Business Blog: Hoover’s Business Insight Zone

Your devoted host is signing off for the next week, heading for the Bighorn Mountains of Wyoming to do some trout fishing and Olympic-class loafing. Meanwhile, my Hoover’s colleague Peter Partheymuller will be sharing some of his observations in this space. You’re in good hands.

Meanwhile, are you in good shape, vacation-wise? My father, one of the most conscientious people who ever lived, worked himself too hard as a young man, to the point that he temporarily lost his voice. The doctor told him that he must start taking his vacations, and for many years after that our family of four enjoyed some of the best driving-and-camping trips you could imagine. (Here’s a particular favorite. I look at the photos and it’s like Proust’s narrator eating that madeleine.)

Not convinced? Here’s more evidence that you should take a vacation:

Cutting Work Is Good for You,
And Skipping Vacation Can Kill

A growing body of research suggests the American trend toward skipping vacations is hazardous. In a nine-year study of 12,000 middle-age men at risk for coronary disease, researchers found those who failed to take vacations had a higher risk of death from any cause, but particularly from heart disease, than those who took regular vacations

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Take that vacation — it could help your career

Companies are beginning to realize the benefits of vacations for their weary workers — fewer sick days, smaller health care bills and a more motivated workforce.

Unfortunately, not all employers get this, and sometimes it’s the workers themselves that don’t get this, either. They have a perverted view that not taking time off and keeping their nose to the grindstone will advance their career, or keep their jobs from ending up on the chopping block.

But in fact, it could lead to burnout, emotional and physical illness, and end up jeopardizing their careers, their lives.

So, if you haven’t already, book some time off. (And if you need any recommendations for a Wyoming vacation, feel free drop me a line . . .)

See you on July 10th!

Or at least yesterday was a solid opening day for IPOs. Dig this, taken hot off the presses (so to speak) from the IPO Performance page of our very own IPO Central:

Data Domain, Inc.
Priced at $13.00
Opened at $20.00
Closed at $24.95

Spectra Energy Partners, LP
Priced at $22.00
Opened at $26.50
Closed at $28.65

Spreadtrum Communications, Inc.
Priced at $14.00
Opened at $14.20
Closed at $15.95

comScore, Inc.
Priced at $16.50
Opened at $22.00
Closed at $23.47

The only downer of the day was AuthenTec, Inc.:
Priced at $11.00
Opened at $11.00
Closed at $10.00

Meanwhile, what about that wee little $4 billion IPO from last week? Well, when we were on the CNBC together last Friday, Ken Fisher and I agreed that Blackstone’s shares — ahem, “common units” — looked pricey. (Hint: more people pay attention to Ken’s opinion than mine.) They were trading around $35.50 at the time, so it looks like we were right: as I write this, Blackstone is trading a few cents above $30, which leads to speculation about what path the shares will take from here.

Me? I don’t know. I wouldn’t bet against Steve Schwarzman . . . but Schwarzman seems to think that now (or last Friday, anyway) was the right time to command a top premium for a slice of Blackstone. I’d assume that he’s right, and that the company is going to settle out at a lower valuation for a little while before it (maybe) climbs again.

More travelers, more flights, more-cramped airports: add in a dash of intermittent bad weather, and you’ve got a recipe for a lousy summer for air travel — at least, if you care about getting where you’re going on time. Joe Sharkey of the NYT and Scott McCartney of the WSJ have been all over this. Here are two recent samples of travelin’ woe from McCartney:

Airlines add delays into flight time

[…]Many delays are now simply being incorporated into schedules, at high cost to consumers and airlines. Congestion at airports and in the sky has forced airlines to pad their schedules more than ever so flights have a better chance of arriving “on time,” which the Department of Transportation defines as within 15 minutes of the airline’s scheduled arrival time. Flights may now arrive technically “on time,” but with 30 minutes or more of delay written into the flight plan. […]

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Summer Flying Turns Ugly

[…] The number of flights canceled in the first 15 days of June was up a whopping 91% compared with the same period last year, and the number of flights that were excessively late — more than 45 minutes — jumped 61%, according to FlightStats.com. Overall, 70.7% of all U.S. flights arrived on time from June 1 through June 15, compared with 79% last year.

“I fly a lot, and I’ve never seen it this bad this systematically. It’s like the Italian train system,” said Nick Abbott, a vice president at networking concern Intelliden Corp. who was stuck in Philadelphia for two days after his flight on US Airways was delayed and then canceled last week. […]

When I searched Google News just now for the term “canceled flights,” I got more than 1,600 hits. A few tidbits:

Northwest cancels hundreds of flights

United says computer outage that delayed, canceled flights was employee mistake

Area airports delayed; United resuming flights

As I’ve said before: At some point, somebody (besides Southwest) is going to figure out how to get around this; they’re going to deliver passengers on time, all the time; and they’re going to make a lot of money doing it.

The big Brazilian sugarcane company — whose products find their way into sugar bowls and fuel tanks alike — has filed for a $2 billion IPO on the Big Board. Lately the company has benefited from strong sales in both sugar and sugarcane-based ethanol: last year it enjoyed a net profit margin above 20% on sales of nearly $1.7 billion.

In today’s “Ahead of the Tape” column (subscription required), the Wall Street Journal’s Henny Sender writes this:

“The president of one of the largest private-equity firms estimates that without private equity’s demand, stock prices would be 20% lower today.”

