Wednesday, October 31, 2007

WILL GOVERNMENT CREATE A DO-NOT-TRACK LIST FOR INTERNET?

From The New York Times:

A coalition of privacy groups asked the government today to set up a mandatory do-not-track list for the Internet.

The groups — which include the Consumer Federation of America, World Privacy Forum and several others — are worried that online advertising companies are collecting too much data about consumers’ Web habits.

For a few years, advertisers have been using information about what Web sites people visit to deliver ads to them later on. The practice is called behavioral targeting, and the Federal Trade Commission is hosting a forum tomorrow and Friday about the privacy issues it raises.

While advertisers often say that consumers like receiving ads that are relevant to them rather than generic, privacy advocates say that most people do not realize the amount of personal information they are sharing with marketers.

FEDERAL RESERVE CUTS KEY RATE QUARTER POINT

From The New York Times:

The Federal Reserve gave investors what they wanted today, lowering short-term rates for the second time in two months.

But it quietly warned Wall Street not to expected to assume that more reductions are ahead.

The move, to reduce short-term rates by a quarter point to 4.5 percent, was aimed at preventing the meltdown in housing from crippling the rest of the economy. But the vote was not unanimous, reflecting disagreement among policymakers about the risks that confront the economy.

Investors were generally pleased, and stocks were up modestly after briefly giving up most of their gains for the day immediately after the announcement. But Treasury prices fell, reflecting some concerns that lower interest rates could stoke inflation. Oil prices surged nearly 4 percent and gold futures were up about 1 percent. The dollar modestly weakened against other major currencies.

GOOGLE'S CONTINGENCY PLAN: TAKE ON FACEBOOK WITH ORKUT & A NEW STRATEGY

From The New York Times:

Google and some of the Web’s leading social networks are teaming up to take on the new kid on the block — Facebook.

On Thursday, an alliance of companies led by Google plans to begin introducing a common set of standards to allow software developers to write programs for Google’s social network, Orkut, as well as others, including LinkedIn, hi5, Friendster, Plaxo and Ning.

The strategy is aimed at one-upping Facebook, which last spring opened its service to outside developers. Since then, more than 5,000 small programs have been built to run on the Facebook site, and some have been adopted by millions of the site’s users. Most of those programs tap into connections among Facebook friends and spread themselves through those connections, as well as through a “news feed” that alerts Facebook users about what their friends are doing.

For Google, the effort could breathe new life into Orkut, which is popular in Brazil and other countries, but not in the United States.

Facebook’s success with its platform has proved that the combination of social data and news feeds is a powerful mechanism to help developers distribute their software. They are now seen as must-have functions for many Internet companies. Other social networks and Web companies, including MySpace and the instant messaging service Meebo.com, have announced plans to open their sites in similar ways.

GDP COMES IN AT SURPRISING 3.9% FOR 3RD QUARTER

From AP via The New York Times:

The economy picked up speed in the summer, growing at a brisk 3.9 percent pace, the fastest in 1 1/2 years and an impressive performance even as a credit crunch plunged the housing market deeper into turmoil.

The latest snapshot of the country's economic health, released by the Commerce Department on Wednesday, suggested that the economy is demonstrating much resilience and thus far holding up well to the strains in the housing and credit markets, which had intensified during the third quarter and rocked Wall Street.

Individuals ratcheted up their spending. U.S. businesses sold more goods abroad and boosted some investment at home. Those were some of the main factors helping to push up overall economic activity in the July-to-September quarter.

The third quarter's growth rate was up slightly from a 3.8 percent pace logged in the second quarter. It marked the strongest showing since the first quarter of last year.

The increase in third quarter gross domestic product exceeded analysts' forecasts for a 3.1 percent growth rate for the period. Gross domestic product is the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.

Consumers, whose spending is an important ingredient for the economy's good health, actually rediscovered their appetite to spend in the third quarter. Their spending rose at a 3 percent pace, a considerable improvement from the second quarter's rather weak 1.4 percent growth rate.

Tuesday, October 30, 2007

CONSUMER CONFIDENCE HITS TWO-YEAR LOW

From USA Today:

A key barometer of consumer sentiment dropped to the lowest level in two years, igniting concern that the upcoming holiday shopping season would be lukewarm.

The Conference Board said Tuesday that its Consumer Confidence Index fell to 95.6 from a revised 99.5 in September. The reading marked the lowest level since October 2005 when it was 85.2. Analysts had expected 99.5.

Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.

OVER 18,000 DIED FROM MRSA IN U.S. IN 2005

MRSA, methicillin-resistant Staphylococcus aureus, a staph infection that is drug resistant, is rapidly spreading, and can kill. Several cases have been confirmed in the Chicagoland area. When we discussed this in a class this morning, several people were unfamiliar with this deadly infection, so I'm posting a link to the story here.

From the Houston Chronicle:

About 18,700 people die in this country each year from drug-resistant staph infections, according to a federal study released Tuesday — more deaths than the United States sees from AIDS annually.

The study by the Centers for Disease Control and Prevention, scheduled to be published in today's edition of the Journal of the American Medical Association, is the first of its kind to track methicillin-resistant Staphylococcus aureus, known as MRSA.

Based on data from 2005, the agency estimated that about 94,400 patients nationwide suffer an invasive MRSA infection each year. And in the vast majority of cases, the infections originated in health care settings.

