How to Find Dirt Cheap Value Stocks

How to Find Dirt Cheap Value Stocks

November 6, 2008

The market has been all over the place lately -- down 700 points here, up 300 points there -- and all of that volatility is leaving tremendous value opportunities in its wake.
Consider the cases of Transocean (NYSE: RIG) and Noble (NYSE: NE): two solidly profitable oil and gas drillers trading with price-to-earnings ratios of 5, both more than 50% off their 52-week highs. If you need a new energy stock for your portfolio, you could do worse than to start your research here.
It's opportunities like this that value investors drool over. After all, the chance to buy dirt cheap dream stocks only comes around so often.
But knowing how to spot the right value stocks in a down market is often more difficult than it sounds -- because there's a reason the market doesn't like this company right now. It's your job to figure out why, and whether the dislike is reasonable.
And one of the best ways I've found to identify promising deep value stocks is PYAD.
What's PYAD? Developed by our friends at Fool UK in 1999, PYAD is a strategy that minimizes downside risk while maximizing upside potential. To this end, it looks for the P, the Y, the A , and the D:
P/E ratio: less than two-thirds of the market's average.
Yield: 50% higher than the market average.
Assets: price-to-book ratio below 1x.
Debt: manageable amount, preferably none.
A stock trading at a steep discount to the market and below the book value of its assets has already taken some tough punches -- and it could also be a sign that the worst is over.
But just because the market has stopped beating up on a stock doesn't mean it's ready to make nice and come to its senses. That could take time. And that's why having a healthy dividend yield is important. In essence, you're getting paid to wait for the rebound.
And finally, low or no debt reduces risk. After all, debt holders need to be paid before common stockholders, and high interest expenses can make earnings more volatile. Stocks saddled with heavy debt loads are not usually worth waiting on.
All of these together suggest a stock might be an excellent deep value play.
Right, but does PYAD work? Out of curiosity, I used PYAD to look at U.S. stocks capitalized over $200 million on Oct. 31, 2002 -- near the last bear market's bottom. Of the 11 stocks that met all four criteria, nine of them are in positive territory today, including Reynolds American (NYSE: RAI), up 247%, and Xcel Energy, up 121%.
Those are pretty good returns for six years -- especially when they include the past few months.
So which stocks would fit the PYAD criteria today? Here are a few of the contenders.
Company
P/E Ratio (ttm)
Dividend Yield
Price to Book
Interest Coverage (EBITDA/Interest Coverage)
Freeport-McMoRan (NYSE: FCX)
3.96
6.1%
0.7
15.2
Ingersoll-Rand (NYSE: IR)
5.9
3.9%
0.5
8.2
Tesoro (NYSE: TSO)
9.67
3.8%
0. 5
5.4
Alcoa (NYSE: AA)
5.65
5.5%
0.6
10.9
Source: Capital IQ, a division of Standard and Poor's.ttm = trailing 12 months. EBITDA = earnings before interest, taxes, depreciation, and amortization.
Of course, no screen, including PYAD, can tell you definitively whether you should buy a stock; they just provide starting points for further research. In this market, for instance, investors would be wise to take a very close look at a company's assets to gauge the risk of write-downs before making an investment.
And the next step, as it is with any potential value play, is doing a valuation to determine the company's intrinsic value. If a PYAD stock's true value is well above its current market price, you can sit back, relax, and let the juicy dividends flow in while you wait for the market to come around.
Time to value hunt? The beauty of PYAD is its simple ability to identify stocks with limited downside. I think Warren Buffett, who famously quipped that rule No. 1 in investing is "Never lose money," would approve.
A strong company with limited downside selling at a discount to its intrinsic value is what advisors Philip Durrell and Ron Gross look for at our Motley Fool Inside Value investing service -- and in this market they're finding plenty.

Chesapeake's Not Choking

October 31, 2008

Apparently, natural gas prices collapsed in the third quarter. You'd hardly know it from Chesapeake Energy's (NYSE: CHK) quarterly results.
Natural gas price realizations -- industry jargon for the effective sales price -- came in at $8.02/mcfe (per thousand cubic feet) for the third quarter. That's down 2% from the June quarter. Production levels were also roughly the same, resulting in operating cash flow of $1.4 billion, compared to $1.44 billion previously.
Confused? Well, the secret sauce is called a swap. Swaps and collars are derivatives employed by E&Ps to hedge their cash flow in case commodities suddenly crash. Practically everyone, from Anadarko Petroleum (NYSE: APC) to Williams Companies (NYSE: WMB), utilizes at least a moderate amount of hedges. Only firms with the most underleveraged balance sheets, such as Occidental Petroleum (NYSE: OXY), are able to largely go without. Those price realizations I mentioned before include the effect of cash-settled derivatives.
The giveaway that something went sour in the quarter is the mark-to-market gain of over $2.8 billion on unrealized hedges -- the ones that are still being carried on the books. This non-cash gain pumped up Chesapeake's net income figure, which, as a result, is pretty much useless for analytical purposes. This is why we generally pay closer attention to cash flow rather than earnings in E&P land.
So hedges are one thing protecting Chesapeake's caboose. Monetization is another maneuver available to muddle through this morose period. In the third quarter, the company completed about $7.5 billion transactions, from BP's (NYSE: BP) Woodford Shale purchase to Plains Exploration & Production's (NYSE: PXP) Haynesville Shale farm-in. Chesapeake is looking to execute more deals in the near term and, so far, sounds confident in its ability to close on them.
These monetizations might smack of deleveraging desperation were they not so darn lucrative. Through the first nine months of this year, Chesapeake sold undeveloped leasehold for $3.6 billion. That's nearly five times the firm's cost basis. There's something to be said for the long-term cash stream that a drilling program provides, but as with respectable ATP Oil & Gas (Nasdaq: ATPG), I see nothing subpar about converting some of that future value into cash today -- especially when credit is tight and you've got as deep a development pipeline as Chesapeake does.

November Meeting

Reminder: The November meeting date was changed to December 4th, 2008. There will be no meeting in December. Please bring your Nov. and Dec. monthly investment at the December meeting.

FDIC INSURANCE UPDATE

As you are probably aware, there have been additional increases to the FDIC insurance limits for non-interest bearing checking accounts.
Effective October 14, 2008 the FDIC will provide full FDIC deposit insurance coverage for non-interest bearing transaction deposit accounts. Like the other recent increases, this provision also expires on December 31, 2009. Recent media reports seem to indicate that the increase only applies to business accounts. This is not the case. While businesses will definitely be the group that benefits the greatest from this increase, the coverage is available for both personal and non-personal accounts.

What this means is that the FDIC will insure, dollar-for-dollar, the amount of money that a customer has in a non-interest bearing account without applying the $250,000 limit (in other words, unlimited insurance). The FDIC is still in the process of updating EDIE with this most recent change. Until that change is implemented, you can either explain to the customer that EDIE does not reflect the change, or you can exclude these types of accounts from the EDIE calculations. When you use EDIE it will tell you if the change has not yet been finalized. If it does not tell you then you should it has been corrected.

Immucor Beats Ests, Stays a Buy

Immucor Beats Ests, Stays a Buy
Tuesday October 14, 12:49 pm ET By Tom Park

Immucor, Inc. (NasdaqGS: BLUD - News) makes automated systems and reagents used in the testing of human blood prior to transfusion. The Norcross, Georgia-based company reported first-quarter earnings that beat our estimate by $0.05 on sales that also exceeded our forecast. The additional worldwide placements of Galileo continue to help drive Immucor's growth.
The acquisition of BioArray Solutions is expected to be significantly dilutive over the next several years. Management revised its fiscal 2009 guidance. However, although initially under pressure after placing instruments, gross margins are expected to regain momentum from the eventual growth in reagent sales, manufacturing efficiencies, and price increases. The acquisition is expected to transform Immucor into a leader in molecular diagnostic systems for blood transfusions. We rate the stock a Buy.
At its current price of $23.93 per share, BLUD is trading at roughly 25x our fiscal 2009 earnings estimate of $0.95 per share, which is at a premium to the group multiple of roughly 22x. Although continuing to grow, revenue may fall below expectations due to lower than anticipated sales from the customer loyalty program and Europe. We believe the stock is appropriately valued at roughly 33x fiscal 2009 EPS estimate. Our target price moves to $31.

Lifeway Foods Reports Record Third Quarter 2008 Revenues

Lifeway Foods Reports Record Third Quarter 2008 Revenues

October 9, 9:15 am ET
- Total consolidated sales for the third quarter rose 15% to $11,270,000 in 2008 from $9,817,000 in 2007.

