In a move that could lead to lower prices for consumers across the country, Maryland has passed a law that prohibits manufacturers from requiring retailers to charge minimum prices for their goods.
The law, which takes effect Oct. 1, takes aim at agreements that many manufacturers have been forcing on retailers, requiring them to charge minimum prices on certain products. The practice has surged since a controversial 2007 U.S. Supreme Court ruling that no longer makes such agreements automatically illegal under federal antitrust law.
Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.
Minimum-pricing agreements keep retail profit margins higher, which in turn keeps retailers from pressuring manufacturers to lower the wholesale prices they pay for those goods. Suppliers also think that eliminating pricing competition can help retailers spend more money promoting their products to consumers. But certain retailers -- particularly online ones -- that attract customers because of low prices say the agreements stifle competition and gouge consumers.
Maryland's legislation is one of a series of recent initiatives aimed at circumventing the Supreme Court decision. A congressional subcommittee is scheduled to hold a hearing today in which several opponents of minimum-pricing agreements are expected to testify, including eBay Inc. and Federal Trade Commissioner Pamela Jones Harbour.http://online.wsj.com/article/SB124087840110661643.html
Wednesday, April 29, 2009
Poll Finds Obama More Popular With Public Than Policies
WASHINGTON -- A hundred days into his presidency, Barack Obama's standing with the public remains high, increasing the odds he can enact his ambitious agenda. Most Americans like their new president, even amid some reservations about his policy goals, a new Wall Street Journal/NBC News poll finds.
The poll paints the image of a popular president, but also offers cautionary notes for the White House, including growing worry over the rising federal deficit, a solid majority opposing his release of Bush-era memos on interrogation techniques and slipping support for his signature economic-stimulus bill. Mr. Obama faces both a rising number of people who view him as a liberal rather than a moderate, and a populist concern that he's not tough enough on Wall Street.
There is early, tentative support for some of Mr. Obama's most complex policy goals, including health-care and energy overhauls, and support for most of the major moves he's already made.
Poll Data
But the poll also finds that the president himself is more popular than his policies, a divide that may catch up with him as Congress begins debate over the big issues in earnest.
The poll finds yet another jump in the portion of the public that sees the nation headed in the right direction, despite the continued hard times, to the point where survey participants are now evenly divided between those who see things going in the right direction, and those who believe things are on the wrong track. That's the most optimistic finding in more than five years, and it suggests that the president himself is injecting this optimism into people, and that his own job approval numbers are likely to stay strong, pollsters say.http://online.wsj.com/article/SB124095605121565495.html
The poll paints the image of a popular president, but also offers cautionary notes for the White House, including growing worry over the rising federal deficit, a solid majority opposing his release of Bush-era memos on interrogation techniques and slipping support for his signature economic-stimulus bill. Mr. Obama faces both a rising number of people who view him as a liberal rather than a moderate, and a populist concern that he's not tough enough on Wall Street.
There is early, tentative support for some of Mr. Obama's most complex policy goals, including health-care and energy overhauls, and support for most of the major moves he's already made.
Poll Data
But the poll also finds that the president himself is more popular than his policies, a divide that may catch up with him as Congress begins debate over the big issues in earnest.
The poll finds yet another jump in the portion of the public that sees the nation headed in the right direction, despite the continued hard times, to the point where survey participants are now evenly divided between those who see things going in the right direction, and those who believe things are on the wrong track. That's the most optimistic finding in more than five years, and it suggests that the president himself is injecting this optimism into people, and that his own job approval numbers are likely to stay strong, pollsters say.http://online.wsj.com/article/SB124095605121565495.html
Home Prices Sink Again, but Pace Is a Bit Slower
The Wall Street Journal - Home prices fell sharply in February, but for the first time in 16 months the annual pace of deterioration slowed.
The Standard & Poor's/Case-Shiller index measuring home prices across 20 major cities declined 18.6% in February from a year earlier. That marked a slight improvement from January's 19% annual decline, but half of the cities posted deeper declines than in prior months. On a monthly basis, home prices fell 2.2% from January.
Meanwhile, the Conference Board's measure of consumer confidence surged to 39.2 in April, from 26.9 in March, based on consumers' expectations that the U.S. economy is nearing a bottom. But confidence remains at historically low levels and well below readings associated with strong economic growth.
The latest home-price figures offered an early sign of hope that some of the worst price declines are abating. A separate measure of home prices by the Federal Housing Finance Agency has posted monthly increases for two straight months, though economists doubt that is a sustainable trend. The Case-Shiller measure is expected to fall through much of the year, with smaller declines that would eventually turn into a flattening of home prices.
Prices "are no longer falling off a cliff," said Patrick Newport, an economist at IHS Global Insight. "Instead, they are rolling down a steep hill."
While all cities posted monthly declines, 16 of the 20 declined at a slower pace than they did in January. The Cleveland, Charlotte, N.C., New York and Washington markets showed larger monthly declines in February than they did in the prior month.http://online.wsj.com/article/SB124092346703363431.html
The Standard & Poor's/Case-Shiller index measuring home prices across 20 major cities declined 18.6% in February from a year earlier. That marked a slight improvement from January's 19% annual decline, but half of the cities posted deeper declines than in prior months. On a monthly basis, home prices fell 2.2% from January.
Meanwhile, the Conference Board's measure of consumer confidence surged to 39.2 in April, from 26.9 in March, based on consumers' expectations that the U.S. economy is nearing a bottom. But confidence remains at historically low levels and well below readings associated with strong economic growth.
The latest home-price figures offered an early sign of hope that some of the worst price declines are abating. A separate measure of home prices by the Federal Housing Finance Agency has posted monthly increases for two straight months, though economists doubt that is a sustainable trend. The Case-Shiller measure is expected to fall through much of the year, with smaller declines that would eventually turn into a flattening of home prices.
Prices "are no longer falling off a cliff," said Patrick Newport, an economist at IHS Global Insight. "Instead, they are rolling down a steep hill."
While all cities posted monthly declines, 16 of the 20 declined at a slower pace than they did in January. The Cleveland, Charlotte, N.C., New York and Washington markets showed larger monthly declines in February than they did in the prior month.http://online.wsj.com/article/SB124092346703363431.html
Fed Gets a Test on Treasurys
The Wall Street Journal - Treasurys slumped Tuesday, and the 10-year note's yield rose above 3%, as the market tested the Federal Reserve ahead of the end of its monetary-policy-setting meeting on Wednesday after a so-so five-year note auction and stronger data.
The 10-year yield rose as high as 3.03% following the auction as losses picked up speed. Treasurys had started to weaken midmorning after data that showed a surprise jump in consumer confidence this month. That figure erased early gains spurred by continued worries about the health of the banking sector.
The 10-year yield has bounced around 3% for most of the month, but had failed to close above that level since mid-March, before the Fed began its Treasury-buying program. Late Tuesday, the 10-year note was yielding 3.002%.
Strategists are focusing on 3.04% as the next key level if supply concerns continue to push yields higher, followed by 3.10% and then 3.25%.
Reaching 3.25% would likely concern policy makers, said Carl Lantz, interest-rate strategist at Credit Suisse in New York, as it could force mortgage rates to rise above 5%. The Fed may then decide to increase its purchases of Treasurys, a program it kicked off March 25 to help drive down consumer borrowing rates.
"There's more of a sense we could see the market break now and test the Fed's resolve to be more aggressive" in its buying, Mr. Lantz said, adding he doesn't believe the Fed will refer to any added buying in its policy-meeting statement Wednesday.
Instead, the Fed is likely to stress that it will work to keep long-term borrowing rates low. If it words the statement correctly, Treasurys could rally.
The Fed, though, could choose to surprise market participants Thursday when it buys Treasurys in 10- to 17-year maturities. Its previous foray into buying longer-term Treasurys was relatively small, at $2.5 billion. The Fed could decide to purchase more than it has in the past and send a message to the bond market that it wants to keep long-term yields in check, Mr. Lantz said.
Microsoft and Verizon Plot an iPhone Rival
The Wall Street Journal - Microsoft Corp. and Verizon Wireless are in talks to launch a touch-screen multimedia cellphone on the carrier's network early next year, in an ambitious effort to challenge Apple Inc.'s iPhone, according to people familiar with the matter.
The discussions are a gambit by Microsoft Chief Executive Steve Ballmer to energize a mobile business that has lost buzz among consumers and software developers to Apple's iPhone and Google Inc.'s Android.
Microsoft is a major player in software for cellphones, but it is working hard to develop a new device that will rival Apple's.
Verizon, meanwhile, is pushing on several fronts to extend its smart-phone offerings and compete with AT&T Inc., which is the iPhone's exclusive U.S. carrier.
Verizon has also had discussions in recent months with Apple about partnering on devices other than the iPhone, people familiar with the matter say.
In a recent interview, Verizon CEO Ivan Seidenberg declined to comment on whether Verizon and Microsoft were planning an iPhone-like device.
Microsoft's project, which is code-named "Pink," aims to produce a phone that will extend the tech giant's Windows Mobile operating system, adding new software capabilities. It would also likely include Microsoft's new Windows Marketplace for Mobile, a store for cellphone downloads along the lines of Apple's App Store, these people said.http://online.wsj.com/article/SB124093915558664239.html#mod=testMod
Monday, April 27, 2009
Conde Nast to Shut Portfolio Magazine
CHICAGO (MarketWatch) -- Publisher Condé Nast will shutter Portfolio and its Web site by the end of the second quarter, it said Monday, as declining advertising sales across the industry claim another casualty, this time after only 21 issues.
Portfolio staffers received the news Monday morning from Editor-in-Chief Joanne Lipman.
Condé Nast had previously decided to scale back Portfolio to 10 issues a year from 12.
Last October, Condé Nast, whose other titles include the New Yorker, Vanity Fair and Wired, informed top executives at all 26 of its magazines to make two separate 5% cuts within its budget, reducing both payroll and nonpayroll expenses.
It also said it would fold Men's Vogue into Vogue, the long-running women's magazine, and cut it to two issues a year from a previous 10.
Portfolio, launched in May 2007, centers on the business of media, and as such has chronicled the painful decline of newspapers and magazines as a consumer shift to online readership and a devastating recession have combined to endanger the model that sustained such publications for generations. See First Take item on Portfolio's shutdown.
While newspapers and magazines have tried to create strong presences online, the money they receive for digital ads is not enough to sustain both Web-based and print versions.
Even without the overhead of printing presses and other costs related to the delivery of a print product, an online-only entity could struggle to maintain a newsgathering organization large and experienced enough to do battle amid ever-growing competition. http://www.marketwatch.com/news/story/cond-nast-shut-portfolio-magazine/story.aspx?guid={1DCD02AC-32E9-4BDD-A8C2-6FDE32A41330}&dist=msr_1&print=true&dist=printMidSection
Portfolio staffers received the news Monday morning from Editor-in-Chief Joanne Lipman.
Condé Nast had previously decided to scale back Portfolio to 10 issues a year from 12.
Last October, Condé Nast, whose other titles include the New Yorker, Vanity Fair and Wired, informed top executives at all 26 of its magazines to make two separate 5% cuts within its budget, reducing both payroll and nonpayroll expenses.
It also said it would fold Men's Vogue into Vogue, the long-running women's magazine, and cut it to two issues a year from a previous 10.
Portfolio, launched in May 2007, centers on the business of media, and as such has chronicled the painful decline of newspapers and magazines as a consumer shift to online readership and a devastating recession have combined to endanger the model that sustained such publications for generations. See First Take item on Portfolio's shutdown.
