Monthly Archives: June 2008

Circuit City Stores Soon To Slip The Surly Bonds Of Earth

High Flight

Oh! I have slipped the surly bonds of Earth
And danced the skies on laughter-silvered wings;
Sunward I’ve climbed and joined the tumbling mirth of sun-split clouds, – and done a hundred things
You have not dreamed of wheeled and soared and swung
High in the sunlit silence. Hov’ring there,
I’ve chased the shouting wind along, and flung
My eager craft through footless falls of air…
Up, up the long, delirious, burning blue
I’ve topped the wind-swept heights with easy grace
Where never lark, nor eer eagle flew –
And, while with silent lifting mind I’ve trod
The high, untrespassed sanctity of space,
Put out my hand and touched the face of God.

– John Gillespie Magee, R.C.A.F

(circa 1941)

Now that we’ve set the mood, we regret to inform you that reports of Circuit City’s demise have been greatly exaggerated. They are still afloat, albeit pretty much dead-in-the-water. Even the rats have been seen abandoning ship. See our previous posts here and here, about the darling of the electronics retailing world.

Management at Circuit City is bailing water, but their ship is sinking. Amazingly, there are many people with a stake in Circuit City (such as the shareholders) who actually believe they can convince a potential suitor that the schooner Schoonover has some market value left (see “A (Fire) Sale For Circuit City?” – Business Week, June 24, 2008).

We think they should scuttle the ship.

Who in their right mind would pay a dime for Circuit City? In our opinion, the only value that remains is the inventory on their shelves. Circuit City is drowning in a sea of red ink (we couldn’t resist one final nautical reference). Same store sales were down 12% for the latest quarter, compared to a year ago, and they lost another $165 million. A liquidation sale would be the best and fastest solution to recoup at least some shareholder value.

We’re amazed Circuit City Stores haven’t had the opportunity yet, but they should be able to “touch the face of God” anytime now.

– Routing By Rumor

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The $10 Gallon Of Gasoline Is Possible, But They Still Won’t Wash Your Windshield !

How high will the price of a gallon of gasoline go? Regular grade gasoline is at or above $4.00 a gallon across the United States now, and crude oil is hovering in the $135 a barrel range. In fact, gasoline is close to $5.00 a gallon in some areas, and diesel fuel is averaging just about $5.00 a gallon across the nation.

At these prices, you’d think a whole squadron of singing “Texaco men” would descend on your car when you pull into the service station, cleaning your windshield, checking your tire pressure and oil level and polishing your headlights. As the jingle promised, “You can trust your car to the man who wears the star… The big, red Texaco star” (or maybe it was “the big, bright Texaco star”). Today though, all you’re likely to find at your local gas station are self-service pumps. If you’re lucky enough to find an air hose to inflate your tires, you’ll probably have to pay for the air and do it yourself.

U.S. DOE EIA\'s Gasoline Price Graph

This gasoline price graph is linked from this U.S. Dept of Energy EIA page, and

should display their current data. For EIA’s Diesel Fuel price history, click here.

We have previously questioned what a flareup in Middle East tensions might do to the price of crude oil. In today’s news, there was speculation that an Israeli military exercise earlier this month may have been a not too subtle hint that they may be preparing to (or at least want to appear to be preparing to) attack nuclear facilities in Iran.

There has been speculation that if Iran reacted to an attack by blockading shipping in the Strait of Hormuz, the price of crude oil on the world market could quickly hit $300 a barrel. The Strait of Hormuz is a 21-mile-wide strategically important body of water between Iran on the North, and the United Arab Emirates and Oman on the South. It is the only shipping route for much of the oil exported from the Persian Gulf.

Just how serious is the threat of an attack on Iran? Mohamed ElBaradei, head of the United Nations’ International Atomic Energy Agency, said in an Interview on Arab television on June 21st, that “any military strike on Iran could turn the Mideast to a ball of fire” (see CNN article). This raises the possibility that the United States, the United Nations, or an international coalition might take military action to keep the Strait of Hormuz open to shipping to keep oil flowing.

The brilliant mathematicians at RoutingByRumor (they stay in our ivory tower) figure that a $300 barrel of crude oil would equate to a gallon of gasoline in the $10 to $12 range. That is, if you are able to buy it at all. Could you imagine the prospect of a $200.00 fill-up at your local gas station? We think the oil companies might have to start using armored cars to deliver the gasoline to their stations. Carjackings might become commonplace, not for the vehicle, but for the contents of it’s gas tank. Imagine what these stratospheric fuel prices would do to the American economy, which is already hurting because of the price of oil.

What we think future gasoline deliveries might look like !

For many Americans, we think gasoline at $10.00 a gallon would quite literally make it too expensive to commute to work (unless they are lucky enough to be driving one of these vehicles). Many Americans without access to public transportation would simply be better off staying home. Imagine what $10.00 gasoline will do to food prices, already spiraling out of control because of the current price of crude oil. People unfortunate enough to have oil heat will be unable to heat their homes.