CONSUMER PRODUCTS SAFETY COMMISSION CHAIR: DO NOT INCREASE BUDGET OR STAFF

From The New York Times:

The nation’s top official for consumer product safety has asked Congress in recent days to reject legislation intended to strengthen the agency, which polices thousands of consumer goods, from toys to tools.

On the eve of an important Senate committee meeting to consider the legislation, Nancy A. Nord, the acting chairwoman of the Consumer Product Safety Commission, has asked lawmakers in two letters not to approve the bulk of legislation that would increase the agency’s authority, double its budget and sharply increase its dwindling staff.

Ms. Nord opposes provisions that would increase the maximum penalties for safety violations and make it easier for the government to make public reports of faulty products, protect industry whistle-blowers and prosecute executives of companies that willfully violate laws.

The measure is an effort to buttress an agency that has been under siege because of a raft of tainted and dangerous products manufactured both domestically and abroad. In the last two months alone, more than 13 million toys have been recalled after tests indicated lead levels that sometimes reached almost 200 times the safety limit.

Ms. Nord’s opposition to important elements of the legislation is consistent with the broadly deregulatory approach of the Bush administration over the last seven years. In a variety of areas, from antitrust to trucking and worker safety, officials appointed by President Bush have sought to reduce the role of regulation and government in the marketplace.

Monday, October 29, 2007

GAP LINKED TO CHILD LABOR IN INDIA

From USA Today:

The Indian children reportedly found making clothes for Gap Inc. should be reunited with their families and compensated by the government, activists said Monday amid a spreading scandal about the use of child labor by the international clothing chain.

The reported discovery of children as young as 10 sewing clothes for clothing retailer Gap Inc. in a New Delhi factory has renewed concerns about child labor in India, but government officials offered no comment Monday.

"The biggest responsibility here lies with the Indian government — they don't develop a way of monitoring" factories, said Bhuwan Ribhu, a lawyer who works with Bachpan Bachao Andolan, or the Save Childhood Movement.

"International companies hire subcontractors and then forget about it. There is no monitoring at all," Ribhu added. "Where the Gap is concerned, at least they've taken a good pro-active stand against the subcontractors."

Britain's Observer newspaper on Sunday reported that it had found children making clothes with Gap labels in a squalid factory in New Delhi. It quoted the children as saying they were from poor parts of India and had been sold to the sweatshop by their impoverished families. Some said they were not paid for their work.

Child labor remains a widespread problem in India, despite the country's economic boom and its growing wealth.

The government has repeatedly tried to ban the use of child workers — in 1986 outlawing them from working in dangerous industries, such as glassmaking, and last year banning them being employed as domestic servants or in restaurants.

But the prohibitions have had only a minimal impact and children's rights activists estimate that 13 million children are still working in India, with many being used in labor-intensive businesses like carpet-weaving and in dangerous industries, such as making fire crackers.

FCC TO CHANGE RULES, ALLOW COMPETITION IN CABLE TV FOR APARTMENT DWELLERS

From The New York Times:

The Federal Communications Commission, hoping to reduce the rising costs of cable television, is preparing to strike down thousands of contracts this week that gave individual cable companies exclusive rights to provide service to an apartment building, the agency’s chairman says.

Commission officials and consumer groups said the new rule could significantly lower cable prices for millions of subscribers who live in apartment buildings and have had no choice in selecting a company for paid television. Government and private studies show that when a second cable company enters a market, prices can drop as much as 30 percent.

“Exclusive contracts have been one of the most significant barriers to competition,” Kevin J. Martin, chairman of the commission, said in an interview. Cable prices have risen “about 93 percent in the last 10 years,” he said. “This is a way to introduce additional competition, which will result in lower prices and greater innovation.”

Sunday, October 28, 2007

UAW RATIFIES CHRYSLER DEAL

From USA Today:

UAW members have ratified the national labor agreement with Chrysler LLC, the union said in a statement [Saturday].

The announcement comes shortly after voting ended at Chrysler's Belvidere Assembly Plant in Illinois. Workers there voted to reject the agreement with 55% of voters against it, a person familiar with the results said.

Belvidere's Local 1268 was the final union local to vote but the defeat was apparently not enough to overcome the number of yes votes already logged.

According to a statement issued by the UAW, the contract passed overall with 56% in favor among production workers and 51% in favor among skilled trade workers.

In addition, 94% of office and clerical workers and 79% of engineering workers voted to approve the deal.

Friday, October 26, 2007

INDEX FUND INVESTING: NOT EXCITING, BUT VERY EFFECTIVE

I get many questions from students regarding investing. I do not consider myself to be an expert in the sense that I am a guru who can pick the hot stock or outperform the market.

What I can do is give what I believe to be good advice for investing for retirement. Put your money in index mutual funds and let compound interest take care of setting you up for a fantastic retirement.

Many investment professionals push investors to buy actively managed funds instead of index funds? Why? Well, the fees associated with index funds are very low (typically about 80-90% less than actively managed funds) and many investment professionals steer clients to the investments that pay them the most (trust me, that isn't index funds).

Check out the article below for more information about index fund investing.

And, if you are interested in taking a class that should help you to make smart moves with your money and plan for a wonderful retirement, consider signing up for FIN205.920, Personal Finance and Investing, in the spring semester.

