Wednesday, November 19, 2008

Chrysler Considered, Abandoned, Bankruptcy Before Seeking Aid

By Jeff Green

Nov. 19 (Bloomberg) -- Chrysler LLC Chief Executive Officer Robert Nardelli said his company studied a prearranged bankruptcy before dismissing the idea as unworkable and approaching the U.S. government for money to survive. Nardelli and General Motors Corp. CEO Rick Wagoner, who has repeatedly ruled out bankruptcy, told senators yesterday that a failure will lead to an economic ``catastrophe'' much costlier than the $25 billion in aid being proposed by Democrats. GM has said it may run out of operating cash this year.

``We did look at prepackaged,'' Nardelli testified in Washington. ``We looked at pre-negotiated. We've looked at almost every alternative within Chrysler as a privately held company before we came here and ask for support to -- to provide a bridge, if you will, through this economic trough.'' His comments highlighted U.S. automakers' objections to so- called prepackaged bankruptcies, as advocated by some Republican lawmakers. While proponents say a filing with financing in hand would let GM, Chrysler and Ford Motor Co. survive, the automakers say going to court would end in their liquidation. Wagoner, Nardelli and Ford CEO Alan Mulally returned to Capitol Hill today for a House committee hearing as they seek an industry bailout before Congress's lame-duck session ends this week. Opposition from President George W. Bush and Republicans threatens to scuttle Democrats' bid to tap the $700 billion bank-rescue plan for automaker loans. A defeat may push consideration of any new aid into 2009, because House Speaker Nancy Pelosi said yesterday she doesn't intend to reconvene in December.

`Fresh Capital'

``Without fresh capital, we project that GM may not have sufficient liquidity to make it to year end,'' Deutsche Bank AG analysts including Rod Lache in New York wrote in a note to investors today. A GM bankruptcy is the ``only way'' for the biggest U.S. automaker to end union costs that make it uncompetitive, Republican Senator James DeMint of South Carolina said in an interview on Bloomberg Radio. Nardelli, who said Chrysler is down to $6.1 billion in cash and burning about $1 billion more each month, told senators yesterday that bankruptcy would take too much time.

``To a certain degree, all of these take an extensive amount of time,'' he said of the options for arranging a filing for court protection. Auburn Hills, Michigan-based Chrysler would need support from ``all the players, all of the suppliers, all of the vendors, all of the labor,'' he said.

`Very Fragile'

``In fact, we are in a very fragile position,'' he said of Chrysler, whose 26 percent U.S. sales decline this year through October is the most among major automakers. The median time for a prepackaged bankruptcy is 45 days, according to Lynn LoPucki, who teaches bankruptcy law at Harvard University and the University of California at Los Angeles. The median time for an ordinary bankruptcy is about 1 1/2 years, or more than 10 times as long, he said. For GM, a prepackaged bankruptcy plan with federal assistance would involve fewer taxpayer dollars than a bailout done outside of court, said Mark Bane, a bankruptcy lawyer at Ropes & Gray in New York. He isn't involved in GM's case. The Detroit-based automaker could use court protection to reduce debt, reject unfavorable contracts and minimize the risk that it would need a future bailout, Bane said in an interview. ``It creates the environment to deal with GM's problems, but limits government financial commitment,'' he said.

No `Stigma'

``I don't understand the stigma that would come with prepackaged bankruptcy,'' with the benefit of government funds to the industry, Tennessee Republican Senator Bob Corker said yesterday. ``I don't know how that could possibly be detrimental.'' Mulally, who said Dearborn, Michigan-based Ford isn't yet running out of money, said he expects that the bankruptcy of one automaker may lead to the failure of the others. The failure of GM would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, estimates. A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' he said Nov. 15. Aid will likely be delayed until Congress attaches more conditions, JPMorgan Chase & Co. analyst Himanshu Patel in New York wrote in a report today. ``The tone of the hearing conducted on behalf of the Senate Banking, Housing and Urban Affairs Committee and the direction of questioning did not change our view that federal aid is more likely than not,'' Patel wrote. ``However, we feel it is clearer now that the timing of any such aid is not imminent as key differences remain amongst influential power-brokers.''

Wednesday, November 5, 2008

Molson Coors Rises on Sales Gains, Quicker Savings

By Allison Abell Schwartz (Bloomberg)

Molson Coors Brewing Co., the third- largest U.S. beer maker, rose 8.3 percent in New York trading because of market-share gains in Canada and the U.K. and after the company said it expects to achieve total cost savings from its joint U.S. venture with SABMiller Plc six months early. Sales to retailers in Canada climbed 3.7 percent, led by “double-digit growth“ of Coors Light, Carling and Rickard’s, the company said today. Those sales gained 0.7 percent in the U.S. In the U.K., the brewer grew market share amid a slowing economy and fewer pub visits because of a smoking ban there. An increase in sales to retailers in the U.S. and Canada and Molson Coors’s cost savings announcement helped send the shares higher in New York trading today, Brian Yarbrough, an analyst at Ed Edward Jones in St. Louis, said in a telephone interview. “We are in probably the healthiest position we could wish to be in,” Chief Executive Officer Peter Swinburn said today in a telephone interview. Molson Coors, based in Denver and Montreal, climbed $3.20 to $41.78 at 4:12 p.m. in New York Stock Exchange composite trading. The shares have lost 19 percent this year. Net income jumped 29 percent to $173.2 million, or 94 cents a share, Molson Coors said in a statement. Profit excluding some one-time costs and gains was unchanged at 95 cents from a year earlier, 2 cents lower than the average estimate of 11 analysts surveyed by Bloomberg. Revenue after excise taxes dropped 45 percent to $921.1 mi million from $1.69 billion in the three months ended Sept. 28 as Molson Coors separated its U.S. operations into the MillerCoors venture. Including the U.S. business, its worldwide beer volume rose less than 1 percent to 12 million barrels.

Canadian Sales

Beer discounts and commodity inflation hurt earnings in Canada, where sales grew by a “high-single-digit” percentage, the brewer said. Profit in the country fell 8.1 percent to $151 million before taxes as the cost of goods sold rose 7 percent because of higher material, packaging material and fuel prices. Earnings in the U.K. climbed 19 percent before taxes, helped by new contracts with suppliers and lower pension costs. Sales volume declined and a 7 percent drop in the pound against the dollar trimmed profit, Molson Coors said. As commodity costs begin to slow, Molson Coors may be well positioned to boost profit, said Yarbrough, who recommends investors buy the shares.

MillerCoors Venture

Earlier today, MillerCoors reported third-quarter profit increased 15 percent to $168.2 million on sales gains of 1.9 percent, helped by purchases of Coors Light. It was the first period of joint operations. MillerCoors will cut “a lot” of jobs in the coming weeks, the unit’s executives said on a Webcast discussing earnings. The venture is the second-biggest U.S. beer company behind Anheuser- Busch Cos. and holds 30 percent of the country’s beer market. In June, Molson Coors and SABMiller joined their U.S. divisions and said they expect to save $500 million over three years from the combination. The brewer said today it anticipates accelerating by six months that savings plan, with the first $50 million by June 30 and $350 million in the second year of the venture. A year earlier, Molson Coors earned $134.7 million, or 74 cents a share.

Outsource Your Collections

Debt collection is a touchy subject because of the economic climate in the US right now but still a necessity for companies. Although some companies do this in house, most businesses are looking to free up current staff and reduce overall costs that are associated with this process. We’ve been looking at a number of debt collectors and will report on them in the next few weeks. The first one we found was American Profit Recovery. They seem to have the right approach. They’ve streamlined the whole process to make it as easy as possible for a client to manage all of their accounts right on their website. Some of the pages in the site seem to be down but it looks like this is a temporary issues and I’ve been told that these kinks will be worked out soon. I’ve worked at a few companies that could have been greatly helped by APR’s work so I would recommend that if you’re looking for help with debt collection that you set up a call with them so they can answer any questions you might have. If you have used them before we’d love to hear your experiences so we encourage you to send us feedback. From all I can gather they have a great operation going.

Senior Journalist Casper Nightingale contributed to this article

Obama Is Elected President as Racial Barrier Falls


Barack Hussein Obama was elected the 44th president of the United States on Tuesday, sweeping away the last racial barrier in American politics with ease as the country chose him as its first black chief executive. The election of Mr. Obama amounted to a national catharsis — a repudiation of a historically unpopular Republican president and his economic and foreign policies, and an embrace of Mr. Obama’s call for a change in the direction and the tone of the country. But it was just as much a strikingly symbolic moment in the evolution of the nation’s fraught racial history, a breakthrough that would have seemed unthinkable just two years ago. Mr. Obama, 47, a first-term senator from Illinois, defeated Senator John McCain of Arizona, 72, a former prisoner of war who was making his second bid for the presidency.

To the very end, Mr. McCain’s campaign was eclipsed by an opponent who was nothing short of a phenomenon, drawing huge crowds epitomized by the tens of thousands of people who turned out to hear Mr. Obama’s victory speech in Grant Park in Chicago. Mr. McCain also fought the headwinds of a relentlessly hostile political environment, weighted down with the baggage left to him by President Bush and an economic collapse that took place in the middle of the general election campaign.“If there is anyone out there who still doubts that America is a place where all things are possible, who still wonders if the dream of our founders is alive in our time, who still questions the power of our democracy, tonight is your answer,” said Mr. Obama, standing before a huge wooden lectern with a row of American flags at his back, casting his eyes to a crowd that stretched far into the Chicago night.