So there you have it… Record high gasoline prices, military posturing by Israel towards Iran, warnings of an apocalyptic conflagration in the Mideast, and the supply of crude oil from the region hanging in the balance. Things do not look good for oil or gasoline prices or an uninterrupted supply.

You know, that old pair of inline skates in the attic, and that rusty old Schwinn in the garage are looking better every day now. Or maybe we will get a Delorean like the one from Back To The Future, with a “Mr. Fusion” Home Energy Reactor that can run on banana peels and half-empty cans of beer.

Dr. Emmett Brown (Christopher Lloyd) fuels up his Delorean’s fusion

reactor with banana peels and beer, in Back To The Future


– Routing By Rumor

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The Commodity Crisis Du Jour – Gasoline… Rice… Now Corn. What’s Next ?

Jerry Edle, left, and Dave Lanz keep an eye on a large
propane tank which they are towing through a flooded cornfield,
in Oakville, Iowa, Monday, June 16, 2008.  The tank floated away
during flooding. (from - AP Photo/Sue Ogrocki)

As if the American economy and the American consumer weren’t being pinched enough by $4.00 to $5.00 a gallon gasoline prices, here comes another big hit.

The flooding in the Midwest will have a major impact on corn prices (see this article), corn supply, and a ripple effect that will be felt in almost all food categories, from breakfast cereals to meat and poultry, to soft drinks and every other food item that contains corn or corn-derived ingredients. Examples of important corn-derived products are corn oil and high fructose corn syrup. They’re used to produce everything from margarine and soda pop, to french fries to bakery items. And rising prices and shortages of corn-derived ethanol will simply fuel higher gasoline prices. Ethanol production was already putting a strain on corn supplies and driving up the price of corn even before the flooding in America’s corn belt impacted this year’s crop.

A police officer \

A police officer demonstrates his finely honed public
relations skills, and welcomes home a resident of
flood ravaged Cedar Rapids, Iowa (read story)
(AP photo/USAToday by Seth Wenig - Caption by RoutingByRumor)

Just like the rising price of crude oil, rising prices for corn will have an almost immediate impact on the cost of many of the things you buy. In fact, corn probably plays a more important role in the food chain than wheat, rice, oats, or any other grain.

If you thought the size of the box of your favorite breakfast cereal was shrinking, you ain’t seen nothing yet. If corn prices go through the roof, you’ll need a microscope to find your cereal boxes. Maybe we’ll switch to shredded wheat.

We expect that in addition to seeing rationing or purchase limits on rice at the supermarket, you’ll soon see shortages and rationing of corn and products containing corn as a major ingredient.

Better start stockpiling the Doritos and the Corn Pops.

– Routing By Rumor

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What’s Wrong With This Picture ?

credit: The New York Times / Sandy Huffaker

As just about everyone whose body temperature is above room temperature knows by now, gasoline prices have gone through the roof. You pretty much expect to see even higher prices each time you pass a gas station.

Most of us wonder who it is that is profiting from these spiraling prices. Many of us expect to see gas shortages, long gas lines, and gas rationing pretty soon. At the same time, station owners are crying poverty, claiming they make only pennies on each gallon of gas sold.

Then would someone please explain the prices in the above photo, from this New York Times article published May 24, 2008 ? We are hesitant to use the term “price gouging”, but there doesn’t seem to be any plausible explanation for the price differential between the “credit” and “full serve” pricing at this Union 76 station in La Jolla, California (The Union 76 brand is owned by ConocoPhillips). While not clear from the photo, we believe that the “credit price” implies self-service. In fact, why in the world would the credit card price be lower than paying cash, in the first place, self-service or not ? And why would gas at the full service pump be up to $1.20 a gallon more expensive ? Something stinks in La Jolla, and we don’t think it’s the MTBE in the gas. Do supermarkets that have self-service checkout lanes charge $1.00 more per item if you pay at a register with a real live honest-to-goodness cashier ?

Here in the Northeast U.S., gas stations generally set a single price for gasoline, regardless of whether you pay with cash or credit card. If a station differentiates between self-service and full-service (which is a misnomer anyway), it is generally a few cents a gallon.

While we’re on the subject of “full service”, when was the last time a gas station offered to check your tire pressure, oil level, coolant level, etc., or wash your windshield ? Full service my foot. We doubt most of the gas jockeys working at these stations would know how to open your hood, much less find your dipstick. Most of the time, you’re lucky if they can find where to insert the gas nozzle, and if they speak English. We wouldn’t pay one cent more for their supposed “full service”.

ExxonMobil just announced that they will be selling all of their company-owned gas stations to their distributors or to other buyers, because there’s no money in the retailing end of the business. Well, when you can make record-setting obscene profit by refining the product, we suppose you might loose interest in the lower profit parts of the business. (It’s sort of like why bank robbers never demand coins, preferring the paper money instead.) Maybe ExxonMobil should use the price model that Union 76 is using at the above station. If they could add up to $1.20 profit per gallon to their sales, we suspect that owning the stations suddenly becomes very profitable indeed !

