) tighter expense management throughout the company.
    International Segment Second Quarter Results
    International Revenue

    International revenue of $1.31 billion declined 12.1% versus last year. This decline was primarily driven by (1) a comparable sales decline of 6.7% driven by China, Canada, and Mexico; (2) the negative impact of foreign currency exchange rate fluctuations; and (3) the loss of revenue from large-format store closures in China.
    International Gross Profit Rate

    International gross profit rate was 21.1% versus 22.3% last year. This 120-basis point rate decline was primarily driven by our Canadian business due to increased promotional activity and an increased mix of the lower-margin gaming category.
    International SG&A

    International SG&A expenses were $291 million or 22.2% of revenue versus $334 million or 22.4% of revenue last year. On a non-GAAP basis, International SG&A expenses were $290 million or 22.1% of revenue versus $332 million or 22.3% of revenue last year. This 20-basis point (or $42 million) rate decline was primarily driven by Renew Blue cost reductions and tighter expense management in Canada, and to a lesser extent, in China.
    Renew Blue Cost Reduction Initiatives Update
    Since our Q1 FY15 earnings release, Renew Blue annualized cost reductions have increased an additional $40 million, bringing the total Renew Blue annualized cost reductions to $900 million ($670 million in SG&A expenses and $230 million in cost of goods sold). This $40 million in cost reductions ($25 million in SG&A and $15 million in cost of goods sold) is primarily driven by (1) efficiency improvements in the US and Canada; (2) supply chain efficiencies; and (3) lower costs associated with returns, replacements and damages.
    On July 3rd, 2014, the company paid a quarterly dividend of $0.17 per common share outstanding, or $59 million.

    Buffett backing BK deal

    Warren Buffett has been a vocal supporter of higher tax rates for the wealthy but when push comes to shove the Oracle is all about the bottom line. As you know yesterday Burger King (BKW) shares soared when word leaked of a potential tax inversion - inspired bid for Canadian donut shop Tim Horton's (THI). Now it's being reported that the deal will be funded in part by Buffett's Berkshire Hathaway (BRK-A, BRK-B).

    The Wall Street Journal says Berkshire will put $3 billion into the $10 billion bid for Tim Horton, likely in the form of a purchase of preferred shares.

    So what's in this for Warren? Billions. This isn't about taxes, but endorsements and relationships. Burger King's majority owner is 3G, a Brazilian PE firm led by 74 year old billionaire Jorge Paulo Lemann. Last year 3G and Berkshire partnered to buy Heinz. Berkshire laid out $8 billion for preferred shares that will pay back $1 billion a year and another $4.25 billion for Heinz common stock. There aren't any terms being leaked on this BK deal yet but Buffett has never been shy about demanding a premium. Expect Berkshire to get at least 10% on the $2.5 billion investment.
    Still this is small potatoes for Berkshire which is sitting on more than $55 billion in cash at last count. The real reason Buffett has to be involved is to protect Berkshire's 9.1% ownership interest in Coke (KO). Burger King is married to Heinz but its drink business is up for grabs. 3G has already pushed for a switch to Pepsi (PEP) in Latin American markets. With earnings flat since 2011 Coke can little afford to lose soda market share, let alone miss growth opportunities for Coke's non-carbonated products. Right now BK sells Nestle's bottled water. While a switch to Coke's Dasani probably won't be explicitly part of this financing package let's just say Berkshire's involvement doesn't hurt.

    As a kid Warren Buffett bought six packs of Coke for a quarter then sold them to his friends for a nickel apiece. He now owns 9% of Coke, half of Heinz and seemingly all of the U.S. financial system. Buffett is the American Dream. He's a modern day Ben Franklin and he's not going to give up billions just because the President calls him names. Does that make Buffett a craven sell-out or does it validate U.S. corporate tax avoidance? Maybe a little bit of both. Ultimately it'll be consumers and voters who decide

    Monday, August 25, 2014

    Cliffs Natural Makes Big Share Repurchase announcement

    The Board of Directors of Cliffs Natural Resources Inc. (NYSE: CLF) today authorized the Company to buy back its outstanding common shares in the open market or in private negotiated transactions up to a maximum of $200 million dollars. The Company will be working with its bank group to ensure the buyback program is effectively implemented in a timely manner. Under the proposed terms of the buyback program, the Company is not obligated to make any purchases and the program may be suspended or discontinued at any time. The authorization is active until December 31, 2015.

    Lourenco Goncalves, Cliffs Chairman and CEO, stated, "The implementation of our new strategy centered on the US iron ore business has successfully started. With that, we are very pleased that our newly reconstituted Board of Directors has agreed with our conviction that, at this point, the best use of our capital is to invest in our own business, our people and our assets by buying back Cliffs’ common stock." Mr. Goncalves concluded saying, "We believe that the stock buyback will be smoothly executed, and should benefit our valuable shareholders."
    Commensurate with approving the stock buyback program, the Board has also authorized the Company to take all the necessary steps to remove the limitations and restrictions present in the Company’s current debt agreements which preclude Cliffs’ ability to execute the buyback program. Such steps include but are not limited to negotiating consents and amendments to the applicable debt instruments.
    Separately, the Company also announces that, simultaneously with the signature of his severance agreement as an officer, Gary Halverson has resigned from his position as a Board member of Cliffs Natural Resources Inc.