MORTON GROVE, Ill., Oct. 9 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., (Nasdaq: LWAY - News), makers of a nutritious, probiotic dairy beverage called Kefir, announced today for the third quarter ended September 30, 2008, total consolidated sales increased 15% to approximately $11,270,000 from $9,817,000 during the same period a year ago.
Key quarterly highlights:
-- Sales via Costco, other new retail channels adding to growth.
-- Strong initial sales of Kefir Wellness Snack Bars now available in
Kroger outlets and online.
-- Cost of milk declining, down approximately 25% compared with third
quarter of 2007.
-- Lifeway's balance sheet remains strong, funding all growth and
operations from internally generated cash flow.
Julie Smolyansky, President and Chief Executive Officer, said, "We are extremely pleased with our third quarter sales. September was a record month for us, with about 40% of the quarter's shipments occurring in that month. In addition to sales growth from our regular channels and products, in the third quarter we began shipping to Costco locations in the Midwest, and the results exceeded our expectations. This should provide a nice springboard to expand to other regions."
Smolyansky also noted that the first shipments of our new Kefir Wellness Snack Bars to several hundred Kroger stores began in the third quarter. "These probiotic packed snack bars are a great extension of our award winning Kefir beverages, which due to the long shelf life, allows us to penetrate a whole new set of distribution channels not previously offered by our traditional perishable lines," she said. "We have since launched our first online store at http://onlinestore.lifeway.net/ where our customers can now order the Kefir Wellness bars direct from our warehouse."
Smolyansky announced that Lifeway has begun to distribute four varieties of its 32 ounce Low Fat Organic Kefir -- Organic Blueberry, Organic Pomegranate-Acai, Organic Plain, and Organic Strawberries 'n Cream -- through Giant Eagle, the major regional grocery chain with more than 200 locations in Ohio, western Pennsylvania, West Virginia and Maryland.
Edward Smolyansky, Chief Financial Officer, noted that milk prices have dropped significantly in recent months, which should reduce pressures on Lifeway's margins.
"Third quarter 2008 milk prices remained much lower compared to the same period in 2007," he said, "which gave us the flexibility to more aggressively promote our products in the second half of the quarter, which is evident in the recent trend increase in demand. In addition, October milk prices have since plummeted to 16 month lows not seen since March 2007, and should provide further cost relief in the fourth quarter."
Edward Smolyansky said that Lifeway remains financially strong, with both its operations and expansion programs 100% self-financed.
"We do not require short term credit, which puts us in a great position to continue to invest in our product lines and increase our market position going forward giving us a competitive advantage in the current tough economic climate," he said.
About Lifeway Foods
Lifeway, recently named Fortune Small Business' 49th Fastest Growing Small Business, is America's leading supplier of the cultured dairy product known as kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these "friendly" cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs (TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding!

Immucor Q1 profit rises

Immucor Q1 profit rises
Atlanta Business Chronicle
Immucor Q2 profit rises 15%
Immucor acquires BioArray Solutions
Immucor sets record profit in fiscal 2008
Immucor Inc. hit record quarterly profitability and revenue in the first quarter of fiscal 2009.
The Norcross, Ga.-based blood reagent systems maker had net income of $20 million and earnings of 28 cents a share, compared with net income of $17.8 million and earnings of 25 cents a share in the first quarter of fiscal 2008.
Revenue increased 15.2 percent to a record $73.2 million, boosted by $7.3 million from price increases in the United States.
"We are very pleased with our record quarterly financial results and the number of Echo [instruments] orders received in North America," said Gioacchino De Chirico, president and CEO. "... All-time highs were achieved in revenues, and net income for the quarter as our strategies to grow our business and the execution of our plan once again generated outstanding results."

September 25th Investment Club Minutes

September 25th Investment Club Minutes
Meeting at Danita's Compound

Present: Shelia, Susan But, Susan Burr, Danita, Tina, Karen, Carol Frihart, Helen, Lisa H, Hiliary

Absent: Carol Fran, Lisa A, Julia

These are dramatic times….. Lisa H

Consumer Group ( Carol Frihart, Karen) gave their power point presentation on their stock selections. Their selections were influenced by the current state of the economy. They decided to focus on things that people still needed to spend money on – food, clothing, and shelter -- for after you pass away J ). Actually they looked at end of life services ( funerals, cremation etc). The decision to look at End of Life services was influenced by the number of aging baby boomers and the fact that it was a necessary “evil” (service) J

Difficult to identify stocks that were A rated that were in our price range.

Campbell’s – food products – carries a number of popular food brands that are either #1 or #2 in various food categories. Rated a B++ .

Aeropostale – clothing store – 10% increase in same store sales. However, may have topped out and may be difficult to sustain sales in light of economy and kids having less disposable income.

Service Corporation International – End of Life services. A leader in the industry. Shares were very inexpensive at less the $9.00 a share. People were not as enthusiastic about this stock.

Karen also informally presented Gamestop – (sells new and used video games) as another option. A leader in the industry ( Electronic stores) with a strong recommendation to buy from the analyst,

Hiliary then presented updates on
Unum – insurance industry. – recently ranked #5 on the 2008InformationWeek 500 for its product and service platform – Simply Unum, which was launched nationwide in 2008. Stock price has increased from $21.41 in July to $25.69 in September. People were impressed with its gain despite the economy and stock market. Shelia had commented that she had already purchased some shares after Hiliary had presented in July.
Amsurg - Operates ambulatory surgery centers. It was listed as one of the Top 5 Volume Stocks for Sept 19. July’s price $26.75 / Sept’s price $26.97.

Motion made by Susan But to purchase 20 shares of Campbells and Unum. All members present voted in favor of the purchase. Susan Burr shared that we had not purchased stock since February and we had a substantial amount of cash in our account.

Susan Burrthen asked for feedback about the Blog ( bucksforbabes19) and asked if people were getting their email notifications when updates were available. Susan asked everyone to take responsibility for a stock and send her updates to be posted to the blog. People signed up or were assigned the following:

Applied Materials – Lisa
Chesapeake – Tina
GE – Susan But
Immuncor – Susan Burr
Merck – Helen
Lifeway, Unum – Hiliary
Walt Disney – Carol Fri
Oracle – Danita
Synovis – Lisa A
Cisco – Carol Fran
Aon – Shelia
Campbell’s - Karen

Send your updates to Susan Burr who is serving as “gatekeeper” for the Blog. This is to ensure that outsiders cannot post anything to our blog.

Next meeting is October 30th. Danita had a speaker lineup to speak on Trusts, but unfortunately that person changed jobs and can no longer speak. She and Shelia will try to find another speaker for October. If they can’t, they will give a presentation on “How to run a Meeting” based on the presentation they heard at the last rotary club meeting.

Purchase of Stock

We purchased:
20 shares of CPB: Campbells Soup at $38.23 Total $764.78
20 shares of UNM: Unum at $26.619 Total $532.38

STOCK ASSIGNMENTS

Applied Materials: Lisa H
AON: Sheila
Immucor: Susan Burr
Chesapeake: Tina
Cisco: Carol Frank
GE: Susan But
Walt Disney: Carol Fri
Lifeway: Hilary
Merck: Helen
Oracle: Danita
Synovis: Lisa A
Campbells: Karen
Unum: Hilary

Oracle to sell computer hardware for first time

Oracle to sell computer hardware for first time
SAN FRANCISCO - Oracle is expanding into the computer hardware business in an effort to make its database software run more efficiently.

CEO Larry Ellison unveiled his company's plans to sell a "database machine" in a Wednesday presentation at an Oracle customer conference that attracted nearly 43,000 people. It marks the first time in Oracle's 31-year history that the company has added hardware to its product line.
The machine, which is being manufactured and maintained by Hewlett-Packard Co., is designed to enable large companies to fetch information stored on databases more quickly. Oracle is the world's largest seller of database software.

Immucor Schedules First Quarter Earnings Release and Conference

Press Release
Source: Immucor, Inc.
Immucor Schedules First Quarter Earnings Release and Conference CallWednesday September 24, 4:01 pm ET
NORCROSS, Ga., Sept. 24 /PRNewswire-FirstCall/ -- Immucor, Inc. (Nasdaq: BLUD - News), a global leader in providing automated instrument-reagent systems to the blood transfusion industry, today announced that it expects to release its first quarter earnings on Wednesday, October 1, 2008, after the close of regular trading hours, and then host a conference call on Thursday, October 2, 2008 at 8:30 AM (EDT) to review the results. Investors are invited to participate in this conference call, with Dr. Gioacchino De Chirico, President and Chief Executive Officer, Richard A. Flynt, Chief Financial Officer, and Edward L. Gallup, consultant. The call will focus on the results for the first quarter and general business trends. The earnings release will be posted on Immucor's website, as well as any material financial information that may be discussed by Dr. De Chirico, Mr. Flynt, or Mr. Gallup during this call that is not contained in the earnings release. Both the earnings release and the additional financial information, if any, will be posted as soon as practicable after the call on the investor news section of Immucor's website. To access this information once posted, go to Immucor's website at www.immucor.com and click on "About Us - Press Releases."
To participate in the telephone conference call, dial 1-888-324-7567 and passcode BLUD. Replays of the conference call will be available for one week beginning at 12:00 noon on October 2nd by calling 1-800-337-5610. Beginning October 9, 2008, audio of the conference call or a transcript of the audio will be available on the "About Us - Press Releases" page of the Immucor website.
For more information on Immucor, please visit our website at www.immucor.com.
Founded in 1982, Immucor manufactures and sells a complete line of reagents and systems used by hospitals, reference laboratories and donor centers to detect and identify certain properties of the cell and serum components of blood prior to transfusion. Immucor markets a complete family of automated instrumentation for all of its market segments.

Chesapeake Energy Deploys Microsoft Office SharePoint Server 2007 to Meet Growth ChallengesTuesday

Chesapeake Energy Deploys Microsoft Office SharePoint Server 2007 to Meet Growth Challenges
Tuesday September 23, 9:00 am ET

Solution provides enhanced collaboration and productivity, smarter decision-making and improved data analysis.

