Prominent GOP Donors Charged With Enormous Fraud

Rachel Ensign — Fri, 30 Jul 2010 09:28:23 +0000

The SEC claims that Sam and Charles Wyly, a pair of Texan brothers who are faithful GOP contributors, have turned a profit of more than $550 million through illegal stock trades, the Washington Post reports. The SEC charged the brothers with fraud Thursday, alleging that they used overseas accounts based in the Isle of Man and the Cayman Islands to trade large amounts of stock of four public companies where they served on the board. The Post excerpts the SEC report that claims the elderly Wyly brothers spent the proceeds from their offshore stock sales on art, jewelry, real estate, and charitable contributions that include a building in Sam Wyly’s name on the University of Michigan’s campus.

Barack Obama, General Motors' majority stockholder, will tour one of the company's plants today, the New York Times reports. He will examine the brand new electric Chevy Volt and try to draw attention to the success of his auto-industry bailout. His administration claims that the bailout saved hundreds of thousands of jobs and will eventually make money for taxpayers. Things are looking up for G.M.—it posted a profit in the first quarter and has been adding shifts at their plants to keep up with demand. Still, Obama and the Democrats will face the political consequences of the bailout in the upcoming midterm elections.

Li Lu, a student leader of the Tiananmen Square protests, is a likely successor to Warren Buffett at Berkshire Hathaway, reports the Wall Street Journal. The 79 year-old Buffett has said that the company’s leadership will be divided between a CEO and an executive who handles investment once he steps down. When asked if Li would fill the role of leading the company’s investments, Berkshire’s vice chairman said, "In my mind, it's a foregone conclusion." Mr. Li is 44 years old and spent his childhood in Chinese foster homes after his parents were sent to labor camps during the Cultural Revolution. He helped organize the Tiananmen Square protests and participated in a hunger strike during the 1989 event. Li is now a hedge fund manager and was an integral part of Berkshire’s investment in BYD, a prospering lithium battery company based in China.

Senate Republicans blocked a bill that would increase lending to small businesses yesterday, reports Reuters. Democrats say that the $30 billion plan would make loans for small businesses less difficult to come by and give them billions in tax breaks. Republicans object to the large amount of federal spending in the bill; "While I support the bill's tax incentives for America's job-creating small businesses, I can't support creating yet another lending fund that turns the Treasury Department into our national bank," said one GOP Senator. Despite the minority party’s loud objections, the bill could pass next week after further negotiations. Obama has been pushing hard for the plan, which has already passed in the House.

In the latest in recall news, MiceDirect, a Georgia-based company that sells frozen mice over the Internet, is the source of hundreds of salmonella outbreaks in the U.S. and Great Britain, reports the New York Times. Health officials found the same strain of salmonella in people who regularly fed the company’s frozen mice to their reptiles and prompted the company to recall millions of its deceased products this week. The recall also covers the company’s frozen rats and chickens. MiceDirect doesn’t seem to be doing much in the way of making the recall anything more than a formality though, “The company’s recall notice was not prominently posted on its Web site until Thursday. And neither the company’s site nor the FDA’s site gave clear instructions on what to do with mice that customers still had.” One man who recently bought 10,500 frozen mice from the company was unaware of the recall until a reporter called him.

Banks Are Convincing Customers To Opt In to Overdraft Fees

Laura Mortkowitz — Thu, 29 Jul 2010 10:31:19 +0000

Banks are relying on outside companies to pinpoint the customers who are most likely to overdraw from accounts, reports the Wall Street Journal. The Federal Reserve’s new overdraft rules state that customers have to “sign up for a bank's overdraft program before the bank can charge the customer for overdrawing the account.” Under the new rules, then banks will have to reject overdrawn charges for customers instead of just charging a fee. Banks made more than $37 billion from overdraft fees last year, so they are now scrambling to convince customers to sign up. With the help of technology and marketing companies, banks are trying to pinpoint those “most likely to incur the hefty fees” before the rules take effect on Aug. 15. Those frequent overdraft users are very important to banks because fewer than one-quarter of bank customers generate 75 percent of overdraft fees.

The state of California’s finances are now bad enough that Gov. Arnold Schwarzenegger declared a state of emergency. According to Reuters, the state’s budget is a month overdue, and it’s facing a $19 billion shortfall. Last year, Schwarzenegger signed a $85 billion general fund budget, but California’s revenue has dropped off so steeply that the deficit is almost a quarter of the budget. The governor has been scrounging up money where he can, like his newest order that all state employees take off three days without pay every month. While California isn’t the only big state overdue with its budget—New York is as well—a further delay “threatens to lower the state's already weak credit rating,” which is barely above junk.

The new Consumer Financial Protection Bureau doesn’t have a director just yet, but Elizabeth Warren might be a little closer to snagging the position after some compliments from two Republicans, reports the Washington Post. The Harvard law professor is chair of the Congressional Oversight Panel, and two Republicans on the panel wrote a statement about how professional she is to work with. While the two men were concerned criticisms of her “might hinder her chances as a candidate to direct the new consumer bureau,” they were also quick to point out they were not endorsing her and that they do oppose the creation of the regulator.

In case anyone had doubts, the Fed’s beige book confirmed that the recovery began slowing down in June, reports the Wall Street Journal. Some parts of the country are seeing improved job market conditions, while the housing market remained weak all around and all 12 districts reported increased tourism. Unsurprisingly, the district that covers most of the Gulf states “noted concerns about lower leisure travel to the Gulf Coast.” The beige book will be used “at the U.S. central bank's next policy-setting meeting Aug. 10.”

Reception troubles made a lot of customers unhappy with Apple (AAPL), but the company tried to smooth it over by giving out free cases to help with the troubles. Now the companies that make cases for the iPhone are unhappy, according to the Los Angeles Times. By giving away cases, there will be less of a demand for those made by third-party suppliers. While the giveaway may cost Apple $175 million, it will also be costly for other companies unless they successfully make and market “more fully featured cases to differentiate their products from Apple's Bumpers.”

Finally, Novartis (NVS) knows how to take unhappy customers and turn them to the drug company’s advantage, reports the New York Times. When competitor Johnson & Johnson (JNJ) had to recall “an estimated 136 million bottles of liquid children’s Tylenol,” Novartis devised a campaign to “woo” customers. From Aug. 2 to Aug. 8, the company “plans to give away up to 250,000 bottles of its new liquid children’s medicine, Triaminic Fever Reducer Pain Reliever,” through rebates. This marketing program, which is taking advantage of the void in the market from Johnson & Johnson’s recall, is expected to cost Novartis roughly $1.5 million.

BP Isn’t Sure How To Clean House

Kelly Faircloth — Wed, 28 Jul 2010 10:50:12 +0000

With the oil well finally capped, BP (BP) turns to assessing the damage and plotting its next move. The Wall Street Journal reports the company just posted a $17.5 billion loss and replaced its CEO, and worried investors want to see some sort of recovery strategy. BP plans $30 billion in asset sales to cover the costs of the cleanup, but the sell-off is quickly turning into a kind of repositioning. The company is unloading oil fields in places like Alaska, Colombia, and Venezuela, shifting focus to faster-growing, more lucrative spots like deep Gulf waters and offshore elsewhere. But the new CEO, Robert Dudley, has been at BP for over a decade, and many worry he won’t force through the overhaul BP desperately needs. One investor says, "as an insider, one wonders if he has the appetite to push for radical change at BP."

The Chevy Volt will be quite a bit pricer than its similarly-sized competitors, the Washington Post reports. The car will cost $41,000, considerably more than even the electric Nissan Leaf, which will hit the market at $32,780. Both companies are factoring in a $7,500 tax credit, but they’re also hoping the appeal of a completely electric model will be enough to sway customers. But analysts are more skeptical, pointing out it took almost eight years to sell 1 million hybrids in the United States. One forecaster doubts the Volt will sell in high volumes, explaining, "The technology still isn't there to make them cheap. At the end of the day, the consumer pays a hefty premium to make a statement."

With wind farms expanding rapidly across the country, electricity companies are scrambling to find a way to store excess energy, the New York Times reports. The instability of wind power is a big problem. Farms generate energy at off-peak times like nighttime and can flood the electric grid with unexpected power. Meanwhile, several states are trying to meet renewable-energy adoption goals, and the intermittent nature of these alternative power sources makes that difficult. It’s going to require a way to store power generated at off-peak times. There’s just one solution: “You can’t do that without batteries of some sort,” says the spokesman for the Hawaiian Electrical Company.

Lobbyists are descending on Washington, D.C., as various agencies hash out the specifics of new financial regulation. The New York Times reports many of them will be former colleagues of the regulators crafting the new rules. Almost 150 of the lobbyists registered this year used to work at financial agencies, and that’s not even counting the lawyers who’ve left government to work for corporate clients. One former official at the Office of Thrift Supervision, now at a law firm, says, “The government background builds your bona fides. It’s a credential that you flaunt.” Their influence will be crucial to the final shape of financial reform, as agencies have been given sweeping power to create specific rules.

PepsiCo (PEP) is working on a major marketing push for its oatmeal business, the Wall Street Journal says. The company bought Quaker Oats almost 10 years ago for $13.8 billion, but sales have slowed since. That’s partly due to pressure from cheaper brands, but Pepsi says Americans are also just less likely to eat in the morning. So the company is planning a marketing push designed to do two things: Convince people to eat breakfast and to choose Quaker oatmeal. "There is a far longer-term issue we have to deal with, which is to get Americans to eat breakfast, [and then] to make sure it's healthy," says the president of Quaker Foods & Snacks. The company also plans to market more aggressively to younger audiences, with new offerings designed to appeal to kids.

GE (GE) has settled an SEC probe with $23 million, the Financial Times reports. The regulator accused GE of violating the Foreign Corrupt Practices Act, bribing Iraqi officials to win U.N. Oil for Food contracts from 2000-03. Of course, the Oil for Food program was also notoriously corrupt, and GE was far from the only company that might have acted improperly. One probe found more than 2,000 groups paid someone off in exchange for contracts. “We believe that it is in the best interests of GE and its shareholders to resolve this matter now ... and put the matter behind us,” GE says. This settlement follows another for $50 million last year, on charges of accounting fraud related to the company’s hedging business.

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Wed, 28 Jul 2010 10:50:12 +0000

No One Really Knows How To Measure an Online Audience

Laura Mortkowitz — Tue, 27 Jul 2010 11:00:58 +0000

Television has Nielsen, radio relies on Arbitron (ARB) and print depends on the Audit Bureau for Circulations to identify how many people are being reached, but the Internet has three different measurement firms using different systems to gain Web data on online audiences. According to the Los Angeles Times, when one service overhauled its methodology, Hulu’s viewership “shriveled to 24 million in June, from 43.5 million in May.” With ComScore, Nielsen, and Quantcast all taking different angles, advertisers are having trouble gauging a site’s viewership, since “the same site's traffic can look emaciated or bulging.” Without a reliable way to measure the size of online audiences, advertisers are hard-pressed to know where to buy ads. This is such a problem because advertisers are “expected to spend $25.1 billion this year in online advertising in the U.S. alone.” To get more accurate reports, the three firms have been working to make improvements. ComScore’s latest change tracks how many ads a user watches on a single site over a month.

