philadelphia

CoStar’s People of Note (Nov. 14-20)

November 19, 2010

This week’s People of Note includes the following markets: Atlanta, Greenville/Spartanburg, Houston, Long Island, National, Philadelphia and Seattle. NATIONAL Underhill Named CEO of the Americas for Cushman & Wakefield Cushman & Wakefield appointed…

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No Plans In Senate For A Vote On Unemployment Benefits

November 17, 2010

Senate Democrats have not figured out a way to get around Republican opposition to reauthorizing extended unemployment insurance for the long-term jobless. “We are still in the process of trying to establish the schedule of the lame duck session, in terms of the remaining days of the session, so no specifics, but think we all understand that this is something that is going to have to be done,” said Sen. Jack Reed (D-R.I.) during a conference call with reporters on Wednesday. The benefits are set to expire at the end of the month, jeopardizing a lifeline for two million people during the holidays. But it’s not likely the benefits will be reauthorized before they lapse, since Congress will go home for Thanksgiving next week, meaning this week is the last chance to prevent an interruption in benefits. Reed said there is no plan for a vote. “At this point it’s not been scheduled,” he said. “We’re trying to make a case that there be action but at this point I can’t point to a specific time it will come up for a vote this week.” Extended unemployment insurance is federally-funded and gives the long-term unemployed up to 73 weeks of payments after they finish 26 weeks of state benefits. Previous reauthorizations have been held up because Republicans and conservative Democrats don’t want the cost of the benefits added to the deficit, even though extended benefits have traditionally been given “emergency” status and financed with deficit spending. (A full-year reauthorization might cost $65 billion, according to the Economic Policy Institute ). Democrats have been highlighting the fact that the people insisting on offsets for unemployment benefits are not insisting on offsets for tax cuts for the rich. “On the one hand they want to provide $700 billion in tax cuts to the wealthiest Americans but not pay for them. And on the other hand they’re demanding that UI benefits for the middle class be paid for,” Reed said. “That’s a little like someone on a diet who orders a Diet Coke and a Big Mac simultaneously.” Starting Dec. 1, people who exhaust state benefits or one of the four “tiers” of Emergency Unemployment Compensation will be ineligible for another tier or for Extended benefits. HuffPost readers: Are you in this boat? Tell us about it — email arthur@huffingtonpost.com . Pat McNamara, 61, said she lost her job with the Philadelphia mayor’s office in August 2009. She’s been unable to find work. “I am not proud. I have applied for everything from administrative positions to temp jobs, even customer service jobs paying $7.50 an hour with no benefits,” she said. “It’s going to be tough when federal unemployment benefits end. I have no other source of income.” Reed and Sen. Robert Casey (D-Pa.) said they didn’t know whether Democrats would attempt a deal to attach the benefits to the tax cuts, but both said they wanted the benefits reauthorized for a full year. Democrats will need at least a handful of Republicans, but moderates who previously crossed the aisle for the unemployed have not signaled they will do so this time. Reed said Senate Democrats are focused for now on reauthorizing current benefits and not giving additional weeks to people who have already exhausted their federal benefits. On Wednesday the National Employment Law Project delivered a petition with 100,000 signatures to Casey’s office calling on the Senate to reauthorize the benefits.

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David M. Abromowitz: Lemons Into Lemonade? Turning Flawed Foreclosures Into Mediated Modifications

November 7, 2010

Is anyone surprised? A mortgage finance industry built on sloppy paperwork, which reaped record profits processing consumers as if they were so many sheep to be fleeced, is caught churning out foreclosures built on sloppy paperwork, so homeowners can be dispossessed on the cheap. It is tempting to wish upon lenders all the retribution that our legal system can rain down. The Attorneys General of all 50 states, hardly a monolithic group politically, are so incensed that they have joined together and launched a full bore coordinated investigation into whether vast numbers of foreclosures were prosecuted based on false certifications and other violations of law. The US Attorney General is gearing up for a similar investigation into the possibility of rampant fraud or other criminal violations Private consumer watchdogs have long been raising similar allegations in defending borrowers facing foreclosure. We stand on the verge of massive litigation that could dwarf the tobacco cases and other national consumer protection efforts. Yet we still have a weak economy to think about, and widespread turmoil in the housing market doesn’t help. Millions of home owners may have had their legal rights violated, but tens of millions of Americans are also anxious about their home values; nearly 30 percent of homeowners with mortgages are drowning “underwater”. Even more worry about their ability to pay their mortgages, Lawsuits that drag on for years may some day bring justice for some borrowers. But in the meantime, how do other borrowers hang on? And what is the impact on the rest of us if home prices plummet again, as a cloud of uncertainty keeps the home buying market perpetually overcast? The best result from litigation therefore may be mediation. As the 50-state Attorney General task force faces off against a range of lenders and loan servicers, both sides should keep the ultimate goal in mind. Is the goal of the AGs to prove that wrongdoing was done? Or is it to get each home owner a fair hearing for his or her individual situation, one that offers a chance to work out a modification or other alternative to foreclosure? Do the lenders want to simply keep insisting they have done nothing wrong that really matters in the hopes of simply adding to the tidal wave of foreclosures? Or do they want to clear the air, restore the public’s confidence in them, and move forward to alternatives to foreclosure? Promisingly, reports so far indicate that the coalition of the AGs is focused more on modifications than reparations: “Instead of paying a huge fine, maybe have the servicers adequately fund a serious modification process,” lead Iowa Attorney General Tom Miller suggested. Hopefully recent election results won’t diminish their resolve or their unity. The AGs should insist on a remedy that has proven a valuable antidote against unnecessary foreclosures: mandatory mediation. As reports by the Center for American Progress and others have shown, states and cities “with fully implemented [mandatory mediation] programs such as Connecticut, Philadelphia, and Nevada report settlement rates nearing 75 percent, with the majority of homeowners remaining in their homes.” Unlike robo-signing and other practices that blindly push through foreclosures and ignore alternatives, mediation programs give the borrower a chance to sit face to face with a lender and a neutral third party and analyze the individual facts of each case. Borrower evidence of ability to pay a modified amount, which seems repeatedly to get lost in the foreclosure shuffle, suddenly cannot be ignored. And perhaps not surprisingly, even when foreclosure is the fair result, cases resolve faster once borrowers have had a chance to be heard in person. Mandatory mediation clears the system, something we desperately need. It does so in a way that feels fairer than what is currently transpiring. But if it’s so sensible, why would this alternative to the current crisis need to be mandated? Voluntary loan modification programs have fallen far short for years now. While many factors contributed to the logjam, it is clear that the incentives and the very structure of the home mortgage finance system tilt the table towards foreclosure as the route most mortgage servicers will follow. Most servicers work for investors who own pools of mortgages. The complicated agreements governing how servicers handle their work compensate foreclosure more than mediation. It takes more time, knowledge and staffing for a servicer to process modifications than it does to call up lawyers and start a foreclosure. And while foreclosure may yield less money for investors in the long run when all the costs are factored in, many of the foreclosure costs come “off the top” from the foreclosure sale, and are not borne by the servicer making the decisions. In short, the mortgage pooling system that was set up to encourage private money to flow into mortgages and make them cheaper for consumers is now a virtual doomsday machine for the economy. Unfortunately, Congressional forces believing in an unfettered financial system, even when it operates out of control to the detriment of all of us, have blocked attempts at bankruptcy reform and other proposals that could have stopped millions of foreclosures. The Attorneys General, however, wield a different club, one based on current law and requiring no action at the federal level. And in today’s Washington climate, that just may be the advantage needed to unlock the national foreclosure mess. David M. Abromowitz is a Senior Fellow at the Center for American Progress, www.americanprogress.org, and has written extensively on the foreclosue crisis.

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Video: Falkenrath Says UPS Packages Could Be `Act of Mischief’: Video

October 29, 2010

Oct. 29 (Bloomberg) — Richard Falkenrath, a principal at Chertoff Group and Bloomberg Television contributing editor, talks about the U.S. investigation into suspicious packages on United Parcel Service Inc. airplanes in Philadelphia and Newark, New Jersey. Falkenrath speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.” Bloomberg’s Julie Hyman also speaks. (Source: Bloomberg)

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Inder Sidhu: They Might Be Giants: Management Insights From San Francisco’s Boys of Summer

October 28, 2010

” Misfits and castoffs .” That’s what some are calling San Francisco’s surprise World Series contenders, the Giants. After defeating the Philadelphia Phillies four games to two for the National League Championship, the team takes on the Texas Rangers this week in the 104th edition of Major League Baseball’s Fall Classic. Fans in the Bay Area could not be more delighted. This year’s team features a lovable cast of characters with back stories that could have been conjured by a Hollywood screenwriter. Take ace relief pitcher Brian Wilson. He sports a menacing pirates beard, dyed jet black to intimidate opposing batters. Then there’s fastball specialist Tim Lincecum, known as “The Freak” for his powerful arm and boyish looks. San Franciscans have especially warmed to outfielder Cody Ross, the the NL Championship Series MVP. Ross joined the team in mid-summer after being dumped unceremoniously by the Florida Marlins. Instead of sitting home watching TV, he now finds himself starring on it. I could go on, but you get the point: The Giants roster is filled with individuals that other teams either overlooked or did not want. So how did the organization turn them into winners? Simple: it provided opportunities for individuals to shine while building a foundation of cohesive teamwork. While that might sound easy, anyone who has ever managed a team knows it isn’t. In organizations that prioritize the collective, new ideas are often smothered and groupthink frequently prevails. When this happens, individuals lose their drive to aspire for greatness. As a result, mediocrity often settles in. Similarly, organizations dominated by superstars have their own problems. When jumbo-sized egos take over, teams lose their unity and sense of purpose. Without shared organizational goals, individuals focus more on their own glory than on team pursuits. When this occurs, internal strife often results. Giants fans need only think back to the last time San Francisco was in the World Series to be reminded of this. The year was 2002, the height of the Barry Bonds era. Though the all-time career leader in home runs, Bonds is one of baseball’s most polarizing figures. When he was the Giants’ highest paid player, Bonds wouldn’t pose for the team picture or ride the team bus. He had his own trainer, his own chef and his own PR spokesman. Bonds won five MVP awards as a Giant, but he never led his team to baseball’s ultimate prize. To be fair, neither did San Francisco’s more beloved Hall of Fame players, including Willie Mays, Orlando Cepeda, Willie McCovey, Juan Marichal and Gaylord Perry. Try as they might, these legendary superstars could not produce both the team cohesion and individual excellence that the 2010 Giants have. Give credit to team manager Bruce Bochy for doing both . In his four years with the team, he has convinced his players to aim high, work collaboratively and check their egos at the door. Specifically, he has experimented with the lineup, providing an opportunity for different players to have their moment in the spotlight. Take rookie Buster Posey. When first called up from the minors, he played backup catcher. But Bochy convinced the young player he could achieve greatness if he got in better shape and improved on his hand speed. Posey did and worked his way into the starting lineup. After batting .305 for the year, he’s now a candidate for league Rookie of the Year. While inspiring individual performers to aim high, Bochy has also promoted an atmosphere of inclusion and camaraderie. That’s inspired stars such as Wilson to spend more time bonding with teammates. He, for example, is a regular at the dominoes table in the locker room with his teammates. Bochy’s insistence that stat leaders and role players stand together has helped him to make some difficult choices. In the post season, he dropped the team’s highest paid player, pitcher Barry Zito, from the active roster due to inconsistent play. Recognizing that the decision was controversial and could divide team loyalties, the affable Zito stepped up and expressed his support for the decision. ” My heart and soul is in this clubhouse ,” Zito said afterward. “I have no other options in myself than to pull for every one of these guys.” You can bet they remembered his unselfishness as they took the field last night against the Rangers. Superstar performers or team players? In San Francisco, it’s nearly impossible to tell them apart. Managers everywhere should take note. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco , and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu .

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Inder Sidhu: They Might Be Giants: Management Insights From San Francisco’s Boys of Summer

October 28, 2010

” Misfits and castoffs .” That’s what some are calling San Francisco’s surprise World Series contenders, the Giants. After defeating the Philadelphia Phillies four games to two for the National League Championship, the team takes on the Texas Rangers this week in the 104th edition of Major League Baseball’s Fall Classic. Fans in the Bay Area could not be more delighted. This year’s team features a lovable cast of characters with back stories that could have been conjured by a Hollywood screenwriter. Take ace relief pitcher Brian Wilson. He sports a menacing pirates beard, dyed jet black to intimidate opposing batters. Then there’s fastball specialist Tim Lincecum, known as “The Freak” for his powerful arm and boyish looks. San Franciscans have especially warmed to outfielder Cody Ross, the the NL Championship Series MVP. Ross joined the team in mid-summer after being dumped unceremoniously by the Florida Marlins. Instead of sitting home watching TV, he now finds himself starring on it. I could go on, but you get the point: The Giants roster is filled with individuals that other teams either overlooked or did not want. So how did the organization turn them into winners? Simple: it provided opportunities for individuals to shine while building a foundation of cohesive teamwork. While that might sound easy, anyone who has ever managed a team knows it isn’t. In organizations that prioritize the collective, new ideas are often smothered and groupthink frequently prevails. When this happens, individuals lose their drive to aspire for greatness. As a result, mediocrity often settles in. Similarly, organizations dominated by superstars have their own problems. When jumbo-sized egos take over, teams lose their unity and sense of purpose. Without shared organizational goals, individuals focus more on their own glory than on team pursuits. When this occurs, internal strife often results. Giants fans need only think back to the last time San Francisco was in the World Series to be reminded of this. The year was 2002, the height of the Barry Bonds era. Though the all-time career leader in home runs, Bonds is one of baseball’s most polarizing figures. When he was the Giants’ highest paid player, Bonds wouldn’t pose for the team picture or ride the team bus. He had his own trainer, his own chef and his own PR spokesman. Bonds won five MVP awards as a Giant, but he never led his team to baseball’s ultimate prize. To be fair, neither did San Francisco’s more beloved Hall of Fame players, including Willie Mays, Orlando Cepeda, Willie McCovey, Juan Marichal and Gaylord Perry. Try as they might, these legendary superstars could not produce both the team cohesion and individual excellence that the 2010 Giants have. Give credit to team manager Bruce Bochy for doing both . In his four years with the team, he has convinced his players to aim high, work collaboratively and check their egos at the door. Specifically, he has experimented with the lineup, providing an opportunity for different players to have their moment in the spotlight. Take rookie Buster Posey. When first called up from the minors, he played backup catcher. But Bochy convinced the young player he could achieve greatness if he got in better shape and improved on his hand speed. Posey did and worked his way into the starting lineup. After batting .305 for the year, he’s now a candidate for league Rookie of the Year. While inspiring individual performers to aim high, Bochy has also promoted an atmosphere of inclusion and camaraderie. That’s inspired stars such as Wilson to spend more time bonding with teammates. He, for example, is a regular at the dominoes table in the locker room with his teammates. Bochy’s insistence that stat leaders and role players stand together has helped him to make some difficult choices. In the post season, he dropped the team’s highest paid player, pitcher Barry Zito, from the active roster due to inconsistent play. Recognizing that the decision was controversial and could divide team loyalties, the affable Zito stepped up and expressed his support for the decision. ” My heart and soul is in this clubhouse ,” Zito said afterward. “I have no other options in myself than to pull for every one of these guys.” You can bet they remembered his unselfishness as they took the field last night against the Rangers. Superstar performers or team players? In San Francisco, it’s nearly impossible to tell them apart. Managers everywhere should take note. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco , and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu .

