Editor's note: Watch for Bloomberg to dump a bunch of money into money-losing BusinessWeek. The company still needs to be repositioned away from a weekly business magazine, a dying format, if it is going to make money. All the weekly news magazines are in trouble except for The Economist. - MT
The New York Times - Bloomberg is taking another step from the trading floor into the corner office.
The company said Tuesday that it was the winning bidder for BusinessWeek, the troubled 80-year-old title that McGraw-Hill had put on sale this summer.
Terms of the deal were not disclosed, but the price was said to be near $5 million, plus assumption of liabilities, which were $31.9 million as of April.
The magazine will continue to be a weekly print publication, rechristened Bloomberg BusinessWeek. Decisions have not been made about BusinessWeek’s staff of more than 400 people; Bloomberg will select which of those employees it wants by the end of the year, when the deal closes. Those not selected will receive severance from McGraw-Hill, said a BusinessWeek executive.
The deal is expected to close by the end of the year.
BusinessWeek was in a tough spot financially, and lost more than $800,000 dollars a week last year. Investors had pressured McGraw-Hill to get it off its books. While there was interest from parties in the private equity world, Bloomberg was seen as the preferred buyer.
“We are committed to the partnership,” said BusinessWeek president Keith Fox in an interview. “Bloomberg is acquiring a really powerful brand with strong reach among business professionals.”
Faced with slowing sales of its financial data terminals during the recession that have since improved, Bloomberg had been looking to expand its presence in consumer media. Clients for Bloomberg’s terminals are largely financial professionals, and the purchase of BusinessWeek, with its consumer and executive readers, gives the media company more access to the corporate offices as well.
With its gigantic newsroom of about 2,200 people and its aggressive reporting, Bloomberg has won a growing number of awards, but it is frustrated by its lack of cachet in the journalism world. Reporters and editors have long been frustrated by the lack of access to business executives, and they believed that limited their ability to break news and be a player in larger news coverage.
With the acquisition, Bloomberg adds name recognition and a consumer publication. The company was considering combining the Bloomberg.com and BusinessWeek.com Web sites and adding the BusinessWeek brand and journalists to Bloomberg TV. The company will continue Bloomberg Markets, a monthly magazine.
Wednesday, October 14, 2009
Friday, October 9, 2009
E. Coli Path Shows Flaws in Beef Inspection
Stephanie Smith, 22, was paralyzed after being stricken by E. coli in 2007. Officials traced the E. coli to hamburger her family had eaten.
Editor's Note: Great story on the dangers of E coli and how it gets into the food chain because of lax safety inspection. - MT
The New York Times - Stephanie Smith, a children’s dance instructor, thought she had a stomach virus. The aches and cramping were tolerable that first day, and she finished her classes.
Then her diarrhea turned bloody. Her kidneys shut down. Seizures knocked her unconscious. The convulsions grew so relentless that doctors had to put her in a coma for nine weeks. When she emerged, she could no longer walk. The affliction had ravaged her nervous system and left her paralyzed.
Ms. Smith, 22, was found to have a severe form of food-borne illness caused by E. coli, which Minnesota officials traced to the hamburger that her mother had grilled for their Sunday dinner in early fall 2007.
“I ask myself every day, ‘Why me?’ and ‘Why from a hamburger?’ ”Ms. Smith said. In the simplest terms, she ran out of luck in a food-safety game of chance whose rules and risks are not widely known.
Meat companies and grocers have been barred from selling ground beef tainted by the virulent strain of E. coli known as O157:H7 since 1994, after an outbreak at Jack in the Box restaurants left four children dead. Yet tens of thousands of people are still sickened annually by this pathogen, federal health officials estimate, with hamburger being the biggest culprit. Ground beef has been blamed for 16 outbreaks in the last three years alone. This summer, contamination led to the recall of beef from nearly 3,000 grocers in 41 states.
Stephanie Smith’s reaction to the virulent strain of E. coli was extreme, but tracing the story of her burger, through interviews and government and corporate records obtained by The New York Times, shows why eating ground beef is still a gamble. Neither the system meant to make the meat safe, nor the meat itself, is what consumers have been led to believe.
Ground beef is usually not simply a chunk of meat run through a grinder. Instead, records and interviews show, a single portion of hamburger meat is often an amalgam of various grades of meat from different parts of cows and even from different slaughterhouses. These cuts of meat are particularly vulnerable to E. coli contamination, food experts and officials say. Despite this, there is no federal requirement for grinders to test their ingredients for the pathogen.