While newspapers and magazines have tried to create strong presences online, the money they receive for digital ads is not enough to sustain both Web-based and print versions.
Even without the overhead of printing presses and other costs related to the delivery of a print product, an online-only entity could struggle to maintain a newsgathering organization large and experienced enough to do battle amid ever-growing competition. http://www.marketwatch.com/news/story/cond-nast-shut-portfolio-magazine/story.aspx?guid={1DCD02AC-32E9-4BDD-A8C2-6FDE32A41330}&dist=msr_1&print=true&dist=printMidSection
Along With New Money, IMF Gets Politically Perilous Tasks
International Monetary Fund officials were nearly giddy in early April when they learned that leaders at the G-20 summit backed a fourfold increase in fund resources to $1 trillion. During a press briefing, IMF Managing Director Dominique Strauss-Kahn used the phrase "the IMF is back" six times.
But at the IMF's spring meeting this past weekend, reality set in. In exchange for the money, the IMF has been handed tough assignments in fighting the global recession and staving off another one. The work will require a political dexterity and willingness to stand up to powerful IMF members that the fund has rarely shown in the past.
"There's been a huge expansion of IMF resources and huge attention to the IMF, but nothing has been done to make members fear IMF surveillance" or oversight, says Adam Posen, deputy director of the Peterson Institute for International Economics, a Washington think tank.
The new facility has won plaudits from some developing countries, but the IMF will still have to make tough political calls. Only nations ranked highly by the IMF can qualify for credit line. The IMF often forces other borrowers to cut spending or raise interest rates even if that deepens a downturn, though the IMF has taken steps to protect some programs for the poor.
The disparate treatment has prompted complaints in Turkey, Pakistan, Eastern Europe and elsewhere that the IMF is playing favorites, and it may lead to pressure on the fund to ease its standards. The World Bank has tried to reduce the effect of the budget cuts by financing infrastructure projects that otherwise might be jettisoned.
Pressure on the IMF will ramp up when it must decide whether to renew the credit lines after their one-year terms. Saying "no" would undermine a country's economic standing; saying "yes," if the country's policies don't warrant it, would undermine IMF credibility.http://online.wsj.com/article/SB124078041608357051.html#mod=todays_us_page_one
About $500 billion of the new funds are earmarked for the IMF's main job of bailing out troubled countries. The IMF has introduced a credit line that doesn't require borrowers to make the kinds of painful economic changes -- cutting spending, slashing subsidies -- that have turned the IMF into political poison in much of Latin America and Asia. Mexico, Poland and Colombia have signed up for the credit line.
But at the IMF's spring meeting this past weekend, reality set in. In exchange for the money, the IMF has been handed tough assignments in fighting the global recession and staving off another one. The work will require a political dexterity and willingness to stand up to powerful IMF members that the fund has rarely shown in the past.
"There's been a huge expansion of IMF resources and huge attention to the IMF, but nothing has been done to make members fear IMF surveillance" or oversight, says Adam Posen, deputy director of the Peterson Institute for International Economics, a Washington think tank.
The new facility has won plaudits from some developing countries, but the IMF will still have to make tough political calls. Only nations ranked highly by the IMF can qualify for credit line. The IMF often forces other borrowers to cut spending or raise interest rates even if that deepens a downturn, though the IMF has taken steps to protect some programs for the poor.
The disparate treatment has prompted complaints in Turkey, Pakistan, Eastern Europe and elsewhere that the IMF is playing favorites, and it may lead to pressure on the fund to ease its standards. The World Bank has tried to reduce the effect of the budget cuts by financing infrastructure projects that otherwise might be jettisoned.
Pressure on the IMF will ramp up when it must decide whether to renew the credit lines after their one-year terms. Saying "no" would undermine a country's economic standing; saying "yes," if the country's policies don't warrant it, would undermine IMF credibility.http://online.wsj.com/article/SB124078041608357051.html#mod=todays_us_page_one
About $500 billion of the new funds are earmarked for the IMF's main job of bailing out troubled countries. The IMF has introduced a credit line that doesn't require borrowers to make the kinds of painful economic changes -- cutting spending, slashing subsidies -- that have turned the IMF into political poison in much of Latin America and Asia. Mexico, Poland and Colombia have signed up for the credit line.
Eight Years After Bank's Seizure, a Depositor Waits
The Wall Street Journal - Fran Sweet was an early victim of the subprime-mortgage fiasco. Now, the Downers Grove, Ill., retiree feels victimized again -- this time by Uncle Sam.In 2001, Ms. Sweet says she put her life savings of nearly $600,000 into accounts at Superior Bank of Hinsdale, Ill. About a month later, the Federal Deposit Insurance Corp. seized Superior because of alleged improper financial and accounting practices related to its subprime business. Much of her money, along with deposits of hundreds of other Superior customers, was frozen because it exceeded the $100,000 limit on FDIC insurance at the time. Since then, the FDIC has been making periodic payments to such depositors to cover some of their losses.
[Fran Sweet]
Earlier this year, FDIC officials told Ms. Sweet her payments had been interrupted, she says. The reason: The agency needed any available Superior-related funds to pay off a $90 million lawsuit settlement with Beal Bank. The Plano, Texas, bank had accused the FDIC of misleading it about the quality of a portfolio of Superior mortgages bought from the agency for $340 million. Beal alleged some of the loans were made with fraudulent appraisals or inaccurate information about a borrower's income. Many of the loans were made after the FDIC took over Superior. The lawsuit was the subject of a page-one article in The Wall Street Journal last year.
The FDIC didn't acknowledge wrongdoing in the Beal suit and has said it acted in good faith in its dealings with the bank. An FDIC spokesman says Superior-related funds had to be used to pay the Beal settlement because the litigation is related to the collapsed bank's loans. The spokesman didn't say when payments to depositors might resume. The FDIC has repaid about 70% of Superior's uninsured deposits, about average in such cases. Some of the $340 million from the initial Beal transaction went to depositors, he added. Still, given the cost of the Beal settlement, some observers estimate it could be years before payments resume to Superior's depositors, still owed over $16 million, according to FDIC records. At least one Superior depositor has died waiting for her money.http://online.wsj.com/article/SB124079290213557875.html?mg=com-wsj
Friday, April 24, 2009
States help with downpayments
The Wall Street Journal - Don’t have enough money to put down on a house? No problem.
States looking to jump-start their housing markets are tapping tactics that fueled the housing boom–and bust. They’re getting creative to help low-to-moderate income buyers make it to the closing table.
Programs differ from state-to-state. Some offer interest-free bridge loans that essentially convert to piggyback mortgages. They loan money to fund down payments and/or closing costs — possibly getting buyers keys for nothing out-of-pocket. The aim is to be a short-term lender, getting the money back once qualified first-time buyers claim a federal tax credit of up to $8,000 for purchases before Dec. 1. States offering deals include Missouri, Ohio and New Jersey in efforts led chiefly by their housing finance agencies.
Participants are screened carefully to ensure they are occupants with documented income and sound credit. Prices are scrutinized to avoid overpayment, buyers undergo education and the loan of choice is a 30-year fixed mortgage, not adjustable-rate loans that reset with crippling payments.
“The borrowers are not entering into more of the exotic loan products that caused a lot of the problems out there today,” said Greg Spurgeon, single-family homeownership administrator for the Missouri Housing Development Commission, which led the way on such programs earlier this year.http://blogs.wsj.com/developments/2009/04/24/cant-afford-the-down-payment-some-states-putting-up-cash/
States looking to jump-start their housing markets are tapping tactics that fueled the housing boom–and bust. They’re getting creative to help low-to-moderate income buyers make it to the closing table.
Programs differ from state-to-state. Some offer interest-free bridge loans that essentially convert to piggyback mortgages. They loan money to fund down payments and/or closing costs — possibly getting buyers keys for nothing out-of-pocket. The aim is to be a short-term lender, getting the money back once qualified first-time buyers claim a federal tax credit of up to $8,000 for purchases before Dec. 1. States offering deals include Missouri, Ohio and New Jersey in efforts led chiefly by their housing finance agencies.
Participants are screened carefully to ensure they are occupants with documented income and sound credit. Prices are scrutinized to avoid overpayment, buyers undergo education and the loan of choice is a 30-year fixed mortgage, not adjustable-rate loans that reset with crippling payments.
“The borrowers are not entering into more of the exotic loan products that caused a lot of the problems out there today,” said Greg Spurgeon, single-family homeownership administrator for the Missouri Housing Development Commission, which led the way on such programs earlier this year.http://blogs.wsj.com/developments/2009/04/24/cant-afford-the-down-payment-some-states-putting-up-cash/
Wednesday, April 22, 2009
Sign of the Times: Manor Price Cut by $50 Million
Leona Helmsley's Dunnellen Hall in Greenwich, Conn., seen here in 1986, went on the market a year ago for $125 million. It's now listed at $75 million.
The Wall Street Journal - Talk about deep discounts. The property downturn has wiped $50 million off the asking price of a single home in what may be the biggest cut ever on a U.S. house.
Now, for a mere $75 million, a buyer can snare the Greenwich, Conn., manor house of the late Leona Helmsley, complete with two pools, more than 13 bedrooms (six for servants) and a walk-in silver closet.
The original asking price was $125 million, and industry veterans can't remember a bigger dollar discount. Last July, a Russian billionaire paid Donald Trump $95 million for a Palm Beach, Fla., mansion originally listed at $125 million.
Helmsley-estate representatives put the 40-acre property up for sale just over a year ago. Even then it was an aggressive price, local brokers said. In October, the estate slashed the price to $95 million.
Called Dunnellen Hall, the 20,000-square-foot Jacobean-style brick mansion is set on a park-like property in the Greenwich back country with views of the Long Island Sound. Brochure photos show a large marble reflecting pool and fountain in front and a back terrace leading to a rock- and plant-lined koi pond, flower beds, a large rectangular pool, many trees and a vast green lawn. The home has more than seven main bedrooms plus a staff wing with six bedrooms.
Mrs. Helmsley, one of the most famous names in New York real estate, and her husband, Harry, paid $11 million for the 1918 house in the early 1980s. They later bought more acreage. The ensuing renovation played a role in her undoing. Among the charges leveled at Mrs. Helmsley when she was convicted in 1989 of tax evasion was that she billed her company for millions of dollars in renovation costs. She served time in federal prison and died in 2007 at age 87.http://online.wsj.com/article/SB124024652556335513.html
Roots of $3 Billion Fraud Case Lie in DVD Players, Not CDOs
MINNEAPOLIS -- Bernard Madoff bilked the public with fictitious securities transactions. Tom Petters, prosecutors allege, gulled his victims with nonexistent DVD players and flat-screen TVs.
Among the spate of alleged scams that have come to light in recent months, the $3.5 billion one that Mr. Petters is charged with is among the most unusual. The Minnesota businessman promised fat returns to investors who lent him money to buy surplus merchandise and resell it to famous retailers like Wal-Mart Stores Inc.
"In fact, there were no such purchases or resales," says a federal indictment. It says both were faked. Mr. Petters denies the charges.
Two months before Mr. Madoff burst onto the public stage last year charged with a Ponzi scheme, authorities here accused Mr. Petters, a gregarious 51-year-old appliance wholesaler, of running a multibillion-dollar fraud of his own. http://online.wsj.com/article/SB124035239814540625.html
Among the spate of alleged scams that have come to light in recent months, the $3.5 billion one that Mr. Petters is charged with is among the most unusual. The Minnesota businessman promised fat returns to investors who lent him money to buy surplus merchandise and resell it to famous retailers like Wal-Mart Stores Inc.