The European Commission is opening two investigations into IBM’s (IBM) mainframe computing business, reports the New York Times. Third-party sellers complained to the commission that, “I.B.M. had illegally tied sales of its mainframe operating system to its mainframe hardware.” The commission also wants to investigate “whether I.B.M. delays the sale of spare parts to third parties, potentially blocking competitors from performing maintenance on its mainframes.” Just a year ago, the European Union investigated Intel (INTC) and fined the company 1.06 billion euros ($1.378 billion) “for abusing its dominance of the chip market.”

The month of May pushed new home sales to a record low, but the numbers rebounded in June for the largest percentage increase in 30 years, according to Reuters. Even though sales increased by 23.6 percent, June still represented the second-lowest month for sales. The Commerce Department does believe, however, that the housing market is “close to working through the distortions following the end of a popular home-buyer tax credit in April.” Right now the number of new houses on the market is at its lowest since 1968.

For four months, Disney (DIS) has been trying to sell Miramax, and right now an investment group has exclusive bidding rights, according to the New York Times. In order for the deal to move forward, the group has to pay a nonrefundable $40 million by Wednesday, otherwise Disney could open the bidding or take the studio completely off the market. The company wants more than $650 million for Miramax. While talks drag on, the studio’s staff has been almost completely cleaned out and Disney still plans to release the few movies on Miramax’s shelf, including a Jennifer Anniston comedy.

The foothills of the Mojave Desert are getting enough turbines to power more than 500,000 homes in Southern California, reports the Los Angeles Times. The project has taken nearly a decade to break ground and will be completed sometime in the next decade, but once completed the turbines “could produce three times as much energy as the country's largest existing wind farm.” The project is being built in groups with the first 290 turbines boosting “California's wind energy output more than 25 percent.” In 2015 a batch of 300 turbines “is expected to be producing an additional 830 megawatts.”

Finally, the man who will replace Tony Hayward as CEO of BP (BP) is American Robert Dudley, reports the Wall Street Journal. Dudley will have to overhaul the company’s U.S. operations and mend fences with the U.S. government. Choosing an American to try to smooth over problems with the government is smart, considering “U.S. operations account for 40 percent of the company's asset base.” Plus, the Deepwater Horizon incident is only the latest in BP’s troubles: In 2005, there was a blast at a Texas refinery, and in 2006, there was an oil spill in Alaska. Meanwhile, Hayward will move to BP’s Russian joint venture, where he will be a “non-executive director.”

Deflation Really Has Economists Worried

Kelly Faircloth — Mon, 26 Jul 2010 10:42:23 +0000

With the White House projecting a $1.47 trillion deficit this year, the debate rages over whether the government should be more concerned about unemployment or inflation. But the Los Angeles Times raises another concern: deflation. In a deflationary scenario, prices drop, profits drop, wages drop, and consumers’ buying power drops, catching the economy in a downward spiral. The pattern cost Japan an entire decade of growth in the '90s. And the numbers suggest cause for concern: Consumer prices have fallen for three months straight, and the core inflationary rate is at a 44-year low of 0.9 percent. Economists have started to worry. "It's a good bet that by some measures we'll be seeing deflation by some time next year," predicts Nobel laureate Paul Krugman. But Fed chair Ben Bernanke dismisses deflation as a short-term risk.

Studios are exerting ever more effort to market their tent-pole releases these days, the New York Times reports, culminating in Disney’s three years priming audiences for Tron: Legacy. DVRs have made movie trailers impossible to rely on as an advertising tactic, so studios are turning to the Internet. The goal is to turn a movie into a must-see event, but that requires starting earlier and working harder to reach the audience. Disney has an even tougher sell with Tron, because the core audience isn’t enough to produce a hit. “We really want to open it up—the message is that this is a film that everyone will find cool and contemporary and relevant,” says Disney’s president for production.

Health care reform is shifting funds from the elderly to younger people, according to the Wall Street Journal. For example, the 11.3 million Americans on public-private Medicare Advantage plans currently receive additional benefits in addition to the basics guaranteed by the government. But the program will be cut 15 percent to help pay for health care reform, so luxuries like gym discounts are disappearing, premiums are rising, and extras like vision and dental coverage are shrinking. The change may be the leading edge of a broader shift, as talk begins of social security reform begins once again. "We badly need to, over time and very gradually, reallocate resources from the elderly to younger families and their children," argues one Brookings Institute fellow.

With European sales slowing, Vespa-maker Piaggio SpA is eyeing growth opportunities in Asia, the Wall Street Journal says. The Italian firm is tinkering with its classic designs to accommodate new customers and their customs, adding features like a footrest for sari-clad Indian woman who prefer to ride side-saddle. Piaggio is investing millions to double its Indian production capacity while expanding its Vietnamese operations and pushing into China. One analyst argues that with its steel body, it’s "too much of a higher-end product" for these markets, but Piaggio is targeting the high-end market and pushing forward, anyway.

BP (BP) CEO Tony Hayward is expected to step down, reports the Washington Post. The board will make the announcement sometime today, and Hayward will leave on Oct. 1. It appears to be a mutual decision, as the lifelong BP employee recognizes he’s become a liability. And it’s not just the oil spill at issue, either. Hayward has failed his attempts to revamp BP itself. On becoming CEO, he tried to revitalize company culture, shrinking the size of his office and encouraging execs to listen more. Despite promises to focus on BP’s serious safety issues, the company wound up with an occasionally ludicrous fixation on personal safety rather than processes. For example, the company once took a report on the human element in safety and turned it into a skit. "It was making light of serious things," says the report’s author.

Google (GOOG) and Microsoft (MSFT) are fighting to sell cloud-based e-mail to the federal government, according to the Journal. They’re competing to serve just one agency, the General Services Administration. But at 15,000 e-mail accounts, that’s a major contract, and the GSA greatly influences technology adoption in other agencies. In a big development for cloud-computing, Google Apps recently received security approval, long a big concern for web-based applications. The chance to sell to the federal government represents a major new front in the two companies' struggle to provide offices with e-mail.

Democrats Want to Eliminate Tax Cuts for Wealthy

Laura Mortkowitz — Sun, 25 Jul 2010 11:58:02 +0000

With Americans still feeling the recession, Democrats are attempting to gather votes in November by eliminating tax cuts for the wealthy, reports the Washington Post. Although raising taxes is never popular, senior Democrats believe it will “expose GOP hypocrisy on budget deficits.” The current tax cuts are due to expire in January, and if they were extended for everyone the national debt would increase $2 trillion in a decade. The plan would extend tax cuts for “families making less than $250,000 a year.” Considering the economic recovery is still shaky, some Democrats worry about raising taxes on small-business owners, many of whom are considered high earners, when “policymakers are trying to encourage them to create jobs.” The two parties need to find some sort of compromise fairly quickly; otherwise all Americans will face higher taxes when the cuts expire in 2011.

The Wall Street Journal explains why it is the stock market has barely reacted to the positive second-quarter earnings reports. Despite the fact that, so far, the majority of companies in the Standard & Poor’s 500-stock index have beat analysts estimates, traders are less interested in the past. Quarterly reports only reflect, they don’t anticipate the future. During the week, rather than focus on the good earnings reports, Wall Street was paying attention to Federal Reserve Chairman Ben Bernanke as he spoke about what the Fed expected in the future. Right now investors are still pessimistic, so that stock market is reacting accordingly.

Hedge fund managers don’t usually make one think of Willy Wonka, but one man in England has almost cornered the chocolate market, reports the New York Times. Anthony Ward now controls enough of worldwide cocoa production to sway prices and he’s already “helped drive cocoa prices on the London market to a 30-year high.” Furthermore, he’s betting $1 billion on cocoa futures, which is causing a controversy because he is creating a shortage and driving up prices. Since 2008, cocoa prices have increased 150 percent and candy makers “may be forced to pay him ever-higher prices” as they prepare for the holiday season.

Another strike in Hollywood could affect the film and television industry when local Teamsters walk when their contract expires Aug.1, according to the Los Angeles Times. However, this latest labor unrest won’t affect the industry as badly as the writer’s strike in 2007 did. The Teamsters represent drivers for studios so a walkout “would not shut down production, but would cause significant disruptions.” The trouble in negotiations centers around pay rates for the 3,000 drivers. The studios are offering a 2 percent increase, but the Teamsters are insisting on 3 percent, which is what the International Alliance of Theatrical Stage Employees got during their negotiations. The last time the Teamsters walked out was in 1988 and it lasted 24 days.

With the housing market continuing to be volatile, people are wondering when the right time to re-enter, according to the Washington Post. Prices have declined since 2006, with just a short climb in mid-2009, before falling again. There’s almost no way to predict whether or not we’ve hit the absolute bottom of the housing market, but some are re-entering anyway based on the low interest rates or the recently expired tax credit. For others, prices have dropped low enough where they can afford to buy a house even if prices drop a little lower afterward. Still, there are plenty of reasons to not become a homeowner again, like cheap rent, tight credit and lingering unemployment.

Finally, the United State’s economic growth has slowed and consumer spending, as always, is partly to blame, reports Bloomberg. In the first quarter gross domestic product rose 2.7 percent, but last quarter that fell to 2.5 percent. Businesses are trying to spur sales since consumer spending also fell last quarter. Spending fell from 3 percent in the first quarter to 2.4 percent. Meanwhile, the economy still lost 125,000 jobs in June, which won’t help consumer confidence.

2011 Will Break New Budget Deficit Record

Sara Behunek — Sat, 24 Jul 2010 10:42:27 +0000

The White house predicts the government will break a new budget deficit record in 2011. According to a report, released Friday, the deficit will reach $1.47 trillion in 2011, $70 billion* more than last year’s record-setting statistic, the Washington Post reports. Nonetheless, Peter Orszag, White House budget director, assured reporters on a conference call that President Obama was still on path to slash the deficit in half by the end of his first term. Facing November elections, Republicans “blasted” the new forecast. "For more than a year and a half, the president and his Democrat allies on Capitol Hill have pushed an anti-business, anti-jobs agenda on the American people while adding trillions to the debt," Senate Minority Leader Mitch McConnell, R-Ky., said in a statement. "It's time for a new approach, one that listens to the American people rather than forcing Washington-based mandates.” Democrats said that the excessive budget was caused by the monetary infusions the government was forced to make as a result of the severe recession."

European bank stress tests revealed that just 91 banks could face $730 billion in potential shortfalls if they were faced with a worse economic and financial environment, the Wall Street Journal reports. Seven institutions flunked the test, needing a collective $4.5 billion in capital to maintain above water in a deteriorating market. Analysts had predicted that a whopping 20 banks would be dubbed “capital deficient” and would need about $40 billion to $115 billion if faced with a tougher environment. The surprisingly upbeat conclusions sparked criticism that the tests weren’t tough enough, but European bank supervisors lauded the findings as proof of the regions financial stability. Investors couldn’t seem to figure out how to react, with “the euro seesaw[ing] in New York trading, eventually gaining ground against the dollar,” according to the WSJ.