The frozen hamburgers that the Smiths ate, which were made by the food giant Cargill, were labeled “American Chef’s Selection Angus Beef Patties.” Yet confidential grinding logs and other Cargill records show that the hamburgers were made from a mix of slaughterhouse trimmings and a mash-like product derived from scraps that were ground together at a plant in Wisconsin. The ingredients came from slaughterhouses in Nebraska, Texas and Uruguay, and from a South Dakota company that processes fatty trimmings and treats them with ammonia to kill bacteria.
Using a combination of sources — a practice followed by most large producers of fresh and packaged hamburger — allowed Cargill to spend about 25 percent less than it would have for cuts of whole meat.
Those low-grade ingredients are cut from areas of the cow that are more likely to have had contact with feces, which carries E. coli, industry research shows. Yet Cargill, like most meat companies, relies on its suppliers to check for the bacteria and does its own testing only after the ingredients are ground together. The United States Department of Agriculture, which allows grinders to devise their own safety plans, has encouraged them to test ingredients first as a way of increasing the chance of finding contamination.
The New York Times - Stephanie Smith, a children’s dance instructor, thought she had a stomach virus. The aches and cramping were tolerable that first day, and she finished her classes.
Then her diarrhea turned bloody. Her kidneys shut down. Seizures knocked her unconscious. The convulsions grew so relentless that doctors had to put her in a coma for nine weeks. When she emerged, she could no longer walk. The affliction had ravaged her nervous system and left her paralyzed.
Ms. Smith, 22, was found to have a severe form of food-borne illness caused by E. coli, which Minnesota officials traced to the hamburger that her mother had grilled for their Sunday dinner in early fall 2007.
“I ask myself every day, ‘Why me?’ and ‘Why from a hamburger?’ ”Ms. Smith said. In the simplest terms, she ran out of luck in a food-safety game of chance whose rules and risks are not widely known.
Meat companies and grocers have been barred from selling ground beef tainted by the virulent strain of E. coli known as O157:H7 since 1994, after an outbreak at Jack in the Box restaurants left four children dead. Yet tens of thousands of people are still sickened annually by this pathogen, federal health officials estimate, with hamburger being the biggest culprit. Ground beef has been blamed for 16 outbreaks in the last three years alone. This summer, contamination led to the recall of beef from nearly 3,000 grocers in 41 states.
Stephanie Smith’s reaction to the virulent strain of E. coli was extreme, but tracing the story of her burger, through interviews and government and corporate records obtained by The New York Times, shows why eating ground beef is still a gamble. Neither the system meant to make the meat safe, nor the meat itself, is what consumers have been led to believe.
Ground beef is usually not simply a chunk of meat run through a grinder. Instead, records and interviews show, a single portion of hamburger meat is often an amalgam of various grades of meat from different parts of cows and even from different slaughterhouses. These cuts of meat are particularly vulnerable to E. coli contamination, food experts and officials say. Despite this, there is no federal requirement for grinders to test their ingredients for the pathogen.
The frozen hamburgers that the Smiths ate, which were made by the food giant Cargill, were labeled “American Chef’s Selection Angus Beef Patties.” Yet confidential grinding logs and other Cargill records show that the hamburgers were made from a mix of slaughterhouse trimmings and a mash-like product derived from scraps that were ground together at a plant in Wisconsin. The ingredients came from slaughterhouses in Nebraska, Texas and Uruguay, and from a South Dakota company that processes fatty trimmings and treats them with ammonia to kill bacteria.
Using a combination of sources — a practice followed by most large producers of fresh and packaged hamburger — allowed Cargill to spend about 25 percent less than it would have for cuts of whole meat.
Those low-grade ingredients are cut from areas of the cow that are more likely to have had contact with feces, which carries E. coli, industry research shows. Yet Cargill, like most meat companies, relies on its suppliers to check for the bacteria and does its own testing only after the ingredients are ground together. The United States Department of Agriculture, which allows grinders to devise their own safety plans, has encouraged them to test ingredients first as a way of increasing the chance of finding contamination.
Wednesday, October 7, 2009
Mining Companies Hit Wall on Mountaintop Blasting
The Wall Street Journal - WHITESVILLE, W.Va.—The coal-mining industry is trying to regroup in the wake of a move by the Obama administration to curtail mountaintop mining to extract coal.
Last week, the Environmental Protection Agency said it was holding up 79 permit applications for mining projects in Central Appalachia due to concerns the projects would damage water quality in nearby streams and violate the Clean Water Act. Another 180 applications are pending.
The companies can resubmit the applications, but uncertainty around permit approval makes planning risky.