"In fact, there were no such purchases or resales," says a federal indictment. It says both were faked. Mr. Petters denies the charges.
Two months before Mr. Madoff burst onto the public stage last year charged with a Ponzi scheme, authorities here accused Mr. Petters, a gregarious 51-year-old appliance wholesaler, of running a multibillion-dollar fraud of his own. http://online.wsj.com/article/SB124035239814540625.html
Monday, April 20, 2009
For Fed, Big Test Will Be When to Turn Off the Money Pump
The Wall Street Journal - During the past eight months, the Federal Reserve has pumped more than $800 billion of cash into the nation's financial system, an action that in normal times could lead to an ugly inflation surge.
Fed Chairman Ben Bernanke is confident that isn't going to happen this time around. To quiet skeptics and reassure markets, he and his lieutenants have been going out of their way the past few days to explain why inflation isn't in the outlook and to lay out the tools they have in hand to fight it.
The focus on inflation isn't just coming from the Fed. In a report this month, Goldman Sachs economists sought to knock down what they described as a wave of "inflation hype" they had been hearing from clients and bond-market traders.
The focus on the issue comes with the Fed's next policy meeting, set for next week. With so many programs already in train, the central bank looks unlikely to take dramatic new actions at the meeting. Assessing signs of improvement in the economy, contingency planning and deliberations on long-term exit strategies are likely to be important parts of the discussions.
Inflation might seem like a distant worry today. Last week, the Labor Department reported that consumer prices in March fell year over year for the first time in 54 years. Rising unemployment and idle factory floors mean businesses have little incentive or capacity to raise wages or the prices they charge customers. There's a risk, in fact, that if the economy weakens much more, the opposite of inflation -- deflation -- could become a serious threat.
That's why the Fed's goal for now is to get inflation higher, not lower. It has effectively been printing money as part of its rescue efforts. When it buys mortgage-backed securities or makes commercial-paper loans, as it has been doing, it electronically credits its counterparty banks with cash in return, which pumps new cash into the financial system.http://online.wsj.com/article/SB124018636521933417.html#mod=todays_us_page_one
Fed Chairman Ben Bernanke is confident that isn't going to happen this time around. To quiet skeptics and reassure markets, he and his lieutenants have been going out of their way the past few days to explain why inflation isn't in the outlook and to lay out the tools they have in hand to fight it.
The focus on inflation isn't just coming from the Fed. In a report this month, Goldman Sachs economists sought to knock down what they described as a wave of "inflation hype" they had been hearing from clients and bond-market traders.
The focus on the issue comes with the Fed's next policy meeting, set for next week. With so many programs already in train, the central bank looks unlikely to take dramatic new actions at the meeting. Assessing signs of improvement in the economy, contingency planning and deliberations on long-term exit strategies are likely to be important parts of the discussions.
Inflation might seem like a distant worry today. Last week, the Labor Department reported that consumer prices in March fell year over year for the first time in 54 years. Rising unemployment and idle factory floors mean businesses have little incentive or capacity to raise wages or the prices they charge customers. There's a risk, in fact, that if the economy weakens much more, the opposite of inflation -- deflation -- could become a serious threat.
That's why the Fed's goal for now is to get inflation higher, not lower. It has effectively been printing money as part of its rescue efforts. When it buys mortgage-backed securities or makes commercial-paper loans, as it has been doing, it electronically credits its counterparty banks with cash in return, which pumps new cash into the financial system.http://online.wsj.com/article/SB124018636521933417.html#mod=todays_us_page_one
White House to Put Credit-Card Rates in Cross Hairs
The Wall Street Journal - WASHINGTON -- President Barack Obama will soon turn his attention to high credit-card rates, giving a potential boost to congressional efforts to put limits on the industry.
Banks have come under increasing pressure over raising their credit-card rates in recent weeks. Consumer groups are particularly critical of those that raised rates on some existing card holders even as the banks received federal bailout funds. Banks have said credit-market conditions and changes in borrowers' credit scores necessitated the increases.http://online.wsj.com/article/SB124015800037232541.html#mod=testMod
Banks have come under increasing pressure over raising their credit-card rates in recent weeks. Consumer groups are particularly critical of those that raised rates on some existing card holders even as the banks received federal bailout funds. Banks have said credit-market conditions and changes in borrowers' credit scores necessitated the increases.http://online.wsj.com/article/SB124015800037232541.html#mod=testMod
AIG Delays Proxy Filing to Reshuffle Its Board
The Wall Street Journal - A potential shakeup of the board of American International Group Inc. has precipitated a delay in the filing of the insurer's annual proxy statement, according to a person familiar with the matter.
The aim is to expand and reshuffle the company's 11-member board, this person said.
AIG's board has remained largely intact since the government rescued it from the brink of bankruptcy in September.
The maneuvers around the proxy illustrate the complicated oversight of AIG. Upon the rescue, the government took a nearly 80% stake in the company. The government has appointed three trustees to oversee taxpayers' stake.
Now, the American International Group board is accountable mostly to the trustees but also to the other shareholders owning a remaining stake that is slightly more than 20%.
It has been previously disclosed that three board members are expected not to stand for re-election to the board at AIG's coming annual meeting. In recent days there has been uncertainty at top levels of the company about reasons for the delay in the proxy filing, according to people familiar with the matter
The aim is to expand and reshuffle the company's 11-member board, this person said.
AIG's board has remained largely intact since the government rescued it from the brink of bankruptcy in September.
The maneuvers around the proxy illustrate the complicated oversight of AIG. Upon the rescue, the government took a nearly 80% stake in the company. The government has appointed three trustees to oversee taxpayers' stake.
Now, the American International Group board is accountable mostly to the trustees but also to the other shareholders owning a remaining stake that is slightly more than 20%.
It has been previously disclosed that three board members are expected not to stand for re-election to the board at AIG's coming annual meeting. In recent days there has been uncertainty at top levels of the company about reasons for the delay in the proxy filing, according to people familiar with the matter
Consumer Confidence Rebounding in April
The Wall Street Journal - The University of Michigan's reading of consumer confidence climbed in April to its highest point since the financial crisis hit in September, though it remains at historically low levels.
The index rose to 61.9 from 57.3 in March. Consumers expressed more confidence in buying houses and cars because of low prices or discounts. The index fell to a three-decade low of 55.3 in November after credit markets froze and stocks tumbled.
The one-year outlook for inflation deteriorated to 3%, from 2% in March, while the five-year inflation outlook stood at 2.7%, from 2.6% the month before. http://online.wsj.com/article/SB124002391385731451.html
The index rose to 61.9 from 57.3 in March. Consumers expressed more confidence in buying houses and cars because of low prices or discounts. The index fell to a three-decade low of 55.3 in November after credit markets froze and stocks tumbled.
The one-year outlook for inflation deteriorated to 3%, from 2% in March, while the five-year inflation outlook stood at 2.7%, from 2.6% the month before. http://online.wsj.com/article/SB124002391385731451.html
Oracle Agrees to Acquire Sun Microsystems
The Wall Street Journal - Oracle Corp. announced a deal to acquire Sun Microsystems Inc. for $5.6 billion excluding cash and debt, calling Sun's Java "the most important software" it has ever acquired.
Earlier this month, Sun's talks to sell itself to International Business Machines Corp. unraveled, raising new questions about the prospects for the company and Sun Chief Executive Jonathan Schwartz, who has been under pressure to come up with an alternative for the struggling computer maker.
The Silicon Valley icon has seen slumping sales of its servers and posted losses in three of its last four quarters.
The companies valued the deal at $7.4 billion including cash and debt. Oracle agreed to pay $9.50 a share for Sun, a 42% premium to Friday's close.http://online.wsj.com/article/SB124022726514434703.html
Earlier this month, Sun's talks to sell itself to International Business Machines Corp. unraveled, raising new questions about the prospects for the company and Sun Chief Executive Jonathan Schwartz, who has been under pressure to come up with an alternative for the struggling computer maker.
The Silicon Valley icon has seen slumping sales of its servers and posted losses in three of its last four quarters.
The companies valued the deal at $7.4 billion including cash and debt. Oracle agreed to pay $9.50 a share for Sun, a 42% premium to Friday's close.http://online.wsj.com/article/SB124022726514434703.html
Wednesday, April 15, 2009
Bernanke's PR Push Rewrites Fed Script
The Wall Street Journal - WASHINGTON -- Ben Bernanke became Federal Reserve chairman intent on making the central bank less personality-driven than it was under Alan Greenspan and Paul Volcker. But as he confronts an economic crisis that has pushed the Fed to shatter precedent and lend trillions of dollars, Mr. Bernanke is waging a public-relations offensive that casts him in the starring role.
The latest example came Tuesday at Atlanta's Morehouse College, where Mr. Bernanke delivered what amounted to an Economics 101 lecture on the crisis. On a day when the government said U.S. retail sales had fallen a worse-than-expected 1.1% in March, Mr. Bernanke told students he's "fundamentally optimistic" about the economy's prospects. After his speech, he sat with undergraduates at a table and took questions with television cameras rolling.
The Fed chief's efforts to speak plainly to Americans come on the heels of a March interview with CBS television's "60 Minutes" and a February appearance at the National Press Club in Washington, where he took questions from a crowd of journalists.http://online.wsj.com/article/SB123975237751018765.html
Inflation Fears Quelled by Gap in Economic Output
The Wall Street Journal - A weak economy is keeping inflation from catching fire, but a recovery won't necessarily spark it, either.
The Bureau of Labor Statistics releases the March consumer-price index on Wednesday. Economists think CPI fell 0.1% and that "core" CPI, which excludes food and energy prices, rose 0.1%.
Such mild results belie the conflicting tectonic forces at work on prices. On the one hand are aggressive government spending and a busy Federal Reserve printing press. Both are designed to fight the recession, and both are raising inflation anxiety.
But the more powerful force is a deflationary one: The wide and growing gap between the economy's output and its potential, or what it would produce if it were making full use of its work force and production capacity. The excess supply of idle workers and drill presses means there is no kindling for an inflationary bonfire.http://online.wsj.com/article/SB123975395700718907.html
The Bureau of Labor Statistics releases the March consumer-price index on Wednesday. Economists think CPI fell 0.1% and that "core" CPI, which excludes food and energy prices, rose 0.1%.
Such mild results belie the conflicting tectonic forces at work on prices. On the one hand are aggressive government spending and a busy Federal Reserve printing press. Both are designed to fight the recession, and both are raising inflation anxiety.
But the more powerful force is a deflationary one: The wide and growing gap between the economy's output and its potential, or what it would produce if it were making full use of its work force and production capacity. The excess supply of idle workers and drill presses means there is no kindling for an inflationary bonfire.http://online.wsj.com/article/SB123975395700718907.html
Drug Makers, Hospitals Raise Prices
The Wall Street Journal - Hospitals and pharmaceutical companies have been pushing through hefty price increases aimed at bolstering earnings, even as government and private insurers are struggling to rein in healthcare costs.
