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.

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.

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.

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.

U.S. ONLINE-ONLY BANK FAILS

From the Sunday Times of London:

NETBANK, a pioneering internet-based bank, has been shut down by US regulators in the biggest American banking collapse for 14 years.

The bank’s failure, revealed late on Friday night, comes as financial groups are still reeling from the fallout of America’s sub-prime mortgage crisis and recent freeze in credit markets.

NetBank is the largest US bank to fail since the savings-and-loans crisis in the early 1990s. The bank, based in Georgia and launched in the late 1990s, had $2.5 billion in assets and was seen as a leading inter-net-only savings bank. The Office of Thrift Supervision, which regulates American lenders, blamed the bank’s demise on thumping loan losses and poor underwriting standards.

NetBank’s problems were made worse by its decision to expand into sub-prime mortgages, leaving it exposed to the meltdown in the US housing market.

ING, the Dutch bank, is taking over NetBank’s customers and $1.5 billion in insured savings deposits. It paid just $15m for the savings book.

iPHONE TURNS TO iBRICK AFTER SOFTWARE UPDATE

From The New York Times:

Since the iPhone hit the market in June, tech-savvy owners of the phone have been busy messing with its insides, figuring out how to add unauthorized software and even “unlock” it for use on networks other than AT&T’s.

But the Web was filled Friday with complaints from people who had installed the latest iPhone software update, only to see all the fun little programs they had been adding to their iPhones disappear — or, still worse, see their phones freeze up entirely.

Since Monday, Apple officials have been warning iPhone owners that using unlocking software could cause the phone to become “permanently inoperable when a future Apple-supplied iPhone software update is installed.” But in many cases those warnings went unheeded.

People who had unlocked their phones to use them with another carrier ran the greatest risk of, in techie terms, having them “bricked” — rendered about as useful as a brick. Most of those who committed the lesser transgression of installing programs not authorized by Apple simply had those programs wiped out.

People have created dozens of programs for the iPhone, ranging from the useless but entertaining (a virtual popcorn popper) to the decidedly practical (a screen-shot capture program).

But for anyone who upgrades the iPhone’s system software, a routine process that adds Apple’s latest fixes and improvements, those programs can no longer be used. The update has made the iPhone “almost impervious to any third-party hacks,” said Erica Sadun, a technical writer in Denver who has created more than a dozen programs for the iPhone, including the screen-shot program and a popular voice recorder.

Jennifer Bowcock, an Apple spokeswoman, said that when people went to update their software with their computer through iTunes, a warning appeared on the computer screen, making it clear that any unauthorized modifications to the iPhone software violated the agreement that people entered into when they bought the phone. “The inability to use your phone after making unauthorized modifications isn’t covered under the iPhone warranty” Ms. Bowcock said.

SOME POSITIVE ECONOMIC NEWS, FINALLY

Although surveys indicate that consumer confidence is falling, consumer spending was on the rise in August. And, while inflation is a concern, core PCE, an inflation figure favored by the Federal Reserve that excludes food and energy, came in at an acceptable 1.8% on an annual basis.

From The New York Times:

Americans made more purchases than expected in August and a crucial inflation indicator cooled, the Commerce Department said yesterday, two indications that the economy is still somewhat insulated from turmoil in the residential housing market.

Consumer spending rose a better-than-forecast 0.6 percent last month, the largest uptick since April, led by strong sales of durable goods. Income increased 0.3 percent, down from a 0.5 percent rise in July but in line with Wall Street forecasts. The rate of wage increases was also slightly down from July.

Consumers also caught a break on rising prices in August. A closely watched inflation gauge, the core personal consumption expenditure deflator, posted its smallest year-over-year gain since February 2004. The core deflator index, which excludes food and energy prices, rose 1.8 percent on an annual basis, continuing a downward trend that stretches back to February.

DETAILS OF GM/UAW DEAL BEGIN TO EMERGE

From The New York Times:

For a generation, executives at the Detroit auto companies have complained that the huge cost of providing generous benefits for its unionized workers put them at a competitive disadvantage with surging foreign car companies like Toyota and Honda.

Now, with a new contract agreement with the United Automobile Workers reached before dawn yesterday, General Motors has taken a momentous step toward eliminating much of that burden, a step likely to be followed by Ford Motor and Chrysler.

The contract’s main feature — a health care trust called a voluntary employee benefit association, or VEBA — means that G.M. will no longer have to carry the debt it will owe for employee and retiree health care benefits on its books. Earlier this year, G.M.’s chief executive, Rick Wagoner, referred to those obligations as “very large and frankly formidable.”

That debt is estimated at $55 billion for the next 80 years. So G.M. will establish the trust with about 70 percent of that amount, making an upfront payment of cash, stock and other assets. The difference is expected to come from gains on investments by the trust.

In return, the union won guarantees that medical benefits for hourly workers and retirees and their families will remain in place for the next two years. G.M. will also invest money in its American plants, and will maintain its current union work force of 73,000, according to Ron Gettelfinger, the U.A.W. president.

GM & UAW REACH TENTATIVE AGREEMENT

From The New York Times:

The United Automobile Workers union and General Motors reached a landmark agreement early today, ending a two-day strike. The key provision of the new contract is a health care trust that would get G.M.’s massive liability off its books.

The deal was announced by the company and the union in separate statements. The U.A.W. had walked out on G.M. on Monday morning, but production will resume this afternoon.

G.M. said the tentative agreement was reached at 3:05 a.m. Eastern. The U.A.W. recessed the strike and said if the contract was not ratified, workers could return to picket lines. The agreement included a memorandum of understanding to establish an independent health care trust, as well as other changes to the national agreement.

G.M. said implementation of the trust would be subject to court approval, as well as a review by G.M.’s accounting for the trust by the Securities and Exchange Commission.

The memorandum apparently establishes the principle of the trust, and allows the two sides to complete its details later. Analysts had predicted the union and the company might have to take that step, because of the complexity of such a trust.

“There’s no question this was one of the most complex and difficult bargaining sessions in the history of the G.M./U.A.W. relationship,” Rick Wagoner, G.M.’s chief executive, said in a statement.

The union’s president, Ron Gettelfinger, said the new contract “will absolutely protect their jobs and keep jobs from being reduced.” He said, while not offering specifics, that the number of jobs at G.M. would be “pretty much the same if not higher” when the contract concludes in 2011.

Later, Mr. Gettelfinger confirmed in a radio interview that there was a signing bonus for workers, but declined to state its size. He also declined comment on reports that the contract contained a two-tier wage program, with sharply lower rates for any new workers hired by G.M.

EXISTING HOME SALES & CONSUMER CONFIDENCE DECLINE

From The New York Times:

Purchases of previously owned homes in August dropped 4.3 percent from July, sending sales to a five-year low, the National Association of Realtors said this morning. The annual sales rate fell to 5.50 million from 5.75 million in July. Existing home sales are down nearly 13 percent over the last 12 months.

The bad news in the housing sector was coupled with a discouraging report on consumer confidence from the Conference Board, whose index dropped to 99.8 in September from 105.6 in August, much more than forecast. The index is now at its lowest level in nearly two years. A weak job market and stagnant salary growth has caused anxiety among consumers, analysts said, suggesting potential declines in consumer spending and job creation over the coming months.

GM UAW WORKERS GO ON STRIKE

From AP via MSNBC:

Thousands of United Auto Workers walked off the job at General Motors plants around the country Monday in the first nationwide strike against the U.S. auto industry since 1976.

UAW President Ron Gettelfinger said that job security was the top unresolved issue, adding that the talks did not stumble over a groundbreaking provision establishing a UAW-managed trust that will administer GM's retiree health care obligations. Gettelfinger complained about "one-sided negotiations."

Workers walked off the job and began picketing Monday outside GM plants after the late morning UAW strike deadline passed. The UAW has 73,000 members who work for GM at 82 U.S. facilities, including assembly and parts plants and warehouses.

General Motors Corp. had been pushing hard in the negotiations for the health care trust — known as a Voluntary Employees Beneficiary Association, or VEBA — so it could move $51 billion in unfunded retiree health costs off its books. GM has nearly 339,000 retirees and surviving spouses.