"They're trying to find a way to kill us a little bit at a time—death by a thousand cuts," said Michael Snelling, head of surface operations for Richmond, Va.,-based Massey Energy Co., which had five permits delayed by the EPA last week. Mr. Snelling said EPA requirements to protect streams might be too burdensome for other projects.
Mountaintop mining involves blasting off the tops and dumping unused rock and dirt into valleys and streams.
The EPA has long had oversight authority over permits that relate to mining's impact on waterways but has challenged few of them--until this year.
Last week, the Environmental Protection Agency said it was holding up 79 permit applications for mining projects in Central Appalachia due to concerns the projects would damage water quality in nearby streams and violate the Clean Water Act. Another 180 applications are pending.
The companies can resubmit the applications, but uncertainty around permit approval makes planning risky.
"They're trying to find a way to kill us a little bit at a time—death by a thousand cuts," said Michael Snelling, head of surface operations for Richmond, Va.,-based Massey Energy Co., which had five permits delayed by the EPA last week. Mr. Snelling said EPA requirements to protect streams might be too burdensome for other projects.
Mountaintop mining involves blasting off the tops and dumping unused rock and dirt into valleys and streams.
The EPA has long had oversight authority over permits that relate to mining's impact on waterways but has challenged few of them--until this year.
Monday, October 5, 2009
Lost Jobs May Never Return
The Wall Street Journal - The U.S. has shed 7.2 million jobs since the recession began in December 2007. How long will it take for the economy to replace them? And where will the jobs come from?
The questions haunt people from the unemployed in San Francisco to officials in Washington. Glenn Atias lost his job as a $100,000-a-year statistician at a market-research firm in the Bay Area last summer when the work was outsourced to India. At 46 years old, he pores over job ads and online postings daily. "I'm stuck watching hundreds of thousands of people in my position grow in ranks each and every month," said Mr. Atias, who lives in Salton City, Calif., in a house worth less than the mortgage.
When unemployment benefits run out, he said, "I literally don't know how I'll pay my mortgage, how I'll pay my health care."
Economists say that when demand picks up -- as it is starting to do -- jobs eventually will follow. History shows that has always been true. But guessing which jobs will be created over the long run is often fruitless. Many of tomorrow's jobs don't exist today.
In 2003, Treasury Department chief economist Alan Krueger, then at Princeton, calculated that a quarter of U.S. workers at the time were in jobs the Census Bureau didn't even list as occupations in 1967.
Determining which fields will become popular is next to impossible. "It is very difficult, without a crystal ball, to know where the economy will be in 10 years," said Susan Wolff, chief academic officer of Columbia Gorge Community College in The Dalles, Ore. "Sometimes we think we're doing a pretty good job if we can guess where the economy is going to be in five years."http://online.wsj.com/article/SB125470053662262957.html
The questions haunt people from the unemployed in San Francisco to officials in Washington. Glenn Atias lost his job as a $100,000-a-year statistician at a market-research firm in the Bay Area last summer when the work was outsourced to India. At 46 years old, he pores over job ads and online postings daily. "I'm stuck watching hundreds of thousands of people in my position grow in ranks each and every month," said Mr. Atias, who lives in Salton City, Calif., in a house worth less than the mortgage.
When unemployment benefits run out, he said, "I literally don't know how I'll pay my mortgage, how I'll pay my health care."
Economists say that when demand picks up -- as it is starting to do -- jobs eventually will follow. History shows that has always been true. But guessing which jobs will be created over the long run is often fruitless. Many of tomorrow's jobs don't exist today.
In 2003, Treasury Department chief economist Alan Krueger, then at Princeton, calculated that a quarter of U.S. workers at the time were in jobs the Census Bureau didn't even list as occupations in 1967.
Determining which fields will become popular is next to impossible. "It is very difficult, without a crystal ball, to know where the economy will be in 10 years," said Susan Wolff, chief academic officer of Columbia Gorge Community College in The Dalles, Ore. "Sometimes we think we're doing a pretty good job if we can guess where the economy is going to be in five years."http://online.wsj.com/article/SB125470053662262957.html
Profits for Buyout Firms as Company Debt Soared
Noble Rogers worked at Simmons for 22 years, mostly at a factory outside Atlanta. When the plant closed last year, he was left with a bitter tast.
Editor's note: Great story about the lessons of debt, buyouts and private equity.
The New York Times - For most of the 133 years since its founding in a small city in Wisconsin, the Simmons Bedding Company enjoyed an illustrious history.
