Starbucks, the nation’s left-wing-nutjob-8-dollars-a-cup-of-joe shop, has finally figured out the economy is slowing down. I suppose when gas costs more than four bucks a gallon - getting that mocha frappachino for six bucks doesn’t seem like such a good idea. Starbucks Corp. announced today it will close 600 company-operated stores in the next year. The move marks a rather dramatic downsizing of the company’s stores - closing close to a fifth of all stores it opened since 2006.

Some are attributing the mocha-meltdown to a “faltering economy.” I would just point out that for all this talk about recession - we’re still not there yet. Recession is defined by economists as two quarters of contracting GDP output. We have not yet experienced that. We have experienced significantly slower growth than we’re used to the last four or so quarters, and in this country, that’s just as bad for many people. But recession? Not yet.

I didn’t watch Olberman tonight - but I’m sure he had a brain aneurism blaming Bush for destroying Starbucks. It’s the war in Iraq that has caused the economy to falter, and now, my left-wing-nuta-chino wih half-half-decaf-global warming footrpint reduced calorie coffee isn’t profitable. Actually, knowing Olberman, he’s probably blaming Haliburton.

But the reality is that it isn’t the weakening economy, or Bush, or Haliburton that blew up Starbucks. The less crazed Dunkin’ Donuts continues to do well - selling coffee, oh and here’s a novel idea, donuts too. Moreover, I haven’t noticed local cafe’s all of a sudden boarding up and moving out in the DC area. So what happened to poor old Starbucks?

Starbucks was a victim of its own greed and stupidity. Many of the slated stores are essentially “in their own pocket” with other Starbucks. I mean - here in DC alone, I did a quick search on Google and there were 18 Starbucks shops in the DC “proper”. I’m not talking about the DC area - Fairfax, Prince Georges, etc., I’m talking about only in the “diamond.” I mean, you can hardly go a block in DC without running into Starbucks!

DC has a population of about 600 thousand. That means there was one store for about every 33 thousand people. Consdering every man, woman, and child in DC does not drink coffee - especially the kids - figure that’s one store realistically per every 15 thousand. Compare this to someone like Wal-Mart. They have 20 stores from Indian Head, VA, through DC to Balitmore, from Annapolis to  Chantilly, VA. That’s an area of roughly 3.5 MILLION people. That means that there is one Wal-Mart per 175,000 greater-DC area residents. Considering people think of Wal-Mart as being “everywhere,” - reality is, if Starbucks tried to cover the same area as Wal-Mart, they’d need 106 stores - or five times the number Wal-Mart has. Now, while there is a good deal of commuting in to DC - I don’t think the District goes from 500 thousand to 3 million residents during the day.

I’m sorry - but who the heck drinks that much coffee that we need a Starbucks on every block in DC?

It’s not the recession that is killing Starbucks, it’s the open-up a store every 30 feet management style they’ve been following. Everything is all fine and rosey, till people wonder, “hey, what the hell does my cup of joe cost as much as my commute to work!” combined with - wow look I can see three Starbucks while sitting in Starbucks drinking my over-priced cup of mocha-lefty-chino - that forced this decision.

DETROIT (AP) — General Motors Corp. struggled to a $3.3 billion first-quarter loss, due in part to a weak U.S. market, a strike at a major parts supplier and plummeting sales of sport utility vehicles and pickups.

The nation’s biggest automaker also cut its industrywide U.S. sales outlook for the year. The company disclosed earlier this week it was cutting production of some of its slow-selling trucks and SUVs.

GM’s loss reported Wednesday for the January-March period amounted to $5.74 per share and also reflected one-time charges. It compares with a profit of $62 million, or 11 cents per share, in the first quarter of 2007.

The company said a two-month strike at American Axle and Manufacturing Holdings Inc. has cost it $800 million and 100,000 vehicles. The strike has affected 30 GM plants.

In light of the results, GM revised its U.S. sales outlook for the year. The Detroit automaker now expects total U.S. sales in the high 15-million range, down from the low 16-million range at the beginning of this year.

“We want to run our business conservatively. We want to be realistic,” said Ray Young, GM’s executive vice president and chief financial officer.

Young said GM expects the second quarter to be a tough one for the industry. He said GM continues to predict a recovery in the second half of the year, although it will not be as robust as the company believed at the beginning of this year.

GM’s loss included a $1.45 billion charge to reflect a change in the value of GM’s interest in GMAC Financial Services and $731 million to increase GM’s liability in Delphi Corp.’s ongoing bankruptcy.