“It’s been a long time coming,” the president-elect added, “but tonight, because of what we did on this date in this election at this defining moment, change has come to America.” The focus shifted quickly on Wednesday to the daunting challenges facing the president-elect, with his supporters offering sober reflections of what lies ahead. “We’re in deep trouble,” said Rep. John Lewis, a Georgia Democrat and leader in the civil rights movement, on the Today show on NBC.

“We’ve got to get our economy out of the ditch, end the war in Iraq and bring our young men and women home, provide health care for all our citizens,” Mr. Lewis said. “And he’s going to call on us, I believe, to sacrifice. We all must give up something.” Mr. McCain delivered his concession speech under clear skies on the lush lawn of the Arizona Biltmore, in Phoenix, where he and his wife had held their wedding reception. The crowd reacted with scattered boos as he offered his congratulations to Mr. Obama and saluted the historical significance of the moment.

“This is a historic election, and I recognize the significance it has for African-Americans and for the special pride that must be theirs tonight,” Mr. McCain said, adding, “We both realize that we have come a long way from the injustices that once stained our nation’s reputation.” Not only did Mr. Obama capture the presidency, but he led his party to sharp gains in Congress. This puts Democrats in control of the House, the Senate and the White House for the first time since 1995, when Bill Clinton was in office.The day shimmered with history as voters began lining up before dawn, hours before polls opened, to take part in the culmination of a campaign that over the course of two years commanded an extraordinary amount of attention from the American public. As the returns became known, and Mr. Obama passed milestone after milestone —Ohio, Florida, Virginia, Pennsylvania, New Hampshire, Iowa and New Mexico — people rolled spontaneously into the streets to celebrate what many described, with perhaps overstated if understandable exhilaration, a new era in a country where just 143 years ago, Mr. Obama, as a black man, could have been owned as a slave.

For Republicans, especially the conservatives who have dominated the party for nearly three decades, the night represented a bitter setback and left them contemplating where they now stand in American politics. Republican leaders began on Wednesday what will likely be a lengthy re-examination of their brand, as Democrats hope to shape a permanent re-alignment of the electoral map. “Certainly, we have to examine this,” said Rep. Kay Bailey Hutchinson, a Texas Republican, on CNN on Wednesday. “We have to listen to what the people are saying if we’re going to be a forceful voice.” Mr. Obama and his expanded Democratic majority on Capitol Hill now face the task of governing the country through a difficult period: the likelihood of a deep and prolonged recession, and two wars. He took note of those circumstances in a speech that was notable for its sobriety and its absence of the triumphalism that he might understandably have displayed on a night when he won an Electoral College landslide.

“The road ahead will be long, our climb will be steep,” said Mr. Obama, his audience hushed and attentive, with some, including the Rev. Jesse Jackson, wiping tears from their eyes. “We may not get there in one year or even one term, but America, I have never been more hopeful than I am tonight that we will get there. I promise you, we as a people will get there.” The roster of defeated Republicans included some notable party moderates, like Senator John E. Sununu of New Hampshire and Representative Christopher Shays of Connecticut, and signaled that the Republican conference convening early next year in Washington will be not only smaller but more conservative. Mr. Obama will come into office after an election in which he laid out a number of clear promises: to cut taxes for most Americans, to get the United States out of Iraq in a fast and orderly fashion, and to expand health care. In a recognition of the difficult transition he faces, given the economic crisis, Mr. Obama is expected to begin filling White House jobs as early as this week.

Mr. Obama defeated Mr. McCain in Ohio, a central battleground in American politics, despite a huge effort that brought Mr. McCain and his running mate, Gov. Sarah Palin of Alaska, back there repeatedly. Mr. Obama had lost the state decisively to Senator Hillary Rodham Clinton of New York in the Democratic primary.

Mr. McCain failed to take from Mr. Obama the two Democratic states that were at the top of his target list: New Hampshire and Pennsylvania. Mr. Obama also held on to Minnesota, the state that played host to the convention that nominated Mr. McCain; Wisconsin; and Michigan, a state Mr. McCain once had in his sights. The apparent breadth of Mr. Obama’s sweep left Republicans sobered, and his showing in states like Ohio and Pennsylvania stood out because officials in both parties had said that his struggles there in the primary campaign reflected the resistance of blue-collar voters to supporting a black candidate. “I always thought there was a potential prejudice factor in the state,” Senator Bob Casey, a Democrat of Pennsylvania who was an early Obama supporter, told reporters in Chicago. “I hope this means we washed that away.” Mr. McCain called Mr. Obama at 10 p.m., Central time, to offer his congratulations. In the call, Mr. Obama said he was eager to sit down and talk; in his concession speech, Mr. McCain said he was ready to help Mr. Obama work through difficult times. “I need your help,” Mr. Obama told his rival, according to an Obama adviser, Robert Gibbs. “You’re a leader on so many important issues.” Mr. Bush called Mr. Obama shortly after 10 p.m. to congratulate him on his victory. “I promise to make this a smooth transition,” the president said to Mr. Obama, according to a transcript provided by the White House .”You are about to go on one of the great journeys of life. Congratulations, and go enjoy yourself.” For most Americans, the news of Mr. Obama’s election came at 11 p.m., Eastern time, when the networks, waiting for the close of polls in California, declared him the victor. A roar sounded from the 125,000 people gathered in Hutchison Field in Grant Park at the moment that they learned Mr. Obama had been projected the winner.

The scene in Phoenix was decidedly more sour. At several points, Mr. McCain, unsmiling, had to motion his crowd to quiet down — he held out both hands, palms down — when they responded to his words of tribute to Mr. Obama with boos. Mr. Obama, who watched Mr. McCain’s speech from his hotel room in Chicago, offered a hand to voters who had not supported him in this election, when he took the stage 15 minutes later. “To those Americans whose support I have yet to earn,” he said, “I may not have won your vote, but I hear your voices, I need your help, and I will be your president, too.” Initial signs were that Mr. Obama benefited from a huge turnout of voters, but particularly among blacks. That group made up 13 percent of the electorate, according to surveys of people leaving the polls, compared with 11 percent in 2006.

In North Carolina, Republicans said that the huge surge of African-Americans was one of the big factors that led to Senator Elizabeth Dole, a Republican, losing her re-election bid. Mr. Obama also did strikingly well among Hispanic voters; Mr. McCain did worse among those voters than Mr. Bush did in 2004. That suggests the damage the Republican Party has suffered among those voters over four years in which Republicans have been at the forefront on the effort to crack down on illegal immigrants. The election ended what by any definition was one of the most remarkable contests in American political history, drawing what was by every appearance unparalleled public interest. Throughout the day, people lined up at the polls for hours — some showing up before dawn — to cast their votes. Aides to both campaigns said that anecdotal evidence suggested record-high voter turnout.

Reflecting the intensity of the two candidates, Mr. McCain and Mr. Obama took a page from what Mr. Bush did in 2004 and continued to campaign after the polls opened. Mr. McCain left his home in Arizona after voting early Tuesday to fly to Colorado and New Mexico, two states where Mr. Bush won four years ago but where Mr. Obama waged a spirited battle. These were symbolically appropriate final campaign stops for Mr. McCain, reflecting the imperative he felt of trying to defend Republican states against a challenge from Mr. Obama. “Get out there and vote,” Mr. McCain said in Grand Junction, Colo. “I need your help. Volunteer, knock on doors, get your neighbors to the polls, drag them there if you need to.” By contrast, Mr. Obama flew from his home in Chicago to Indiana, a state that in many ways came to epitomize the audacity of his effort this year. Indiana has not voted for a Democrat since President Lyndon B. Johnson’s landslide victory in 1964, and Mr. Obama made an intense bid for support there. He later returned home to Chicago play basketball, his election-day ritual.

Thursday, October 30, 2008

Economy shrinks in 3Q, signaling recession

AP WASHINGTON: The economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession. The broadest barometer of the nation's economic health, gross domestic product, shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department reported Thursday. It marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession. The latest GDP reading marked a rapid loss of traction for the economy, which logged growth of 2.8 percent in the second quarter, and is sure to buttress the belief of many economists that the nation is in the throes of a painful downturn.

"No question. We're definitely in a recession. That is just a reality," said Brian Bethune, economist at IHS Global Insight. The White House tried to downplay the significance of the numbers, saying they were not unexpected and caused partly by special circumstances such as hurricanes and a Boeing Co. strike.

"While we continue to face serious challenges, the United States remains the best place to do business, and we're positioned to bounce back," White House press secretary Dana Perino said. The deterioration reflected a sharp retrenchment by consumers, whose spending accounts for the largest chunk of national economic activity. Consumers ratcheted back their spending at a 3.1 percent pace in the third quarter, the most since the second quarter of 1980, when the country was in the grip of recession. GDP measures the value of all goods and services produced within the United States and is the broadest barometer of the country's economic health. While the third-quarter's contraction wasn't as deep as the 0.5 percent annualized decline analysts expected, the poor showing underscored the terrible toll of the housing, credit and financial crises. J. Steven Landefeld, director of the Commerce Department's Bureau of Economic Analysis, which puts together the GDP report, didn't use the word "recession" to describe economic conditions but said: "Certainly we are seeing a period of dramatic slowdown."

