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Sramana Mitra: Indian Entrepreneurs Are Maturing

February 6, 2011

For this week’s One Million by One Million round-table, we partnered with the Indian Angel Network (IAN). India, as you all know, is a rising power in the entrepreneurship firmament, and the country’s entrepreneurs are making a long-awaited switch from pure outsourcing and labor arbitrage to now venturing into building Internet companies, cloud businesses, and, as you will see in today’s presenters, some very cool hybrid businesses that leverage India’s cheap labor pool and combined with sophisticated technology, deliver solutions to hairy and hard core problem domains. It is particularly satisfying for me to work with these entrepreneurs, because I have long believed that India needs to diversify out of pure labor arbitrage. I deliberately wrote a highly controversial series of articles in 2008 [ Death Of Indian Outsourcing ] to provoke a debate on the topic. Other discussions on India’s need for product companies have also been equally controversial. But in the end, I believe, we have arrived at a better place as an industry where Indian entrepreneurs are thinking beyond outsourcing. Meanwhile, outsourcing itself is absolutely booming. You can read more on the topic in Top 10 Outsourcing Trends Of The Decade , while I discuss some of the entrepreneur pitches we discussed today. First up today was Ankur Tripathi with IRTEX: Indian Road Transportation Exchange . Ankur has underscored a very real and substantial problem in the transportation industry spanning road, rail, ship – that very often vehicle capacity goes under utilized due to lack of information on cargo and its whereabouts, and lack of communication among shippers and their clients. I like this business very much, and believe it can be a large, and important company. It reminds me somewhat of RedBus, India’s largest online bus-ticketing company , that went into a very low-tech, inefficient industry and completely changed its dynamics. In today’s session, we primarily discussed Ankur’s scaling challenges and prioritization issues. We also discussed how to move this cash transaction oriented business to a more efficient, electronic payment mode. The industry is extremely low-tech, but in today’s India, everyone uses mobile phones. I pointed Ankur to Obopay, a mobile payment solution , by which, conceivably, he can turn the cash-intensive nature of the business to a more efficient and accurate workflow. Then Praful Thachery pitched Delyver Retail Network – a home delivery solution through which Praful is already delivering food, flowers, and a variety of other products and services (like dry cleaning) to over 5,000 customers in Bangalore. The value proposition is sound. The Indian cities are incredibly crowded today and traffic is an absolute nightmare. Upwardly mobile consumers, I am sure, would welcome a service like Delyver. Praful is looking to scale his business, and needs cash to open additional hubs in Bangalore, as well as elsewhere. He also wants to build optimization technology to make the delivery process — today managed largely by hand — better optimized. For an investor, Praful needs to present a thorough financial analysis — based on his first 5,000 customers — on what are the margins and mechanics of the business he is trying to build, and also a clear articulation of the growth levers. Next Kiran Reddy presented Saagam.com . I learned that there are educational institutions in India that cater to non-resident Indians, and out-of-state students on a quota basis, but the information flow is extremely limited. Kiran is trying to bring transparency to the industry that currently has some awkward behavior like admission in exchange for donations! I detected a major flaw in Kiran’s business model assumption. He wants 8% commission off the admission fee for every students that he helps the institutes recruit, yet the institute wants to slap that fee on top of their regular fee, and pass the charge on to the student. This creates a pricing model disparity, whereby, the tuition fee on Kiran’s site is 8% higher than if the student goes directly to the institute. Well, guess what? The students will do all their research on Kiran’s site, and then go buy from the institute directly! Up last was Tuanni Price presenting Zuri Wine Tasting , a wine education service for African American women with a household income of $40,000 a year. Tuanni has come to realize that this segment has a somewhat specific palette – they like sweeter wines. And of course, at a $40k HHI, they cannot afford to buy Opus One or Stag’s Leap. But in their price range, say, $10-$25 a bottle, there are very nice wines from different parts of the world, and of those there are some that are better suited to the African American palette than others. I like the precision of the positioning in Tuanni’s business. I also think this is a perfect e-Commerce / Web 3.0 opportunity with a well-defined context. And she is also interested in doing a somewhat hybrid business with a physical tasting room in Los Angeles. Speaking of which, I like this trend of hybrid online businesses. I like the way Ankur is using physical resources to address the challenge that his clientele is low-tech, non computer-savvy (forget Internet savvy), and hence unable to provide data through electronic means. Over time, Ankur will be in a position to solve this with technology, but for now, human intervention is just fine. Similarly, Praful’s business is very much a hybrid business where, conceivably, consumers would order online (or by phone), and human beings do the actual delivery. I think, hybrid e-commerce will be a trend this decade. A very good case study to refer to is Fresh Diet , in this context. Overall, I’d like to suggest that entrepreneurs look at the trend more carefully, especially since these kinds of businesses also create a lot of jobs. You can listen to the recording of today’s roundtable here . Recordings of previous roundtables are all available here . You can register for the next roundtable here .

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Dedrick Muhammad: Little Known History of Labor Rights and Civil Rights