DENVER, Sept. 23 /PRNewswire-FirstCall/ -- Helping one of the nation's leading energy companies meet the challenges of rapid growth while boosting worker productivity, workflow and collaboration, Microsoft Corp. today announced that Oklahoma City-based Chesapeake Energy Corp. has deployed an extensible and scalable enterprise solution based on Microsoft Office SharePoint Server 2007 across its entire enterprise. The new solution integrates the company's intranet, extranet and Internet presence and, through its extensibility, streamlines collaboration across project teams -- including teams with remote employees -- creating a foundation for business intelligence applications, stronger content management and consistent communications with external stakeholders.

Chesapeake is the largest producer of natural gas in the United States. It is also the most active driller, with a daily production volume of 2.3 billion cubic feet. Between 2005 and 2008, the company experienced rapid growth, adding up to 100 new employees per month. Keeping up with such growth requires IT flexibility, and the company's legacy intranet was proving to be cumbersome to maintain, update and extend. This led to delays in updating the site and users became less invested in the content.
Because Chesapeake already relied extensively on Microsoft technologies, executives felt that Office SharePoint Server would interoperate smoothly into its existing IT infrastructure. Working closely with the Microsoft account team and Microsoft Services, Chesapeake developed and deployed the SharePoint Server-based solution across the enterprise in less than three months. Since its implementation, the solution continues to deliver solid benefits to Chesapeake in areas ranging from enterprise search to collaboration and from business intelligence to enterprise content management.

According to Lori Garcia, manager of IT business systems at Chesapeake, one reason for the hearty welcome that users have given the new solution is its ease of adoption.
"Managers say it has been easy to instruct users on how to find information through the new solution," Garcia said. "As a result, training usually takes no longer than a single afternoon."
The solution runs on a server farm consisting of two front-end Web servers, an index server, a search server and a database server running a 64-bit version of Microsoft SQL Server 2005 database software along with Office SharePoint Server 2007. By using the Microsoft .NET Framework for custom development, the Chesapeake IT team has found it easy to deploy custom code and integrate the intranet with other Microsoft applications and technologies.
One application deployed on SharePoint Server specifically helps with collaboration across project teams. Another implementation uses SharePoint sites to provide workspaces that give employees a more efficient collaboration environment than having to depend on file shares and e-mail. And with the document version control in Office SharePoint Server 2007, employees can collaborate on document development without having to send dozens of e-mail messages or worry about versioning problems. This benefit is especially valuable to Chesapeake because so many of its employees are situated at remote wells and work sites with limited connectivity.
"Comprehensive information access is essential in the oil-and-gas production environment, which is awash in information from diverse sources and reliant on employees often working in very remote locations such as field offices and rig sites," said Wade Brawley, vice president of land administration at Chesapeake. "Now, through SharePoint sites, field-based employees can access the same information, with the same ease, as employees working at corporate headquarters. This is a real productivity booster."
Employees seeking new content also find their task easier. Instead of having to filter an entire page to determine which content is new and which is not, they can use views and alerts to be notified when new information is published. What's more, because content is so easy to post and update in a security-enhanced, centralized location, employees have more confidence in the reliability of information: that it is there, that it is fresh, that it is consistent and that it is accessible to people with the appropriate permissions by role. For example, sensitive human resources information is available only to people with the appropriate credentials. In contrast, the previous intranet made it exceedingly difficult to restrict confidential documents from nonsenior audiences.
"Oil and gas companies are continuing to embrace new technologies as they struggle with fractured ecosystems, processes and workflows that often hinder or delay company collaboration and productivity," said Craig Hodges, U.S. energy industry solutions director at Microsoft. "SharePoint Server is the right solution to improve multiparty collaboration for Chesapeake and can make business processes work more seamlessly across the entire oil and gas supply chain. This enables the company to stay competitive and manage continued growth."
The Chesapeake intranet solution based on SharePoint Server will be showcased in Microsoft's exhibit booth (No. 755) at the Society of Petroleum Engineers Annual Technical Conference and Exhibition (ATCE) 2008, Sept. 21-24, 2008. More information about Microsoft in Oil and Gas is available at http://www.microsoft.com/oilandgas.
Founded in 1975, Microsoft (Nasdaq: MSFT - News) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Should G.E. Spin Off Its Financing Arm?

Should G.E. Spin Off Its Financing Arm?
September 23, 2008, 7:55 am

As The New York Times noted Monday, General Electric is as much a bank as a blue-chip industrial company and that dichotomy last week landed smack in the middle of the market turmoil surrounding financial companies.

Half of G.E.’s profits come from GE Capital and in last week’s crisis, G.E. found itself treated by fearful investors as another financial company potentially in peril, until news of a planned federal bailout brought a rebound in the markets late Thursday and Friday.

The way Breakingviews sees it, GE Capital is holding the rest of the group’s top-notch businesses hostage, Breakingviews argues. That doesn’t just hurt the stock’s value, says the publication — GE Capital’s financing needs could put the whole company at risk.

One solution to keeping its other businesses untainted by future problems with its financing arm, Breakingviews argues, would be to spin off GE Capital to shareholders, perhaps even as a bank holding company — the corporate structure Goldman Sachs and Morgan Stanley are now embracing.

The publication admits this would be a complicated move. But, Breakingviews argues, if there’s a lesson to be drawn from the travails at Lehman Brothers, Bear Stearns, the American International Group and elsewhere, it is that corporate executives and the boards that oversee them should be a little more imaginative in their planning meetings.

Chesapeake Energy Cuts Capital Budget, Production Outlook

Chesapeake Energy Cuts Capital Budget, Production Outlook
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SAN FRANCISCO -- Chesapeake Energy Corp. said late Monday it is reducing its drilling capital expenditure budget for the remainder of 2008 until the end of 2010 by $3.2 billion, or by 17%, because of falling natural gas prices. Chesapeake said the cut is in response to a 50% fall in natural gas prices since June 30, and "concerns about the possibility of an emerging U.S. natural gas surplus in advance of increased demand from the U.S. transportation sector." Also, the company reduced its full-year 2008 production growth estimate to 18% from 21%, and its anticipated annual production growth forecasts in 2009 and 2010 to 16% from 19%.

Oracle unveils new units, products at OpenWorld

Oracle unveils new units, products at OpenWorld
Deborah Gage, Chronicle Staff Writer
Tuesday, September 23, 2008

Oracle Corp. President Charles Phillips revealed two new business units as well as several new products and product upgrades Monday at OpenWorld,




One of the new units will provide specialized software for insurance companies - billing, claims analysis, policy administration and so on - and was assembled using software from at least four acquisitions, including Siebel and PeopleSoft. The other new business unit will sell software for health care companies.

New products from Oracle include Beehive, a secure online workplace inspired by Lotus Notes that enables customers to share e-mails and calendars and other social networking tools; a portal for online support that lets Oracle recommend software patches and upgrades for customers; and technologies that let customers run some Oracle software from Amazon's data centers - "in the cloud" - rather than inside their own buildings.
All this software "is the transformation of Oracle," said Albert Pang, an analyst at IDC, a market research firm. "They used to be so database- and middleware-centric, but with BEA (the largest of this year's acquisitions) in particular, there are a huge number of customers they can bring in."
The announcements are part of Oracle's plan to retain the confidence of its customers as it continues to gobble up software companies, analysts said.
In the past 44 months, according to Phillips, Oracle has acquired 50 companies. The number of employees at Oracle has more than doubled to 85,000, up from 40,000 five years ago.

"The person who wins in software is the person with a lot of scale," Phillips told an audience of several thousand people in Moscone Center. "Being a leader is a cultural thing for us - we want to win in every market."
Oracle started as a database company, but it has expanded in recent years into middleware, which connects its database to applications, and the applications themselves, making its chief competitor SAP, the German software giant.

Oracle is also working to integrate all of its applications with each other and with software on customers' premises and invests $3 billion per year in research and development, Phillips said.

In each industry where it has software, the company has teams of people who analyze how that industry works and build products to fit. Oracle also offers lifetime support for customers for all the software it owns.
Oracle's challenge will be to persuade customers to keep spending money on software applications as the economy contracts, without raising prices too high, analysts said.

Last week, Oracle reported an 18 percent revenue increase for its first quarter and earnings per share of 29 cents - 2 cents more than analysts expected. But the company also said growth in the sale of new software licenses would slow in the second quarter compared with last year.
Also appearing onstage with Phillips was swimmer Michael Phelps, who won eight gold medals at the Summer Olympics in China. Phillips introduced Phelps as another example of excellence, just like Oracle.
Phelps said all he did was eat, train and sleep but that the hardest thing was getting out of a warm bed in the morning and into a cold pool. "I've never been in front of this many people unless you count TV," he told Phillips.