"This strike is not about the VEBA in any way shape or form," Gettelfinger said at an afternoon news conference in Detroit.

"The No. 1 issue here is job security," Gettelfinger later said, adding that the union also was fighting to preserve workers' benefits.

It remained to be seen what effect the strike would have on the automaker and consumers. The company has sufficient stocks of just about every product to withstand a short strike, according to Tom Libby, senior director of industry analysis for J.D. Power and Associates.

SOME EUROPEANS FEAR POSSIBLE DOWNSIDE OF A STRONG EURO

From The New York Times:

Fears of an abrupt economic slowdown in Europe deepened on Friday, after the release of weaker-than-expected data and another record in the euro’s relentless rise against the dollar.

Europe’s stampeding currency prompted a warning from the plane maker Airbus that it might have to cut costs more deeply than expected to restore its troubled operations to financial health.

“If the euro remained durably at $1.45, that would mean we have to find 1 billion euros in additional savings,” Fabrice Brégier, the chief operating officer, said in an interview with a French radio station. The euro briefly traded at $1.41 on Friday morning before falling back slightly. It was at $1.4091 in late trading in New York.

Most European exporters have weathered the rally without complaint, having cut costs and hedged their exposure, either financially or by moving production to countries that do not use the euro.

But a noisy minority is starting to agitate, and political leaders, notably in France, have picked up their concerns, lobbying the European Central Bank to take steps to stem the euro’s appreciation.

“We hope the E.C.B., at its meeting in October, will examine the consequences and take appropriate action,” the French finance minister, Christine Lagarde, said during a visit to China on Friday.

Airbus is particularly vulnerable because it earns all its revenue in dollars and incurs about half of its operating costs in euros. That puts it at a big disadvantage to its American rival, Boeing.

Under its existing plan, Airbus plans to cut 2 billion euros ($2.8 billion) a year in costs by 2010, through the sale of several factories and the elimination of 10,000 jobs. In his radio interview, Mr. Brégier said the cost-cutting plan was predicated on a euro exchange rate of $1.35.

INTEL IS THE EUROPEAN COMMISSION'S NEXT TARGET

In the wake of the ruling against Microsoft this week, Intel seems to be the next target for the E.U. in terms of anti-competitive behavior. Rival AMD has complained since 2000 that Intel has used questionable practices, seemingly legal in the United States, but perhaps illegal in the E.U. In July of this year the European Commission charged Intel with illegal use of sales tactics such as rebates and incentives to maintain or increase its market share in microprocessors.

From BusinessWeek:

The EC cases against Microsoft and Intel are based on different kinds of alleged market abuse and draw on separate legal precedents. But both reflect a widening gap in how the U.S. and Europe view the legality of hardball business tactics by dominant companies. While regulators in both regions look for signs of harm to consumers from monopoly behavior, Europe gives as much or more weight to the impact on competitors.

That distinction played a critical role in the Microsoft ruling. On the face of it, Microsoft's free inclusion of Media Player in Windows was a boon to consumers. But the EC was able to show that the software bundling harmed rivals such as Real Networks and Apple and reduced competition in the media player market—thus potentially hurting customers in the long run by leading to less choice in digital content formats. A similar argument held that by limiting the information it gave out about Windows networking standards, Microsoft had foreclosed competition in desktop and server operating systems, to the detriment of consumer choice.

The same kind of thinking is at the core of the commission's case against Intel. Prompted by complaints from rival chipmaker AMD dating back to 2000, the EC has charged Intel with illegal use of sales tactics such as rebates and incentives to maintain or increase its market share in microprocessors. Such programs are normally permissible but can cross the line into abuse when practiced by companies with monopoly market share.

Intel strongly denies any wrongdoing and says it has acted within the law with its market incentive programs. It also argues that the programs have led to lower chip prices for consumers.

That may not be enough of a defense in Europe—especially now that the commission's hand has been strengthened in the wake of the Microsoft defeat. "European authorities and courts put a higher duty on dominant firms to deal fairly with their competitors," says Philip Marsden, a senior research fellow at the British Institute of International & Comparative Law. "They want to foster gentlemanly competition, a premise that is foreign to American antitrust thinking."

INDEX OF LEADING ECONOMIC INDICATORS FALLS IN AUGUST

The Conference Board's Index of Leading Economic Indicators includes the following:

*Real money supply (M2)
*Index of consumer expectations
*Average weekly initial claims for unemployment insurance
*Stock prices
*Building permits
*Vendor performance
*Manufacturers' new orders for nondefense capital goods
*Interest rate spread
*Manufacturers' new orders for consumer goods and materials
*Average weekly manufacturing hours

It is considered a good indicator for economic performance for the next three to six months.

From The New York Times:

The index of leading economic indicators fell in August by the most in six months, reflecting lower consumer confidence and a rise in initial claims for unemployment insurance.

The indicators index, compiled by the Conference Board, declined 0.6 percent, more than forecast, after a 0.7 percent increase in July that was larger than initially reported, the group, based in New York, said yesterday. The index points to the direction of the economy over the next three to six months.

The data underlined concerns that the economy might be in danger of stalling as a real estate slump, tougher lending standards and a recently softer job market threaten consumer spending.

GATES TOPS FORBES 400 RICHEST AMERICANS

No surprise here. Bill Gates is the richest American with $59 billion and Warren Buffett is second with $52 billion.

You can view the full rankings at Forbes.com.

This list includes only Americans. Interested in who is wealthier, Bill Gates or Mexican telephone mogul Carlos Slim Helú? As of August 31, 2007, they were even. Check out this article at Forbes.com for details.

CANADIAN LOONIE EQUAL TO U.S. DOLLAR

From CNNMoney.com:

The Canadian dollar reached parity with the U.S. dollar on Thursday for the first time since November 1976.

Known as the loonie because of the bird pictured on the one-dollar coin, the Canadian dollar has been gaining ground on its American counterpart since hitting an all-time low of 61.79 U.S. cents on Jan. 21, 2002.

This week the loonie rose sharply against its U.S. counterpart after the Federal Reserve announced a dramatic half-point cut in its benchmark interest rates. The Bank of Canada, meanwhile, has kept its equivalent rates stable.

As a result, the spread between U.S. and Canadian interest rates widened, making Canada a more attractive place for German, Japanese, American and other foreign investors to put their money.

"Canadians are getting a lot richer relative to Americans. The parity exchange rate is just one example of that," said Jeff Rubin, Chief Economist and Strategist at CIBC World Markets.

"It really reflects the rise of the resource economy in Canada and the rise of western Canada and the decline of the manufacturing sector and the manufacturing heartland of Canada in Ontario," Rubin said.

"The Canadian economy that once use to be the sleepy little resource backwater of the North American economy, is certainly turning the tables on its big brother in a hurry," Rubin said.

The high (Canadian) dollar will hurt Canadian manufacturers who sell goods in the U.S. Canadian Auto Workers economist Jim Stanford warned that the sector, largely based in Ontario, will lose hundreds of thousands more jobs if the dollar remains at current levels.

PRESIDENT'S FISCAL POLICY: NO TAX INCREASES

From the Los Angeles Times:

Sidestepping the turmoil in the housing market and the credit problems associated with it, President Bush said today that the nation's economy was strong and would remain so if Congress steered clear of tax increases.

But he would not rate the risk of recession, saying, "You need to talk to economists. I think I got a B in Econ 101. I got an A, however, in keeping taxes low."

HOUSING STARTS DROP 2.6% IN AUGUST

From USA Today:

Construction of new homes fell in August to the slowest pace in 12 years as troubles in the housing industry continued.

The Commerce Department reported Wednesday that construction of new homes fell 2.6% in August to a seasonally adjusted annual rate of 1.331 million units.

That was the lowest pace for housing starts since the June 1995 rate of 1.281 million units.

By region, the drop in housing starts was the worst in the Northeast, where they fell 38% in August, the sharpest drop since December 1990. Starts were off 18% in the West but rose 4.2% in the Midwest and 11.4% in the South.

FEDERAL DEBT CEILING TO BE HIT IF IT ISN'T RAISED

From USA Today:

Treasury Secretary Henry Paulson told Congress on Wednesday that the federal government will hit the current debt ceiling on Oct. 1.