From The New York Times:

IS it worth the risk to try to outperform the market?

“I have yet to meet a retiree that couldn’t have met his or her retirement goals just with market returns — and this is over a 40-year career,” said Paul Merriman, the editor of FundAdvice.com and an investment adviser at Merriman Berkman Next in Seattle.

In his experience, most retired people regard an 8-to-12-percent compounded annual return as satisfactory for their needs. Any investor who simply bought and held a no-load mutual fund that replicated the Standard & Poor’s 500 stock index would have had an 11.2 percent compounded return from 1970 to 2006. So why keep trying to pick stocks and time a volatile market when you can own the market through low-cost index funds?

Index funds are not just for the little guy who can’t take the heat, either. Theodore R. Aronson, an institutional money manager at Aronson Johnson Ortiz in Philadelphia, is paid by his clients to beat various benchmarks like the S.& P. 500 or the Russell 1000 — not to match them. His family’s money, by contrast, goes into 11 Vanguard index funds allocated 80 percent to equities and 20 percent to bonds. “Statistically it is so hard to prove that active managers can outperform, and that any outperformance is due to skill and not luck,” Mr. Aronson said.

His one-year return from indexing as of Oct. 2 was 23.5 percent; his three-year annualized return is 18.8 percent.

CONSUMER SENTIMENT AT 17-MONTH LOW

From USA Today:

Consumer sentiment fell more than expected in late October to its lowest in more than a year as concerns about the housing slump darkened the economic outlook, a survey released Friday showed.

The Reuters/University of Michigan Surveys of Consumers said its late October figure on consumer sentiment was 80.9, down from the month's preliminary reading of 82 and the final September reading of 83.4. It was the lowest reading since May 2006 when the index stood at 79.1.

Economists polled by Reuters had expected the final October figure to remain unchanged from early in the month at 82.

Consumer sentiment is often seen as a proxy for future spending, which accounts for two-thirds of the U.S. economy.

Thursday, October 25, 2007

OIL CLOSES OVER $90

From The New York Times:

Oil prices shot past $90 a barrel today on what one analyst described as a “perfect storm” of economic news, ranging from tensions in the Middle East to growing anticipation of a Fed rate cut.

Crude oil futures jumped $3.36 to close at $90.46 a barrel, exceeding the highs reached last week, though still shy of the inflation-adjusted record price of $101.70 set in 1980.

Concerns over supply levels spurred the price increase after the Energy Department reported yesterday that crude oil stockpiles fell last week and investors learned that OPEC shipments from the Middle East were expected to slow. Fewer oil supplies and steady demand mean that oil prices will go up.

Military tensions between Turkey and Iraqi Kurds also contributed to the sudden spike, along with a decision by the United States to impose sanctions against oil-rich Iran. Prices were also pushed up by a weak dollar and expectations that the Federal Reserve will cut its benchmark interest rate next week, analysts said.

“It’s almost like a perfect storm,” said Fadel Gheit, managing director of oil and gas research at OppenheimerFunds.

CHINESE ECONOMY POSTS 11.5% THIRD QUARTER GROWTH

From USA Today:

China's sizzling economy registered more double-digit growth in the third quarter, but the expansion slowed slightly amid efforts to avert overheating, the government said Thursday.

Economists said the peak of the latest boom may have passed.

The 11.5% annual growth rate in economic output for the July-September period kept China on track to surpass Germany as the world's third-largest economy by early 2008.

The figure, a decline from the 11.9% rate reported for the previous quarter, suggests China's expansion has peaked, economists said. They said growth is expected to slow further, but still stay above 10% next year.

Also in September, inflation eased slightly, with consumer prices up 6.2% over the same month last year, down from an 11-year high of 6.5% in August, the government said.

Authorities have blamed a recent spike in inflation on a shortage of food items, especially pork. They say it should ease as government efforts to encourage farmers to raise more pigs take effect.

MICROSOFT EARNINGS UP 23%, STOCK RISES

From USA Today:

Microsoft registered a sharp rise in financial results Thursday, propelled by brisk sales of its Vista operating system, Office 2007 software suite and Halo 3 video game.

The software giant said earnings increased 23% in its fiscal first quarter, to $4.3 billion, or 45 cents a share. Revenue climbed 27% to $13.8 billion.

In the year-ago quarter, Microsoft earned $3.5 billion, or 35 cents a share. The results beat analyst forecasts of 39 cents per share on sales of $12.6 billion, according to a poll by Thomson Financial.

It was Microsoft's best first quarter since 1999, when Microsoft's Windows 98 operating system was launched in Japan and several European countries. The news sent Microsoft soaring 11%, to $35.53, in after-hours trading Thursday.

Wednesday, October 24, 2007

NEW INCOME TAX PROPOSAL UNLIKELY TO BE ADOPTED NOW

From The New York Times:

The House’s leading Democratic tax writer will propose a sweeping overhaul of the tax code on Thursday that would increase taxes on many people with incomes above $200,000 but cut them for most others.

The bill, to be introduced by Representative Charles B. Rangel of New York, chairman of the Ways and Means Committee, would also overhaul corporate taxes by eliminating many major tax breaks and lowering overall tax rates.