Presidents have slumbered on its mattresses aboard Air Force One. Dignitaries have slept on them in the Lincoln Bedroom. Its advertisements have featured Henry Ford and H. G. Wells. Eleanor Roosevelt extolled the virtues of the Simmons Beautyrest mattress, and the brand was immortalized on Broadway in Cole Porter’s song “Anything Goes.”
Its recent history has been notable, too, but for a different reason.
Simmons says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money.
For many of the company’s investors, the sale will be a disaster. Its bondholders alone stand to lose more than $575 million. The company’s downfall has also devastated employees like Noble Rogers, who worked for 22 years at Simmons, most of that time at a factory outside Atlanta. He is one of 1,000 employees — more than one-quarter of the work force — laid off last year.
But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.
Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.http://www.nytimes.com/2009/10/05/business/economy/05simmons.html
Video: http://www.nytimes.com/packages/html/business/2009-private-equity/index.html
Monday, September 14, 2009
BusinessWeek, on the Block and Ailing
Editor's Note: BusinessWeek rode high on tech advertising during the 1990s making a lot of money for its owner, McGraw Hill. But during the past ten years, the publication has been squeezed between dailies like the New York Times and the Wall Street Journal on one end and monthly and bi-monthly publications Forbes and Fortune on the other end.
The New York Times - Numbers sometimes tell a story. And the figures for BusinessWeek suggest it is having one tough time.
Bids are due Tuesday for the magazine, which McGraw-Hill has owned for 80 years. A handful of potential investors, including Bloomberg L.P., are still looking at the company. But before buyers had a chance to comb through the magazine’s finances, initial interest had been much higher. BusinessWeek lost more than $43 million last year, though that included certain costs like rent and overhead, which a document sent to potential investors suggests McGraw-Hill has been charging too much for. A buyer would also have to assume much of the $31.9 million in debt.
As the thwarted sellers of The Rocky Mountain News and The Seattle Post-Intelligencer have discovered, this year is not a good time to sell news media outlets. Print advertising is down, and readers’ attention is being diverted to the Web. Business magazines, including BusinessWeek and rivals like Forbes and Fortune, have been hit particularly hard, as automotive, financial services and technology advertisers have pulled back their marketing spending.
So far, about six investors appear interested in BusinessWeek, including OpenGate Capital, which bought TV Guide for $1 last year; Warburg Pincus; and Platinum Equity, which is also bidding for The Boston Globe.
Other candidates include Bloomberg; Joe Mansueto, the founder of the ratings firm Morningstar who bought Inc. and Fast Company in 2005; and Bruce Wasserstein, the chairman and chief executive of Lazard, who also owns New York magazine.
But Peter P. Appert, who is an analyst at Piper Jaffray, argued that BusinessWeek’s future was cloudy. “I don’t think the prospect of meaningful earnings recovery is particularly good,” he said.
BusinessWeek executives declined to comment for this article, as did a McGraw-Hill spokesman, Steven H. Weiss. He referred a reporter to a July news release in which McGraw-Hill said it was “exploring strategic options” for the magazine.http://www.nytimes.com/2009/09/14/business/media/14bizweek.html
The New York Times - Numbers sometimes tell a story. And the figures for BusinessWeek suggest it is having one tough time.
Bids are due Tuesday for the magazine, which McGraw-Hill has owned for 80 years. A handful of potential investors, including Bloomberg L.P., are still looking at the company. But before buyers had a chance to comb through the magazine’s finances, initial interest had been much higher. BusinessWeek lost more than $43 million last year, though that included certain costs like rent and overhead, which a document sent to potential investors suggests McGraw-Hill has been charging too much for. A buyer would also have to assume much of the $31.9 million in debt.
As the thwarted sellers of The Rocky Mountain News and The Seattle Post-Intelligencer have discovered, this year is not a good time to sell news media outlets. Print advertising is down, and readers’ attention is being diverted to the Web. Business magazines, including BusinessWeek and rivals like Forbes and Fortune, have been hit particularly hard, as automotive, financial services and technology advertisers have pulled back their marketing spending.
So far, about six investors appear interested in BusinessWeek, including OpenGate Capital, which bought TV Guide for $1 last year; Warburg Pincus; and Platinum Equity, which is also bidding for The Boston Globe.
Other candidates include Bloomberg; Joe Mansueto, the founder of the ratings firm Morningstar who bought Inc. and Fast Company in 2005; and Bruce Wasserstein, the chairman and chief executive of Lazard, who also owns New York magazine.
But Peter P. Appert, who is an analyst at Piper Jaffray, argued that BusinessWeek’s future was cloudy. “I don’t think the prospect of meaningful earnings recovery is particularly good,” he said.