BP (BP) is getting ready to drill more than a mile below seal level off the coast of Libya in the Gulf of Sirte, according to the Financial Times. The well will be nearly 660 feet deeper than the well off the coast of Louisiana that spilled billions of barrels of oil into the Gulf of Mexico. Beyond the more obvious concerns that the oil major is going to set up shop so soon after the cap was fixed on the leak in the Gulf of Mexico, the news has taken a more political bent. To secure the $900 million contract in 2007, the company said that it lobbied the U.K. government to transfer Libyan prisoner Abdel Basset al-Megrahi, known as the Lockerbie bomber, to his native country. The prisoner was released last year by Scottish authorities on compassionate grounds. CEO Tony Hayward said he is mulling a request to appear before the U.S. Senate foreign relations committee regarding Basset al-Megrahi.

Pay czar Kenneth Feinberg chastised 17 banks on Friday for dolling out $1.6 billion in excessive compensation to executives amid the turmoil of the financial crisis, the WP writes. Although Feinberg called the payouts “ill-advised,” they did not break the law nor did they “act against the public interest,” according to the paoer. Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM), Morgan Stanley (MS), and Bank of America (BAC) were among the institutions that were called out in the report. “Citigroup, which received $45 billion in bailout help, was the worst offender, handing out $400 million in excess pay, according to a government source close to the investigation,” the WP reports. Feinberg, who was appointed by Obama to investigate compensation at the 419 firms that received bailouts, zeroed in on executives who were paid more than $500,000 during the months from late 2008 to early 2009. Feinberg does not have the authority to force the bank executives to return the cash.

The publisher of such magazine titles as Vanity Fair, Cosmopolitan, and GQ has announced that it will shift from a print ad-based revenue model to a business that relies more on full-price subscriptions, the New York Times says. Since its establishment, the iconic publisher has relied on advertising revenue in its print publications. The transition could cause discomfort as “consumers have grown accustomed to paying so little for Condé Nast’s magazines. A yearlong subscription to the New Yorker, a Condé Nast weekly, can cost as little as $39.95. Glamour’s Web site advertises a two-year subscription for $15 (including a free handbag),” the NYT says. Conde Nast CEO Charles Townsend said he envisions consumers paying one price to have access to information across several platforms, including print, mobile, and Web.

*Correction (July 26, 2010): Because of a math error, this piece originally stated that the 2011 budget deficit could exceed last year's budget deficit by $700,000 instead of $70 billion.

Digital Comics Could Be Savior or Supervillain

Kelly Faircloth — Fri, 23 Jul 2010 10:38:03 +0000

Fans have descended upon San Diego Comic Con, and the L.A. Times reports that, in many cases, they’ve been greeted with fancy demonstrations of comics' new digital editions. The digital-book revolution has reached comic books, and publishers are suddenly releasing digital editions for smart phones, tablets, e-readers, and even game consoles. Their experiments have big implications for the way comics are marketed and sold. But some are wary, concerned that adding bells and whistles like animation will detract from the reading experience. And the new distribution channels could kill comic book stores, long a center of fan culture. But others say this is also a big chance for publishers to attract new readers and experiment with the form. While print sales are flat, "digital sales for us have so far doubled, year over year," says Marvel’s digital media VP.

In a decision that’s raising eyebrows, GM has agreed to pay $3.5 billion to purchase subprime lender AmeriCredit (AFC), the New York Times reports. The automaker hasn’t owned a financing arm since 2007, when it unloaded GMAC Financial Services, and the deal will allow it to sell more cars to customers with lower credit scores. But while the move looks risky, TrueCar.com’s VP for industry trends says lenders have tightened standards to the point they’re ignoring consumers who might have paid a bill late but are otherwise unlikely to default. “If GM can fill in that void, there’s a big potential for return for them,” he says. The company has been looking for ways to regain a bigger share of the North American market.

Trying to stave off the summer sales doldrums, the Washington Post reports many retailers are attempting to hold Black Friday-style sales that’ll draw customers into stores. Target is holding a “Back in Black Friday,” while Toys R Us has signs all over the store featuring Santa in flip-flops. It’s traditionally a slow period, as summer shopping is over but back-to-school hasn’t started, and consumers are losing confidence in the economic recovery. "The recession has forced everyone to be much more creative," says one marketing consultant.

Some good news for the economy: Equipment maker Caterpillar (CAT) almost doubled its profits in the second quarter, the Wall Street Journal reports. The company’s CEO reported they’ve seen improvement almost every month since the year’s start, and profit jumped 91 percent for the quarter thanks to build-up demand. Other manufacturers also posted improved returns and outlooks for the period, and the Fed reported the sector’s activity grew at an annualized rate of 7.9 percent. "For all the hand-wringing about where we are going, a good part of the manufacturing sector is still moving along well," says one analyst.

Wal-Mart (WMT) is introducing a new electronic tagging system to track inventory, reports the Wall Street Journal. For now, the retailer will attach these new smart tags, which can be read with just a hand-held scanner, only to individual pairs of jeans and underwear. That will enable associates to determine what’s on the floor very quickly, right to down to brand and size. That kind of tracking ability could “transform our business,” says the exec for the retailer’s Western U.S. stores. It won’t be cheap, but Wal-Mart plans to roll out the tags for other products if the pilot program goes well. However, that would likely push other stores to adopt the technology, and that creates some serious privacy concerns. “There are a lot of corporate marketers who are interested in tracking people as they walk sales floors,” says one consumer advocate.

The Federal Reserve has a problem with its mortgage securities, the New York Times reports. Its buying program was fairly successful in its mission of supporting the housing market during the financial crisis, but now the Fed has a massive pile of securities that it can’t sell without sucking money out of the weak economy. Holding them is likely going to cost the central bank a good bit of money. And the Fed has no intention of restarting the program to bolster the stuttering recovery. “In my view, any judgment to expand the balance sheet further should be subject to strict scrutiny,” one Fed governor said in a recent speech.

Fed Has Low Hopes for Unemployment Rate

Laura Mortkowitz — Thu, 22 Jul 2010 04:27:38 +0000

Federal Reserve Chairman Ben Bernanke had little good news when he spoke on the economy’s outlook yesterday. According to the New York Times, unemployment, which has remained high at just under 9.7 percent, is expected to still be more than 7 percent by the end of 2012. The Fed considers full employment to be about 5 percent. In 2008 and 2009, the United States lost 8.5 million jobs, and the economy has remained unstable from the European debt crisis. Despite a slight growth of 100,000 jobs a month during the first half of 2010, Bernanke said that it is “insufficient to reduce the unemployment rate materially.” The Fed is also expecting small changes in economic growth.

In the wake of the government’s second moratorium on offshore drilling, four oil companies are banding together to create a rapid-response system in case of another oil spill in the Gulf of Mexico, according to the Wall Street Journal. Exxon Mobile (XOM), Chevron (CVX), Royal Dutch Shell (RDS), and ConocoPhillips (COP) will spend a combined $1 billion on the system, which would “contain up to 100,000 barrels of oil a day flowing 10,000 feet below the surface of the sea.” The system would be available for use by other companies drilling in the Gulf, although it will take a year and a half to be put into place. Overall, the system will be similar to what BP (BP) has relied on for the last three months, with “several oil-collection ships and an array of subsurface containment equipment.” In the event of a spill, crews would mobilize within 24 hours to install a cap that would redirect oil to pipes connected to ships. BP wasn’t invited to join because the group felt the company had enough to deal with right now, but “ultimately the four companies would like the rest of the industry to join in the effort.”

In the past six months the administration has tackled health care and financial reform, and now President Obama is eyeing the housing market, reports the Washington Post. Perhaps the largest concern with the financial regulation that Obama just signed into law was that it didn’t get at the root of the problem, of what really caused the financial crisis. Now, the administration wants to address that issue with “an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations.” The new financial reform bill requires Obama’s administration to have a housing reform proposal that includes “restructuring or replacing Fannie [Mae] and Freddie [Mac]” by early 2011. The government is aiming at “fewer homeowners overall” by placing “more barriers to lower-income people buying houses.” However, the changes would bring about a more stable market.

While Google (GOOG) ran into censorship problems with the Chinese government, rival Baidu (BIDU) reaped the rewards, according to Bloomberg. Already China’s most popular search engine, Baidu beat estimates with a strong second quarter. The company’s net income more than doubled to $123.6 million or 837.4 million yuan. Baidu gained new advertisers when Google had to shut its China-based site because of censorship rules. During the second quarter, Baidu gained another 3 percent of China’s search-engine market, bringing it to 70.8 percent; meanwhile, Google’s market share dropped from 29.5 percent to 27.3 percent.

Finally, although growth in the United States is slow, Credit Suisse (CS) believes there is “zero chance” there will be a double-dip, reports Bloomberg. However, what the financial group does predict is that the United States will be affected by this past recession for many years to come. As a result of the crisis, “U.S. contractions will be more frequent and severe.” The rebound from this recession has been very weak, which has made the economic slowdown seem even worse. Still, recent “gains in business investment on equipment and software” are helping the United States “avoid a renewed recession."

BP Loves Deep-Water Wells More Than Ever

Kelly Faircloth — Wed, 21 Jul 2010 10:38:50 +0000

BP’s (BP) plans for the future include more deep wells than ever before, reports the New York Times. The company announced just yesterday it would sell $7 billion worth of land-based assets to the Apache Corp., including oil and gas fields from Texas to Egypt. Of course, that deal has more to do with the $20 billion escrow fund BP must establish for payments to those affected by the spill. But the company had a choice, and it chose to unload those assets, rather than riskier deep-sea wells. “The Gulf of Mexico, West Africa, Brazil, Egypt—these offshore areas are where you have significant deposits, and this is what BP will continue to go after,” says one energy strategist.

The housing market has slowed to a crawl once again, the Wall Street Journal reports. Homes aren’t selling, so inventory is piling up on the market, which will drive prices down in the long run. A big home-buyers’ tax credit expired in April, leaving people with one less reason to purchase instead of rent. But the loss of that credit has affected the market more than expected, says Fannie Mae’s chief economist: "The drop-off in activity has surpassed expectations.'' With demand so depressed, it’s no surprise that construction on new homes has slowed as well. Starts fell 0.7 percent in June to a seasonally adjusted annual rate of 454,000, and future construction looks even slower, with permits falling 3 percent in June. Compare that with 1.47 million housing starts in 2006, the height of the bubble.

The Senate has voted to advance a measure extending benefits for the unemployed, making it almost certain to pass, reports the Washington Post. More than 2.5 million people stopped getting unemployment checks June 2, when the program expired. The bill would reactivate those benefits, while making up to 99 weeks of aid available to the unemployed through the end of November. However, it stalled in the Senate for months, a victim of increasingly rancorous debates over deficit spending. Republicans claim it would add $34 billion to the deficit, which minority leader Mitch McConnell calls “completely out of control,” and they didn’t want to back the bill unless it used unspent stimulus money.

