Buzzard’s luck

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Entergy.gifIn the midst of pre-hurricane gasoline and bottled water shortages — and in anticipation of probable power outages resulting from Hurricane Rita — this report is not giving me warm and fuzzy feelings:

Facing huge costs for rebuilding its Hurricane Katrina-devastated systems along the Gulf Coast, utility giant Entergy said Tuesday that it will consider filing for bankruptcy protection for its New Orleans unit.
Entergy, whose Entergy New Orleans unit has lost up to an estimated 130,000 customers because of the hurricane, estimates the unit’s storm-related costs at $325 million to $475 million.
The company put its total estimated costs for repairing and replacing electric and gas facilities damaged by the Aug. 29 storm at $750 million to $1.1 billion.

Entergy is the utility company for a good part of the northern part of the Houston metro area, including The Woodlands.

More on the sad state of the airline industry

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airliner6.jpgThe Wall Street Journal’s ($) Holman Jenkins addresses the sad state of the airline industry in his Business World column today, and hammers home a point that this previous post made about the ownership stake in the reorganized United Airlines that the debtor-airline is proposing to foist on the federal government under United’s pending reorganization plan:

“Let’s not delude ourselves: Through the bankruptcy and pension insurance systems, Washington is already engaged in a bailout — an incoherent and self-defeating one.”

Read the entire piece, and feel free to peruse this long line of posts over the past couple of years on the sad state of the airline industry.
After the economic shakeout of the early and mid-1980’s — which included the demise of the savings and loan industry — the federal government ended up owning large inventories of foreclosed real estate and related assets in the wake of failed lending institutions. A number of entreprenuers bought those assets from the government for pennies on the dollar and deployed the assets in properly capitalized businesses. It’s beginning to look as if a similar market in government-owned airline securities is developing, and it will be interesting to watch if a government sale of those securities at rock-bottom prices will prompt the type of true reorganization from a capitalization standpoint that the American airline industry desperately needs.

Economic ripples of Rita

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traders6.jpgCrude-oil prices surged on Monday as it became clear that Tropical Storm Rita would threaten the Gulf Coast, then prices fell on Tuesday morning when the National Hurricane Center forecast a more southerly path for Rita that might spare the Houston area, and then yesterday afternoon and overnight, prices rose again as the storm evolved into a major hurricane.
Such are the vagaries of predicting hurricane tracks and commodity markets.
Oil prices settled Tuesday afternoon more than $1 a barrel lower than Monday’s closing price as early Tuesday projections had Rita coming in closer to Freeport so that the brunt of the storm would miss the Houston area refineries. Those initial reports triggered a drop of more than $2 a barrel in oil prices, but those prices recovered quickly during the day as Rita strengthened into a major hurricane and evacuations from offshore rigs picked up. At the New York Mercantile Exchange, the October crude contract ended $1.16 lower from its Monday high at $66.23. October gasoline closed at $1.9766 a gallon, down 6.61 cents for the day and October heating oil, up more than 20 cents Monday, ended at $2.0113, down 2.71 cents.

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Handy hurricane information links

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Rita092005.jpgGiven that those of us living in the Houston and south Texas area are in for a wild ride over the next few days, I am passing along the hurricane information sites that I am reviewing frequently for up-to-the-minute information and analysis:

Eric Berger’s SciGuy. Eric is the Chronicle’s science writer who started his blog recently as a part of the weblog initiative that Chronicle tech writer Dwight Silverman promoted at the local newspaper. During Hurricane Katrina, Eric provided an extraordinary source of information and analysis, and he has been doing the same in the early stages of Rita.
StormTrack. A weblog that a couple of young fellows from the northeast started to provide up-to-date analysis of hurricane storm trends. Excellent resource.
Dr. Jeff Masters’ WunderBlog. Jeff Masters is the Weather Underground’s Director of Meteorology and provides first-rate analysis in his blog.
The Google Map link to the upper Texas Gulf Coast.
This site provides a good overview of hurricane information, including this pithy chart explaining the categories of hurricane strength.
And, of course, the National Hurricane Center site.

As all grizzled veterans of Hurricane Alicia in 1983 know (related Chronicle story is here), this is a serious situation for the Texas Gulf coast and it is time to prepare to batten down the hatches. If you are a relative newcomer to this area and have never been through an intense hurricane before, do not fall into the trap of thinking that the media and others are crying “wolf.” This is a deadly serious storm that has the potential to be every bit as devastating to the Texas Gulf coast as Katrina was to the Louisiana-Mississippi-Alabama Gulf coast. As destructive as Alicia was in 1983 (it’s eye came in on Galveston’s West Beach and tore through the middle of Houston on a track that essentially followed I-45), it was a minimal category 3 storm. In comparison, Rita is shaping up to be a much more powerful storm that is comparable to Hurricane Carla, which was a category 4 (winds of 133-155 mph) storm that caused incredible damage to Houston and the upper Texas Gulf coast on September 11, 1961. Carla had the same minimum barometric pressure as the great 1900 storm that killed over 6,000 people in Galveston.
I hope I have gotten your attention.

Coach Price turns up the heat on Sports Illustrated

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Mike Price2.JPGThis prior post related the interesting story of former University of Alabama football coach and current University of Texas at El Paso football coach Mike Price‘s $20 million libel lawsuit against Time Inc. The lawsuit involves an allegedly false and malicious story that Time’s Sports Illustrated magazine ran in May, 2003 involving a very wild night that Coach Price had in Pensacola, Florida while attending a University of Alabama football-related golf tournament. That night of festive activity led to Coach Price’s termination as the Alabama football coach before he had ever coached a game for the Crimson Tide.
Well, the Price v. Time case is getting very interesting, as this recent AL.com story relates. An appellate panel of the Eleventh Circuit Court of Appeals has advised Time’s attorney in this decision that the attorney-client privilege does not obviate the attorney’s parallel obligation as an officer of the trial court to advise the court of perjury that would help identify a confidential source. The attorney stuck between a rock and a hard place is Gary C. Huckaby of Huntsville, Ala., who represents Time in the Price lawsuit.