Getting back to our original question of “What’s wrong with this picture?” we think there are many things wrong on many levels. Why is gasoline $4.00 or $5.00 a gallon, and climbing? Why hasn’t the United States done more to lessen our dependence on foreign oil? Why is this country in love with gas-guzzling vehicles? (although that is starting to change). Why are the big oil companies allowed to rake in record profits, while much of America is hurting from the spiraling cost of energy? Why aren’t we seeing more government mandates or inducements to effect energy conservation, such as carpooling, discounts on mass transit fares, tax breaks to employers who encourage telecommuting, restrictions on the use of non-essential lighting, etc? (When there’s a water shortage, restrictions are put in place on non-essential water use. We think the same should be done regarding non-essential energy use, especially by commercial users.) How about giving free bicycles or scooters (or tax breaks) to city-dwellers (or anyone) who pledge to go car-free at least one day a week?

Oh, and does anybody actually opt for the “full serve” pumps at this, or any other Union 76 station ?

– Routing By Rumor

P.S. – Another suspicious thing about the prices displayed in the above photo is that all the prices are in the form $ xx9.9 ! While it is customary for gas retailers to always tack on that 9/10 of a cent, it looks like some retailers, this station included, have adopted the practice of tacking on 9.9 cents to everything. We guess the next logical step is to go to the $ x99.9 pricing model, where all grades of gas will sell for $4.99, $5.99, $6.99 a gallon, etc. Why bother raising the price by 10 cents or 20 cents every couple of days. Just start raising it in one-dollar-a-gallon increments.

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CVS / Pharmacy Stores Win First Prize In The Shrinking Toilet Paper Contest !

Quite honestly, it shouldn’t surprise anyone.

The CVS / Pharmacy chain of drug / variety stores (a division of CVS Caremark Corporation) was never on our list of places that provide “fair dinkum” value to consumers. That’s too bad, because they have about 6,200 stores in the United States. That makes them almost as ubiquitous as McDonald’s. Many towns have more than one CVS location.

We’re digressing, but come to think about it, McDonald’s doesn’t exactly offer great value for your money either. That’s one of the reasons we don’t eat at McDonald’s. Of course, most of the stuff they sell is so unhealthy that they’re probably doing you a favor by selling (in our opinion) barely edible food. I think we’ve set foot in a McDonald’s one time in the last five years. There must be a correlation between a chain of stores getting very large and offering poor value to consumers. And don’t get us wrong… Burger King, Wendy’s and the others aren’t any better values or (again, in our opinion) any healthier or more palatable.

The high prices at CVS are in line with the prices in convenience stores such as 7-Eleven, albeit with a much larger selection of merchandise. We only rarely walk into a CVS store, to pick up something on sale, and only if we happen to be passing by anyway. But frankly, we’re not careless enough with money to shop there otherwise. If you have a Target, Wal-Mart, K-Mart or other discount store nearby, you’d have to be insane to do much shopping at CVS. Nobody we know ever confused CVS with a discount chain. To make matters even worse, they are often out of stock on the sale items we try to find there. Like many other retailers, they go through the trouble of printing and distributing a weekly sale circular, but don’t seem to be able to have much of what they are advertising in stock. Keep your stinkin’ rainchecks. To us, they seem like a poorly managed company that takes their customers to be a bunch of idiots. We’re amazed they’ve grown as large as they are and manage to stay in business. Then again, there are many horrible retailers (here’s a prime example) that seem to defy the laws of physics by being able to stay in business. Go figure.

We will often find the HIGHEST prices for many different items at CVS. Toilet paper, a favorite topic of this blogger, is no exception. On my last visit to a CVS, they were up to $1.15 for a single role of Scott Tissue’s 1000-sheet roll, which is by far, the highest retail price we’ve seen for Scott toilet paper.

CVS’s store brand of 1000 sheet, single ply toilet paper is now the smallest roll we’ve ever seen in any brand of toilet paper. It boasts a sheet size of 4.3″ x 3.66″. That makes the miniature rolls of Scott Tissue’s 4.5″ x 3.7″ sheets seem huge by comparison.

The reduction in width from 4.5″ to 4.3″ means you’re getting about 5% less paper per roll. But then they added insult to injury, by chiseling 0.04″ off the length of each sheet, compared to what most brands currently measure (after a number of product downsizings).

Really now. 3.66″ instead of 3.7″ ?

How desperate are they getting ?

Now what about the price of CVS brand toilet paper ? Did CVS shrink the price too ?

No such luck. I believe it was selling for 89 cents a roll, which by concidence, is probably the highest price I’ve ever seen for a store-brand roll of toilet paper. But then again, it’s CVS, and I’ve never heard anyone say that the “V” in CVS stands for “value”.

– Routing By Rumor


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