    The apple iPhone 6. More of the same or cutting edge

    Apple are expected to launch their new iPhone 6 next month, the company is said to be launching a 4.7 inch version of the handset, and a 5.5 inch model is expected later in the year.

    The iPhone 6 is expected to come with a number of new features and updated hardware over the current model, which will include a larger display and a faster processor.

    Apple’s iPhone 6 will come with a 4.7 inch display and it is said to be powered by Apple’s second generation 64-bit mobile processor, the Apple A8.

    We have also heard that Apple will launch a 128GB model of the iPhone 6, and the device will also come with Apple’s TouchID, which was introduced with the iPhone 5S.

    The Apple TouchID in the new iPhone 6 is said to be a new fingerprint sensor module that is designed to be more durable and also accurate than the current one used in the iPhone 5S.

    Apple are rumored to be holding a press event on the 9th of September and the company is rumored to launch the handset on the 19th of September, as soon as we get some more details, we will let you guys know.

    I like response genetics

    Its a growing company. I want to buy it under $1.10. I think $1.50 is fair value

    new home sales hurting

    July new home sales at a seasonally-adjusted annualized rate of 412K were 2.4% lower than the revised June number of 422K, and 12.3% above the year ago's 367K. July's pace is the slowest in four months.

    Im not backing off this mREIT

    All of the key metrics of Annaly (NYSE:NLY) are improving. I love the widening of the net interest spread. The all-important book value is on the rise. Shares are up substantially since they bottomed in the winter. All signs point to core income increasing, which should lead to higher dividends in coming quarters, and in turn, a higher share price. I am not backing off of Annaly any time soon. And HERE IS WHY (click to read entire article)

    Apple is the most valuable company in the world

    This past week was a monumental time for Apple Inc. (NASDAQ: AAPL) and its shareholders. Despite chatter that the highly anticipated iPhone 6 could face delays, Apple shares hit a new, adjusted all-time high. Recall that the split-adjusted price would have to hit $100.72 to beat the old $705 price from September of 2012. With a close of $101.32 and a whopping $606.7 billion market cap and this price puts the market valuation now puts Apple at worth more than General Electric Co. (NYSE: GE) and Wal-Mart Stores Inc. (NYSE: WMT) combined — with an extra $100 billion in market cap to boot!

    GE is the top conglomerate, outside of Berkshire Hathaway, and Walmart is the world’s largest retailer. Apple made more than GE and Walmart combined in net income last year, despite sales expectations being less than half of Walmart and only about 20% higher than GE. Apple’s employee headcount is one-sixth that of GE and one-40th that of Walmart. All three companies have comparable forward price-to-earnings (P/E ratios). Apple dominates these others in cash and cash equivalents.
    And the best part? Apple is by FAR the best of these stocks to own over the next year.

    What is this restaurant doing?

    Today, Buffalo Wild Wings®, Inc. (NASDAQ: BWLD)  announced it has made a majority investment in Rusty Taco, Inc., which owns and operates Rusty Taco restaurants and is headquartered in Dallas, Texas. Rusty Taco features a simple menu of tasty tacos prepared fresh in a fun and lively atmosphere. Terms of the deal were not disclosed.
    Rusty Tacos fresh approach to tacos truly sets this concept apart, stated Kathy Benning, Buffalo Wild Wings executive vice president, chief strategy officer and new business development. Buffalo Wild Wings investment is part of our strategy to partner with emerging restaurant concepts that have the potential for significant growth, can work throughout the country and have a highly engaged management team with a passion to grow the business.
    Rusty Taco boasts fast, affordable food served in a friendly and fun atmosphere. As a fast-casual restaurant, Rusty Taco specializes in street-style tacos made fresh and from scratch. In 2010, the first restaurant opened its doors in Dallas, Texas. Since then, Rusty Taco has grown to include nine locations: two company-owned restaurants and seven franchised locations in three markets Dallas, Denver and Minneapolis/St. Paul.
    We are delighted to be partnering with Buffalo Wild Wings (BWLD) and believe it can have an immediate impact in helping accelerate our growth, said Steve Dunn, chief executive officer of Rusty Taco. Our co-founder, Rusty Fenton, always said, Tacos are the most important meal of the day" and we truly live that every day by providing our guests with the freshest ingredients and authentic tasting tacos at an affordable price.
    In addition to Rusty Taco, Buffalo Wild Wings also has a minority investment in Los Angeles-based PizzaRev, a growing artisanal pizza concept. As part of our long-term growth strategy, we are actively looking for additional concepts to invest in to build a portfolio of emerging brands, and continue to build a dynamic restaurant company, said Benning. PizzaRev is a fast-casual pizza chain delivering an interactive dining experience where Guests craft their own pizzas, choosing from a wide variety of premium-quality ingredients, in any amount, for one price.