Drug makers increased prices on drugs like Viagra and the leukemia pill Sprycel by more than 20% in the first quarter from a year earlier, according to data from Credit Suisse. Meanwhile, one of the largest hospital owners in the country, HCA Inc., said Tuesday it expects to report higher revenue for the first quarter even though it had fewer hospitals and its admissions declined. It also said its income before taxes had nearly doubled.http://online.wsj.com/article/SB123975436561018959.html
Drug makers increased prices on drugs like Viagra and the leukemia pill Sprycel by more than 20% in the first quarter from a year earlier, according to data from Credit Suisse. Meanwhile, one of the largest hospital owners in the country, HCA Inc., said Tuesday it expects to report higher revenue for the first quarter even though it had fewer hospitals and its admissions declined. It also said its income before taxes had nearly doubled.http://online.wsj.com/article/SB123975436561018959.html
Retail-Sales Fall Damps Hope That Rebound Is Near
The Wall Street Journal - WASHINGTON -- Retail sales tumbled in March as job losses and tight credit left consumers cautious and constrained, damping hopes for a rapid economic turnaround.
After some improvement earlier this year from a dismal autumn, retail sales in March fell 1.1% from February, the Commerce Department said Tuesday. Credit turmoil continued to hit automobile sales especially hard, but the declines also came in most major categories, from appliances to furniture to clothing stores. Retail sales, a broad tally that also includes food services, were down more than 9% from the same month a year ago.
The decline signaled that consumer spending, which accounts for 70% of U.S. economic activity, probably won't bounce back quickly from the depths of the recession. Consumers, hit by a weak job market and steep declines in household wealth, remain worried that more tough times lie ahead.http://online.wsj.com/article/SB123971231648816831.html
After some improvement earlier this year from a dismal autumn, retail sales in March fell 1.1% from February, the Commerce Department said Tuesday. Credit turmoil continued to hit automobile sales especially hard, but the declines also came in most major categories, from appliances to furniture to clothing stores. Retail sales, a broad tally that also includes food services, were down more than 9% from the same month a year ago.
The decline signaled that consumer spending, which accounts for 70% of U.S. economic activity, probably won't bounce back quickly from the depths of the recession. Consumers, hit by a weak job market and steep declines in household wealth, remain worried that more tough times lie ahead.http://online.wsj.com/article/SB123971231648816831.html
ATT Wants Lock On IPhone
The Wall Street Journal - When Randall Stephenson became AT&T Inc.'s chief executive, the company had just started offering the iPhone. The blockbuster device has since reeled in millions of new customers and helped revitalize the telecom giant's brand.
But AT&T's exclusive deal to carry the iPhone in the U.S. expires next year, according to people familiar with the matter, and Mr. Stephenson is now in discussions with Apple Inc. to get an extension until 2011.
An Apple spokeswoman declined to comment, saying only, "We have a great relationship with AT&T."
Keeping the iPhone away from rivals and finding the next hit devices, such as smart phones and multimedia handheld tablets, are among the challenges the 48-year-old CEO faces as he shifts AT&T's energy away from the crumbling U.S. landline phone business and into the wireless market, where technologies evolve quickly and hit products don't last long.
Mr. Stephenson also is seeking to overhaul AT&T's marketing to make wireless the priority. The next step, he said, is to do away with a requirement that customers have AT&T's home-phone service to qualify for discounts on TV or broadband Internet services. Being a wireless customer should be enough, he said.http://online.wsj.com/article/SB123973238611017715.html#mod=testMod
But AT&T's exclusive deal to carry the iPhone in the U.S. expires next year, according to people familiar with the matter, and Mr. Stephenson is now in discussions with Apple Inc. to get an extension until 2011.
An Apple spokeswoman declined to comment, saying only, "We have a great relationship with AT&T."
Keeping the iPhone away from rivals and finding the next hit devices, such as smart phones and multimedia handheld tablets, are among the challenges the 48-year-old CEO faces as he shifts AT&T's energy away from the crumbling U.S. landline phone business and into the wireless market, where technologies evolve quickly and hit products don't last long.
Mr. Stephenson also is seeking to overhaul AT&T's marketing to make wireless the priority. The next step, he said, is to do away with a requirement that customers have AT&T's home-phone service to qualify for discounts on TV or broadband Internet services. Being a wireless customer should be enough, he said.http://online.wsj.com/article/SB123973238611017715.html#mod=testMod
U.S. May Make Public Bank's Report Card
The Obama administration is considering making public some results of the stress tests being conducted on the country's 19 largest banks, said people familiar with the matter, a move that could help more clearly separate healthy banks from the weaklings.
Until now, the government has tried to treat all banks equally, pouring cash into both strong and struggling institutions to prop up the financial sector. The strategy has provided cover for beleaguered banks, which received funds along with their stronger brethren.
This possible move, combined with first-quarter bank earnings and the push by some financial institutions to raise new capital and repay their bailout funds, could lay the groundwork for a new phase in the financial crisis. Within weeks, the stronger banks could emerge free of government shackles and flush with new funds, with weaker ones still reliant on federal largesse. That would transform how investors and the government view the financial sector.http://online.wsj.com/article/SB123975110468218627.html#mod=testMod
Until now, the government has tried to treat all banks equally, pouring cash into both strong and struggling institutions to prop up the financial sector. The strategy has provided cover for beleaguered banks, which received funds along with their stronger brethren.
This possible move, combined with first-quarter bank earnings and the push by some financial institutions to raise new capital and repay their bailout funds, could lay the groundwork for a new phase in the financial crisis. Within weeks, the stronger banks could emerge free of government shackles and flush with new funds, with weaker ones still reliant on federal largesse. That would transform how investors and the government view the financial sector.http://online.wsj.com/article/SB123975110468218627.html#mod=testMod
Tuesday, April 14, 2009
Former Silverado head Wise commits suicide in Fla.
Banker Michael Wise is dead. How strange. I first met this gentleman back in the mid 1980s when I started writing about Silverado Banking. He was smooth, impeccably dressed, wearing tie bars and high end Hart Marx suits.As they saying goes,Michael could sell ice to an eskimo. People in Denver, which at that time, was a small town, loved him. He joined all the right clubs and said all the right things. But Wise also had a hidden, less obvious side. He keep people at a distance. He employed a slick PR man who I never trusted. Most people who met Wise always wondered what they weren't being told. The answer eventually came out - and it turned out there was a lot to be told. Silverado was built on a funny money scheme. It collapsed in 1988. The feds took it over, bailing out depositors. When the dust settled, Silverado went down in the banking log books as classic '80s S&L gangster behavior.
Wise slipped away. He was always slippery, maybe too much for his own good. He was very good at selling people, knowing when he turn on the charm and when to use his intellectual muscle. He was so good that he convinced Neil Bush, brother of George W. Bush to sit on Silverado's board. Neil was just a dump kid at the time, but Neil's dad, George H. Bush was vice president at the time. Wise wanted an Ace card to play with federal regulators. And Neil, of course, had no idea what he was getting involved in at the time or how he was being used by Wise.
Well, Wise stopped selling this week - committing suicide in Florida. And at this point, Wise is just a post script to a scandal that to most people is a distant memory. The thrift banking crisis cost the government $180 billion - but that seems like a drop in the bucket to the $2.5 - $3 trillion the government is now spending to bail out banks, insurers and re-inflate the economy. My how times change. What follows is a piece from my former employer, the Denver Post where I first wrote about Wise's shenanigans with another former Post reporter, Henry Dubroff who is now a publisher in California. - MT
The Denver Post - Michael Wise, who became a symbol of the savings-and-loan debacle of the late 1980s, committed suicide in Florida last week.
Wise jumped from the ninth floor of a parking garage at Tampa International Airport on April 8, said Henry Poage of the Hillsborough Medical Examiner's office, which ruled the death a suicide.
According to the medical examiner's office, Wise drove a rental car to the ninth floor of the short-term parking garage.
A security video shows Wise pacing, then he stepped off the side. Wise landed in a landscaped area with palm trees and some greenery, said Tampa International Airport spokeswoman Brenda Geoghagan.
He was taken to a hospital but died in the emergency room at 1:39 p.m. The airport's police department ruled out any foul play or accident.
Wise was chairman of Denver-based Silverado Savings and Loan, which collapsed in 1988. http://www.denverpost.com/breakingnews/ci_12140329
http://www.nytimes.com/1990/07/21/business/how-silverado-recruited-neil-bush.html?scp=3&sq=Michael%20Wise&st=cse
Ten Trillion and Counting
The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury's debt auction room, where the U.S. government sells securities backed by the "full faith and credit of the United States." On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.
Observers warn that the United States' reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. "You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows," Economist reporter Greg Ip tells FRONTLINE. "No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut."
Yet more borrowing is exactly what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for the auto industry; $275 billion for homeowners and mortgage lenders; and a giant $787 billion stimulus package to jump-start an economy spiraling downward. Just like the Bush administration before it, Obama and his team are going to borrow big.
"That's the paradox of the situation that we're in now," observes Matt Miller, author of The Tyranny of Dead Ideas. "Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable ... because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back."http://www.pbs.org/wgbh/pages/frontline/tentrillion/
Observers warn that the United States' reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. "You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows," Economist reporter Greg Ip tells FRONTLINE. "No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut."
Yet more borrowing is exactly what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for the auto industry; $275 billion for homeowners and mortgage lenders; and a giant $787 billion stimulus package to jump-start an economy spiraling downward. Just like the Bush administration before it, Obama and his team are going to borrow big.
"That's the paradox of the situation that we're in now," observes Matt Miller, author of The Tyranny of Dead Ideas. "Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable ... because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back."http://www.pbs.org/wgbh/pages/frontline/tentrillion/
Sunday, April 12, 2009
When an Economic Cure Fights Itself
The New York Times - ALMOST every day, a few letters arrive, saying that a group in some city or town is about to have a “tea party.”
The gist, in case you haven’t received any of these invitations, is that President Obama’s taxing and spending plans are far too lavish. The United States will be burdened with immense debts, the protesters say. Taxes will be far too high for comfort, and we will decline as a nation. The tea parties are aimed at stopping all that.
These tea parties strike me as off-base, in some respects, though they evoke a certain principle that rings true, or at least possibly true.
First, I don’t quite get the taxation uproar. As far as I know, no new taxes of any size have been enacted. The only new tax I can spot immediately in front of us is the “cap and trade” levy on carbon emissions, which would be a tax on energy consumers. And even that, based on a questionable idea, doesn’t seem imminent.
When the recession ends, though, we will be facing very large budget deficits, even under the best projections. Unless the Federal Reserve is just going to print money — usually a dangerous road to inflation — how will we pay for government, except through taxes? And who has the money to pay, except the rich? So unless I am missing something, don’t we have to tax the rich, defined in some sensible way?
That’s just arithmetic. I wish that lowering spending were an option, but it’s not. Politicians talk about cutting spending and going through the budget, line by line, looking for waste. It never happens — except that sometimes, the military budget is cut, which is the last thing we should cut in a world as dangerous as ours. And right now, over all, the military budget isn’t being cut, although some programs are being reduced while others are expanding.http://www.nytimes.com/2009/04/12/business/economy/12every.html
The gist, in case you haven’t received any of these invitations, is that President Obama’s taxing and spending plans are far too lavish. The United States will be burdened with immense debts, the protesters say. Taxes will be far too high for comfort, and we will decline as a nation. The tea parties are aimed at stopping all that.
These tea parties strike me as off-base, in some respects, though they evoke a certain principle that rings true, or at least possibly true.