February 6, 2011

A few weeks ago I attended the United Auto Workers Region 9A 18th Annual Civil Rights Award Recognition dinner in Hartford, Connecticut. The evening was a stirring tribute to the work of those who through their work in labor rights have been advancing civil rights. For most Americans the story of how labor organizations like the UAW were key partners in the Civil Rights movement of the mid 20th century is an unknown piece of trivia. From the UAW’s support of the Montgomery Bus Boycott in 1955 which would bring the leadership of Dr. Martin Luther King Jr. to national attention, to UAW’s support of the freedom riders and voters registration of African Americans in the 1960′s, to fighting for women worker’s rights, to supporting the struggle of Cesar Chavez’s United Farm Workers, the United Auto Workers has served as an essential ally in supporting movements for greater equality and social justice. Similarly there is little recollection of the Civil Rights’ legacy of fighting for economic rights, workers rights, and the right to work. The famed March on Washington in 1963 was titled the March on Washington for Freedom and Jobs and was originally envisioned by the great labor leader A Phillip Randolph. Dr. Martin Luther King was assassinated in Memphis Tennessee supporting a labor strike. Dr. King’s last nation campaign was aimed at demanding greater investment into and more opportunity for working class Americans. The struggle for racial equality has at its core many of the same issues at the foundation of the labor movement, the right to a living wage and the need for greater economic opportunity and equality. In the context of the “Great Recession”and a decades long regression in economic opportunity for most Americans this connection of labor and civil rights is as important as ever. What has made the Great Recession such a challenge is the Great Recession comes after decades of a “great regression” in many areas of economic equality. For the last 30 years the American economy has been one where wealth and income is increasingly concentrated in the hands of an elite, creating a top heavy economy versus a middle class economy that was at the center of America’s most prosperous years. Dr. King stated in his 1963 speech, “Social Justice and the New Emerging Era”, “I never intend to adjust myself to economic conditions that will take necessities from the many to give luxuries to the few.” Increasingly, the economic reality of a declining middle class, a solidifying of racial economic inequality, and a growing concentration of wealth is being called the new normal. It was an honor to be part of an event that recognized those who were maladjusted to the reality of the new normal and are fighting for the dream shared by Dr. King, the civil rights movement, and organized labor, a dream of greater economic equality and opportunity. The honorees of the United Auto Work Civil Rights dinner were Domestic Workers United, Ron Patenaude, and General Holifield. Domestic Workers Unites is a labor group who in the midst of this poor economy has organized the most disenfranchised segments of society primarily women, people of color, and immigrants who provide the domestic work which makes the lifestyle of those with higher income possible. Ron Patenaude, President of Local 322 in Holyoke Massachusetts, was honored for his diverse work in ensuring civil rights for all regardless of sexual orientation, fighting to restore cuts to Medicaid, and Criminal Offender Record Information reform. Last but not least the NAACP’s own national board member and UAW Vice President General Holifield was awarded for embodying in action the unity between civil and labor rights. The examples of those honored at the UAW Civil Rights dinner highlight the great work that intersects civil and labor rights that is still being done. Malcolm X used to state that the subject of history is best qualified to reward our research. As we begin Black history month let us examine the history of civil and labor rights and examine how these movements can best reward our contemporary challenges of promoting great economic equality and opportunity for all.

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Tango Management Consulting Advances the Practice of Retail Customer Analytics

January 31, 2011

Tango Management Consulting Announces Taesun Kim, PhD, as Senior Market Research Director

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Tango Management Consulting Advances the Practice of Retail Customer Analytics

January 31, 2011

Tango Management Consulting Announces Taesun Kim, PhD, as Senior Market Research Director

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Dan Dorfman: Lurking Oil Shock Could Wreak Havoc

January 29, 2011

After reading in a local paper that he had died, a very live Mark Twain emphatically denied it, uttering that now famous quote: “The reports of my death are greatly exaggerated.” It may be the same thing can be said about our most recent recession, which, given the onset of a peppier economy, is widely believed to have gone the way of the black-and-white TV set. Maybe so, but then again, maybe no because some economic watchers point to a developing trend that suggests another recession is lurking in the wings. Sure, we all know the obvious recessionary dangers, such as the renewed downturn in housing, which will precipitate an accelerated rate of foreclosures, the prospects of a wave of new layoffs by financially-strapped state and local governments and the ongoing, high 9.4 percent jobless rate, which, at best, is expected to show only a minimal improvement this year. None of these, however, fit the bill for the new recession reason being referred to here. This one centers on an emerging risk — the ballooning price of oil — which is rearing its ugly head as a potential new and dangerous economic threat. The facts speak for themselves. According to knowledgeable energy industry trackers, 10 of the past 11 recessions since World War II can be directly linked to oil shocks or sharply higher oil prices. The very same can be said about six of the last seven recessions since 1973. On top of this, I recently read in a Florida newsletter, Strategic Investment, that one energy expert, Steven Kopits, the managing director of Douglas-Westwood LLC, a leading provider of business research and analysis on global energy services sectors, has shown that the U.S. economy reliably sinks into a recession when spending on oil and gasoline exceeds 4 percent of GDP, as it will do with oil at $90 a barrel. Every driver will tell you they’re getting beaten up at the gas pump in the wake of a sharply rising price per barrel of oil (now at around $89), which has more than doubled from its March-April 2009 trading range of about $40. As Oppenheimer & Co.’s well-regarded energy analyst Fadel Gheit explains it to me, every $1/a barrel rise in the price of oil is equivalent to about a $0.2 to $0.3-a gallon hike at the pump. That may not seem like a lot, but it is if you look at it on a broader scale, what with every penny boost at the pump draining an estimated $1.5 billion out of household cash flow. So where are oil prices headed this year following a 2010 close of $91.48? Gheit figures a realistic 2011 range is between $75 and $100 a barrel, but he doesn’t rule out a higher level, say between $90 and $100, due to a weaker dollar, inflation fears, the threat of global disruptions and brisk fund trading in oil, among them hedge and pension funds. He’s quick to note, though, that such price ranges are not supported by supply-demand factors, what with an abundance of available supply, most noteworthy 5 million barrels a day of spare capacity in Saudi Arabia. Moreover, he points out, every one, thanks to research breakthroughs and research and development, is becoming more energy efficient. About 10-15 years ago, he points out, we got 10 to 15 miles a gallon, now we’re getting 25 miles a gallon, and in 5-10 years it’ll probably be double that. In other words, he says, we’re all going to get a bigger bang for the buck. Getting back to the risk of an oil-related recession, a number of economists see it as a real potential danger that could precipitate recessionary pressures. One of them is Madeline Schnapp, the economist at West Coast-based TrimTabs Research, who recently griped to me that it cost $75 to fill up her SUV. In her neck of the woods, she says, the average price of gas has risen from $2.90 to $3.40 a gallon, which she calculates is a $60 million tax on consumption nationally. “We’re talking about an economic hardship,” says. “The more you spend on energy, the less discretionary income.” Although we’re right around that recession-producing $90 a barrel, Kopits, for one, doubts we’ll see a recession at current oil prices, given the current phase of recovery. But he does see the high price as an economic drag by slowing the rehiring of millions unemployed here and reducing consumption. As of now, Kopits thinks the U.S. can tolerate current prices, but he does see a “substantial risk” of a recession should oil rise to the $100-$120 range. Whether such a range could be in the cards is anybody’s guess, but one could certainly view higher prices as probable, given Kopits’ observations that consumption estimates for 2011 are too low by about a half, conspicuously so because of the increased demand he expects from China, an increase in this year’s demand by about two million barrels a day, mostly from emerging nations, and flat overall supply. Against this background, our Energy Information Association expects world demand to climb 1,47 million barrels per day this year to 86.65 million barrels per day, another catalyst for higher prices. An unanswered question is the impact of the riots in Egypt on the price of oil, which has already risen somewhat on that chaotic situation. The longer it lasts the higher the price of oil will go, observes one commodities trader. Kopits sketches a worrisome 2012, noting if the 2012 supply situation looks like 2011′s, then we’ll run out of capacity next year. Historically, he adds, when demand outstrips all supply, that leads to an oil shock, which, in 2012, could be similar, he believes, to the one we experienced in 2008. In July of that year, crude rose to an-all-time high of $147.27 a barrel. If he’s right — and that’s a big if — such an oil shock could be pretty devastating. Among other things, it could well set the stage for a double-dip recession, establish a widespread price of $4 a gallon at the pump, possibly lead to some airline bankruptcies and open the door to a price of triple-digit a-barrel crude, which could be chaotic for corporate earnings, especially those of transportation companies. What do you think? E-mail me at Dandordan@aol.com.