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Battery Safety Fight: Pilots Take On Big Business After Deadly Crash

October 27, 2010

WASHINGTON — Safety advocates have warned for more than a decade that someday an air shipment of lithium batteries like those used in cameras, cell phones and countless other products would catch fire, causing a plane to crash and people to die. That day may have arrived last month. A United Parcel Service cargo plane with a fire raging on board, and carrying a large quantity of lithium batteries, crashed near Dubai in the United Arab Emirates on Sept. 3, killing both pilots. The cause of the accident isn’t likely to be determined for months, but investigators suspect the batteries were either the source of the fire or contributed to its severity. The Federal Aviation Administration was concerned enough by the accident to warn air carriers about risks posed by lithium battery shipments. ___ EDITOR’S NOTE – An occasional look at how behind-the-scenes influence is exercised in Washington. ___ The accident has given new urgency to a high-stakes lobbying struggle under way in Washington. Pilot unions and safety advocates are urging the government to treat air shipments of lithium batteries as hazardous materials. But rules proposed by the Obama administration are opposed by many of the nation’s top retailers, electronics manufacturers, battery makers and cargo airlines, including UPS. They say the rules would cost them hundreds of millions of dollars in added packaging, paperwork and training for employees. The rechargeable battery industry alone says the rules would cost more than $1 billion in the first year. The makers of medical devices say the rules might mean delays in getting equipment to patients, and one electronics lobbyist even portrayed the proposal as a holiday Grinch that could drive up the cost of gift shipments. “The cost of expedited delivery to stores could become prohibitive and could ruin a lot of Christmases for children,” Christopher McLean, executive director of a retailers coalition that includes Amazon.com, Best Buy, Radio Shack, Target and Wal-Mart, told Transportation Department officials at a meeting earlier this year, though that’s unlikely this Christmas. Industry lobbyists say the government already has enough rules to ensure safe battery shipments; they say the problem is that a relative few shippers aren’t following current packaging requirements. They recommend stronger enforcement. Indeed, many of the more than 40 documented incidents of lithium battery fires in flight or at airports involved improperly packaged or handled batteries. George Kerchner, a lobbyist for the rechargeable battery industry, wrote Transportation Secretary Ray LaHood last month asking him not to let the Dubai crash cause regulators to rush put new rules in place. “We urge that any actions taken by DOT be justified by facts, not speculation or political pressures,” Kerchner wrote. “They also should be narrowly drawn to minimize disruption of commerce in a holiday season that will be critical to the nation’s economic recovery.” A bill that would prod DOT to move faster on new rules is opposed by industry supporters in Congress. Pilots and safety advocates say the industry opposition is typical of the hurdles they face when trying to get government regulators to take action to prevent a tragedy even when there is clear evidence of danger. “All regulation eventually gets written in blood because it takes something catastrophic to get anything done,” said Russ Leighton, safety director for the International Brotherhood of Teamsters’ airline division. “In this case, only two people died, and it wasn’t a huge media story, so we’ll probably have to wait till 300 people do die before there’s any change.” Safety experts point to the 1996 ValuJet crash in the Florida Everglades that killed all 110 people aboard. The cause of the accident was a fire started by improperly shipped oxygen canisters in the cargo hold. The National Transportation Safety Board said the Federal Aviation Administration shared blame for the accident because the agency failed to implement earlier recommendations that cargo holds on passenger planes be required to have either smoke detectors or fire-suppression systems. The requirements were put in place after the crash. Lithium batteries are “a big safety concern,” said Bob Chipkevich, a former head of NTSB’s hazardous materials division. “I don’t think we need to wait for a major accident with multiple fatalities to move forward.” Fire broke out four years ago in cargo containing lithium batteries and other goods on a UPS plane. The plane made an emergency landing in Philadelphia and no one was killed. The cause of the fire wasn’t determined, but batteries were suspected. Afterward, the NTSB recommended all cargo compartments on cargo-only planes have fire suppression systems. The FAA rejected that recommendation, saying it would be too expensive. In the recent UPS accident, a fire erupted in the Boeing 747-400′s main cargo compartment – the same part of the plane as the passenger compartment on passenger-carrying planes – within a half-hour after takeoff from Dubai. The compartment didn’t have a halon gas fire suppression system. The flight’s two pilots, racing to return to Dubai, radioed that smoke was so dense in the cockpit they couldn’t read their instruments or change radio frequencies. Unlike other kinds of batteries, some lithium batteries contain metal that will spontaneously ignite if exposed to air. Also, the positive and negative poles in some lithium batteries are close together, leading more easily to short circuiting, which can cause a fire. Lithium batteries come in two types: lithium metal, which are nonrechargeable and are used in products like watches and cameras, and lithium-ion, which are rechargeable and are used for products like laptop computers, cell phones and power tools. Both can short circuit and ignite if they are improperly packaged, damaged or have manufacturing defects. Batteries contained in devices can also overheat and ignite if the device inadvertently turns on. Overheated lithium batteries can blow the lids off steel shipping containers with enough force to damage a plane. Once a battery catches fire, the heat can set off other batteries. The halon gas fire suppression systems required in the cargo compartments of passenger planes don’t work on fires caused by lithium metal batteries. Shipment of lithium metal batteries is already prohibited on passenger planes, but not cargo planes. There is also concern that if a large quantity of lithium-ion batteries was to ignite, it could overwhelm a halon suppression system. Lithium-ion battery fires can reach 1,100 degrees, close to the melting point of aluminum, a key material in airplane construction. Lithium-metal battery fires are far hotter, capable of reaching 4,000 degrees. The Air Line Pilots Association has asked LaHood to ban air shipments of all lithium batteries until new rules are implemented. “It’s difficult to know what caused the (Dubai) fire, but it really doesn’t matter because we know that a fire did break out on that airplane and the situation quickly became uncontrollable,” said Mark Rogers, ALPA’s hazardous materials chairman. “We had what was possibly a live demonstration of what can happen if batteries are exposed to fire.” ___ Online: Federal Aviation Administration http://www.faa.gov Department of Transportation http://www.dot.gov

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Dennis Santiago: Moving the Economy Forward: Can the City of Los Angeles Pass Its Responsible Banking Ordinance?

October 22, 2010

Somewhere in the next 30 days, America will have a chance to attempt to open another path towards economic recovery. For the past year, Councilman Richard Alarcon has been leading the drive towards a municipal ordinance that directs his city to explore flexing its financial muscle to demand that bankers pay more than lip service to local community reinvesting. It’s no secret that America is hurting. We’ve got industrial capacity now arguably below the carrying capacity needed to sustain our people’s lifestyle hopes. These issues are felt most acutely in our largest metropolitan economic zones, and — as of now — there really isn’t a lot of focused public-private infrastructure aimed at bringing these dead zones back to life. Alarcon and his colleagues on the L.A. City Council hope to change this. They’ve drafted an ordinance that takes bank measurement methods that have been working in other cities like Philadelphia and Cleveland and adapting them to ask bankers in Los Angeles a simple question, “How much are you really doing for the local economy?” And they are willing to put some teeth behind the question by calling for the city to favor future banking and financial contracts with banks that demonstrate “responsible banking practices” benefiting the economy and people of Los Angeles. Some banks are wary. They don’t want the intrusion into their world, particularly when many remain in survive-the-storm mode. But at the same time, banks large and small mean to husband resources so tightly that they now lend mostly to existing customers and are either putting all their reserves towards absorbing the losses of their burgeoning books of troubled assets or “diversifying their exposure” — meaning sending money elsewhere — as investments. Translation — we see a country full of cheap money that “ordinary people” can’t get to. Just so you know, this subject of financial diversification has lately put me at odds with economists when I ask the silly question, “So tell me again why it’s good for a community’s money to abandon the community where it’s needed so it can diversify and achieve a slightly better marginal return elsewhere? Why shouldn’t a community have the policy mechanisms in place to encourage money to circulate locally as long as possible so as to maximize the concentration of the accelerator effect?” I apologize for the dive into the arcane, but it’s really hard to argue for old approaches when the primary benefit is diminishing the balance-sheet pain on an industry that is going to consolidate anyway. What I really find interesting though when I look through the more than 7,500 banks and 4,500 bank holding companies in this country, is that there are some banks that do stand to benefit from shifts in how a community’s wealth is channeled. They won’t actually say so outright that they’d jump on it — that would reveal their strategic plans and designs about eating their kinsmen — but if you think all banks are unified in their opposition to the potential of an emerging opportunity from municipal initiatives like this one from Los Angeles — or future ones from other cities or collections of cities — you’re wrong. In a consolidating-industry scenario, the last banks standing will be the ones who figure out how to serve the future. So the political question is, can the Los Angeles City Council see its way to passing this ordinance and setting an example to help open alternative paths to the future? I hope so. It’s an important national question because for the last two years we’ve concentrated on solutions that we’ve discovered are at best temporary stimuli. They delay but do not substitute for finding sustainable solutions. Then again, common sense does say that fixing America was always a job that was too big for any single approach to solve; much less a broad sword relying on trickling that is the true limit that a federal government acting alone can do. It will likely take regional “invest-local” initiatives working in concert with a more cohesive federal process and, most important of all, the ingenuity of private industry and the people of America to get a job as large as repairing the United States economy done. The ordinance that Alarcon has carefully husbanded deserves consideration. The City of Los Angeles needs to hear from ordinary people that this experiment is indeed vital to the National Interest. There will be a public hearing on the measure at L.A. City Hall on Oct. 26. I respectfully suggest that Councilman Alarcon’s inbox could use your input. The person to contact in his office is, Sarah Brennan, Policy Deputy sarah.brennan@lacity.org 213-847-7777 *Permission to publish contact information was confirmed prior to posting.

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Fed Officials Clash Over How To Fix The Economy

September 29, 2010

WASHINGTON — Divisions within the Federal Reserve over how to pump up the economy and lower unemployment came into sharper view Wednesday. Three Fed officials squared off in competing speeches over how much help would come from one likely next step – buying more government debt. Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, argued that such an effort may not help the economy much. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, made a similar point. But, Eric Rosengren, president of the Federal Reserve Bank of Boston, said Fed policymakers must do what they can to bring some more relief. The Fed delivered a strong signal last week at its meeting that it was prepared to act if the economy weakened. High on the list of unconventional tools is buying more government debt, known as quantitative easing. The goal is to force down rates on consumer and businesses loans even more to get Americans to boost their spending. Doing so, would help the economy. In their speeches, Kocherlakota and Plosser expressed skepticism that quantitative easing would drive down rates nearly as much as such efforts did during the recession and financial crisis. Because financial markets are in better shape now than during the crisis, the difference between the rates on super-safe Treasury securities and rates on other consumer and business loans has narrowed. “I suspect that it will be somewhat more challenging for the Fed to impact them,” Kocherlakota said. A new debt-buying program “would have a more muted effect,” he concluded. Plosser said: “Monetary policy is not a magic elixir that can solve every economic ill.” However, Rosengren said buying more government debt could benefit the economy, and therefore should be considered. “It is important that policymakers be open to implementing policies” that are aimed at lowering unemployment and preventing inflation from getting too low, which could put the country at risk of deflation, he said in a speech in New York. Many economists believe the Fed is likely to announce action when it wraps up a two-day meeting on Nov. 3, the day after the congressional midterm elections. Although the Fed has yet to coalesce around a specific plan, one idea put forward by James Bullard, president of the Federal Reserve Bank of St. Louis, is gaining closer scrutiny. Under Bullard’s approach, the Fed would initially buy a moderate amount of government bonds – perhaps in the range of $100 billion or less. After that, the Fed would review the economic climate at each meeting and decide whether it needs to buy more government bonds to bolster the recovery. That would allow the Fed to avoid making the kind of upfront commitment to buy government debt on a large scale in the trillion-dollar range. It also could ease concerns among some Fed officials about carrying out the type of large-scale interventions seen during the recession. The Fed ended up buying a total of roughly $1.7 trillion of mortgage securities and debt, as well as government bonds, during the recession. Another big buying binge would complicate the Fed’s efforts later on to unwind all its stimulus. There are also concerns that another large-scale effort could spark inflation later on or trigger a wave of speculative buying that could create bubbles in the prices of bonds or commodities or other assets. On Wednesday, the three Fed presidents in their speeches weighed the pros and cons of buying government debt in general, rather than the specific Bullard proposal. Rosengren is currently a voting member of the Federal Open Market Committee – the group, including Fed Chairman Ben Bernanke, that makes decisions on interest rates and other policies that influence economic activity. Kocherlakota and Plosser will both be voting members next year, although they participate in the Fed meetings and debates over policy moves. Kocherlakota spoke in London, while Plosser spoke in New Jersey.

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CoStar’s People of Note (Sept. 19-25)

September 23, 2010

This week’s People of Note includes the following markets: East Bay, Houston, Indianapolis, Philadelphia and San Francisco. EAST BAY, SAN FRANCISCO Cassidy Turley Names New Head of S.F. Office Cassidy Turley BT Commercial appointed Greg Moss as…

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Video: LeBas Sees `Anemic’ Consumer Until Middle Of Next Decade: Video

September 23, 2010

Sept. 23 (Bloomberg) — Guy LeBas, chief fixed-income strategist with Janney Montgomery Scott, a financial advisory firm based in Philadelphia, talks with Bloomberg’s Mark Crumpton about the outlook for the U.S. economy. Sales of U.S. previously owned homes climbed from a record low in August and a gauge of the outlook for the economy increased, confirming the Federal Reserve’s forecast for a “modest” pace of expansion. (Source: Bloomberg)

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William D. Green: What is Right with Education Reform

September 22, 2010

President Obama had an optimistic message for students in his “Back to School” speech last week telling a group of children in Philadelphia that nothing is beyond their reach with the right amount of passion and hard work. His challenging message to adults: our nation has an obligation to ensure that children are receiving the best possible education – the tool they need to achieve their dreams. As 56 million children return to elementary and secondary schools this fall, we at the Business Coalition for Student Achievement, representing business leaders from every sector of the economy, are mindful of the sobering realities facing our education system, which is letting far too many of these children down. We agree with President Obama that ensuring the best possible education for our children will take “all of us working hand-in-hand”–but we cannot let the desire for consensus prevent us from taking a hard and honest look at our schools and policies and making difficult but necessary changes. As employers, we believe that dramatically improving our K-12 education system is critical to providing a strong foundation for our nation’s competitiveness, promoting innovation and economic growth, and creating the well-paying jobs of tomorrow. At a time when resources are limited, it’s important to focus on the things that will have the greatest impact and bolster existing efforts that are moving us in the right direction. In that spirit, we urge the Obama Administration and the Congress to implement what we believe are the core components of a successful federal education reform strategy. First, update and strengthen the key elements of the Elementary and Secondary Education Act, including rigorous, high-quality standards and assessments, increased accountability for performance at all levels of the school system, effective teachers and administrators, and expanded options for parents and children. Second, continue funding for competitive programs that incentivize innovating thinking at the state and local level. The $4.35 billion Race to the Top fund, which rewards states that have shown success in raising student achievement and have the best plans to accelerate their reforms in the future, is already spurring significant reforms, prodding 11 states to tie teacher pay to student performance, nearly 40 to adopt rigorous reading and math standards and another dozen to vow to fix failing schools. These states will offer models for others to follow and will spread the best reform ideas across their states and across the country. Likewise, the Teacher Incentive Fund is generating new models of teacher and principal compensation reform that can help attract and retain the strongest educators and school leaders. Third, increase funding for high-quality charter schools, holding them accountable for improved academic achievement just as we do with traditional public schools, and for programs that boost student achievement in science, technology, engineering and math (STEM). Fourth, ensure that education reform is the top priority when federal taxpayer dollars support state and local education efforts. We cannot afford to use limited resources to prop up the educational status quo. As employers, we understand the important role that the U.S. business community must play in ensuring that the American education system prepares our youth to meet the challenges of higher education and the workplace. In fact, there is perhaps no greater job the U.S. business community can undertake. We stand ready to work in partnership with the Obama Administration, Congress and all stakeholders on the essential task of raising student achievement in the U.S. However, education reform isn’t – and shouldn’t – just be a concern for CEOs and Washington insiders. True reform will come from rigor, not rhetoric. Parents, teachers, state legislators and communities must work together to take a more active role in education on the state and local levels. They must be even more diligent in supporting their local schools. They must demand classroom innovation and accountability systems that measure and reward results, and that ensure change when improvements are needed. Ultimately no government reform will be successful without all of us as citizens and parents holding ourselves, and our children’s schools, accountable. Together we can make a difference for students and teachers, and ultimately, our nation’s future.

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Josh Bernoff: Empowered: Managing In Real Time

September 21, 2010

Does it seem to you that world is moving faster now? You can whip out your iPhone and instantly find the price online of any product with a bar code. Or look up the movie you were thinking of seeing and see what a thousand people had to say about it – while you’re waiting in line. Even as the consumer is moving faster, corporations are still plodding along. How long does your bank make you wait on hold for service? Why are they designing mass marketing programs months in advance, when people can get instant feedback on what to buy from their Facebook friends? When Heather Armstrong – a self-proclaimed professional blogger who goes by the name dooce – talked to Maytag about her brand new, broken Maytag washing machine that three service calls had failed to fix, the customer support rep was deaf to her pleas. Even when she told the rep that she had a million Twitter followers. Then she tweeted, “DO NOT EVER BUY A MAYTAG . . . OUR MAYTAG EXPERIENCE HAS BEEN A NIGHTMARE.” Brand disaster. Face it. Top-down management can’t move at the speed of today’s technology. The solution for companies is to empower their workers to solve customer problems with technology. Let me share some examples. Leonard Bonacci runs stadium security for the Philadelphia Eagles football team. Working with a company called GuestAssist , he put in place a system that lets anyone at the game text for help to a short code. Those texts could say “A guy spilled coke on my seat” or “The person in front of me is having a heart attack” – but either way, Leonard’s two dozen staffers can get there and solve the problem quickly. He’s turned the 68,000 people in the stadium into his eyes and ears, and the result is an organization that moves a lot faster. Marty Collins, a community marketer at Microsoft, saw that lots and lots of people were tweeting, posting photos and videos, and making Facebook connections about getting stuff done with PCs. She helped Microsoft marketing see how to reclaim “I’m a PC” from Apple ads and make it a positive. And she corralled those positive comments into a feed that anyone could see. It’s at www.windows.com/social . During the launch of Windows 7, that feed was on the home page for Windows, showing what positive things people are posting about Windows right this minute. Sunbelt Rentals rents construction equipment to work sites. Its salespeople were visiting those sites, but by the time they got there, pricing and availability information was often out of date. So John Stadick, the CIO, equipped the salespeople with iPhones and an app that called up accurate inventory and price lists. The people with the iPhones generated 3.5% more rentals and called the office 30% less, because they were now operating at the speed their customers required. These aren’t isolated cases. These people who find and deploy technology to serve consumers are what we call HEROes – highly empowered and resourceful operatives. In the companies I’ve interviewed for our new book Empowered , I see a trend – companies that embrace their HEROes can operate at Internet speed and create loyal customers who spread word-of-mouth. This takes a new way of working for three groups within the companies: managers, the technology department, and the HEROes themselves. Managers need to embrace their workers’ technology ideas and help clear obstacles out of the way. These obstacles can come from PR, senior management, legal, or IT – but they need to be negotiated. Managers also need to be clearer about strategy, so their workers will come up ideas that fit the corporate goals. IT people need to get out their current mindset around technology, which is typically as the department of “No.” People are using social networks, google docs, and other simple tools to get work done (unless you work with Dilbert , of course). Instead, they need to support workers with technology advice. These projects will go forward, but they’re typically too small for IT to own. And IT has to help people work together with collaboration systems. At Deloitte Australia, 4,500 people work together with a tool called Yammer – a sort of corporate version of Twitter – that allows people to operate at the speed of their customers, finding the required resources quickly. And the HEROes themselves need to use their creativity to serve customers, not just to fool around with technology. We’ve got a tool that HEROes can use to assess their projects for value and effort – a better idea than just rushing in. HEROes who work with management and IT to nail down benefits and risks of their projects are far more likely to succeed. The future of business is HERO-powered. HEROes can operate at a speed no top-down organization can match. Every company has them. The question at your company is – will they get the chance to make you more responsive, more sensitive to customers, more competitive? In this age of empowered consumers, you’d better hope so. Josh Bernoff is Senior Vice President of Idea Development at Forrester Research and the co-author of Empowered: Unleash your Employees, Energize your Customers, and Transform your Business (Harvard Business Review Press, 2010). His previous book , Groundswell: Winning in a World Transformed by Social Technologies , was a BusinessWeek bestseller and won the American Marketing Association Foundation’s award for the best marketing book of the year in 2009.