Mr. Rangel has acknowledged that he does not expect to enact such a bill this year, and President Bush would almost certainly veto legislation that raises taxes on the wealthy.

The plan is probably most important as a preview of what Democrats are likely to pursue after the 2008 elections, especially in rolling back a good part of Mr. Bush’s tax cuts for people at the top of the income ladder.

MICROSOFT BUYS PIECE OF FACEBOOK

From USA Today:

Microsoft said Wednesday it would pay $240 million for a small slice of Facebook in a deal that values the red-hot social networking website at $15 billion.

In selling a 1.6% stake to the software giant, Facebook rebuffed a competing offer from search-engine giant Google. Google had no comment.

Microsoft also will sell ads on Facebook outside the USA, extending a marketing relationship that began last year. The deal, announced after several weeks of negotiations, is considered a coup for Microsoft as it slugs it out with Google for online ad sales. Facebook, founded in 2004, has more than 47 million users.

The hefty price paid by Microsoft validates the gambit by Facebook CEO Mark Zuckerberg to spurn a $1 billion takeover bid from Yahoo last year. In 2005, News Corp., parent of Fox News, paid $580 million to acquire Facebook rival MySpace.

Microsoft covets the data Facebook collects about its members' tastes and preferences. Microsoft wants to sell ads based on those preferences, ads that appear when Facebook members use Windows Live services, Windows Mobile smartphones — even its Xbox Live online-gaming service, says online search expert Kevin Lee, chairman of Did-it.com.

Tuesday, October 23, 2007

NEUMANN HOMES FILES FOR BANKRUPTCY

From the Chicago Sun-Times:

The crash in the Chicago area market for new homes has claimed its biggest casualty. Suburban builder Neumann Homes Inc. said Monday it will file for bankruptcy and has laid off most of its employees.

Warrenville-based Neumann, the Chicago area's ninth largest builder, blamed its predicament on a drop of more than 50 percent in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million.

Neumann said it will file for Chapter 11 bankruptcy and that its lenders have agreed to provide limited additional funding so that its assets can be evaluated and sold.

It also said the earnest money of customers whose new homes haven't started construction is safe in escrow. Neumann said it will ask a bankruptcy judge to approve refunds from those accounts.

It also said it will work with lenders to ensure that homes will be completed if construction has started.

APPLE POST 67% EARNINGS GAIN FOR QUARTER

From The New York Times:

Apple reported earnings on Monday that leapt ahead of analysts’ already optimistic expectations on record sales of its Macintosh computers.

The numbers showed that the company was slowly climbing back into the league of the dominant personal computer makers, Hewlett-Packard and Dell.

Apple reported fourth-quarter profit of $904 million, or $1.01 a share, up from $542 million, or 62 cents, in the quarter a year ago, an increase of 67 percent. Analysts had predicted profit of 85 cents a share.

Sales rose to $6.22 billion, from $4.84 billion. Gross margin also surged, to 33.6 percent, from 29.2 percent a year ago.

Apple said it sold 2.16 million Macintosh computers worldwide in the quarter, an increase of 400,000 over the previous record. It does not break out domestic and foreign sales.

The market research firm Dataquest estimated last week that Apple sold 1.3 million computers in the United States, and IDC put the figure at 1.1 million. In the same period, Dell sold 5 million computers and H.P. sold 4.3 million in the United States, according to the IDC report.

CALIFORNIA WILD FIRES DESTROY OVER 700 HOMES, FORCE 250,000 TO EVACUATE

From Reuters:

Wildfires burned unchecked on Tuesday in Southern California from Santa Barbara to the Mexican border, with hundreds of thousands of people forced to evacuate, at least 700 homes destroyed, and little hope for relief from the hot desert winds fanning the flames.

The National Weather Service said "strong and damaging winds" will continue near Los Angeles through mid-afternoon, and high wind warnings may be issued for some areas Tuesday night. In San Diego, the hot, dry winds fanning the flames were expected through Wednesday.

At least 13 fires, whipped by hot, gale-force Santa Ana winds have swept unchecked over the lower half of the state over the past two days, overwhelming fire crews and state emergency services. Some 200,000 acres were torched, one person killed and more than three dozen injured.

Gov. Arnold Schwarzenegger summoned aid from 1,500 National Guard troops, including 200 from the Mexican border, to help with firefighting, evacuations and crowd control.

Meanwhile, some 250,000 people who had been ordered to evacuate ahead of the flames spent the night out of their homes, about 10,000 of them at a San Diego area football stadium that had been converted to an emergency shelter.

Saturday, October 20, 2007

WOMEN NARROW PAY GAP, BUT STILL LAG BEHIND MEN

From The New York Times:

When it comes to the advancement of women in the workplace, progress is almost never sudden. But often it is steady. And so it is with women’s wages.

In 1979, women working full time made only 63 percent as much pay as men, according to data compiled by the Bureau of Labor Statistics. Now working women make 81 percent as much as men.

Yes, that’s an improvement, but it still means that median weekly earnings were $600 for women last year, compared with $743 for men.

What is the reason for the disparity? Discrimination? Choices that women and men have made? That is not entirely clear.

What is clear is that wage differences vary by age group. Among workers aged 45 to 64, women made 73 percent as much as men. But in the 25-to-34 group, the number rises to 88 percent.

