How Medical Marijuana is Transforming the Pot Industry

Most people think business reporting is boring and is about numbers and guys in suits. But a good business writer can write about anything - as long as it involves money. That is why this recent New Yorker piece is a great business story. Read on.

The New Yorker - July 28, 2008 - The Tibetan prayer flags suspended on a string over the sleeping body of Captain Blue rose and fell in fluttering counterpoint to the wheezy rhythm of his breath. Lifted by a gentle breeze off the Pacific Ocean, each swatch of red, white, yellow, or green cotton bore a paragraph of Asian script. Every time a flag flaps in the breeze, it is thought, a prayer flies off to Heaven. Blue’s mother says that when her son was an infant he used to sleep until noon, which is still the time that he wakes up most days, on his platform bed in a one-bedroom apartment overlooking Venice Beach, a neighborhood of Los Angeles.

I recently spent six months, off and on, with Blue—at his apartment, in private homes, on farms, in pot grow rooms, and in other places where “medical marijuana” is produced, traded, sold, and consumed in California. During that time, I saw thousands of Tibetan prayer flags. The flags identify their owners with serenity and the conscious path, rather than with the sinister world of urban dope dealers, who flaunt muscles and guns, and charge exorbitant prices for mediocre product. For Blue and tens of thousands of like-minded individuals, Proposition 215 presented an opportunity to participate in a legally sanctioned experiment in altered living. The people I met in the high-end ganja business had an affinity for higher modes of thinking and being, including vegetarianism and eating organic food, practicing yoga, avoiding prescription drugs in favor of holistic healing methods, travelling to Indonesia and Thailand, fasting, and experimenting with hallucinogenic drugs. Many were also financially savvy, working long hours and making six-figure incomes.
Full story can be obtained here: http://www.newyorker.com/reporting/2008/07/28/080728fa_fact_samuels?currentPage=all

Download PDF of story here: https://backup.filesanywhere.com/v.asp?v=%8Cjc%88%5Fa%AB%AA%AE%A2

Is College Worth the Cost

FBI Probes Home Buying Incentives - Was there fraud?

Like the Savings and Loan bust in the 1980s, allegations of questionable practices are now surfacing and may have contributed to the hyper growth in housing sales. Stay tuned.

The Wall Street Journal - When home sales began to slow at the start of the downturn, home builders offered buyers incentives -- instead of reducing prices -- to stimulate demand. The incentives included cars, tuition and credit-card payments, and even cash.

Now, federal investigators are questioning whether some of those incentives misled lenders and caused them to write mortgages that were artificially inflated, contributing to today's home-price crash.

Using incentives to sell homes has long been a marketing tool for builders. When properly disclosed and structured, the practice is legal. But the Federal Bureau of Investigation is looking into allegations that home builders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers, which could have added as much as $100,000 to the price of a home. http://online.wsj.com/article/SB121884641242946145.html

Dollar's Rise Could Damp Inflation

The Wall Street Journal - The U.S. dollar marched higher again on Friday, continuing a development that could ease inflationary pressures but also could slow a U.S. export boom.

Just a couple of months ago, policy makers were alarmed about how far the dollar had fallen. Now evidence is building that its seven-year slide may be ending.When a currency strengthens, it's usually a sign of health in the underlying economy. In this case, the dollar's rally is a sign of weakness in other economies. Reports in recent days showed that the economies of Japan and Europe contracted in the second quarter, and the U.K. slowed. It's now looking less likely that the rest of the world will be insulated from U.S. economic ills.

The dollar's latest rise is closely tied to recent declines in oil and other commodity prices. As economies in the rest of the world slow, demand for raw materials appears to be waning, which is taking pressure off commodity prices. These goods are typically priced in dollars. As the U.S. currency strengthens, commodity producers have less incentive to increase their prices, further easing the upward pressure on prices. http://online.wsj.com/article/SB121884105817145699.html?mod=hps_us_pageone

The Problem With Wall Street Analysts Research

New York Times - Frank P. Quattrone thinks Wall Street research has “proven to be a disaster, in my humble opinion.