On Wall Street, however, the smaller-than-expected decline gave some comfort to investors. The Dow Jones industrials were up about 80 points in midday trading. Meanwhile, the Labor Department said Thursday that new claims for jobless benefits for the week ending Oct. 25 stood at a seasonally adjusted 479,000, the same as the previous week and above analysts' estimates of 475,000. Jobless claims above 400,000 are considered a sign of a struggling economy. The grim reports come just days before the nation picks the next president on Nov. 4. Whether Democrat Barack Obama or Republican John McCain wins the White House, the incoming president will inherit a deeply troubled economy and a record-high budget deficit that could cramp his domestic agenda. Many economists believe the economy will continue to contract into next year, which would more than meet a classic definition of recession two straight quarters of shrinking GDP. The National Bureau of Economic Research, the panel of experts that determines when U.S. recessions begin and end, uses a broader definition to determine recessions than two quarters of contracting GDP. That didn't happen in the last recession, in 2001. The NBER takes into account income, employment and other barometers. The finding is usually made well after the fact.

A collapse of the housing market and locked up lending have produced the worst financial crisis to hit the country in more than 70 years. To cushion the fallout, the Fed slashed interest rates on Wednesday by half a percentage point to 1 percent, a level seen only once before in the last half century.Fed Chairman Ben Bernanke has warned that the country's economic weakness could last for some time even if the government's unprecedented $700 billion financial bailout package and other steps do succeed in getting financial and credit markets to operate more normally. Unemployment now at 6.1 percent could hit 8 percent or higher next year. Disappearing jobs, battered nest eggs and retirement accounts, and falling home prices are likely to make consumers retrench even more. Underscoring the strain faced by consumers, the report showed that Americans' disposable income fell at an annual rate of 8.7 percent in the third quarter, the largest quarterly drop on records dating back to 1947.

In the third quarter, consumers cut back on purchases of cars, furniture, household appliances, clothes and other things.They pulled back after the bracing impact of the government's tax rebates disappeared. In addition to consumers, businesses cut back sharply in the third quarter. They cut spending on equipment and software at a 5.5 percent pace, the most since the first quarter of 2002, when the economy was struggling to recover from the 2001 recession. Home builders slashed spending at a 19.1 percent pace, marking the 11th straight quarterly cut back, and fresh evidence of the depth of the housing slump. Slower growth for U.S. exports reflecting less demand from overseas buyers who are coping with their own economic problems also factored into the weak GDP report. Exports grew at a 5.9 percent pace in the third quarter, a sharp deceleration from the second quarter's 12.3 percent growth rate. The U.S. economic downturn in the third quarter was accompanied by higher inflation. An inflation gauge tied to the GDP report showed prices excluding food and energy rose at a 2.9 percent pace, up considerably from the 2.2 percent growth rate in the second quarter. Although the new reading is outside the Fed's comfort zone, Fed officials predict the economy's slowdown will damp inflation pressures in the months ahead. The Fed has made clear that its primary mission at the moment is reviving the economy.

Monday, October 27, 2008

Newspapers see sharp circulation drop of 4.6 pct

(AP) — The nation's daily newspapers, already finding advertising revenue fell sharply because of the weak economy, saw circulation decline more steeply than anticipated in the latest reporting period, an auditing agency said Monday. Average weekday circulation was 38,165,848 in the six-months ending in September, a 4.6 percent decline from 40,022,356 a year earlier at the 507 papers that reported circulation totals in both periods. The drop was only 2.6 percent in the September 2007 period, compared with September 2006. In the six-month period that ended in March 2008, the decline was 3.6 percent over a year earlier, according to circulation figures that newspapers submitted to the Audit Bureau of Circulations. Sunday circulation fell even more, 4.8 percent, to 43,631,646 in the latest period at the 571 papers with comparable totals. The drop was 3.5 percent a year ago and 4.6 percent in the period ending in March. Circulation and advertising have been dropping at newspapers as readers continue to migrate to the Internet. Ad revenue began to decline more steeply this summer as the weak economy prompted advertisers to pull back on spending. The sharper circulation declines appear to be a response to that, said Rick Edmonds, media analyst at the journalism think tank Poynter Institute.

"Times are tough, and they are looking at everything that's in their expense base," he said. "Building new subscribers is an expensive proposition." Some newspapers have purposely let some sales slide to focus on those readers who are coveted by advertisers and exclude those in outlying areas that are more expensive to reach. Circulation could drop even faster as regular readers, in a tight economy, decide they no longer need their printed newspapers, Edmonds warned. Many papers have offset circulation declines with price increases, though papers risk losing readers if they raise prices too much. In a sign of hope, the Newspaper Association of America said last week that usage of newspaper Web sites grew nearly 16 percent in the third quarter, compared with last year, to an average of more than 68 million monthly unique visitors. But online ad sales haven't increased fast enough to offset the declines in print, which still makes up the bulk of a paper's revenue. USA Today remains the nation's top-selling newspaper, with average daily circulation of 2,293,310, just 173 more than last year. The No. 2 daily, The Wall Street Journal, also reported flat circulation — up just 117 copies to 2,011,999.

The New York Times saw circulation decline 3.6 percent to 1,000,665, while the Los Angeles Times had a 5.2 percent drop to 739,147. The other papers in the top 25 also saw circulation drops of from 1.9 percent at The Washington Post to 13.6 percent at The Atlanta Journal-Constitution. The New York Times remains the top paper on Sundays, when USA Today and the Journal do not publish, with a circulation of 1,438,585, down 4.1 percent. The Los Angeles Times follows at 1,055,076, down 5.1 percent, and the Post at 866,057, a decrease of 3.2 percent. Among the top 25, only the St. Louis Post-Dispatch and the St. Petersburg (Fla.) Times reported Sunday gains, of 0.8 percent and 0.1 percent, respectively. Despite the industrywide decline in circulation, five papers outside the top 25 reported gains of at least 5 percent, led by the Wisconsin State Journal of Madison, where circulation rose 10.6 percent to 97,012. The other gainers are The Macomb Daily of Mount Clemens, Mich., The Daily Sun of The Villages, Fla., The Times of Trenton, N.J., and the Citizen Tribune of Morristown, Tenn.

Wednesday, October 22, 2008

Wells Fargo Chairman Prefers U.S. Plan to Buy Stakes

(Bloomberg) -- Wells Fargo & Co. Chairman Richard Kovacevich said the U.S. Treasury's intention to buy stock in banks provides a better stimulus to escape the financial crisis than an earlier plan to purchase soured mortgage-related assets.

``Direct capital injections versus buying loans is a far more preferable way'' to help companies already facing credit losses, Kovacevich, 64, said yesterday at an event hosted by San Francisco's Commonwealth Club. ``It's an important tool to get the financial system back into the money business again.'' Wells Fargo, which agreed to buy Wachovia Corp. for about $14 billion this month, is one of nine large lenders slated to receive cash infusions as part of the government's plan to spend $700 billion unfreezing credit markets. Wells Fargo, based in San Francisco, will get $25 billion. JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. are among the others that will receive the cash.

U.S. Treasury Secretary Henry Paulson last week urged banks to ``deploy'' the money in loans. He was forced to change his strategy after the initial plan to buy distressed assets caused banks to hoard cash and failed to halt a slide in the stock market. Kovacevich declined to say if he initially opposed Paulson's plan as the New York Times reported. Wells Fargo dropped 99 cents, or 3 percent, to $31.65 at 10:04 a.m. in New York Stock Exchange composite trading. The shares gained 8.1 percent this year through yesterday, the biggest advance in the 24-comopany KBW Bank Index. Wachovia fell 17 cents to $5.92, adding to its 84 percent decline this year.

He's Seen Worse

Kovacevich said the current economic crisis isn't the worst he's seen, and the U.S. government's may help end the credit freeze ``reasonably soon.''

``Our customers, except those in residential home lending or autos, are doing quite well,'' he said. ``By far, the worst economic crisis of my career was in the 1980s.'' The Wachovia deal, orchestrated by Kovacevich, marks an eastward expansion and strategic shift for Wells Fargo, which maintained a profit during the financial crisis by avoiding riskier loans. Wachovia's mortgage portfolio includes an estimated $74 billion in future losses. The Wells Fargo-Wachovia deal will create the biggest U.S. bank network, with 6,675 branches. The Federal Reserve said yesterday that Wells Fargo agreed to reduce its deposit base to comply with U.S. bank-merger law should the combined company control more than 10 percent of deposits nationwide.

Wachovia reported its third straight quarterly loss today, hurt by crumbling mortgage markets and writedowns on securities backed by real estate. The loss for the three months ended Sept. 30 was $23.9 billion, or $11.18 a share, compared with net income of $1.6 billion, or 85 cents, in the same period a year earlier, the Charlotte, North Carolina-based company said in a statement. The Wachovia deal would be Wells Fargo's biggest acquisition since Norwest Corp. purchased the old Wells Fargo 10 years ago and adopted the name. Kovacevich was chief operating officer at Minneapolis-based Norwest in the 1980s when current Wells Fargo Chief Executive Officer John Stumpf, 55, was running the auto-dealer business and working on commercial loans. Kovacevich was promoted to CEO of Norwest in 1993 and stepped down in June 2007 to make way for the promotion of Stumpf, who has been with the company for 26 years.

Let 'Em Ride

I haven't been playing much online poker since my party poker days at college but I've recently been getting into some of the new casino sites that offer table games. A friend of mine recommended a new German casino that is absolutely fabulous. They've got a great blackjack game and my favorite craps. Craps is possibly the most fun table game in casinos and although it's dangerous, can provide hours of fun online. There's nothing like being on a roll in craps. I remember being at the Luxor a few years ago and turning my gas money (that's all I had left after getting killed in blackjack) into a grand on the last night in the casino. The shooter at the table didn't crap out for 2 hours! I'll probably be gambling less after losing a lot in the markets this month but there will always be a place in my heart for that Las Vegas action that you can now get online. This casino is great because not only can I enjoy the gaming, I can also brush up on my German which I've used less and less since my days in Berlin. I'd be wary of spending too much on gambling, but the game play is great and if you can't make it to Vegas or Atlantic City (and you speak German) check our their site for good times. Good Luck!