Wal-Mart (WMT) may have a costly lawsuit on its hands, reports the Wall Street Journal. A class-action lawsuit in Colorado alleges the retailer sent employees injured on the job to a subsidiary clinic, Concentra Inc., making it easier to control costs or even limit care. It’s actually illegal in Colorado for an employer to control where employees get treated for an on-the-job injury, and the state is accusing Wal-Mart, Concentra, and insurer American Home Assurance Co. of conspiring to violate that law. The defendants all deny the accusations, and a Wal-Mart spokesperson simply says, "we want our associates to get the best treatment and care."

Despite the antenna kerfluffle, the the New York Times reports Apple’s (AAPL) profits shot up 78 percent last quarter. Sales of the iPad, iPhone, and Mac computers were strong, as Apple outperforms competitors in the computer, phone, and tablet markets. The company can’t even produce enough iPads and iPhones to match consumer demand, so sales could be even higher. As it stands, Apple sold almost 3.3 million iPads in the last quarter, for $2.1 billion in revenue, and 8.4 million iPhones, for $5.3 billion in revenue. And Mac sales hit a new high of 3.47 million for the quarter, relieving fears that tablet sales would “cannibalize” computer sales. One analyst attributes the skyrocketing sales figures to the importance of computing in people’s lives: “People realize that and are willing to pay up for it, and Apple is capitalizing on that.”

Florida’s tourism industry is reeling from the impact of the oil spill, reports the Los Angeles Times—and it’s largely a matter of perception. Visitors don’t want to risk taking a trip that might be ruined by beaches coated in crude. Tourism has dropped 25 percent in oil-free Franklin County, located on the panhandle. Hotels in Key West expected a better summer, thanks to an improved economy, but bookings are flat. "We have not been physically impacted by the first tar ball or drop of oil," says a spokesman for the Keys’ tourism council, adding, "But we have certainly been impacted by an economic standpoint."

Amazon Isn’t (Too) Concerned About the iPad

Laura Mortkowitz — Tue, 20 Jul 2010 10:59:19 +0000

Despite Amazon’s confidence, sales of Apple’s (AAPL) iPad in its first two months aren’t much less than the amount of Kindles Amazon (AMZN) is expected to sell for the whole year, according to the Washington Post. Perhaps that's why Amazon decided to squash those pesky rumors that the iPad “has crimped Kindle demand.” The company released growth figures about the Kindle for the first time since 2007, announcing that Kindle sales have tripled since its price was cut by 27 percent. The fact that Amazon is now selling “more than triple the number of Kindle books in the first half of the year as it did in the comparable period last year” means the Internet retailer is selling more electronic books than hardcover books.

Right now, the measure in Senate that would extend unemployment benefits for those who haven’t had a job for six months is about more than the legislation, reports the New York Times. With midterm elections fast approaching, both parties are using this issue “to motivate its own base.” The proposal would add billions more to the country’s deficit, and Republicans are jumping on the chance to point out yet another way “the government’s response to the recession has been wasteful and ineffective.” The Democrats, on the other hand, are continuing their stance that Republicans are obstructionist and don’t understand the troubles Americans are facing right now. In order to avoid a filibuster, the Democrats are relying on Maine’s Republican senators, Susan Collins and Olympia Snowe, who helped the Democrats pass the financial regulation bill less than a week ago.

In the past, the world’s biggest energy consumer was also the most dominant economy. Now, although the United States is still considered the biggest economy, China recently passed it as No. 1 in energy consumption, reports the Wall Street Journal. Just 10 years ago, China was consuming half the energy the United States was, but last year the most populous country in the world used 4 percent more than America. China’s surging demand could affect foreign policies, as Beijing won’t cap consumption of fossil fuels or “its emissions of carbon dioxide and other greenhouse gases.” What the country would agree to is becoming more energy efficient, which would then increase its competitiveness. The United States still consumes more energy per person, “with the average American burning five times as much energy annually as the average Chinese citizen.” Americans are also the biggest oil consumer, going through roughly 10 million barrels a day more than China, which is the second-biggest consumer.

According to the Wall Street Journal, companies are stocking up on servers to make sure they are keeping up with the demand for Web-related services. Sales of servers, which cost a few thousand dollars, increased 36 percent in the first quarter and another 30 percent last quarter. Customers are expecting companies to have more features available online, including “video streams that require more computing power and faster network connections.” To answer these demands, companies need to replace old servers.

The cosmetics industry is getting a boost in a place where most wouldn’t think its products were in high demand: Saudi Arabia. The Financial Times reports that Saudi women spent more than $2 billion on cosmetics last year and “analysts predict that the market will grow by 11 percent this year.” Despite the fact that these women spend their time in public with their faces hidden, the amount they spend on make-up is “among the highest per capita in the world. Since many public activities separated by gender, they “dress to the nines to impress one another and the mothers and relatives of eligible bachelors.” However, it’s still frowned upon by the government, leaving many beauty parlors “vulnerable to raids by the religious police.”

Finally, the first oil well since the BP (BP) spill began oil production from a Gulf of Mexico deepwater well, according to Reuters. Although the U.S. government imposed a moratorium on offshore drilling, a well can be completed if it was already drilled. Marathon Oil Corp.’s well is in 3,000 feet of water and “expected to produce about 50,000 net barrels of oil equivalent per day at its peak.”

Apple Competitors Insist Their Antennas Work

Kelly Faircloth — Mon, 19 Jul 2010 10:39:12 +0000

How bad are smartphones’ reception problems? The Wall Street Journal says Steve Jobs’ defense of Apple's (AAPL) iPhone 4 has spurred a debate over whether the device’s reception problems are unique or endemic. While Jobs admitted the phone’s reception problems in Friday’s press conference, he said dropped calls in poor service areas and touch degrading reception are a problem common to smartphones and not limited to the iPhone. While experts agree touching the antenna does create reception problems, they say that’s why most companies avoid putting them on the outside of the phone, as the iPhone4 does. According to one professor of electrical engineering, other models don’t expose the antenna to the hand, so "I'd be surprised if the effect of the hand would be as pronounced as it was on the iPhone 4." But if Apple does perfect the external antenna, it would be a "breakthrough," says one industry CEO.

The New York Times takes a look at the intense pressure on DreamWorks Animation (DWA) these days. Because the studio is independent and can only make a few films a year, almost every single one needs to be a success. And since DreamWorks has closed the book on its most reliable moneymaker, the Shrek franchise, that’s about to get harder. Hollywood is speculating about whether it even makes sense for DreamWorks to stay independent, and rumor has Comcast (CMCSA) contemplating a move. New competitors are emerging to challenge the animation powerhouse, though they’ll probably find it hard to match the studio’s consistency. And everyone in the business seems to think CEO Jeffrey Katzenberg is ready to move on to a bigger company. But he says, “I literally believe I have the best job in Hollywood.”

After months of debt fears, matters appear to have stabilized in Europe, reports the New York Times. Investors are buying up bonds issued by the so-called PIGS themselves, at relatively favorable interest rates. Compare that to spring, when many countries held off on debt auctions for fear they would upset global financial markets too greatly. According to one think-tank observer, Europe’s debt crisis has been relatively constructive: “In the short term, it made a number of very constructive decisions that had the effect of calming down the markets or shifting market attention elsewhere.” Greece has frozen wages and Portugal and Italy have held successful debt sales. Plus, the U.S. recovery has slowed, so Europe doesn’t look so bad.

Jet makers are upbeat these days, and, the Journal reports, airplane-leasing companies are buying again. The industry is gathering in London for the Farnborough International Airshow, and airplane-makers are expecting orders. "I think you'll see a lot of leasing orders at this air show," predicts one Airbus official. Demand is growing as the economy rebounds worldwide; plus, there are a number of new players in the space who need to build their fleets. Investors are betting billions on new leasing companies, even as airlines continue to struggle. That’s because lessors can typically make money regardless of individual airlines’ financial situations, simply by yanking planes from deadbeat customers and leasing them to someone new.

TARP auditor Neil Barofsky says Obama’s insistence on closing auto dealerships was probably unnecessary and may have exacerbated unemployment, according to the Washington Post. When General Motors and Chrysler presented their initial plans for returning to profitability, the government insisted they move faster on closing dealerships. Barofsky says the administration should have weighed the benefits with the tens of thousands of jobs lost. "Such dramatic and accelerated dealership closings may not have been necessary and underscores the need for Treasury to tread very carefully when considering such decisions in the future," he writes.

Motorola will sell most of its wireless networking unit to Nokia Seimens Networks for $1.2 billion, the Wall Street Journal reports. The deal will give the half-Finnish, half-German venture a way to muscle in to the American and Japanese markets. The sale is part of Motorola’s efforts to split itself in two by spinning off its cellphone and cable box businesses. But that new company needs cash if it’s going to survive, and so Motorola is trying to build as big a reserve as possible.

Facebook Profiles Live On Even After the Users Pass Away

Laura Mortkowitz — Sun, 18 Jul 2010 11:51:32 +0000

When the fastest growing age group on Facebook is people over 65, it should come as no surprise then that Facebook is experiencing more of its users dying than when only college students used it, reports the New York Times. Facebook is working on a way to detect the “ghosts” in its system before the software offers a reminder that it has been a while since you’ve contacted your aunt who passed away three months ago. The social network still has some kinks to iron out, but the way it handles deaths has progressed in the last few years. In the beginning, Facebook “would immediately erase the profile of anyone it learned had died.” Now profiles can be turned into a memorial of sorts where most of the information is taken out, but “grieving friends can still post messages on those pages.” The only problem is that someone else has to take the time to convert the profile to a tribute page and “this option is not well publicized.” Since there are too many users for each employee to go through the pages, Facebook’s latest consideration is software that looks for postings of phrases that would go on the wall of someone who recently died and then have an employee look into it.

One of the issues with the financial reform bill is that it never addressed some of “the weaknesses and imbalances that led to the financial crisis.” Although Congress will look into some of those issues later on, the Washington Post examines the overlooked ones that could still lead to the next financial crisis. For instance, fast-growing economies like China funneled money into countries like the United States because of the investment opportunities, which gave off the false perception that the American economy was healthier than it was. Plus, American debt is growing out of control: In the early 1990s, household debt was less than 60 percent of GDP, whereas in 2006, that number was just under 100 percent. Another issue is that in the financial sector there is “a lot of money in a few hands,” so losing millions just doesn’t mean as much to someone who has billions to play around with.

According to the Wall Street Journal, an overwhelming majority of Americans avoid talking about finances because it puts stress on relationships. However, when money is tight, couples should discuss finances because they need to figure out where their paychecks are going, where spending can be cut, and what assets they have to draw money from in times of need. More than a quarter of couples either hide spending from one another or lie about the amount. A big issue where money is concerned is when couples have already sunk money into a project or vacation. If someone was recently laid off it is actually better “to let go of money already spent and not dig their hole any deeper” by putting the kibosh on the project or vacation rather than going forward and losing another few hundred or thousand to finish.