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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National Lampoon CEO Daniel Laikin Sentenced For Conspiracy

September 8, 2010

PHILADELPHIA — The former CEO of entertainment company National Lampoon Inc. has been sentenced in Philadelphia to nearly four years in prison in a stock price manipulation scheme. Federal prosecutors say 48-year-old Daniel Laikin plotted to artificially inflate the company’s stock price by paying people to buy shares. They dropped a count of securities fraud last fall when Laikin pleaded guilty to conspiracy. Prosecutors say Laikin and others hoped to push the share price from $2 to $5 to boost the company’s attractiveness in a strategic partnership or acquisition. They say the company was removed from the American Stock Exchange and its share price plummeted. The company owned the rights to the “Vacation” and “Animal House” movies. Laikin was sentenced Wednesday to three years and nine months.

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Jake Blumgart: A New Labor Standard for Labor Day: Paid Sick Leave

September 3, 2010

You wake up Monday morning with a throbbing headache, achy muscles and a hacking cough. Do you miserably trudge into work, likely prolonging your recovery time and exposing your co-workers to infection? Or do you give your body the time it needs to heal, and call in sick? Can you afford to? For almost 40 percent of the nation’s private workforce, the answer to that last question is no. A recent Bureau of Labor Statistics report shows only 33 percent of workers earning $10.50 an hour or less have access to paid sick leave, compared with 81 percent of those earning $24.22 an hour or more. This means, perversely, that if you can afford to take an unpaid sick day, you generally don’t have to. Politicians and policy advocates across the country are aware of this squeeze on working families, and paid sick leave bills have been introduced at the city, state, and national levels. Most of these proposals are based on the earned sick time model: Employees must work, say, 30 hours to earn one hour of sick leave. Those earned hours accumulate, eventually, into full paid sick days. All the proposals include a cap on the number of mandated paid sick days. Most require five to nine days a year. Some allow employees to carry over unused sick days from one year to the next. “The economic climate makes it even more important for lawmakers to act because, in this economy, workers can ill-afford to miss a paycheck or risk the long-term unemployment that often follows losing a job,” said Vicki Shabo, Director of Work & Family Programs for the National Partnership for Women & Families . “Workers shouldn’t have to put their economic stability and job security on the line every time they get sick. It’s bad for business, bad for workers, and bad public policy.” So far, only two U.S. cities have adopted paid sick leave laws. Since 2008, five other cities, as well as 21 states and the U.S. Congress, have considered similar bills. So far, none have passed, because organized business interests have thwarted the proposals, claiming that even the most modest benefits will harm the economy and kill jobs. That scare tactic has proven quite potent in the present climate, with employers fiercely resistant to anything that even hints at additional costs. Are these claims correct or are the business groups crying wolf? One way to judge is to examine whether places that already have paid sick leave laws are suffering the dire consequences that corporate America warns against. A majority of the world’s nations guarantee sick leave benefits, as do Washington, D.C., and San Francisco. (Similar legislation was passed in Milwaukee with 68 percent of the vote, but area business groups sued and a local court overturned it). In 2006, San Francisco became the first American city to guarantee its citizens the right to paid time off to recuperate from illness. Business groups, spearheaded by the local Chamber of Commerce, lobbied against the ballot measure, which came on the heels of a municipal minimum wage raise and a universal health care law in the city. The business-side arguments evoked the typical “job killer” rhetoric. After voters approved the law by 61 percent, Kevin Westlye, executive director of the Golden Gate Restaurant Association, told the New York Times, “There’s no such thing as a free lunch on something like this,” and darkly warned of rising prices and shuttered restaurants. Four years later, these dire predictions have not come to pass. A recent study by the Drum Major Institute (DMI) shows that San Francisco’s employment rate has remained stronger than in any of the five neighboring counties, including wealthy Santa Clara (Silicon Valley). Even the industries where opponents warned that the impact would be harshest – retail, hospitality, and food services – remained stronger, without exception, than their nearby counterparts. At least 145 nations guarantee working adults some form of sick leave, including rich countries like Germany and Canada, and poorer ones like Indonesia and Senegal. Most of them allow at least one week, and over half ensuring leave of a month or more. A 2006 study in the Journal for Comparative Policy Analysis revealed that there is little, if any, connection between sick pay laws and unemployment levels. A 2009 follow up study by the Center for Economic and Policy Research shows that the duration of European sick leave laws doesn’t have any discernible relation to unemployment rates either. Studies show that paid sick leave is beneficial for employers too. Currently, businesses lose money from high turnover rates caused by illness absences and from the lowered productivity that results from sick employees spreading their germs at work. The Institute of Women’s Policy Research found that if all U.S. workers were offered seven days of paid sick leave annually the result would be “a net savings of $8.1 billion a year due to increased productivity and reduced turnover.” Today, even San Francisco business owners have come around. Jim Lazarus, senior vice president of the city’s Chamber of Commerce, told the Wall Street Journal that the legislation hasn’t stirred up any backlash from his members. And in a June article in Business Week , former doomsayer Westlye, executive director of the restaurant industry’s lobby, sounded downright enthusiastic about the bill: “[Paid sick leave] is the best public policy for the least cost. Do you want your server coughing over your food?” Despite the success of the San Francisco law, business groups continue to use the same tired rhetoric against similar legislative proposals. From California to Connecticut, business groups cry wolf about paid sick leave, and its supposedly catastrophic economic effects. Our nation’s lawmakers would do well to ignore them. Paid sick leave would have a tangible impact on the lives of American families–and politicians. The National Opinion Research Center released a poll in June showing that 86 percent of Americans favored laws guaranteeing paid sick leave. Strong majorities of self-identified Republicans as well as Democrats supported the proposal. Most said they would be more likely to vote for politicians who backed it. All employees should be able to take time off for their illnesses, not just those lucky enough to have the right job. As the San Francisco experience shows, we can make our economy friendlier to beleaguered workers without harming their employers. Jake Blumgart is a researcher with the San Diego-based Center on Policy Initiatives’ Cry Wolf Project funded by the Ford Foundation and the Public Welfare Foundation. His work has been published by the American Prospect, the Philadelphia Inquirer, The Stranger, and Campus Progress. A shorter version of this article was originally published in the Philadelphia Inquirer. Follow him on Twitter .

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LaSalle Acquires Three Hotels for $292.5M

September 2, 2010

LaSalle Hotel Properties has completed the acquisition of two hotels in Philadelphia and one in San Francisco, while selling off an asset in New Jersey. The Bethesda, MD-based hospitality REIT acquired the 294-room Westin Philadelphia and the 288-room…

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Scott Paul: The Onshoring Trend Is Phony

August 20, 2010

On Friday August 6th, no less an authority than the president himself heralded a USA Today front page story headlined: “Some manufacturing heads back to USA.” I watched CNBC that morning — the July unemployment figures were just out — and its anchors also trumpeted the news. So did the House Democratic leadership, which viewed the headline as a positive development and vindication of its recent focus on manufacturing. I don’t blame any of these folks for trying to squeeze the good news out of an otherwise horrible day of economic news, but it turns out that exactly the opposite is happening, Turns out they were all misinformed. Actual hard data released by the Federal Reserve Bank of Philadelphia today shows that onshoring, in fact, has declined over the past two years. Only 4.5 percent of manufacturers surveyed indicated that they had brought work back to the U.S. since the beginning of the year, compared to 6.2 percent in a survey two years ago. On the other hand, offshoring continues at a higher, though slightly diminished, pace: 9.7 percent of companies indicated that they had offshored work, compared to 11.1 percent two years ago. There’s an explanation for why this “onshoring” myth has been perpetuated: it’s what multinational companies want you to think. These companies know that “Made in America” is a label that sells once again. Even KIA — the Korean automaker — advertises its minivan as being made in the USA. Companies know that they risk a consumer backlash if they offshore work. A survey done for the Alliance for American Manufacturing by Mark Mellman and Whit Ayres shows that the American people have an overwhelmingly negative view (83 percent unfavorable) of companies that ship jobs to China. So, corporations like General Electric and NCR build consumer goodwill by heralding an onshoring event. They don’t tend to publicize offshoring. The USA Today story , on which all this hysteria was based, focused on a few anecdotes of companies moving production back to the United States. My contribution to the story was simply to say that onshoring was a “trickle, not a flood,” and that “there’s still more going out than coming in.” The Philadelphia Fed numbers confirm this, as does our astonishingly high trade deficit, which was nearly $50 billion for the month of June alone. So, how do we really make an onshoring trend a reality? It will take far more than what either the Obama Administration or the Congress have proposed so far. First, we need to stop China’s cheating on currency. This isn’t protectionist — far from it. Even free trade economists like Paul Krugman and Fred Bergsten support a strong response. Those who say China has the leverage in the relationship are completely mistaken: they need our market more than we need their debt financing. We’ll create as many as 1.5 million new jobs by moving China to a market-based exchange rate, at no cost to our Treasury. Second, we need a real manufacturing strategy. “Made in America” must be more than slogan — it must be the purpose of our economic policies. It will take real investment in our crumbling infrastructure and our workforce to make this a reality. Beyond that, we’ll need to unravel decades of neglect by ensuring access to capital through innovative ideas like a government-backed infrastructure bank and manufacturing investment bank that would leverage private capital. We’ll also need a trade policy where the goal is balanced trade, and not simply loading up our shelves with more made in China consumables. Onshoring is possible. America possesses enormous advantages — highly skilled workers, abundant natural resources, amazing entrepreneurship and innovation — but if we don’t stand up to China and also get our own house in order, onshoring will remain a myth.

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Philadelphia Housing Director Facing Foreclosure

August 14, 2010

PHILADELPHIA — A bank has foreclosed on a $615,000 condominium owned by the head of the Philadelphia Housing Authority, who earned $350,000 last year leading the nation’s fourth-largest public-housing agency. Carl R. Greene, PHA’s executive director, bought the three-bedroom, 2,100-square-foot condo in the upscale Naval Square development in 2007. He put down $215,000 in cash and took out a $400,000 mortgage, city records show. Greene, 53, stopped making payments on or around April 1, and three months later owed more than $7,500 in missed payments and late fees, according to the bank’s July 27 lawsuit. A spokesman denied that Greene has any financial problems, and said he is instead locked in a dispute with the mortgage company. Spokesman Kirk Dorn said he did not know the nature of the dispute, though he acknowledged the public’s interest in the case. “We all understand the irony of the situation,” Dorn said. “We’re very concerned about the appearance of the head of a large housing organization not paying his mortgage. But until the matter is resolved, Mr. Greene is simply not willing to air this dispute,” he said. Because of the missed payments, Wells Fargo is demanding that Greene pay in full the $386,685 outstanding on the mortgage. Greene himself did not immediately return a call for comment left at the housing agency. He is scheduled to appear in court on Sept. 16 to take part in the city’s foreclosure-prevention program, court records show. No lawyer is listed for him in the case file. The lawyer listed for Wells Fargo did not immediately return a message. Greene took over at PHA in 1998, after previously working as executive director of the Detroit Housing Commission, and also working for housing authorities in Atlanta and Washington, D.C. Greene, who is unmarried and has no dependents, earned a base salary of $306,370 plus a $41,188 bonus last year, Dorn confirmed. The condominium appears to be the first property he has owned in Philadelphia, according to city real estate records. The Philadelphia Inquirer first reported on the foreclosure proceedings.

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Philadelphia Housing Director Facing Foreclosure

August 14, 2010

PHILADELPHIA — A bank has foreclosed on a $615,000 condominium owned by the head of the Philadelphia Housing Authority, who earned $350,000 last year leading the nation’s fourth-largest public-housing agency. Carl R. Greene, PHA’s executive director, bought the three-bedroom, 2,100-square-foot condo in the upscale Naval Square development in 2007. He put down $215,000 in cash and took out a $400,000 mortgage, city records show. Greene, 53, stopped making payments on or around April 1, and three months later owed more than $7,500 in missed payments and late fees, according to the bank’s July 27 lawsuit. A spokesman denied that Greene has any financial problems, and said he is instead locked in a dispute with the mortgage company. Spokesman Kirk Dorn said he did not know the nature of the dispute, though he acknowledged the public’s interest in the case. “We all understand the irony of the situation,” Dorn said. “We’re very concerned about the appearance of the head of a large housing organization not paying his mortgage. But until the matter is resolved, Mr. Greene is simply not willing to air this dispute,” he said. Because of the missed payments, Wells Fargo is demanding that Greene pay in full the $386,685 outstanding on the mortgage. Greene himself did not immediately return a call for comment left at the housing agency. He is scheduled to appear in court on Sept. 16 to take part in the city’s foreclosure-prevention program, court records show. No lawyer is listed for him in the case file. The lawyer listed for Wells Fargo did not immediately return a message. Greene took over at PHA in 1998, after previously working as executive director of the Detroit Housing Commission, and also working for housing authorities in Atlanta and Washington, D.C. Greene, who is unmarried and has no dependents, earned a base salary of $306,370 plus a $41,188 bonus last year, Dorn confirmed. The condominium appears to be the first property he has owned in Philadelphia, according to city real estate records. The Philadelphia Inquirer first reported on the foreclosure proceedings.

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CoStar’s People of Note (Aug. 8-14)

August 12, 2010

This week’s People of Note includes the following markets: Chicago, Kansas City, Los Angeles, New York City, Northern New Jersey, Philadelphia and San Francisco. NORTHERN NEW JERSEY Bangia Joins Realogy’s Global Client Solutions Team Parsippany…

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Video: Plosser Doesn’t See Need For Added Monetary Stimulus: Video

July 26, 2010

July 26 (Bloomberg) — Federal Reserve Bank of Philadelphia President Charles Plosser talks with Bloomberg’s Michael McKee about the U.S. economy and potential Fed actions to stimulate growth. (Source: Bloomberg)

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David Isenberg: Just Another Day in Helping Make the U.S. Military the Best Supplied in Human History

July 4, 2010

Thanks to the ever watchful and observant Ms. Sparky , always on the lookout for the latest in contractor malfeasance, I want to share this latest news on the newly announced suspensions of PWC/Agility executives. Some may recall that last year, on November 9, 2009 to be precise, a Criminal Indictment was filed in the United States District Court for the Northern District of Georgia against the Public Warehousing Company (PWC) aka Agility DGS Holdings, Inc., headquartered in Kuwait, for violations of 18 U.S.C. § 371 (Conspiracy to Commit an Offense), 18 U.S.C. § 1031 (Major Fraud Against the United States), and 18 U.S.C. § 1343 (Fraud by Wire). PWC was indicted on allegations it overcharged the U.S. government on a multibillion-dollar contract to supply food for troops in Kuwait and Iraq. On July 1 the Defense Logistics Agency (DLA) sent out a memo announcing that Agility’s Chairman and Managing Director Tarek Sultan and two others have been suspended indefinitely from doing business with the DoD under ANY circumstances! The suspended parties are PWC affiliates who actively participated in the criminal conduct that lead to the indictment. Agility, by the way, is a member company of the trade association IPOA , which goes by the name of The Association of the Stability Operations Industry. It is headed by Doug Brooks, well known for his ubiquitous sound bite that “this [U.S. military operations in Iraq] is the best-supported and -supplied military operation in history.” Perhaps he might want to rethink that. One also wonders what IPOA will do regarding Agility? After all, IPOA’s exhortative but toothless Code of Conduct , Article 3.3, states “Signatories shall take firm and definitive action if their personnel engage in unlawful activities. For serious infractions, such as grave breaches of international humanitarian and human rights laws, Signatories should report such offences to the relevant authorities.” Perhaps nothing will be done. After all overcharging on a food contract most likely is not considered a grave breach of “international humanitarian and human rights laws.” Or perhaps a lawyer could argue that a suspension is not tantamount to an “unlawful activity. Although being suspended indefinitely strikes me as a pretty good sign that something is not kosher. One of Ms. Sparky’s colleagues observes, It is possible that at least two of KBR top brassholes, Paul Cerjan and Joe Cosumano will get caught up in the mess. Paul Cerjan was at L3, after KBR and before Agility. Also Remo Butler is at L3; then of course there is Craig Peterson who left KBR and went to IAP, got caught up in the Walter Reed scandal. What do they all have in common, they are all retired Generals and KBR. A commenter on Ms. Sparky’s website wrote : These “suspension” notices against the three PWC/Agility scumbags are a hoot. The only reason that DLA is taking such an agressive posture against these three is to stay ahead of the Justice Department’s investigation. DLA does NOT want the FBI looking into the “Prime Vendor Program” and the people running it in Philadelphia because therein exist the accomplices that make it possible for companies like PWC/Agility to rip-off the American Taxpayers for so much money on a systematic basis: People like Gary Shifton, Linda Sandoli and Paul Zebrowski. Oh, and Alan Estevez the Deputy Assistant Secretary of Defense who oversees DLA and who fixes lots of contracts for his friends….like his GREAT friend Maj. Gen. Daniel Mongeon (ret.) the President of PWC/Agility and former Commander of the Defense Supply Center Philadelphia.