Merck to contract out some sales jobs -- after cuts

Merck to contract out some sales jobs -- after cuts
Monday September 22, 5:22 pm ET
Merck retains inVentiv Health to handle some drug sales work -- after cutting its sales force
TRENTON, N.J. (AP) -- Merck & Co. is about to contract out some of its sales work to deal with short-term vacancies in the U.S. sales force, just months after it eliminated about 15 percent of that staff.
The drugmaker has retained inVentiv Health "to give us flexible alternatives that have successfully been used by other major pharmaceutical companies," Merck spokeswoman Amy Rose said Monday.
"We are taking this approach as we prepare for a reconfiguration of our field sales force," set for early 2009, she said.
Merck eliminated about 1,200 salespeople early this summer as revenue was hurt by questions about the effectiveness and price of Vytorin and Zetia, cholesterol drugs it jointly sells with partner Schering-Plough. In addition, an experimental cholesterol treatment they were hoping to launch was rejected by the Food and Drug Administration.
InVentiv provides sales, communications, market analysis, clinical trial management and other support to all top 20 global pharmaceutical manufacturers and dozens of other drugmakers and biotech companies.
Merck chose to contract with the company to handle sales needs in particular territories or for particular products rather than recruiting, hiring and retaining new full-time employees, Rose said.
InVentiv is based in Somerset, N.J., not far from Merck's headquarters in Whitehouse Station, N.J.

General Electric Wins $100 Million Order for Gas Transmission Project in China,

Press Release
Source: Industrial Info Resources

General Electric Wins $100 Million Order for Gas Transmission Project in China,
an Industrial Info News Alert
Monday September 22, 6:30 am ET

BEIJING--(MARKET WIRE)--Sep 22, 2008 -- Researched by Industrial Info Resources (Sugar Land, Texas) -- GE Oil and Gas (Florence, Italy), a division of General Electric Company (GE - News) (Fairfield, Connecticut), has won a bid to supply pipeline compression equipment to China's west-to-east gas-transmission project. The total value of this contract exceeds $100 million. GE Oil and Gas will provide seven compressor units driven

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Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services. For information send inquiries to oilandgastransmissiongroup@industrialinfo.com or visit us at www.industrialinfo.com.

STOCKS TO STUDY

Hi all,

Well, in light of recent stock market events it has been difficult to find a stock(s) to present. One thought we had was what are the only things in today's economy that are sure things. We decided that people will eat and people will die. So in light of that thought please take a look at the following stocks so we can discuss them on Thursday:

Campbells Soup CPB
Sysco SYY
Service Corp. International SCI Funeral Home chain (you can laugh now)

Campbells--no Value Line current price is $38.60
Sysco is an A+ in Value Line current price in the $33.43
Service Corp. SCI Value Line C++ $9.38

I know we've never really looked at a C++ company but hey maybe we should consider a risk in this crazy market.

See everyone Thursday
Carol, Julia, Karen

S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF ORACLE CORP.

S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF ORACLE CORP. (ORCL; 18.75):
August-quarter operating EPS of $0.28, vs. $0.21, is $0.02 above our estimate. Sales rose 18% to $5.42 billion, below our $5.45 billion view. New licenses rose 14% to $1.24 billion, $8 million below our outlook. Application licenses fell 12%, on tough comps, while database and middleware licenses rose 27%, helped by $84 million contribution from BEA. Operating margins widened notably, and we think ORCL performed well in a seasonally slow quarter. We continue to expect ORCL to grow faster than peers. We raise our fiscal year 2009 (May) EPS estimate $0.02 to $1.49 and initiate our fiscal year 2010 view at $1.71. We maintain our $25 target price. -Z. Bokhari

GE says it's 'not Lehman,' but stock still takes hitsPublished

GE says it's 'not Lehman,' but stock still takes hits
Published: September 19. 2008 12:01AM
OAS_AD('Middle');

VideoAd by Mixpo The anxiety over the U.S. financial system has spread far beyond Wall Street to infect any company that's involved in loans, finance and credit, even dragging down the value of huge conglomerate General Electric Co.Its shares have been battered over the past few days, even though slightly more than half of GE's business is making light bulbs, jet engines, locomotives, water treatment plants and other major manufacturing goods."It's trading as a financial stock this year," said analyst Matt Collins at Edward Jones in St. Louis. "Right now, the credit crisis has gone well beyond just the Wall Street institutions."GE Capital is the conglomerate's financial business that provides consumer finance in car loans, mortgages outside the United States, credit cards and other products. Its commercial side finances real estate, corporate lending and leasing.

And GE also finances energy projects and airline leasing.In the last 10 days, the share price has tumbled nearly 20 percent as Wall Street grapples with chaos in the financial markets. Since April, when GE widely missed its first-quarter earnings target, almost $83 billion in GE's market capitalization has been wiped out, a loss of 25 percent."No one is immune in this market and no one has been spared and they certainly are in that basket," said Eric Boyce, portfolio manager at Hester Capital Management in Texas.However, GE originates its own loans, avoiding the loan packaging and selling that have sunk many other lenders, he said.GE spokesman Russell Wilkerson emphasized what the company is not."We're not AIG. We're not Lehman. It's not our business model. We're not a bank," he said.-- wire report

Applied Materials says new solar power system will replace about 10 percent of the electricity it now buys.

ENERGY
Largest corporate solar array installed in California
Applied Materials says new solar power system will replace about 10 percent of the electricity it now buys.

By Bob KeefeWEST COAST BUREAU Saturday, September 20, 2008
Semiconductor equipment maker Applied Materials Inc. has flipped the switch on what it says is the largest solar power array at any U.S. corporation.

The 2.1-megawatt system that covers parking lots and the tops of two buildings at Applied's Sunnyvale, Calif., campus bests a 1.6-megawatt array a few miles away at the headquarters of Google Inc., that previously was the nation's biggest corporate solar power array.

One megawatt is enough energy to supply power to about 1,000 average-sized houses. According to Applied, its new solar power system will replace about 10 percent of the electricity it buys for its corporate headquarters.
The system also is expected to eliminate 2,700 tons of carbon emissions annually — the equivalent of taking about 450 passenger cars off the road.
"We've converted our parking lots to power plants," Applied chief executive Mike Splinter said in a statement.

Last year, Applied installed a 24.6-kilowatt solar array at its corporate campus in Austin. Although much smaller than the California installation, the Texas array was the biggest in Austin.

Applied spokesman Dave Miller said the company is planning an expansion of its Austin system but hasn't set a timetable yet.
It's no coincidence that Applied is a big fan of solar. The company, the world's biggest maker of equipment for the semiconductor industry, expanded into the solar fabrication equipment business nearly four years ago and now gets about 10 percent of its revenue from equipment it sells to the solar panel industry.

Applied recently introduced its SunFab line of machines that are designed to make giant solar panels that are nearly 19 square feet in size.
Ironically, the new array at Applied's headquarters doesn't contain SunFab panels. That's because Applied customers just recently began using the first SunFab machines and are only now bringing the first panels made with them to market, Miller said.
"We just don't have them yet," Miller said. "We'll be adding them in the future."
That doesn't mean Applied didn't have an inside track on a good deal for its new solar power system, however.

The equipment is made by SunPower Corp., a subsidiary of Cypress Semiconductor Corp. Cypress is a big customer of Applied's.
SunPower also uses equipment and technology developed by Baccini SpA, an Italian company that Applied purchased in November 2007.

Bend and Stretch...Xynomix to Emphasise Flexibility of Oracle Support

Bend and Stretch...Xynomix to Emphasise Flexibility of Oracle Support
Oracle database management specialists Xynomix are set to highlight the flexibility of their Oracle Database Support offering as part of a new lead marketing campaign.

Nottingham, United Kingdom, September 05, 2008 --(PR.com)-- Xynomix deliver Support, Managed Services and Consultancy to Oracle users, and have selected Oracle Database Support as a primary area of focus in a bid to bolster the number of clients benefitting from the service. The company projects a 20% increase in the value of their client support base by this time next year.Says Xynomix Marketing Executive, Jules Pedersen: "As every database support solution requirement is different, we have decided to re-emphasise the bespoke nature of our solutions. We want clients to envisage Xynomix support as putty...clients can mould it around their systems, or push it into any cracks in their database environment."Re-addressing the perception of support for Oracle database is set to be the first of many changes to the way in which Xynomix delivers its services. There are a number of new technologies in the pipeline that, according to Managing Director, Andy Elcock, are set to "improve the quality of support and revolutionise the way in which that support is administered."Xynomix Information: Xynomix, an Oracle Certified Partner, specialise in the design of bespoke monitoring and management solutions for Oracle databases and Operating Systems. Founded in 2002, Xynomix has experienced consistent growth and can now lay claim to a client base that varies from Oracle estates with a few Database users to corporate environments with multiple databases and thousands of worldwide users.###
Contact Information
XynomixJules Pedersen0845 222 9600julietp@xynomix.comwww.xynomix.com

