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/
Tuesday, April 14, 2009
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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