Thursday, September 25, 2008

Deal close on $700 billion financial bailout plan


WASHINGTON (AP) - President Bush is bringing presidential candidates Barack Obama and John McCain into negotiations on a $700 billion rescue of Wall Street as Democrats and Republicans near agreement on a bailout plan with more protections for taxpayers and new help for distressed homeowners. Senior lawmakers and Bush administration officials have cleared away key obstacles to a deal on the unprecedented rescue, agreeing to include widely supported limits on pay packages for executives whose companies benefit. They're still wrangling over major elements, including how to phase in the eye-popping cost - a measure demanded by Democrats and some Republicans who want stronger congressional control over the bailout - without spooking markets. A plan to let the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also was under intense negotiation. A bipartisan meeting was set for Thursday to begin drafting a compromise, which top Democrats said they hoped could pass within days.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession. Bush acknowledged in a prime-time television address Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold," Bush said as he worked to resurrect the unpopular bailout package. "Our entire economy is in danger." Bush's warning came soon after he invited Obama and McCain, one of whom will inherit the economic mess in four months, as well as key congressional leaders to a White House meeting Thursday to work on a compromise. With the administration's original proposal considered dead in Congress, House leaders said they were making progress toward revised legislation that could be approved. Rep. Barney Frank, D-Mass., who has led negotiations with Treasury Secretary Henry Paulson on the package, said that given the progress of the talks, the White House meeting was a distraction.

"We're going to have to interrupt a negotiating session tomorrow between the Democrats and Republicans on a bill where I think we are getting pretty close, and troop down to the White House for their photo op," said Frank, the House Financial Services Committee chairman. "I wish they'd checked with us." Paulson and Federal Reserve Chairman Ben Bernanke have been crisscrossing Capitol Hill in recent days, shuttling between public hearings on the proposal and private meetings with lawmakers, to sell the proposal. Obama and McCain are calling for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

"The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail," they said in a joint statement Wednesday night. "This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe." Presidential politics intruded, nonetheless, when McCain said earlier Wednesday he intended to return to Washington and was asking Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead. Lawmakers in both parties have objected strenuously to the rescue plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on more conditions and help for beleaguered homeowners. But many in both parties said they were open to legislation, although on different terms than the White House has proposed. Some partisan sticking points remain. Democrats are pushing to allow bankruptcy judges to rewrite mortgages to ease the burden on consumers who are facing foreclosure - a nonstarter for Republicans.

Democrats acknowledge privately that the provision will almost certainly be dropped in the interest of a bipartisan deal. Obama told reporters it's "probably something that we shouldn't try to do in this piece of legislation." Democrats also want any potential proceeds the government reaps from the bailout to go to a fund designed to pay for housing for poor families. Many Republicans oppose the very existence of the fund, which they say is a backdoor means of funneling money to liberal political groups. Democratic demands that Congress be given greater authority over the bailout and that the government be required to help homeowners renegotiate their mortgages so they have lower monthly payments already have been accepted in principle. Under the bailout bill, which will let the government buy huge amounts of toxic mortgage-related assets, "we're now the biggest mortgage holder in town, and we can do serious foreclosure avoidance," Frank said.

Bush Warns "Entire Economy Is In Danger"

Media reports are casting President Bush's televised address last night as both a warning to the nation on the severity of the financial crisis and an attempt to push Congress into passing his proposed bailout. A number of the stories remark on Bush's stark warnings about the health of the economy. Roll Call, for example, says Bush "sketched a frightening view of the economic danger," and used "unusually blunt and even dramatic language." The New York Times reports Bush told the country that "'a long and painful recession' could occur if Congress does not act quickly." Like many other media outlets this morning, the Times quotes the President saying, "Our entire economy is in danger." Bush's speech highlighted "a growing sense of urgency on the part of the administration that Congress must act to avert a far-reaching economic collapse." USA Today notes the President also said, "Without immediate action by Congress, America could slip into a financial panic. ... More banks could fail, including some in your community." He also "warned that inaction could cause millions of layoffs, bank failures, business closures, lost retirement savings, more foreclosures, a further drying up of credit." McClatchy, Los Angeles Times and Washington Post run similar reports.

The speech is also seen as a response to critics who accused the President of not having played a lead role in the government's efforts to defuse the crisis. USA Today reports, for example, that Bush faced "criticism from some Democrats for being AWOL in the debate," and the Wall Street Journal says that "until now," the President had "relied largely on Treasury Secretary Henry Paulson -- a former Goldman Sachs CEO -- and Federal Reserve Chairman Ben Bernanke to make the case for the plan," but "Republican support has been so soft that Democrats worried they would have to take on most of the responsibility -- and political risk -- for passing the package." And "to spread that risk, Democrats on Tuesday called on Mr. Bush to address the nation."

The Politico describes Paulson as "the captain of a crowded lifeboat" who "struggled to stay afloat in Congress Wednesday, battling the waves crashing in on his Wall Street rescue plan." With his speech, Bush was "lending a hand" and taking "back the helm long enough Wednesday night to deliver a nationally televised address," but "to the surprise of some in his own administration, Bush spent precious political capital by using the speech to try to help McCain by bringing him into what have been delicate negotiations with Congress."

McCain, Obama To Attend White House Talks Today The AP notes Bush "spoke just after inviting Democrat Sen. Barack Obama and Republican Sen. John McCain, one of whom will inherit the mess in four months, and key congressional leaders to an extraordinary White House meeting Thursday to hammer out a compromise." In his speech, the President "explicitly endorsed several of the changes that have been demanded in recent days from the right and left. But he warned that he would draw the line at regulations he determined would hamper economic growth." Another AP story and a report in the Los Angeles Times, among other media stories, note both Obama and McCain have said they will attend the meeting.

Wednesday, September 10, 2008

Lehman: Too big to fail?

By Paul R. La Monica, editor

NEW YORK ( -- Lehman Brothers has finally announced a path to raising capital. But after Tuesday's 45% plunge in its stock price, it's unclear if Wall Street will let chief executive officer Richard Fuld carry out the plan. Lehman's (LEH, Fortune 500) stock was down about 2% late Wednesday morning after the company said it would slash its dividend, look for a buyer of the majority of its Neuberger Berman investment management unit and spin off part of its commercial real estate business. Shares are trading at their lowest point in 10 years, having plummeted nearly 90% so far this year. And by the way, the company lost $3.9 billion in the third quarter. So now, the natural question that needs to be asked is this: On the heels of the Treasury Department's takeover of mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), does the government now have to step in and bailout Lehman as well. Unfortunately, it may have no choice.

Talkback: Do you think Lehman should be allowed to fail or does it need to be bailed out?

The Federal Reserve set a dangerous precedent in March when it helped engineer the takeover of Bear Stearns by JPMorgan Chase (JPM, Fortune 500) by agreeing to guarantee $29 billion in potential losses. Since then, several Fed members, most notably chief Ben Bernanke, have gone out of their way to defend the action, arguing that Bear Stearns simply was too big to fail. The repercussions of allowing Bear to collapse could have been catastrophic. So if Bear was determined to be too big to fail, isn't it likely the Fed would think Lehman is as well?

Probably. That's because Lehman, the fourth-largest investment bank, is bigger than Bear, which was the fifth-largest at the time it nearly imploded. What's more, Lehman, a bond-trading powerhouse, is even a bigger player in the mortgage-backed securities market than Bear was. So the Fed could easily argue that letting Lehman go under could create even more chaos in the already volatile credit markets. Yes, Fuld wants to keep the bank independent by taking a piecemeal approach to breaking up the company. But the market may not let him do so. And until Lehman actually announces that it has, in fact, raised a substantial amount of capital, it's likely that there will be continued pressure on the stock. If Lehman's stock falls further, it's reasonable to think that some financial institution would take a gamble on buying the company, especially if it could get Lehman through a "takeunder" just as JPMorgan did with Bear.

Some analysts have tossed out investment manager BlackRock (BLK, Fortune 500), British bank HSBC (HBC) and private equity firm Blackstone (BX) as potential bidders. But why would any of them agree to take on all the risk without some assurance from the Fed? After all, that's exactly what JPMorgan got in the Bear deal. Don't get me wrong. I don't like the notion of big Wall Street firms getting saved after making irresponsible, reckless decisions. In what's supposed to be a free market, companies should be allowed to fail. But the Fed has already opened Pandora's box. It's too late now to say that Lehman should be left to wither away to nothing while Bear was allowed to escape that fate. To be sure, if one of the three aforementioned firms were to try and buy Lehman and wanted the Fed's help, this would be more complicated than the JPMorgan takeover. BlackRock and Blackstone aren't banks. And HSBC is not a U.S.-headquartered institution.

Still, Bernanke and Fed vice chairman Tim Geithner have demonstrated a remarkable willingness to be flexible and creative in dealing with the credit crunch. So if they wanted to help someone buy Lehman, one would think they would find a way to get it done. Like it or not, the age of the bailout is in full swing. To top of page

Wednesday, August 27, 2008

Fewer without health insurance, U.S. Census says

By Ruth Mantell

WASHINGTON (MarketWatch) -- Even as the number of Americans living in poverty rose last year, fewer Americans overall went without health insurance and there was an increase in the median household income adjusted for inflation, the Census Bureau reported Tuesday. The number of people without health-insurance coverage fell to 45.7 million in 2007 from 47 million in 2006, the government said in its annual snapshot. The number of uninsured children also declined, slipping to 8.1 million from 8.7 million. Median household income, adjusted for inflation, rose 1.3% to $50,233 -- the highest level since 2000. Income includes items such as earnings, interest, alimony and unemployment compensation. For households at the 20th percentile, income fell 1.5% to $20,291. For households at the 80th percentile, income rose less than a percentage point to $100,000.

