These are stories Report on Business is following Tuesday, Oct. 30, 2012.
Americans tally Sandy losses
Americans are getting back to business while tallying up the cost of Superstorm Sandy.
Observers today put the direct losses at between $10-billion (U.S.) and $20-billion, though reports vary, of course. The upper end of that would put the cost at more than Hurricane Irene last year, but well below the estimated $100-billion destruction of Hurricane Katrina and the more than $200-billion in destruction from Japan's earthquake and tsunami, noted Capital Economics.
But the over all impact on the economy will be muted compared with the damage, given what the rebuilding effort will contribute.
"The initial impact on the economy could be quite large," said Paul Ashworth of Capital Economics, citing the fact that the 12 states hit by the storm represent almost one-quarter of U.S. gross domestic product.
"Making the extreme assumption that all output was lost in the two regions for two days then, given that there are 23 working days in this October, that would mean a reduction in monthly output of 8.7 per cent in the affected regions and a 2-per-cent loss nationally," he said.
"For the quarter as a whole, the loss would be about 0.7 per cent which, when annualized, comes out at 2.1 per cent," Mr. Ashworth added in a report on the economic impact.
"But these back of the envelope calculations undoubtedly overstate the loss of output. Not all output has been lost, particularly not across the whole East Coast region. Some people will be working as normal, others will be working from home. Sales will have been boosted in the days before the storm arrived, as people stocked up on canned food, batteries, candles and gasoline. Some of the lost output will also be made up in the coming weeks."
The storm will, of course, play out in economic indicators over the next few months, notably in reports on retail sales, construction and home sales, said deputy chief economist Beata Caranci of Toronto-Dominion Bank.
"Bigger picture, there is every reason to believe that the hurricane won't kick the legs out of an already-fragile U.S. economy," Ms. Caranci said.
"The extent and speed in which the local economies rebound depends on the severity of the damage and the response received via insurance and government support," she said in her report today, adding that "whatever the magnitude of the economic drag in the near-term, it should prove temporary and result in a rebound in activity in future months."
IHS Global Insight, according to The Financial Times, pegs the potential cost at $30-billion to $50-billion when loss of business and refinery shutdowns are factored in.
Whatever the final tally, businesses are getting up and running again, including refineries and stores, including, according to Reuters, Saks Inc., Macy's Inc. and Wal-Mart Stores Inc. The New York Stock Exchange also plans to reopen tomorrow.
"Our building and systems were not damaged and our people have been working diligently to ensure that we have a smooth opening tomorrow," said Duncan Niederauer, the chief of NYSE Euronext. "Our thoughts and prayers remain with the families and communities suffering in the wake of this terrible natural disaster.”
The exchange has been closed for two days.
"We're not particularly concerned about the impact of the closure of U.S. financial markets for a second day," said Mr. Ashworth.
"Unlike the closures after the 9/11 attacks, the storm and the shut down of the stock market were known about in advance, allowing investors time to adjust positions. Admittedly, the upcoming release of October's payrolls figures on Friday and next week's Presidential election mean there is the potential for some volatility when markets reopen, but stock futures, which are still being traded, don't point to any slump."
- High volumes, gains expected as NYSE prepares to reopen
- After the superstorm, U.S. authorities struggle with still unfolding disaster
Pay me $4.05-billion you will
The Walt Disney Co. has struck a $4.05-billion (U.S.) deal to buy the celebrated Lucasfilm Ltd.
The stock-and-cash deal for Lucasfilm, owned and founded by George Lucas, was announced late today.
Lucasfilm, of course, is behind the lucrative and enduring Star Wars franchises, and now puts the company in the same camp as Pixar and Marvel, both acquired earlier by Disney.
“For the past 35 years, one of my greatest pleasures has been to see Star Wars passed from one generation to the next,” Mr. Lucas said in a statement.
“It’s now time for me to pass Star Wars on to a new generation of filmmakers. I’ve always believed that Star Wars could live beyond me, and I thought it was important to set up the transition during my lifetime.”
About half the deal is in cash, the rest in some 40 million Disney shares.
Among the more interesting tidbits in the news release is a plan for Star Wars Episode 7 in 2015.
Lucasfilm co-chair Kathleen Kennedy, who will become president of the Lucasfilm business, will be executive producer on new Star Wars movies, Disney said, with Mr. Lucas as creative consultant.
After Episode 7, more movies are expected “to continue the Star Wars saga and grow the franchise well into the future," with one every two to three years.
Leaving Apple means never having to say you're sorry
Call it the 2012 version of “love means never having to say you’re sorry,” that famous quote from 1970’s Love Story (the date movie of all time?), which spawned too many copycat lines to count.
Reports this morning suggest that Scott Forstall, the man behind Apple Inc.’s mobile software, left the tech giant because he wouldn’t sign a letter of apology related to the company’s recent mapping fiasco.