First, I don’t quite get the taxation uproar. As far as I know, no new taxes of any size have been enacted. The only new tax I can spot immediately in front of us is the “cap and trade” levy on carbon emissions, which would be a tax on energy consumers. And even that, based on a questionable idea, doesn’t seem imminent.
When the recession ends, though, we will be facing very large budget deficits, even under the best projections. Unless the Federal Reserve is just going to print money — usually a dangerous road to inflation — how will we pay for government, except through taxes? And who has the money to pay, except the rich? So unless I am missing something, don’t we have to tax the rich, defined in some sensible way?
That’s just arithmetic. I wish that lowering spending were an option, but it’s not. Politicians talk about cutting spending and going through the budget, line by line, looking for waste. It never happens — except that sometimes, the military budget is cut, which is the last thing we should cut in a world as dangerous as ours. And right now, over all, the military budget isn’t being cut, although some programs are being reduced while others are expanding.http://www.nytimes.com/2009/04/12/business/economy/12every.html
Financial News, Front and Center: What Took So Long?
The New York Times - THERE is a well-worn but telling newspaper industry joke: “If it bleeds, it leads.” But that has never applied to the elementary, if trickier, parts of business news — things like the federal budget deficit, current account shortfalls, or quarterly losses at companies like G.M.
Despite the dramatic rise in stock ownership among ordinary Americans through 401(k) plans and electronic trading, financial news has remained, at best, an afterthought for most general-interest publications. Even though many financial threats the world faced in recent years were hiding in plain sight — in the pages of the business press — the broader media’s longstanding indifference to economic news helped keep it safely out of the public dialogue.
Forget about television. Viewers tend to find business chatter more boring than a test pattern or a Charlie Rose interview. It has never delivered ratings — even CNBC considers an audience of 600,000 a pretty good day, and the network’s unaccountable loudmouth, Jim Cramer, is lucky to get a quarter of that.
Now that the global financial system’s belly-flop has become Topic A, the mainstream media has stifled its yawns and is digging in ferociously. In this news cycle, the press has become so obsessed with Treasury Secretary Timothy F. Geithner and Edward M. Liddy, A.I.G.’s dollar-a-year C.E.O., that even Octomom and Rihanna have trouble grabbing air time and column inches.
Suddenly, everyone has an opinion about how to retrofit financial markets for the next economic earthquake. The same talking heads who once prided themselves on their inability to balance their own checkbooks are now engaged in “Crossfire”-esque shouting matches over newly proposed hedge fund regulations or debt-to-capital ratios for banks. Television, predictably, is discovering that sexy extra little something that had always been missing from the financial story: lynch mobs. http://www.nytimes.com/2009/04/12/business/media/12media.html
Despite the dramatic rise in stock ownership among ordinary Americans through 401(k) plans and electronic trading, financial news has remained, at best, an afterthought for most general-interest publications. Even though many financial threats the world faced in recent years were hiding in plain sight — in the pages of the business press — the broader media’s longstanding indifference to economic news helped keep it safely out of the public dialogue.
Forget about television. Viewers tend to find business chatter more boring than a test pattern or a Charlie Rose interview. It has never delivered ratings — even CNBC considers an audience of 600,000 a pretty good day, and the network’s unaccountable loudmouth, Jim Cramer, is lucky to get a quarter of that.
Now that the global financial system’s belly-flop has become Topic A, the mainstream media has stifled its yawns and is digging in ferociously. In this news cycle, the press has become so obsessed with Treasury Secretary Timothy F. Geithner and Edward M. Liddy, A.I.G.’s dollar-a-year C.E.O., that even Octomom and Rihanna have trouble grabbing air time and column inches.
Suddenly, everyone has an opinion about how to retrofit financial markets for the next economic earthquake. The same talking heads who once prided themselves on their inability to balance their own checkbooks are now engaged in “Crossfire”-esque shouting matches over newly proposed hedge fund regulations or debt-to-capital ratios for banks. Television, predictably, is discovering that sexy extra little something that had always been missing from the financial story: lynch mobs. http://www.nytimes.com/2009/04/12/business/media/12media.html
Fees to Firms Referring Clients to Madoff Topped $790 Million
The Wall Street Journal - Firms that funneled investors' money to Bernard Madoff likely took in at least $790 million in fees over the years, according to a review of lawsuits and other documents emerging in the wake of Mr. Madoff's arrest.Now, investors and authorities are trying to get some of those dollars back, though how successful they will be remains unclear.
Banco Santander SA, one of the biggest of the "feeders" to Mr. Madoff, had some $3 billion with him through its Geneva-based hedge-fund group, Optimal Investment Services SA, according to the firm. Santander earned $52.7 million in 2007 and $43.3 million in 2006 in "investment manager's fees" from its Madoff-run Strategic U.S. Equity Series, according to a 2007 annual report.
Optimal's relationship with Mr. Madoff, which dated back more than a decade, was described in a 2008 internal report reviewed by The Wall Street Journal as a "very profitable business for the group." At the time, the firm collected an average management fee of "above 2%" on money placed with Mr. Madoff. Santander declined to comment.
Mr. Madoff pleaded guilty last month to perpetrating a massive Ponzi scheme. Many of his victims don't expect to recover anywhere near 100 cents on the dollar and are looking down all avenues for possible relief.
Banco Santander SA, one of the biggest of the "feeders" to Mr. Madoff, had some $3 billion with him through its Geneva-based hedge-fund group, Optimal Investment Services SA, according to the firm. Santander earned $52.7 million in 2007 and $43.3 million in 2006 in "investment manager's fees" from its Madoff-run Strategic U.S. Equity Series, according to a 2007 annual report.
Optimal's relationship with Mr. Madoff, which dated back more than a decade, was described in a 2008 internal report reviewed by The Wall Street Journal as a "very profitable business for the group." At the time, the firm collected an average management fee of "above 2%" on money placed with Mr. Madoff. Santander declined to comment.
Mr. Madoff pleaded guilty last month to perpetrating a massive Ponzi scheme. Many of his victims don't expect to recover anywhere near 100 cents on the dollar and are looking down all avenues for possible relief.
Crisis Altering Wall St. As Stars Begin to Scatter
Rick Crescenzo, formerly of Bear Stearns, works at Broadpoint. Smaller firms have been hiring hundreds from bigger banks. The New York Times - There is an air of exodus on Wall Street — and not just among those being fired. As Washington cracks down on compensation and tightens regulation of banks, a brain drain is occurring at some of the biggest ones. They are some of the same banks blamed for setting off the worst downturn since the Depression.
Top bankers have been leaving Goldman Sachs, Morgan Stanley, Citigroup and others in rising numbers to join banks that do not face tighter regulation, including foreign banks, or start-up companies eager to build themselves into tomorrow’s financial powerhouses. Others are leaving because of culture clashes at merging companies, like Bank of America and Merrill Lynch, and still others are simply retiring early.
This is certainly a concern for the banks losing top talent. But other financial experts believe it is the beginning of a broader and necessary reshaping of Wall Street, too long dominated by a handful of major players that helped to fuel the financial crisis. The country may be better off if the banking industry is less concentrated, they say. http://www.nytimes.com/2009/04/12/business/12wall.html
China Slows Purchases of U.S. and Other Bonds
The New York Times - HONG KONG — Reversing its role as the world’s fastest-growing buyer of U.S. Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released this weekend by China’s central bank.
China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years. For the quarter, the reserves edged up $7.7 billion, compared to a record increase of $153.9 billion in the same quarter last year.
The main effect of slower bond purchases may be to weaken Beijing’s influence in Washington, by lessening the reliance of the U.S. Treasury on Chinese central bank purchases at its government bond auctions. Chinese officials from Premier Wen Jiabao on down have expressed growing nervousness over the past two months about their country’s huge exposure to America’s financial well-being.
Private investors from around the world, including the United States, have been buying more American bonds in search of a refuge from global financial troubles. This has made the Chinese government’s cash less necessary and kept interest rates low in the United States over the winter despite the Chinese pullback.http://www.nytimes.com/2009/04/13/business/global/13yuan.html
China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years. For the quarter, the reserves edged up $7.7 billion, compared to a record increase of $153.9 billion in the same quarter last year.
The main effect of slower bond purchases may be to weaken Beijing’s influence in Washington, by lessening the reliance of the U.S. Treasury on Chinese central bank purchases at its government bond auctions. Chinese officials from Premier Wen Jiabao on down have expressed growing nervousness over the past two months about their country’s huge exposure to America’s financial well-being.
Private investors from around the world, including the United States, have been buying more American bonds in search of a refuge from global financial troubles. This has made the Chinese government’s cash less necessary and kept interest rates low in the United States over the winter despite the Chinese pullback.http://www.nytimes.com/2009/04/13/business/global/13yuan.html
Longer Unemployment for Those 45 and Older
When Ben Sims, 57, showed up earlier this year for a job interview at a company in Richardson, Tex., he noticed the hiring manager — several decades his junior — falter upon spotting him in the lobby. Her face actually dropped,” said Mr. Sims, who was dressed in a conservative business suit, befitting his 25-year career in human resources at I.B.M.
Later, in her office, after several perfunctory questions, the woman told Mr. Sims she did not believe the job would be “suitable” for him. And, barely 10 minutes later she stood to signal the interview was over.
“I knew very much then it was an age situation,” said Mr. Sims, who has been looking for work since November 2007, a month before the economic downturn began.
The recession’s onslaught has come as Mr. Sims and many others belonging to the post-World War II baby boom generation — the demographic burst from 1946 to 1964 that reshaped the country — remain years from retirement. But unemployed boomers, many of whom believed they were still in the prime of their careers, are confronting the grim reality that they face some of the steepest odds of any job seekers in this dismal market.
Unemployed workers ages 45 and over form a disproportionate share of the hard-luck recession category, the long-term unemployed — those who have been out of work for six months or longer, according to the Bureau of Labor Statistics. On average, laid-off workers in this age group were out of work 22.2 weeks in 2008, compared with 16.2 weeks for younger workers.http://www.nytimes.com/2009/04/13/us/13age.html
Later, in her office, after several perfunctory questions, the woman told Mr. Sims she did not believe the job would be “suitable” for him. And, barely 10 minutes later she stood to signal the interview was over.
“I knew very much then it was an age situation,” said Mr. Sims, who has been looking for work since November 2007, a month before the economic downturn began.
The recession’s onslaught has come as Mr. Sims and many others belonging to the post-World War II baby boom generation — the demographic burst from 1946 to 1964 that reshaped the country — remain years from retirement. But unemployed boomers, many of whom believed they were still in the prime of their careers, are confronting the grim reality that they face some of the steepest odds of any job seekers in this dismal market.
Unemployed workers ages 45 and over form a disproportionate share of the hard-luck recession category, the long-term unemployed — those who have been out of work for six months or longer, according to the Bureau of Labor Statistics. On average, laid-off workers in this age group were out of work 22.2 weeks in 2008, compared with 16.2 weeks for younger workers.http://www.nytimes.com/2009/04/13/us/13age.html
Friday, April 10, 2009
In March Retailing Report, Bright Spots Are Few
Costco shoppers in Mountain View, Calif. Costco sales fell 5 percent in March. The New York Times - Retailers posted another month of disappointing sales in March, signaling that consumers are not yet ready to come out of hiding.
Only a handful of chains on Thursday reported an increase in sales at stores open at least a year, a measure of retail health. Wal-Mart Stores, the nation’s largest retailer and a bellwether for the industry, had a 1.4 percent increase over March 2008, not including fuel. Other discount stores like TJX and Ross Stores, as well as some teenage apparel chains, also fared well.