Meanwhile, following three years of annual declines in real earnings, both men and women experienced gains in 2007. The real median earnings for men working full-time and on a year-round basis rose 3.8% to $45,113, with women's earnings growing by 5% to $35,102. The poverty rate hit 12.5% in 2007, compared with 12.3% in the prior year -- not statistically different, according to the Census Bureau. The poverty rate reached 11.7% in 2001, when the economy was in a recession. The number of Americans living under the poverty line reached 37.3 million, including 13.3 million children. In the prior year, there were 36.5 million under the poverty line, 12.8 million of whom were children.

Cause for concern

Despite some good news in the data, there is also cause for concern, according to the Center on Budget and Policy Priorities, a policy and research organization that specializes in programs that affect low- and moderate-income families and individuals. In particular, the rate of those without health insurance hit 15.3% in 2007, up from 14.1% in 2001. "The data for 2007 are of particular concern given that the economy is now in a slowdown, and poverty is almost certainly higher now -- and incomes lower -- than in 2007," said Robert Greenstein, CBPP's executive director.

"The 2007 levels -- already disappointing because they are worse than those for the 2001 recession -- are likely to constitute a high-water mark for the next few years. This suggests that significant pain may lie ahead for many Americans," he commented in a statement. Dr. Nancy Nielsen, president of the American Medical Association, said in a statement that many patients are priced out of coverage, and that covering all Americans would be a "good first step."

"We advocate for a shift in tax incentives for health insurance so lower-income Americans get money to purchase coverage," she added. "We also want insurance-market reforms to provide individuals more choices and ensure coverage for high-risk patients." CBPP estimates that the absolute number of Americans and the percentage of the overall population who are uninsured can be expected to increase both this year and next. "The numbers of uninsured parents and children are likely to grow as employers lay off more workers and states consider cuts in their Medicaid programs to help balance their budgets during the economic slowdown," Greenstein said.

Tuesday, August 19, 2008

U.S. Producer Prices Surge More Than Forecast in July

U.S. Producer Prices Surge More Than Forecast in July (Update2)

By Timothy R. Homan(Bloomberg) -- Prices paid to U.S. producers rose twice as much as economists had forecast in July, reflecting the jump in energy and commodity costs that has since started to wane. The 1.2 percent increase in the producer price index followed a 1.8 percent increase the prior month, the Labor Department said today in Washington. Costs were up the most in 27 years from a year before. So-called core prices that exclude fuel and food rose 0.7 percent after a 0.2 percent gain in June. Oil prices have dropped 21 percent since the start of last month, copper is down 15 percent and corn has dropped 14 percent, helping ease the cost pressures on companies. Federal Reserve officials anticipate the economic slowdown, along with a stabilization in commodity costs, will help contain inflation.

``It's not a pretty number,'' said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. ``Today's PPI is a bit of an echo and maybe a little bit of a rude reminder of how much of a problem inflation was in July.'' Another government report showed builders in the U.S. broke ground in July on the fewest houses in 17 years, signaling the residential-construction slump will continue to hurt economic growth. Treasuries were little changed after the reports, with benchmark 10-year notes yielding 3.80 percent at 8:37 a.m. in New York, from 3.82 percent late yesterday. Futures contracts on the Standard & Poor's 500 Stock Index were down 0.9 percent at 1,270.20.

Housing Starts

The 11 percent decrease in housing starts to an annual rate of 965,000, the lowest since March 1991, followed a 1.084 million pace the prior month, the Commerce Department said today in Washington. Building permits, a sign of future construction, also fell. Prices paid to factories, farmers and other producers were forecast to rise 0.6 percent following a previously reported 1.8 percent increase the previous month, according to the median of 77 forecasts in a Bloomberg News survey. Estimates ranged from gains of 0.1 percent to 1.8 percent. Core prices were projected to rise 0.2 percent, according to the survey median. Producers paid 9.8 percent more for goods from July 2007, the biggest year-over-year gain since June 1981, compared with a 9.2 percent gain in the 12 months ended in June. Excluding food and energy, the increase was 3.5 percent from a year earlier, its biggest jump since 1991, compared with a 3 percent gain in the prior month.


Producers paid 0.2 percent less for gasoline, and diesel fuel gained 2.6 percent, the report showed. Natural gas costs were up 7.8 percent from the previous month. The wholesale-price report is based on figures for the Tuesday of the week that includes the 13th of the month. On that basis, a barrel of crude oil cost $138.74 on the New York Mercantile Exchange for July, up from $131.31 the previous month. August producer prices are likely to reflect this month's drop in the cost of oil, which traded at $112.11 a barrel earlier today. Oil futures prices reached a record $147.27 a barrel July 11. Food was 0.3 percent more costly, after a 1.5 percent increase the previous month, today's report showed. Prices for raw materials, or so-called crude goods, increased 4.2 percent, after a 3.7 percent rise the prior month.

Inflation Outlook

Fed policy makers in their statement on Aug. 5 indicated that they expect inflation will moderate in the second half of the year and into 2009. Still, the outlook for prices is ``highly uncertain,'' the central bank's Federal Open Market Committee said in a statement when it voted to keep its benchmark interest rate at 2 percent. Today's report showed passenger car prices gained 1.4 percent and light trucks increased 0.8 percent. The report also showed prices for capital equipment increased 0.8 percent. Consumer goods prices were up 1.2 percent. Producer prices are one of three monthly inflation gauges reported by the Labor Department. Import prices rose 1.7 percent in July and consumer prices increased 0.8 percent for the same period, the Labor Department said last week. Both figures were higher than estimated. Higher raw-material costs are outpacing price increases for some companies. Deere & Co., the world's largest maker of farm equipment, last week said higher prices for tractors and combines weren't enough to counter a $140 million increase in production costs for materials such as steel.

``Escalating raw-material costs are expected to have an impact on margins'' for the fourth quarter, the Moline, Illinois- based company said last week in a statement. Hershey Co., the largest U.S. chocolate maker, on Aug. 15 said it will raise prices to counter higher commodity costs. The changes will result in a roughly 10 percent increase across Hershey's entire U.S. product line, the company said in a statement.

Tuesday, August 5, 2008

Cablevision Systems mulls spin-off of units


NEW YORK (AP) — Nine months after shareholders rejected the Dolan family's latest bid to take Cablevision Systems Corp. private, the cable operator said Tuesday it is considering options that could see it sell some of its diverse holdings. Chief Executive James Dolan, who has long criticized shareholders for undervaluing what is considered one of the strongest cable franchises in the country, said the Bethpage, N.Y., company may also buy back stock or pay a special dividend.

Dolan said Tuesday the company is "actively looking" at options to close the gap between operating performance and the market value of its shares. The company plans to hire investment banking firms. Its market capitalization stood at around $8.27 billion. The announcement comes a week after Dolan said investors are "significantly" undervaluing the company. The Dolan family controls Cablevision through a special class of shares and has tried to take the company private several times in the past few years. Its most recent attempt offered shareholders $36.26 per share, but that was rejected as too low in October 2007. Cablevision shares rose 7.5 percent to $27.82 in midday trading Tuesday.

Cablevision did not say which of its businesses it would consider selling. Analysts consider its cable franchise, which serves the affluent New York suburbs, one of the best in the business. The unit is the country's fifth-largest cable system and accounts for 75 percent of company revenue. It includes high-speed Internet and phone services that have helped beat back competition from phone companies and satellite TV operators. The company runs several cable television stations, including AMC, IFC and WE tv, as part of its Rainbow Media Holdings LLC unit. The market for popular cable networks has been hot in recent months, with General Electric's NBC Universal paying $3.5 billion for Weather Channel and $875 million for women's programming channel Oxygen. Cablevision paid about $500 million for independent film channel Sundance in June. The company also owns Madison Square Garden and the three sports teams that play there: basketball's New York Knicks and New York Liberty, and hockey's New York Rangers. But potential suitors may have trouble placing a value on the Knicks or Rangers because Cablevision has intertwined contracts among the teams, the arena and the regional sports network that airs their games.

"It will be next to impossible to assess the franchise values unless you know what the contracts are that they work under," said Andrew Zimbalist, a sports economist with Smith College.

Assuming the arena and cable contracts were broken, Zimbalist said the Knicks would be worth about $500 million and the Rangers about $300 million. He estimated average revenue for a National Basketball Association team is $150 million. Forbes magazine ranked the Knicks as the most valuable franchise in the NBA at $608 million in its 2007 rankings, which includes an estimate for the arena deal. Cablevision paid $300 million for the Knicks in 1997, the magazine said. Robert Johnson, the billionaire founder of Black Entertainment Television, paid $300 million for the expansion Charlotte Bobcats in 2003, one of the last NBA teams to be sold. Hockey's Edmonton Oilers, a storied franchise in a small media market, recently sold for about $200 million.

"There's a very special media market in New York for sports teams," Zimbalist said. "There is significant value over and above the average franchise because of the market."