He urged quick action to increase the limit, saying it was essential to protect the "full faith and credit" of the country, especially at a time of financial market turmoil.

The current debt limit is $8.965 trillion. Unless Congress votes to raise that ceiling, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due. The United States has never defaulted on a debt payment but the decision on whether to raise the debt ceiling often sparks a prolonged political battle in Congress.

The Senate Finance Committee earlier this month approved increasing the limit on the national debt to $9.82 trillion. That boost of $850 billion would be the fifth increase in the government's borrowing limit since President Bush took office in 2001.

CPI DROPS IN AUGUST

Check out the Bureau of Labor Statistics CPI Report here.

From USA Today:

Consumer prices in August fell for the first time in 10 months as another big drop in energy costs offset higher food prices.

The Labor Department reported Wednesday that its closely watched consumer price index dipped 0.1% last month, slightly better than the flat reading that had been expected. It was the first decline in consumer prices since a 0.4% fall in October.

Overall inflation through August is rising at an annual rate of 3.7%, up from a 2.5% increase for all of 2006.

n addition to higher food costs, consumers have also been hit by surging energy prices, which are up 12.7% at an annual rate this year, even with the declines in the past three months. Analysts are worried that further price increases are in the pipeline given the fact that oil prices have now surged to record levels above $80 a barrel.

Core inflation, which the Fed closely monitors, is better behaved this year, rising at an annual rate of 2.3% through August, down from an increase of 2.6% for all of 2006.

The price of medical care continued to surge, rising 0.5% in August. Medical costs are up 4.5% over the past year.

OIL TOPS $82 PER BARREL

You can check the current price by clicking here.

From USA Today:

Oil futures rose to records Tuesday after the Federal Reserve cut interest rates by a larger-than-expected half percentage point, raising market hopes that economic growth will accelerate and lift demand even as crude oil and gasoline inventories are tight.

A barrel of crude surged to a new trading high of $81.90 on the New York Mercantile Exchange in the moments immediately after the Fed's decision.

Investors had already priced a quarter-point cut in the benchmark federal funds rate into the market, said Brad Samples, a commodities analyst at Summit Energy Services in Louisville The half-point cut spurred even more buying.

Moreover, many analysts see a weaker dollar as a natural side effect of lower rates, and that could promote buying of oil contracts by foreign investors.

"Lower interest rates have the unintended consequence of raising oil prices if the dollar declines relative to other currencies," said Larry Chorn, chief economist at Platts, the energy research arm of McGraw-Hill, in a statement.

"Seen through a euro or yen prism, nominal (New York Mercantile Exchange crude) prices have yet to reach their 2006 highs," said Antoine Halff, head of energy research at Fimat USA, in a research note.

FED MAKES HALF-POINT CUT

From USA Today:

The Federal Reserve cut interest rates a half-percentage point Tuesday in a dramatic bid to shore up confidence in the economy and ease worries about a credit crunch in financial markets.

Fed Chairman Ben Bernanke and his colleagues unanimously voted to lower their target for short-term interest rates, which influences a wide variety of borrowing costs, to 4.75% from 5.25%. The cut was the first from the Fed in more than four years and followed 15 months of steady rates from the central bank.

In their post-meeting statement, Fed policymakers said the credit squeeze "has the potential" to sharpen the housing decline and harm the larger economy. They said turmoil in financial markets had "increased the uncertainty" about the economic outlook.

"Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time," they wrote.

The Fed on Tuesday also cut the discount rate, the rate it charges banks for direct loans, by a half-percentage point, in a move to facilitate lending. A month ago, the Fed, in a rare move, cut the discount rate, which usually moves in tandem with the Fed's main interest rate lever, to help ease the credit crunch.

Financial markets moved sharply higher in response to the Fed move Tuesday, with the Dow Jones industrials adding more than 100 points within minutes of the Fed announcement. They closed up more than 300.

EUROPEAN COURT DENIES MICROSOFT APPEAL

From the International Herald Tribune:

The second-highest court in Europe on Monday rejected Microsoft's attempt to overturn a landmark European Commission antitrust ruling and record fine, bolstering smaller software makers and putting market leaders on notice that they cannot leverage dominance in one technology niche to squelch broader innovation, industry and legal experts said.

The European Court of First Instance, in a starkly worded summary, ordered Microsoft to obey a 2004 commission order to share confidential computer code with competitors. The court also upheld the record fine of €497.2 million, or $690 million, against the world's largest software maker.

Software and legal experts said the court's decision may signal problems for companies like Apple, Intel and Qualcomm, whose market dominance in online music downloads, computer chips and mobile phone technology is also being scrutinized by the commission. The ruling also could make it harder for Microsoft to continue "bundling" new features into its Windows software.

Microsoft's allies said the court's decision, which expressly forbids the company's policy of bundling new extras into its Windows operating system, will have a chilling effect on the strategies of many global software makers.

"This ruling is certainly going to introduce a lot of uncertainty," said Jonathan Zuck, president of the Association for Competitive Technology, a Washington-based group that supported Microsoft in its legal case in Europe. "What the court is basically saying is that if you develop a successful product and get too big, the European Commission is going to force you to give away your intellectual property."

When Microsoft wants to put handwriting and speech recognition features or stronger anti-virus and other security software into the Windows operating system, competitors can complain to European authorities, even though the European unbundling order in the media player case - compelling Microsoft to offer a version of Windows in Europe without the media player but with no difference in price - was a failure.

Microsoft has already been forced to pay nearly €1 billion in fines in the long-running legal case, which has pitted the software maker against the commission and a host of competitors, including International Business Machines and Novell.

After Sun filed the initial complaint in 1998, the commission later expanded its inquiry to include Microsoft's practice of bundling its Windows Media Player into the Windows operating system. After Microsoft began bundling its media player into Windows, it overtook the market leader, RealNetworks.

Microsoft has been repeatedly fined by the commission since the 2004 antitrust ruling for failing to adequately disclose server software coding.

During the course of the litigation, Kroes said in Brussels that Microsoft's share of the market in workgroup servers had risen to 80 percent from 40 percent and that Windows Media Player had come to dominate the market.

She highlighted the fact that Microsoft had 95 percent of the world market for desktop operating systems and said she would like to see that share decline.

"You can't draw a line and say exactly 50 percent is correct, but a significant drop in market share is what we would like to see," she said. "Microsoft cannot regulate the market by imposing its products and its services on people."

IS THE U.S. DOLLAR IN SERIOUS TROUBLE?

From the International Herald Tribune:

Finance ministers and central bankers have long fretted that at some point, the rest of the world would lose its willingness to finance the United States' proclivity to consume far more than it produces - and that a potentially disastrous free-fall in the dollar's value would result.

But for longer than most economists would have been willing to predict a decade ago, the world has been a willing partner in American excess - until a new and home-grown financial crisis this summer rattled confidence in the country, the world's largest economy.

On Thursday, the dollar briefly fell to another low against the euro of $1.3927, as a slow decline that has been under way for months picked up steam this past week.

"This is all pointing to a greatly increased risk of a fast unwinding of the U.S. current account deficit and a serious decline of the dollar," said Kenneth Rogoff, a former chief economist at the International Monetary Fund and an expert on exchange rates. "We could finally see the big kahuna hit."

So long as Americans buy more than they earn from exports - and they did, creating a current account deficit of $850 billion last year - the rest of the world financed the binge by bringing dollars into the United States for investment in stocks, bonds, real estate or other assets, thereby preserving demand for the dollar.

While most economists just a few months ago would have dismissed the prospect of a dollar collapse outright, they now are debating the possibility that something on par with the dollar debacle of the 1970s might just happen again.

When a currency collapses, the central bank can push up interest rates to attract needed investment, but strangle the economy in the process. Alternatively, it can let the currency fall and watch prices of imports - and eventually competing domestic goods - rise sharply.

Double-digit inflation resulted in the 1970s and only a global recession brought it to an end.

The European Central Bank put off an interest rate increase it had planned for September, but is still inclined to tighten credit at least one more time by the end of this year. By contrast, the U.S. Federal Reserve has hinted at a rate cut at its meeting next Tuesday - a step that would diminish the appeal of dollar-denominated assets, almost certainly sending the dollar lower.