Lately, people might have been noticing the absence of an uninvited friend: credit card offers. However, mailboxes will once again be filled with them now that issuers are escalating their “marketing efforts,” reports the Wall Street Journal. People with good credit scores will see the most, while others “likely won't receive an onslaught of offers until the housing market bounces back.”

The Washington Post suggests deciding when to retire based on how much money you’ve accumulated rather than how old you are. After all, planning to retire at 55 sounds nice, but not when you still have a mortgage, you haven’t saved enough to last as long as you might live or another crisis hits. Once you hit retirement, you’re on a fixed income that might have to last into your 90s.

Finally, a survey by Nielsen shows that consumer confidence is varied around the world, reports Reuters. Europe saw a drop as a result of the debt crisis weighing on the region. However, the case is different in Asia, where “Chinese consumers were seventh most optimistic among countries surveyed” and “Vietnam saw the biggest jump in confidence.” China and Vietnam are offsetting Japan and Korea, which are the “second and third most pessimistic countries.”

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Sun, 18 Jul 2010 11:51:32 +0000

Two SEC Commissioners Opposed Goldman's Mild Punishment

Sara Behunek — Sat, 17 Jul 2010 11:02:56 +0000

Two days after announcing that it had settled with Goldman Sachs (GS) over alleged securities fraud, the Wall Street Journal has learned that the Securities and Exchange Commission was split over the decision to settle, with the SEC's two Republican commissioners—Kathleen Casey and Troy Paredes—voting against the agreement. The split, according to the paper, reveals possible holes in the strength of the SEC’s case. The agency on Thursday said that it had settled with Goldman for $550 million over allegations that the firm misled investors about the soundness of its real estate investment products. “The political split over the case comes at a time when the agency remains under fire for its policing of the financial markets during the financial crisis. The SEC commissioners often split on party lines over policy decisions, but rarely do so on such high-profile enforcement cases.” Ultimately, it was Chairwoman Mary Schapiro who pushed the agreement through by breaking the tie with her vote. Although the settlement is one of the largest in the agency’s history, many investors expected a settlement of $1 billion or more. Since the deal was announced, Goldman’s shares have risen.

The New York Times reports that the chief driver of the economy, the American consumer, has been curbing his spending due to stock market volatility and issues in Europe. Consumer confidence in July reached its lowest level since August 2009, and a recent Gallup poll showed that daily spending by upper income consumers (those who make $90,000 or more annually) fell to $119 in June from $145 in May. Although the spending habits of those in the higher income brackets have been a focus for economists, consumers of all income brackets are tightening their purse strings, the paper says, posing a threat to the nascent economic recovery. Economists are hoping that the jitters will be temporary. “If growth is actually solid, those fears will dissipate,” Dean Maki, chief United States economist at Barclays Capital and a former senior economist at the Federal Reserve Board, told the paper.

Weak earnings by Bank of America (BAC) and Citigroup (C) pushed bank stocks down Friday, excepting only Goldman Sachs (GS), which enjoyed an increase thanks to the announcement of its $550 million settlement with the SEC. JPMorgan (JPM) on Thursday also reported disappointing second-quarter earnings results. BofA fell more than 9 percent after announcing that the new financial regulation could hack $2 billion from its earnings next year. Shares in Citi, meanwhile, dropped 5 percent or so, even though it posted a profit for the quarter. “Investors are focused on the lack of revenue and loan growth at the banks, along with sluggish performance in their investment banking units—all signs that the sector is still to regain its footing after the recent turmoil,” writes the Financial Times.

Next week, European regulators will unveil the results of their own round of “stress tests” that involved 91 European banks, the Washington Post reports. The results could show that European banks are short tens of billions of dollars to manage another economic meltdown, “a prospect that could further dim growth in an already lagging part of the world economy and force banks and their host governments to present a clear plan for paying the tab." European authorities had conducted similar tests in the past and had reported that its financial system was stable; however, recent turmoil in Greece and other EU member countries raised doubts about the continued viability of regional economies. In the case that the banks are deemed undercapitalized, Europe’s individual governments will be responsible for filling in the shortfall.

Facing mounting complaints, Apple (AAPL) CEO Steve Jobs on Friday admitted the iPhone 4, which has sold more than 3 million devices, had some problems with reception when held on its lower left-hand corner and was prone to dropping more calls than the previous generation of iPhones. Onstage at Apple’s headquarters, Jobs showed videos of rival products that faced similar problems. The demonstration drew the ire of competitors, according to the WSJ. Research in Motion (RIMM) co-CEOs Mike Lazaridis and Jim Balsillie said in a statement: "RIM has avoided designs like the one Apple used in the iPhone 4 and instead has used innovative designs which reduce the risk for dropped calls, especially in areas of lower coverage. ... Apple clearly made certain design decisions and it should take responsibility for these decisions." RIM makes the BlackBerry. Motorola (MOT) co-CEO Sanjay Jha said, "Antennas on the outside of products have known issues, and despite the fact that they lead to smaller phones we have avoided them because consumers don't like being told how to hold the phone." The company said it would offer free cases to alleviate the issues with reception.

Apple Knew About Antenna Problems

Kelly Faircloth — Fri, 16 Jul 2010 10:40:31 +0000

The design that makes Apple (AAPL) products so well-known and widely used may have landed the company in hot water. The Wall Street Journal reports Apple actually knew about the antenna problems that have customers so disgruntled. Engineers knew months ago the new antenna design was risky, but Steve Jobs liked the design so much, they moved forward anyway. To make matters worse, the phone’s development was so secretive, it didn’t get the real-world testing that would have revealed the problems. "This is a perfect storm of Apple's design methodology," says the chief creative officer of a design firm that has worked with the company. Apple is holding a news conference today, but a source says there will not be a recall.

Yesterday, after almost a year of negotiation and politicking, Congress finally passed the financial reform bill. The Washington Post calls it “the most ambitious overhaul of financial regulation in generations,” and there certainly is a lot packed into this piece of legislation. It creates a bureau in the Federal Reserve, to guard consumers against shady lending. A council will watch for systemic threats to the financial system, and the government will have new authority to take over ailing giants like Lehman Bros. There will even be oversight on derivatives. It’s all a big win for Obama, who backed the bill throughout the long process of getting it passed.

Now, of course, the federal government has to implement all these new rules. The Wall Street Journal says the bill now goes to 10 regulatory agencies, who’ll be writing the actual rules that put the bill’s requirements into effect. The results are going to have a big impact on banks, likely forcing them to make changes throughout their businesses. That means they will be launching a new lobbying offensive in an attempt to influence the precise language and strictness of these rules. "The shape of the reform won't be known until the regulators have spoken," says one lawyer who handles banking.

With revenues from album sales plunging, artists are hitting the road for additional revenue. But ticket sales are suffering from the excessive number of concerts scheduled this summer, reports the LA Times. Big names as varied as Christina Aguilera, the Eagles, and even the Jonas Brothers have cancelled shows. "It's brutal out there," says one manager. Promoter Live Nation (LYV) has been hit especially hard, with adjusted operating income expected to drop 10 percent for 2010. But critics say Live Nation has only itself to blame, as it set ticket prices too high. Admission to one show in Chicago ran as high as $895, while the cheapest tickets to see Christina Aguilera were $125.

The standoff between the SEC and Goldman Sachs (GS) is over, reports the Journal. The investment bank will pay $550 million to settle civil charges that it defrauded customers into buying certain mortgage securities. At issue were a set of securities sold to clients, which were designed by a hedge fund to cash in on the housing collapse. The firm has admitted it made "a mistake" and promised to ramp up employee oversight. But the company has gotten off relatively lightly. While it might look like a lot of money, $550 million is just 14 days of Goldman’s profits, and nothing about the outcome is likely to impact the bottom line. Plus, they didn’t have to fire any top execs. "That is a steal," says one industry observer.

Investors are putting the pressure on Google (GOOG) to come up with another big success, the New York Times reports. Even though net income rose 24 percent last quarter, the company’s stock has fallen 17 percent in the last 3 months. Google still leads the search advertising business, but no matter how talented the proverbial pony, investors want “that second trick,” says one observer. The company is experimenting with smartphones, mobile ads, display ads, and other ideas, but so far everything is just a drop in the bucket. “Search has slowed down and Google has more competition, but Google’s non-search business is not enough to move the needle,” says one analyst.

Regulators Try Not To Cave In to World Banks' Demands

Laura Mortkowitz — Thu, 15 Jul 2010 04:56:33 +0000

While the United States is on the cusp of passing its financial regulation bill this week, officials around the world met to discuss rules for world banks, reports the Wall Street Journal. Although the new rules are stricter than what is currently in place, as talks progress they seem to be “moving toward less stringent rules than initially proposed.” Regulators have a very fine line to walk: Cracking down too much will hurt lending, but backing away might allow future crises to occur. Banks are arguing that forcing them to be more cautious could “strangle economic growth.” Even if the final rules put into place are more relaxed, the committee had realized that might happen when they were initially proposed. Those working on the rules have a November deadline to meet, which was set by the Group of 20 leaders.

The past two years of borrowing are finally about to catch up to the world, reports the Washington Post. This year alone the United States and Europe are expected to sell $4 trillion in new bonds, and this will continue for years. It has yet to be seen whether global markets can “smoothly absorb that new debt” or whether “less-creditworthy governments” will find themselves in a crisis akin to Greece’s. The International Monetary Fund seems to believe that governments would be better off trimming their deficits. For the next two years, the United States is expected to sell double its usual amount of bonds.

The last few weeks have been tougher on Apple (AAPL) than usual, and Reuters believes that even if the company’s earnings report is still strong, the brand’s image has been tarnished. The recent reception problems with the iPhone 4 have only added to concerns over Apple’s “heavy-handedness in dealing with app developers and companies like Adobe” (ADBE). Troubles with the iPhone, which “accounts for roughly 40 percent of Apple’s revenue,” have affected the company’s stock. Analysts aren’t too worried about Apple’s quarterly report since the company has beat estimates “every quarter for at least two years.” However, troubles at Apple were strong enough for the company to call an impromptu news conference to discuss the new iPhone.

Issues with the iPhone is great news for Verizon (VZ), according to the New York Times. While the company may have been champing at the bit to get its hands on the popular smartphone, success with Google’s (GOOG) Android system has probably softened the blow that AT&T (T) continues to enjoy exclusivity with the iPhone. Over the past two years, Verizon increased its share of the smartphone market while AT&T has slipped. At this point, with six Android phones on Verizon, the company doesn’t seem too upset that it doesn’t have the iPhone. In fact, according to one analyst, “Verizon is behaving as if it’s not going to get the iPhone anytime soon.”

While the United States and Europe prepare for troubles, the world might not be able to lean on China’s growth, which may be slowing, according to the Financial Times. Although no concrete numbers are available yet, the first quarter showed growth of 11.9 percent, whereas the numbers for the first two quarters combined was only 11.1 percent, “pointing to a considerable slowdown in the second quarter of the year.” The drop in growth is probably a result of the measures Chinese authorities introduced “to try and cool the housing market.” Despite slowing growth, China still has strong numbers for exports and consumption: Retail sales grew 18.3 percent year-on-year, while exports are up 44 percent.