But a majority of the nation’s retailers continued to suffer sales declines. Abercrombie & Fitch was most notable, with a stunning 34 percent drop that analysts attributed to its strategy of not offering the same deep discounts as its competitors. Sales at other mall apparel chains and department stores remained weak.
For the last few months, retailers have taken all sorts of measures to ride out the bleak economy. They have cut costs, hoarded cash and reduced inventory by cutting orders and running sales and unprecedented promotions. Now, they must wait.http://www.nytimes.com/2009/04/10/business/economy/10shop.html
Wednesday, April 8, 2009
Today's Headlines
2 Homebuilders Merge in $1.3 Billion Deal
NYT - In a transaction that would create the nation’s largest homebuilder, Pulte Homes and Centex said Wednesday that they would merge in a $1.3 billion stock-for-stock deal.The transaction valued by the companies at $3.1 billion, includes $1.8 billion in debt.The two companies are hoping that the merger will help them survive a severe slump in the housing market that has helped lengthen a recession that started in December 2007. Homebuilders have sharply cut back construction and prices as they try to reduce inventories. Centex lost $664 million in the quarter that ended in December while Pulte reported a $338.2 million loss. http://www.nytimes.com/2009/04/09/business/09build.html
They Pay for Cable, Music and Extra Bags. How About News?
NYT - Just a year ago, most media companies believed the formula for Internet success was to offer free content, build an audience and rake in advertising dollars. Now, with the recession battering advertising online, in print and on television, media executives are contemplating a tougher trick: making the consumer pay. Publishers like Hearst Newspapers, The New York Times and Time Inc.are drawing up plans for possible Internet fees. Jeffrey L. Bewkes, Time Warner’s chief executive, is promoting a plan called “TV Everywhere,” to offer consumers a vast array of television online, provided they are paying cable TV customers. And Rupert Murdoch, who once vowed to make The Wall Street Journal’s Web site free, is now an evangelist for charging readers.http://www.nytimes.com/2009/04/08/business/media/08pay.html
Magazines Blur Line Between Ad and Article
NYT -If the separation between magazines’ editorial and advertising sides was once a gulf, it is now diminished to the size of a sidewalk crack.Recent issues of Entertainment Weekly, Esquire, Time, People, ESPN the Magazine, Scholastic Parent & Child and other magazines have woven in advertisers in new ways, some going as far as putting ads on their covers. In a medium like television, a partnership with advertisers is nothing surprising — look at how often plastic bags and containers from Glad are featured on “Top Chef.” But in magazines, the editorial and advertising sides have stayed distinct, largely because of the American Society of Magazine Editors. The society hands out the annual National Magazine Awards, and its guidelines govern how editorial content and advertising should be kept separate. Cover ads are prohibited.http://www.nytimes.com/2009/04/08/business/media/08adco.html
Big GM Bondholder Sells Its Stake
NYT -As talk continues to circulate about the likelihood of a General Motors bankruptcy, one of G.M.’s significant bondholders has shed the bulk of its holdings, according to a regulatory filing.The bondholder, Southeastern Asset Management, and its investment group, Longleaf Partners, both of Memphis, now hold 9.6 percent of G.M.’s Series B bonds, Southeastern said Tuesday in a filing with the Securities and Exchange Commission.Southeastern held 33 percent of G.M.’s Series B bonds as recently as September. Its bonds were convertible to 13.2 million G.M. common shares, or about 2.3 percent of G.M. stock, according to Bloomberg News.http://www.nytimes.com/2009/04/08/business/08gm.html
As Room Rates Sink, Sleepless Nights for Hotel Investors
NYT - In San Francisco, prices of hotel rooms have “gone off a cliff,” said Karl Hoagland, chairman of Larkspur Hotels and Restaurants. Softening demand has led some luxury hotels to offer rooms for less than $100 a night.“It’s a great windfall for travelers,” said Mr. Hoagland, whose company owns three hotels in the city’s Union Square neighborhood.But it is anything but a windfall for Mr. Hoagland. His company paid about $100 million for the three hotels, in 2006 and 2007. “It was a pretty big bet on San Francisco,” he said.http://www.nytimes.com/2009/04/08/business/08hotel.html
Consumer Borrowing Declined in February
WASHINGTON (AP) — Consumer borrowing plunged in February at a 3.5 percent annual rate, more than analysts had expected, as Americans cut back their use of credit cards by a record amount.The Federal Reserve said Tuesday that consumer borrowing dropped at an annual rate of $7.48 billion in February from January, which amounts to a 3.5 percent annual rate of decline. Wall Street economists expected borrowing to slide by only $1 billion, according to a survey by Thomson Reuters. http://www.nytimes.com/2009/04/08/business/economy/08econ.html
Judge Orders Probe of Prosecutors
WSJ - WASHINGTON -- A federal judge ordered a criminal investigation into prosecutorial misconduct in the trial of former Alaska Sen. Ted Stevens, and suggested that the botched case exposed a deeper problem at the Justice Department.U.S. District Judge Emmet G. Sullivan appointed a special prosecutor to look into possible criminal contempt-of-court charges against six federal prosecutors who the judge said withheld evidence from defense lawyers.Judge Sullivan erased the corruption conviction of Mr. Stevens and dismissed the case, in line with a request last week by U.S. Attorney General Eric Holder. A federal jury in October convicted Mr. Stevens on seven counts of failing to disclose free home renovations and other gifts from friends. The verdict came just eight days before Election Day, and the Republican lost his re-election bid by fewer than 4,000 votes, handing Democrats a crucial seat in the Senate.http://online.wsj.com/article/SB123911047345896733.html
Pirates Seize U.S.-Flagged Ship
WSJ - DUBAI -- Pirates on Wednesday seized a U.S.-flagged container vessel off the coast of Somalia, raising the stakes for American naval commanders battling a recent surge of attacks in the region. A spokeswoman for the U.S. Fifth Fleet in Bahrain said the attack took place early Wednesday about 240 nautical miles southeast of the pirate haven of Eyl, Somalia. The Navy didn't release detailed information about the ship, but A.P. Moller Maersk, the Danish shipping giant, identified the vessel as the Maersk Alabama, a large container ship.http://online.wsj.com/article/SB123918590857500753.html
NYT - In a transaction that would create the nation’s largest homebuilder, Pulte Homes and Centex said Wednesday that they would merge in a $1.3 billion stock-for-stock deal.The transaction valued by the companies at $3.1 billion, includes $1.8 billion in debt.The two companies are hoping that the merger will help them survive a severe slump in the housing market that has helped lengthen a recession that started in December 2007. Homebuilders have sharply cut back construction and prices as they try to reduce inventories. Centex lost $664 million in the quarter that ended in December while Pulte reported a $338.2 million loss. http://www.nytimes.com/2009/04/09/business/09build.html
They Pay for Cable, Music and Extra Bags. How About News?
NYT - Just a year ago, most media companies believed the formula for Internet success was to offer free content, build an audience and rake in advertising dollars. Now, with the recession battering advertising online, in print and on television, media executives are contemplating a tougher trick: making the consumer pay. Publishers like Hearst Newspapers, The New York Times and Time Inc.are drawing up plans for possible Internet fees. Jeffrey L. Bewkes, Time Warner’s chief executive, is promoting a plan called “TV Everywhere,” to offer consumers a vast array of television online, provided they are paying cable TV customers. And Rupert Murdoch, who once vowed to make The Wall Street Journal’s Web site free, is now an evangelist for charging readers.http://www.nytimes.com/2009/04/08/business/media/08pay.html
Magazines Blur Line Between Ad and Article
NYT -If the separation between magazines’ editorial and advertising sides was once a gulf, it is now diminished to the size of a sidewalk crack.Recent issues of Entertainment Weekly, Esquire, Time, People, ESPN the Magazine, Scholastic Parent & Child and other magazines have woven in advertisers in new ways, some going as far as putting ads on their covers. In a medium like television, a partnership with advertisers is nothing surprising — look at how often plastic bags and containers from Glad are featured on “Top Chef.” But in magazines, the editorial and advertising sides have stayed distinct, largely because of the American Society of Magazine Editors. The society hands out the annual National Magazine Awards, and its guidelines govern how editorial content and advertising should be kept separate. Cover ads are prohibited.http://www.nytimes.com/2009/04/08/business/media/08adco.html
Big GM Bondholder Sells Its Stake
NYT -As talk continues to circulate about the likelihood of a General Motors bankruptcy, one of G.M.’s significant bondholders has shed the bulk of its holdings, according to a regulatory filing.The bondholder, Southeastern Asset Management, and its investment group, Longleaf Partners, both of Memphis, now hold 9.6 percent of G.M.’s Series B bonds, Southeastern said Tuesday in a filing with the Securities and Exchange Commission.Southeastern held 33 percent of G.M.’s Series B bonds as recently as September. Its bonds were convertible to 13.2 million G.M. common shares, or about 2.3 percent of G.M. stock, according to Bloomberg News.http://www.nytimes.com/2009/04/08/business/08gm.html
As Room Rates Sink, Sleepless Nights for Hotel Investors
NYT - In San Francisco, prices of hotel rooms have “gone off a cliff,” said Karl Hoagland, chairman of Larkspur Hotels and Restaurants. Softening demand has led some luxury hotels to offer rooms for less than $100 a night.“It’s a great windfall for travelers,” said Mr. Hoagland, whose company owns three hotels in the city’s Union Square neighborhood.But it is anything but a windfall for Mr. Hoagland. His company paid about $100 million for the three hotels, in 2006 and 2007. “It was a pretty big bet on San Francisco,” he said.http://www.nytimes.com/2009/04/08/business/08hotel.html
Consumer Borrowing Declined in February
WASHINGTON (AP) — Consumer borrowing plunged in February at a 3.5 percent annual rate, more than analysts had expected, as Americans cut back their use of credit cards by a record amount.The Federal Reserve said Tuesday that consumer borrowing dropped at an annual rate of $7.48 billion in February from January, which amounts to a 3.5 percent annual rate of decline. Wall Street economists expected borrowing to slide by only $1 billion, according to a survey by Thomson Reuters. http://www.nytimes.com/2009/04/08/business/economy/08econ.html
Judge Orders Probe of Prosecutors
WSJ - WASHINGTON -- A federal judge ordered a criminal investigation into prosecutorial misconduct in the trial of former Alaska Sen. Ted Stevens, and suggested that the botched case exposed a deeper problem at the Justice Department.U.S. District Judge Emmet G. Sullivan appointed a special prosecutor to look into possible criminal contempt-of-court charges against six federal prosecutors who the judge said withheld evidence from defense lawyers.Judge Sullivan erased the corruption conviction of Mr. Stevens and dismissed the case, in line with a request last week by U.S. Attorney General Eric Holder. A federal jury in October convicted Mr. Stevens on seven counts of failing to disclose free home renovations and other gifts from friends. The verdict came just eight days before Election Day, and the Republican lost his re-election bid by fewer than 4,000 votes, handing Democrats a crucial seat in the Senate.http://online.wsj.com/article/SB123911047345896733.html
Pirates Seize U.S.-Flagged Ship
WSJ - DUBAI -- Pirates on Wednesday seized a U.S.-flagged container vessel off the coast of Somalia, raising the stakes for American naval commanders battling a recent surge of attacks in the region. A spokeswoman for the U.S. Fifth Fleet in Bahrain said the attack took place early Wednesday about 240 nautical miles southeast of the pirate haven of Eyl, Somalia. The Navy didn't release detailed information about the ship, but A.P. Moller Maersk, the Danish shipping giant, identified the vessel as the Maersk Alabama, a large container ship.http://online.wsj.com/article/SB123918590857500753.html
Monday, April 6, 2009
Downturn Pushes More Into Bankruptcy Despite Tougher Rules
The ailing economy continues to pull more Americans into bankruptcy court, where the number of troubled consumers filing for protection soared in March to its highest level since October 2005, when a new law made it more arduous and expensive to file.