Pressed to make an educated guess, most economists opt for calm, believing the dollar is unlikely to go into a tailspin even as they mark up the odds of one.

The major holders of dollars - notably the Chinese, with their $1.3 trillion in currency reserves - have little incentive to see the dollar weaken, and their support provides the dollar with a bulwark of strength. And since investors need to stay diversified, and U.S. markets are deep and liquid, abandoning the dollar wholesale is hardly a realistic option.

"Rather than a precipitous decline, we are probably be looking at a move steadily lower," said Simon Derrick, chief currency strategist at Bank of New York in London.

LIQUIDITY CONCERN CAUSES RUN ON BRITISH BANK

From the International Herald Tribune:

Hundreds of Northern Rock customers crowded into branches across Britain on Friday to pull out their savings after the mortgage-loan provider sought emergency funding from the Bank of England.

"It's scary," said Peter Pye, a 60-year-old retired university lecturer standing in a line of about 30 people outside the Moorgate branch in London's financial district. "I have my life's savings in Northern Rock."

Fears were sparked by the Bank of England's emergency loan to Northern Rock, Britain's eighth-largest listed bank, whose access to funds dried up as the cost of borrowing between banks rose in the broader credit crisis.

Deposit insurance from the Financial Services Compensation Scheme protects customers for up to £31,700 should a bank default.

In addition, the Bank of England said Northern Rock was solvent and only in need of short-term help. But many customers were not taking any chances.

Queues snaked through branches and spilled onto streets as tellers tried to soothe frazzled nerves. Some customers were satisfied by the lender's reassurances.

Northern Rock's Web site was also inundated, frustrating those who sought to withdraw funds. The bank had to restart the site "over a period of time" after unusually high usage froze the service, spokesman Don Hunter said.

"I've been trying to get my money out since 7 o'clock this morning and I'm failing," said customer Andrew Murphy." I appreciate that it's very unlikely to go bust but I don't want to take the risk with my savings."

"I don't think anything is going to happen because the Bank of England won't allow it to happen," said Paul Delamere, 46, waiting at Maddox Street to withdraw his money. Still, he was "more comfortable" with reducing his account.

GREENSPAN BOOK CRITICIZES BUSH AND REPUBLICANS FOR LACKING FISCAL DISCIPLINE

From The Wall Street Journal:

In a withering critique of his fellow Republicans, former Federal Reserve Chairman Alan Greenspan says in his memoir that the party to which he has belonged all his life deserved to lose power last year for forsaking its small-government principles.

In "The Age of Turbulence: Adventures in a New World," published by Penguin Press, Mr. Greenspan criticizes both congressional Republicans and President George W. Bush for abandoning fiscal discipline.

Mr. Greenspan, who calls himself a "lifelong libertarian Republican," writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. He says President Bush's failure to do so "was a major mistake." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither. They deserved to lose."

Mr. Greenspan writes that when President Bush chose Dick Cheney as vice president and Paul O'Neill as treasury secretary -- both colleagues from the Gerald Ford administration, during which Mr. Greenspan was chairman of the Council of Economic Advisers -- he "indulged in a bit of fantasy" that this would be the government that would have resulted if Mr. Ford hadn't lost to Jimmy Carter in 1976. But Mr. Greenspan discovered that in the Bush White House, the "political operation was far more dominant" than in Mr. Ford's. "Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he writes.

From serving under so many presidents, Mr. Greenspan concludes that there's something abnormal about anyone willing to do what it takes to get the job. Mr. Ford, he writes, "was as close to normal as you get in a president, but he was never elected." The Watergate tapes, he says, show Richard Nixon as "an extremely smart man who is sadly paranoid, misanthropic and cynical." He recalls telling someone who had accused Nixon of anti-Semitism that he "wasn't exclusively anti-Semitic. He was anti-Semitic, anti-Italian, anti-Greek, anti-Slovak. I don't know anybody he was pro."

Ronald Reagan's ability to instantly tap one-liners and anecdotes in support of a particular policy represented an "odd form of intelligence." He describes Bill Clinton as "a fellow information hound" with "a consistent, disciplined focus on long-term economic growth" whose relationship with Monica Lewinsky "made me feel disappointed and sad."

Mr. Greenspan retired in early 2006 after 18 years as chairman of the Federal Reserve. He had served under six presidents as either Fed chairman or adviser. He now runs a private consulting company; his only formal public role is adviser to British Prime Minister Gordon Brown.

UCLA ANDERSON FORECAST PREDICTS ECONOMIC SLOWDOWN

From AP via MSNBC:

Ongoing weakness in the housing market will push the national economy to the brink of recession, but growth in other areas should put the country back on a slow road to recovery by 2009, according to an economic forecast released Wednesday.

The quarterly Anderson Forecast by the University of California at Los Angeles predicts growth in the gross domestic product of just over 1 percent for the fourth quarter of 2007 and first quarter of 2008.

Economic growth will remain “tepid” for the remainder of 2008 and return to 3 percent in 2009, said David Shulman, senior economist for the forecast.

Shulman lowered his forecast for housing starts to an annual rate of about 1 million to 1.1 million, down from a range of 1.2 million to 1.3 million.

That outlook is less optimistic than one presented Tuesday by the National Association of Realtors, which projected construction of new homes will fall to 1.4 million this year from 1.8 million last year.

Shulman also expects housing prices to plunge 10 percent to 15 percent before they start to recover, sometime in 2009.

OPEC CONSIDERS PRODUCTION INCREASE AS OIL TOPS $77 PER BARREL

From Reuters:

OPEC was meeting on Tuesday to consider a modest rise in oil output proposed by Saudi Arabia and other Gulf Arab states in a gesture to consumers worried by the economic impact of $77 oil and rapidly diminishing stocks.

But the plan to add 500,000 barrels per day of oil had yet to convince all OPEC ministers and discussions were continuing, a delegate said. Venezuela, Algeria and Libya said ahead of the talks they were not in support of increasing supplies.

Industrialized consumer nations are forecasting their crude oil stocks will fall to the bottom of the five-year average range by January unless OPEC pumps more crude oil, and fast.

U.S. crude oil is above $77, close to its August 1 record high of $78.77 a barrel, following attacks on oil and natural gas pipelines in Mexico, the world's fifth largest crude exporter.

BUSINESSES PROVIDE INCENTIVES FOR WORKERS TO REDUCE HEALTH RISKS

From AP via MSNBC:

First they tried nudging. Now companies are penalizing workers who have high health risks such as obesity and high blood pressure or cholesterol as insurance costs climb.

A small number of companies have linked health factors to what employees pay for benefits, but the practice is expected to grow now that some federal rules have been finalized, spelling out what’s allowed by law. Employee advocates worry that other anti-discrimination laws such as the Americans with Disabilities Act won’t cover the person who is 20 or 30 pounds overweight.

The businesses are deducting from employees’ paychecks, adding insurance surcharges or offering insurance discounts or rebates only to low-risk workers.

“Employers know they have to do something,” said Garry Mathiason, a senior partner at the national employment and labor law firm Littler Mendelson, based in Boston. “I believe that in just the next two years more employers will turn to penalties to change employee behavior.”

A 2003-2004 National Health and Nutrition Examination Survey showed about two-thirds of adults in the United States were overweight and almost one-third obese. A U.S. surgeon general’s report said health care costs of obesity totaled more than $117 billion in 2000.

FED EXPECTED TO LOWER INTEREST RATES

From USA Today:

The Federal Reserve will lower interest rates by half a percentage point by March in the face of sluggish economic growth, according to a survey of economists from the National Association of Business Economics released Monday.

The survey, reflecting the estimates of 46 economists, was taken Aug 2-23.

The economists forecast a 50-basis-point cut in the federal funds rate by the end of the first quarter of 2008, up from May's forecast of 25 basis points.

The Fed is scheduled to meet next on Sept. 18.

33% OF ECONOMISTS POLLED PREDICT RECESSION WITHIN NEXT YEAR

From MSNBC:

Before the meltdown in the credit markets last month, the Blue Chip (a financial newsletter) consensus pegged the odds of recession in the next year at about one in four. That number recently jumped to one in three, according to Randell Moore, the newsletter’s editor.