Cervical Cancer

CENTER OF GRAVITY By Rony V. Diaz Cervical cancer
THE New England Journal of Medicine (NEJM) published on August 21, two articles and an editorial that were critical of the vaccines against the human papilloma­virus (HPV) that Merck and GlaxoSmithKline had put on the market.
HPV is sexually transmitted. It has no symptoms in the early stages but genital warts may appear in time. It does not trigger the immune system. When it becomes chronic—which is relatively rare—it may cause cervical cancer.
Gardasil and Cervarix are the brand names of, respectively, Merck’s and GlaxoSmithKline’s vaccines. According to the articles in the NEJM, the evidence that they are effective is not “sufficient.” It’s also not clear, NEJM continued, that immunity would last a lifetime. The vaccines are expensive; 3 shots cost from US$400 to $1000.
The last point is important because almost 80 percent of cervical cancer occurs in poor countries, according to the World Health Organization (WHO). It’s the second most common cancer, after breast cancer, in women all over the world.
I did not find any official statistics on the number of cervical cancer cases in the Philippines. By extrapolating from WHO’s numbers—500,000 new cases each year; 274,000 mortality in 2006, nearly 95 percent in developing countries and so forth—my guess would be between 50 and 100 cases every year. The Journal of the National Cancer Institute in the US estimates the risk at less than 1 woman in 1000 younger than 50 of dying in the next decade from cervical cancer. It would be interesting also to find out the rate of HPV infection but because the Department of Health (DOH) has no Pap screening program, one might have to fall back on the Population Commission’s (Popcom) estimate of sexual activity among young persons between the ages of 18 and 40.
Charlotte Haug, the editor of The Journal of the Norwegian Medical Association and the author of the editorial in the NEJM, wrote: “Despite great expectations and promising results of clinical trials, we still lack sufficient evidence of an effective vaccine against cervical cancer… With so many essential questions still unanswered, there is good reason to be cautious.”
She also thought that six-and-a-half years of clinical trials were not enough for the vaccines to have been approved in 2006 by the US Food and Drug Administration (FDA) for general use.
Among the unanswered questions were those that relate to whether eliminating the 2 strains of the HPV that cause genital warts and cervical cancer would affect the ability of the immune system to respond to the other strains of the HPV.
Her most telling point was since cervical cancer develops only after years of chronic HPV infection, there was no clear proof that protection against 2 of its strains would also reduce the rates of cervical cancer.
In answer, Richard Haupt, the medical director of Merck, told The New York Times (August 21, 2008): “You can only study a vaccine for so long before you license and use it in a population… This is a remarkable vaccine that will have a huge impact on women.”
He added that Haug’s points were “very theoretical”; continuing research indicates that immunity is “long lasting” and that the vaccine “would not lead to problems with other strains.”
Unless the government pays for or subsidizes them, these vaccines are not affordable by poor people.
In rich countries, the cost of mandatory vaccination is charged to public health budgets.
Health economists estimate that depending on how the vaccines are used, the cost to society could be between $30,000 and $70,000, “for each year of life they save.”
Dr. Abby Lippman, the policy director of the Canadian Women’s Health Network, was quoted by The New York Times, as saying, “This kind of money could be better used to solve so many other problems in women’s health. I’m not against vaccines, but in Canada and in the US, women are not dying in the streets of cervical cancer.”
It’s only a matter of time before these pharmaceutical giants will start to market these vaccines in middle-income countries like the Philippines.
Cancer prevention and women’s health are powerful marketing messages. The DOH is well-advised to begin thinking of a policy response.
The choice is between mandatory vaccination and a Pap smear program. Until the medical benefits of mandatory vaccination are clearly established, a policy of Pap screening is the better option. The WHO said that in countries where Pap smear programs are available, few women died of cervical cancer.

Cisco to buy instant-messaging software company Jabber for undisclosed sum

APCisco to buy messaging provider JabberFriday September 19, 3:39 pm ET
Cisco to buy instant-messaging software company Jabber for undisclosed sum
SAN JOSE, Calif. (AP) -- Cisco Systems Inc. Friday said it would buy Jabber Inc., a maker of instant-messaging software for corporations.
Denver-based Jabber is privately held, and the terms of the deal were not disclosed.
San Jose, Calif.-based Cisco will incorporate Jabber into multiple platforms, including WebEx Connect teleconferencing and Cisco Unified Communications.
"With the acquisition of Jabber, we will be able to extend the reach of our current instant messaging service and expand the capabilities of our collaboration platform," said Doug Dennerline, senior vice president of Cisco's Collaboration Software Group.
Shares of Cisco added $1.25, or 5.5 percent, to $24.05 in afternoon trading. The stock earlier hit a year low of $17.25. It has ranged between $20.56 and $34.24 over the past year.

CISCO

Cisco is buying instant message client Jabber for an undisclosed amount.

Cisco Is Jabbering Its Way Into Office Cubicles

September 19, 2008, 2:01 pm — Updated: 3:20 pm -->
Cisco Is Jabbering Its Way Into Office Cubicles
By Ashlee Vance
The switching gear made by Cisco Systems tends to lurk in the deepest, darkest parts of data centers. It pushes information between servers and storage systems and funnels data out to the myriad networks that combine to form the Internet. When everything functions well, Cisco’s hardware lives in relative anonymity.
Over the last couple of years, however, Cisco has worked to get itself more directly onto workers’ desks. The company sells voice-over-Internet-protocol phones along with video conferencing systems. It also acquired WebEx for $3.2 billion in March 2007, adding an online meeting and collaboration software element to its arsenal, and purchased the e-mail and calendar software provider PostPath last month for $215 million.
On Friday, Cisco rounded out that online play with the acquisition of Jabber, a privately held messaging specialist.
Denver-based Jabber bills itself as a seller of “commercial messaging solutions.” Putting the jargon aside, Jabber offers instant-messaging software that has a more corporate shine than applications like AOL Instant Messenger or Yahoo Messenger. Jabber’s software provides additional security and message archiving functions that make it possible for financial, government and other large customers that must adhere to regulatory measures to use instant messaging within their organizations.
Cisco will use the Jabber technology to complement the WebEx platform, said Charles Carmel, vice president of corporate development for Cisco.
With its increasingly comprehensive array of collaboration products, Cisco now competes head-to-head against the likes of Microsoft, I.B.M., Yahoo and Google, which are all courting the same market.
Given the amount of business Cisco does with these companies, it maintains a certain level of decorum when characterizing its broader software plans.
“Both Microsoft and I.B.M. are important partners to Cisco in many parts of our business,” Mr. Carmel said. “I think the collaboration part is an area where there is overlap, and our objective is to make that as seamless as possible.”
More broadly, Cisco’s maneuvering represents an attempt to capitalize on the shift to “cloud computing” services where users tap into software running in a data center rather than bothering with applications locked to individual computers. Cisco could benefit from this shift in at least two ways.
Software like WebEx can drive more interest in Internet-based software, which in turn produces more network traffic and demand for Cisco’s switches. “That is always a good thing,” Mr. Carmel said.
In addition, Cisco can crack into new software markets with a collection of fresh products and not worry about supporting older communications systems and revenue streams, as is the case for companies such as Microsoft and I.B.M.
Jabber’s current instant-messaging software can work with Google Talk, AIM, Microsoft Windows Live Messenger and Yahoo Messenger. This gives Cisco something it’s billing as an “open” play for corporate messaging.
Cisco declined to discuss financial terms for the acquisition but said that it was expected to close in the first half of the company’s fiscal 2009. Most of the 54 Jabber employees will join Cisco’s Collaboration Software Group, Mr. Carmel said.

10 Ways to Protect Your Money Now

10 ways to protect your money now
As the country's financial system teeters on the brink of disaster, you need a game plan to minimize the damage.
Here are 10 things you can do amid the current financial panic:

1. Check that your bank accounts are federally insured.
The Federal Deposit Insurance Corp. (FDIC) guarantees deposits up to $100,000 per person. If you have to hold more than that, spread it across multiple banks. As a taxpayer, you are paying for this insurance, so use it.

2. Make sure your brokerage accounts are federally insured, too.
The Securities Investor Protection Corp. (SIPC) guarantees you at places like Lehman Bros. (LEH, news, msgs), Merrill Lynch (MER, news, msgs) and E-Trade Financial (ETFC, news, msgs) up to $500,000, including $100,000 in cash. The same rules apply: If you have more to invest, spread it across multiple firms. Note that the SIPC only makes sure you get your shares and bonds back if a brokerage fails. It does not, obviously, guarantee those investments' value.
Readers talk: Worried about your bank?

3. Put money in thy purse.
If this market and this economy get any tougher, cash isn't going to be just king anymore. It's going to be king, queen, emperor, lord high chamberlain and the whole court. The easiest way to make or find a buck is to save it. So take an ax to those family budgets -- the restaurant meals, the Superduper Everything Cable package, the rip-off checking account with the high fees and low interest. It's all costing you.

4. Set up a home-equity line of credit while you still can.
Normally it would not be advisable to take on more debt, but if access to ready cash might be a lifesaver, it's best to line it up now. That's true especially if you are worried about your job. Credit is already tight, and it may get a lot tighter.

5. Refinance your mortgage.
The panic on Wall Street just caused a collapse in the interest rate on long-term U.S. Treasury bonds, as lots of investors rushed there for safety. And that usually leads to a fall in long-term mortgage rates.

6. Don't wait for your worst investments to "recover."
If you ever saw John Cleese and Michael Palin perform their famous skit about the dead parrot, you know exactly what I mean. No, your Fannie Mae (FNM, news, msgs) shares aren't "resting." They're lying at the bottom of the cage with their feet in the air. What more do you need to know? Stop waiting for them to "recover" before you sort out your portfolio.

7. Don't panic.
Journalists, like markets, tend to move in herds. And by the nature of their jobs, they write about the plane that crashes instead of the thousands that land safely. Remember, too, that pundits want to seem really wise by putting on serious expressions and saying things like "We don't know how this thing is going to play out" and "The situation could get a lot worse." Bah.
Guess what. We never know how things are going to play out. And the situation could get a lot better, too.

8. When it comes to your short-term money needs, nothing has changed.
Any money you might need within the next year or two should be held in cash or equivalents. That was true two years ago, and it is true now. The stock market is no home for money you may need urgently. It could fall 30% or jump 30%. Nobody knows. You can get a one-year CD paying 5% right now, and it's federally guaranteed.