Cablevision's other entertainment venues include Radio City Music Hall and the Beacon Theater, both in New York, and the Chicago Theater. Cablevision is unlikely to sell newspaper publisher Newsday Media Group, following its $650 million purchase of Newsday from Tribune Co. The acquisition closed in July. The company has paid a special dividend in past, returning $3 billion, or $10 per share, in cash to shareholders in 2006. The company took on debt to fund that dividend, which may not be an option now because of the credit crisis.

"We believe that Cablevision's options will be limited by the credit markets," said Goldman Sachs analyst Ingrid Chung in a note to clients.

Monday, July 28, 2008

Cable May Have Gained Broadband Share From Telcos In 2Q

NEW YORK -(Dow Jones)- Disappointing high-speed Internet numbers from the two largest U.S. telecommunications companies suggest the cable companies could post surprisingly strong customer growth when they report their second quarter results. The second quarter marks a difficult time for all broadband providers because college students tend to disconnect their lines as they go on summer vacation. The weakened economy and housing problems have also weighed on the service providers. Even with the lowered expectations, the telcos failed to match Wall Street's estimates, suggesting competition was a more worrisome issue than previously thought.

"When the chapter is closed on the second quarter, the cable industry will very likely have garnered the highest share in the history of the broadband market," said Craig Moffett, an analyst at Sanford C. Bernstein & Co. LLC.

The telcos and cable providers are aggressively tustling over broadband customers because the Internet line is seen as the key service for customers. Consumers are more willing to forego phone service, where wireless is an alternative, or even television, which can be replaced by online videos, than their Internet connection.

Cable, however, still has an advantage in speed. While the telcos have been ramping up their faster fiber-optic-powered Internet service, the offering is limited. Cable, meanwhile, has pushed the advantage through aggressive marketing, with players such as Comcast Corp. (CMCSK, CMCSA) increasing the airtime for its Slowsky turtles commercials, which mock slower DSL customers. Moffett envisions a scenario where the cable companies gained as much as 75% to 80% of the net new broadband customers in the second quarter.

Wall Street will know if these trends play out according to his expectations when the cable companies report. Comcast Corp. (CMCSK, CMCSA) releases its results Wednesday. Cablevision Systems Corp. (CVC) reports Thursday. Time Warner Cable Inc. (TWC) reports on Aug. 6. Spokesmen for Comcast and Cablevision weren't immediately available for comment. Time Warner Cable declined to comment.

AT&T, which reported last Wednesday, set the tone by reporting 46,000 net new broadband connections, which analysts considered surprisingly weak. Chief Financial Officer Rick Lindner, speaking to analysts on a conference call, said that the company and its cable competitors have seen a fairly even split of the new customers. He blamed the weakness more on the seasonal factor and weaker economy than competition, but acknowledged the market share picture may have slipped in cable's favor.

"I don't think that's a big factor," he said, noting that AT&T had been ahead of cable in the last few quarters. Verizon, meanwhile, reported 54,000 net new high-speed Internet customers, with a decline of 133,000 DSL subscribers eating into the 187,000 net new FiOS Internet subscribers.

Verizon was more forthcoming on the disappointing figure. Chief Financial Officer Doreen Toben said in an interview with Dow Jones Newswires that in areas where FiOS isn't available, the company is unable to keep up with customers' demands for higher Internet speeds. She noted that a quarter of the DSL losses were from subscribers migrating to FiOS. Verizon has some reason to be optimistic. The company on Monday officially launched its rollout of FiOS TV in New York City. The bundling of television service with Internet is expected to drive growth in the lucrative market.

In addition to the economic issues and the seasonal impact, the companies are facing a maturing market where nearly everyone has a broadband connection.

"When you're starting to push on 90% broadband penetration, the growth rate was going to slow," Toben said. She declined to comment on whether she expects further DSL losses in the coming quarters.

The DSL numbers for Verizon have already been weak for the last several quarters, said William Power, an analyst at Robert W. Baird & Co. He doesn't expect the trend to change because the penetration rate is already at such a high level. Likewise, Moffett is pessimistic about the telcos. He expects the cable industry to continue to win market share in broadband and voice services at an accelerated rate.

"It's important not to get lost in the weeds from quarter to quarter and focus on the broader trend line," he said, which will continue to favor cable. Verizon slipped 1.8% to $33.84. AT&T fell 0.5% to $31.24.

-By Roger Cheng, Dow Jones Newswires

Monday, July 14, 2008

Mercedes to cut petroleum out of lineup by 2015

By Jaymi Heimbuch (Yahoo! Green)

In less than 7 years, Mercedes-Benz plans to ditch petroleum-powered vehicles from its lineup. Focusing on electric, fuel cell, and biofuels, the company is revving up research in alternative fuel sources and efficiency. The German car company has a few new power-trains in the line-up that European journalists have had the opportunity to test out in the Mercedes facility in Spain. One vehicle includes the F700, powered by a DiesOtto engine that combines HCCI and spark ignition to get nearly the same efficiency as diesel, but minus the expensive after-treatment systems. The engine can run on biofuels, and we may have a purchasable vehicle by 2010 -- a year that seems to be popular for the debut of a lot of new alternative fuel car models, making ’08 and ’09 simply thumb-twiddling years for consumers. I don’t know, maybe car makers just like the roundness of “2010.” The company’s next big step will be to launch a Smart electric car which is fuel and emission-free.

Anyway, Mercedes is looking into electric vehicles, both battery-powered and fuel-cell powered. Not only are models in development, but we’ve also seen the company making steps towards its zero-petroleum goal right now, from better cabs in London to li-ion battery improvements. The company also has about 100 Smart electric cars undergoing testing in London, with that favorite 2010 year as the projected market release date. Mercedes is making serious investments, already putting nearly $4 million into the pot of its long-term Sustainable Mobility plan, with another nearly $1.4 billion going in before 2014. While car models may be able to run on fuels other than gasoline or diesel, we have yet to find a method of both running and producing vehicles entirely free of fossil fuels. I’m waiting for a mainstream car line that creates renewable fuel, clean-running vehicles out of 100% recycled materials in plants run on 100% renewable, clean power … Will I even be alive when that finally happens? I have hope.

Friday, July 11, 2008

EPA chief says Congress should pass greenhouse gases legislation

(Los Angeles Times) Responding to a U.S. Supreme Court order, Environmental Protection Agency Administrator Stephen Johnson said today that the Clean Air Act was "the wrong tool for addressing greenhouse gases" because it would be too costly to the American public, and said that Congress should move forward with passing legislation to tackle the issue instead.

The high court had ordered the EPA more than a year ago to determine if greenhouse gases were a danger to the public. If so, the justices said, under the Clean Air Act, the agency was required to develop regulations to reduce the risk.

Instead, Johnson signed what he said was an unprecedented 1,000-page document this morning that included letters from numerous White House environmental and economic agencies detailing how such regulations could harm major sectors of the economy.

"One point is clear," Johnson said. "The potential regulation of greenhouse gases under any portion of the Clean Air Act could result in an unprecedented expansion of EPA authority that would have a profound effect on virtually every sector of the economy and touch every household in the land."

He said he would accept comments on the proposed EPA regulations in response to the court order, but stressed repeatedly that it was the wrong approach because of the costs.

The document also includes a sharply revised version of a May draft by EPA staff members in which they concluded as much as $2 trillion in savings to consumers at the gas pump could be achieved if greenhouse gas regulations were implemented. That number was slashed to $830 billion, and the price of gas was calculated at $2 a gallon for the next 30 years. EPA press secretary Jonathan Schradar said he did not know why the numbers had been changed, but said extensive review of the earlier draft had been performed by agency staff members.

Today's announcement once again effectively eliminates any likelihood of the Bush administration regulating greenhouse gases.

-- Janet Wilson

Tuesday, July 1, 2008

Scribe Fire

This is my first post with ScribeFire. It's a blog editing addon for FireFox. Looks interesting.

Wednesday, June 18, 2008

Boeing Wins Protest of Northrop Aerial-Tanker Award

June 18 (Bloomberg) -- Boeing Co. deserves another chance to bid on the $35 billion U.S. Air Force aerial-tanker contract won by rival Northrop Grumman Corp., a government agency said.

``Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman,'' the U.S. Government Accountability Office announced today in Washington. ``We therefore sustained Boeing's protest.''

Boeing appealed to the GAO after Northrop and partner European Aeronautic, Defence & Space Co. won the contract Feb. 29, snaring a program that had been Boeing's for more than half a century. Boeing claimed changes the Air Force made during the competition favored Northrop. The selection of Northrop was undermined June 12 when both companies confirmed the Air Force miscalculated operating costs of the competing aircraft.

``While the variance in costs is trivial, it points to a broader erosion in the government's rationale for picking the Northrop-EADS plane,'' Loren Thompson, an analyst at Lexington Institute, an Arlington, Virginia-based public policy research group, said in an e-mail before the announcement. ``The outcome of the competition was fairly close, as Boeing has argued in its filings, rather than a decisive win for the Northrop-EADS team as the Air Force asserts.''

Boeing shares have declined 11 percent since the decision, compared with a 12 percent drop in Northrop. Boeing rose $1.08 to $75.46 at 1:22 p.m. in New York Stock Exchange trading, while Northrop fell 33 cents to $70.76.

Air Force Response

Boeing beat the odds in winning support from the GAO, the investigative arm of Congress that sustains only one in four protests. Winning the protest also helps Boeing keep its main commercial-aircraft rival, EADS' unit Airbus SAS, from a getting a foothold in the U.S. defense industry. Airbus took the No. 1 commercial-plane position away from Boeing in 2003.