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Hedge Fund Manager Reportedly Brought In $5 Billion Last Year

January 28, 2011

BOSTON (By Svea Herbst-Bayliss) – Billionaire hedge fund manager John Paulson, whose bet against the overheated housing market made him one of the world’s wealthiest people, became a lot richer last year. By earning an estimated $5 billion in 2010 thanks to bets the economy would recover, the 55-year old investor likely set a new record for the $1.9 trillion hedge fund industry’s biggest-ever annual payday. He beat his own record, which he set in 2007 with a $4 billion haul made off the subprime bet. The Wall Street Journal first reported Paulson’s payout in its Friday edition, and investors familiar with Paulson’s portfolios said the number is likely correct given the manager’s asset size and his recent profitable bets on Citigroup and gold. For Paulson, the payday comes after he reversed deep losses in his funds halfway through the year, and it may put to rest lingering talk that his investing prowess was limited to a lucky bet during the subprime era, investors said. “He did it on the short side and on the long side,” said Brad Alford, founder of Alpha Capital Management, which invests with hedge funds. “He proved that he can really do it all.” Other prominent managers like Appaloosa Management’s David Tepper and Bridgewater Associates’ Ray Dalio likely also earned 10-figure paychecks, the Journal reported. EYEBROWS RAISED But Paulson and other managers’ eye-popping earnings are sure to raise new questions about how managers are paid in an industry known for charging hefty fees that often guarantee generous payouts even if returns were merely average. Last year, the average hedge fund gained 10.5 percent, lagging the Standard & Poor’s 500 index by 15 percent and falling short of their own 19 percent return in 2009, data from Hedge Fund Research show. But managers will collect 2 percent management fees and about a 20 percent cut of their gains. By definition, this raises the payouts for managers at the industry’s biggest firms. In Paulson’s case, the fact that his 17-year old firm Paulson & Co oversees about $35 billion fattened up his payout. To be fair, Paulson also invests his entire fortune in his funds and since his gold fund gained 35 percent, his investment gains added billions to his payout. For other managers, including ones who lost money, however, the industry’ payouts may seem less fair, investors and analysts said. “People are fine with hedge fund fee structures as long as they are making great returns,” said Stewart Massey, who invests with hedge funds at Massey, Quick & Co. “But where they get antsy is where managers have middling returns and the managers are still making a lot of money.” As hedge funds look for new investors, experts say that investors’ demands on pay will hold more sway. A push from some investors to set a so-called hurdle rate, or minimum accepted rate of return, for manager pay, or to reward them only if they exceed certain benchmarks may gain traction. ROAD TO BIG PAYDAYS The big paydays at hedge funds are likely to confirm that hedge funds can be modern-day gold mines on Wall Street and spark even more movement from the world of banking and mutual fund management into this asset class. “Many of these big hedge fund managers are now earning more than professional athletes,” said Kenneth Murray, president of Mercury Partners, which recruits staff for hedge funds. “And they can do this for the rest of their lives, unlike sports stars who have to find another job after the age of 35…. 100 percent, hedge funds are the places where everyone wants to be.” But he and other recruiters agreed that the hedge fund industry’s biggest payouts really will be limited to its biggest stars, noting that working at a hedge fund is no longer a sure way to easy riches. As the industry matures, these people said that it is becoming harder for newcomers to break in and that portfolio managers need to bring long records of top performance before getting a job. Also with investors becoming pickier, it is harder to raise a lot of money. “If you’ve been in the game and successful, you may be set for life, but for everyone else it is becoming tougher,” Murray said. (Editing by Robert MacMillan) Copyright 2010 Thomson Reuters. Click for Restrictions .