You remember Mr. Quattrone, don’t you? He’s the mustachioed Silicon Valley banker who brought some of the biggest technology initial public offerings to market — Cisco Systems, Amazon, Netscape, just to name a few. His career was famously derailed by a four-year-long public battle against obstruction of justice charges at the height of the previous market bubble. The charges were ultimately dropped, and he’s now back in business.

“I do think the industry should petition to remove the Spitzer initiatives because ultimately they hurt the competitiveness of our country by denying small companies the access to research analysts,” he said, throwing a proverbial grenade into the auditorium.

Mr. Quattrone was referring, of course, to the former New York attorney general Eliot Spitzer’s landmark settlement in 2002, which forced the separation of investment banking from research. The settlement followed an investigation into whether some Wall Street analysts were providing misleading ratings of the companies they covered to bolster their firms’ investment banking business. Henry Blodget of Merrill Lynch and Jack Grubman of Citigroup were barred from the securities industry and others took their licks. (As an aside, Mr. Spitzer was not behind Mr. Quattrone’s prosecution.)

As a result, banks are no longer allowed to pay their analysts from any revenue derived from investment banking, only from trading operations. Beyond that, an investment banker can’t even call a research analyst at the same firm without a lawyer chaperoning the conversation.”http://www.nytimes.com/2008/08/12/business/12sorkin.html?ex=1376280000&en=d816fb300d1d487b&ei=5124&partner=permalink&exprod=permalink

Companies Tap Workers Pension Plans To Fund Executive Benefits

At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives' retirement benefits and pay.The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy.The background: Federal law encourages employers to offer pensions by giving companies a tax deduction when they contribute cash to a pension plan, and by letting the money in the plan grow tax free. Executives, like anyone else, can participate in these plans.

But their benefits can't be disproportionately large. IRS rules say pension plans must not "discriminate in favor of highly compensated employees." If a company wants to give its executives larger pensions -- as most do -- it must provide "supplemental" executive pensions, which don't carry any tax advantages.http://online.wsj.com/article/SB121761989739205497.html?mod=hpp_us_whats_news

Amid Turmoil, U.S. Turns Away From Decades of Deregulation

WASHINGTON -- The housing and financial crisis convulsing the U.S. is powering a new wave of government regulation of business and the economy. Federal and state governments alike are increasingly hands-on in their effort to deal with failing businesses, plunging house prices, worthless mortgages and soaring energy prices. The steps add up to a major challenge to the movement toward deregulation that has defined American governance for much of the past quarter-century since the "Reagan Revolution" of the early 1980s. In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan.http://online.wsj.com/article_print/SB121694460456283007.html

Mortgage Rates Near a Year High

Home-mortgage rates are nearing their highest levels in a year, adding to pressures on the already weak housing market.

Rates on conforming 30-year fixed-rate mortgages rose by nearly 0.40 percentage point in the past week to an average of 6.71%, according to HSH Associates in Pompton Plains, N.J. Rates on jumbo loans, which are too big to be eligible for purchase by Fannie Mae or Freddie Mac, currently average 7.84%.

The higher rates are making it more difficult for borrowers to refinance and putting another crimp on weak home sales. "It's a tough market and rates going up isn't helping it," said Steve Walsh, a mortgage broker in Scottsdale, Ariz.

Mortgage rates typically move in line with rates on 10-year Treasurys. Treasury rates have risen, but so has the spread between rates on 30-year mortgages and 10-year Treasurys, said Nicholas Strand, a mortgage strategist at Barclays Capital. http://online.wsj.com/article/SB121677010658575383.html?mod=todays_us_money_and_investing

Richest Americans See Their Income Share Grow

In a new sign of increasing inequality in the U.S., the richest 1% of Americans in 2006 garnered the highest share of the nation's adjusted gross income for two decades, and possibly the highest since 1929, according to Internal Revenue Service data.

Meanwhile, the average tax rate of the wealthiest 1% fell to its lowest level in at least 18 years. The group's share of the tax burden has risen, though not as quickly as its share of income.

The figures are from the IRS's income-statistics division and were posted on the agency's Web site last week. The 2006 data are the most recent available.