The growing signs of economic strain have consumers feeling more pessimistic — especially since most no longer have rising equity in their home to help fund their shopping trips. Consumer confidence dropped sharply in August, based on a widely watched University of Michigan survey.
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You can view the University of Michigan survey here.

You can view the Conference Board survey here.

RECORD FORECLOSURES REPORTED

Check out this chart that accompanies the story below for mortgage delinquency and foreclosure statistics for every state.

In Illinois there are 1.67 million mortgages listed with 5.09% past due and 1.05% more than 90 days so.

From USA Today:

With a warning that the worst is yet to come, the Mortgage Bankers Association said Thursday that lenders began foreclosure proceedings on a record number of homes this spring.

The turmoil in the mortgage market poses multiple threats, the MBA says. Foreclosures are likely to rise for at least another year. A bigger supply of homes in foreclosure would weaken prices in many areas. And people behind on loans will find it harder to refinance.

For all loan types, 5% of borrowers — nearly 2.5 million people — missed at least one payment last quarter. That's up from 4.4% in the same period last year.

The problems appear to be focused in seven states. Job losses in Michigan, Ohio and Indiana have depressed housing there. Those three states account for nearly 20% of the nation's homes in foreclosure.

And a rising number of defaults in four states — California, Nevada, Florida and Arizona — is largely why the U.S. delinquency rate is up. As home prices there fall, more people are in the upside-down position of owing more on their loans than their homes are worth.

California accounted for more than 17% of the subprime ARMs in the country and for more than 19% of the new foreclosures in the second quarter, the MBA says.

HORRIBLE EMPLOYMENT REPORT CAUSES CONCERN

The Bureau of Labor Statistics issued its August Employment Situation Report today. It provided plenty of bad news.

From USA Today:

Employers cut 4,000 jobs in August, the first time in four years that monthly hiring contracted, the government said Friday in a report certain to boost pressure on Federal Reserve policymakers to cut interest rates.

In addition to the August job losses, the Labor Department revised down its estimates for hiring in June and July by a total of 81,000. It said 68,000 jobs were added in July rather than 92,000 and 69,000 in June instead of 126,000.

Economists polled a week ago by Reuters had forecast 110,000 jobs would be created in August, but many analysts had scaled back their expectations since then amid increasing signs the job market was coming under strain.

The surprisingly bleak August jobs report was a stark sign that a painful credit crunch that has unnerved Wall Street is putting a strain on the national economy. The last time the economy shed jobs was in August 2003, when 42,000 jobs were cut.

Job losses in August were concentrated in the goods-producing sector. A whopping 46,000 manufacturing jobs were cut, the most since an 86,000-job cut in July 2003. Construction businesses shed another 22,000 jobs, up from 14,000 that were lost in July.

Service industries added 60,000 jobs in August.

Those with jobs, however, did see modest wage gains.

Average hourly earnings rose to $17.50 in August, a 0.3% increase from July. That matched economists' forecasts. Over the past 12 months, wages are up 3.9%. Wage growth supports consumer spending, a major ingredient for a healthy economy.

MATTEL RECALLS MORE LEAD-TAINTED CHINESE TOYS

From USA Today:

Mattel announced another recall of lead-tainted toys from China late Tuesday, its third such announcement in about a month.

The recall of nearly 800,000 Fisher-Price and parent company Mattel-brand products includes Barbie accessories, such as lead-tainted puppies and cats; GeoTrax trains; and toy bongo drums. All were sold within the last year.

Children can get lead poisoning from sucking on or swallowing toys or jewelry with lead. Lead can cause learning and behavior problems and even death.

PENDING EXISTING HOME SALES LOWEST SINCE 2001

From USA Today:

Pending sales of existing homes, a leading indicator for the housing sector, fell in July to the lowest level in nearly six years as borrowers struggled to finalize home purchases, particularly in expensive areas.

The National Association of Realtors said its seasonally adjusted index of pending home sales for July fell 16.1% from a year ago and 12.2% from the prior month.

A home sale is listed as pending when the contract has been signed but the transaction has not closed. The sale usually closes within months of signing.

Some home purchases aren't closing because mortgage loans have been "falling through at the last moment," Lawrence Yun, the Realtors trade group's senior economist, said in a statement.

"Numbers like this should put to rest the belief that we've reached the bottom" in the housing market, said Joel Naroff, chief economist for Commerce Bancorp. "There's still a lot of pain that's ahead of us."

WTO INVESTIGATING POSSIBLE VIOLATIONS BY CHINA

From USA Today:

The World Trade Organization opened a formal investigation Friday into allegations by the USA and Mexico that China is providing illegal subsidies for a range of industries, officials said.

The North American countries accuse Beijing of using WTO-prohibited tax breaks to encourage Chinese companies to boost exports, while imposing tax and tariff penalties to limit purchases of foreign products in China.

"China is providing numerous subsidies that appear to be prohibited under WTO rules," U.S. trade lawyer Juan Millan told the WTO's dispute body last month. "China offers tax refunds, reductions and exemptions that discriminate against imported products ... or that subsidize China's exports."

The U.S. trade deficit set a record for the fifth consecutive year in 2006 at $765.3 billion. The imbalance with China grew to $232.5 billion, the highest ever with a single country.

Beijing, meanwhile, blocked a separate probe of its rules for protecting intellectual property rights. But the move will probably only delay the creation of a panel until the next meeting of the WTO's dispute body in September, when Washington can bring up the issue again.

Under WTO rules, a second request for an investigative panel is automatically granted.

COURT DECISION GIVES MEXICAN TRUCKERS GREEN LIGHT TO DRIVE IN USA

From AP via Yahoo:

The Bush administration can go ahead with a pilot program to allow as many as 100 Mexican trucking companies to freely haul their cargo anywhere within the U.S. for the next year, a federal appeals court ruled Friday.

The 9th U.S. Circuit Court of Appeals denied a request made by the Teamsters union, the Sierra Club and the nonprofit Public Citizen to halt the program.

The appeals court ruled the groups have not satisfied the legal requirements to immediately stop what the government is calling a "demonstration project," but can continue to argue their case.

The trucking program is scheduled to begin Thursday.

Canadian trucking companies have full access to U.S. roads, but Mexican trucks can travel only about 20 miles inside the country at certain border crossings, such as ones in San Diego and El Paso, Texas.

The government says it has imposed rigorous safety protocols in the program, including drug and alcohol testing for drivers done by U.S. companies. In addition, law enforcement officials have stepped up nationwide enforcement of a law that's been on the books since the 1970s requiring interstate truck and bus drivers to have a basic understanding of written and spoken English.

The Federal Motor Carrier Safety Administration, the Department of Transportation agency charged with managing the program, said Friday that the court's decision is "welcome news for U.S. truck drivers anxious to compete south of the border and U.S. consumers eager to realize the savings of more efficient shipments with one of our largest trading partners."

However, the agency said it must still wait for final report by the inspector general and for Mexico to begin giving U.S. trucking companies reciprocal access before the program can begin.

FEDERAL HOUSING ADMINISTRATION TO PROVIDE SAFETY NET

From USA Today:

President Bush announced a series of "limited" steps Friday designed to help homeowners struggling to pay their mortgages, expanding the role of the Federal Housing Administration and proposing a temporary change in tax law to prevent people from being penalized when they refinance risky "subprime" adjustable-rate mortgages.

Under Bush's proposal, an estimated 80,000 homeowners with bruised credit and subprime ARMs they can no longer afford will be able to refinance loans, which the Federal Housing Administration (FHA) would insure.

The move marks a historic expansion of the role of the FHA, a Depression-era agency that has traditionally served low- and moderate-income families and first-time buyers, but not delinquent borrowers. Nearly 16% of subprime borrowers are behind on their ARMs, and an estimated 2 million subprime ARMs totaling about $600 billion will reset to higher rates through the end of next year.

To qualify for the new benefit, homeowners would have to prove they paid their loan on time before it reset to a higher rate and must have at least 3% equity in the home.

Under current rules, the maximum loan the FHA can guarantee is $202,000 in most states and up to $362,000 in high-cost states such as California and New York.