Thursday, October 18, 2007

SEC INVESTIGATING COUNTRYWIDE FINANCIAL CEO FOR INSIDER TRADING

From USA Today:

The Securities and Exchange Commission is examining stock sales of the chief executive of Countrywide Financial, the nation's largest mortgage lender, a person familiar with the matter said Wednesday.

The informal SEC inquiry of stock sales by CEO Angelo R. Mozilo has been underway for a while, the person said, speaking on condition of anonymity because the probe has not been made public.

The inquiry was reported online Wednesday afternoon by The Wall Street Journal.

Mozilo sold some $130 million in Countrywide stock in the first half of the year through a prearranged 10b51 trading plan. These plans allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of material non-public information.

North Carolina's state treasurer last week asked the SEC to investigate Mozilo's stock sales. He raised questions about changes made to Mozilo's plan in the months before the company's stock plunged, allowing Mozilo to significantly increase his sales of Countrywide shares.

Wednesday, October 17, 2007

CRUDE OIL SURGES AS TURKEY VOTES TO USE MILITARY FORCE AGAINST KURDS

From Bloomberg:

Crude oil rose to a record $89 a barrel in New York after Turkish lawmakers voted to allow the use of military force against Kurdish rebels in northern Iraq.

The assembly in Turkey's capital of Ankara backed the motion by 507 votes to 19, Parliament Speaker Koksal Toptan told lawmakers. An Energy Department report today showed that U.S. oil, gasoline and heating-oil supplies rose last week.

``The Turkish vote has scared traders,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The doomsday scenario is that things will spiral out of control and lead neighboring countries like Iran and Saudi Arabia to become involved. This isn't likely but it encourages people to be long oil.'' Longs are bets prices will rise.

Crude oil for November delivery rose 31 cents, or 0.4 percent, to $87.92 a barrel at 1:20 p.m. on the New York Mercantile Exchange. Futures reached $89, the highest since the contract was introduced in 1983. Prices are up 49 percent from a year ago. This is the seventh straight daily gain.

On Oct. 15, prices passed the previous all-time inflation- adjusted record reached in 1981, when Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.

CONSUMER INFLATION UP 0.3% IN SEPTEMBER

From The New York Times:

Inflation stayed steady in September, indicating that the Federal Reserve has room to cut interest rates again, but most likely not this month.

Prices of consumer goods ticked up 0.3 percent in September, slightly faster than expectations and a reversal of a 0.1 percent decline in August. The core rate, a key gauge of inflation that excludes more volatile food and energy prices, held at 0.2 percent, where it has stood since June, the Labor Department said this morning.

Core inflation rose 2.1 percent since last September — the lowest year-over-year growth in 18 months — suggesting that pricing pressures have stayed in check. But the Fed, which keeps close tabs on inflation to determine its benchmark interest rates, prefers a rate between 1 percent and 2 percent. A bubbling-up of inflation, coupled with recent reports that point to a more resilient economy than analysts had expected, makes it more likely the Fed will keep rates unchanged when it issues its decision on Oct. 31.

APPLE TO RELEASE NEW OPERATING SYSTEM ON OCTOBER 26TH

From the San Jose Mercury News:

Leopard is ready to leap into the computing world.

Apple announced Tuesday that its newest operating system, one in a long line named after cats, will be released at 6 p.m. Oct. 26. That should please Macintosh enthusiasts, who have followed development of the delayed system through blogs and online discussion groups.

The new system will include 300 new features, including Stacks, which will allow users a new way to access files. They will spring up accordion-style from a redesigned, three-dimensional dock. Another highlight is Time Machine, a quick way to automatically backup everything on the Mac.

Boot Camp - software that lets users of Macs running on Intel chips to choose at start-up whether to run the Mac OS or Windows operating system - will be built into Leopard. Apple will also ship a complete set of Windows drivers with Leopard, so that Windows applications will be able to use the Web cameras and other hardware features built into the Macintosh computers. There's also a parental control content filter and the ability to limit the times children can use the computer.

Saturday, October 13, 2007

CHINA TRYING TO COOL ECONOMY, FIGHT INFLATION

Many observers had wondered for years how China's economy could grow at 10+% per year and yet only encounter minimal inflation. Some suspected, and many still suspect, that the Chinese have simply underreported inflationary data. Others think that while China may have actually enjoyed low inflation in the past, that the country now will have to grapple with rapidly rising inflation. What is clear, is that China is now trying to slow the economy and fight inflation.

From USA Today:

China's central bank said Saturday it was boosting the amount of money that its banks must hold in reserve for the eighth time this year, reducing the amount available for lending in an effort to cool an investment boom.

The bank said in a statement on its website that it had raised the rate by half a percentage point to 13% to "strengthen liquidity management in the banking system and check the excessive credit growth."

The change takes effect Oct. 25, the People's Bank of China said.

The order, which had been expected by industry analysts, comes on top of repeated interest rate hikes and investment curbs imposed on real estate, auto manufacturing and other industries in an effort to cool a boom that Chinese leaders worry could ignite inflation or a financial crisis.

The rate rise also follows the recent release of government figures on inflation.

The inflation rate jumped 6.5% in August — its highest monthly rate in 11 years — propelled by a double-digit rise in food prices, including pork, the country's staple meat.

That follows a rise in consumer prices in July of 5.6% over the same month last year.

