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Hilarious estimates, more pain for restaurants, & mmmmmmmmm beer

Recs

14

April 24, 2008 – Comments (4) | RELATED TICKERS: ABKFQ.DL , MBI , SBMRY.PK.DL

I normally don't pay much attention to what Wall Street analysts say, but some are better than others.  Goldman Sachs' stuff is usually pretty good, so I usually check out their "A.M. Headlines" when Charles Schwab e-mails them to me. 

At the top of each day's report Goldman posts any revisions that its analysts have made to their earnings estimates.  They usually change by a few cents here and there, but not today.  I laughed out loud when I saw Goldman's estimate changes for Ambac (ABK) and MBIA (MBI) this morning.  Here they are:

Ambac Financial Group: Old estimate: $0.95, New estimate: -$18.05

MBIA Inc. (MBI): Old estimate -$1.81, New estimate: -$21.75.  

Oops.  HAHAHAHAH.   

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In my previous post I mentioned the excellent Wall Street Journal article on the headwinds that the restaurant industry is facing.  I have talked about the rapidly approaching spike in meat prices and a likely slowown in consumer spending cause by higher food and gas prices already.  The article brought something to my attention that I hadn't thought of yet, the impending rise in the minimum wage.  

Regardless of what you think about whether we should have a minimum wage or what it should be, there's no denying that raising it is going to cause pain for some industries.  States are free to set their own minimum wage, but the federal government sets a floor that they cannot go below.  For those of you who aren't familiar with the Fair Minimum Wage Act of 2007, officially signed on May 25, 2007 the law will raise the federal minimum wage from its current level of $5.85 to $6.55 on July 24, 2007 and to $7.25 on July 24, 2009.  Twenty-seven of the fifty states currently have lower minimum wages than the new 2008 federal rate and 41 of the 50 are lower than new 2009 federal level.  

According to some quick searches that I did on the web, supposedly two-thirds of all minimum wage workers are employed in the food services industry.  This is not good news for restaurants.  They are going to get bombarded from every possible angle by, increasing food input costs, slowing consumer demand, and rising wages for their employees.  Ouch.  

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Another interesting thing that I found in today's WSJ in the five minutes that I spent perusing it at lunch is this blog:  Brew Blog.  It's a blog about one of my favorite subjects, beer.  It's a blog about one of my favorite subjects, beer. Sponsored by SABMiller (SBMRY.PK), the site talks about the business of alcohol. It does not appear to be a hidden commercial for the company's products. I'll have to add this one to my growing list of favorite links. It may have some interesting nuggets of information for all of you SABMiller shareholders from time to time. 

Perhaps I'll even sample some of the products that it mentions once I get these darn antibiotics out of my system (for those of you who have been reading my stuff, I think that I still have a schard of wood stuck in my leg.  The doctor will hopefuly let me know next Wed.).  I am looking forward to throwing back a nice cold Miller Light (I used to be a Bud guy, but I refuse to drink the competition until I sell my stake in Altria) during the NFL Draft on Saturday.  

Deej

No position in GS, ABK, MBI, or SBMR.PK

Unfortunately long the New York Jets

4 Comments – Post Your Own

#1) On April 24, 2008 at 9:07 PM, nuf2bdangrus (< 20) wrote:

How about a nice cold St Pauli girl, or a Sam Adams.  Oh, how I miss those days.  OR you could buy some TAP

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#2) On April 24, 2008 at 10:11 PM, Ozcutty (53.99) wrote:

you are spot on about restaurants facing big challenges, especially upmarket ones.

I know beer is supposed to be a safe haven (i.e. people drink more when stressed). But surely higher commodity prices, hops, sugar, metal for cans,etc, plus all the US factory workers must also be on minimum wage. That will surely effect them a bit too.

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#3) On April 24, 2008 at 10:31 PM, eskatonic (29.06) wrote:

Ambac Financial Group: Old estimate: $0.95, New estimate: -$18.05

MBIA Inc. (MBI): Old estimate -$1.81, New estimate: -$21.75.  

that is easily the funniest thing I've seen all day 

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#4) On April 24, 2008 at 11:11 PM, mandrake66 (93.37) wrote:

Wait until they revise the new estimates. They will, inevitably, if the companies last that long.

It was fun to see them rally today, along with all the other financials. One time I would have cried "does not compute" like Will Robinson's robot, but now it can be a funny game once you realize there are no rules.

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