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U.S. Economy’s Expansion Creates Little Job Growth as Inflation Controlled

June 17, 2010

By Shobhana Chandra and Courtney Schlisserman June 17 (Bloomberg) — The world’s largest economy will keep expanding in the second half of the year without stoking inflation or generating many jobs, reinforcing the Federal Reserve’s low-rate policy, reports today showed. The index of leading indicators, a gauge of the outlook for growth over the next three to six months, climbed 0.4 percent in May, according to data from the New York-based Conference Board. Other figures showed the cost of living dropped, claims for jobless benefits unexpectedly increased to the highest level in a month and manufacturing in the Philadelphia Fed region cooled. “The recovery is intact,” said Ellen Zentner , a senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who correctly forecast the gain in the leading index. “With price data like we saw today, the Fed is absolutely able to stand pat through this year without any qualms about inflation. The labor market is still in a precarious position.” Stocks dropped, halting a global rally, as the reports raised concern the European debt crisis may prompt American companies to rein in hiring. The drop in commodity prices brought on by the turmoil and price cuts by retailers including Wal-Mart Stores Inc. highlight the Fed’s forecast for “subdued” inflation. The Standard & Poor’s 500 Index fell 0.1 percent to 1,113.53 at 2:13 p.m. in New York. Treasury securities jumped, pushing the yield on the benchmark 10-year note down to 3.19 percent from 3.26 percent late yesterday. More Claims Initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed. Economists surveyed by Bloomberg News projected the number of applications would drop to 450,000, according to the median forecast. The figures indicated firings are staying elevated even as the economy grows. Some companies are trimming payrolls to boost or maintain profits at the same time overall employment has grown each month this year. “The labor market is not improving,” said Steven Ricchiuto , chief economist at Mizuho Securities USA Inc. in New York. “If you really are going to have a sustainable recovery, you need the labor market to improve.” Manufacturing in the region covered by the Philadelphia Fed expanded in June at the slowest pace since August as a measure of factory employment contracted for the first time in seven months, the branch of the central bank reported today. Philadelphia Manufacturing Its general economic index , where readings greater than zero signal growth, dropped to 8 from 21.4 in May. The regional gauge covers eastern Pennsylvania, southern New Jersey and Delaware. Economists forecast the measure would fall to 20, according to the median projection. Manufacturing, which led the economy out of the worst recession since the 1930s, is easing into a more sustainable pace of growth as the need to replenish inventories becomes less pressing. The figures stand in contrast to a report this week showing New York factories expanded at a faster rate. Other data from the Labor Department showed consumer prices dropped 0.2 percent in May, a second consecutive decrease and the biggest since December 2008. Excluding food and fuel, the so-called core rate increased 0.1 percent. The figures matched the median forecasts of economists surveyed. Last month’s fall was led by a decrease in energy costs propelled by concern that efforts to rein in government debt in Europe will slow global growth. Gasoline prices declined 5.2 percent, the biggest drop since December 2008. Inflation Cools In the 12 months ended in May, consumer prices rose 2 percent following a 2.2 percent year-over-year gain the prior month. The core rate rose 0.9 percent from May 2009, matching the smallest year-over-year gain since 1966. Fed forecasters lowered their outlook for inflation, according to minutes of their April meeting. Officials “anticipated that inflation would remain subdued over the next several years,” the minutes released May 19 said. The deceleration in inflation prompted economists at JPMorgan Chase & Co. in New York today to push their forecast for a rate increase by the central bank to the fourth quarter of 2011 from the second quarter of that year. “The disinflation we have witnessed could be with us for some time,” Michael Feroli , JPMorgan’s chief U.S. economist, said in a note to clients, citing the smaller price gains in services and the lack of wage pressure. Shopping for Discounts Some lower-income customers in the U.S. are “still deeply in the recession” and are shopping various retailers for the cheapest prices, Jamie Sohosky, senior director of marketing for Wal-Mart’s U.S. stores, said this month. Shoppers at Wal-Mart, the world’s largest retailer, are also using more coupons than a year ago, Sohosky said. They’re worried about losing their jobs and paying mortgages, she said. The breadth of gains within the components of the index of leading indicators means there is little risk the rebound from the recession will be derailed by the European debt crisis. Five of the 10 indicators contributed to May’s increase, led by the spread between the yield on the benchmark 10-year Treasury note and the Fed’s target rate for short-term loans between banks. An increase in the money supply and a longer factory workweek also added. Five of the components declined, including slumps in stock prices and building permits . “The European crisis is having an extremely mild impact,” said Bank of Tokyo-Mitsubishi UFJ’s Zentner. “While there are some signs it’s affecting business sentiment, the effect is very limited at this time.” To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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U.S. Stocks Halt Global Rally, Treasuries, Gold Gain on Economy

June 17, 2010

By Michael P. Regan and Nikolaj Gammeltoft June 17 (Bloomberg) — U.S. stocks halted a global advance , while Treasuries and gold rallied, as an unexpected increase in jobless claims and lower-than-estimated growth in Philadelphia manufacturing cast doubt on the strength of the economy. The Standard & Poor’s 500 Index slipped 0.4 percent to 1,109.8 at 1:15 p.m. in New York and the MSCI World Index erased an earlier gain that would have extended its rally to eight days, the longest in 11 months. Copper and zinc tumbled more than 3.1 percent in London to lead losses in industrial metals. Ten-year Treasury yields fell 7 basis points to 3.19 percent and spot gold jumped 1.5 percent to $1,247.23 an ounce. Stocks turned lower as the Federal Reserve Bank of Philadelphia’s general economic index dropped to a 10-month low of 8, less than half the median estimate in a Bloomberg survey of economists. Initial U.S. jobless claims rose to 472,000 last week, indicating firings remain elevated even as the economy recovers. European shares reversed early gains triggered when a Spanish bond sale eased concern about the region’s debt crisis. “The economic numbers are still somewhat concerning,” said Brett Hryb , part of a group that manages $2.6 billion at MFC Global Investment Management in Toronto. “We have a very long-tailed recovery as opposed to a V-shaped bounce back. The gain in Treasuries and gold fall into the flight to safety. Gold is the net beneficiary every time the market is unsure.” The S&P 500 added to losses from yesterday’s 0.1 percent drop. The Philadelphia Fed figures stand in contrast to a report this week showing New York factories expanded at a faster rate. U.S. Stocks Consumer-discretionary, telephone and commodity companies led declines in eight of 10 industry groups in the S&P 500. Home Depot Inc., Alcoa Inc. and American Express Co. fell more than 1.3 percent to lead the Dow Jones Industrial Average down 0.4 percent to 10,372.05. “Clearly the market doesn’t like the Philly Fed number,” said Mike Shea , a managing partner and trader at Direct Access Partners LLC in New York. “If the numbers tell us anything it’s that this recovery is going to take longer than we thought.” U.S. stock futures pared an early rally in pre-market trading after initial jobless claims increased by 12,000 to 472,000 in the week ended June 12, Labor Department figures showed. Economists surveyed by Bloomberg News projected 450,000 claims, according to the median forecast. The number of people receiving unemployment insurance rose, while those getting extended benefits dropped. Europe Stocks The Stoxx Europe 600 Index rose 0.2 percent, paring a 0.7 percent rally. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds at yields lower than the prevailing market rates, attracting bids worth as much as 2.45 times the securities on offer, assuaging concern that it would face difficulty meeting bond repayments. Spain’s gauge of 35 stocks increased 0.7 percent, paring a rally of as much as 1.6 percent. Spanish bonds rose, with the yield on the 10-year note falling from the highest level in almost two years. The yield dropped 11 basis points to 4.77 percent. The difference in yield, or spread, between German and Spanish 10-year government bonds narrowed 10 basis points to 211 basis points. Spain is trying to convince investors it can cut the euro- region’s third-largest deficit, while propping up the country’s savings banks and lifting the economy out of a two-year slump. Spain, which faces 24.7 billion euros of maturing debt in July, had seen the risk premium on its 10-year bonds rise to a decade high on concern it may need to tap a European rescue fund. BP Rebounds BP Plc, battling to contain the worst oil spill in U.S. history, rallied 6.7 percent in London as the company scrapped dividends and pledged asset sales to meet President Barack Obama ’s demand for a $20 billion fund to help victims. The shares are down 45 percent since the rig explosion that triggered the spill in April. The euro rose 0.4 percent to $1.2355 and earlier topped $1.24 for the first time in almost three weeks as Spain’s bond sale bolstered confidence in the currency. The dollar weakened against 13 of 16 major currencies, led by a 1.6 percent drop versus the Swiss franc. The Swiss franc approached an all-time high against the euro after the central bank softened its stance on fighting franc gains as deflation risks ease. The Swiss National Bank, which has been buying foreign currencies since March 2009 to counter the threat of deflation, said today that those risks have “largely disappeared.” Emerging Markets The MSCI Emerging Markets Index rose 0.4 percent, climbing for an eighth day in the longest stretch of gains in two months. Benchmark indexes in Turkey, Indonesia, Egypt and Romania climbed at least 0.9 percent. Crude oil fell for the first time this week, slipping 1.6 percent to $76.44 a barrel. Copper futures for September delivery slid 8.9 cents, or 3 percent, to $2.9245 a pound on the Comex in New York. The Reuters/Jefferies CRB Index of commodities retreated for the first time in nine days, snapping its longest streak of gains in three years. To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net .

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Stocks in U.S. Trim Losses as Technology Shares, Industrial Companies Rise

June 17, 2010

By Nikolaj Gammeltoft June 17 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, as a jump in jobless claims and slower growth in Philadelphia manufacturing called into question the strength of the economy. Pfizer Inc., Home Depot Inc. and Merck & Co. led declines in the Dow Jones Industrial Average. Homebuilders fell after Toll Brothers Inc . said low consumer confidence is hurting home sales. Bed Bath & Beyond Inc. fell 6.6 percent as consumer stocks dropped the most in the Standard & Poor’s 500 Index . M&T Bank Corp. jumped 9.7 percent on merger speculation. The S&P 500 slipped 0.4 percent to 1,110.18 as of 1:34 p.m. in New York after climbing as much as 0.3 percent. The Dow Jones Industrial Average lost 40.29 points, or 0.4 percent, to 10,369.17. “Economic surprises, which had been very positive, are now becoming negative,” said Michael Mullaney , who manages $9 billion at Fiduciary Trust Co. in Boston. “If we continue to see economic deceleration happen, including what looks like a double dip in housing, maybe we have to look at those earnings with much more questioning eyes.” Stocks erased an early gain after the Federal Reserve Bank of Philadelphia’s general economic index slumped to 8 in June from 21.4 the previous month. That was below the economist forecast of 20, according to the median of 58 projections in a Bloomberg News survey. Futures of the major indexes had already retreated from their highs in the morning after a jobs report showed an increase in first-time unemployment claims. Jobless Claims Consumer-discretionary stocks fell the most of 10 industry groups in the S&P 500 as initial jobless claims rose by 12,000 to 472,000 last week, figures from the Labor Department showed today in Washington. The median expectation of a Bloomberg survey of economists was for a decline to 450,000. Consumer- staples shares advanced the most among the 10 categories. Bed Bath & Beyond decreased the most in the S&P 500, erasing 6.6 percent to $42.13. Home Depot Inc. , the world’s largest home improvement retailer, retreated 2.1 percent to $31.47 for the biggest drop in the Dow. The Philly Fed number “is another indicator that the economy may not be recovering as quickly as many had hoped,” said James W. Gaul , a money manager at Boston Advisors LLC in Boston, which oversees about $1.9 billion. “It’s a volatile trading period as the market is trying to figure out if the recent rally was enough or if investors want to keep push higher.” Materials Producers Materials producers had the second-biggest drop as a group in the S&P 500. Steel Dynamics Inc. , the fourth-largest U.S.- based steelmaker, fell 2.3 percent to $13.89 after forecasting second-quarter earnings that trailed analysts’ estimates amid decreased profit margins on recycled metals and lower sales of flat-rolled steel. Alcoa Inc. , the largest U.S. aluminum maker, fell 1.5 percent to $11.24. American Express Co. , the biggest U.S. credit-card issuer by purchases, declined 1.5 percent to $41.71. Most U.S. stocks fell yesterday after housing starts dropped and FedEx Corp.’s profit forecast trailed estimates. The S&P 500 tumbled 14 percent from a 19-month high on April 23 through June 7 as concern grew that Europe’s debt crisis will derail the economic recovery and BP Plc’s leaking well triggered the worst oil spill in U.S. history. The index has since rebounded 6.1 percent through yesterday as concern over European budget deficits eased and investors speculated growth in China and the U.S. will bolster the global recovery. Spain sold 3.5 billion euros ($4.3 billion) of 10-year and 30-year bonds today, the maximum set for the auction, as a decline in prices enticed buyers and concern eased that the nation will struggle to finance looming debt maturities. Homebuilders Toll Brothers fell 3.9 percent to $18.05. The largest U.S. luxury homebuilder said deposits have been running 20 percent behind the year-earlier period in the past three weeks as the Gulf oil spill and European debt crisis hurt buyer confidence. Other homebuilders also declined. Pulte Group Inc. , the largest U.S. homebuilder by revenue, slipped 2.6 percent to $9.50. D.R. Horton Inc. , the second-largest U.S. homebuilder by revenue, erased 3.1 percent to $10.89. The consumer price index declined 0.2 percent in May, the Labor Department said, matching the median estimate of economists surveyed by Bloomberg. Pfizer, the world’s largest drugmaker, fell 1.4 percent to $15.27. Merck , the second-largest U.S. drugmaker, lost 1.3 percent to $35.54. Chanos Jim Chanos , the hedge-fund manager who made money betting against Enron Corp., said on Bloomberg Television that he is short-selling shares of large oil companies because investment in drilling and exploration is eating up their cash flows. Exxon Mobil Corp. dropped 0.6 percent to $62.13. Energy companies fell 0.6 percent as a group among 10 industries in the S&P 500. BP declined 0.6 percent to $31.67 as Chief Executive Officer Tony Hayward said at a hearing of a U.S. House Energy Committee panel that he didn’t take part in decisions on drilling the well in the Gulf of Mexico that blew out, triggering the worst U.S. oil spill. First Solar Inc. , the world’s largest manufacturer of thin- film solar power modules, climbed 4.3 percent to $123.91. Credit Suisse Group AG raised its recommendation on the stock to “outperform” from “neutral.” M&T Bank, DirecTV M&T Bank rose the most in the S&P 500, jumping 9.7 percent to $89.85. Banco Santander SA said it has taken no decision on any possible decision to combine its business with of the U.S. bank. Matias Inciarte , the Spanish lender’s third vice-chairman said “it’s been said” that there have been conversations between the two banks. DirecTV slid 3.9 percent to $37.81. The largest U.S. satellite-TV provider was cut to “market perform” from “outperform” by Wells Fargo & Co. To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net .

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Reid Got Christmas-Eve Lift to West Coast on Feinstein Husband’s Airplane

June 17, 2010

By James Rowley June 17 (Bloomberg) — Senate Majority Leader Harry Reid hitched a ride to the West Coast on a private jet owned by Senator Dianne Feinstein ’s husband after the Senate passed a version of health-care legislation last Christmas Eve, according to Reid’s financial disclosure form. Predictions of stormy winter weather prompted the Senate to conduct an early morning vote on the bill Dec. 24 to give lawmakers as much time as possible to travel to their home states for the Christmas holidays. It was the Senate’s first Christmas Eve session held to pass legislation since 1963, according to the Senate historian’s office. Reid, a Nevada Democrat, and Senator Barbara Boxer , a California Democrat, flew to San Francisco aboard a Gulfstream jet owned by Feinstein’s husband, Richard C. Blum , chairman of Los Angeles-based CB Richard Ellis Group Inc., said Gil Duran, a spokesman for Feinstein, in an e-mail. Feinstein, a California Democrat, also was on the flight, her husband wasn’t, Duran said. Reid and Boxer reported receiving their gifts of free transportation, which they valued at $3,625, on the annual financial disclosure forms for Senate and House members that were released yesterday. Such gifts must be listed on the form. Both lawmakers stated that the flight’s value was “determined in consultation with the ethics committee staff.” Boxer, 69, chairs the Senate ethics panel. Invitation Offered As bad weather interfered with commercial air traffic to the West, Reid accepted an invitation from Feinstein, 76, to fly on the plane, said Jon Summers, a Reid spokesman. The flight left Washington immediately after the Senate vote, Summers said. A final version of the health-care overhaul measure cleared Congress in late March and was signed into law by President Barack Obama . Reid, 70, who reported a net worth of at least $1.56 million to $3.6 million, flew by commercial airliner to Reno, Nevada, where he spent Christmas with his wife, Landra, and their son’s family, Summers said. Besides chairing the Los Angeles-based real-estate services firm, Blum, 74, is chairman of Blum Capital Partners LP , an investment management firm based in San Francisco. Pelosi’s Husband In other disclosure statements released yesterday, House Speaker Nancy Pelosi reported that her husband, San Francisco real-estate investor Paul Pelosi, sold as much as $25 million of his holdings in Apple Inc. during an eight-month period when the shares almost doubled in value. He made a capital gain of between $1 million and $5 million. The closing price of Apple shares was $123.40 on April 20, 2009, the day Pelosi first sold the stock, and was $211.61 on Dec. 28, the last day he sold Apple. The speaker reported that her husband still owned as much as $5 million worth of Apple stock at year’s end. Nancy Pelosi, a California Democrat and author of “Know Your Power, A Message to America’s Daughters,” reported earning $102,161 in book royalties. Senator John Ensign , a Nevada Republican, received between $100,000 and $250,000 as partial payment for the veterinary practice he sold after being elected to the Senate. House Financial Services Committee Chairman Barney Frank , a Massachusetts Democrat, received round-trip airfare to Los Angeles, a hotel room and meals for a May appearance on comedian Bill Maher ’s television show. Milwaukee Bucks Wisconsin Democratic Senator Herb Kohl , owner of the Milwaukee Bucks basketball team, holds his assets in a blind trust worth more than $50 million. The trust earned more than $5 million last year. Representative Leonard Boswell , an Iowa Democrat, made between $50,000 and $10,000 selling calves for breeding. Representative Sam Graves , a Missouri Republican, sold a 1967 Piper Cherokee airplane for between $15,000 and $50,000. Senator Orrin Hatch , a Utah Republican, reported almost $12,000 in book and music royalties. Other authors included Senators Jim DeMint , a South Carolina Republican, who received $42,500, the second half of a book advance, and Byron Dorgan , a North Dakota Democrat, who received a final payment of $29,750 for his book. Kentucky Republican Jim Bunning , the only U.S. senator in the Baseball Hall of Fame, earned $18,000 for appearances at baseball card shows and received Senate Ethics Committee approval to accept a $12,300 ring from his former team, the Philadelphia Phillies, to commemorate its 2008 World Series win. To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net .