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JetBlue Expects Fare, Fee Hikes To Continue

January 27, 2011

NEW YORK — JetBlue is tacking on surcharges on flights to the Caribbean to cover its rising fuel bill, and said airlines should continue to pass these costs on through higher fares. The New York airline said in a conference call after the release of its fourth-quarter earnings that it’s glad to see that airlines are raising fares to cover the price of fuel, their largest expense. JetBlue expects to pay 17 percent more for fuel in the first three months of the year than it did in the fourth-quarter. Fuel jumped 16 percent in the October-to-December period from the year before. The airline raised ticket prices by about 4 percent in the fourth-quarter and recently added a $35 fuel surcharge for flights in or out of Puerto Rico and $45 for Caribbean destinations. JetBlue hopes to get 20 percent more in fees this year. Passengers on average paid $20 apiece in extra fees in the fourth-quarter, mostly for more spacious seats. For all of last year, travelers paid $85 million to sit in seats with “Even More Legroom.” The airline was tripped up by higher costs, mostly for fuel, in the fourth-quarter. That drove net income down 18 percent. A massive winter storm in December walloped its home base of New York and slammed operations in Boston, where it is the biggest domestic airline by passengers. , JetBlue estimated that the storm cost $30 million in lost revenue. The airline canceled around 375 flights on Wednesday and Thursday after another big storm rolled into the Northeast. The New York airline earned $9 million, or 3 cents per share, in the October-to-December period. That compares with a year-ago profit of $11 million, or 4 cents per share. Revenue rose 13 percent to $940 million. Costs rose 15 percent. The results fell short of Wall Street’s expectations. Analysts polled FactSet Research expected a profit of 6 cents per share on revenue of $948.3 million. Traffic improved by about 10 percent from a year ago. Most other major airlines posted a profit in the last three months of the year – which includes the important holiday travel period – as demand improved and they were able to raise ticket prices. Only American Airlines and United-Continental lost money in the last three months of the year. For all of 2010, the airline posted a profit of $97 million, or 31 cents per share, compared with $61 million, or 21 cents per share, in 2009. JetBlue plans to expand the number of available seats it offers, or capacity, by about seven to nine percent this year. That will mostly be through continued expansion in Boston and the Caribbean, where JetBlue has been aggressively adding service while bigger airlines have pulled back. JetBlue increased flights in Boston by 30 percent in 2010 over 2009, and expects to reach 100 daily flights there by this summer. It predicts that about one-quarter of its flights will be in and out of the Caribbean this year. The company has 600 daily flights. It says its efforts to lure more business travelers, especially in Boston, are paying off. The airline made changes last year to make its flights more attractive to corporate customers, who tend to pay more. That included adding an early boarding option for those who paid more for extra legroom seats, adding more convenient flight times and offering refundable fares. In midday trading JetBlue shares rose 2 cents to $6.50.

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Halliburton Profit Soars On Jump In Oil Revenue

January 24, 2011

NEW YORK/SAN FRANCISCO (By Matt Daily and Braden Reddall) – Oilfield service company Halliburton Co. posted higher-than-expected profits, boosted by oil projects in North America, and forecast steady growth elsewhere, but said pricing competition could be tough. Shares of the world’s second-largest oilfield services company, which have long traded at a discount to those of larger rival Schlumberger Ltd (SLB.N: Quote, Profile, Research, Stock Buzz), outperformed the sector on Monday in response to the more than doubling of fourth-quarter profit. The rise in oil prices to near $90 a barrel during the period spurred a bout of spending on new wells, overshadowing a decline in natural gas projects, as prices for that fuel remained weak. An 80 percent jump in Halliburton’s North American revenue in the fourth quarter was driven by robust onshore activity, though offshore activity in the Gulf of Mexico remained slack. Graphic on earnings/rig count: r.reuters.com/kym67r On Friday, Schlumberger posted higher-than-expected profits and said it expected client spending to grow. Shares of Halliburton were up 0.5 percent at $39.37 on the New York Stock Exchange in early afternoon trading, off an earlier high of $40.31. The Philadelphia Stock Exchange’s Oil Service index was down 0.2 percent. Halliburton shares are up 25 percent in the last 12 months, but remain a bargain compared with those of peers, analysts said. “It’s still the cheapest of the large-cap diversified (oilfield service) companies,” said RBC Capital Markets analyst Kurt Hallead. Halliburton was trading at a 20 percent discount to rivals based on 2012 earnings forecasts, according to UBS analyst Angie Sedita, who has a price target of $48 on the shares. BEAT THE MARKET Halliburton’s fourth-quarter net profit rose to $605 million, or 66 cents per share, from $243 million or 27 cents per share, a year earlier. Excluding a 2 cent-per-share charge related to former subsidiary KBR Inc’s (KBR.N: Quote, Profile, Research, Stock Buzz) settlement with Nigeria, earnings per share were 68 cents, topping the 63 cents that analysts had forecast on average, according to Thomson Reuters I/B/E/S. Revenue jumped 40 percent to $5.16 billion, while analysts had expected $4.88 billion. Houston-based Halliburton is looking abroad for growth in the year ahead, but margins are likely to remain under pressure as its rivals are chasing growth in the very same markets. “We do see activity increases happening throughout 2011,” Chief Executive Dave Lesar told analysts on a conference call. “The big wild card is just how tough the pricing environment continues to be.” The company said it recently won a 15-well package in Iraq, on top of three deals announced there last year, and it will double its employee headcount in the country to 1,200 in 2011. Lesar sees steady demand in North America this year, helped by the 3,200 uncompleted wells in the region — a number higher than he had expected, and that he sees rising this quarter. Gulf of Mexico activity is moribund as companies struggle to obtain drilling permits in the wake of BP Plc’s (BP.L: Quote, Profile, Research, Stock Buzz) oil spill last April after a blowout that killed 11 workers — for which Halliburton, a BP contractor, could face legal liability. Halliburton is maintaining its staffing in the Gulf even though activity looks likely to stay subdued in the first half of 2011, and possibly for the rest of the year, Lesar said. Halliburton will expand deepwater operations in the Eastern Hemisphere, but did not specify how much it would spend. Competitors Baker Hughes Inc (BHI.N: Quote, Profile, Research, Stock Buzz) and Weatherford International Ltd (WFT.N: Quote, Profile, Research, Stock Buzz) WFT.S report results on Tuesday. (Reporting by Matt Daily in New York and Braden Reddall in San Francisco; Editing by Gerald E. McCormick and Matthew Lewis) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Key Senator Urges Obama To Push Foreclosure Relief