The central bank has already said it expects the inflation rate for the year to exceed the government's 3% target.

China announced on Friday that the trade surplus, a key source of domestic liquidity, remained high at US$23.91 billion in September.

The last reserve ratio hike took effect Sept. 25.

Friday, October 12, 2007

PRODUCER PRICE INDEX UP IN SEPTEMBER

From The New York Times:

The Producer Price Index, which measures wholesale prices paid by businesses, rose 1.1 percent in September after a 1.4 percent dip in August. The core rate of inflation, a less volatile gauge that excludes food and energy costs, rose 0.1 percent, a slight deceleration from the month before, the Labor Department said this morning.

Prices for raw materials, or so-called crude goods, continued to increase, with the core rate jumping 1.6 percent last month. Overall crude prices are up 11.4 percent from last September, compared with a 4.4 percent year-over-year increase in finished goods. These costs, located higher up the production pipeline, are typically passed on to consumers, signaling a likely increase in retail prices in the months ahead.

Wednesday, October 10, 2007

CHRYSLER WORKERS GO ON STRIKE

From The New York Times:

The United Automobile Workers union walked off the job at Chrysler LLC plants nationwide this morning after the two sides failed to reach agreement on a new four-year contract by a union-set deadline.

Chrysler has about 48,000 workers in the United States. About 12,000 workers are exempt from the strike, however, while their plants are temporarily closed by Chrysler.

The strike is the second in two weeks by the union against a Detroit automaker. Workers at General Motors struck for two days before the union reached a tentative deal with G.M. on Sept. 26.

DEAL BETWEEN SABMILLER AND MOLSON COORS COULD BE BLOCKED

Will the proposed Molson Coors/SABMiller deal decrease or increase competition? The answer to that question could determine whether the deal is allowed to go through.

From The New York Times:

Analysts and investors seem to be waving aside the possibility that the proposed merger of SABMiller and Molson Coors in the United States could run into trouble with regulators. But not that long ago, a similar deal seeking to combine the No. 2 and No. 3 players in a consolidated industry — sometimes called a 3-to-2 deal, because it reduces the industry leaders from three to two — was blocked on antitrust grounds.

That was H.J. Heinz’s attempt to buy the maker of Beech-Nut baby food, a $185 million transaction Heinz ended up abandoning.

Together, Heinz and Milnot, the parent of Beech-Nut at the time, would have controlled nearly 33 percent of the retail baby-food market; Gerber, the industry leader, controlled 65 percent. Compare that with the numbers in Tuesday’s proposed deal, in which a combined MillerCoors would have a 29 percent share of the U.S. beer market, and Anheuser-Busch would have 49 percent, according to analysts at Citigroup.

Many think that regulators won’t blink at the MillerCoors transaction. They have argued that the deal could be seen as increasing competition, rather than diminishing it, because it will create a stronger and more efficient rival to Anheuser-Busch, whose brands include Budweiser and Bud Light.

A similar argument was put forward in favor of the Heinz-Milnot transaction — and it did get some traction early on. A lower court initially approved the deal, only to have it overturned by an appeals panel in April 2001. At the time, Robert Pitofsky, the departing chairman of the F.T.C., now in private practice at Arnold & Porter, told The New York Times that the decision was one of the most important antitrust cases during his six years leading the agency.

Tuesday, October 09, 2007

MOLSON COORS & MILLER COMBINE U.S. OPERATIONS IN JOINT VENTURE

From AP via The New York Times:

Brewers Molson Coors Brewing Co. and SABMiller said Tuesday they will combine their U.S. operations in a joint venture.

The makers of Miller Lite, Original Coors and Coors Light said they will share ownership equally in the new venture which they said should help them compete more effectively.

The industry leader in the United States is Anheuser-Busch Cos., maker of Budweiser, Michelob and Bud Light.

The financial terms of the deal were not disclosed.

The new company will be called MillerCoors, the companies said. London-based SABMiller, which brews Miller Lite as well as a slew of European beers, and Molson Coors, the brewer of Coors Light and the craft beer Blue Moon, will each have a 50 percent voting interest in the venture and have five representatives on its board of directors.

Under the terms of the agreement, the companies said they will conduct all of their U.S. business exclusively through the venture.

The companies project MillerCoors will have combined annual beer sales of 69 million U.S. barrels with revenue of about $6.6 billion.

Monday, October 08, 2007

UAW SETS WEDNESDAY STRIKE DEADLINE FOR CHRYSLER

From The New York Times:

The United Automobile Workers union has set an 11 a.m. Wednesday deadline in its bid to reach a new four-year contract with Chrysler, a Chrysler spokeswoman said this morning.

The deadline appeared to be an effort to keep the talks from dragging on for days as they did at General Motors last month, where the contract covering 73,000 workers expired on Sept. 14. After talking for nine days, the union walked out for two days before reaching a deal on Sept. 26.

People with direct knowledge of the negotiations said Sunday night that a deadline had been set, and the deadline was confirmed today by Michele Tinson, a Chrysler spokeswoman.

If the deadline passes without a deal, the union could strike the company, or it could extend its contract hour to hour, as it initially did at G.M., one person with direct knowledge of the talks said today. The U.A.W. could also set aside the talks with Chrysler and seek a deal first with the Ford Motor Company, said this person, who spoke on anonymity because the discussions are private.