BusinessWeek executives declined to comment for this article, as did a McGraw-Hill spokesman, Steven H. Weiss. He referred a reporter to a July news release in which McGraw-Hill said it was “exploring strategic options” for the magazine.http://www.nytimes.com/2009/09/14/business/media/14bizweek.html
Thursday, August 13, 2009
'Fastest Dying Cities' Meet for a Lively Talk
Wall Street Journal - DAYTON, Ohio -- Here's an idea for saving Rust Belt cities: Tell bloggers and radio stations to stop calling your town a basket case.
That was one suggestion from representatives of eight of the 10 cities labeled last year as America's fastest dying. They met at the Dayton Convention Center last weekend to swap ideas about how to halt the long skid that's turned cities like Detroit, Cleveland and Buffalo, N.Y., into shorthand for dystopia.
The city representatives lunched on $6 sloppy Joes and commiserated through Power Point strategy sessions: Lure back former residents, entice entrepreneurs and artists, convert blighted pockets into parkland.
What emerged was a sense of desperation over the difficulty of rebounding from both real problems -- declining populations, dwindling tax bases -- and perceived woes.
Valarie McCall expressed frustration at marketing a city that still echoed the image of the polluted Cuyahoga River catching fire. "That was 1969," said Ms. McCall, Cleveland's chief of governmental affairs. "Come on, I wasn't even born then."
Last year, Forbes.com used long-term trends of unemployment, population loss and economic output to devise a list of "America's Fastest Dying Cities." A few months later, Peter Benkendorf was eating chicken tacos when he hatched the idea for the symposium.http://online.wsj.com/article/SB125011106498326993.html
That was one suggestion from representatives of eight of the 10 cities labeled last year as America's fastest dying. They met at the Dayton Convention Center last weekend to swap ideas about how to halt the long skid that's turned cities like Detroit, Cleveland and Buffalo, N.Y., into shorthand for dystopia.
The city representatives lunched on $6 sloppy Joes and commiserated through Power Point strategy sessions: Lure back former residents, entice entrepreneurs and artists, convert blighted pockets into parkland.
What emerged was a sense of desperation over the difficulty of rebounding from both real problems -- declining populations, dwindling tax bases -- and perceived woes.
Valarie McCall expressed frustration at marketing a city that still echoed the image of the polluted Cuyahoga River catching fire. "That was 1969," said Ms. McCall, Cleveland's chief of governmental affairs. "Come on, I wasn't even born then."
Last year, Forbes.com used long-term trends of unemployment, population loss and economic output to devise a list of "America's Fastest Dying Cities." A few months later, Peter Benkendorf was eating chicken tacos when he hatched the idea for the symposium.http://online.wsj.com/article/SB125011106498326993.html
Inside G.E., a Little Bit of Enron
The New York Times - A decade ago, General Electric was the shining star of American business. Its longtime chief executive, Jack Welch, was named manager of the century by Fortune Magazine, and its stock seemed always to go up.
It ran a bewildering array of businesses but somehow always managed to make the expected profits. That record was viewed as proof of superior management, and the battle to succeed Mr. Welch in 2001 was watched all over the business universe. When a winner emerged, the losers quickly were hired to run other major companies.
G.E. is different now. The stock has fallen and the aura has dissipated.
This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers. Some of the details are eerily reminiscent of Enron.http://www.nytimes.com/2009/08/07/business/07norris1.html
It ran a bewildering array of businesses but somehow always managed to make the expected profits. That record was viewed as proof of superior management, and the battle to succeed Mr. Welch in 2001 was watched all over the business universe. When a winner emerged, the losers quickly were hired to run other major companies.
G.E. is different now. The stock has fallen and the aura has dissipated.
This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers. Some of the details are eerily reminiscent of Enron.http://www.nytimes.com/2009/08/07/business/07norris1.html
Sunday, July 19, 2009
Sources say Forbes.com CEO stepping down
For years, Forbes.com has been the envy of the financial press, with Web traffic far surpassing that of competitors such as BusinessWeek.com and WSJ.com.
But the site's fortunes have taken a turn for the worse lately, and now someone is apparently answering for it: Jim Spanfeller, president and CEO of Forbes.com and executive vice president of electronic publishing, is stepping down, according to sources. The announcement is expected as soon as Thursday, when the company has a scheduled sales meeting.http://www.dailyfinance.com/2009/07/15/sources-say-forbes-com-ceo-stepping-down/
But the site's fortunes have taken a turn for the worse lately, and now someone is apparently answering for it: Jim Spanfeller, president and CEO of Forbes.com and executive vice president of electronic publishing, is stepping down, according to sources. The announcement is expected as soon as Thursday, when the company has a scheduled sales meeting.http://www.dailyfinance.com/2009/07/15/sources-say-forbes-com-ceo-stepping-down/
Monday, June 29, 2009
State Budget Woes Are Poised to Get Worse
The Wall Street Journal - State budgets look bad now, but they are set to get worse.