Finally, BP’s (BP) newest effort to stop the oil gushing into the Gulf of Mexico hit a setback as many of the company’s attempts have, reports the Washington Post. A leak formed Wednesday night, but BP expects to repair the choke line and ideally will be able to shut the oil flow permanently. Originally, BP planned to test the equipment to see whether it could handle high pressures, thus enabling BP to leave the well shut completely. During testing, however, BP has to completely stop collecting oil and drilling of the relief well.

No More Obscene Fines for Fleeting Nudity

Kelly Faircloth — Wed, 14 Jul 2010 10:40:43 +0000

A federal court has ruled the FCC’s stepped-up prohibitions on “indecency” are vague to the point of violating the first amendment, the Washington Post reports. That means the agency will no longer be able to demand massive fines (up to $325,000) for the merest hint of nudity or off-the-cuff swear words. The U.S. Court of Appeals for the 2^nd Circuit said the rules create “a chilling effect that goes far beyond the fleeting expletives at issue here.” The court also argued that with the proliferation of ways to consume media, such as cable and Internet video, the FCC can’t single out broadcast. But don’t expect Grey’s Anatomy to morph into The Sopranos—broadcasters say they’ll stick with what viewers expect.

The Federal Reserve is predicting sluggish growth for the rest of the year, according to the Wall Street Journal, and officials will most likely announce today that they've revised their projections downward. But with interest rates slashed to the bone, the institution doesn’t have many options for ways to encourage growth. The Fed’s most aggressive move would be to resume purchases of government bonds or mortgage-backed securities, but officials disagree over the measure. Several oppose the move, saying it wouldn’t even be effective now that the economy is in recovery mode. “The recovery will take time. We just have to be patient and manage it carefully,” says Jeffrey Lacker, president of the Federal Reserve Bank of Richmond. Others say the option should stay on the table, in case of deflation.

Contributing to the poor growth projections is a sudden widening of the U.S. trade gap, reports the Financial Times. Chinese imports jumped suddenly in May, surprising economists who’d predicted the trade gap would shrink that month. Instead, it grew 4.8 percent to its highest level since November 2008, $42.3 billion. The numbers aren’t very conducive to an upbeat jobs picture. According to a PNC economist, increased imports means less domestic production, which means “less job creation in the manufacturing sector, a higher unemployment rate, and less income growth domestically.” That spells trouble for Obama, as the economy is likely to be a big issue in the upcoming midterm elections.

FedEx (FDX) is betting big time on the Boeing 777 for its post-recession game plan, says the Wall Street Journal. The cargo version of Boeing’s (BA) massive, long-range passenger jet can haul more freight and fly farther than the MD-11, FedEx’s previous choice for long distances. It doesn’t even have to stop and refuel for a transpacific flight, which shaves one to three hours off the trip. "It's given us a whole new dimension into what we can do," says CEO Frederick Smith. So FedEx is adding more 777s to its fleet, with the aim of challenging UPS and other competitors for international business. The growing middle classes in India, China, and Brazil want their packages a lot faster, and FedEx plans to get them there.

The New York Times reports CNN is nearing a deal on a replacement for Larry King, who will retire at the end of the year. It looks like Piers Morgan, aka, the tough judge from America’s Got Talent, will be taking over King’s time slot with his own interview show. That has required delicate maneuvering from Turner Broadcasting, CNN’s parent company, and NBC Universal, which airs the talent competition. But NBC has signaled its willingness to share Morgan, clearing the way for a deal. Floated as a replacement from the very beginning, Morgan is little-known in America but has a reputation as a top celebrity interviewer in the United Kingdom. While CNN might still decide to go in another direction, one of King’s former executive producers points out, “Almost every other U.K. TV import has been hugely successful.”

Business is good for Intel (INTC), according to the New York Times. Companies apparently feel confident enough about the recovery to invest in new PCs, and Intel is reaping the benefits. The second quarter brought record profits, raking in net income of $2.89 billion. Compare that to last year’s $398 million loss. The company has also revised its third-quarter estimates upward. “It does seem like the long-awaited upgrade cycle is starting to manifest itself a little bit,” says one analyst.

FinReg Bill Ready To Squeak by Senate

Laura Mortkowitz — Tue, 13 Jul 2010 10:55:05 +0000

Now that both Sen. Scott Brown and Sen. Olympia Snowe have said they plan to vote for the financial regulation bill, Democrats have the 60 votes needed to prevent a filibuster, reports the Wall Street Journal. Brown, R-Mass., and Snowe, R-Maine, both voted for an earlier version of the bill, but “withheld support during the July 4 recess, saying they needed more time to study the 2,300-page bill.” In addition, Democrats already had the support of Sen. Susan Collins, R-Maine, and knew they needed Republican support on this bill because Sen. Russell Feingold, D-Wis., had already announced he would vote against it, and no one has succeeded the recently deceased Sen. Robert Byrd. In order to ensure the votes of Brown, Collins, and Snowe, Democrats went back to the legislation and made changes to address the three Republicans’ concerns about the bill. Now that the numbers are on the Democrats’ side, the bill is expected to pass the Senate quickly so it can finally get to President Obama’s desk.

The government is clearly a big believer in the saying, “If at first you don’t succeed, try, try again.” Recently, a federal judge blocked the government’s offshore drilling moratorium, so the Interior Department simply issued a new, different one, according to the Washington Post. Previously, the government was trying to bar “drilling in waters more than 500 feet deep,” but the new moratorium suspends “drilling done using undersea blowout preventers or blowout preventers used on top of floating rigs.” The suspension would have the same expiration date as the original moratorium: Nov. 30.

Reception on iPhones was already spotty thanks to AT&T (T), but because the new iPhone 4 was designed in a way that actually hinders reception more, Consumer Reports said it “cannot recommend the phone to potential buyers,” reports the Los Angeles Times. Apple (AAPL) had issued an explanation that the phone had a software bug that made it look like the user had a stronger reception than he or she really had. The magazine ran its own tests and discovered that it was actually the design of the phone and not the software. Apple also tried to claim that reception degradation was a common problem, to a lesser extent, with all cell phones; however, Consumer Reports tested previous versions of iPhones and determined the issue only applied to the iPhone 4.

A New York man is claiming he has an 84 percent stake in Facebook and filed a lawsuit in the Supreme Court of Allegany County, reports Reuters. Paul Ceglia claimed he “signed a contract with Facebook co-founder Mark Zuckerberg in 2003 to develop and design a website.” Ceglia was to receive a fee and stake in the product. For each day until the site was complete, Ceglia would receive an additional 1 percent interest in the company. Casting some doubt on the allegation is a previous account that “Zuckerberg was at work on other projects during that period” and the fact that the site in question, thefacebook.com, wasn’t registered until January 2004.

Playboy (PLA) is making a bid to go private, according to the Los Angeles Times. Hugh Hefner is proposing to “acquire all of the outstanding shares” for $5.50 per share, valuing Playboy at $815 million. The action “could spark an auction for the company” as the owner of Penthouse has already said he is going to place a competing bid. However, Hefner, who controls 70 percent of the company’s shares with voting privileges, isn’t “interested in any sale or merger of Playboy.”

Finally, fans of baseball have long realized that the American League clearly dominants the National League during the All-Star game, having won 12 out of 13 games, but the A.L. also dominates when it comes to money. Each of the team’s 33 players make “an average of $2.77 million more than their NL counterparts,” according to Bloomberg. The number is inflated thanks to the New York Yankees. The six players from the defending World Series champion make “a combined $104.3 million, or 35.2 percent of the league’s total.” Third baseman Alex Rodriguez is the highest-paid player in the A.L. with $33 million a year. The N.L.’s highest-paid player is the first baseman for the Philadelphia Phillies, Ryan Howard, who makes significantly less at $19 million a year.

Small Investors Give Up on Stocks

Kelly Faircloth — Mon, 12 Jul 2010 10:48:54 +0000

Small investors have finally had it with stocks, according to the Wall Street Journal. In the 1990s, individuals embraced the stock market, investing in mutual funds and helping push major indexes higher. But history shows these investors tend to pull back after a big market decline, and that’s exactly what we’re seeing right now. Their specific reasons are numerous: discomfort with banks, concerns over the national debt, the specter of another “flash crash,” when a computer glitch sent stocks plummeting 700 points. But it really all comes down to this rationale, from one man who got out of stocks entirely: "I won't make 8% on my money. I will make 4% or 5%, but the money will be there." Sources say these investors aren’t likely to return until stocks are booming again.

Sprint (S) beat its rivals to the market with the first 4G network, but the Wall Street Journal says the way things are going, the company will have a tough time sustaining its lead. Execs had hoped they could use their 4G edge to attract customers and steal market share. But the reality of the situation is less rosy. "We thought we would have more of a head start than we'll end up having," says CEO Dan Hesse. The company’s primary means of attracting 4G customers is the HTC EVO, but the manufacturer can’t keep up with demand. So the phone is currently backordered with no estimated ship date available on Sprint’s Web site. Meanwhile, rivals Verizon (VZ) and AT&T (T) are near to launching their own 4G networks.

They resisted for years, but luxury retailers like Jimmy Choo, Hugo Boss, and Marc Jacobs are finally opening online stores, the New York Times reports. It’s still difficult to recreate the boutique experience with a Web site, but last year’s 8 percent drop in luxury good sales impressed upon these companies the need to exploit all their sales opportunities fully. “The recession forced these manufacturers to realize they needed to look for revenue wherever they could,” says Jeffrey Max, CEO of an e-commerce tech company. Luxury retailers are also finding many features of the web to their liking: They get to keep a higher percentage of the money by cutting out the department-store middleman, and they completely control the marketing and presentation of their products.

The New York Times takes a look today at the intensifying conflict between TV networks and cable providers. Distributors have always paid for premium channels but carried networks like ABC for free. But broadcast channels, strapped for cash and looking for revenue streams, are fighting to change that. On the other hand, upstart pay-TV services see an opportunity to pressure their more established competitors. The latest round of contract negotiations, these between Disney (DIS) and Time Warner (TWX), inspired Verizon to take out ads suggesting Time Warner customers go ahead and switch to Fios, so they wouldn’t run any risk of having their ESPN or ABC cut off. “As time goes by, we’re seeing that these things are getting really, really vicious,” says one analyst.

Lawmakers have caved to industry pressure and scaled back their plans for auto-safety legislation, the Los Angeles Times reports. Drawn up in response to Toyota’s runaway acceleration problems, the bill was meant to be a comprehensive overall. But the latest version is considerably less aggressive. For example, it caps safety violation fines for automakers at $200 million, and the secretary of Transportation will only have to consider safety standards for vehicle electronics, rather than to establish any. But Rep. Henry Waxman insisted this version will improve automobile safety and implied it can actually garner the support to pass: "Through this process we were able to earn broad support from our membership."