The figures about the relative income and tax rates of the wealthiest Americans come as the presumptive presidential candidates are in a debate about taxes. Congress and the next president will have to decide whether to extend several Bush-era tax cuts, including the 2003 reduction in tax rates on capital gains and dividends. Experts said those tax cuts in particular are playing a major role in falling tax rates for the very wealthy. http://online.wsj.com/article/SB121677287690575589.html?mod=todays_us_page_one

House Passes FAA Safety Legislation

WASHINGTON -- The House passed legislation that would overhaul the Federal Aviation Administration's approach to airline safety, following disclosures of lax oversight by agency inspectors.http://online.wsj.com/article/SB121677609061675827.html?mod=hps_us_whats_news

Bankers get bailouts before borrowers

By GRETCHEN MORGENSON
Published: July 20, 2008

THE credit crisis has exposed and worsened a dangerous and deepening divide in this country between a vast number of average borrowers and a fairly elite slice of corporations, banks and executives enriched by the mortgage mania.

Borrowers who are in trouble on their mortgages have seen their government move slowly — or not all — to help them. But banks and the executives who ran them are quickly deemed worthy of taxpayer bailouts.

On the ground, this translates into millions of troubled borrowers, left to work through their problems with understaffed, sometimes adversarial loan servicing companies. If they get nowhere, they lose their homes.

Taxpayers, meanwhile, are asked to stand by with money to inject into Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants, should they need propping up if loan losses balloon.

The message in this disconnect couldn’t be clearer. Borrowers should shoulder the consequences of signing loan documents they didn’t understand, but with punishing terms that quickly made the loans unaffordable. But for executives and directors of the big companies who financed these loans, who grew wealthy while the getting was good, the taxpayer is coming to the rescue.

“The banks are too big to fail and the man in the street is too small to bail,” said John C. Bogle, the founder of the Vanguard Group, the mutual funds giant, who is a philosopher of finance.

Mr. Bogle is working on his seventh book, titled “Enough,” which is scheduled to be published in November. He said he was disturbed by the extreme speculation that spread into the entire economy during the housing boom and that now threatens both consumers and investorshttp://www.nytimes.com/2008/07/20/business/economy/20gret.html?ex=1374206400&en=c623c7b6d1904b15&ei=5124&partner=permalink&exprod=permalink

The Fannie and Freddie Fallout

By GRETCHEN MORGENSON
The New York Times - IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.

This wasn’t the way the “ownership society” was supposed to work. Investors weren’t supposed to watch their financial stocks plummet more than 70 percent in less than a year. And taxpayers weren’t supposed to be left holding defaulted mortgages and abandoned homes while executives who presided over balance sheet implosions walked away with millions.

Over the course of this 18-month financial crisis, we have lurched from land mine to land mine. Last week’s was all about Fannie Mae and Freddie Mac, the giant government-sponsored enterprises set up to provide affordable housing across the nation. By issuing debt, these shareholder-owned companies guarantee or own more than $5 trillion in home mortgages. Got that? $5 trillion.http://www.nytimes.com/2008/07/13/business/13gret.html?ex=1373688000&en=a640b55198507941&ei=5124&partner=permalink&exprod=permalink

White House Refused to Open E-Mail on Pollutants

The New York Times - The White House in December refused to accept the Environmental Protection Agency’s conclusion that greenhouse gases are pollutants that must be controlled, telling agency officials that an e-mail message containing the document would not be opened, senior E.P.A. officials said last week.

The document, which ended up in e-mail limbo, without official status, was the E.P.A.’s answer to a 2007 Supreme Court ruling that required it to determine whether greenhouse gases represent a danger to health or the environment, the officials said.

This week, more than six months later, the E.P.A. is set to respond to that order by releasing a watered-down version of the original proposal that offers no conclusion. Instead, the document reviews the legal and economic issues presented by declaring greenhouse gases a pollutant. http://www.nytimes.com/2008/06/25/washington/25epa.html?ex=1372132800&en=b1495bebcccefc51&ei=5124&partner=permalink&exprod=permalink

Portolio

http://www.portfolio.com/views/blogs/market-movers/2007/10/23/the-need-for-conflict-in-business-journalism

Conflict sells Journalism

http://www.portfolio.com/views/blogs/market-movers/2007/10/23/the-need-for-conflict-in-business-journalism