January 20, 2011

WASHINGTON — Sen. Jeff Merkley (D-Ore.) is urging President Barack Obama to pledge a new round of foreclosure relief during his State of the Union address next week. In a letter to the president obtained by The Huffington Post, Merkley said the administration’s current anti-foreclosure programs have proven woefully inadequate, and pushed for a more thorough program to keep families in their homes. “A record one million families lost their home to foreclosure last year,” Merkley wrote. “Next week, Mr. President, you will have the attention of the nation. I urge you to use this opportunity to renew efforts to tackle the national foreclosure crisis.” Merkley’s call for presidential leadership on foreclosures comes as infighting among federal regulators appears to have stalled out key reforms to the bank divisions that work with troubled borrowers and process foreclosures. The FDIC has been pushing to impose new requirements on the operations of those divisions, which are known as mortgage servicers. The agency has been engaged in heated negotiations with other regulators at the Federal Reserve and the Office of the Comptroller of the Currency (OCC). According to a source familiar with the negotiations, the Fed had initially opposed the plan, but agreed to support the rules after a few weeks of negotiations. The OCC, however, which is currently responsible for regulating the largest mortgage servicers — Wells Fargo, JPMorgan Chase, Bank of America and Citigroup — has resisted those rules. The OCC has never publicly sanctioned a mortgage servicer, despite widespread court findings of servicer fraud in the foreclosure process. The Treasury Department, which had supported the new rules, had expected an agreement between agencies by Friday, Jan. 14, according to a spokesman. That anticipated agreement has not yet come to fruition. But Treasury itself is engaged in a delicate dance on foreclosure policy — defending the foreclosure prevention program criticized by Merkley, even as it urges sweeping reform of the bank divisions that participate in that program. “The goal of the [Home Affordable Modification Program] was to prevent three to four million foreclosures,” Merkley wrote, “but to date, fewer than 600,000 homowners have been approved.” Merkley is a persistent advocate for financial reform, and co-authored a key provision of last year’s Wall Street overhaul legislation known as the Volcker Rule, which bars banks from speculating with taxpayer money. At a Wednesday meeting of the Mortgage Bankers Association, Cindy Gertz, Treasury’s Director of Operations for HAMP, praised the servicers involved in the Treasury plan, noting that they had ramped up staffing in order to deal with the foreclosure flood. Treasury spokeswoman Andrea Risotto told HuffPost that Gertz’s praise for servicers was restricted to HAMP, and not to any other servicer activities. But servicer abuses within HAMP have been widely documented, with borrowers frequently making good on loan modification arrangements only to be foreclosed on. Risotto noted that Treasury has a “compliance agent” that inspects servicers once a month to make sure banks are implementing the program correctly. Nevertheless, servicer employees have admitted to fraudulently robo-signing hundreds of foreclosure documents a day as a matter of ordinary procedure. Treasury has never sanctioned a servicer for violating HAMP rules, and maintains that it has no authority to do so, because the program is voluntary for banks. But as Treasury defends servicers with one hand, it is also demanding fundamental reform of the servicer industry with the other. On Tuesday, Treasury Secretary Timothy Geithner called for an overhaul of the way servicers are paid, arguing that the status quo is a “broken” system. Regulatory agencies are debating whether to include standards for servicer conduct in new “skin-in-the-game” regulations for the mortgage bond market. The Wall Street overhaul legislation contains a provision requiring banks to retain at least five percent of the default risk whenever they sell mortgages off to investors. But there’s a key exception to the rule: for standardized, top-quality loans, banks will not have to retain any of the risk. The FDIC hopes that by including mortgage servicing rules in the definition of a standardized, top-quality mortgage, they can create a new gold standard for mortgage lending that is immune from current abuses. But these new regulations would only reform the way that servicers operate with regard to new mortgages. They will not help the millions of borrowers already trapped in unaffordable loans, nor will they provide a way to manage the widening gyre of fraud allegations and other improprieties that pose massive potential losses at the nation’s too-big-to-fail banks. In a speech Wednesday, FDIC Chair Sheila Bair warned, “Chaos in mortgage servicing and foreclosure is introducing a dangerous new uncertainty into this fragile market.” Bair suggested creating a foreclosure disaster fund akin to the BP oil spill fund that would compensate wronged homeowners and investors, while capping liabilities for big banks. Merkley wants to find a solution that deals with homeowners already facing foreclosure (and bank fraud). He’s pushing for a six-point program to overhaul the current foreclosure system, including new standards for servicer conduct and new legal mechanisms to provide debt relief to deserving families. Central to the program is a reform of the bankruptcy code, dubbed by Merkley as “lifeline bankruptcy reform.” Mortgages are currently excluded from the bankruptcy process, so even if borrowers declare bankruptcy — a process that is difficult to qualify for and comes with serious financial penalties — they cannot get debt relief on their mortgage. By making mortgages subject to renegotiation in bankruptcy under the supervision of a judge, Merkley hopes to establish a process that would allow borrowers to remain in their homes without simply granting a get-out-of-debt free card to everyone whose home value has declined since the collapse of the housing bubble. “This makes much more sense than paying for modifications,” economist Dean Baker, co-Director of the Center for Economic Policy and Research, told HuffPost. Under HAMP, the Treasury pays servicers $1,000 to implement each loan modification, plus an additional $1,000 for every year that borrowers keep paying on the modified loan. A similar program for farm loans was adopted during the mid-1980s and helped thousands of family farms avoid foreclosure, and a recent IMF report suggested bankruptcy reform as an effective solution to the U.S. mortgage mess. The same report found that the high rate of foreclosure may be responsible for between 1 percent and 1.25 percent of the U.S. unemployment rate, currently at 9.4 percent. Mortgage bankruptcy reform was endorsed by then-Sen. Barack Obama during his presidential campaign, but died in the Senate in Spring 2009 amid weak backing from President Obama. Senate Republicans, who pushed for bankruptcy to be the appropriate way to deal with faltering megabanks, did not believe that consumers should receive the same treatment. Several bank-friendly Democrats also opposed the bankruptcy overhaul, prompting Sen. Dick Durbin (D-Ill.) to fume that banks “frankly own the place,” referring to Congress. Merkley also calls for an end to the “dual-track” system, in which mortgage servicers begin the foreclosure process even as they negotiate loan modifications with troubled borrowers. The system allows banks to foreclose as quickly as possible if the modification falls through, but also leads to many unnecessary foreclosures as banks improperly continue with foreclosures on successful modifications. Merkley would also require servicers to establish a single individual to contact borrowers, preventing paperwork mix-ups and other bank confusion which lead to improper foreclosures, and establish an independent party to review whether banks have followed the rules on foreclosures. OCC policy already bans the dual-track system unless the process is required by mortgage bond agreements, but the OCC is yet to enforce that ban with any sanction against banks that violate it. The potential impact of other elements in Merkley’s plan is less clear. He would implement a “short-refinance” plan, which would allow homeowners who owe more on their loan than their house is worth to refinance into a new loan at the current value of their home. Government agencies would then pay the existing bank to expunge the remaining debt levels. But Baker was skeptical that such a program would be workable. With home prices down dramatically nationwide from their bubble-level peaks, even outright housing speculators will be sure to seek relief, triggering a government payout to the very banks who caused the problem by lending recklessly in the midst of a bubble. “There is not going to be any plausible means test that you can put in place that will prevent almost anyone in this situation from taking advantage of the opportunity,” Baker said. Merkley would also provide a $5,000 tax credit for first-time homebuyers in an effort to boost home sales. But Baker said such an arrangement is unlikely to be an efficient mechanism to lift the struggling housing market.