As oil continues to gush into the gulf and clean-up costs mount, BP (BP) is considering a billion-dollar asset sale, the Journal says. The company is currently trying to place another, tighter cap, which would capture more of the oil and gas leaking from the well. Meanwhile, BP has already paid out $147 million in compensation claims, and that number is going to get a lot larger. To raise cash, the company is in talks with Apache Corp, a U.S. oil and gas producer, for a deal worth up to $10 billion. That would include stakes in BP’s Alaskan operations.

Even When BP Moves Forward, It Looks Like a Step Back

Laura Mortkowitz — Sun, 11 Jul 2010 11:19:24 +0000

The cap sitting on the damaged well in the Gulf of Mexico will soon be removed for a short while, allowing oil to flow freely for a time, reports the Washington Post. The cap’s removal is part of BP’s (BP) plan to replace it with “one that would capture most or all of the leaking crude.” The current cap is collecting 15,000 barrels a day, but an estimated 35,000 to 60,000 barrels are released daily. The whole process of putting the new cap in place could take as little as four days or as long as a week. However, in addition to capturing more oil, the new system has advantages now that hurricane season is here: Ships can disconnect and reconnect faster. In the meantime, BP is “within 70 feet of its goal” for drilling the first relief well.

Although unemployment remains high across the entire country, Wall Street is on the mend, according to the New York Times. Big banks and brokerage firms are increasing hiring more so than other fields have been. Construction jobs have shrunk by nearly 22 percent since 2008, but the financial industry has only seen a decline of 8.5 percent. However, the Times says that Wall Street has often hired more when the economy is on an upswing, but it also shrinks quicker when things turn sour.

Despite worries of a slowdown, China’s trade surplus beat expectations for the month of June, according to Reuters. Exports for last month increased by 43.9 percent, and China’s surplus was $20 billion, which beat expectations by roughly $6 billion. While this is good for the country, which was concerned about “the potential for a skid in the Chinese economy,” the news will surely reopen pressure on China about its currency. The yuan was pegged to the U.S. dollar for two years, but the government allowed it to appreciate a little. China’s continued strong export numbers will likely increase pressure on President Obama “to take a stronger line against Beijing.”

After a year of stock gains, the second quarter finally provided that correction bears were warning about, reports the Washington Post. A number of factors including “sluggish U.S. jobs growth, a faltering housing-sector recovery, Europe's debt crisis and Asia's slowing economic growth” all came together to bring down financial markets the last three months. During March 2009 to March 2010, the S&P 500 gained 80 percent, but during the last three months, it lost 12 percent.

Bloomberg has the details of a study that shows European countries might be better off if they abandoned the euro and went back to their individual currencies. The region grew only 0.2 percent during the first quarter, and the International Monetary Fund is forecasting 1 percent growth this year. The area is struggling to recover so much because the Greek debt crisis is driving down the euro and forcing governments “to embrace austerity measures and cut their deficits.” Weaker economies are struggling to remain competitive with Germany, “which runs a large trade surplus and restrains domestic demand.” By returning to their own currencies and letting them depreciate, exports could expand and countries could boost their competitiveness.

Finally, the Democrats are relying on two moderate Republicans to vote for passing the financial reform bill, and Olympia Snowe has yet to make up her mind, reports Reuters. The senator from Maine voted for an earlier version of the bill but is still going through the newest version. Democrats are relying on Snowe and Sen. Scott Brown, Mass., to support the bill and even scrapped a “$19 billion tax on large banks and hedge funds” to try to secure Brown’s vote.

BofA Hid Billions in Debt From Public

Sara Behunek — Sat, 10 Jul 2010 10:52:20 +0000

Bank of America (BAC) has revealed to the Securities and Exchange Commission that it made six incorrect transactions at the end of the quarters in 2007 to 2009 that hid from view billions of dollars of debt. The disclosure was made in an April letter to the agency that was posted as a regulatory filing, according to the Wall Street Journal. The transactions took place as the bank was trying to gussy up its balance sheet, also known sometime as end-of-quarter “window dressing,” and meet internal targets. “Window dressing isn't illegal in itself. But intentionally masking debt to deceive investors violates regulatory guidelines. BofA said its incorrect accounting wasn't intentional,” the paper writes. Before filing for bankruptcy in 2008, Lehman Bros. used an accounting strategy to remove $50 billion in assets from its balance sheet. The revelation of the letters come as the SEC is about to disclose the results of an inquiry into the bank’s accounting for repurchase agreements. The agency has said it is mulling stricter disclosure standards and hopes to gain a better understanding of the practice of cleaning up balance sheets for quarterly earnings reports.

Federal prosecutors have put into high gear their two-year-long investigation into whether London’s HSBC (HSBA) has helped its wealthy U.S. clients stash undeclared assets in private offshore accounts, the New York Times reports, citing anonymous sources. “Special agents from the Internal Revenue Service have paid surprise visits in recent weeks to at least two American clients of HSBC whom the authorities suspect of tax evasion,” the paper says. The American clients are reportedly cooperating by handing over account details, names of bankers, and internal memos. The bank has also turned over evidence “regarding the accounts of at least two prominent clients, including written documents and, unusually, recordings of dozens of conversations between the clients and their bankers,” according to the paper. HSBC has yet to receive a “target letter” informing it that a grand jury has been convened to investigate, which is the first step toward an indictment. The investigation of the bank started as a part of the investigation into UBS, which involved thousands of the Swiss banking giant’s clients. The bank declined comment on the investigation, but spokeswoman Juanita Gutierrez, said, “HSBC does not condone tax evasion.”

Google (GOOG) will keep its Chinese web address, www.google.cn. The country has agreed to renew Google’s license even after the company publicly challenged the government over censorship issues. “The decision preserves the search giant's toehold in the country with the most Internet users. But it won't end the uncertainty around Google's future there, because Beijing may revoke the license at any time or block access to Google's services,” according to the WSJ. Google since March has been automatically redirecting users to an uncensored version of its services hosted in Hong Kong, but stopped doing so two weeks ago at the behest of the Chinese government, which said it wouldn’t renew the license if Google kept it up. Users can still access uncensored material by clicking on an image on the homepage to be rerouted. Google CEO Eric Schmidt, at a news conference Thursday commented that his company’s operations were “completely at the discretion” of Beijing. “I don't want anyone to be confused about that," he said.

The Washington Post takes a look at a new Pew Research Center report that found that six out of 10 African-Americans and Hispanics use their mobile phones to access the Internet. The adoption rate among these groups is higher than that of the entire adult population, and experts point, as a reason, to the proliferation of free Wi-Fi, the value of owning a phone with Internet search capacities over a computer and monthly broadband bills, and the fact that ethnic minorities are often the first to take to new technologies. As a result, “cellphones and laptops are recasting the access issue for minority and low-income communities that have been disproportionately left behind as Facebook, Wikipedia and Skype become fixtures in homes and at businesses,” the paper says. The number of African Americans who own a laptop rose 50 percent in the past year, the report said.

BP (BP) prepped on Friday a cap to stymie the oil spill in the Gulf of Mexico by collecting up to 50,000 barrels of oil per day, the Financial times reports. In an e-mail to employees from CEO Tony Hayward, the new system will likely get going in the next few days and could stop the leak by the end of the month. The United States' National Incident Commander, Adm. Thad Allen, said the target for sealing the well completely was mid-August. BP’s shares are up 23 percent from their low point at the end of June.

Chennai Is the New Detroit

Kelly Faircloth — Fri, 09 Jul 2010 10:54:07 +0000

The Wall Street Journal says Chennai, India, is morphing into the world’s new Motor City. Automakers and parts suppliers like Ford, Hyundai, and Michelin are investing billions in new, top-of-the-line factories, which will produce small cars for export and for increasingly flush Indians, as well. "India is now on the radar as one of the two most important markets for Ford strategically world-wide," says the managing director of Ford’s Indian operations. The boom in automaker interest has created more than 200,000 jobs, many of them in India’s underdeveloped gap between agriculture and high-level tech work. The city will soon be manufacturing 1.5 million cars a year.

Apple (AAPL) is opening a big, splashy store in Shanghai, and the New York Times says it’s part of a new push for a bigger presence in China. The flagship will be a “launching pad” for 25 new stores over the next two years. But while Apple often seems unstoppable here in the U.S., cracking the Chinese mobile market won’t be easy. Chinese partners are tough to find and expensive to work with, and sales through official channels drive prices up as high as $864 USD for a 3GS model. That puts Apple in competition with the country’s savvy counterfeiters. “The price of the official iPhones is too high compared to that on the gray market,” says a Gartner analyst. But ironically, all the home-grown imitators may be the most promising sign for Apple—the company is entering a country full of enthusiasts.

A major leak at HSBC (HBC) has secretive Swiss bankers worried, the Wall Street Journal reports. Two years ago, Hervé Falciani and Georgina Mikhael, a couple of HSBC employees, emailed several major law enforcement agencies, offering data on tax evaders. Swiss authorities are looking in to whether they broke banking secrecy laws. But they enlisted French police for help in searching Falciani’s home in southern France, and now the nation’s tax authorities are using the information obtained to (you guessed it) chase tax dodgers. All this has Swiss banking execs anxious about the future of their $2 trillion industry. "If governments are in the market of buying illegal data, that changes the world," says UBS CEO Oswald Grubel.

The LA Times takes a look at HTC, now the fourth-largest smartphone maker in the world. In North America, they’re beating Samsung, Nokia, and Palm, having sold nearly 10 percent of all smartphones purchased in Q1 of this year. Q2 sales hit $1.9 billion, up 58 percent from last year. As the first maker of an Android device, HTC’s star has risen as the operating system has become popular. "Android helped pull them out" of early quality issues and obscurity, says an analyst at Envisioneering Group. He adds that the Taiwanese company, founded in 1997, is now “the fastest-growing handset company in history.”

Department stores had a good June, but overall retail sales were nothing to get excited about, says the New York Times. Department stores in particular has a good quarter, with the biggest June jump in sales since 2003. Thomson Reuters put their gains at 5.8 percent, explaining, “Right now we’re seeing consumers are releasing a little bit of the pent-up demand” compared with last year, when the recession kept shoppers away. But overall sales rose only 3.1 percent year-on-year, described by one analyst as “lackluster at best.” Sellers on the extreme high and low of the spectrum—discounters and luxury retailers—reported especially poor results.

The Washington Post spotlights businesses that actually benefitted from this week’s misery-inducing heat wave. For example: Anyone who sells air conditioning. "This is likely going to be, for air conditioners, probably their best week in years," says one source, whose firm, Planalytics, advises retailers on weather and business. He expects air conditioner sales in the Baltimore-Washington area will be up 159 percent over last year. Lowe’s staffers in Chantilly, Va., moved fans and ACs closer to the front of the store as the temperature rose. Cold drinks also spiked in popularity. On the other hand, lawnmower sales were expected to collapse for the week, because no one wants to mow his lawn in 103 degree weather.

