Ed’s Daily Notes for August 21st   3 comments

Reuters (via Yahoo Finance): Stocks dip but dollar gains as Fed minutes awaited

European shares hovered near three-week lows on Wednesday while the dollar found some support as investors braced for a U.S. Federal Reserve report which may shed light on when it will trim its stimulus policy.

Emerging market currencies remained under pressure from expectations that the minutes from the Fed’s last policy meeting in July, due out later, will signal an early end to the supply of cheap dollars they have relied on.

“I don’t think we’re going to get that clear signal as to whether September is when they pull the trigger on tapering, but that is what the markets are hoping for,” said Daragh Maher, FX strategist at HSBC.

I think Maher is spot-on with that comment. If the Fed was certain of September, that would have begged the question of why not taper in July?

Business Week: Best Buy’s Price-Shredding Turnaround Is Working

A long-awaited turnaround appears to be taking hold at Best Buy (BBY). The electronics retailer on Tuesday reported its best quarterly results in two years, cheering investors who had long wondered whether the sale of TVs, stereos, and other entertainment gadgetry had shifted permanently to the Internet and forever away from big-box retailers such as Best Buy and defunct Circuit City and Tweeter.

Best Buy, at least, seems to have put to rest immediate concerns about its demise. Chief Executive Officer Hubert Joly, who marked his first anniversary at the helm this month, has already managed to cut annualized costs by $390 million and steer the company on a broad restructuring path dubbed “Renew Blue,” which seeks $725 million in total savings. The former McKinsey & Co. management consultant is known as a corporate turnaround specialist, and he was hired specifically to address Best Buy’s many woes.

Chief among the problems: high prices. By routinely losing the price competition with rivals, particularly online retailers, Best Buy only exacerbated the phenomenon of showrooming, in which consumers use a physical store to peruse products they later purchase from a lower-priced website such as Amazon.com (AMZN). In the age of the smartphone, the problem has hardly been limited to electronics, yet Best Buy was particularly vulnerable as a result of prices that for many years have been more expensive than those most of its online competitors charge for identical products.

In February, the company said it was making permanent a holiday season trial program that promises to match the prices of 19 online competitors, as well as local stores. The price-match effort also offers a rebate to shoppers if Best Buy lowers its price on an item within 15 days of purchase. Beyond that program, the retailer is working to get prices more in line with rivals’ “to eliminate price as an obstacle to buying,” as Joly said on a Tuesday conference call with analysts. But that doesn’t mean Best Buy will undercut anyone. “We love the traffic on our site, in our stores, and we don’t want to lose a customer because of price. But we don’t feel that we need to be lower than (the) competition,” he said. “We just don’t want to be beat.”

Also helping Best Buy has been a shift among shoppers toward larger televisions, which cost more and present more attractive profit margins. Among the priciest is a $15,000 model from LG (066570:KS) that Best Buy began selling last month, featuring the newest organic light-emitting diode (OLED) technology, and a 90-inch LED model from Sharp (6753:JP) that sells for $8,000.

Is Best Buy a “buy”? I think it comes down to whether you believe in their turnaround story. Based on their last earnings report, they are certainly a more efficient company. And the plan by CEO Joly has potential.

Truth be told, I haven’t been to a Best Buy in about a year. I would have to visit the store to get a better idea of how they are doing. Feel free to add your own opinion of Best Buy’s shopping experience in the comments.

Bloomberg: Goldman Sachs Said to Send Stock-Option Orders by Mistake

The vampire squid strikes again!

A programming error at Goldman Sachs Group Inc. caused unintended stock-option orders to flood American exchanges [yesterday] morning, roiling markets and shaking confidence in electronic trading infrastructure.

An internal system that Goldman Sachs uses to help prepare to meet market demand for equity options inadvertently produced orders with inaccurate price limits and sent them to exchanges, said a person familiar with the situation, who asked not to be named because the information is private. The size of the losses depends on which trades are canceled, the person said. Some have already been voided, data compiled by Bloomberg show.

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Posted August 21, 2013 by edmcgon in Federal Reserve, Market Analysis, News, Stocks

3 responses to “Ed’s Daily Notes for August 21st

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  1. I’ve been to a couple Best Buy stores in the last couple months and I am in no hurry to return. Not impressed and not buying.

    Sales tax savings and free shipping help me make my choices for electronics.

  2. As a Home Theater enthusiast, I was originally not a fan of BB. However, they appear to be the last man standing and the only place left to actually touch/see new equipment. I do appreciate BB’s approach with the “Magnolia” section where they display the slightly higher-end stuff and create a separation from the mass-market products even if it’s isn’t truly high-end. Of all the retail location models, I think they’ve found the best mix. Most of my friends ask for my help with installing Home theater set ups and over the last 5 years all of the higher-end stores I normally shopped at have gone out of business. If you don’t know what you are looking for, the online shopping is rather daunting. Right now, BB is the only place I can take my friend to actually show them the differences between the Walmart TV’s and mid-to-high level equipment.

    Is that good enough for an investment? I’m really not sure. I just know that I don’t have any other options at the moment. If BB gives their sales staff incentives and the ability to haggle/bundle in addition to the price-match policy they might just keep a loyal customer base.

  3. Thanks for your views folks. I’m just not sold on Best Buy yet.

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