The bulk of funds from the federal government's stimulus package will be allocated by 2011, but tax collections aren't likely to be enough to take their place -- even if the economy is recovering.
The drop in tax revenue is set to be deeper and last longer as collections have become more sensitive to business cycles in recent years. At the same time, states face growing health-care costs and the need to replenish pension programs funded by decimated investments. And some of the stimulus funds expand programs that will require state money to sustain them after the federal largesse runs out.http://online.wsj.com/article/SB124398568837379031.html
The bulk of funds from the federal government's stimulus package will be allocated by 2011, but tax collections aren't likely to be enough to take their place -- even if the economy is recovering.
The drop in tax revenue is set to be deeper and last longer as collections have become more sensitive to business cycles in recent years. At the same time, states face growing health-care costs and the need to replenish pension programs funded by decimated investments. And some of the stimulus funds expand programs that will require state money to sustain them after the federal largesse runs out.http://online.wsj.com/article/SB124398568837379031.html
Monday, June 1, 2009
Credit Relief May Not Last Long
The New York Times - The experience of being choked to death can concentrate a person’s attention. When the chokehold is removed, a feeling of relief, perhaps even of exhilaration, is to be expected.allowing a person to breathe may not be enough to restore him to health.
In that regard, 2009 is starting to feel a little like 1980.
Then, as in recent months, a sudden credit contraction choked off economic activity. When the credit squeeze eased, a sense of relief spread. Within a few months, consumer confidence leaped amid expectations that both employment and business conditions would soon improve.
The improvement came, but it did not last long.
When the current credit crisis was at its worst, even financially solid companies could not get short-term financing. Banks did not trust one another, and trade financing dried up. One result was a collapse in inventories, as imports sagged even more than final demand.
Now, thanks to government financing of debts as diverse as mortgages and commercial paper, credit is more readily available. That should provide a lift to orders and at least a temporary boost for countries, including China and Germany, that rely on export marketshttp://www.nytimes.com/2009/05/29/business/economy/29norris.html
In that regard, 2009 is starting to feel a little like 1980.
Then, as in recent months, a sudden credit contraction choked off economic activity. When the credit squeeze eased, a sense of relief spread. Within a few months, consumer confidence leaped amid expectations that both employment and business conditions would soon improve.
The improvement came, but it did not last long.
When the current credit crisis was at its worst, even financially solid companies could not get short-term financing. Banks did not trust one another, and trade financing dried up. One result was a collapse in inventories, as imports sagged even more than final demand.
Now, thanks to government financing of debts as diverse as mortgages and commercial paper, credit is more readily available. That should provide a lift to orders and at least a temporary boost for countries, including China and Germany, that rely on export marketshttp://www.nytimes.com/2009/05/29/business/economy/29norris.html
Preparing to Sell E-Books, Google Takes on Amazon
The New York Times - Google appears to be throwing down the gauntlet in the e-book market.
In discussions with publishers at the annual BookExpo convention in New York over the weekend, Google signaled its intent to introduce a program by that would enable publishers to sell digital versions of their newest books direct to consumers through Google. The move would pit Google against Amazon.com, which is seeking to control the e-book market with the versions it sells for its Kindle reading device.
Google’s move is likely to be welcomed by publishers who have expressed concerns about Amazon’s aggressive pricing strategy for e-books. Amazon offers Kindle editions of most new best sellers for $9.99, far less than the typical $26 at which publishers sell new hardcovers. In early discussions, Google has said it will allow publishers to set consumer prices.
Google’s e-book retail program would be separate from the company’s settlement with authors and publishers over its book-scanning project, under which Google has scanned more than seven million volumes from several university libraries. A majority of those books are out of printhttp://www.nytimes.com/2009/06/01/technology/internet/01google.html
In discussions with publishers at the annual BookExpo convention in New York over the weekend, Google signaled its intent to introduce a program by that would enable publishers to sell digital versions of their newest books direct to consumers through Google. The move would pit Google against Amazon.com, which is seeking to control the e-book market with the versions it sells for its Kindle reading device.
Google’s move is likely to be welcomed by publishers who have expressed concerns about Amazon’s aggressive pricing strategy for e-books. Amazon offers Kindle editions of most new best sellers for $9.99, far less than the typical $26 at which publishers sell new hardcovers. In early discussions, Google has said it will allow publishers to set consumer prices.