The union and Chrysler officials intensified their talks on Friday and continued through the weekend. Discussions recessed late Sunday and resumed this morning.

Sunday, October 07, 2007

ATTITUDES TOWARD GLOBAL TRADE, FOREIGN COMPANIES, FREE MARKETS, AND MORE

Want to know how people around the world feel about issues such as global trade, free markets, and immigration? Check out the summary of results from the Pew Global Attitudes Project. If you are pressed for time, then just examine the charts and graphs. I think you will find some of the results surprising. The "Wealth and Religiosity" graph was particularly interesting to me and does a good job of illustrating different perspectives globally regarding religion, morality, values, and wealth. For that matter, one does not need to think globally about such issues to find different perspectives, as there is quite a split here in the United States.

Saturday, October 06, 2007

GM & UAW TO CREATE NATIONAL INSTITUTE FOR HEALTH CARE REFORM

From The New York Times:

For years, General Motors has said it supports the United Automobile Workers union in its push for change in the nation’s health care system. Now the U.A.W. has persuaded G.M. to put its money where its mouth is.

In a labor agreement reached last week between the company and the union, G.M. has agreed to spend up to $15 million over the next few years to create a National Institute for Health Care Reform.

The institute, run by G.M. and the U.A.W., would engage economists, analysts, academics and other experts, who would conduct studies on the current health care system as well as alternatives. It would look at ways to lower drug costs and would sponsor forums on health care changes.

A G.M. spokeswoman, Michelle Bunker, said the company had not specifically called for a single-payer health care plan, in which a government program would be created to offer health care benefits.

But she said G.M. “believes that all Americans should have access to insurance, and we are working with key players to make sure that everyone has high-quality care at low cost.”
Although G.M. is making the initial investment, Ford Motor and Chrysler also would make proportional contributions, if they agree to similar terms in their new contracts with the U.A.W., according to the contract language.

The U.A.W. has supported national health care for generations. It was a primary focus for Walter P. Reuther, one of the union’s founders. He began arguing in favor of universal health care after World War II, and was one of the forces behind the creation of Medicare for older Americans.

Mr. Reuther’s successor, Leonard Woodcock, urged American businesses in 1970 to support a national health care plan as a way to fight raging health care inflation.

In the absence of a national system, the union instead secured generous health care benefits for its members and retirees, which have since added up to a $55 billion liability for G.M. and a nearly $100 billion liability for the industry over all.

Friday, October 05, 2007

JURY FINDS WOMAN GUILTY OF MUSIC PIRACY, CHARGES HER $9,250 PER SONG

From Wired:

Jammie Thomas, a single mother of two, was found liable Thursday for copyright infringement in the nation's first file-sharing case to go before a jury.

Twelve jurors here said the Minnesota woman must pay $9,250 for each of 24 shared songs that were the subject of the lawsuit, amounting to $222,000 in penalties.

They could have dinged her for up to $3.6 million in damages, or awarded as little as $18,000. She was found liable for infringing songs from bands such as Journey, Green Day, Aerosmith and others.

After the verdict was read, Thomas and her attorney left the courthouse without comment. The jurors also declined to talk to reporters.

The verdict, coming after two days of testimony and about five hours of deliberations, was a mixed victory for the RIAA, which has brought more than 20,000 lawsuits in the last four years as part of its zero-tolerance policy against pirating. The outcome is likely to embolden the RIAA, which began targeting individuals in lawsuits after concluding the legal system could not keep pace with the ever growing number of file-sharing sites and services.

"This is what can happen if you don't settle," RIAA attorney Richard Gabriel told reporters outside the courthouse. "I think we have sent a message we are willing to go to trial."

According to BigChampagne, an online measuring service, the number of peer-to-peer users unlawfully trading goods has nearly tripled since 2003, when the RIAA began legal onslaught targeting individuals.

At the time, BigChampagne says, there were about 3.8 million file sharers trading over the internet at a given moment. Now, the group has measured a record 9 million users trading at the same time. Roughly 70 percent of trading involves digital music, according to BigChampagne.

MINIMIZING LIABILITY BY CHOOSING THE RIGHT FORM OF BUSINESS OWNERSHIP STRUCTURE

Yesterday I stumbled upon this column that describes the benefits of choosing the correct form of business ownership structure. Since we are covering this in class now, and it is certain to be a part of the upcoming midterm, I'm including a link. Check it out at businessweek.com.

SEPTEMBER JOBS REPORT MODESTLY POSITIVE DESPITE SMALL UNEMPLOYMENT RATE INCREASE

You can view the official release at the Bureau of Labor Statistics.

From USA Today:

Employers added 110,000 workers in September, fastest rate in four months, but the unemployment rate ticked up to the highest level in more than a year as companies didn't add enough jobs to absorb a steady stream of people coming into the labor force.

The numbers suggest that the job market, although it has lost some steam, is still relatively healthy.

"Slowdown in place — but no collapse nor recession," Wachovia chief economist John Silvia said in a note to clients.

The seasonally adjusted 110,000 workers that companies and the government added in September was the biggest increase since May, the Labor Department said. And in a big reversal, the department revised its estimate of job creation in August to a positive 89,000 after saying last month that employers cut workers for the first time in four years.