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Despite Lackluster Returns, Hedge Fund Assets Hit Record

January 19, 2011

BOSTON (By Svea Herbst-Bayliss) – Hedge fund assets grew a record $149 billion during the last three months of 2010, according to new data released on Wednesday. According to Hedge Fund Research (HFR), which tracks industry performance and asset flows, hedge funds around the world now invest $1.917 trillion. Investors added $13.1 billion in new money during the last quarter after having put in $19 billion in the third quarter. In total, pension funds, endowments and wealthy investors added $55.5 billion in new money in 2010, the highest annual total since 2007. The rest of the increase during the last quarter came from market gains. The increased flows came even as the industry delivered only lackluster returns of 10 percent, lagging behind mutual funds and the industry’s own more impressive 19 percent gain in 2009. The industry is almost back to its peak size of the second quarter of 2008, when assets hit $1.93 trillion, right before the height of the financial crisis. But the flows also suggest investors are taking a more cautious stance by sticking with established players. The data show that 80 percent of net new assets went to big fund firms that oversee more than $5 billion in assets. “The second half of 2010 was a historic time in the hedge fund industry, characterized by powerful and pervasive trends shaping the institutional landscape of the hedge fund industry”, Kenneth Heinz, President of HFR, said in a statement. “As the industry is positioned to surpass its previous asset peak, global investors are focused on the dynamics of inflation protection, strategic specialization, enhanced liquidity, improved structure and transparency for accessing hedge fund performance in coming years,” he said. Macro and relative value funds were the most popular with investors, as clients hoped those types of funds could best navigate volatile currency and interest rate markets. Event-driven funds which focus on mergers and acquisitions were also popular, pulling in $14 billion during 2010. But the industry’s biggest category, equity hedge funds that can take long and short bets, failed to excite investors and added only $2.6 billion in new money during the year. (Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick) Copyright 2010 Thomson Reuters. Click for Restrictions .

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American Diabetes Association Announces Tamara Darsow, PhD, as New Vice President, Research Programs

January 19, 2011

ALEXANDRIA, VA–(Marketwire – January 19, 2011) – The American Diabetes Association announced today that Tamara “Mara” Darsow, PhD, has been named the Association’s Vice President of Research Programs. As a part of the Association’s Scientific & Medical Division leadership team, Darsow will oversee the research grants programs and research committees, while also providing scientific support for the Association’s Research Foundation .

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Video: Acacia’s Ryan Says More Companies Licensing Patents

January 13, 2011

Jan. 12 (Bloomberg) — Paul Ryan, chief executive officer of Acacia Research Corp., talks about corporations’ licensing of their patents. Ryan also discusses types of licensing agreements and Acacia’s strategy. Acacia Research invests in and licenses patents. Ryan talks with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Ebooks Now Outsell Paper Books On Web Bookstore

December 30, 2010

NEW YORK (AP) — Bookseller Barnes & Noble Inc. on Thursday said its line of Nook e-reading devices are the biggest-selling items in its history, and added it sold nearly 1 million e-books on Christmas Day. The New York company said its Nookcolor e-reader, which launched eight weeks before Christmas, was its top-selling gift of the holiday season. Barnes & Noble also said it now sells more digital books than physical books on its Web site. Nearly 1 million e-books were purchased on Christmas Day alone, the company said, with popular titles including James Patterson’s “Cross Fire” and Stieg Larsson’s “The Girl With the Dragon Tattoo. Electronic book readers are a nascent but growing electronic category, and companies have so far been reticent to say exactly how many are selling. On Monday, Amazon.com, which sells the Kindle electronic book reader, said its third-generation Kindle was the bestselling product in its history, besting the seventh book in the Harry Potter series, “Harry Potter and the Deathly Hallows.” Forrester Research expects U.S. e-book sales to total $2.8 billion in 2015, up from nearly $1 billion in 2010. The research firm projects the number of e-readers and tablets in the U.S. will soar from more than 15 million in 2010 to nearly 60 million in 2015. Barnes & Noble shares fell 4 cents in light trading to $14.27. Amazon.com shares fell 22 cents to $183.15.