Bush also called on Congress to pass his proposal to reform the FHA, in part by raising those loan limits to $262,000 in most states and $417,000 in pricier areas.

GDP GROWTH SOLID IN SECOND QUARTER

From Action Economics via BusinessWeek:

For the preliminary U.S. second-quarter GDP report, the figures revealed an upward bump to growth of 4.0% from the 3.4% advance estimate released in July. The median forecast of economists surveyed by Action Economics was for an upward revision to 4.1%.

GDP growth averaged 2.3% through the first half of 2007, and we continue to expect a 2.8% pace in the third quarter. August economic data will be watched closely for clues as to the impacts of current financial dislocation, and we have thus far marked down our fourth-quarter GDP estimate to 2.8% in response to these effects. But solid growth up to August will provide a floor to any revisions to third-quarter growth, as will the strong GDP component mix that has boosted third-quarter prospects.

HELMSLEY'S DOG $12 MILLION, TWO OF FOUR GRANDKIDS $0

From USA Today:

Leona Helmsley's dog will continue to live an opulent life, and then be buried alongside her in a mausoleum. But two of Helmsley's grandchildren got nothing from the late luxury hotelier and real estate billionaire's estate.

Helmsley left her beloved white Maltese, named Trouble, a $12 million trust fund, according to her will, which was made public Tuesday in surrogate court.

She also left millions for her brother, Alvin Rosenthal, who was named to care for Trouble in her absence, as well as two of four grandchildren from her late son Jay Panzirer — so long as they visit their father's grave site once each calendar year.

Otherwise, she wrote, neither will get a penny of the $5 million she left for each.

Helmsley left nothing to two of Jay Panzirer's other children — Craig and Meegan Panzirer — for "reasons that are known to them," she wrote.

AN APPLE iCAR?

From USA Today:

U.S. computer company Apple and German automaker Volkswagen are discussing the possibility of building an "iCar" which would feature products by the producer of the ubiquitous iPod personal music player.

Apple CEO Steve Jobs and Volkswagen's chief Martin Winterkorn met several days ago in California, and plan to meet for further discussions, said Hans-Gerd Bode, a spokesman for VW.
There are "scores of ideas," but few concrete plans at this point, Bode said.

Market experts estimate that a compact car upgraded with Apple products would be of substantial interest to young target groups, according to German financial magazine Capital.

Electronics, ranging from satellite navigation machines to cup warmers, are increasingly a selling point for automakers.

Ford Motor, for instance, will debut this fall an in-car communication and entertainment system developed with Microsoft that will cost $395 as an option.

The system, called Sync, allows drivers, using either voice recognition or steering wheel controls, to listen to their digital music players and have text messages on their cellphones read aloud.

WAGES INCREASING IN CHINA

From The New York Times:

Chinese wages are on the rise. No reliable figures for average wages exist; the government’s economic data are notably unreliable. But factory owners and experts who monitor the nation’s labor market say that businesses are having a hard time finding able-bodied workers and are having to pay the workers they can find more money.

Chinese officials are quick to say that there is no overall shortage of labor — rather, there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s. Factories in cities like Guangzhou advertise heavily for young workers, even while employment offices consider it a success if someone over 40 can find any job in less than a year.

“Now they’re taking workers into their early 30s,” said Jonathan Unger, director of the Contemporary China Center at Australian National University in Canberra, “but anything older than that and they think they can’t take the conditions, the 11-hour days,” as well as work on weekends, and a tedious life in factory-owned dormitories.

This lack of laborers of desirable age is hardly making China a worker’s paradise. Factory wages remain extremely low by Western standards: roughly $1 an hour for better-paid workers near the coast, compared with as little as 50 cents early this decade.

Moreover, labor regulation is weak in China, as shown most vividly this year by the discovery that brick kilns in the north of the country had kidnapped and enslaved hundreds of children and mentally disadvantaged adults, working them under brutal conditions with little or no pay.

And wages are stagnating in the middle of the labor market — workers who consider themselves too educated for entry-level jobs in a garment factory, but lacking the skills or experience to command a premium salary elsewhere. “It’s easy to find a job with not a very high salary,” said Chen Zheng, a 24-year-old auto worker and high school graduate in Ningbo. “It’s not easy if you want a higher wage.”

APPLE INTRODUCING NEW iPODS SEPTEMBER 5TH?

From Reuters:

Apple Inc shares rose more than 4.5 percent on Wednesday, fueled by excitement over the pending launch of new iPod digital music players, which could entice current users to buy upgraded models.

The stock climbed $5.74 to $132.56 in early trading on the Nasdaq, after Apple distributed invitations to a September 5 event in San Francisco. Goldman Sachs said in a note to clients that the date would bring "the almost certain launch of a new family of iPods."

"The product announcement is likely to include a full line-up of revamped iPods with significantly greater functionality at current price points, including the much-anticipated full-screen video iPod," Goldman said.

Goldman recommended clients buy Apple shares, saying the next video iPod could drive "an accelerated upgrade cycle."

Apple shares are up about 55 percent this year, driven by the steady strength of the iPod, which dominates the portable music player market, and the late June launch of the iPhone.

GASOLINE SUPPLY AT RECORD LOW

From USA Today:

U.S. gasoline supplies are the lowest level ever recorded in terms of demand, just 20 days of average fuel consumption, the Energy Information Administration said Wednesday.

"This is even fewer days than seen following the hurricanes in 2005," the EIA said in its weekly review of the oil market. "While the absolute level of total gasoline inventories has been slightly lower a few times in recent years, when the level of demand is taken into account, it has not been this low before."

The low gasoline inventory will not likely cause a sharp spike in retail fuel prices, but will limit the usual decline in pump prices after this weekend's Labor Day holiday, the EIA said.

ILLINOIS STATE UNIVERSITY DRESS CODE

From the Peoria Journal Star:

The College of Business at Illinois State University is taking aim at images of pajama-wearing students with backwards hats.

Starting next week, students majoring in marketing or business teacher education will have to wear business casual attire to class or risk being sent home for the day.

While many business schools at colleges and universities encourage students to dress up for interviews and meetings, not many require a dress code in class. ISU officials implemented this code, they say, as a way to give their students an edge in the professional world.

The marketing department began testing the dress code in select classes in 2003, and last fall, all students in the professional sales sequence were required to dress in business casual attire to class.

"I have noticed in my interactions with these students that when they come dressed in business attire, they look like they are ready to do serious work. They are attentive, they're courteous and have a sense of confidence about them," said Amy Humphreys, assistant to the dean for constituent relations.

EBERT GIVES DISNEY NEGOTIATORS THUMBS DOWN

From The Wall Street Journal's The Evening Wrap:

Film critic Roger Ebert may ban the use of thumbs on his show ""At the Movies with Ebert & Roeper." Mr. Ebert holds a copyright on the "thumbs-up" or "thumbs-down" gesture with which reviewers on the show judge each film. Thumb positioning has become a staple of movie marketing and, in turn, a big part of the show's influence. In his frustration over contract negotiations with Disney-ABC Domestic Television, his show's distributor, the critic allegedly exercised his right to block thumb-based film assessment until he receives a better offer. Mr. Ebert hasn't appeared on the show in over a year after struggling with health problems, but guest critics had kept the thumb tradition alive. The two sides disagree on who actually enacted the thumb ban -- with Mr. Ebert blaming Disney, and Disney pointing the finger at Mr. Ebert -- but two episodes have already been filmed without opposable digits.

MORE BAD NEWS FOR HOUSING MARKET

From USA Today:

Sales of existing homes dropped for a fifth straight month in July, falling to the slowest annual pace in nearly five years, while home prices fell for a record 12th consecutive month.

The National Association of Realtors reported that sales of existing homes dipped 0.2% last month to a seasonally adjusted annual rate of 5.75 million units.

The median price of a home sold last month slid to $230,200, down 0.6% from the median price a year ago. It marked the 12th consecutive month that home prices have declined compared with a year ago, an all-time high.

The inventory of homes for sale rose 5.1% to 4.59 million, representing 9.6 months worth of supply at the current sales pace.

ACER TO BUY GATEWAY

From USA Today:

Taiwan's Acer will buy Gateway for $710 million, creating the world's No. 3 PC maker and doubling its U.S. presence while dealing a blow to rival Lenovo's efforts to grow in Europe.