Poor Outlook for Remaining TARP Returns

Laura Mortkowitz — Thu, 08 Jul 2010 11:04:19 +0000

In the past year, money repaid to TARP has generated large returns for taxpayers as well, but that isn’t likely to happen this year, according to the Wall Street Journal. On average, 10.3 percent was earned, with Goldman Sachs (GS) and Morgan Stanley (MS) generating returns of nearly 20 percent and 16 percent, respectively. Now when companies repay, the returns will be smaller since they are dependent “in part on where that company's stock is trading when the government gets paid.” Financial stocks have fallen about 18 percent in three months, and hundreds of companies have yet to repay investments, including General Motors and Chrysler. Struggling banks have also missed dividend payments to the government. Of course there are also the companies that filed for bankruptcy, causing the government to take a permanent loss on its investment.

This year the Dow Jones has surged over 10,000 and dropped below it multiple times, but it managed a two-day rally this week, reports the Washington Post. The speculation of companies doing well lifted the stocks, even BP’s (BP). Just a week into July and so far the Dow is up for the month, but the story is different for the year. The real test will be if more than two winning days can be strung together to help the slowing economy, but July “has tended to be a highly volatile month on Wall Street.” Overall, the Dow is down for the year.

Two winning days for the Dow has done nothing to eased the Federal Reserve’s concerns that the economic recovery seems to be faltering, the Post reports. With Europe’s problems and the struggling markets, the Fed has concluded “that the risks of the recovery losing steam have increased” and begun to look at ways to “strengthen growth.” They could change the wording on policy to statements in order to “effectively commit to keeping rates near zero for even longer than investors now expect. ..." Also, they could cut the interest rate for banks to encourage banks to lend the money rather than leave it at the Fed. And if the situation worsens, the Fed could still consider “massive infusions of cash, such as those undertaken during the depths of the financial crisis.”

The toughest restriction on bankers’ bonuses was just passed by the European Union, according to the Financial Times. By this winter’s pay season, bankers might find that they can only “receive between 20 and 30 percent of any bonus in upfront cash.” The rest of the bonus will be deferred up to five years or “paid in shares or in other securities linked to the bank’s performance.” These strict restrictions might put the EU at a competitive disadvantage after the economy returns to normal. The United States has guidelines for bank bonuses only, and banks will undoubtedly exploit that difference when scouting for talent.

Most firms have closed their subprime mortgage loan offices and Wells Fargo (WFC) is following suit, reports the Los Angeles Times. The bank is closing its 638 subprime lending offices and will have to fire 3,800 of its 14,000 employees in those offices. Subprime mortgages were only a small part of Wells Fargo, making up “less than a tenth of 1% of the home loans the company originates.” Citigroup (C) is now the only national subprime lender and even it “announced this year that it would close hundreds of offices.”

Finally, many Americans hadn’t heard of Transocean (RIG) before its oil rig exploded in the Gulf of Mexico, but that doesn’t mean the company hasn’t made news in other countries. The New York Times profiles the company and its many troubles abroad. The company is suspected of dealing with men accused of laundering money for Burma's government, although no formal investigations took place. Norway is investigating tax fraud and could assess “$840 million in taxes and penalties.” Transocean ran into trouble with Louisiana previously, where one of its merger partners was trying to “avoid potential liability in a pollution case.” It is also facing tax inquiries in both the United States and Brazil.

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Thu, 08 Jul 2010 11:04:19 +0000

Now Apple’s Got iTunes Problems

Kelly Faircloth — Wed, 07 Jul 2010 10:46:19 +0000

If you’ve got an iTunes account, you may want to double-check your credit card bill. The Wall Street Journal says Apple’s (AAPL) adopting new security measures for iTunes, after the latest breach by a shady developer. And we’re not just talking exposed data, as with the glitch in pre-ordering iPads. More customers are reporting fraudulent charges and iTunes spending sprees. Even though this latest incident affected only 400 users, others report mysterious charges. One woman got a call from her credit card company asking whether she’d charged $7,000 worth of iPad apps, and she doesn’t even own an iPad. "The phone call should have come from Apple hours before it came from Visa," she complains. So for now, Apple will require users to enter their credit card security code more frequently, especially when logging in from a new computer.

Do unemployment benefits discourage recipients from taking jobs? The Wall Street Journal reports that as the recovery remains weak and hiring slow, the question is becoming a hot topic of debate among policy-makers. As Congress considers whether to extend jobless benefits again, they’re getting mixed information from economists. One says, "Given the current economic situation I doubt that effect is very large," while another argues any sort of regular check discourages workers from taking less than ideal gigs. And the unique features of this recession have complicated matters. Payments are meant as a temporary measure, but 6.8 million people have been unemployed for more than six months, and 4.3 of them for more than a year.

The Agricultural Bank of China—started by Mao Zedong to serve rural farmers—raised more than $19 billion in its IPO yesterday, the New York Times reports. When all’s said and done, that number could reach $22.1 billion, the largest ever. Of course, shareholders aren’t getting a sure thing. The bank is huge, with 24,000 branches and $1 trillion in deposits, but it also has a long history of loans that don’t pay off. However, officials are promising to stick to “prudent credit control” and say their dominance among farmers gives the bank an edge as the country urbanizes.

Japanese companies are eyeing emerging markets as their next big growth areas, the Journal reports. A report put together by the nation’s ministry of trade, together with several major exporters, pinpoints countries such as China, Brazil, India, and Vietnam as major opportunities, with the potential to “revitalize the Japanese economy as a whole.” And they’re not looking at selling to the local elites, either. Companies plan to expand their offerings for those who get by on less than $3,000 a year. Toyota has specially designed the Etios to fit the needs of less wealthy Indian customers, while Canon has discovered a big market among rural villagers.

In addition to peppermints by the pallet and economy-size containers of BBQ sauce, Wal-Mart’s (WMT) Sam’s Club division will soon offer small-business loans, according to the AP. The retailer is running a pilot program with federally licensed nonbank lender Superior Financial Group, offering loans between $5,000 and $25,000 to qualified borrowers. The warehouse-style chain has been offering more financial services to customers, as part of broader attempts to boost revenues. And, of course, ready access to a line of credit makes it easier to buy office supplies by the case.

After 26 years, Chrysler is bringing Fiat back to the United States, the New York Times reports. The company will set up 200 dealerships to sell the Fiat 500 subcompact. But these outlets will be run by current dealers, often on the same property, even though they’ll have their own showrooms. The decision runs counter to the current move toward multiple brands on one floor. Plus, it’ll initially be just the one model. One automotive analyst says he’d be reluctant to make the investment, if he were a dealer: “You have to go and build a new facility to sell a brand that really is going to take a considerable amount of time to get any kind of volume.” But Chrysler says interest among dealers is high.

USPS Wants to Cut Saturday Deliveries to Save Money

Laura Mortkowitz — Tue, 06 Jul 2010 10:31:14 +0000

In a few months, that Netflix (NLX) DVD you were waiting for might not arrive on Saturday if the U.S. Postal Service gets its way, and Netflix is surprisingly OK with that, reports the New York Times. With the proposal to switch to a five-day service by cutting out Saturday deliveries, the companies that regularly rely on the USPS are split. The USPS is estimating a $7 billion loss this year, and “cutting Saturday delivery would result in savings of $3 billion a year.” The alternative would be raising postal rates by a significant amount, which Netflix worries would slow the company’s growth. However, the change in service could result in Postal Service losing more money if its customers looking for that Saturday delivery leave. Weekly newspapers that are delivered on Saturday would have no choice but to find a different mail service, and “credit card and insurance companies would be seriously affected by five-day delivery because they issue frequent notifications to customers.” Right now the proposal is before a regulatory commission, which will then make a recommendation to Congress, “which since 1983 has required mail delivery six days a week.”

A handful of American-based retailers are expanding outside of the United States for the first time, according to the Los Angeles Times. With Americans buying less than they once did, stores like Bloomingdale’s, Crate & Barrel, and Target (TGT) are opening stores abroad. Even Wal-Mart (WMT), which went international almost 20 years ago, decided it would start counting "on consumers outside the U.S. to make up for stalled sales at home.” In the past, with Americans spending more than they were saving, retailers had no need to venture far from home; but now, Americans have cut back enough to make those same stores that prospered before the recession take a gamble overseas. And American success doesn’t necessarily translate internationally; in the past Wal-Mart pulled out of both Germany and South Korea. The company that can “adapt to local tastes and customs” is the company that can succeed in a foreign environment.

The New York Times highlights a growing economic power in Europe that has struggled to make it into the European Union for decades. Turkey has made a turnaround in a surprisingly short time and “is now closer to fulfilling the criteria for adopting the euro … than most of the troubled economies already in the euro zone.” A decade ago, the country’s budget deficit was 16 percent of GDP, but by next year it could be below 3 percent. Turkey managed this partially thanks to the policies of its prime minister and partially because its economy has been growing so fast that it recently reported “11.4 percent expansion for the first quarter, second only to China.” As it stands right now, Turkey’s financial risk is slightly less than Italy’s.

Since the oil spill in the Gulf of Mexico began 78 days ago, BP (BP) has seen its shares tumble more than 50 percent and now it might be seeking help to prevent a takeover, reports Reuters. In order to defend itself, BP has sought “support from sovereign wealth funds in the Middle East and Asia.” The oil company also hopes to raise half of its $20 billion cleanup fund from asset sales. Current shareholders don’t seem to think BP is looking to sell a stake, but an anonymous United Arab Emirates source told Reuters that BP is talking with Abu Dhabi, Singapore, and China, among others.

Watching the unemployment rate stay mostly static is painful, but based on vacant office space numbers, businesses aren't planning to suddenly start hiring anytime soon, according to the Wall Street Journal. Reduction in office space slowed in the second quarter in comparison with previous ones, but the continued drop meant companies “still lacked confidence in economic recovery.” Federal regulatory agencies have been expanding, but the high unemployment rate remains high because big banks and corporations are not back at prerecession staffing levels. Las Vegas, Phoenix, and Detroit have the highest vacancy rates around 25 percent, while Washington, D.C., and New York City have the lowest at 10 percent and 11.7 percent, respectively. Oddly, these two cities are also the most expensive markets, with the highest rent per square foot per year.

Archives

Prominent GOP Donors Charged With Enormous Fraud

Banks Are Convincing Customers To Opt In to Overdraft Fees

BP Isn’t Sure How To Clean House

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No One Really Knows How To Measure an Online Audience

Deflation Really Has Economists Worried

Democrats Want to Eliminate Tax Cuts for Wealthy

2011 Will Break New Budget Deficit Record

Digital Comics Could Be Savior or Supervillain

Fed Has Low Hopes for Unemployment Rate

BP Loves Deep-Water Wells More Than Ever

Amazon Isn’t (Too) Concerned About the iPad

Apple Competitors Insist Their Antennas Work

Facebook Profiles Live On Even After the Users Pass Away

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Two SEC Commissioners Opposed Goldman's Mild Punishment

Apple Knew About Antenna Problems

Regulators Try Not To Cave In to World Banks' Demands

No More Obscene Fines for Fleeting Nudity

FinReg Bill Ready To Squeak by Senate

Small Investors Give Up on Stocks

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