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Charles Plosser, Philadelphia Fed Chief, Criticizes Financial Reform Bills, Says They Don’t End ‘Too Big To Fail’

June 16, 2010

A top Federal Reserve official reiterated his call Wednesday for a tougher approach to ending Too Big To Fail, arguing that the current pending legislation before Congress doesn’t adequately address the “most important element in fixing our financial system.” Federal Reserve Bank of Philadelphia President Charles Plosser criticized proposals that leave too much discretion to regulators and political appointees — as the legislation does — because he feels that when the time comes for a failing TBTF bank to be dismantled and shut down, regulators will be reluctant to pull the trigger. “I don’t think we’ve got the Too-Big-To-Fail problem solved in this legislation, and that’s the one I worry most about,” the central bank official told a crowd of bankers, regulators and economists in New York. Organized by a group of 15 economists that comprise the Squam Lake Group, the meeting was held to discuss the group’s views on reforming the financial system. “In my view, the most important element in fixing our financial system is that we must end the notion that some financial firms are too big or too interconnected to fail,” Plosser said. “If a firm’s creditors believe that the government will rescue them in times of trouble, they will have little incentive to exert market discipline and discourage a firm from taking excessive risk. “Eliminating too big to fail should be the first priority of any regulatory reform. This is easier said than done. As the crisis has taught us, when the systemic risks are perceived to be large — and regulators are prone to see systemic risks under every rock — they will be very reluctant to close down insolvent firms or impose losses on creditors. “So how do we reduce these risks so that regulators can credibly commit to a policy of allowing financial companies to fail and not resort to rescues or bailouts?” he asked. Plosser is one of at least four regional Fed presidents who have publicly said that the current pending legislation does not do enough to end Too Big To Fail. Richard Fisher of Dallas, Thomas Hoenig of Kansas City and James Bullard of St. Louis are the known dissenters. The Obama administration and the Fed’s Washington-based Board of Governors, meanwhile, publicly cheer the legislation, hailing it as the measure that will end TBTF. “While Congress is likely to pass a regulatory reform bill in the coming weeks, this is certainly not the end of the process of regulatory reform,” Plosser cautioned. “Regulators will need to work out many details left open by the legislation. “And taking the longer view, I don’t think that Congress’s approach is necessarily the final word on designing a resolution mechanism that will end the problem of firms that are too big to fail.” Instead of relying on the approach advocated by the Obama administration, which was largely adopted by both the House and Senate, Plosser repeated his call for a new bankruptcy-like process to resolve large, complex financial firms on the verge of failure. Market participants need firm rules and procedures, he argued, echoing a view voiced by Hoenig. Relying on regulators won’t be enough. “[I]f we are to deal effectively with the too-big-to-fail problem, we must have a credible mechanism to deal with such failures,” Plosser said. “[T]he resolution process should be as predictable as possible; regulatory authorities should not be able to use discretion to alter contractual claims in the resolution process. “I believe a bankruptcy court with special procedures for financial institutions would be better equipped than a bank regulator to credibly dismantle large financial institutions without bailouts,” he added. And unlike current bankruptcy law, which exempts derivatives contracts from its normal procedures, Plosser thinks this new version of bankruptcy should include most derivative contracts. “Arguably, this special treatment actually increased systemic risks during the recent crisis,” Plosser said of the existing exemption of derivatives contracts from bankruptcy court. Here’s how: “Sophisticated counterparties were encouraged to provide short-term repo funding, collateralized by securities that turned out to be very illiquid, such as various asset-backed securities,” he said. Repos are repurchase agreements, which are transactions in which one party borrows cash using securities as collateral with a promise to buy back those securities at a later date. “These creditors clearly perceived that they did not need to carefully monitor their borrowers’ condition, in part, because they expected that they could seize collateral before other claimants,” he said. “In turn, this created incentives for the borrowing firms to increase leverage, and increase their reliance on short-term funding, which increased fragility in the financial system.” Hence, he argues, “we should limit the special treatment in bankruptcy to a much smaller group of contracts, such as those repos secured by highly liquid collateral (cash or Treasuries).” If that happens, then other types of short-term funding may become “more expensive and less pervasive,” Plosser said. “In turn, our financial system might become a little less fragile. Not such a bad outcome.” As for the oft-repeated critique that the international coordination issues involved in putting a failing TBTF bank through bankruptcy, Plosser acknowledged that while it’s an “obstacle,” it needn’t lead to his plan being ignored. “One possible solution is for global financial firms to declare a single jurisdiction under which bankruptcy would be administered,” he said. While this would require coordination, “contrary to some claims, however, we don’t really require a full harmonization of bankruptcy regimes across nations.” Rather, he said, “it is enough to seek agreement about the creation of a special regime for financial firms. International firms do go through bankruptcy now, so I don’t see this as an insurmountable task.” These firm rules are all the more important because regulators likely won’t be able to spot the next crisis, Plosser said, echoing a sentiment voiced by other policymakers. “Discretionary supervision and regulation alone are not sufficient to prevent excessive risk-taking or prevent future crises,” said Plosser.

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ANOTHER Fed Official Says Senate Bill Doesn’t End ‘Too Big To Fail’

June 11, 2010

The Senate financial reform bill serving as the base text for Congressional negotiations doesn’t end the perception that the nation’s largest financial firms are Too Big To Fail, another top Federal Reserve official said Friday. Federal Reserve Bank of Philadelphia President Charles I. Plosser is the latest regional Fed chief to criticize the bill for its apparently inadequate attempt to forever end Too Big To Fail, joining a growing group that includes Dallas Fed President Richard W. Fisher and Kansas City Fed President Thomas M. Hoenig . “We must work to restore the prospect of failure,” Plosser said in prepared remarks to a gathering in Altoona, Penn. “To do so, we must establish a credible commitment by the government to not intervene or bail out firms on the verge of bankruptcy.” That’s what happened in 2008 as the federal government propped up investment firm Bear Stearns, insurer AIG, mortgage giants Fannie Mae and Freddie Mac, as well as the nation’s largest banks. More than 800 companies have either received or have been promised hundreds of billions of dollars in taxpayer cash. But, Plosser said, the approach favored by the Democratic leadership in the Senate as well as by top officials in the Obama administration to ensure that never happens again doesn’t go far enough, and leaves taxpayers on the line should the financial system near another crash. “I believe the best approach is amending the bankruptcy code for nonbank financial firms and bank holding companies, rather than expanding the bank resolution process under the FDIC Improvement Act as both versions of the reform legislation appear to do,” he said. “Resolution processes can be highly inefficient and arbitrary — granting far too much discretion to regulators or politicians to rescue some stakeholders and not others. “[I]t is important that we recognize that rules and regulations can have unintended and often undesirable consequences,” Plosser continued. “While the proposals now before Congress claim to have solved the Too Big To Fail problem, I am less convinced.” The House and Senate have each passed a financial reform bill, which the Democratic leadership in both chambers as well as the Obama administration claim will fix the ailments in the financial system that led to the worst financial crisis since the Great Depression. Lawmakers are in the process of reconciling these bills into a single version acceptable to both houses of Congress before sending the final version to President Barack Obama. The importance of forever ending Too Big To Fail can not be understated, according to Plosser and his counterparts across the Fed’s regional banks. “I believe that one of the most important objectives of financial regulatory reform is to address the notion that some firms are Too Big To Fail,” Plosser said. “The recent crisis and actions by policymakers have exacerbated moral hazard and expanded the safety net for failing firms. This is a huge problem that if not adequately addressed will sow the seeds of the next crisis. “If a firm’s creditors believe that the government will rescue them in the event of an impending failure, they will have little incentive to discourage the firm from taking excessive risk. Failure is the ultimate form of market discipline and an essential element of free enterprise. “Individuals must have the freedom to reap the rewards of their success, but they must also be free to fail. As my friend and fellow economist Allan Meltzer has said, “Capitalism without failure is like religion without sin. It doesn’t work.” Meanwhile, administration officials, like Obama’s top economic adviser, Larry Summers, argue that had the proposed resolution process been in place around the time taxpayers were bailing out AIG, the bailout wouldn’t have been necessary. Officials at the New York Fed and the Fed’s Board of Governors in Washington make similar claims. Analysts at Moody’s Investors Service said in a report last week that they doubted whether the proposed legislation truly ends Too Big To Fail, noting that regulators and policymakers would inevitably step in if a systemically-important firm was on the verge of collapse, since by definition such a firm’s dissolution would threaten the broader financial system. Such financial behemoths — which many observers believe to be Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley , among others — enjoy the support of an implicit government backstop. This allows them to issue debt at lower costs than their competitors because their creditors credibly believe that they’ll be bailed out should times get rough. Collectively, the firms save billions of dollars a year thanks to this implicit government guarantee. Fisher, the Dallas Fed chief, and Hoenig, of the Kansas City Fed, argue that the best way to end Too Big To Fail is to break up the nation’s megabanks. In a speech last week, Fisher said the nation doesn’t need ” a few gargantuan institutions capable of bringing down the very system they claim to serve .”

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U.S. Stocks Drop as S&ampP 500 Marks Seven-Month Low Apple Falls

June 7, 2010

By Esme E. Deprez June 7 (Bloomberg) — U.S. stocks fell, sending benchmark indexes to seven-month lows, as Google Inc. and Apple Inc. led a drop in technology shares and Goldman Sachs Group Inc. was subpoenaed in the financial-crisis investigation. Apple lost 2 percent as the introduction of a new iPhone failed to boost the stock. Google sank 2.7 percent as Connecticut demanded information about data collection. Goldman Sachs slid 2.4 percent as the Financial Crisis Inquiry Commission said the bank had not complied with requests for documents. Autodesk Inc. fell 4.4 percent after Goldman Sachs removed the software company from its “conviction buy” list. The Standard & Poor’s 500 Index slipped 1.4 percent to 1,050.43 as of 4 p.m. in New York. The Dow Jones Industrial Average decreased 115.85 points, or 1.2 percent, to 9,816.12. Five stocks fell for each that rose on U.S. exchanges. Benchmark indexes rose earlier following growth in German factory orders and toned-down comments from Hungarian officials about a potential default. “Despite some mildly positive news from Germany and Hungary, there’s been a lack of anything too positive to give the market a push and give investors more confidence to step in and do some bargain hunting,” said Richard Sichel , who oversees $1.4 billion as chief investment officer at Philadelphia Trust Co. “The U.S. economy is an attractive place, but our economic recovery is going to be slow.” ‘Significant Headwinds’ U.S. stocks fell last week as lower-than-estimated jobs growth and a worsening government debt crisis in Europe fueled concern the global economic recovery will slow. Janet Yellen , President Barack Obama ’s pick to be the Federal Reserve’s next vice chairman, said in a San Francisco speech today that while there appear to be improvements in the global economy, “significant headwinds to stability remain.” Benchmark U.S. indexes advanced in early trading after German factory orders unexpectedly jumped for a second month in April as the weaker euro boosted export demand and companies increased investment. Hungary’s government pledged to control the budget deficit and make structural changes to overhaul the economy as it further distanced itself from suggestions the country was facing a Greece-like crisis. “This is a small glimmer of hope that Europe might be doing better,” Malcolm Polley , who oversees $1 billion as chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, said of Germany factory orders. “A lot of the issues affecting markets have been coming from Europe, so this is an encouragement.” To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net .

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U.S. Stocks Drop as S&ampP 500 Marks Seven-Month Low Apple Falls

June 7, 2010

By Esme E. Deprez June 7 (Bloomberg) — U.S. stocks fell, sending benchmark indexes to seven-month lows, as Google Inc. and Apple Inc. led a drop in technology shares and Goldman Sachs Group Inc. was subpoenaed in the financial-crisis investigation. Apple lost 2 percent as the introduction of a new iPhone failed to boost the stock. Google sank 2.7 percent as Connecticut demanded information about data collection. Goldman Sachs slid 2.4 percent as the Financial Crisis Inquiry Commission said the bank had not complied with requests for documents. Autodesk Inc. fell 4.4 percent after Goldman Sachs removed the software company from its “conviction buy” list. The Standard & Poor’s 500 Index slipped 1.4 percent to 1,050.43 as of 4 p.m. in New York. The Dow Jones Industrial Average decreased 115.85 points, or 1.2 percent, to 9,816.12. Five stocks fell for each that rose on U.S. exchanges. Benchmark indexes rose earlier following growth in German factory orders and toned-down comments from Hungarian officials about a potential default. “Despite some mildly positive news from Germany and Hungary, there’s been a lack of anything too positive to give the market a push and give investors more confidence to step in and do some bargain hunting,” said Richard Sichel , who oversees $1.4 billion as chief investment officer at Philadelphia Trust Co. “The U.S. economy is an attractive place, but our economic recovery is going to be slow.” ‘Significant Headwinds’ U.S. stocks fell last week as lower-than-estimated jobs growth and a worsening government debt crisis in Europe fueled concern the global economic recovery will slow. Janet Yellen , President Barack Obama ’s pick to be the Federal Reserve’s next vice chairman, said in a San Francisco speech today that while there appear to be improvements in the global economy, “significant headwinds to stability remain.” Benchmark U.S. indexes advanced in early trading after German factory orders unexpectedly jumped for a second month in April as the weaker euro boosted export demand and companies increased investment. Hungary’s government pledged to control the budget deficit and make structural changes to overhaul the economy as it further distanced itself from suggestions the country was facing a Greece-like crisis. “This is a small glimmer of hope that Europe might be doing better,” Malcolm Polley , who oversees $1 billion as chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, said of Germany factory orders. “A lot of the issues affecting markets have been coming from Europe, so this is an encouragement.” To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net .

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Stocks in U.S. Decline as Shares of Apple, Goldman Sachs, Autodesk Retreat

June 7, 2010

By Esme E. Deprez June 7 (Bloomberg) — U.S. stocks fell, sending benchmark indexes to seven-month lows, as Google Inc. and Apple Inc. led a drop in technology shares and Goldman Sachs Group Inc. was subpoenaed in the financial-crisis investigation. Apple lost 2 percent as the introduction of a new iPhone failed to boost the stock. Google sank 2.7 percent as Connecticut demanded information about data collection. Goldman Sachs slid 2.4 percent as the Financial Crisis Inquiry Commission said the bank had not complied with requests for documents. Autodesk Inc. fell 4.4 percent after Goldman Sachs removed the software company from its “conviction buy” list. The Standard & Poor’s 500 Index slipped 1.4 percent to 1,050.43 as of 4 p.m. in New York. The Dow Jones Industrial Average decreased 115.85 points, or 1.2 percent, to 9,816.12. Five stocks fell for each that rose on U.S. exchanges. Benchmark indexes rose earlier following growth in German factory orders and toned-down comments from Hungarian officials about a potential default. “Despite some mildly positive news from Germany and Hungary, there’s been a lack of anything too positive to give the market a push and give investors more confidence to step in and do some bargain hunting,” said Richard Sichel , who oversees $1.4 billion as chief investment officer at Philadelphia Trust Co. “The U.S. economy is an attractive place, but our economic recovery is going to be slow.” ‘Significant Headwinds’ U.S. stocks fell last week as lower-than-estimated jobs growth and a worsening government debt crisis in Europe fueled concern the global economic recovery will slow. Janet Yellen , President Barack Obama ’s pick to be the Federal Reserve’s next vice chairman, said in a San Francisco speech today that while there appear to be improvements in the global economy, “significant headwinds to stability remain.” Benchmark U.S. indexes advanced in early trading after German factory orders unexpectedly jumped for a second month in April as the weaker euro boosted export demand and companies increased investment. Hungary’s government pledged to control the budget deficit and make structural changes to overhaul the economy as it further distanced itself from suggestions the country was facing a Greece-like crisis. “This is a small glimmer of hope that Europe might be doing better,” Malcolm Polley , who oversees $1 billion as chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, said of Germany factory orders. “A lot of the issues affecting markets have been coming from Europe, so this is an encouragement.” To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net .

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Stocks in U.S. Decline as Shares of Apple, Goldman Sachs, Autodesk Retreat

June 7, 2010

By Esme E. Deprez June 7 (Bloomberg) — U.S. stocks fell, sending benchmark indexes to seven-month lows, as Google Inc. and Apple Inc. led a drop in technology shares and Goldman Sachs Group Inc. was subpoenaed in the financial-crisis investigation. Apple lost 2 percent as the introduction of a new iPhone failed to boost the stock. Google sank 2.7 percent as Connecticut demanded information about data collection. Goldman Sachs slid 2.4 percent as the Financial Crisis Inquiry Commission said the bank had not complied with requests for documents. Autodesk Inc. fell 4.4 percent after Goldman Sachs removed the software company from its “conviction buy” list. The Standard & Poor’s 500 Index slipped 1.4 percent to 1,050.43 as of 4 p.m. in New York. The Dow Jones Industrial Average decreased 115.85 points, or 1.2 percent, to 9,816.12. Five stocks fell for each that rose on U.S. exchanges. Benchmark indexes rose earlier following growth in German factory orders and toned-down comments from Hungarian officials about a potential default. “Despite some mildly positive news from Germany and Hungary, there’s been a lack of anything too positive to give the market a push and give investors more confidence to step in and do some bargain hunting,” said Richard Sichel , who oversees $1.4 billion as chief investment officer at Philadelphia Trust Co. “The U.S. economy is an attractive place, but our economic recovery is going to be slow.” ‘Significant Headwinds’ U.S. stocks fell last week as lower-than-estimated jobs growth and a worsening government debt crisis in Europe fueled concern the global economic recovery will slow. Janet Yellen , President Barack Obama ’s pick to be the Federal Reserve’s next vice chairman, said in a San Francisco speech today that while there appear to be improvements in the global economy, “significant headwinds to stability remain.” Benchmark U.S. indexes advanced in early trading after German factory orders unexpectedly jumped for a second month in April as the weaker euro boosted export demand and companies increased investment. Hungary’s government pledged to control the budget deficit and make structural changes to overhaul the economy as it further distanced itself from suggestions the country was facing a Greece-like crisis. “This is a small glimmer of hope that Europe might be doing better,” Malcolm Polley , who oversees $1 billion as chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, said of Germany factory orders. “A lot of the issues affecting markets have been coming from Europe, so this is an encouragement.” To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net .