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Video: Achuthan Expects Revival of U.S. Economic Growth in 2011

December 30, 2010

Dec. 30 (Bloomberg) — Lakshman Achuthan, managing director of Economic Cycle Research Institute, talks about the outlook for the U.S. economy and employment in 2011. Achuthan, speaking with Melissa Long on Bloomberg Television’s “Bottom Line,” also discusses Federal Reserve policy. (Source: Bloomberg)

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Video: Maher Says Google, Yahoo Face Biggest Risk From Facebook: Video

December 30, 2010

Dec. 30 (Bloomberg) — Rory Maher, an analyst for Hudson Square Research, talks about Google Inc. and Yahoo! Inc., and the outlook for online advertising. Maher speaks with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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Video: Stone Says U.S. Labor Market Is on Cusp of Turnaround

December 30, 2010

Dec. 30 (Bloomberg) — Raymond Stone, an economist of Stone & McCarthy Research Associates, talks about the outlook for the U.S. labor market. Stone speaks with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

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How Rich Children Can Deal With ‘Affluenza’

December 29, 2010

From his research he developed a list of traits to avert what he calls the devastating infection of “affluenza.” He explains these traits in his self-published book, The Affluenza Antidote: How Wealthy Families Can Raise Grounded Children in an Age of Apathy and Entitlement. D’Amico, who says he wrote the book as an ode to his nine grandchildren, said it was frightening how many wealthy families were dysfunctional and the knock-on effect this had on the economy when family businesses failed.

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Preeti Vissa: An Ebenezer Scrooge Christmas?

December 22, 2010

This time of year conjures up traditional images of family gatherings, cozy fireplaces, shared meals and happy exchanges of presents — images of home, security and friendship. But millions of Americans who have had their homes foreclosed or who are in imminent danger of foreclosure have no such sense of security, and in many cases no real home. Far too little is being done to help them. It seems like Ebenezer Scrooge is running Christmas this year. But it doesn’t have to be this way. I’ve written before about the utter failure of the federally backed Home Affordable Modification Program (HAMP), but other efforts to help recession-battered borrowers keep their homes seem to be equally ineffective. A big chunk of TARP money went to 18 states to assist such homeowners, but The New York Times reports that only five of these states actually have their programs up and running. In California, some $2 billion in funding received from the Feds over the past year has yet to help a single homeowner. The Times ‘ story quotes U.S. Treasury Department spokeswoman Andrea Risotto as saying, “The mortgage industry wasn’t set up to help struggling homeowners.” Of course. That was the idea behind creating these government programs, but where is the sense of urgency? This is a fixable problem. In Washington, our leaders just gave a big Christmas present to America’s wealthiest in the newly-signed tax deal. The financial industry is again wildly profitable and preparing to hand out an estimated $144 billion in bonuses this year. Everyone, it seems, is getting a windfall except those in the most desperate need, the families who will lose their homes if a way isn’t found to reduce the principal of their mortgages. The failure to provide meaningful assistance isn’t just hurting individual families. It threatens to devastate whole communities — like the town of Richmond, California, profiled in The Times fore piece, where in some ZIP codes one third or more of homes are in danger of foreclosure. So what is holding back real mortgage relief? It certainly isn’t public opinion. For example, a Lake Research Partners poll taken right before the November midterm elections found overwhelming agreement across party lines that “the foreclosure crisis is a very important issue.” In this survey, 60 percent of voters said the government has done too little to prevent foreclosures, while only 17 percent said it had done too much and 14 percent said it had done the right amount. And 58 percent favored requiring banks to renegotiate mortgages to help people keep their homes, while only 19 percent opposed the idea. This is the right thing to do. The public supports it. If we give struggling homeowners relief by reducing the principal on their mortgages, everyone can win: the families who get to keep their homes, the neighborhoods that won’t be torn apart (including the neighbors whose own homes will retain more value if there isn’t a wave of foreclosures nearby), and yes, even the banks, who will get reliable if somewhat reduced payments rather than taking a beating on foreclosure sales. We don’t need Scrooge this Christmas, we need compassion and common sense. It’s not too late.

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Video: Most U.S. Stocks Rise as Profits Offset Europe Concerns

December 17, 2010

Dec. 17 (Bloomberg) — Bloomberg’s Deborah Kostroun reports on the performance of the U.S. equity market today. Most U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-year high, as better-than-projected earnings forecasts at Oracle Corp. and Research In Motion Ltd. and the takeover of a regional bank overshadowed concern Europe’s debt crisis will spread. Bloomberg’s Pimm Fox also speaks.(Source: Bloomberg)

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Video: Most U.S. Stocks Rise as Profits Offset Europe Concerns

December 17, 2010

Dec. 17 (Bloomberg) — Bloomberg’s Deborah Kostroun reports on the performance of the U.S. equity market today. Most U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-year high, as better-than-projected earnings forecasts at Oracle Corp. and Research In Motion Ltd. and the takeover of a regional bank overshadowed concern Europe’s debt crisis will spread. Bloomberg’s Pimm Fox also speaks.(Source: Bloomberg)

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Video: Aguirre Says Probe `Positive Step’ in Leveling Market

December 16, 2010

Dec. 16 (Bloomberg) — Gary Aguirre, former attorney for the Securities and Exchange Commission, and Bloomberg’s Cory Johnson talk about today’s insider trading arrests. James Fleishman, an executive for Primary Global Research, an expert-networking firm, was arrested this morning on charges of wire fraud and conspiracy for allegedly trying to give non-public information to the firm’s clients, including hedge funds, according to a statement by U.S. Attorney Preet Bharara in Manhattan. Aguirre and Johnson talk with Lisa Murphy on Bloomberg’s “Fast Forward.” (Source: Bloomberg)

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iPhone Secrets Among Tips That Led To Arrests