Apple announced late yesterday that Mr. Forstall and John Browett, the head of its retail business, were leaving, marking one of the most important management moves at the company of late.
Apple recently had a rare, and embarrassing, stumble when it replaced Google Maps with its own version, which was fraught with difficulty.
According to The Wall Street Journal, Mr. Forstall left after pressing Apple to not apologize to customers. Chief executive officer Tim Cook signed the letter instead.
Mr. Forstall’s departure is a big loss for the company. According to the reports, it follows several disputes.
Mr. Cook said Mr. Forstall will leave next year, and until then will be his adviser. It did not give reasons for his leaving, saying simply that the management changes will “encourage even more collaboration between the company’s world-class hardware, software and services teams.”
Japan fights trouble
The Bank of Japan pumped up its stimulus program today as it painted a bleak outlook and said it was working closely with the government to fight deflation, but observers saw it as a tepid response to big troubles.
“The timing for Japan’s economy to emerge from the leveling-off period and start recovering is expected to be delayed from the previous projection, mainly reflecting the fact that overseas economies have moved deeper into the deceleration phase,” the central bank said.
The Bank of Japan increased its asset-buying program by ¥11-trillion, the second move in as many months.
The government has been pushing the central bank to act, and today the two jointly announced they will fight months of deflation in a plan aimed at bringing the annual inflation rate to 1 per cent.
“The government and the bank share the recognition that the critical challenge for Japan’s economy is to overcome deflation as early as possible and to return to a sustainable growth path with price stability,” they said.
Observers were disappointed by what they consider a tame approach, and projected further action at some point.
“Predictably the market reacted with disappointment and the yen once again started to push higher,” said senior analyst Michael Hewson of CMC Markets in London.
“The limited scale of the action is likely to prompt speculation as to what it will take for the Bank of Japan to unleash its next move given that the economic data of the past couple of days has shown evidence of continued deterioration and the rising yen will once again hamper attempts to boost the economy,” he said in a research note.
“It remains likely that more stimulus measures will be unveiled further down the line as exporters berate the BOJ for its timid approach.”
- Brian Milner's Economy Lab: Japan just mailing it in with latest stimulus
- Bank of Japan unveils new easing, cuts growth outlook
Talisman pledges restraint
The new chief of Canada’s Talisman Energy Inc. pledged today to “live within our means,” suggesting less spending this year as it posted a hefty third-quarter loss.
Talisman lost $731-million (U.S.) or 71 cents a share, primarily on a $443-million impairment hit as it quits Peru, among other factors. That compared to a profit of $521-million or 51 cents a year earlier.
“We will live within our means,” the company said, reporting results for the first time under CEO Hal Kvisle, who took the job last month.
“We will set capital spending budgets that can be funded by operating cash flows,” it said in a statement.
“We will pay down debt, strengthen our balance sheet and build financial capacity to act opportunistically when attractive acquisition or development opportunities come our way. We will focus our capital program on projects that come onstream more quickly and deliver sustainable cash flow over the longer term. We will reduce up front capital on high-risk exploration in multiple regions around the world. We will continue to explore, but in regions we know well and in a lower risk part of the exploration spectrum.”
Canada's Petrobank Energy and Resources Ltd. is spinning off its majority holding in PetroBakken Energy Ltd., The Globe and Mail's Bertrand Marotte reports.
The company said today it will spin off the 57-per-cent stake to shareholders. They'll get one share of a new Petrobank for each Petrobank share held, with a similar move for each PetroBakken share.
“This reorganization is designed to enhance long-term value for Petrobank and PetroBakken shareholders and is consistent with our long-held corporate goal of enhancing shareholder value by creating strong, independent and focused companies,” PetroBakken said in a statement late yesterday.
Youth underemployment a concern
Youth joblessness tends to garner all the headlines, The Globe and Mail's Tavia writes today, but the more troubling trend may be the more hidden one: Underemployment.
And a new study is urging more examination of the extent of youth underemployment in Canada and more research into the causes that are driving it.
“Contrary to the highly visible issue of youth unemployment, underemployment is seldom spoken of,” says the 61-page paper by the Certified General Accountants Association of Canada, which periodically publishes research on various aspects of the Canadian economy.
- Three red flags that signal an investment is not what it seems
- Financial literacy still elusive in Canada
- Rob Carrick on money: A gallery of expensive housing markets
- Eric Reguly's Economy Lab: Inflation adds to Spain's economic woes
- No U.S.-style housing crash for Canada: report
- R&D spending back in fashion after 5-year lull
- TransCanada profit falls, misses estimates
- Ford posts better-than-expected third-quarter profit
- CAW union reaches tentative deal at GM supplier Lear Whitby
- UBS to slash 10,000 jobs in fixed-income retreat