Lenovo's plans were set back when Gateway said Monday that it would exercise its right to take a first attempt at buying the parent of European-focused PC maker Packard Bell.

The Chinese PC giant has said it was in talks to buy Paris-based Packard Bell, hoping to expand its presence in a European consumer market where it is relatively weak.

Acer said the merger would create a company with more than $15 billion in sales and 20 million PCs shipped per year, adding it would keep the Gateway brand in the United States.

On a worldwide basis, the tie-up would help Acer — Taiwan's most recognized global brand — displace Lenovo.

Lenovo — one of a handful of Chinese firms trying to forge a global brand by investing abroad — dropped to global fourth place in the first three months of 2007 but has now reclaimed the No. 3 slot from Acer in a closely fought battle.

The deal is expected to be completed by December and the merged company would still be a distant third in the United States, behind No. 2 Hewlett-Packard at 23.6% and market leader Dell at 28.4%, according to IDC.

A merged Acer and Gateway would have sold about 18.6 million PCs worldwide last year, or about 8% of global sales, compared to Dell's 39.1 million units, Hewlett-Packard's 38.8 million and Lenovo's 16.6 million, according to IDC.

$100 BILL GETTING MAKEOVER

Counterfeiting is a huge problem for the United States. It isn't just criminals who do it, but foreign governments have been suspected of producing counterfeit U.S. currency, as well. After reading the story below, check out this one about North Korea counterfeiting U.S. $100 bills.

AP story from MSNBC.com:

After six decades in which the venerable greenback never changed its look, the U.S. currency has undergone a slew of makeovers. The most amazing is yet to come.

A new security thread has been approved for the $100 bill, The Associated Press has learned, and the change will cause double-takes.

The new look is part of an effort to thwart counterfeiters who are armed with ever-more sophisticated computers, scanners and color copiers. The C-note, with features the likeness of Benjamin Franklin, is the most frequent target of counterfeiters operating outside the United States.

The operation of the new security thread looks like something straight out of the Hogwarts School of Witchcraft and Wizardry. This magic, however, relies on innovations produced from decades of development.

It combines micro-printing with tiny lenses _ 650,000 for a single $100 bill. The lenses magnify the micro-printing in a truly remarkable way.

Move the bill side to side and the image appears to move up and down. Move the bill up and down and the image appears to move from side to side.

"It is a really complex optical structure on a microscopic scale. It makes for a very compelling high security device," said Douglas Crane, a vice president at Crane & Co. The Dalton, Mass-based company has a $46 million contract to produce the new security threads.

Larry Felix, director of the Bureau of Engraving and Printing, confirmed details about the security thread in an AP interview.

The redesign of the $100 is about one-third of the way complete. The bill is expected to go into circulation late next year.

The $100 bill represents more than 70 percent of the $776 billion in currency in circulation, two-thirds of which is held overseas.

"Counterfeiting is becoming highly organized and highly efficient," Felix said. He said some clandestine printing plants in Latin America and Eastern Europe have been caught counterfeiting not only the U.S. currency but other countries' notes.

The government says $118.1 million in counterfeit U.S. currency was detected in 2006, an increase of 3.8 percent from 2005.

CHINESE GOVERNMENT DECLARES "WAR" ON TAINTED FOOD, DRUGS, AND EXPORTS

From Reuters:

China has launched a four-month "war" on tainted food, drugs and exports, state media reported on Friday, as beleaguered officials embraced time-tested campaign tactics to clean up the country's battered image.

Chinese Vice Premier Wu Yi told officials that the campaign, to run to the end of the year, would focus on problem products that have corroded domestic and foreign consumers' confidence in the "made in China" label.

"This is a special battle to protect the health and personal interests of the public and to protect the reputation of Chinese goods and the national image," Wu said, according to the government Web site (www.gov.cn).

She called the campaign a "stern political task" -- a reminder that officials' careers may be on the line.

Wu announced targets to clean up pig slaughtering, restaurants and canteens, pesticide use, food additives and the country's vital exports. "In some businesses the management level is low, production conditions are poor, quality levels and standards are low, and reliability is weak," she said.

Local officials may not share Wu's determination to move so fast, said the China Daily.

"Building an omnipresent monitoring and guarantee mechanism will prove a challenging mission for a four-month campaign," the paper said.

CRAMER'S MAD MONEY = CRAMER'S BAD ADVICE?

CNBC crazy man Jim Cramer who made millions in the 1980s and 1990s with his hedge fund rolls up his sleaves, beats his chest, and makes seemingly thousands of stock picks per show on Mad Money, but Barron's reports that Cramer's picks overall do not beat the S&P 500.

From Barron's August 20th edition:

"Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by YourMoneyWatch.com, a Website run by a retired stock analyst and loyal Cramer-watcher."

"We also looked at a database of Cramer's Mad Money picks maintained by his Website, TheStreet.com. It covers only the past six months, but includes an astounding 3,458 stocks - Buys mainly, punctuated by some Sells. These picks were flat to down in relation to the market. Count commissions and you would have been much better off in an index fund that simply tracks the market."

After an initial day-after 2% pop for Cramer's picks, the stocks "usually moved sideways or down for the following 30 trading days. This offered an opportunity to make money - 5% to 30% a year - by selling Cramer's selections short." Short selling is betting that a stock price will drop and profiting from that drop.

WAL-MART PET FOOD FROM CHINA FOUND TO HAVE MELAMINE

From USA Today:

Tests of two Chinese brands of dog treats sold at Wal-Mart stores found traces of melamine, a chemical agent that led to a previous, large-scale pet food recall in March, a spokeswoman said Tuesday.

Wal-Mart Stores stopped selling Chicken Jerky Strips from Import-Pingyang Pet Product and Chicken Jerky from Shanghai Bestro Trading in July, after customers said the products sickened their pets.

No recall was announced at that time, but Wal-Mart said in a statement Tuesday that customers who bought one of the products should return it to the nearest store for a refund.

Company spokeswoman Deisha Galberth said 17 sets of tests done on the products found melamine, a contaminant that's a byproduct of several pesticides.

The Delaware County (Pa.) Daily Times reported last week that a woman claimed her 2-year-old Chihuahua died after eating some of the products.

NIKE WINS PITTANCE IN CHINESE COUNTERFEIT LAWSUIT

Think this is an isolated case of counterfeiting? Google "counterfeit Nike" and check out the results, or check out this link to an official Chinese customs site that details efforts to catch counterfeiters. The picture below is of 55,000 counterfeit goods confiscated in Tianjin, China.


From USA Today:

Nike has won lawsuits against two Chinese shoemakers and the local operations of a French supermarket chain over alleged illegal copying of its Air Jordan logo, a court official said Tuesday.

The Shanghai No. 2 Intermediate Court awarded Nike, the world's largest sports apparel company, a total of 350,000 yuan ($46,100) in damages from Jinjiang Longzhibu Shoe Co., Jinjiang Kangwei Shoe Co. and retailer Auchan, the official Xinhua News Agency and other reports said.

The case was the latest victory for foreign companies seeking protection from rampant theft of copyrights and other intellectual property in China. Regardless of laws against commercial piracy, counterfeit copies of most products can be easily found in Chinese stores and markets.

Nike said its employees found shoes made by the companies being sold for about 100 yuan ($13) a pair in outlets operated by the Auchan chain in Shanghai and the nearby city of Ningbo. Authentic Air Jordans sell for many times that amount.

JOB TIPS FOR RECENT GRADUATES

Please click the link to read the entire article.

From the Chicago Sun-Times:

1. Don't be afraid to ask for help.
2. Dress like a professional, not someone who just got out of college.
3. Work on your written and spoken communication skills. No professional e-mail to a colleague or customer should start out with, "hey, dave ..." And capitalization is a beautiful thing.
4. Be prepared for criticism.
5. Respect deadlines.

CHINESE STATE TV DEFENDS CHINESE-MADE PRODUCTS

From USA Today:

Chinese state television has launched a week-long series of programs dedicated to defending the country's reputation as a safe maker of global goods, pushing forward its campaign to woo back international trust.