9. If you are investing for five years or more, buy some stock.
The investment outlook is much, much better today than it has been for several years, because shares are much cheaper. World markets overall have fallen 27% from last year's peak. They're not a steal at current levels, but they are not particularly expensive either. Invest globally. Vanguard Total World Stock (VTWSX) gives you the whole world and low fees.
If you are looking for a value, Morningstar analyst Bridget Hughes likes Oakmark Global (OAKGX). Another good one is Tweedy, Browne's new Worldwide High Dividend Yield Value (TBHDX).
This list is not comprehensive. Remember: I am not trying to call the bottom of the market. Things could fall quite a bit further. No one knows. So invest little, often and broadly.

10. If you want to worry about anything, worry about your taxes.
The worse this crisis gets, the more the feds will end up putting taxpayers on the hook to prevent a meltdown. Taxes will go up sooner or later anyway, no matter who wins the election, because of our gigantic federal deficit. If you think Lehman Bros. was bad, you should look at Uncle Sam. You can forget about any talk of tax breaks. Oh, and if you want a break from worrying about taxes, worry about Treasury bonds. Deficits won't do anything good for them.

Integrity Bank fails, bought by Regions Financial

Integrity Bank's skyrocket run as the fastest-growing bank in Georgia history, fueled by housing construction, has ended in failure.
Birmingham, Ala.-based Regions Financial Corp. (NYSE: RF) has acquired the branches and deposits for the Alpharetta, Ga.-based community bank, according to a late Friday press release from the Federal Deposit Insurance Corp.
Integrity Bank operates five branches in metro Atlanta, primarily in the city's affluent north suburbs. All of those branches will be acquired by Regions.
Integrity Bank branches will open Tuesday morning as Regions locations, and the FDIC said all customer deposits at the bank will be available for customer use over the weekend through checks, debit cards and ATM withdrawals.
The bank has $919 million in insured deposits, according to FDIC estimates, out of $962 million in total deposits.
CEO Pat Frawley was not immediately available for comment. In a recent previous interview with Atlanta Business Chronicle, Frawley -- hired to turn the bank around in fall 2007 -- described the bank as a plane slowly crashing to earth, and himself as the pilot at the controls.
"I don't know when we're going to hit the earth, if we'll hit sooner than I expect or someone else will make that decision for me," said Frawley. "But I'm at the controls and I know we're descending."
Integrity Bank's failure trails only NetbankÂ’s failure in 2007 and the collapse of Fulton Federal Savings Bank in 1991.
Atlanta-based NetBank Inc. had $2.2 billion in deposits, but operated as an online bank gathering deposits nationwide.
Fulton Federal Savings Bank had $1.3 billion in deposits.
It is the fourth bank failure in Georgia since 2000 and 43 banks have failed in Georgia since the FDIC's creation in 1934. Four the last five Georgia bank failures have been in the metro area.
Centered around a Christian faith-based business model, Integrity Bank was a high-flying star of metro Atlanta's housing boom. The bank was the fastest in Georgia history to $1 billion in assets.
From Dec. 31, 2000 to June 30, 2008, the bank's loan portfolio grew 14,826 percent from $5.6 million to $834.8 million. That growth was fueled by loans for housing construction and land lot development, which increased 15,727 percent during that same period, from $4.2 million to $668 million.
But problems first emerged in spring 2007, when the bank's parent company disclosed in a Securities and Exchange Commission filing that losses were mounting in a series of $83 million loans to one borrower, and a federal regulatory inquiry into the matter had begun.
By the end of the summer, founding CEO Steve Skow had been ousted along with senior lender Douglas Ballard. Turnaround specialist
Frawley was hired soon after.
Frawley proceeded to shrink the bank's balance sheet -- particularly the troubled loan portfolio -- from $1.1 billion in total assets in second quarter 2007 to $880 million in second quarter 2008.
Bank executives also courted customers' deposits to fund the bank, offering certificate of deposit rates and shedding brokered deposits or so-called "hot money."
In the weeks before the bank's failure, Frawley said he remained confident the bank could continue to operate and eventually turn itself around. The only concern, he said, was how quickly federal and state regulators would push the bank to shed bad assets.
"If they ask me to sell it all tomorrow, we'll have to close our doors," he said. "But if you give me eight to ten quarters and some time to slowly work the pig through the python, we have a chance."
But the bank's losses from its rapid growth during the first half of the decade overwhelmed Frawley's turnaround efforts.
The bank's loan problems at the time of its closing were $353 million. That figure alone is 10 times the size of the bank's Tier 1 capital -- a key statistic comprised of shareholder equity and other internal assets that shows a bank's ability to weather loan losses.
On Aug. 28, Integrity Bank said it did not expect to be profitable during any reasonable future period, and wrote-down a series of deferred tax assets worth as much as $10.6 million.
The bank had also struggled to file quarterly and annual reports because of deterioration in its overall loan portfolio, and independent auditors have been unable to complete their review of the company's 2007 financial statements.
"Pat and his team did everything possible to try to save this bank," said Walt Moeling, Powell Goldstein banking attorney and senior counsel to the board. "It just wasn't recoverable." Regions Financial operates 62 branches in metro Atlanta, with the bulk of those branches in the northern suburbs.
The bank has $2.5 billion in local deposits and 2.27 percent market share, according to the 2007 FDIC Summary of Deposits report, the most recent data available.
Its acquisition of Integrity Bank adds five branches in high-growth suburbs, experts said, and is the first major move by Regions local executive Bill Linginfelter since he joined the bank in July.
At the time, Linginfelter said the bank would be a selective player in acquiring distressed or failing banks in Atlanta to add branches to a bank that has struggled to gain a firm Atlanta foothold.

Federal Reserve BAnk

This morning I attended the quarterly economic forecast at Georgia State and guess who one of the speakers was – the President and CEO (Dennis Lockhart) of the Federal Reserve Bank of Atlanta. Although, there are many concerns about inflation, liquidity, banks, jobs, etc., I didn’t sense the level of full panic that was communicated last night. Be careful, if you consider liquidating investments. Carol F.’s advice about consulting with a tax advisor, etc. is a good one before you do anything rash, especially since we’ve already had such a significant decline in equities. Also, I do believe having more than one banking relationship is prudent. Sometime in 2010 before any recovery is the timeframe I keep hearing. Below are summaries of Dr. Dhawan’s (head of Georgia State’s Economic Forecasting Center) speech and Dennis Lockhart’s presentation, if you want to read.
Sheila

Credit Aftershocks Damage Nation's Growth Prospects; Oil Holds the Key to Fed's Next Move, Says Georgia State Forecaster
August 27, 2008 – (ATLANTA) – The aftershocks from the credit crisis, which continue to spread to other sectors, have not only put the economy into a recessionary state but also have damaged its growth prospects until 2010, according to Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. In his Forecast of the Nation, released today, Dhawan warns that any additional uptick in oil prices could put the economy further at risk and recovery further away. "Despite all of the aftershocks from the credit fallout, oil has been the wild card testing the Fed's patience," he said. "If the price of oil does not retreat below $100 per barrel by October on a sustained basis, worries of inflation will cause the Fed to raise rates much earlier than expected."Dhawan expects the price of oil will drop to an average of $89 per barrel in the fourth quarter of 2008, allowing the Fed to hold off on rate hikes until next spring. However, he anticipates that the Fed will be somewhat aggressive raising the federal funds rate by 250 basis points by mid-2010."The Fed hikes will begin even before growth catches its stride, which is a departure from the norm," he said. "But rather than waiting until job growth picks up to normal levels, the Fed will hike the federal funds rate to show it is serious about containing inflation." While Dhawan says that the Fed will be able to stave off inflation, he cautions that the fragile health of the banks will cause the economy to recover at a slow rate. "Despite efforts by the Fed and the Treasury to help bail out the financial industry, lenders still need to keep liquidity or cash on-hand to deal with charge-offs that they will have to take as loans continue to go sour," he said. "Still, some banks are on the brink of failure and it will be up to the FDIC to bail them out, and should they run short of funds, look for the government to bail out the FDIC, leaving taxpayers with the tab. Thus my forecast calls for an anemic recovery in 2009 and a below potential growth in 2010." Highlights from the Economic Forecasting Center's National Report:
· The GDP growth fails to cross the 2.0% mark until late-2009. Overall, real GDP growth for 2008 will be 1.4%, decelerating to a 0.5% rate in 2009. In 2010, real GDP will grow by 2.2%, still below the trend rate of 3.0%.

· For 2008, consumption growth will be 1.0%, before moderating to 0.3% in 2009. It will rise by 1.9% in 2010. Durable goods consumption will decline by 2.8% in 2008 and 3.7% in 2009, before experiencing a sharp 3.9% rise in 2010.

· For the year 2008, oil prices will average $106.7 per barrel, before moderating to just below $90.0 per barrel in 2009 and 2010.

· Housing starts will average 0.949 million units in 2008 and will drop to 0.900 million units in 2009. Housing starts will rise to 1.209 million units in 2010.

· For 2008, the inflation rate will average 4.3% but will moderate sharply to a 2.2% rate in 2009. In 2010, the inflation rate will average 2.0%. Meanwhile, the core CPI inflation rate will average 2.3% in 2008 and 2009, before rising mildly to 2.4% in 2010.