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Bristol-Myers Sprycel Drug Beats Gleevec in Leukemia Patients, Study Says

June 5, 2010

By Shannon Pettypiece June 5 (Bloomberg) — Bristol-Myers Squibb Co. ’s cancer pill Sprycel worked better and faster at eliminating leukemia cells than Novartis AG’s Gleevec, the standard treatment for the blood malignancy, a study of newly diagnosed patients found. Bristol-Myers said it plans to use the finding to seek expanded U.S. approval for Sprycel as an initial treatment for the form of blood cancer called chronic myelogenous leukemia or CML. Sprycel is already approved as a second-line option for patients who fail to benefit from Gleevec. The expanded use could more than double sales of Sprycel by 2015 to $900 million, said Tony Butler , an analyst with Barclays. Novartis is also racing to get a next generation leukemia drug, Tasigna, approved as a first-line therapy. Gleevec, Novartis’s second best-selling drug with 2009 sales of $3.9 billion, revolutionized the treatment of CML nine years ago, turning it from a fatal to chronic disease for many patients. Now, the arrival of two new drugs could cut Gleevec’s market share 25 percent in the next five years, Butler said in a report. “Sprycel could become the next frontline drug for CML and could replace Gleevec,” said Hagop Kantarjian , a leukemia specialist at the University of Texas MD Anderson Cancer Center in Houston, who studied the drug. “For anyone who has a new diagnosis, they should consider this new kind of inhibitor as a viable option that could be better.” Results from the Sprycel study were released today at the American Society of Clinical Oncology annual meeting in Chicago. Tasigna cut levels of a protein linked to chronic myeloid leukemia in three times as many patients as those taking Gleevec after 18 months, Basel, Novartis reported yesterday in a statement. Regulatory Decision Due U.S. regulators are due to make a decision this year on whether to clear Tasigna for newly diagnosed patients, Basel, Switzerland-based Novartis said in April. Like Sprycel, Tasigna already is approved for patients who don’t benefit from Gleevec. New York-based Bristol-Myers plans to seek U.S. regulatory approval this year for Sprycel, the company said in March. The study released today focused on Sprycel’s ability to attack cells with a defective chromosome in the bone marrow called the Philadelphia chromosome, named after the city where it was discovered. In CML, which affects about 5,000 people a year in the U.S., the Philadelphia chromosome produces a gene called Bcr-AbL, which leads to the overproduction of white blood cells. Gleevec, Sprycel and Tasigna stop this chain of events. Cell Signal Target Gleevec was the first drug approved that is designed to suppress a cell signal known to cause cancer rather than poison the tumor cells, as with chemotherapy. Before Gleevec became available, CML patients lived an average of three to five years, according to the American Society of Hematology. With new treatments that have become available over the past decade, 95 percent of CML patients live at least five years. “Gleevec is a great drug, you will never hear me say anything negative about Gleevec, but in this trial Sprycel did even better,” said Renzo Canetta , Bristol-Myers’s vice president of oncology clinical research. “We think Sprycel can offer something more.” In the study, 77 percent of patients taking Sprycel had a confirmed complete cytogenetic response, meaning no cells with the Philadelphia chromosome could be found, compared with 66 percent taking Gleevec. An absence of tumor cells is an indicator of longer survival, said Canetta in a telephone interview. The study followed 519 newly diagnosed patients for at least 12 months. Side Effects Patients given Sprycel were more likely to have a loss of platelets and fluid build-up in the lungs while patients taking Gleevec were more likely to have fluid retention under the skin. Patients taking Gleevec were also more likely to have nausea, rash and muscle pain. Doctors will probably need longer-term data on the benefit of Sprycel and Tasigna over Gleevec for 24 to 36 months before they routinely prescribe the newer treatments as a first-line therapy, said Seamus Fernandez , an analyst with Leerink Swann & Co. in a research report. Price may also keep doctors and patients on Gleevec, said Kantarjian. When generic copies of Gleevec enter the market in 2015 it will cause the price to fall from its average wholesale price of $4,340 for a month’s supply. That price difference could sway some patients to try Gleevec first instead of Sprycel, Kantarjian said. The wholesale price of Sprycel is $6,950 at the 100-milligram dose, Bristol-Myers said. Gleevec Still ‘Reassuring’ “I don’t think this is going to be the end of Gleevec,” Kantarjian said in a telephone interview. “The long-term follow up with Gleevec is very reassuring. Gleevec will also become generic in four to five years so the price difference could become significant.” Bristol-Myers also reported data today that showed its experimental skin cancer drug ipilimumab almost doubled the number of patients alive after two years compared with another experimental treatment called gp100, developed by the National Cancer Institute. Bristol-Myers said it hopes to start selling the medicine by the end of 2012. If approved, ipilimumab could generate more than $1 billion in annual sales, analysts said. To contact the reporter responsible for this story: Shannon Pettypiece at spettypiece@bloomberg.net .

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U.S. Stocks Tumble as Job Growth Trails Forecasts Alcoa Falls

June 5, 2010

By Rita Nazareth June 4 (Bloomberg) — U.S. stocks sank, with the Standard & Poor’s 500 Index falling to its lowest level in four months, as slower-than-estimated jobs growth spurred concern the economic recovery may not be as robust as forecast. Caterpillar Inc. and American Express Co. tumbled at least 5 percent after a government report showed employers in the U.S. hired fewer workers in May than forecast and Americans dropped out of the labor force. Chevron Corp. and Alcoa Inc. dropped more than 3.5 percent to lead commodities producers lower as oil fell to $71.40 a barrel and industrial metal prices plunged. Wal-Mart Stores Inc. fell 2.6 percent after saying gasoline prices and unemployment hurt traffic at U.S. stores. The S&P 500 Index declined 3.4 percent to 1,064.88 at 4 p.m. in New York, as 497 of its 500 stocks slid. It was the biggest drop on the day of the U.S. Labor Department’s monthly jobs report since at least 1998, according to data compiled by Bespoke Investment Group LLC. The Dow Jones Industrial Average sank 324.06 points, or 3.2 percent, to 9,931.22. All 30 of its components retreated. “The jobs report puts a damper on the growth story,” said James Dunigan , chief investment officer at PNC Wealth Management in Philadelphia, which oversees $104 billion. “It’s a victim of the uncertainty that we’ve seen over the last months especially regarding the European situation. Those who had been expecting a more robust recovery might be cutting down their projections.” Payrolls The S&P 500 erased its weekly advance after the Labor Department said today that payrolls increased by 431,000 in May, trailing the median economist forecast in a Bloomberg News survey that called for a gain of 536,000. Private employers added 41,000 positions, 139,000 less than estimated. Mohamed A. El-Erian , whose firm runs the world’s biggest mutual fund, says stock investors should brace for higher volatility after the jobs report. “Investors should keep their seat belts on and tight,” El-Erian, 51, the chief executive officer of Pacific Investment Management Co., wrote in an e-mail to Bloomberg News. “The disappointing jobs report is further evidence that drivers of self-sustaining private consumption growth are facing structural problems that result in slow income growth, reduced credit availability and lower ability to monetize wealth.” Euro Below $1.20 U.S. futures and European stocks turned lower even before the jobs report as the Hungarian forint slumped for a second day on concern the eastern European nation faces a Greece-like debt crisis. The Euro sank below $1.20 for the first time since March 2006 amid speculation the European fiscal crisis may be spreading into the financial system. Hungary’s economy is in a “very grave situation” because the previous government manipulated figures and lied about the state of the economy, Peter Szijjarto , a spokesman for Hungarian Prime Minister Viktor Orban , said at a press conference in Budapest. The cost of insuring against losses on Hungarian sovereign debt rose 63 basis points to 371, according to CMA DataVision at 3:30 p.m. in London, after earlier reaching 416 basis points. U.S. stocks advanced yesterday, giving the S&P 500 its first back-to-back gains since April, amid speculation the employment figures will bolster investor optimism in the economic recovery. The S&P 500 has slumped 12 percent from this year’s high on April 23 as the sovereign-debt crisis in Europe and slowing growth in China threatened to derail the global economic recovery. ‘Ahead of Itself’ “The stock market is ahead of itself because it thought that the economic recovery was further along than it really is so people are adjusting to those expectations,” said Peter Jankovskis , who helps manage $2.3 billion at OakBrook Investments in Lisle, Illinois. “This recovery is taking longer than people thought and the stock market isn’t very patient.” Gauges of energy and raw-materials companies in the S&P 500 sank at least 3.4 percent. Crude oil for July delivery declined 4.3 percent to $71.40 on the New York Mercantile Exchange. Copper and silver also tumbled. Chevron fell 3.6 percent to $71.28, while Alcoa declined 4.7 percent to $10.84. Industrial shares had the biggest decline among 10 S&P 500 industries, slumping 4.6 percent. Caterpillar declined 5.5 percent to $57.76, for the biggest drop in the Dow. American Express tumbled 5.5 percent to $57.76. U.S. Steel Corp. lost 7.3 percent to $41.99. The nation’s second-largest domestic steelmaker was cut from the “conviction buy” list at Goldman Sachs Group Inc. on concerns over European credit, Chinese demand and the Gulf of Mexico oil spill. ‘Stiffer Than Ever’ Wal-Mart slid 2.6 percent to $50.40. Eduardo Castro-Wright , vice chairman and U.S. stores chief at the world’s largest retailer, told shareholders that competition in the industry “is stiffer than ever.” The stock fell even after the company said it will buy back as much as $15 billion of its shares. Bank of New York Mellon Corp. sank 4.7 percent to $26. The world’s biggest custody bank will offer $700 million of common stock to the public to help fund its previously announced purchase of a unit of PNC Financial Services Group Inc. BNY Mellon agreed in February to pay $2.31 billion for Pittsburgh- based PNC’s global investment-servicing business, a move aimed at adding hedge-fund and mutual-fund clients. Tellabs Inc. fell 11 percent to $6.98. Barclays Plc cut its share-price estimate to $7 from $9.50 on concern the maker of telecommunications equipment may not be picked by AT&T Inc. as a supplier for a high-speed wireless Internet network known as long-term evolution. Jacobs Engineering Group Inc. slid 8.2 percent to $40.14. The second-largest publicly traded U.S. engineering company agreed to buy TechTeam Government Solutions Inc. for $59 million. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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Video: Yankee Stadium Boxing Revives as Foreman Battles Cotto: Video

June 4, 2010

June 4 (Bloomberg) — Bloomberg’s Michele Steele reports on the outlook for sports this weekend. Tomorrow, undefeated World Boxing Association super-welterweight champion Yuri Foreman fights Miguel Cotto at Yankee Stadium, while Kentucky Derby runner-up Ice Box is the favorite at 3-1 for the 142nd Belmont Stakes. The Philadelphia Flyers host Game 4 of the Stanley Cup final against the Chicago Blackhawks tonight. (Source: Bloomberg)

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Bernanke Says Unemployment Imposes `Heavy Costs’ on Economy, Urges Lending

June 3, 2010

By Scott Lanman June 3 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said he’s concerned about the costs U.S. joblessness is imposing on the economy and that the central bank is telling field examiners to encourage lending to creditworthy businesses. “One particularly difficult issue is the continued high rate of unemployment,” Bernanke said today at a forum at the Chicago Fed’s Detroit office, calling joblessness among the “important concerns” for the recovery. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.” The central bank chief, visiting a state whose jobless rate of 14 percent is the highest in the country, has kept the main interest rate close to zero since December 2008 to stoke job growth after the worst recession since the 1930s. Fed policy makers in April reiterated their concern that “tight credit” is restraining consumer spending. “Our collective challenge is to help ensure that creditworthy borrowers have access to credit so that, should they choose, they can expand their businesses or increase payrolls, helping our economy to recover,” Bernanke said in prepared remarks before participating in panel discussions on the credit needs of small and mid-sized businesses. Bernanke, 56, didn’t elaborate on the outlook for the U.S. economy or monetary policy. Fed policy makers next meet June 22- 23 in Washington. The Labor Department is scheduled tomorrow to release its May report on the U.S. job market. Private payrolls probably rose by 178,000, while the jobless rate fell to 9.8 percent from 9.9 percent, according to the median estimates of analysts surveyed by Bloomberg News. That’s still close to a 26-year high. Around Country The event is part of more than 40 gatherings the Fed is holding around the country to discuss issues related to lending to small businesses, Bernanke said. Outstanding loans to small businesses have declined to about $660 billion in the first quarter of this year from almost $700 billion two years ago, he said. It’s “difficult to answer” how much of the drop comes from declining demand and how much from supply. The central bank is training its bank examiners and giving them the “message that encouraging lending to small businesses that are well positioned to repay is positive, not negative, for the safety and soundness of our banking system.” Last month Bernanke said the central bank is “extremely sensitive to the issue” of whether Fed examiners are compelling firms to be too conservative in lending to small businesses and startups. Bernanke’s visit was part of recent efforts to see more of the U.S. economy outside Washington. Last month he toured a Philadelphia shipyard and cake factory in a part of the city being redeveloped, and next week he is scheduled to visit a community college in Richmond, Virginia. To contact the reporter on this story: Scott Lanman in Detroit at slanman@bloomberg.net .

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U.S. Stocks Drop on Report Lebanon Fired on Israeli Warplanes

June 1, 2010

By Elizabeth Stanton and Nikolaj Gammeltoft June 1 (Bloomberg) — U.S. stocks fell, adding to losses from the Dow Jones Industrial Average’s worst May since 1940, as BP Plc ’s failure to plug a leaking oil well dragged down energy producers and AFP reported Lebanon fired on Israeli warplanes. Transocean Ltd ., Anadarko Petroleum Corp . and Halliburton Co . fell more than 11 percent after BP gave up trying to plug the worst oil spill in U.S. history any sooner than August. Benchmark indexes erased earlier gains triggered by growth in construction spending and manufacturing after a senior Israeli security official told AFP that the nation’s aircraft were targeted by Lebanese anti-aircraft guns. The Standard & Poor’s 500 Index decreased 1.7 percent to 1,070.71 at 4 p.m. in New York. The S&P 500 lost 8.2 percent in May, its worst month since February 2009, on concern Europe’s debt crisis will hamper the global economic recovery and China will take more steps to cool its economy. The Dow lost 112.61 points, or 1.1 percent, to 10,024.02 today. “The nervousness about the global economic recovery continues,” said Giri Cherukuri , portfolio manager and head trader at Oakbrook Investments in Lisle, Illinois, which manages $2.2 billion. “Also, political tension across the world is making investors more cautious.” The S&P 500 has fallen 12 percent from a 19-month high on April 23 on concern that widening budget deficits in Europe could derail global growth. The five-week slide is consistent with a temporary pullback within a bull market, said Thomas J. Lee , the chief U.S. equity strategist at JPMorgan Chase & Co. ‘Pretty Normal’ “It is a pretty normal correction in a bull market,” Lee said today in a Bloomberg Television interview. “It pays up to be a slow buyer here. If you start to get enough positive headlines to offset the negatives, that would be a way to build confidence. Investors are seeing good opportunities to buy.” Stocks fell to the lowest levels of the day after AFP said Lebanon’s military fired at Israeli planes as they flew over its airspace, according to a senior Israeli security official. The report came a day after nine people were killed in an Israeli commando raid on boats carrying pro-Palestinian activists to the Gaza Strip. Israeli forces killed two Palestinians who tried to infiltrate from the enclave today and another three who tried to fire a rocket, according to an army statement. Energy companies extended losses after Attorney General Eric Holder said the U.S. Justice Department is investigating whether any criminal or civil laws were violated in the BP oil spill in the Gulf of Mexico. ‘A Tragedy’ “We will prosecute to the fullest extent of the law anyone who has violated the law,” Holder said. “This disaster is nothing less than a tragedy.” BP plunged 15 percent in New York, its largest retreat since at least 1980. Transocean , owner of the Deepwater Horizon rig that exploded April 20, declined 9.4 percent to $51.45. Halliburton, which provided oilfield services on the well, dropped 13 percent to $21.72. Anadarko Petroleum Corp. , which owns a 25 percent stake in the well, lost 16 percent to $43.99 for the biggest drop in the S&P 500. Tenet Healthcare Corp. fell 15 percent to $4.89 for the second-biggest drop in the S&P 500. The third-largest publicly held U.S. hospital chain said it is discussing a potential acquisition of Healthscope Ltd., the second-largest private hospital company in Australia. China, Europe Slowdown Concern that economic growth in China and Europe will slow also weighed on equities. China’s Purchasing Managers’ Index slid to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said today. That was less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. Readings above 50 indicate expansion in manufacturing. China is the world’s biggest consumer of industrial metals including copper and zinc, and the second-biggest consumer of crude oil after the U.S. Emerging markets such as China are driving the global economy, which the Organization for Economic Cooperation and Development estimates will expand 4.6 percent this year. Excluding emerging countries, the forecast is 2.7 percent. The euro touched a four-year low against the U.S. dollar after the European Union’s statistics office said the jobless rate in the 16-nation currency zone increased to 10.1 percent in April, the highest since June 1998. The currency has lost 14 percent of its value against the dollar this year as the ability of countries such as Greece, Spain and Portugal to avoid debt restructuring has discouraged investment in the region. ISM, Construction Spending U.S. benchmark indexes temporarily recovered from their lows of the day after the Institute for Supply Management’s factory index came in at 59.7 for May, topping the reading of 59 in a Bloomberg survey of economists. Commerce Department figures showed construction spending rose 2.7 in April after a gain of 0.2 percent the prior month. That exceeded economists’ estimates that it would remain even. Manufacturing has been a leader in the U.S. economic recovery as demand from abroad strengthened and firms picked up production and spending to meet demand after a record drawdown in inventories last year. “The underpinning of the economic recovery in the U.S. and emerging markets appear to be sustainable despite what’s going on in Europe,” said Jason Pride , director of investment strategy at Glenmede in Philadelphia, which manages $18 billion. “This is not a crystal-clear resolution that we’ll have enduring growth, because the debt bogeyman can peak around the corner and surprise anyone at almost any time.” RadioShack rose 2.8 percent to $21.01 for the biggest advance in the S&P 500. The New York Post reported that Blackstone Group LP is a leading bidder for the electronics chain and said KKR & Co., Bain Capital LLC and TPG are also likely to be involved in the bidding. Hershey Co. increased 2.6 percent to $48. The candy maker said it may cut 500 to 600 jobs in a plan to modernize its manufacturing. Ev3 Inc. rallied 17 percent to $22.22 for the second- biggest advance in Russell 2000 Index. Covidien Plc, the medical-device company spun off from Tyco International Ltd., agreed to buy ev3 for $2.6 billion to add treatments for heart disease. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net .