GAO rulings are advisory. While the Air Force isn't required to follow the agency's recommendation, the service has to explain to Congress if it chooses to ignore the advice.

The Air Force must now respond within 60 days with a course of action based on the GAO findings, adding to a four-year delay in the program that the service says is needed to replace a fleet of airborne tankers in use since 1956.

Replacing Fleet

Efforts to begin replacing the fleet of more than 500 tankers have been held up since 2004, when a plan to lease and buy 100 aircraft from Boeing collapsed amid ethical violations by an executive and an Air Force official that sent both to jail.

Alabama Governor Bob Riley was in an editorial board meeting at Bloomberg headquarters in New York when he learned of the news, which will create further delay in Northrop's plans to build the tankers in his state and create at least 1,500 jobs.

``Oh, God, that's not good,'' said Riley, a Republican serving his second term. Earlier, he said it would take ``an absolute nutcase'' to prefer the Boeing bid over Northrop's.

The GAO decision doesn't imply that Boeing now has an easy road to reversing the original award and capturing the work for itself, said Jim McAleese of McAleese & Associates, a government contracting and national-security law firm in McLean, Virginia.

``To be successful in any potential re-competition, Boeing must demonstrate that it is either technically superior at a reasonable cost/price-premium, or that it is significantly lowest-evaluated-cost,'' McAleese said in an e-mail before the announcement. He wasn't involved in the protest.

Tuesday, June 10, 2008

Bernanke's Rate Spike Poker Face

By Maurna Desmond

(Forbes) Investors and economists placed their bets Tuesday, some with investments and some with pens, on whether Federal Reserve Chairman Ben Bernanke will make good on his tough inflation talk and spike U.S. fed funds interest rates.

Late Monday, the Fed chief said that the likelihood of a significant American economic downturn had diminished substantially in recent months. He expressed concern, however, about inflationary pressures in the United States. His statements implied the Federal Reserve is more worried about stemming inflation, perhaps by raising interest rates, than stimulating a not-quite-so-weak economy.

While many on Wall Street jumped at the prospect of a rate hike, some aren't buying that the Fed will increase interest rates again. Morgan Stanley's Global head of interest rate strategy said Monday that he thinks it is "unlikely" the Fed will raise rates until mid-2009. He added that U.S. two-year treasury bonds are undervalued due to Fed interest rate hike fears. The economist added that he views the U.S. as "lingering below-trend growth" and not a prolonged recession according to
Treasury bonds were hit hard by the Fed chairman's statement, with interest rates apparently rising both because of the outlook that the Fed might begin to undo its easy-money policy of the past year and because of the inflation threat. The yield on the 10-year Treasury note, a benchmark for the world's capital markets, rose to 4.10% from 3.99% late Monday. As inflation rises, investors demand higher returns on bonds since the purchasing power of the money invested will be eroded. The 10-year yield ended the first quarter of this year at 3.43% as fears of financial collapse had investors running for the perceived safe haven of the U.S. government market.

The dollar benefited from the idea that the Fed might raise short-term rates. While the greenback gained to 107.20 yen from 106.30 late on Monday, the euro fell to $1.547 from $1.563 and the British pound slipped to $1.9548 from $1.9733.

Boston Fed President Eric Rosengren echoed Bernanke's concerns Monday saying that rising food and energy costs are impacting the economy from the top down, complicating the outlook for inflation. Dallas Fed President Richard Fisher warned that gradualism was still a watchword for the central bank, even though it had acted very aggressively in lowering interest rates to combat the fallout of the subprime mortgage crisis last year.

Not everyone believes that inflation is the greatest threat to the U.S. economy, but rather the burgeoning U.S. trade deficit which hit $60.9 billion in April, up from $56.5 billion in March. April's gap was substantially larger than the $59.5 billion economists had expected.

"The trade deficit heightens the risk of recession and surging unemployment," said Peter Morici, a professor at the University of Maryland School of Business and Forbes columnist. "Ben Bernanke’s recent comments about oil driven inflation only serve to distract attention from these issues and aggravate risks."

Morici argued that money spent on foreign oil, China's lopsided trade relationship that is propped up by a devalued yuan, and a few other key deficit components pose a growing threat to the financial health of the United States.

Thursday, June 5, 2008

Natus Medical cuts full-year profit expectations

NEW YORK (Associated Press) - Natus Medical Inc., a provider of medical devices for newborn care, said Thursday it lowered its 2008 full-year profit projection as a result of an acquisition and two stock offerings. Natus now expects full-year profit between 68 cents and 70 cents per share on revenue between $163 million and $164 million. Previously, the company projected per-share profit between 70 cents and 72 cents and revenue between $161 million and $162 million. Analysts surveyed by Thomson Financial expect full-year profit of 69 cents on revenue of $161.7 million. The company reaffirmed its second-quarter earnings projection of between 14 cents and 15 cents per share. Analysts expect earnings of 14 cents per share. For the second quarter, the company now expects revenue of $38.3 million to $39.3 million. It had previously said it expected revenue of $38 million to $39 million. Analysts expect revenue of $39 million. In May, Natus completed its $9 million acquisition of privately held Sonamed Corp., which makes products to test for hearing loss in newborns. Natus also completed a public offering of 4.6 million shares in May, bringing in proceeds of $84.3 million before expenses. In April, the company closed a 885,500 share offering, raising $15.4 million.

Monday, June 2, 2008

Major Music Distributor Handleman Exits Music Business

Major music distributor Handleman Corp. announced Monday (June 2) that it is exiting the music business. The Wal-Mart chain has been Handleman's biggest CD customer. Handleman president/CEO Albert A. Koch said, "CD music sales have been declining at double-digit rates for several years, both industry wide and at our customers' stores, resulting in a sharp drop-off in our business. Unfortunately, even the significant steps we've taken over the past two years to reduce our costs have not enabled the company to return to profitability." The Troy, Mich.-based company will lay off 260 workers. Its inventory and other assets will be sold to Anderson, based in Amarillo, Tex. Handleman said it will continue to operate its other units, including video game maker Crave Entertainment.

Analysts see JPMorgan Chase as suitor for Wachovia

by Katy Finger

(The Business Journal of Milwaukee)Wall Street analysts say the ouster of Ken Thompson as Wachovia Corp. chief executive could lead to a sale of the bank, with JPMorgan Chase & Co., which has a large Milwaukee-area presence, identified as the most likely buyer.

Even without such a sale, Charlotte, N.C.-based Wachovia (NYSE: WB), which has no Wisconsin bank branches, is facing a period of significant change that some analysts view as a chance to improve the bank's earnings but others expect will mean more weakness and uncertainty.

"Under Ken Thompson's leadership, he took a defeated First Union franchise and transformed it into one of the premier retail banks in the country and significantly improved profitability," wrote Citigroup Global Markets Inc. analyst Keith Horowitz in a research note Monday. "Unfortunately, his legacy will more likely be defined by the ill-timed Golden West acquisition, which left Wachovia very exposed to the mortgage crisis."

Wachovia has been hit by a string of bad news in recent months, but the company's financial woes have revolved largely around its massive exposure to the declining mortgage market, a byproduct of its 2006 acquisition of Golden West Financial Corp., a California thrift that specialized in nontraditional, option-adjustable-rate mortgage loans. The deal put Wachovia in California and other Western states, but the bank bought the thrift at the peak of the mortgage market and has become swamped with defaulting mortgage loans.

Thompson has since conceded the acquisition was poorly timed.

The bank also recently cut its dividend to 37.5 cents per share from 64 cents per share while raising $8 billion in new common and preferred stock, which diluted the value of existing shareholders' stock.

Several analysts think a sale to New York City-based JPMorgan (NYSE: JPM) may be likely. JPMorgan Chase entered the Milwaukee market with its 2004 purchase of Bank One of Chicago. Chase is now the third-largest bank in the Milwaukee area based on local deposits.

"JPMorgan would be regarded as the most likely buyer," wrote Edward Najarian, research analyst at Merrill Lynch & Co. Inc., in a research note Monday. He points out that JPMorgan's CEO, James Dimon, has said he would like to expand JPMorgan's branch network in the Southeast. "He would also likely find Wachovia's over 14,000 retail brokers an attractive asset," he wrote.

Deutsche Bank analysts also say Wachovia offers what JPMorgan wants. "JPMorgan has indicated at times that it would be interested in franchises that include a combination of California, Texas, Florida and brokerage," analysts Mike Mayo and Chris Spahr wrote Monday, "and Wachovia contains all of these."

However, after JPMorgan, "potential buyers dwindle materially," Merrill Lynch's Najarian wrote. Charlotte, N.C.-based Bank of America Corp. (NYSE: BAC) is an unlikely suitor because of antitrust issues, he wrote. And Citigroup Inc. (NYSE:C) doesn't have the capital, he wrote.

Wednesday, May 28, 2008

3-US files WTO case vs EU over technology tariffs

WASHINGTON, May 28 (Reuters) - The United States said on Wednesday it was taking action at the World Trade Organization aimed at overturning tariffs the European Union imposes on computer screens, multifunction printers and TV set-top boxes capable of accessing the Internet. U.S. technology heavyweights such as Hewlett Packard Co have argued that EU tariffs on the products violate the spirit and the letter of the WTO's 1997 Information Technology Agreement (ITA), which axed tariffs on a range of high-tech goods to boost trade. "The EU should be working with the United States to promote new technologies, not finding protectionist gimmicks to apply new duties to these products," said U.S. Trade Representative Susan Schwab.