And as job losses continue to climb, they may well drag bankruptcy filings along with them.
An average of 5,945 bankruptcy petitions were filed each day in March, up 9 percent from February and up 38 percent compared with a year earlier, according to Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company. In all, 130,793 people filed for bankruptcy in March.
The law, the Bankruptcy Abuse Prevention and Consumer Protection Act, made it more difficult for consumers to erase their debts through Chapter 7 bankruptcies. Those who earn more than their state’s median income are now required to first pass a means test — based on income, living expenses and other factors. If they are deemed able to repay some debts, they are then forced to pursue a Chapter 13 bankruptcy, which sets up a three- or five-year repayment plan and makes it more difficult to get a fresh start.http://www.nytimes.com/2009/04/04/your-money/04bankruptcy.html?scp=1&sq=Bankruptcy%20rules&st=cse
And as job losses continue to climb, they may well drag bankruptcy filings along with them.
An average of 5,945 bankruptcy petitions were filed each day in March, up 9 percent from February and up 38 percent compared with a year earlier, according to Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company. In all, 130,793 people filed for bankruptcy in March.
The law, the Bankruptcy Abuse Prevention and Consumer Protection Act, made it more difficult for consumers to erase their debts through Chapter 7 bankruptcies. Those who earn more than their state’s median income are now required to first pass a means test — based on income, living expenses and other factors. If they are deemed able to repay some debts, they are then forced to pursue a Chapter 13 bankruptcy, which sets up a three- or five-year repayment plan and makes it more difficult to get a fresh start.http://www.nytimes.com/2009/04/04/your-money/04bankruptcy.html?scp=1&sq=Bankruptcy%20rules&st=cse
663,000 Jobs Lost in March; Total Tops 5 Million
With 663,000 more jobs disappearing from the American economy last month, swelling the total number of jobs surrendered to the recession beyond five million, the government’s response to the downturn is being put to a strenuous test.
When drafting plans in January to spend roughly $800 billion to stimulate the deteriorating economy, the Obama administration operated on the assumption that the unemployment rate would reach 8.9 percent by the end of the year — without the extra federal spending. Three months into the year, the unemployment rate has already soared to 8.5 percent, from 7.6 percent, the highest level in more than a quarter-century.
Between January and March, more than two million jobs were lost, according to the Labor Department’s employment report, released Friday.
The pace of retrenchment has prompted talk that another wave of government stimulus spending may be needed to accompany the $787 billion already in the pipeline.http://www.nytimes.com/2009/04/04/business/economy/04jobs.html
When drafting plans in January to spend roughly $800 billion to stimulate the deteriorating economy, the Obama administration operated on the assumption that the unemployment rate would reach 8.9 percent by the end of the year — without the extra federal spending. Three months into the year, the unemployment rate has already soared to 8.5 percent, from 7.6 percent, the highest level in more than a quarter-century.
Between January and March, more than two million jobs were lost, according to the Labor Department’s employment report, released Friday.
The pace of retrenchment has prompted talk that another wave of government stimulus spending may be needed to accompany the $787 billion already in the pipeline.http://www.nytimes.com/2009/04/04/business/economy/04jobs.html
Top Headlines - Monday April 6
Big Companies Invest to Grab Sales in Recovery; the iPod Lesson
Frugality Forged in Today's Recession Has Potential to Outlast It
With their jobs less secure, their houses worth less and their stock-market portfolios shrunken, Americans are saving more now. But will they still be thrifty when the recession ends? No one will know for sure for years, but there's good reason to believe Americans will be saving more in the next decade than they did in the last one. "It's hard to believe we're ever going back to the easy credit and free spending of the last 10 years," said economist Richard Berner of Morgan Stanley. He predicts consumer spending will grow at an inflation-adjusted 2% to 2.5% annual rate over the next several years, compared with 3.5% in the decade ended in 2007. That means trouble for retailers, restaurants and luxury-goods makers that rely on U.S. consumers. But it could also restore some balance to a world economy that has relied -- too much, many economists say -- on Americans' debt-fueled spending and emerging markets' willingness to save and lend.http://online.wsj.com/article/SB123897160787290857.html
Euro-Zone Consumer Prices Tumble
LONDON -- Industrial producer prices in the euro zone posted their biggest drop in annual terms for almost 10 years in February, official data showed Monday.
Factory gate prices dropped 0.5% on the month, leaving them 1.8% weaker than in February last year, the European Union statistics agency Eurostat said. It was the biggest annual fall since April 1999 and the seventh consecutive monthly decline in prices. February's declines were also sharper than the market consensus estimate of a 0.4% drop from a month earlier and a 1.6% fall on a year-to-year basis from a Dow Jones Newswires survey of economists last week. January's price drops were revised from 0.8% on a month and 0.5% on the year reported in March.http://online.wsj.com/article/SB123901150123392283.html#mod=testMod
R&D Spending Holds Steady in Slump
Major U.S. companies are cutting jobs and wages. But many are still spending on innovation. Wary of emerging from the recession with obsolete products, big U.S. companies spent nearly as much on research and development in the dismal last quarter of 2008 as they did a year earlier, even as their revenue fell 7.7%, according to a Wall Street Journal analysis. The sampling looked at 28 of the largest U.S. R&D spenders, excluding deeply troubled auto makers and the drug industry, where R&D spending is dictated by government requirements.http://online.wsj.com/article/SB123819035034460761.html#mod=testMod
Internet Providers Gird for Fight With FCC
Cable and telephone companies are gearing up for a fight as regulators begin work Wednesday on a national broadband strategy that could bring major changes to how Internet services are delivered to American homes. The $787 billion government stimulus package requires the Federal Communications Commission to provide a road map for how potentially billions of future taxpayer dollars should be spent to build or upgrade Internet lines across the U.S. The plan will raise thorny issues about what sort of requirements, if any, should be imposed on Internet-service providers to share the networks they have built with government help. Phone and cable companies argue that such requirements would likely stifle investment and be counterproductive.http://online.wsj.com/article/SB123897361669991013.html
City Tries to Hang On Amid Auto Collapse
STERLING HEIGHTS, Mich. -- This factory town has held its own through decades of auto-industry retrenchment and downsizing, staving off the blight that has spread to so many nearby cities. When an auto-supply plant here closed two years ago, city leaders found a defense company to fill the property. And the city's finances remained strong enough that Sterling Heights hasn't had to cut into core services such as the police and fire departments.http://online.wsj.com/article/SB123878894916987561.html?mod=article-outset-box
IBM Talks Teeter as Sun Board Splits
Talks between International Business Machines Corp. and Sun Microsystems Inc. were on the verge of unraveling Sunday, threatening a potential $7 billion acquisition that would place one of Silicon Valley's iconic companies under the Big Blue umbrella.Sun's board is split over whether to do the deal, with a faction led by Sun's chairman and co-founder, Scott McNealy, opposing the transaction and a group led by Chief Executive Jonathan Schwartz in favor, said two people familiar with the talks. While the price of IBM's offer remained unclear -- some placed it at $9.10 a share, others at $9.40 -- some people familiar with the talks say price wasn't the biggest issue.http://online.wsj.com/article/SB123896664697090681.html#mod=testMod
Frugality Forged in Today's Recession Has Potential to Outlast It
With their jobs less secure, their houses worth less and their stock-market portfolios shrunken, Americans are saving more now. But will they still be thrifty when the recession ends? No one will know for sure for years, but there's good reason to believe Americans will be saving more in the next decade than they did in the last one. "It's hard to believe we're ever going back to the easy credit and free spending of the last 10 years," said economist Richard Berner of Morgan Stanley. He predicts consumer spending will grow at an inflation-adjusted 2% to 2.5% annual rate over the next several years, compared with 3.5% in the decade ended in 2007. That means trouble for retailers, restaurants and luxury-goods makers that rely on U.S. consumers. But it could also restore some balance to a world economy that has relied -- too much, many economists say -- on Americans' debt-fueled spending and emerging markets' willingness to save and lend.http://online.wsj.com/article/SB123897160787290857.html
Euro-Zone Consumer Prices Tumble
LONDON -- Industrial producer prices in the euro zone posted their biggest drop in annual terms for almost 10 years in February, official data showed Monday.
Factory gate prices dropped 0.5% on the month, leaving them 1.8% weaker than in February last year, the European Union statistics agency Eurostat said. It was the biggest annual fall since April 1999 and the seventh consecutive monthly decline in prices. February's declines were also sharper than the market consensus estimate of a 0.4% drop from a month earlier and a 1.6% fall on a year-to-year basis from a Dow Jones Newswires survey of economists last week. January's price drops were revised from 0.8% on a month and 0.5% on the year reported in March.http://online.wsj.com/article/SB123901150123392283.html#mod=testMod
R&D Spending Holds Steady in Slump
Major U.S. companies are cutting jobs and wages. But many are still spending on innovation. Wary of emerging from the recession with obsolete products, big U.S. companies spent nearly as much on research and development in the dismal last quarter of 2008 as they did a year earlier, even as their revenue fell 7.7%, according to a Wall Street Journal analysis. The sampling looked at 28 of the largest U.S. R&D spenders, excluding deeply troubled auto makers and the drug industry, where R&D spending is dictated by government requirements.http://online.wsj.com/article/SB123819035034460761.html#mod=testMod
Internet Providers Gird for Fight With FCC
Cable and telephone companies are gearing up for a fight as regulators begin work Wednesday on a national broadband strategy that could bring major changes to how Internet services are delivered to American homes. The $787 billion government stimulus package requires the Federal Communications Commission to provide a road map for how potentially billions of future taxpayer dollars should be spent to build or upgrade Internet lines across the U.S. The plan will raise thorny issues about what sort of requirements, if any, should be imposed on Internet-service providers to share the networks they have built with government help. Phone and cable companies argue that such requirements would likely stifle investment and be counterproductive.http://online.wsj.com/article/SB123897361669991013.html
City Tries to Hang On Amid Auto Collapse
STERLING HEIGHTS, Mich. -- This factory town has held its own through decades of auto-industry retrenchment and downsizing, staving off the blight that has spread to so many nearby cities. When an auto-supply plant here closed two years ago, city leaders found a defense company to fill the property. And the city's finances remained strong enough that Sterling Heights hasn't had to cut into core services such as the police and fire departments.http://online.wsj.com/article/SB123878894916987561.html?mod=article-outset-box
IBM Talks Teeter as Sun Board Splits
Talks between International Business Machines Corp. and Sun Microsystems Inc. were on the verge of unraveling Sunday, threatening a potential $7 billion acquisition that would place one of Silicon Valley's iconic companies under the Big Blue umbrella.Sun's board is split over whether to do the deal, with a faction led by Sun's chairman and co-founder, Scott McNealy, opposing the transaction and a group led by Chief Executive Jonathan Schwartz in favor, said two people familiar with the talks. While the price of IBM's offer remained unclear -- some placed it at $9.10 a share, others at $9.40 -- some people familiar with the talks say price wasn't the biggest issue.http://online.wsj.com/article/SB123896664697090681.html#mod=testMod
Wednesday, April 1, 2009
Today's Top News
Bondholders and the White House now have a CEO they want running GM
New GM Chief Bends to U.S. Pressure
DETROIT -- Facing heavy government pressure, General Motors Corp.'s chief executive spent his second day on the job making a public break from his predecessor, sending a sharply different message of willingness to shake up the ailing auto maker.http://online.wsj.com/article/SB123850236944873521.html#mod=testMod
What's Going On Here - Aren't Things Suppose to be Getting Better?