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U.S. Stocks Fluctuate as Economic Reports Offset Slump in Energy Producers

June 1, 2010

By Elizabeth Stanton June 1 (Bloomberg) — U.S. stocks fluctuated as higher- than-estimated growth in construction spending and manufacturing offset a drop in energy shares. Wal-Mart Stores Inc. and AT&T Inc. led gains in the Dow Jones Industrial Average as the 30-stock gauge rebounded from a 98-point drop in early trading. Transocean Ltd. and Halliburton Co. fell more than 9 percent to help lead losses in energy shares after BP Plc failed to halt the flow of oil from a leaking Gulf of Mexico well. RadioShack Corp. rose on a report naming several private-equity firms as bidders for the company. The Standard & Poor’s 500 Index decreased 0.2 percent to 1,086.82 at 2:01 p.m. in New York. The S&P 500 lost 8.2 percent in May, its worst month since February 2009, on concern Europe’s debt crisis will hamper the global economic recovery and China will take more steps to cool its economy. The Dow rose 23.2 points, or 0.2 percent, to 10,159.83 today. “The manufacturing sector is still showing some good growth despite the headlines from Europe and the perceived slowdown from China,” said Chris Hensen , part of a group that manages $3 billion of U.S. stocks at MFC Global Investment Management in Toronto. “If you get major selloffs on that I’d see it as an opportunity, because we’re getting down to valuation levels that are attractive.” ‘Normal Correction’ The S&P 500 has fallen 11 percent from a 19-month high on April 23 on concern that widening budget deficits in Europe could derail global growth. The five-week slide is consistent with a temporary pullback within a bull market, said Thomas J. Lee , the chief U.S. equity strategist at JPMorgan Chase & Co. “It is a pretty normal correction in a bull market,” Lee said today in a Bloomberg Television interview. “It pays up to be a slow buyer here. If you start to get enough positive headlines to offset the negatives, that would be a way to build confidence. Investors are seeing good opportunities to buy, and that could be as a sign of potential capitulation as well.” Early losses in stocks came after China’s Purchasing Managers’ Index slid to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said today. That was less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. Readings above 50 indicate an expansion. China, the world’s third-largest economy, is the world’s biggest consumer of industrial metals including copper and zinc, and the second-biggest consumer of crude oil after the U.S. Emerging economies such as China are driving the global economy, which the Organization for Economic Cooperation and Development estimates will expand 4.6 percent this year. Excluding those economies, the forecast is 2.7 percent. Euro’s 4-Year Low Also damping demand for equities in early trading, the euro touched a four-year low against the U.S. dollar after the European Union’s statistics office said the jobless rate in the 16-nation currency zone increased to 10.1 percent in April, the highest since June 1998. The currency has lost 14 percent of its value against the dollar this year as the ability of countries such as Greece, Spain and Portugal to avoid debt restructuring has discouraged investment in the region. U.S. benchmark indexes reversed losses after the Institute for Supply Management’s factory index came in at 59.7 for May, topping the reading of 59 in a Bloomberg survey of economists. Commerce Department figures showed construction spending rose 2.7 in April after a gain of 0.2 percent the prior month. That exceeded economists’ estimates that it would remain even. Manufacturing has been a leader in the U.S. economic recovery as demand from abroad strengthened and firms picked up production and spending to meet demand after a record drawdown in inventories last year. Recovery ‘Sustainable’ “The underpinning of the economic recovery in the U.S. and emerging markets appear to be sustainable despite what’s going on in Europe,” said Jason Pride , director of investment strategy at Glenmede in Philadelphia, which manages $18 billion. “This is not a crystal-clear resolution that we’ll have enduring growth, because the debt bogeyman can peak around the corner and surprise anyone at almost any time.” BP Plc of the U.K. plunged 13 percent in London, the biggest drop since 1992, after a failed attempt to plug the leaking well in the Gulf of Mexico. Transocean , owner of the Deepwater Horizon rig that exploded April 20, beginning what has become the biggest-ever U.S. oil spill, declined 9.4 percent to $51.43. Halliburton, which provided oilfield services on the well, dropped 11 percent to $22.01. Anadarko Petroleum Corp. , which owns a 25 percent stake in the well, lost 14 percent to $44.76 for the second- biggest drop in the S&P 500. RadioShack rose 4.5 percent to $21.36 for the biggest advance in the S&P 500. The New York Post reported that Blackstone Group LP is a leading bidder for the electronics chain and said KKR & Co., Bain Capital LLC and TPG are also likely to be involved in the bidding. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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Evans Signals Europe’s Crisis Will Delay Fed Rate Increase `A Little Bit’

May 30, 2010

By Aki Ito May 31 (Bloomberg) — Federal Reserve Bank of Chicago President Charles Evans indicated that the European sovereign debt crisis will prompt the U.S. central bank to delay raising interest rates. Evans told reporters in Seoul today that he “wouldn’t be surprised” if the Fed’s policy of keeping rates low “gets extended just a little bit.” Philadelphia Fed President Charles Plosser , who is attending the same event, said separately that “how the crisis in Europe ends up affecting the economy will dictate how we will respond.” Today’s comments underscore the attention global policy makers are paying to the potential consequences of the European crisis sparked by ballooning fiscal deficits from Greece to Spain and Portugal. In Asia, central banks from Australia to Indonesia and South Korea are projected to keep rates unchanged this week as they gauge the effect on the global recovery. “The European situation adds uncertainty to the economic outlook,” Evans said at a press briefing while attending a conference hosted by the Bank of Korea. He said lower-than- expected demand for U.S. exports because of slower growth in Europe will “dampen the recovery a little bit.” U.S. central bankers on April 28 kept the benchmark federal funds rate in a range of zero to 0.25 percent, where it has been since December 2008, and said “subdued” inflation and high unemployment are likely to keep rates “exceptionally low.” Low Inflation It’s appropriate to keep an accommodative monetary policy for now because inflation is “seriously under-running” price stability and unemployment is “very high,” said Evans, who along with Plosser isn’t a voting member of the Federal Open Market Committee this year. “But, if the situation turns rapidly, if inflation expectations were to bounce back in a way that we weren’t expecting,” the Fed “will respond more quickly,” he added. Plosser said he will “wait and see” how events in Europe might affect Fed policy. “It’s certainly true that there are things that could change the pace of our exit strategy, but I don’t see those happening as of yet,” he said. Fed officials to date have indicated the damage to the U.S. economy’s expansion from Europe will be limited. Richmond Fed President Jeffrey Lacker said in a Bloomberg Television interview last week that the “most likely outcome” is shaving “a tenth or two off my growth forecast for this year.” St. Louis Fed President James Bullard said in a May 26 speech in London that the European crisis “will probably fall short of becoming a worldwide recessionary shock.” At the same time, evidence of rising stress in bank funding markets spurred the Fed to reopen currency-swap lines with central banks from the euro region, U.K., Canada, Switzerland and Japan this month. Stall Recovery “A deeper contraction in Europe associated with sharp financial dislocations would have the potential to stall the recovery of the entire global economy, and this scenario would have far more serious consequences for U.S. trade and economic growth,” Fed Governor Daniel Tarullo said May 20 in testimony to House Financial Services subcommittees, making the case for the restarting of the swaps. Bank of Korea Governor Kim Choong Soo yesterday proposed an “institutionalization” of swaps to help establish a global safety net. To contact the reporter on this story: Aki Ito in Seoul at aito16@bloomberg.net

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Stocks in U.S. Extend Losses After Fitch Downgrades Spain’s Credit Rating

May 28, 2010

By Esme E. Deprez May 28 (Bloomberg) — U.S. stocks slid, wiping out most of the market’s weekly gain, as a downgrade of Spain’s debt spurred concern the European credit crisis will worsen and energy shares sank on President Barack Obama ’s moratorium on new deepwater drilling permits. Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. paced declines in all 79 financial stocks in the Standard & Poor’s 500 Index after Fitch Ratings stripped Spain of its AAA rating. Baker Hughes Inc. , Halliburton Co. and Schlumberger Ltd. fell more than 6.7 percent after Obama canceled pending lease sales in the Gulf of Mexico as work continued to plug BP Plc’s oil spill. The S&P 500 fell 0.9 percent to 1,093.13 as of 1:01 p.m. in New York. The Dow Jones Industrial Average declined 95.23 points, or 0.9 percent, to 10,163.76. Three stocks declined for each that rose on U.S. stock exchanges. “The credit issues are not going away in Europe — it’s a simple fact that everyone has to accept,” said David Kovacs , head of quantitative strategies at Turner Investment Partners, which manages $18 billion in Berwyn, Pennsylvania. “Credit markets are seizing up because investors are concerned. So when they see further downgrades by the credit agencies it reminds them that these issues are not going away and on a Friday before a long weekend you can expect selling off of equities.” Benchmark indexes extended losses earlier after North Korean Major General Pak Rim Su disputed the results of the international investigation into the sinking of a South Korean warship. ‘All-Out War’ “Any accidental clash that may break out in the waters of the West Sea of Korea or in areas along the Demilitarized Zone will lead to all-out war,” he said at a press conference today, according a KCNA statement. Equities opened lower after government data showed spending in the U.S. was unchanged last month as Americans used wages to rebuild savings. The pause in purchases compared with a 0.3 percent increase projected by the median forecast of economists surveyed by Bloomberg News, Commerce Department figures showed. Incomes climbed 0.4 percent and the savings rate rose for the first time in four months. Baker Hughes declined 7 percent to $38.21. Halliburton lost 7.5 percent to $24.98. Schlumberger slipped 6.5 percent to $55.94. BP Plc ’s U.S. shares fell 5.4 percent to $42.92 after it restarted its effort to block a damaged oil well to halt a Gulf of Mexico spill that may be the largest in U.S. history. Well Leak The well began leaking after an April 20 explosion and fire on the Deepwater Horizon drilling rig, which resulted in the deaths of 11 workers. BP leased the rig from Geneva-based Transocean Ltd. , the largest deep-water driller, which fell 4.8 percent to $56.86. Energy companies lost 1.7 percent as a group, for the second-biggest decline of 10 industries in the S&P 500. Obama is suspending exploration in two areas off Alaska, including planned drilling by Royal Dutch Shell Plc, canceling pending lease sales in the Gulf of Mexico and proposed sales off Virginia’s coast, extending by six months a moratorium on deepwater drilling permits and suspending operations at all 33 exploratory wells being drilled in the Gulf. He also said more must be done to wipe out the “cozy and sometime corrupt relationship” between oil companies and federal officials. ‘Waiting for Clarity’ “We’re watching closely the details of the Obama administration’s plan to halt new drilling in the Gulf of Mexico and some existing deepwater drilling facilities,” said Eric Green , senior money manager at Penn Capital Management in Philadelphia, which oversees about $5 billion. “We’re waiting for clarity. It’s been hard to determine who will benefit from this and who will be hurt by it.” To contact the reporter on this story: Esme E. Deprez in New York at edeprez@bloomberg.net .

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Pfizer Rapamune Lawsuit: Pharma Giant Accused Of Targeting ‘High-Risk’ Black Patients For Unapproved Use Of Drug

May 25, 2010

Scroll down for the complaint In a stunning whistleblower lawsuit, the world’s largest pharmaceutical company is being sued over the dangerous practice of illegally promoting a kidney transplant drug for unapproved uses — and targeting African-Americans, even though they are at higher risk of complications. Two former hospital sales representatives, Marlene Sandler and Scott Paris, originally filed their suit in 2005 but the case was recently unsealed. The amended complaint against Pfizer and Wyeth was filed this week, as reported by the Pharmalot blog . Sandler and Paris claim that Wyeth, which is now owned by Pfizer, promoted the “off-label” use of Rapamune, a kidney transplant drug , encouraging its sales force to promote the drug for heart, lung, liver, and pancreas transplants even though Rapamune was never approved for those procedures. The Food and Drug Administration warned against such off-label use of Rapamune in 2004 and 2007. The suit claims: “Wyeth trained and encouraged its sales representatives to market Rapamune for uses outside those listed on the FDA-approved label and to misrepresent and withhold clinical information regarding the safety and efficacy of Rapamune. As a result of Wyeth’s wrongdoing, patients were put at risk of serious physical and financial harm, including: the disruption or discontinuation of stable treatment regimens; increased costs associated with treating side effects caused or exacerbated by Rapamune; life-threatening side effects such as anemia, bone marrow suppression, inhibited wound-healing, proteinuria, blood clots, leukopenia, thrombocytopenia, liver failure, pulmonary dehiscence; and death.” Off-label promotion of drugs has become one of the most controversial issues in the pharmaceutical industry, and has lead to host of federal indictments and massive settlements. Just last September, Pfizer agreed to plead guilty to criminal charges and to pay more than $2 billion in fines to settle allegations regarding its market practices, which included the off-label promotion of the antipsychotic Geodon and the antibiotic Zyvox. One of the most stunning allegations in the Sandler-Paris suit, is that Wyeth targeted African-American patients for unapproved use of the drug “even though they didn’t have data supporting its use in that population,” reports BNet.com . “Blacks are considered “high-risk” patients for kidney transplants because of their more vigorous immune response to new organs. Rapamune reduces immune response so patients don’t reject their new kidneys.” Yet the suit claims that Wyeth targeted two hospitals with predominantly African-American patient populations — Philadelphia’s Einstein Medical Center and New York’s SUNY Downstate Medical Center. Some hospitals, including the famed Mayo Clinic, raised concerns with Wyeth Global Medical Affairs that patients given the drug were experiencing “very serious side effects,” but “nothing was done,” according to the complaint. The suit alleges that several prominent doctors, including the clinical research director of the prestigious Cleveland Clinic, were involved in helping promote the use of Rapamune. The suit describes a speakers list of 18 physicians who could talk about off-label use of drugs. One of those cited was the Cleveland Clinic’s Dr. Stuart Flechner, who was available to speak about the use of Rapamune “for an honorarium of $2,000 or “prorated $15,000.” Flechner, a fellow of the American College of Surgeons, was named one of the Top Doctors in America, according to the clinic’s Website. When doctors at Mt. Sinai Medical Center expressed concerns about using Rapamune as part of a specific regimen, Wyeth brought in Flechner to talk to them: “Wyeth paid Dr. Flechner to assist in the marketing of the unapproved combination of Cellcept, an IL-2 receptor antagonist and Rapamune in order to overcome these objections and secure Rapamune sales.” Pfizer issued the following statement to HuffPost: “Pfizer is committed to patient safety and to ensuring that information provided to physicians for Rapamune is consistent with its FDA-approved indications. We are very confident that the current promotional practices surrounding this product are fully compliant with all legal requirements. “Rapamune was first approved by the FDA in 1999 for the prophylaxis of organ rejection in patients 13 years or older receiving kidney transplants. As the science has evolved, so, too, has our labeling information for Rapamune, which includes the appropriate caveats about treatment areas where safety and efficacy have not been established.” A spokesman for Wyeth’s then National Director of Transplant Sales Joe McCafferty, who selected Philadelphia’s Einstein Medical Center as the focus of the firm’s sales plan for Rapamune, did not return calls to HuffPost. A spokesman for the Cleveland Clinic did not return calls for comment. READ the complaint: PfizerWyeth

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Bruce Shore, Unemployed Philadelphia Man, Indicted For ‘Harassing Email’ To Jim Bunning

May 25, 2010

When Sen. Jim Bunning complained on the Senate floor in February that he’d missed the Kentucky-South Carolina basketball game because of a debate on unemployment benefits — a debate the Kentucky Republican himself prevented from proceeding to a vote — Bruce Shore got angry. “I was livid. I was just livid,” said Shore, 51, who watched the floor proceedings on C-SPAN from his home in Philadelphia. “I’m on unemployment, so it affects me. I’m in shock.” Instead of just being angry, Shore took action: He sent several emails to Bunning staffers, blasting the senator for blocking the benefits. “ARE you’all insane,” said part of one letter Shore sent on Feb. 26 (which he shared with HuffPost). “NO checks equal no food for me. DO YOU GET IT??” In that letter he signed off as “Brad Shore” from Louisville. He said he did the same thing in several messages sent via the contact form on Bunning’s website. “My assumption was that if he gets an email from Philadelphia, who cares?” he said. “Why would he even care if a guy from Philadelphia gets upset?” Bunning might not have cared, but the FBI did. Sometime in March, said Shore, agents came calling to ask about the emails. They read from printouts and asked if Shore was the author, which he readily admitted. They asked a few questions, and then, according to Shore, they said, “All right, we just wanted to make sure it wasn’t anything to worry about.” But on March 13, U.S. Marshals showed up at Shore’s house with a grand jury indictment. Now he’s got to appear in federal court in Covington, Ky. on May 28 to answer for felony email harassment. Specifically, the indictment ( PDF ) says that on Feb. 26, Shore “did utilize a telecommunications device, that is a computer, whether or not communication ensued, without disclosing his identity and with the intent to annoy, abuse, threaten, and harass any person who received the communication.” The language of Shore’s indictment is taken directly from the statute — there’s no description of the actual crime. The Kentucky U.S. Attorney’s Office declined to comment, but said it’s a typical indictment. The crime carries a penalty of up to two years in prison and a $250,000 maximum fine. Shore swears he didn’t intend to make a threat. He thought sending angry letters to Congress was a First Amendment thing. “If I send 50 letters to Congress, is that illegal or is it just me wasting paper?” Harvey Silverglate, a prominent civil liberties lawyer and the author of “Three Felonies a Day : How the Feds Target the Innocent”, has long argued that vague laws allow the federal government to prosecute citizens for things most people wouldn’t consider crimes. (The message of his book’s title is that the average person unintentionally commits three felonies a day. “Half of the anonymous Internet comments would” be illegal according to the statute used against Shore, said Silverglate.) “If nothing else the U.S Attorney has managed to harass a defendant. Now we have to find out if the defendant managed to harass anybody,” said Silverglate, who looked at Shore’s indictment. “When finally the government is forced by a judge’s order to specify what the criminal harassment consisted of, if in fact the words used are quite innocuous and don’t by any standard rise to the level of a real threat, it’s going to be an example of exactly what my complaint is about.” Bunning’s office is not involved in the prosecution. A staffer said the office received lots of email over the unemployment issue and turned some over to the Capitol Police. It’s up to the Capitol Police whether to involve federal or local law enforcement, and up to those agencies to pursue a case. Shore said he’s been unemployed for the past two years since losing his job as an office manager. He recently received his final unemployment check, joining the ranks of 35,200 Pennsylvanians and hundreds of thousands of Americans who’ve exhausted all their benefits . He said he used a credit card to book a hotel room in Covington for Friday. He’s particularly alarmed because he’s already got a criminal record: In 1995, he and his girlfriend pleaded guilty to 35 burglaries in Bucks County, Pa. The Philadelphia Daily News dubbed them “Bonnie & Clyde”: “Their last embrace came in their Northeast Philadelphia apartment. Cops with a warrant did some breaking in of their own and caught the couple, well, coupling — surrounded by half the booty they’d burgled.” Shore said he got out of prison in 1999 and his lived since then with his mother, who is 81. He’s afraid his email indiscretion will wipe out his progress, which includes community college and classes at Temple University, where in 2004 he was on a team that won a $2,000 prize in an IT excellence competition . “I’m walking around in my head: jail for email, jail for email,” he said. “At this point I’m just looking at my government and going, anything is possible. When do the adults wake up and say, ‘This gentleman is just angry and frustrated?’ I’m just speechless. Shocked. I probably dropped 10 pounds in a week. To think you turn your life around, you don’t do anything wrong after you make a mistake when you were younger…”