The first program was aired Sunday on China Central Television's economic channel and featured the head of a quality watchdog criticizing the recent furor over the quality of Chinese exports as "demonizing China's products."

"Personally, I believe it is new trend in trade protectionism. Although recalls are necessary, it is unfair to decide that all products made in China are unqualified," Li Changjiang, director of the General Administration of Quality Supervision, Inspection and Quarantine, said on the inaugural 90-minute show, titled "Believe in Made in China."

The programs are the latest in China's recent push to prove it is a safe manufacturer and exporter of goods amid discoveries of high levels of chemicals and toxins in Chinese products by countries around the world, from toothpaste to fish.

On Monday, New Zealand launched an investigation after children's clothes from China were found to contain dangerous levels of formaldehyde.

The government ordered the probe after scientists testing clothes for TV3's "Target" consumer watchdog program discovered formaldehyde concentrations up to 900 times above the safe level in woolen and cotton clothes.

The chemical gives a permanent press effect to clothes and is also used as an embalming fluid. It can cause problems ranging from skin rashes to cancer.

The television station says it will not release details of brand names or importers ahead of the show's airing on Tuesday.

WEAK DOLLAR VERSUS EURO CAUSES DECLINE IN GERMAN CAR SALES

Remember, a weak dollar causes imported foreign goods to be more expensive for those using the dollar to make purchases, while U.S.-made goods exported to other countries, in this case Germany, a user of the Euro, are less expensive to those using the Euro.

From The New York Times:

This year, the dollar was down about 6 percent against the euro, which damaged German car sales in this country. Its auto trade surplus with the United States fell 30 percent.

The declining American trade deficit for the auto industry does not mean that this country is anywhere close to reaching a balance in the sector. During the second quarter, the United States imported $1.90 in automobiles and parts for every dollar of such goods it exported. That is the lowest ratio since 1998 and is down from $2.27 in the 2006 period. It is way below the record ratio of $4.22, reached in 1989.

But it still means that it would take a 31 percent increase in American auto exports, and a similar decrease in imports, to produce a balance in auto trade. That would require a much lower dollar — and a much weaker American economy.

FED LOWERS KEY DISCOUNT RATE HALF POINT

From USA Today:

Stocks soared Friday after the Federal Reserve did what Wall Street was clamoring for and cut its key discount rate a half percentage point.

The move quelled investors' credit worries at least for the time being and initially sent the Dow Jones industrials up more than 300 points before retreating some.

The Fed — which had resisted lowering rates despite weeks of market volatility, and instead added nearly $120 billion in liquidity into the banking system — cut its discount rate to 5.75% from 6.25%. The Fed acknowledged that the stock market turbulence that has pulled the Dow by hundreds of points a day was posing a risk to economic growth.

But the central bank made no mention of lowering its target for the federal funds rate, which has stood at 5.25% for more than a year. The fed funds rate determines the rates that banks charge each other for loans, while the discount rate only covers loans the Fed makes to banks. Many strategists believe the market won't settle down until the Fed lowers the fed funds rate target, considered a more significant benchmark.

Traders who bet on how the Fed might alter rates now expect the central bank will lower the benchmark fed funds rate at its next meeting on Sept. 18. Some investors are hoping for a cut in that benchmark rate even sooner.

"If the cut in the discount rate succeeds in restoring confidence, then perhaps there is no need for the Fed to cut rates at the Sept. 18 meeting," said John Lonski, chief economist of Moody's Investor Service. He added, though, that the key line in the Fed's statement Friday was its willingness to take more steps to prevent market volatility from harming the economy.

"That means the Fed is prepared to make a rate cut if stability doesn't come," Lonski said.

FAKE DIABETES TEST STRIPS TRACED TO CHINA

From the International Herald Tribune:

A global manhunt begun by Johnson & Johnson has traced to China counterfeit versions of an at-home diabetes test used by 10 million Americans to take sensitive measurements of blood sugar levels.

Potentially dangerous copies of the OneTouch Test Strip sold by Johnson & Johnson's LifeScan unit surfaced in U.S. and Canadian pharmacies last year, according to federal court documents unsealed in June but only recently discovered by Bloomberg News.

Court filings disclose, for the first time, that China is the source of about one million phony test strips, which have turned up in at least 35 states and in Canada, Greece, India, Pakistan, the Philippines, Saudi Arabia and Turkey.

Fake medicines are a $32 billion global business, said the World Health Organization, and the Food and Drug agency said it had run 54 counterfeit investigations in 2006, almost twice as many as in the year before.

Records seized from the importers show the counterfeit strips were bought from Henry Fu and his company, Halson Pharmaceutical, which, according to its Internet site, is based in Shanghai.

Halson's Web site says that the company distributes and manufactures medical supplies like syringes, and is run by Fu, who, according to a court order, is also known as Su Zhi Yong. Fu was arrested by the Chinese authorities and remains in prison in China, awaiting resolution of his case in the People's Court of Shanghai.

MATTEL CHINESE-MADE TOY RECALL UP TO NEARLY 19 MILLION

From CNN Money:

Mattel Inc. Tuesday recalled more than 9 million toys made in China and sold in the United States, including "Polly Pocket" and "Batman" dolls and other popular figures, because of loose magnets and lead paint - its second major recall in less than a month.

The recall affects 9.58 million imported toys sold at toy stores, discount stores and other retailers nationwide dating back as far back as May 2003. Worldwide, Mattel said the recall includes nearly 19 million toys. The company said the recalls would cost about $30 million.

The recall is the latest development in the growing crisis over the safety of Chinese products. Chinese officials have gone out of their way to stress the safety and quality of its exports, blaming the problems on a small number of companies. Earlier this month, China's Commerce ministry blacklisted 400 export firms following the recent product safety scares.

MOTOROLA PINS HOPES ON NEW RAZR

From Howard Wolinsky of the Chicago Sun-Times:

Motorola said Friday the next generation of its hugely popular RAZR thin clamshell phone -- one of the Schaumburg company's great hopes to spark a turnaround -- will be available from all major mobile phone carriers within 60 days.

RAZR2 will be available starting in the next two weeks. Tracey Thiele, Motorola spokeswoman, said that by October, the new RAZR2 will be sold by AT&T, Sprint, T-Mobile and Verizon, the top national carriers, and Alltel and Chicago-based U.S. Cellular, the regional carriers.

RAZR2 is part of a new product lineup, which Motorola hopes can turn around the company. Motorola, which invented the cell phone in 1973, has suffered a series of setbacks, dropping in the last quarter to No. 3 in the industry.

MILK PRICES SOARING

From USA Today:

It's cheaper than oil and, barring a global mad cow crisis, we'll probably never run out of it. But milk has one thing in common with oil: It's trading at record highs.

Milk prices hit a record last month in the United States, where consumers paid an average $3.80 a gallon, compared to $3.29 in January, according to the U.S. Department of Agriculture. It forecasts prices will remain high throughout the year.

International dairy prices increased 46% between November 2006 and April 2007, with milk powder prices increasing even faster, according to the Food and Agriculture Organization.

The boom in biofuels is also pushing up corn prices and, as a result, making animal feed more expensive. Farmers have responded by raising milk prices. Corn futures indicate that the price of corn will remain high this year, according to the Washington-based International Dairy Foods Association. Prices have also risen for soybeans, another feed crop, it said.

FEDERAL RESERVE PUSHES $38 BILLION INTO CIRCULATION

From Reuters:

The U.S. Federal Reserve provided the banking system with $38 billion on Friday, the largest amount of liquidity since the days after the September 11 attacks six years ago, adding ample funds for the second day running as financial markets fretted over credit conditions.

In its statement after Friday's first market operation, the Fed said it would provide liquidity as needed "to facilitate the orderly functioning of financial markets.

"In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets," it said.

The last time the central bank made a similar statement was after the September 11, 2001, terror attacks, when it also said it would do what was necessary to keep markets functioning normally. The Fed made a similar vow in October 1987 following a precipitous decline in U.S. stock markets.

Central banks worldwide have now injected at least $326.3 billion in the past 48 hours to prevent markets from spinning into a global liquidity squeeze. Short-term interest rates spiked in response to banks' decreased willingness to lend to each other.