But despite the payroll gains, the unemployment rate rose to 4.7% in September from 4.6% in August, to the highest rate since August 2006. The increase came as the number of people entering the labor force jumped in September after dropping in August. While most of those people were hired, not everyone was able to find work.

Thursday, October 04, 2007

ECB AND BANK OF ENGLAND HOLD INTEREST RATES

From The New York Times:

The European Central Bank held its benchmark interest rate steady at 4 percent on Thursday, resisting pressure for a cut in the face of a rising euro that some fear will hurt Europe's economies.

Markets will be paying close attention to what ECB President Jean-Claude Trichet says about how the central bank plans to ward off more disruption from U.S. subprime credit woes and the dollar, which has weakened since the U.S. Federal Reserve made a larger-than-expected rate cut.

In London, the Bank of England decided to leave its key interest rate unchanged at 5.75 percent, a move most analysts had predicted. Howard Archer, chief U.K. and European economist at Global Insight, said a move by the British bank to cut rates would have been premature.

"Indeed, a cutting of interest rates at this stage could have been seen as a panic move and risked damaging the bank's anti-inflation credibility," he said in a statement.

NORTH KOREA TAKES PROMISING FIRST STEPS TOWARD JOINING THE INTERNATIONAL COMMUNITY

From USA Today:

The South Korean president signed a commitment with North Korea Thursday to seek a formal end to the Korean War, ending a historic three-day summit during which he was snubbed by his host and upstaged by a nuclear agreement 600 miles away in Beijing.

South Korea never signed the cease fire that ended hostilities in the 1950-53 Korean War; so the two Koreas have remained technically at war ever since. In their declaration Thursday in the northern capital Pyongyang, South Korean President Roh Moo Hyun and North Korean dictator Kim Jong Il agreed to pursue a permanent peace. South Korea has said it will need to work with the other combatants in the Korean war — China and the United States — to reach a formal peace deal. President Bush has said there can be no permanent peace on the Korean peninsula until North Korea gives up nuclear arms.

In their 8-point agreement Thursday, the wealthy South and destitute North also promised to expand economic cooperation, open regular freight service along a recently restored rail link and create a joint fishing zone on their disputed sea frontier.

But the lofty pronouncements in Pyongyang were overshadowed by a nuclear deal late Wednesday in Beijing: In talks with five other countries, North Korea agreed to complete the disabling of its nuclear facilities at Yongbyon and reveal all its nuclear programs by the end of the year.

In return, the isolated Stalinist state will get the equivalent of one million tons of heavy fuel oil in energy, economic and humanitarian assistance, and the United States will work toward establishing normal diplomatic relations with North Korea and taking it off a blacklist of countries that sponsor terrorism.

Wednesday, October 03, 2007

WAL-MART FORCED TO PAY ADDITIONAL $62 MILLION TO PENNSYLVANIA WORKERS

From USA Today:

Wal-Mart workers in Pennsylvania who previously won a $78.5 million class-action award for working off the clock will share an additional $62.3 million in damages, a judge ruled Wednesday.

About 125,000 people will receive $500 each in liquidated damages under a state law invoked when a company, without cause, withholds pay for more than 30 days.

"By this statute the legislature created significant financial incentives for employers to pay workers all the money they've earned by their hard work," Philadelphia Common Pleas Judge Mark Bernstein wrote.

"The law in its majesty applies equally to highly paid executives and minimum wage clerks," he wrote.

A Philadelphia jury last year awarded the workers the exact amount they had sought, rejecting Wal-Mart's claim that some people chose to work through breaks or that a few minutes of extra work here and there was insignificant.

Similar suits charging that Wal-Mart violated state wage laws are in play across the country.
A California trial ended with a $172 million verdict that Wal-Mart is appealing while the Bentonville, Ark.-based company settled a Colorado suit for $50 million.

A trial opened last week in Minnesota while suits are pending in New Jersey and several other states.

MICROSOFT UPDATES ZUNE

From The New York Times:

Microsoft has revamped its slow-selling Zune digital music players and created a MySpace-style social-networking site in its drive to compete with Apple’s market-leading iPod player.

In large part, the Microsoft moves announced Tuesday — the introduction of a smaller, sleeker version of the Zune player and the planned Zune Social Web site — reflect an attempt to build scale for a brand that so far has achieved only niche status. Microsoft said it had sold about 1.2 million units of the original device in the last year.

Many of the changes are stylistic. The company reworked the device’s navigation button and dropped one of its signature colors, brown, from the list of options. The Zune will be available in black, pink, green and red.

But one of the most striking changes had to do with Microsoft’s effort to enhance what had been perhaps the most talked-about feature on the original device: the ability to share music files and other media wirelessly with other Zune owners. Far too few people, however, purchased the player for such sharing to become commonplace, and the function held little appeal because it was crippled by usage rules negotiated with the music industry. Shared songs expired within a few days, even if the recipient did not play them. And a file acquired from one Zune user could not be shared with a third user.

Under the new rules, Microsoft said, shared songs would have no expiration date and it would be possible repeatedly to pass along songs sent from one device to another. But a shared file can be played only three times on each Zune.

A version with 80 gigabytes of storage, available only in black, will sell for $250. A version using flash memory with 8 gigabytes of storage will sell for $200, and the 4-gigabyte flash player will cost $150, the company said.