Wow. Even factoring in a large grain of salt*, that’s a huge number — and one that could become ominous for the stock market if (or when) the Goldilocks conditions prevailing in the economy turn sour. If, for example, junk-bond financing started to dry up . . .

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* The grain of salt is this: (1) Presidents of private-equity firms tend to be constitutionally averse to understating their industry’s importance in the economy, so this could be wishful talk. (2) Presidents of the largest private-equity firms are, without exception, extraordinarily shrewd. It would make sense for one of them to put out a high number like this — which implies a devastating impact on stock markets if private-equity demand turns south — to chill efforts to, oh, I don’t know, make tax regulations harsher for private-equity firms.

Tom Peters writes a typically exclamation-point-filled blast in praise of the Schumpeterian de- and reconstruction carried out by entrepreneurs:

Built to Be Eclipsed

As Solow says, “[Schumpeter] was explicit that, while technological innovation was in the long run the most important function of the entrepreneur, organizational innovation in governance, finance and management was comparable in significance.” Thus the advantage that accrued to, say, Dell’s supply chain organizational-management approach (abetted, indeed, by new technology) is as decisive to progress (at the moment—which is the point!) as is Amgen’s latest FDA-approved compound.

This struck me because of (1) the Fast Company item on solar power discussed the other day, in which Charles Fishman wrote:

“Solar, it turns out, hasn’t been waiting for a technology breakthrough. It’s been waiting for a business model breakthrough.”

and (2) this item from last month in which I (and Pascal Zachary) cited the Schumpeterian effects of businesses addressing global warming.

Pulling all of this together: I’m more prepared than ever to be wowed by the creativity of entrepreneurs inventing the next generation of companies that will (figuratively) power the economy while (literally) powering the world.

The prevailing question from my CNBC session the other day was whether we’ll see a spate of private equity IPOs now that Blackstone Group has gone public. (For more on their early returns, check out IPO Central.) My hypothesis is that we won’t, because:

1. The market is in a particularly sweet spot right now — sweet enough for Steve Schwarzman & Co. to think that now is the right time to cash out part of their Blackstone stake.
2. The market could sour quickly, especially if the ominous rumblings in the bond market continue, or if the rivers of cash sloshing around today dry up, or if China monkeys with exchange rates, or if oil prices . . . maybe you get the idea. There are a lot of X-factors out there.
3. It’s hard to imagine that Henry Kravis or any of the other private equity titans will offer much in the way of bargain buys at the IPO store.
4. There are only a few real titans of private equity anyway, including KKR, Carlyle, and TPG. After you get out of that august company, you get into firms whose pockets and Wall Street connections are shallower, and who don’t enjoy nearly as much name-brand recognition.

The other commentator during our CNBC spot was investment guru Ken Fisher, who (a) agrees with me that Blackstone shares are too pricey to buy now, but (b) thinks that more private equity IPOs are likely since a deal could be much less lucrative than Blackstone’s and still be lucrative enough that a private equity firm would want to pursue it. We’ll see.

Meanwhile, my Hoover’s colleague Ryan Caione (who was invaluable in helping me to prepare for the CNBC spot) explores another angle of the private equity game in this Bizmology entry on the prospect of buyouts of financial services firms.

A few months back the Australian government passed legislation that requires a phase-out of old-fashioned incandescent light bulbs — the kind Thomas Edison invented — in favor of much more efficient compact fluorescent light (CFL) bulbs. These new bulbs use less energy as they burn, plus they last 10 times as long, so Australia as a whole could easily reduce its carbon dioxide by a billion tons because of this move.

Meanwhile, here in the States, Wal-Mart has been on a tear to get customers to switch from incandescents to CFLs. Once upon a time, the fluorescents were priced like a luxury item, but now they’re so cheap — and they save you so much money in the long run — that Wal-Mart can sell them as another “everyday low prices” item.

Now the world’s biggest retailer has gone one better by announcing that it will start a pilot program to collect used CFLs for recycling. (There’s a small amount of mercury in a CFL, so it shouldn’t go into the regular trash.)

On top of that, an even newer type of bulb promises to outdo CFLs by a mile. And that’s before we get into long-lasting LEDs . . .

Probably a couple of longer posts later, but for now here’s some housecleaning:

–A month ago we talked about the crazy spate of mergers between stock exchanges. It may get a little crazier.

–More on Blackstone’s IPO to come; meanwhile, as I touched on yesterday, it looks like KKR may go the same route.

–It’s been quieter lately, but the battle to buy ABN Amro continues. Barclays is game to keep fighting.

–The success of Facebook’s new platform strategy comes at a cost — especially for the little guys.

–That didn’t take long: Rockstar Games (a unit of Take-Two) has delayed the release of its vile “Manhunt 2″ game, which we discussed here yesterday.

And finally, two quick follow-ups from my two posts about doing business in Russia:

–First, I note that yet another foreign-owned petroleum project in Russia has been taken over by a Russian company: “BP Set to Leave Russia Gas Project”.

–This story seems to confirm the view of Hoover’s own Stuart Hampton, who’s been covering the oil and gas sector for many years. After my initial Russia post from last week, he wrote me a note that said this:

“My take is that the Russian leadership uses Gazprom as a blunt instrument of foreign policy and acts like the Sopranos in squeezing neighboring countries to do its bidding (by periodically turning off the gas pipeline) and by roughing up foreign investors. Russia is not a nice place for foreign companies to do business, and only the big ones can absorb the blows.”

Seems about right to me. Don’t go to Russia to do business unless you’re willing to play tough.