Global Slump Seen Deepening.
The outlook for the global economy worsened on the eve of a summit of the world's 20 biggest economic powers, as two international agencies warned that global output will fall in 2009 for the first time since World War II. Fresh evidence of the deepening slowdown came from around the world. Euro-zone data Tuesday showed inflation at 0.6% in Europe's single-currency area for the year through March, the lowest level since official records began in 1996. In the U.S., home prices fell 19% in January compared with a year earlier. Japan's business-confidence fell to an all-time low in data released by its central bank early Wednesday, a day after the jobless rate there rose to a three-year high.http://online.wsj.com/article/
SB123849211128473261.html
States Push to Raise Taxes on Richest Taxpayers
The governor and Democratic lawmakers in New York will attempt to patch an $18 billion budget deficit by imposing much higher taxes on the richest residents, joining several states considering such a move this year. Under a proposal by Gov. David Paterson, New York would follow California and Maryland in pushing its top earners into higher tax brackets that are several percentage points more than what most earners pay. And New Jersey is considering raising its top-tier income taxes even higher, to more than 10% compared with the 5.25% marginal rate paid by most household. http://online.wsj.com/article/SB123854978218576549.html
What Are the Implications For Lower Oil Prices and Is Oil Headed Back Up?
Oil Falls Below $50 a barrel
Oil prices slipped below $49 Wednesday as new signs of deterioration in the world's three biggest economies -- the U.S., Japan and China -- undermined crude's recent gains. Benchmark crude for May delivery was down $1.22 to $48.44 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. That fall nearly wiped out overnight gains, when the contract rose $1.25 to settle at $49.66. In London, Brent prices fell 96 cents to $48.28 a barrel on the ICE Futures exchange.http://online.wsj.com/article/SB123858224641977803.html
Home Sales are followed closely - is this a leading or lagging indicator?
Home Prices Drop, but Homes Still Not Cheap
Homeowners are watching anxiously for any signs of housing market stabilization. So, too, are all those who believe the market may hold the key to the economy.
And yet the most recent data makes for more gloomy reading.The closely watched Case-Shiller index, which tracks prices across twenty major cities, shows that through January the crash was getting worse, not better. And yet, even after these declines, homes overall still may not be that cheap relative to wages. More on that later.http://online.wsj.com/article/SB123853857749575441.html
Investors follow the Stock Market closely - is this a leading or lagging indicator?
Stock Bull Still Breathing, But Dow Loses 13% Overall in Period.
For investors, the first quarter was a case of one step forward but two steps back.
As the Federal Reserve, Treasury and governments around the world stepped up efforts to address the financial crisis, fears of a systemic collapse abated and investors showed glimmers of willingness to take on more risk. It wasn't enough to prevent stocks from posting their sixth consecutive losing quarter and dashing the hopes of many investors by setting lows in the process. Even a 20% rally over the span of three weeks -- putting the market into a bull market by common definition -- faded in the final days of the quarter as bad news out of the auto industry reminded investors that challenges remain.http://online.wsj.com/article/SB123849617556773343.html
How Much Lower Can Car Sales Go?
Vehicle-sales data for March will print Wednesday and once again the numbers will look depressing. But, just maybe, auto sales have bottomed. Car buyers are expected to have purchased in March roughly 9.5 million new cars on a seasonally adjusted, annualized basis, according to Moody's Economy.com. That will mark the third consecutive month in the sub-10 million range. The past decade saw monthly new-car sales annualized at about 16 million to 17 million a year, spiking at times above 20 million. But what follows "could be less, because if you reason there was a bubble in housing, then there was some degree of bubble in durable consumption," such as car sales, says Peter Kretzmer, senior economist at Bank of America.http://online.wsj.com/article/SB123853992973675517.html
What Does this Mean for Microsoft?
PC Makers Test Laptops Running Google Software
Hewlett-PackardCo. and other PC makers are considering using free software developed by GoogleInc. to run some small computers, a move that would open a new front in the battle between the Internet giant and MicrosoftCorp. PC makers are testing Google's Android operating system—which has so far been used to power mobile phones—for use in new models of so-called netbooks, inexpensive laptops that have become the fastest-growing segment of the PC industry. Google, which dominates Internet search, already challenges Microsoft on other fronts, including with its free word-processing and spreadsheet software, neither of which has succeeded in denting Microsoft's Office suite. The effort to move Android to netbooks targets Windows, which generated more than 60% of Microsoft's operating profit in its last fiscal year.http://online.wsj.com/article/SB123852934905974845.html
If the Dollar Loses its Status - What does that Mean for the U.S. Economy?
Dollar Losing its Status as a Safe Haven
The dollar surged out of the gate in the first months of 2009 only to stumble as the quarter drew to a close. Further obstacles could lie ahead. There are two main impediments in the dollar's path: the latest efforts by the Federal Reserve to jump-start the U.S. economy, and investors' tentative return to riskier types of assets. Both developments mean that investors are less likely to seek out the dollar as a safe port in a storm, something they have done relatively consistently since the global financial crisis intensified last year. Still, the dollar ended the quarter on a positive note. It strengthened 5% against the euro, 9% against the Japanese yen and 4% against a trade-weighted basket of 16 currencies tracked by J.P. Morgan Chase.http://online.wsj.com/article/SB123855139602376717.html
New GM Chief Bends to U.S. Pressure
DETROIT -- Facing heavy government pressure, General Motors Corp.'s chief executive spent his second day on the job making a public break from his predecessor, sending a sharply different message of willingness to shake up the ailing auto maker.http://online.wsj.com/article/SB123850236944873521.html#mod=testMod
What's Going On Here - Aren't Things Suppose to be Getting Better?
Global Slump Seen Deepening.
The outlook for the global economy worsened on the eve of a summit of the world's 20 biggest economic powers, as two international agencies warned that global output will fall in 2009 for the first time since World War II. Fresh evidence of the deepening slowdown came from around the world. Euro-zone data Tuesday showed inflation at 0.6% in Europe's single-currency area for the year through March, the lowest level since official records began in 1996. In the U.S., home prices fell 19% in January compared with a year earlier. Japan's business-confidence fell to an all-time low in data released by its central bank early Wednesday, a day after the jobless rate there rose to a three-year high.http://online.wsj.com/article/
SB123849211128473261.html
States Push to Raise Taxes on Richest Taxpayers
The governor and Democratic lawmakers in New York will attempt to patch an $18 billion budget deficit by imposing much higher taxes on the richest residents, joining several states considering such a move this year. Under a proposal by Gov. David Paterson, New York would follow California and Maryland in pushing its top earners into higher tax brackets that are several percentage points more than what most earners pay. And New Jersey is considering raising its top-tier income taxes even higher, to more than 10% compared with the 5.25% marginal rate paid by most household. http://online.wsj.com/article/SB123854978218576549.html
What Are the Implications For Lower Oil Prices and Is Oil Headed Back Up?
Oil Falls Below $50 a barrel
Oil prices slipped below $49 Wednesday as new signs of deterioration in the world's three biggest economies -- the U.S., Japan and China -- undermined crude's recent gains. Benchmark crude for May delivery was down $1.22 to $48.44 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. That fall nearly wiped out overnight gains, when the contract rose $1.25 to settle at $49.66. In London, Brent prices fell 96 cents to $48.28 a barrel on the ICE Futures exchange.http://online.wsj.com/article/SB123858224641977803.html
Home Sales are followed closely - is this a leading or lagging indicator?
Home Prices Drop, but Homes Still Not Cheap
Homeowners are watching anxiously for any signs of housing market stabilization. So, too, are all those who believe the market may hold the key to the economy.
And yet the most recent data makes for more gloomy reading.The closely watched Case-Shiller index, which tracks prices across twenty major cities, shows that through January the crash was getting worse, not better. And yet, even after these declines, homes overall still may not be that cheap relative to wages. More on that later.http://online.wsj.com/article/SB123853857749575441.html
Investors follow the Stock Market closely - is this a leading or lagging indicator?
Stock Bull Still Breathing, But Dow Loses 13% Overall in Period.
For investors, the first quarter was a case of one step forward but two steps back.
As the Federal Reserve, Treasury and governments around the world stepped up efforts to address the financial crisis, fears of a systemic collapse abated and investors showed glimmers of willingness to take on more risk. It wasn't enough to prevent stocks from posting their sixth consecutive losing quarter and dashing the hopes of many investors by setting lows in the process. Even a 20% rally over the span of three weeks -- putting the market into a bull market by common definition -- faded in the final days of the quarter as bad news out of the auto industry reminded investors that challenges remain.http://online.wsj.com/article/SB123849617556773343.html
How Much Lower Can Car Sales Go?
Vehicle-sales data for March will print Wednesday and once again the numbers will look depressing. But, just maybe, auto sales have bottomed. Car buyers are expected to have purchased in March roughly 9.5 million new cars on a seasonally adjusted, annualized basis, according to Moody's Economy.com. That will mark the third consecutive month in the sub-10 million range. The past decade saw monthly new-car sales annualized at about 16 million to 17 million a year, spiking at times above 20 million. But what follows "could be less, because if you reason there was a bubble in housing, then there was some degree of bubble in durable consumption," such as car sales, says Peter Kretzmer, senior economist at Bank of America.http://online.wsj.com/article/SB123853992973675517.html
What Does this Mean for Microsoft?
PC Makers Test Laptops Running Google Software
Hewlett-PackardCo. and other PC makers are considering using free software developed by GoogleInc. to run some small computers, a move that would open a new front in the battle between the Internet giant and MicrosoftCorp. PC makers are testing Google's Android operating system—which has so far been used to power mobile phones—for use in new models of so-called netbooks, inexpensive laptops that have become the fastest-growing segment of the PC industry. Google, which dominates Internet search, already challenges Microsoft on other fronts, including with its free word-processing and spreadsheet software, neither of which has succeeded in denting Microsoft's Office suite. The effort to move Android to netbooks targets Windows, which generated more than 60% of Microsoft's operating profit in its last fiscal year.http://online.wsj.com/article/SB123852934905974845.html
If the Dollar Loses its Status - What does that Mean for the U.S. Economy?
Dollar Losing its Status as a Safe Haven
The dollar surged out of the gate in the first months of 2009 only to stumble as the quarter drew to a close. Further obstacles could lie ahead. There are two main impediments in the dollar's path: the latest efforts by the Federal Reserve to jump-start the U.S. economy, and investors' tentative return to riskier types of assets. Both developments mean that investors are less likely to seek out the dollar as a safe port in a storm, something they have done relatively consistently since the global financial crisis intensified last year. Still, the dollar ended the quarter on a positive note. It strengthened 5% against the euro, 9% against the Japanese yen and 4% against a trade-weighted basket of 16 currencies tracked by J.P. Morgan Chase.http://online.wsj.com/article/SB123855139602376717.html
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