· The unemployment rate will average 5.5% in 2008, but it will rise to 6.3% in 2009, dropping slightly to 6.2% in 2010.

Georgia and Atlanta—Georgia's Boat Tied to National WoesGeorgia's job picture continues to look bleak despite gains in education, healthcare and government jobs during the second quarter of 2008. According to Dhawan, the problem stems from the housing downturn, which has had a negative ripple effect throughout Georgia's economy. Additionally, high gas prices and the credit crisis have added to the area's problems and, like the national economy, Georgia's growth prospects will not return until 2010.In his Forecast of Georgia and Atlanta, Dhawan says that Georgia's residential and commercial real estate sector continues to show signs of weakness, which not only impacts construction jobs but also has spread to supporting sector jobs. While future construction growth depends on what the economy's growth warrants, it is also a function of credit market conditions."Ultimately, it is the willingness of the banking sector to make new construction loans that makes future construction activity possible. The ability to finance construction in turn depends on the quality of the bank's balance sheet," says Dhawan. "Unfortunately, Georgia has been hard hit by the credit crisis with a proportion of unprofitable lending institutions currently at 25%, almost double the national rate." In addition, high gas prices are negatively impacting consumer spending and are wreaking havoc with Delta, the area's largest employer, which has already announced major cutbacks in routes and jobs.Net-net, says Dhawan, the prognosis for Georgia's growth in the coming quarters is bleak. The question is, when can the area expect to see job growth return? "I expect job losses to continue at a somewhat heavy rate for the rest of the year and anticipate a net loss of 35,300 jobs for calendar year 2008," he said. "In 2009, we'll see the decline slow to 2,600 losses before the recovery strengthens in 2010 where we can expect to see 61,700 new jobs." However, he cautions, "Like the national picture, this forecast assumes that oil prices moderate below $100 per barrel by late October and stay low."Highlights from the Economic Forecasting Center's Local Report:

· For calendar year 2008, we anticipate 35,300 net losses (14,600 premium jobs). In 2009, 13,900 job losses are expected in the first half of the year, followed by 11,300 job gains in the second half, making for 2,600 job losses (11,000 premium jobs losses). The recovery will strengthen in 2010 when 61,700 jobs will be created (12,000 premium jobs).

· Atlanta's employment growth will remain negative for the remainder of 2008 for a total loss of 20,600 jobs (8,000 premium job losses). For calendar year 2009, Atlanta will post 3,900 job gains, but 4,100 premium job losses. The recovery will strengthen in 2010 when 44,200 jobs are created (10,200 premium job gains).

· Atlanta's total housing permits will plummet by posting a 52.1% drop in 2008 after a 34.6% decline in 2007. Permit activity will again decrease at a slower rate of 5.0% in 2009 but will inch up in 2010, posting an 18.4% increase.

· Most MSAs in Georgia will exhibit slower employment growth in 2008, with Albany, Columbus, Dalton and Macon observing job losses. Only Savannah, Gainesville and Warner Robins will see any increase in employment in 2008, though increases will average below 1.0%.
Contact:
Gary McKillips, APROffice of Communications & Marketing404-413-7077 – voice678-644-9032 – cell

Dr. Rajeev Dhawandirector, Economic Forecasting Center404-413-7261 - voice404-867-2286 - cell