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The Texans’ next firing?

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brain.jpgThis Wall Street Journal ($) article profiles Dr. Fran Pirozzolo, The Woodlands-based sports psychologist who has developed a successful practice by catering to a couple of dozen professional athletes who seek him out for “stress inoculation” and other “mental toughness” techniques that supposedly enhance performance. I have listened to Dr. Pirozzolo several times on local sports-talk radio shows and, for the life of me, cannot understand how he is able to persuade professional athletes to pay him money for the psycho-babble that he exudes on those shows. However, as the article notes, Dr. Pizzorolo is also the “staff psychologist” of the Houston Texans, who are not exactly the most well-adjusted and emotionally stable group at this time. If offensive coordinator Chris Palmer lost his job after these two performances (here and here), then how on earth has Dr. Fran not also been canned?

Oil and gas markets react to Rita

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rig offshore2.jpgWhoa, Nellie! Oil prices surged yesterday in anticipation of Hurricane Rita plowing through the Gulf of Mexico as OPEC ministers meeting in Vienna conceded they have no real means to cool red-hot petroleum markets that have become roiled by successive hurricanes in the extensive Gulf of Mexico production region.
The price of U.S. benchmark crude-oil futures for October delivery shot up $4.39 a barrel on the New York Mercantile Exchange and settled at $67.39. That was the highest one-day rise in nominal terms since Nymex began trading oil futures in 1983. Moreover, the storm’s approach is slowing down efforts to fix Gulf production infrastructure that was damaged by Hurricane Katrina. The U.S. Mineral Management Service reported yesterday that 44% of the daily output of oil and natural gas remained off-line from the earlier storm.
Folks, hang on to your hat because it’s going to be one wild ride this week in the oil and gas markets.

Kozlowski and Swartz sentenced

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Kozlowski and Swartz3.jpgFormer Tyco International executives L. Dennis Kozlowski and Mark Swartz were led away from a New York City state courthouse in handcuffs today after New York state Justice Michael Obus sentenced them to serve 8 1/3 to 25 years in prison and pay a total of about $240 million in restitution and fines for being convicted of corporate fraud and conspiracy for looting Tyco of more than $150 million. Prior posts on the conviction of Messrs. Kozlowski and Swartz are here and here.
Under New York law, defendants generally are eligible for parole based upon their minimum sentence, but can earn one-sixth off that time for good behavior and other good deeds while in prison. Accordingly, Messrs. Kozlowski and Swartz could serve as little as about 7 years so long as they are good boys in prison. However, it looks like the men will serve hard time because the New York State Department of Correctional Services generally assigns prisoners to maximum security prisons who have more than six years until they are eligible for parole. Although the Department has leeway to modify that policy according to the circumstances of individual cases, don’t bet on that sort of discretion in cases involving former corporate executives — just ask Jamie Olis.
Update: Ellen Podgor has typically insightful comments on the Kozlowski and Swartz sentencings over at the White Collar Crime Prof Blog. In addition, Professor Bainbridge provides a good overview of the policy considerations emanating from draconian sentences of business executives, and makes a particularly good point that such sentences do little to deter the Kozlowskis of the world, but could very well deter the type of creative risk taking that generates beneficial economic activity.

Texan fans in full revolt

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reliant stadium 4.jpgThe Texans firing of offensive coordinator Chris Palmer this morning did little to quell the anger of Texan fans over yesterday’s debacle, one of whom emailed me as follows:

“The biggest joke of all is leaving the roof open. On Friday, I got an e-mail telling me that the roof would be open and that I should stay hydrated during the game. I couldn’t believe they were sending out a heat related medical advisory on a stadium that has air conditioning. During the first year of the new stadium, management said it was going to keep the roof open in order to have an advantage over the teams that didn’t practice in the Texas heat. So, yesterday, the Texans — whose bench is on the sunny side of the field — sat there and baked. The Steelers had air-conditioned benches (Texans not) and sat in the shade. Moreover, the Texans lost whatever home field advantage we might have had because half of the seats were emptied by people seeking refuge from the sun. What a bunch of Braniacs.”

Key hint to the Texans’ front office — the only thing worse than an angry fan is an angry fan who is also hot and sweaty after boiling in the sun for three hours.
Looks like it’s going to be a long season, folks.

We don’t really need this

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Rita.gifRita.jpgTropical Storm Rita is preparing to enter the Gulf of Mexico, and current predictions have it headed toward the Texas Gulf Coast by the end of the week. This is not good news, particularly for the oil and gas industry’s Gulf operations, which have stablized at reduced production levels in the wake of Hurricane Katrina, but are producing at far below usual levels. Here is a download of a handy map of oil and gas interests in the Gulf of Mexico.
With gasoline inventories still low and a substantial portion of Gulf of Mexico oil and gas production remaining shut-in, another hurricane in the Gulf is not what the doctor ordered for the economy. This EIA Daily Report from this past Friday reflects just how precarious oil and gas production is in the Gulf at the present time. If Rita strengthens as expected over the warm waters of the Gulf, then we could experience a real double whammy of damage to Gulf oil and gas production, not to speak to the usual damage to the Texas Gulf Coast that results from such a storm. Hat tip to Calculated Risk for the links to the map and the EIA report.
Update: The latest National Hurricane Center projection has the storm headed straight for the West Beach of Galveston Island. Batten down the hatches!