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Options Traders’ Ranks Swell as Amateur Investors Embrace `Iron Condors’

May 25, 2010

By Margaret Collins and Jeff Kearns May 25 (Bloomberg) — David Siniapkin, a postal worker in York, Pennsylvania, uses some of his retirement money to trade options. After three years and being down as much as $10,000, he’s broken even. Siniapkin, 46, said he tries to profit from strategies such as the “iron condor,” which requires placing four different bets on the same security, risking $38 to make as much as $204 on one trade. It takes its name from the payout diagram resembling a bird with outstretched wings. Investors use options to improve returns, hedge risks or speculate on market performance. Volume in the U.S. has tripled since 2004 to a record 3.61 billion contracts in 2009, while trading by individual investors in the same period has increased fivefold at Fidelity Investments, the world’s largest mutual-fund firm. Sophisticated online software and the growth in training offered by industry groups and brokerages, such as Charles Schwab Corp. and TD Ameritrade Holding Corp. , are enabling individuals to execute advanced techniques on home computers that had been the province of professionals. “Trading options is one of the all-time suckers’ bets,” said Whitney Tilson , founder of hedge fund T2 Partners LLC, based in New York. “Most experienced professionals lose money doing it. It’s virtually certain that inexperienced, individual retail investors will lose money doing this.” Trading Tools About half of options investors earn less than $100,000 and 70 percent trade to increase income and for short-term gains, according to an April survey by the Options Industry Council, an industry education group based in Chicago. Retail traders can access professional-level analytics and trading tools that “weren’t even available to institutional investors five years ago,” said Andy Nybo , head of derivatives research at Tabb Group LLC in New York. The numbers of trades by individuals rather than institutional investors aren’t available, said Jim Binder , a spokesman for Chicago-based Options Clearing Corp., which settles all trading of exchange-listed contracts. Siniapkin was one of about 100 non-professionals who attended an all-day training class last month provided by online options brokerage Thinkorswim Group Inc. , which Omaha, Nebraska- based TD Ameritrade acquired last year for $749 million. Participants traveled as many as three hours to a windowless Radisson hotel ballroom near Philadelphia and scribbled notes as Bob Groves, a former Standard & Poor’s 100 Index options trader on the floor of the Chicago Board Options Exchange, waved a laser pointer at a projection screen to explain advanced trades. Knowing Risks “I’ll do the iron condors, I’ll do calendars, I like double diagonals,” said Siniapkin, who said he has had “mixed success” with these strategies, known as multi-leg transactions, which involve buying or selling multiple contracts on the same underlying security. Training lets retail investors understand the risks involved, said Debra Peters, vice president of the Options Institute, the CBOE’s education division, which had a record 41,004 registrations for its free online courses last year. E*Trade Financial Corp. , based in New York, saw a 600 percent increase in attendance at training events last year, and TD Ameritrade’s education arm, Investools, has attracted more than 40,000 clients to its classes since June, about a 50 percent increase from a year earlier, the companies said. Cost of the courses ranges from free to thousands of dollars. Thinkorswim’s session in April was free and participants were later pitched additional training and online tools, which run from $299 to more than $2,000. Options Contracts “I’m not a fan of people who say you shouldn’t be doing this,” said Thinkorswim’s founder Tom Sosnoff of investors using complex strategies. “Imagine you walked into the casino and people said to you, ‘You look stupid so you can only play the slots.’” Options are contracts that grant their buyers the right, without the obligation, to buy or sell a security, a commodity or an index’s cash value at a set price by a specific date. Call options give the right to call a security away from another owner if the security reaches its strike price on or before the contract’s expiration date. Put options give the right to sell. Like gambling on the Super Bowl and having to beat the point spread, options traders may lose if they predict the correct direction of a stock move and not the magnitude. For example, an investor who buys a put to sell a biotechnology stock before a Food and Drug Administration decision may get the direction of the stock’s move right while losing money if the security doesn’t fall or rise far enough. Not More Risky “Options trading is always going to be more complicated than equities trading but it doesn’t have to be more risky,” said Randy Frederick , director of trading and derivatives at Schwab , the largest independent brokerage by client assets. “They can potentially reduce the amount of losses in a bearish market.” Simpler strategies include buying put spreads to protect stocks from declines and selling call options to profit from the sale while betting that the stock won’t rise past a given level. “My first couple of trades I did very, very well and I got a little big headed and very, very greedy, and I ended up blowing out an account,” said John Mahoney, 49, an engineer who trades options weekly. “I lost about $20,000 initially.” Mahoney said he made $4,000 one week in April by playing multiple contracts and is working his way back into the market by trading smaller amounts and attending classes. IRA Assets Regulators permit trading options using retirement accounts, said Herb Perone , spokesman for the Financial Industry Regulatory Authority. Certain trading may violate Internal Revenue Service rules, which is why firms including Schwab, Fidelity, TD Ameritrade, E*Trade, Interactive Brokers Group Inc. and OptionsXpress Holdings Inc. prevent investors from executing strategies that may cause an IRA to go into debt, according to the companies. About 46 million U.S. households owned IRAs last year, according to the Investment Company Institute , a Washington- based mutual fund trade group. Accounts held for 20 years or more had a median of $75,000 in assets, according to ICI. Michael Madden, a 48-year-old sales manager from Whitehall, Pennsylvania, said he transferred some of his IRA money to Thinkorswim to trade options. He said he lost about 40 percent when he started three years ago and has since recovered those losses, purchasing about $5,000 to $10,000 in contracts a week. Testing Trades Fidelity has started allowing spread trades in IRAs, an options strategy requiring two transactions usually executed at the same time, said Gregg Murphy, who oversees equities and options trading for the Boston-based company’s retail customers. Schwab, based in San Francisco, is testing spread trading for retirement accounts with a few hundred customers and hopes to expand it later this year, said Frederick. Options shouldn’t be an integral part of investors’ long- term planning, of which retirement money is the “nucleus,” said Jonathan Krasney , president of Krasney Financial LLC, a Mendham, New Jersey, fee-based wealth management firm. “My concern is that investors can quickly dig themselves into a deep hole if they venture into the options market,” Krasney said. Most trading involves contracts that expire within months, so investors can’t hold them indefinitely to recoup losses or wait for gains, as they can with stocks, Krasney said. Approving Investors Brokers must approve investors to trade options, said Gary Goldsholle , vice president in Finra’s general counsel office. Customers must provide companies with details about their financial status and trading experience, and sign a document saying they received a copy of the Characteristics and Risks of Standardized Options from the Options Clearing Corp. Karen Fitchett, 64, said the learning curve has been steep. The New York real estate investor said she has lost tens of thousands of dollars trading options since starting in 2007, which is why she still attends classes like the one provided by Thinkorswim. “It’s become like an intellectual affair,” she said. “I just became seduced.” To contact the reporters on this story: Margaret Collins in New York at mcollins45@bloomberg.net Jeff Kearns in New York at jkearns3@bloomberg.net

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Dan Dorfman: Hey, This Bullet-Proof Vest Doesn’t Work

May 24, 2010

Hey, what’s up with gold, supposedly the bullet-proof investment when things look like they’re going to hell (like now)? Somehow, the script got screwed up. Instead of roaring, gold is crawling, and not only that, it’s going backwards to boot. After tripling since 2001 and steadily ballooning in recent years to an all-time high a couple of weeks ago of $1,250.40 an ounce — about a 50% jump from its 2007 close of $833 and nearly a 15% gain from last year’s wrapup of $1,098.60 — the yellow metal is starting to tarnish. Last week alone, it dropped $54.40 or 4.4%. Granted, nothing goes up forever, but the sudden retreat by the investment darling of the flight-to- safety crowd into the $1,100s — coupled with growing predictions of more erosion ahead — seems totally out of line, given a slew of gold-buying catalysts. These include: –Europe’s worsening sovereign debt crisis. –A growing number of forecasts that Greece will default. –Swelling currency concerns, led by the collapsing Euro. –French President Sarkozy’s threat to pull France out of the Euro. –Burgeoning money printing world-wide, a sure harbinger of future inflation. –Fears that the European debt crisis will lead to a faltering global recovery, maybe even a recession. –Our exploding debt and deficit. –A warning by former Treasury Secretary Paul O’Neill that the U.S. could go the way of Greece, that “if we don’t change course, we could become a basket case ourself.” –Increasing worries about bonds, including long-term U.S. Treasuries. –An increasingly erratic U.S. stock market, characterized by growing daily triple-digit losses in the Dow Industrials and the recent nasty one-day decline in the Dow of nearly 1,000 points. Actually, given world-wide financial turmoil and no indication of any let-up in sight, some gold traders think the metal should already be commanding a price tag of around $2,000. But even some bulls see additional weakness, with the metal, currently around $1,192, seen falling over the near term to $1,120 and perhaps even retesting $1,000. One concern, as a number of gold experts see it, is a worrisome contrary indicator, namely there are way too many bulls. “It’s a crowded trade on the upside,” says Larry Edelson, who monitors precious metals trends for Weiss Research in Jupiter, Fla. and notes that sentiment readings show 98% of investors are bullish on gold. “Near term, it’s putting in a little top, says Edelson, who thinks the metal could drop to the $1,130-$1,150 range. One reason, he believes, that gold is being negatively impacted short term is stepped-up overseas demand for the U.S. dollar for safety purposes, although Edelson views such buying as tantamount “to jumping from the frying pan into the fire.” Although concerned about the near term outlook for gold, the analyst takes a far more positive view beyond that, arguing that it’s surely headed higher. Pointing in particular to the collapsing Euro and growing financial distress in the U.S., Edelson sees gold subsequently rising to $1,500 this year and on to $2,300 in 2011. As another positive for the metal, he notes that gold, before its recent spell of weakness, has been climbing even in the face of a rising greenback. “That’s proof positive of a crisis in the fiat currency system,” says Edelson. Taking a longer term view, he thinks gold should be part of every investor’s portfolio. His favorite is the physical gold itself, which can be purchased from such well known outfits as Monex; Manfra, Tordello and Brookes, a New York bullion dealer, and Kitco.com., an online dealer. As for individual stocks, he goes for the biggies, notably Barrick Gold., Goldcorp., and Newmont Mining. A fella who has made some excellent up and down calls on the direction of gold prices — in fact, he accurately predicted the recent weakness — is Mark Leibovit, editor of the VR Gold Letter in Sedona, Ariz. He drew my attention to several recent negative technical signs that suggest gold could continue its recent drop to around $1,060 an ounce, which would be equivalent to an overall retreat of say 15%. which Leibovit contends would represent a buying opportunity. One of those signs was what he calls a reversal pattern, which occurred when gold rose to higher highs during one recent trading session and then reversed to lower lows the following day. Another red flag was the failure of a couple of gold indexes — the Gold Bugs Index and the Philadelphia Gold Index — to accompany and confirm the metal’s recent rise to record highs. Leibovit cited the possibility of a strengthening Euro, which could hurt gold, maybe even lead to a retesting of the $1,000 price tag, but he thought a more likely course was the fear that the European debt crisis might expand, leading instead to a higher gold price. In any event, he thinks the wind is at gold’s back and views $2,000 or $3,000 as only a matter of time. A HuffPost reader in Brisbane, Australia, Cornel Campeanu, a chartist at Techpro.au.Com, e-mailed me with an entirely different scenario. Based on his work, he believes we are a short time away from a meltdown of biblical proportions in mining stocks, with such names as BH Billiton and Rio Tinto leading the charge. As for gold, he sees a potential drop of hundreds of dollars an ounce, preceded by a possible near term drop to $1,120. Campeanu, it should be duly noted, is spouting contrarian views. Most market pros I talk to overwhelmingly feel that long term, the outlook for gold remains golden. What do you think? E-mail me at Dandordan@aol.com

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Leading Indicators Decline in Sign U.S. Recovery May Cool in Second Half

May 20, 2010

By Bob Willis May 20 (Bloomberg) — The index of U.S. leading economic indicators unexpectedly declined in April, a sign the economic expansion may cool in the second half of the year. The 0.1 percent decrease in the New York-based Conference Board’s measure of the outlook for three to six months marked the first drop in a year and followed a revised 1.3 percent gain in March. Other reports showed more Americans filed for jobless benefits and manufacturing in the Philadelphia region expanded. The initial factory-induced rebound from the worst recession since the 1930s, which is broadening to include advances in consumer spending and service industries, still faces hurdles. A slump in building permits, little letup in firings and retreating stock prices highlight risks to the strength of the recovery as concern over the European debt crisis mounts. “It is unlikely that the U.S. economy can shrug off the troubling developments in the euro zone,” said John Herrmann , senior macro strategist at State Street Global Markets in Boston, who correctly forecast the drop. “The manufacturing rebound may be cooling a little bit from the torrid pace we’ve seen. There may also be disappointments on the retail side.” Stocks dropped on concern Europe’s debt crisis is getting worse. The Standard & Poor’s 500 Index fell 2.3 percent to 1,089.44 at 11:29 a.m. in New York. Treasury securities surged, sending the yield on the benchmark 10-year note down to 3.24 percent from 3.37 percent late yesterday. Factories Grow A report from the Federal Reserve Bank of Philadelphia showed factories in the region expanded this month at the fastest pace of the year. The bank’s general economic index climbed to 21.4 from 20.2 in April. Readings greater than zero signal growth. The figures ran counter to a similar measure from the Fed Bank of New York earlier this week that showed manufacturing in that region slowed in May. The New York and Philadelphia surveys both showed factory managers were less optimistic about the outlook for the next six months, perhaps reflecting the influence of the debt crisis. More Americans unexpectedly filed applications for unemployment benefits last week, showing firings remain elevated even as employment climbs, figures from the Labor Department also showed today. Initial jobless claims rose by 25,000 to 471,000 in the week ended May 15, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level in a month. Unexpected Drop The drop in the leading index last month compared with a median estimate calling for a 0.2 percent increase, according to 59 economists surveyed by Bloomberg News. Projections ranged from a 0.4 percent decrease to a gain of 0.5 percent. March’s increase was the biggest since May 2009. Six of the 10 components of the leading index subtracted from the measure, led by declining building permits, faster supplier deliveries, shrinking money supply and rising initial jobless claims. A positive interest-rate spread, gains in stock prices and longer factory workweeks limited the decline. “These latest results suggest a recovery that will continue through the summer, although it could lose a little steam,” Ken Goldstein , a Conference Board economist, said in a statement. The interest-rate spread and stocks may be less supportive this month. The gap between 10-year Treasury note yields and the overnight fed funds rate will probably narrow in May as the note’s yield drops on growing concern over European debt. Stocks Retreat The S&P 500 was down more than 10 percent today from an April 23 high on concern measures aimed at avoiding a Greek default will choke economic growth. In a worst-case scenario, contagion could spark another credit crunch reminiscent of the September 2008 financial collapse, leading to a double-dip global recession, according to New York University professor Nouriel Roubini . A Commerce Department report this week showed building permits fell 11.5 percent in April to the lowest level in six months. The drop signals residential construction will pause in coming months. Manufacturing is one area holding up better than most as companies rebuild stockpiles, exports grow and businesses invest in new equipment. The factory workweek climbed by 12 minutes to 41.2 hours in April, according to figures from the Labor Department. Even here, the outlook may be turning a little murkier. The jump in the value of the dollar caused by mounting concern over European debt means American goods will become more expensive to buyers overseas. Profit Projections Among retailers expecting slow growth, Kohl’s Corp ., the fourth-largest U.S. department-store chain, last week forecast second-quarter profit that trailed analysts’ projections. While shoppers are spending more now, they’re also being careful about their purchases, said Kevin Mansell , chief executive officer at the Menomonee Falls, Wisconsin-based company. “Things are improving,” he said in a telephone interview last week. “But if you put it in the context of spending three, four, five years ago, the consumer is still spending a lot less on discretionary categories than she used to.” The economy will expand 3 percent this year, according to the median forecast of economists surveyed from April 29 to May 10. That compares with a 2.4 percent contraction last year. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net .

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