Excluding the one-time items, GM lost $350 million, or 62 cents per share, beating Wall Street’s expectations. Analysts surveyed by Thomson Financial had expected a loss of $1.60 per share.

Its shares rose 60 cents, or 2.8 percent, to $21.80 in premarket trading.

GM’s total revenue for the quarter was $42.7 billion, down from $43.4 billion a year ago. GM said revenues were up 20 percent outside North America thanks to strong growth in China, Russia, Brazil and India. Total revenue was hurt by the slowdown in North America and losses at GMAC.

Young said analysts may be underestimating GM’s overseas growth. He also said GM is making progress in cutting costs in North America. Young said the company isn’t giving any earnings guidance in the near term.

“The North American turnaround is occurring,” he said.

GM lost $276 million in the first quarter due to its minority stake in GMAC, which was hurt by losses in its ResCap residential mortgage division. Young said GM revalued its stake in GMAC because it doesn’t expect the mortgage market to recover soon.

GM lost $812 million in North America, compared with a loss of $208 million in the year-ago quarter. Its U.S. market share remained flat at 22 percent. The company said earlier this week that it is cutting production of some trucks and SUVs at four U.S. plants, resulting in 3,500 layoffs.

GM sold 2.25 million vehicles worldwide in the first quarter, down less than 1 percent from a year ago. GM said a record 64 percent of those sales came outside the U.S.

“We continue to leverage our global product portfolio to take advantage of tremendous growth in key emerging markets, while at the same time taking the appropriate actions to deal with the challenging economic conditions in the U.S.,” GM Chairman and Chief Executive Officer Rick Wagoner said in a statement.

Lehman beat expectations this morning in earnings:

AP
Lehman Profit Falls 57 Percent
Tuesday March 18, 9:17 am ET
By Stephen Bernard, AP Business Writer

Lehman Brothers Earns $489 Million During First Quarter, Beating Analyst Expectations

NEW YORK (AP) — Investment bank Lehman Brothers Holdings Inc. said Tuesday its fiscal first-quarter earnings fell 57 percent due to a steep decline in its capital markets business, but its shares soared as it easily beat Wall Street forecasts.Net income for the quarter ending Feb. 29 fell to $489 million, or 81 cents per share, compared with earnings of $1.15 billion, or $1.96 per share, during the same quarter last year. Lehman’s revenue fell 31 percent to $3.5 billion during the first quarter.

Analysts polled by Thomson Financial, on average, forecast earnings of 72 cents per share for the quarter on revenue of $3.35 billion.

Lehman Brothers took a $1.8 billion write-down during the first quarter because of deterioration in the credit markets. It had taken about $2.13 billion in write-downs in the previous two quarters combined, while financial services firms have taken about $160 billion in write-downs since the credit markets began to tighten.

Capital markets revenue fell 52 percent to $1.7 billion because of continued deterioration of the credit and mortgage markets. Gains in products like high-grade corporate debt and foreign exchanges were more than offset by investors’ lack of appetite for riskier products such as residential and commercial mortgage securities and acquisition finance.

Lehman’s chairman and chief executive, Richard Fuld, said in a statement the current credit environment remains “challenging,” but the bank maintains a strong capital base and liquidity position.

Lehman has $34 billion in available liquidity at its holding company.

Liquidity problems among investment banks have been a major question in recent days. Lehman’s competitor Bear Stearns Cos. was forced to sell itself Sunday for about $2 per share in order to avoid bankruptcy. The sale came just days after its liquidity evaporated in a matter of hours, as investors and lenders worried over the company’s investments in risky debt.

As mortgages increasingly defaulted in 2007, investors shied away from bonds backed by the risky loans for fear of the bonds defaulting. That lack of investor appetite led banks to cut the value of their holdings, and has severely reduced investment banks’ capital markets and fixed income business.

Investment management operations at Lehman helped lessen the blow of the weakening credit markets. Lehman’s investment management division posted record revenue of $968 million, 39 percent more than the year-ago period.

Shares of Lehman rose 17.8 percent to $37.40 in premarket trading.

Today, shares of Lehman fell dramatically on rumors that they might be “next” in losing liquidity among the Wall Street brokerage houses. The attached story ran today on the wires:

AP
Lehman Brothers Drops on Investor Fears
Monday March 17, 3:09 pm ET

Lehman Brothers Plunges; Analysts Doubt the Investment Bank Is Next Credit Crisis Victim NEW YORK (AP) — Lehman Brothers Holdings Inc. lost nearly half its value on Monday, as the investment bank was swept up in a crisis of confidence following news of JPMorgan & Chase’s government-backed takeover of Bear Stearns.In afternoon trading, Lehman shares plunged $14.83, or 37.8 percent, to $24.43. At one point on the day the stock fell to $20.25, its lowest since June 2000. The stock plunge slashed Lehman’s market capitalization to $12.96 billion, compared with about $20.8 billion at the close of trading on Friday.