Google’s e-book retail program would be separate from the company’s settlement with authors and publishers over its book-scanning project, under which Google has scanned more than seven million volumes from several university libraries. A majority of those books are out of printhttp://www.nytimes.com/2009/06/01/technology/internet/01google.html
Low Mortgage Rates Are Going, Going…
The Wall Street Journal - If you're looking for a new 30-year mortgage, last week's events from the financial markets carry a very simple message: Get 'em cheap while you still can.
Rates on conforming 30-year loans jumped dramatically in just a few days, ending the week at an average of 5.27% according to Bankrate.com. That's still OK by historic standards, but it's a jump from the levels seen just a few weeks ago, when you could get loans at 4.75% or below.
The underlying cause isn't hard to find. Rising government debts, and burgeoning hopes of an economic recovery, are pushing up long-term interest rates on government debt. The yield on the 10-Year Treasury, which was barely 2% near the end of last year, surged to 3.67% late last week before settling back slightly. And that, in turn, pushes up rates on other long-term loans.
What does this mean for you?
This surge in mortgage rates, if it continues, is ominous news all around. It's bad for those trying to refinance an existing mortgage, those looking to buy a new home, and those looking to sell their home. It may also be bad for the stock market, and maybe even for the dollar, too. More on that later.
For those trying to refinance: If you hadn't locked in the rate already, you are probably out of luck. You may be stuck with higher rates.
Ironically, if you were stuck crawling through the refi process when the rates jumped, you may be a victim of new mortgage rules. These were introduced in the last year to prevent another subprime scandal. They have slowed down the loan approval process and have discouraged most lenders from offering rate locks until other steps have been completed. "Lenders are not locking in borrowers' rates until the (home) appraisals are in," says Paul Sapienza, broker at Drew Mortgage in Boston. Until last year you could lock in a rate while you refinanced, or even looked for a new home. "That's over," Mr Sapienza says.
For those looking to buy a new home: Be aware this rate hike -- to 5.25%, from 4.75% recently -- can add quite a bit to your expenses. It will cost an extra $50 a month for someone buying a typical $200,000 residence with an 80% loan. http://online.wsj.com/article/SB124381108186970343.html
Rates on conforming 30-year loans jumped dramatically in just a few days, ending the week at an average of 5.27% according to Bankrate.com. That's still OK by historic standards, but it's a jump from the levels seen just a few weeks ago, when you could get loans at 4.75% or below.
The underlying cause isn't hard to find. Rising government debts, and burgeoning hopes of an economic recovery, are pushing up long-term interest rates on government debt. The yield on the 10-Year Treasury, which was barely 2% near the end of last year, surged to 3.67% late last week before settling back slightly. And that, in turn, pushes up rates on other long-term loans.
What does this mean for you?
This surge in mortgage rates, if it continues, is ominous news all around. It's bad for those trying to refinance an existing mortgage, those looking to buy a new home, and those looking to sell their home. It may also be bad for the stock market, and maybe even for the dollar, too. More on that later.
For those trying to refinance: If you hadn't locked in the rate already, you are probably out of luck. You may be stuck with higher rates.
Ironically, if you were stuck crawling through the refi process when the rates jumped, you may be a victim of new mortgage rules. These were introduced in the last year to prevent another subprime scandal. They have slowed down the loan approval process and have discouraged most lenders from offering rate locks until other steps have been completed. "Lenders are not locking in borrowers' rates until the (home) appraisals are in," says Paul Sapienza, broker at Drew Mortgage in Boston. Until last year you could lock in a rate while you refinanced, or even looked for a new home. "That's over," Mr Sapienza says.
For those looking to buy a new home: Be aware this rate hike -- to 5.25%, from 4.75% recently -- can add quite a bit to your expenses. It will cost an extra $50 a month for someone buying a typical $200,000 residence with an 80% loan. http://online.wsj.com/article/SB124381108186970343.html
Dollar's Woes Not Over
The Wall Street Journal - After three months of losses for the U.S. dollar against the euro, what's one more week?
Traders say the dollar, which fell to its lowest level this year on Friday, is likely to continue to trend lower this week as investors sift through a number of key data reports, as well as news from the European Central Bank policy meeting, and react to another round of Federal Reserve Treasury purchases.
The bond purchases may be the key to the dollar's performance in the first part of the week, as they could drive down yields, particularly as the Treasury won't have any note sales this week.
With market rates falling, inflation fears will come to the fore again.