Inflation Beyond the Headlines
Dennis P. LockhartPresident and Chief Executive OfficerFederal Reserve Bank of AtlantaGeorgia State University J. Mack Robinson College of BusinessEconomic Outlook ConferenceAtlanta, Georgia August 27, 2008
I'm aware that Georgia State's College of Business (now the Robinson College of Business) has been convening these economic outlook conferences since at least the 1980s, when I previously lived in Atlanta. You've earned a fine reputation. I'm honored to be included in the program this morning.
The stock in trade of Federal Reserve Bank presidents is the economic outlook speech. Later this morning Rajeev Dhawan will provide his views on the outlook. Instead of competing with such a well-regarded economic forecaster, I will devote my remarks to the topic of inflation.
On August 14, the July reading of the so-called headline consumer price index was released. The 12-month inflation rate through July was measured at 5.6 percent, the highest since 1991. This is a high and worrisome number.
I've titled my talk this morning "Inflation beyond the headlines." Central bankers aren't especially known for clever wordplay, but the title was meant to suggest both a deeper treatment of the topic and a look at the phenomenon of inflation beyond so-called headline inflation: the inflation you and I experience as consumers. I plan to cover the current state of inflation in our economy, some instructional information and views on inflation analytics, and my near-term outlook for inflation. I must emphasize I am speaking only for myself. The views I will express are mine alone and not necessarily those of my colleagues on the Federal Open Market Committee (FOMC).
What do we mean by inflation?Let me begin by posing the simple question: What do we mean by "inflation"? The answer to that simple question isn't as simple as it may seem.
The popular treatment of inflation in our sound bite society risks confusing inflation with relative price movements and the cost of living. By cost of living, I'm referring to the costs you and I incur to maintain our level of consumption of various goods and services including essential items such as food, gasoline, and lodging.
Relative price movements occur continuously in an economy as individual prices react to market forces affecting that good or service. Neither relative price movements nor sustained high living costs constitute inflation as economists commonly use the term.
Up front, I want to be clear that I'm well aware recent cost increases have hurt many households and businesses, especially those heavily dependent on transportation. Believe me, I'm not happy about paying $3.80 for a gallon of gasoline, and I know you're not either.
In the past three months, costs faced by the average urban family as measured by the consumer price index (CPI) have risen at an annualized rate of more than 10 percent. Food and energy accounted for about two-thirds of that rise. But the higher cost of maintaining consumption—while certainly painful—is not exactly the same thing as higher inflation. Let me explain.
Early in the last century, the economist Irving Fisher offered a vivid metaphor for the movement of individual costs relative to the aggregate level of inflation. The general inflation, he said, can be thought of as the movement of the swarm of bees. He likened the relative movement of individual prices (both up and down) to the movement of individual bees within the swarm. Now, I admit that Fisher's analogy may be simplistic. Not all prices move in the same direction, but consumers tend to pay greater attention to rising prices than those that are falling. Recently, the average price of personal computing has declined while energy and food costs have increased.
Monetary policy discussions are focused on the movement over time of the swarm, or the aggregate price level. That is where monetary policy holds its influence over prices.
To keep track of overall inflation there are two commonly used measures: the consumer price index, or CPI, and the personal consumption expenditure price index, or PCE price index. Both measures are expenditure-weighted averages of price changes for a notional basket of goods and services. They seldom mirror an individual consumer's personal experience.
The differences between the two measures are largely conceptual. For instance, the CPI measure is based on an average consumer's out-of-pocket expenditure while the PCE index is based on the total cost of the expenditure. So, while the total cost of pharmaceutical drugs is counted in the PCE index, only the consumer's insurance co-pay is counted in the CPI.
Also, the PCE price index updates the consumer basket continuously over time while the CPI is fixed every two years. By this method, the PCE better reflects the tendency for substitution, such as buying more chicken if the price of beef goes up.
In my view, the compositional differences don't clearly favor one index versus the other. While the level of the inflation rate measured by the two indices differs at any point in time, over the short term both generally give the same signal about the pattern of inflation.
Taken together, measures of both CPI and PCE inflation are important tools to help get a fix on the overall inflation picture, giving us a sense of whether the inflation is persistent or transitory along with other information needed to make informed policy decisions.
At times, large movements in some component prices may mask the underlying inflation trends in the CPI and PCE indexes. For this reason, measures of core inflation can be useful tools. Measures of core inflation typically remove volatile food and energy costs from the overall CPI or PCE number.
Insights can be drawn from some alternative measurements of core inflation. For instance, the Cleveland Fed's median CPI and the Dallas Fed's trimmed mean PCE index calculate inflation after stripping out extreme price changes—both high and low. Other approaches to refine core measures of inflation involve using statistical techniques.
Before I go any further, I will say that I agree with those who say core inflation measures in isolation are an inadequate approach to determining the direction of overall price changes. Like you, I ultimately care about the trend rate of overall inflation, which I believe is ultimately the appropriate object of monetary policy.
Upward movements of individual prices may take a variety of forms. For instance, smaller portions or downgraded quality for the same price, removal of service or warranty features accompanying a product, changes in packaging where the package has utility—all these represent individual item inflation. They are called quality changes. The agencies that compute the CPI and PCE indexes work to account for these quality changes.
Attempts to measure the aggregate rate of price change—no matter how sophisticated—remain imperfect. As a result, when it comes to measuring inflation, judgment is needed to distinguish persistent price movements that underlie overall inflation from the relative price adjustments. Separating the inflation signal from noise involves much uncertainty—especially when making decisions in real time. Discerning accurately the underlying trend is difficult. It is essential for those of us who have responsibility for responding to these trends to use a wide variety of core measures and inflation projections to make the most informed judgment we can.
Today's U.S. inflationWith that, let me turn to the current inflation situation. No matter how you measure it, the aggregate inflation we are experiencing in the United States at the moment is uncomfortably high. Over the first half of this year, the CPI has risen at an annualized rate of nearly 5.5 percent. Over the same period, the PCE index has risen at an annualized rate of 4.5 percent. With the surge of energy prices in early summer, the annualized CPI for July was the highest in 17 years.
Also, considering the global context, I should add that consumer inflation measures in most parts of the world also have moved higher in recent months. Headline inflation rose to above 4 percent in major developed economies in July. In developing economies, inflation has been running at the highest rate since the start of the decade. On the positive side, inflation in China has declined in recent months to around 6 percent from a peak of 9 percent at the beginning of the year.
Measures of core inflation in the United States suggest that overall price pressures have been on the rise, perhaps because higher commodities costs have begun to affect prices paid by consumers and businesses across a broader range of other goods and services. In July, core CPI inflation on a year-over-year basis increased 2.5 percent—up from an average annual rate last year of 2.3 percent.
How did we get here? The mechanical answer, of course, is the outsized rise of particularly prominent prices in the consumption basket, notably food and energy. The rate of change in the food and beverages component of the CPI, which accounts for about 15 percent of the total market basket, rose at an annual rate of slightly more than 6.5 percent in the first half of this year.
Over this time, the fuel and utilities piece of housing prices increased at an annual pace of nearly 21 percent and motor fuel by about 32 percent. In the CPI these two components account for more than 10 percent of total household expenditure.
I expect the recent decline in oil prices will begin to reverse some of the pressures we have seen on overall inflation in the first half of the year. But the underlying global supply pressures remain tight, and demand pressures remain relatively high. As such, any relief will likely be only partial.
Furthermore, some government estimates suggest little respite from food price hikes in the near term. At this point, it seems quite probable that PCE index inflation this calendar year will clock in at more than 3.5 percent and the CPI somewhere north of 4 percent—an improvement over the first half of the year, and trending in the right direction, but not numbers I would be comfortable with over the longer term.
Outlook and risksAlthough recent measures of inflation are higher than I would like to see, I would say that recent price increases are more likely to be transitory than persistent. I expect that CPI inflation will peak near the July level of 5.6 percent. By comparison, in March 1980 the CPI peaked at 14.8 percent.
Let me elaborate in the context of current Fed policy. On August 5 the FOMC voted to leave the fed funds rate at 2 percent and issued the following statement: "Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."
I concur with that view and believe current Fed policy is consistent with an easing in overall inflation given the dynamics of the economy. With weak growth and financial market strains, I believe the most likely outcome is that both headline and core inflation will diminish over the rest of 2008 and into next year as the temporary effects of energy and food price increases abate. Note that my outlook does not require that food and energy prices fall, but simply that their rates of increase moderate.
Some of you may wonder why a central bank would allow higher energy prices to push up measured inflation even in the short run. Let me respond to that question by posing a counterfactual argument.
Suppose that in the current environment of weakening economic growth the FOMC were to lean heavily against the recent run-up in energy prices. Because monetary policy necessarily works on prices in the aggregate—the swarm—tightening policy would lower the dollar value of all prices, including oil. Unless monetary policy can materially affect demand and supply fundamentals in global oil markets, energy would still be expensive relative to other goods and services. Also, energy would still be expensive relative to wages whose dollar values likely would decline because of policy actions that restricted growth in the entire economy.
It might be possible for restrictive monetary policy to slow the economy enough to reduce the demand for energy and soften prices overall as a consequence. I doubt, however, that many people would be happy with attempts to solve the problem of high oil prices through policies that would deliberately reduce the real incomes of American consumers and wage-earners.
Why expectations matterWith my inflation outlook, I do not mean to dismiss the very real threats to Fed objectives. In today's geopolitical environment, for instance, there's always the potential of a severe energy price shock.
Also, my forecast could be wrong. If overall prices do not moderate in the near term as I expect, inflation expectations could become unmoored.
In the long run, the crux of the problem is not the elevated overall rate of inflation per se. It is the prospect that these elevated rates of inflation persist to such an extent that they become embedded in expectations and mainstreamed into the price and wage setting decisions of businesses, workers, and consumers.
In such an event, the decisions required to serve the FOMC's dual mandate of price stability and maximum sustainable growth would become very difficult indeed. We need not look back many years to recall the seriousness of unfettered inflation expectations. During the so-called Great Inflation between 1965 and 1984, the average CPI inflation rate for this extended period was 6.3 percent and PCE index averaged 5.6 percent.
This persistent run-up in prices was reversed only after the Fed raised the fed funds rate to extremely high levels. Victory was achieved at great cost to the real economy and only after inflation expectations were brought back under control. Such an episode need not recur—even with temporarily elevated prices—if the Fed acts as needed to keep inflation expectations anchored.
There are three commonly cited measures for inflation expectations: economic forecasts, such as the ones you will be hearing at this conference, surveys of households, and financial data such as the term structure of interest rates. One example of the latter is Treasury Inflation-Protected Securities, or TIPS.
Taken as a whole, these measures suggest inflation expectations may have risen modestly—but not by a material degree. By that, I mean not sufficient for me to think Fed policies have been off target with respect to the central bank responsibility for price stability. But like measurements of inflation, measurements of inflation expectations also are far from perfect. For instance, surveys of household inflation expectations can be criticized as flawed stemming from the way questions are posed and the size and selection of the sample. Further, because financial market data reflect more than inflation expectations, these data are not always reliable indicators.
Some fear inflation expectations are on the move in reaction to recent experience. As suggested a moment ago, I don't hold that view. But I feel that it's important to acknowledge that not enough is known about transitional periods from one state of expectations to another. Even though we're measuring expectations, there's an element of looking back to gauge their essence. I do not dismiss the view that we run the risk that by the time change in expectations is clear, it's too late. In my view, we need to know more about how and why inflation expectations shift.
That said, years of hard work by economists have gone into developing the measures of inflation expectations we currently track. And I have challenged our Atlanta Fed research staff to build on this progress.
Protecting hard-won credibilityTo recap, I acknowledge that current prices—no matter how measured—have been elevated. Thankfully, commodity prices appear to have declined somewhat, though there is no certainty that they will continue to be better behaved. And, some pass through has unquestionably occurred.
In this context, with higher commodity costs causing painful increases in the cost of living, I believe we should not let the sting of individual bees divert our attention from the direction of the swarm. I believe the Fed's central concern is evidence of broad-based, persistent, and increasingly institutionalized upward price pressures.
Like many forecasts, the Atlanta Fed's forecast shows the inflation trend moving gradually lower as general economic weakness eases some price pressures. My belief is that the Fed has undertaken tactically prudent actions to help move the economy through a difficult transition in line with the larger strategic goals of sustainable growth, low and stable inflation over the long term, and financial stability. Also, let me emphasize that I am mindful of today's elevated risks and am prepared at any point to change tactics to ensure inflation expectations do not become unanchored.
Further, I'm acutely aware that the current FOMC has inherited the inflation policy credibility that was hard won by our predecessors. One thing that has impressed me since taking my position last year is the seriousness with which my colleagues approach the duty to protect that legacy. I am confident that the Federal Reserve's institutional commitment to maintaining low and stable inflation will prevail.
Thank you. I would be happy to respond to your questions and comments.

The largest business school in the South and part of a major research institution, the J. Mack Robinson College of Business at Georgia State University is located in Atlanta, an epicenter of business and a gateway to the world. With programs on four continents and students from 150 countries, the College is both worldwide and world class. Its part-time MBA program is ranked number five in the nation and has been in the top 10 for 13 consecutive years. The College has 200 faculty, 7,400 students and 65,000 alumni. Noted for an emphasis on educating leaders, the Robinson College and Georgia State have produced more of Georgia's top executives with graduate degrees than any other school in the nation.

Energy Stocks

Energy stocks moved higher today as Tropical Storm Gustav slowly moved toward oil-and-gas production facilities in the Gulf of Mexico. Financial stocks rallied, too, and stocks overall ended the day with modest gains.

The Dow Jones industrials, once up as much as 141 points, closed with a 90-point gain, or 0.8%, at 11,503. The Standard & Poor's 500 Index gained 10 points, 0.8%, to 1,282. And the Nasdaq Composite Index finished up 20 points, 0.9%, to 2,382.

But volume was extremely light because many investors and traders were on vacation. New York Stock Exchange volume was less than 800 million shares; 1.6 billion shares is normal. Nasdaq volume barely hit 1.57 billion shares, well below the 2.2 billion-share average.
Energy was the strongest sector of the market as crude oil rose to $118.15 a barrel, up $1.88 from Tuesday. Most weather forecasts said Gustav would intensify back into a Category 3 hurricane and make landfall Monday along the Gulf Coast of Mississippi or Louisiana.
The Gulf is home to about one-fifth of all U.S. oil production and about 16% of the nation's natural-gas output, and any disruption to operations there would push oil, natural-gas and gasoline prices higher.

The Amex Oil Index ($XOI.X) rose 1.9% to 1,343 today. The Amex Natural Gas Index ($XNG.X) was up 1.4% to 617, and the Philadelphia Oil Service Sector Index ($OSX.X) was 1.1% to 303.

Oil refiner Valero (VLO, news, msgs) jumped 4.2% to $35.02. Chevron (CVX, news, msgs) rose 1% to $86.62.

Adding a little buying pressure to energy prices was the weekly supply data from the Energy Department. Oil supplies fell by 100,000 barrels last week; analysts had expected oil supplies to increase by 1 million barrels.

Gasoline supplies fell by 1.2 million barrels, and distillate supplies were unchanged.