"We urge the EU to eliminate permanently the new duties and to cease manipulating tariffs to discourage technological innovation," Schwab said at a news conference to announce the United States had requested formal dispute settlement talks with the European Union on the issue. Japan is joining the dispute on the side of the United States, Schwab said. As the three products have evolved, EU customs officials have decided they are no longer covered by the pact and hit them with tariffs of up to 14 percent. Global exports of the three products are estimated to be worth more than $70 billion, Schwab's office said. The European Commission said it "strongly rejected" the arguments of the United States and accused Washington of refusing to heed its calls for negotiated changes in the products covered by the ITA deal.

"The ITA has a review clause which can be invoked by members at any time. The EU has said it is willing to negotiate with all other ITA members. The U.S. is not willing to do this. Why not?" the Commission said in a statement. Schwab told reporters the EU position would render the Information Technology Agreement meaningless over time because it would cover fewer and fewer products.

"If ITA participants only provided duty-free treatment to products with the technology that existed at the time the ITA was concluded, very few ITA products would be eligible for duty-free treatment today," she said. "That is not what ITA participants intended when this landmark sectoral agreement was reached more than 10 years ago," Schwab said, adding the United States did not want to "pay twice" for trade concessions it believes the EU is already obligated to honor. Most of the products at issue are manufactured in countries such as China and Malaysia but are based on U.S. design and engineering and sold under U.S. brand names.

Tuesday, May 27, 2008

Laveranues Picks

I thought I would start shedding light on a few securities that I find promising. I'll try to do this about once a week. One stock that's on my radar is Chicago Bridge & Iron Co (CBI). Chicago Bridge is a dutch company who is a supplier and construction engineering company for oil and gas. This should be a great way to cash in on rising oil prices. I've set my price target at $60.

Thursday, May 22, 2008

Ford: Fewer trucks, more losses

By Chris Isidore, senior writer

NEW YORK ( - Ford Motor Co. cited record-high gas prices in announcing Thursday that it will cut production of pickups and SUVs and likely miss its long-held goal of returning its core North American auto unit to profitability next year. The company said it now hopes to break even companywide next year as overseas profits balance out losses at home. It also announced it would slash production of pickups and SUVs due to changing consumer demand.

"We saw a real change in the industry demand in pickups and SUV in the first two weeks of May," said Ford Chief Executive Alan Mulally. "It seems to us we reached a tipping point." Ford now believes that the change in vehicle choice is structural, not cyclical, Mulally said. Mulally said the company in July will detail longer-term changes, including personnel reductions. Ford had already offered buyouts and early retirement to all of its U.S. hourly employees. Ford (F, Fortune 500) said it will ramp up production of some other models such as cars and so called crossovers, a vehicle designed to bring a more car-like ride to SUVs. But the cuts in its pickup and SUV output will be greater than its increased car production. Ford trimmed an additional 20,000 vehicles, or 3%, from its North American plans, for the second quarter, putting its target at 690,000 vehicles. That will leave output down 15% from year-ago levels. The company said it now plans to produce between 510,000 and 540,000 units in the third quarter, down 15-20% from the same period last year, while the fourth-quarter production target is now between 590,000 and 630,000 units, down 2-8% from year-earlier levels. The shift is bad news for the nation's No. 3 automaker, which has lost money on its North American auto operations since 2005. The smaller cars for which it will ramp up production - Ford Focus, Fusion, Edge and Escape, the Mercury Milan and Mariner, as well as the Lincoln MKZ and Lincoln MKX - generally have lower prices and profit margins than the light truck models for which it is cutting production, such as the F-Series pickup, still the nation's best selling vehicle.

Also since the car models cannot be built on the same assembly lines where the pickups and SUV are built, the decreased production will mean more idled plants. Ford will have to pay employees who are not working while it increases the hours for those at car plants. Ford said it plans further manufacturing capacity realignments and additional cost reductions as part of its turnaround plan. Also Thursday Ford said it was not taking a position on a previously-announced proposal by investor Kirk Kerkorian to buy an increased stake in Ford.

Wednesday, May 21, 2008

Microsoft Creates Unified Ad Brand, Expands Mobile Offerings

ClickZ News) Microsoft SVP Brian McAndrews yesterday unveiled new mobile ad sales initiatives along with a new brand to house all the company's offerings to marketers: Microsoft Advertising.

The company is also planning to roll out a program to offer searchers cash back on the purchase of products discovered through its search interface. The move is partly an attempt to capture search share from Google, a more urgent goal in the wake of Microsoft's aborted bid to acquire Yahoo.

Speaking at the company's Advance08 advertising summit on its Redmond campus, McAndrews said the new brand will offer a "one stop shopping" experience for advertisers. The move is a baby step toward integrating the company's many free-floating ad units, including aQuantive's Avenue A/Razorfish, Atlas, and DrivePM brands; the AdECN exchange; and its own Search, MSN Network and MSN Ad Direct Response units.

To an extent, the brand consolidation is superficial. Internally those brands will continue to reside separately within the Advertiser and Publisher Solutions group, while Microsoft will use the Microsoft Advertising brand in its external business. "It's designed to let customers know that we're committed to making sense out of a complex environment, and that we have everything they need, all under one roof," McAndrews said in a statement.

McAndrews also touched on enhancements to the company's new Windows Live for Mobile environment, including the availability of display advertising on Windows Live Hotmail and Messenger for mobile in four markets: the U.S., U.K., France, and Spain. Microsoft claims 25 million people in the U.S. access Windows Live Hotmail and Windows Live Messenger on their mobile phones.

Microsoft also announced plans to offer mobile search advertisements on Live Search Mobile, currently in beta in the U.S. but scheduled for wider release in the second half of 2008. Advertisers will be able to create keyword campaigns through adCenter targeting users of Live Search Mobile.

More information is available at the Microsoft Advertising Web site.

In his presentation to some 400 advertisers, marketers, and industry professionals, McAndrews also discussed the signing of nearly 100 new publishers to the Microsoft platform, and key recent acquisitions such as those of Rapt, AdECN, and YaData, and the launch of Engagement Mapping, now in beta. Microsoft touts Engagement Mapping as a superior way to measure and optimize digital media spending, allowing advertisers to assign a share of conversions to non-search "touch points" and to assign them weight according to frequency, recency, ad size, and day part. McAndrews claimed the average user sees an average of 17 ads before clicking on one, but only the last one typically gets credit.

Advance08 will continue through tomorrow, with Live Search announcements due from SVP Satya Nadella, and an appearance by Bill Gates.

Tuesday, May 20, 2008

Wall Street Brokerages Look To Shed Light on Dark Pools (Wall Street Journal)


Goldman Sachs Group Inc., Morgan Stanley and UBS AG announced a series of deals that will allow their clients to share access to all three firms' pools of non-displayed liquidity as they try to address the growing complexity of market fragmentation amid so-called dark pools. The moves come as dark pools -- the secretive electronic trading networks that match buyers and sellers anonymously -- are booming in popularity as big institutional investors look for ways to trade blocks of stock without triggering ripples in the share price, as can happen on traditional stock markets such as the NYSE and Nasdaq Stock Market. But all that darkness is causing nightmares on Wall Street because there are now so many that using them is increasingly frustrating and time-consuming. The deals announced Tuesday allow algorithmic-trading orders of each firm to interact with the U.S. equity liquidity found in three of the nation's largest broker-dealer-operated dark pools -- Goldman Sachs' SIGMA X, Morgan Stanley's MS POOL and UBS' PIN ATS. Forty-two such U.S. trading networks now are competing for orders, up from seven dark pools five years ago, according to Tabb Group, a Westborough, Mass., research firm. Large brokerage firms, trading boutiques and even stock exchanges have designed systems that allow shares to be bought and sold out of the sight of prying eyes. "We're confident that providing our respective clients access to each other's liquidity will achieve even better crossing results for our clients in an increasingly fragmented market," said Greg Tusar, managing director of electronic trading for Goldman.

Monday, May 19, 2008

BCE shares fall on report saying buyout in trouble

BUSINESS WEEK - Shares of BCE Inc., the parent of Bell Canada, declined Monday following reports that its proposed $52 billion takeover by an investor group led by the Ontario Teachers' Pension Plan was in trouble. Citing unnamed people on both sides of the deal, the New York Times reported Monday that the banks that have committed to finance the deal wanted to re-negotiate the lending terms. Bill Fox, a spokesman for BCE, wouldn't comment on whether the banks are trying to re-negotiate the terms, but he said the company still expects the deal to close before the end of the second quarter.

"We have an agreement," Fox said. "I'm not going to comment on any aspect of the work being done to close the transaction. We're working to close on the basis of the terms set out in the agreement."

BCE's is not the first private equity deal to be affected by the credit crunch. Earlier this month, Clear Channel Communications Inc. agreed to take a lower price and slightly higher interest rates to settle a dispute with its lenders and allow its buyout to proceed. The BCE offer, valued at about $52 billion, includes debt, preferred equity and minority interests. According to the New York Times report, the banks backing the deal sent revised terms to the investor group, and these terms included higher interest rates, tighter loan restrictions and stronger protections for banks. The negotiations surrounding the deal, the report said, started to fray late Friday. Citigroup spokeswoman Danielle Romero-Apsilos declined to comment, saying it's too early to discuss what took place over the weekend regarding the BCE deal. Deborah Allen, a spokeswoman with Ontario Teachers Pension Fund, said they can't comment on discussions with the banks or BCE but said "we expect everyone will honor their commitments and we look forward to closing the transaction." Shares of BCE fell $2.02, or 5.2 percent, to $36.79 in afternoon trading. In the past 52 weeks, the stock has traded between $32.94 and $44.59.