Not that the dollar's chances for a bounce are nil.
"The dollar-positive scenario comes if the Fed allows a bond market selloff to undermine housing," said John Normand, a foreign-exchange analyst at J.P. Morgan Chase. "But officials are unlikely to take this gamble so early in the recovery."
Ultimately, the most vulnerable currency in the near term is the one that is most exposed to quantitative easing.
Given the Fed's commitments on asset purchases, the dollar fits the bill, which will give the euro room to advance after hitting $1.4168 Friday, a level unseen since Decemberhttp://online.wsj.com/article/SB124381671772870785.html
Traders say the dollar, which fell to its lowest level this year on Friday, is likely to continue to trend lower this week as investors sift through a number of key data reports, as well as news from the European Central Bank policy meeting, and react to another round of Federal Reserve Treasury purchases.
The bond purchases may be the key to the dollar's performance in the first part of the week, as they could drive down yields, particularly as the Treasury won't have any note sales this week.
With market rates falling, inflation fears will come to the fore again.
Not that the dollar's chances for a bounce are nil.
"The dollar-positive scenario comes if the Fed allows a bond market selloff to undermine housing," said John Normand, a foreign-exchange analyst at J.P. Morgan Chase. "But officials are unlikely to take this gamble so early in the recovery."
Ultimately, the most vulnerable currency in the near term is the one that is most exposed to quantitative easing.
Given the Fed's commitments on asset purchases, the dollar fits the bill, which will give the euro room to advance after hitting $1.4168 Friday, a level unseen since Decemberhttp://online.wsj.com/article/SB124381671772870785.html
Fed Mortgage Efforts Prove Costly
The Wall Street Journal - The U.S. Federal Reserve's program to keep mortgage rates low by buying securities and Treasury bonds so far has been costly and seems to be having a fleeting impact.
An analysis of the timing of the Fed's purchases of mortgage-backed securities by J.P. Morgan Chase & Co. shows the Fed is "under water" on its portfolio by about 10%, and it would have to take about $5 billion in losses if it were to mark its portfolio to the market.
Since last autumn, the Fed has purchased more than $480 billion, out of an allowance of $1.25 trillion, in mortgage-backed securities and more than $130 billion, of $300 billion, in Treasury bonds to help keep mortgage rates low. Keeping rates low lets people refinance their mortgages to reduce payments and stay in their homes. It also encourages them to consider snapping up bargains in the still-ailing housing market. Many analysts believe the Fed plans to hold these securities until they mature in 10 years or so, with no plans to sell them into the market, so the losses will probably never be realized.
The central bank owns the majority of securities sold in 2009, with interest payments of 4%, 4.5% and 5%, according to J.P. Morgan's research. As interest rates rise, the value of these securities falls because new bonds are backed with higher-interest mortgage loans and thus pay higher coupons.
The Fed has spent about $2,500 per borrower, by J.P. Morgan's analysis -- more than it costs a typical mortgage borrower to refinance their debt. Higher fees and adjustments based on a borrower's credit score or home's value have been an impediment to borrowers looking to refinance a mortgage, damping the refinancing wave the Fed hoped for, analysts sayhttp://online.wsj.com/article/SB124380834210470271.html#mod=testMod
An analysis of the timing of the Fed's purchases of mortgage-backed securities by J.P. Morgan Chase & Co. shows the Fed is "under water" on its portfolio by about 10%, and it would have to take about $5 billion in losses if it were to mark its portfolio to the market.
Since last autumn, the Fed has purchased more than $480 billion, out of an allowance of $1.25 trillion, in mortgage-backed securities and more than $130 billion, of $300 billion, in Treasury bonds to help keep mortgage rates low. Keeping rates low lets people refinance their mortgages to reduce payments and stay in their homes. It also encourages them to consider snapping up bargains in the still-ailing housing market. Many analysts believe the Fed plans to hold these securities until they mature in 10 years or so, with no plans to sell them into the market, so the losses will probably never be realized.
The central bank owns the majority of securities sold in 2009, with interest payments of 4%, 4.5% and 5%, according to J.P. Morgan's research. As interest rates rise, the value of these securities falls because new bonds are backed with higher-interest mortgage loans and thus pay higher coupons.
The Fed has spent about $2,500 per borrower, by J.P. Morgan's analysis -- more than it costs a typical mortgage borrower to refinance their debt. Higher fees and adjustments based on a borrower's credit score or home's value have been an impediment to borrowers looking to refinance a mortgage, damping the refinancing wave the Fed hoped for, analysts sayhttp://online.wsj.com/article/SB124380834210470271.html#mod=testMod
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