As Wall Street absorbs Bear Stearns’ sudden and dramatic downfall, investor attention has turned to the question of who might be next. Lehman, which has substantial exposure to the subprime debt that brought down Bear Stearns, is the target of much of that speculation. The bank is scheduled to report its first-quarter earnings Tuesday.

Fears about Lehman were stoked by news reports that DBS Group Holdings Ltd., Southeast Asia’s largest bank, instructed traders in an e-mail early Monday not to do business with the bank. According to Dow Jones Newswires, DBS Group later told traders to disregard the earlier e-mail. Lehman denied there were any problems with DBS.

Lehman Chief Executive Richard Fuld denied Monday that the firm was facing similar liquidity issues to Bear Stearns and, in several research notes released Monday, analysts tended to agree with that assessment.

Buckingham Research Group analyst James Mitchell said Bear Stearns “was in a somewhat uniquely challenging situation when the market’s confidence in the company vanished,” as compared to other investment banks.

Specifically, analysts noted that Lehman’s liquidity position is the strongest of the group.

The liquidity review, Mitchell said, “does seem to point to a somewhat unique failure at Bear Stearns, which gives us some comfort that other firms are in relatively good position.”

Mitchell also said Bear going away would free up market share for competitors.

“Lehman is not Bear,” said Deutsche Bank analyst Mike Mayo, who maintained the company’s “Buy” rating. “The industry issue seems more liquidity than solvency, and Lehman protected itself more fully after it’s problems similar to (Bear) in 1998,” Mayo said.

UBS Investment Research analyst Glenn Schorr downgraded Lehman shares to “Neutral” from “Buy” along with other companies in the sector, reflecting the perception that it may be “next on the list” — though he was quick to offer a caveat.

“For what it’s worth,” Schorr said, “we think Lehman is an excellent company that is far more diversified (by product & geography) than Bear, has a deeper capital base and far better liquidity position, and has done a great job managing risk in this incredibly challenging environment.”

NEW YORK — JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million - or $2 a share - a stunning collapse for one of the world’s largest and most venerable investment banks.

The last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system.

The Federal Reserve and the U.S. government swiftly approved the all-stock deal, showing the urgency of completing the deal before world markets opened.

Bear Stearns shares close Friday at $30 a share. At their peak, the shares traded at $159.36.

The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns’ less liquid assets. Risky bets on securities tied to subprime mortgages _ loans given to customers with poor credit history _ crippled Bear Stearns, the nations’ fifth-largest investment bank.

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank’s official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.

The announcements from both the Fed and JPMorgan come ahead of what some analysts expected to be a brutal day for global stocks. Already, before the announcements, New Zealand’s markets opened drastically lower _ then began to recover after the deal was unveiled.

“This is going to go down in very historic terms,” said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. “This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we’re probably heading into a recession.”

A collapse of Bear Stearns could have created a further crisis of confidence in world financial markets amid a deepening credit crunch. JPMorgan’s acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago.

The deal marked a 93.3 percent discount to Bear Stearns’ market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.

“The past week has been an incredibly difficult time for Bear Stearns,” said Bear Stearns Chief Executive Alan Schwartz in a statement. “This represents the best outcome for all of our constituencies based upon the current circumstances.”

Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world’s largest investments bank _ it was a prop for the U.S. economy and the global financial system. An outright collapse could cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.

The government, led by the Treasury Department and the Fed, was reported to have closely monitored the talks between JPMorgan and Bear Stearns. Treasury Secretary Henry Paulson, former chief executive of Goldman Sachs Group Inc., “has been in nearly continuous consultations all weekend,” said Brookly McLaughlin, a Treasury Department spokeswoman.

After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government’s guarantee that JPMorgan would not suffer any losses on the deal.

This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed “too big to fail.” On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.

Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities _ and what was once a cash cow turned into the investment bank’s undoing.

In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.

The funds’ collapse and subsequent problems in the credit markets called into question Bear Stearns’ ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.

Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.

Cayne took over from the legendary Alan “Ace” Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called “Memos from the Chairman.”

Before Greenberg’s ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.

The company was opened in 1923 as an equity trading shop. Today, it has subsidiaries providing a wide array of financial services products for individuals, corporations, institutions and governments. Generally, it provides capital markets, wealth management and global clearing services to its customers.

____

AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.