December 16, 2010

NEW YORK — Federal prosecutors in Manhattan broadened their insider trading crackdown Thursday, arresting four people on charges alleging that so-called “expert consultants” revealed secrets about Apple Inc.’s iPhone and other technology products to hedge funds seeking a trading edge on quarterly earnings reports. The latest probe targeted Primary Global Research, a Mountain View, Calif.-based firm that offered consulting services to investors on industry trends, issues and regulations. Instead, prosecutors allege, firm executive James Fleishman used four consultants employed by publicly traded companies to create a corrupt clearinghouse for confidential information. Fleishman, 41, was charged with wire fraud and conspiracy. Three others, all outside “expert consultants” for Primary Global Research until earlier this year, were charged with wire fraud and conspiracy to commit securities fraud and wire fraud, according to papers filed in federal court in Manhattan. Fleishman helped arrange for Primary Global Research clients, including hedge funds, to speak with the consultants, the papers said. The clients were told about highly confidential Apple sales forecasts information, new product features for the iPhone and a top-secret project known internally at Apple as “K48,” which became the iPad, launched this year, the complaint said. The charges allege that a “corrupt network of insiders at some of the world’s leading technology companies served as so-called ‘consultants’ who sold out their employers by stealing and then peddling their valuable inside information,” U.S. Attorney Preet Bharara said in a statement. He said the allegations describe criminal conduct that went “well beyond any legitimate information-sharing or good faith business practice.” Primary Global Research paid four consultants more than $400,000 merely to participate in phone calls with their clients, “an indication of the value placed on the information,” said FBI Assistant Director Janice K. Fedarcyk. “This wasn’t market research. What the defendants did was purchase and sell insider information,” Fedarcyk said, adding: “Our investigation is most assuredly continuing.” The three consultants charged were Mark Anthony Longoria, 44, of Round Rock, Texas; Walter Shimoon, 39, of San Diego; and Manosha Karunatilaka, 37, of Marlborough, Mass. The prosecution is an offshoot of a probe of Galleon Funds founder Raj Rajaratnam and 22 others in which prosecutors made extensive use of wiretaps, which are more common in drug and organized crime investigations. Rajaratnam has pleaded not guilty and said he only traded with information available to the public. On wiretaps used to build evidence against those arrested Thursday, Fleishman and Longoria could be heard speaking about the Galleon probe, with Fleishman assuring Longoria that Galleon was not a client, according to court papers. The complaint said Longoria responded: “OK. Good. I wasn’t sure. I was, like, really getting nervous.” Richard Choo-Beng Lee, a former hedge fund co-manager who has pleaded guilty and is cooperating with the government, made some of the recordings, the complaint said. Investigators have learned from Lee that his hedge fund’s “practice was to have its employees call a firm consultant before the consultant’s employer was expected to release its quarterly earnings, in part to obtain inside information,” the complaint said. Longoria worked at Advanced Micro Devices Inc. as a supply chain manager, Shimoon worked at Flextronics International Limited as senior director of business development and Karunatilaka worked as an account manager at Taiwan Semiconductor Manufacturing Co. office in Burlington, Mass. The complaint said Shimoon illegally provided information about sales forecasts and new product features for Apple’s iPhone that had been given to employees of Flextronics, which worked with Apple on camera and charger components for the iPhone and iPod. It said he also spoke of the iPad project, saying on secretly recorded conversations with a government cooperating witness: “At Apple you can get fired for saying K48 … outside of a meeting that doesn’t have K48 people in it. That’s how crazy they are about it.” The complaint said Shimoon was also captured on wiretaps promising to get secrets about sales at Research In Motion Ltd., which makes Blackberrys. Shimoon has been terminated and Flextronics has clear policies prohibiting the release of confidential information about the company and its business partners, Flextronics said in a statement. It was not immediately clear who would represent Shimoon at an initial court appearance. For Karunatilaka, bail was set at $250,000 after an initial appearance in federal court in Boston. He was expected to be released Thursday. His lawyer, Brad Bailey, said he was reviewing the allegations against his client and would decide how to proceed. He said it was likely Karunatilaka would appear in Manhattan court sometime in January. Longoria appeared before U.S. Magistrate Judge Andrew W. Austin, Texas, who ordered him released on $50,000 unsecured bond and told him to surrender his expired passport. When asked if he was a flight risk, a tearful Longoria said no. “I’m not trying to fight this. I’m here to help. I’ve been cooperating on this from the beginning,” Longoria said. Longoria resigned Oct. 22 from AMD, where he had worked since 2007, said Mike Silverman, a company spokesman. “It appears that AMD is the victim of an insider trading scheme,” Silverman said. He added that AMD was cooperating with investigators. A lawyers for Fleishman did not return phone calls for comment. A fourth consultant for Primary Global Research, former Dell global supply manager Daniel Devore, pleaded guilty Dec. 10 to wire fraud and conspiracy charges in a cooperation deal that could win him leniency at sentencing, prosecutors also announced. His lawyer, John Sutton, declined to comment Thursday. In his plea, Devore told a judge that Primary Global Research paid him about $145,000 to share inside information with the firm’s clients and employees. “I knew that when I was misappropriating Dell’s confidential information and providing it to money managers, I was violating my duties of confidentiality and trust to Dell,” he said, according to a transcript. David Best, a Dell spokesman, said the company would cooperate with authorities. ___ Associated Press Writer Larry Neumeister in New York and AP Technology writers Jordan Robertson in San Francisco and Jessica Mintz in Seattle contributed to this report.

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Bing Upgrades Search With A Hand From Facebook

December 16, 2010

SAN FRANCISCO — Microsoft Corp. is hoping its Bing search engine can gain more ground on Google with a little more help from Facebook and its other Internet friends. As part of an extensive upgrade announced Wednesday, Bing will feature more recommendations and other information from people’s social circles on Facebook to help distinguish its results from Google’s. Bing also is teaming up with several other Internet companies to make it easier to complete a variety of tasks, such as buying tickets to a sporting event or making reservations at a restaurant, on its site. The changes, which will start appearing during the next few weeks, are unlikely to shift the balance of power in the lucrative search market any time soon. Google Inc. ended November with a 66 percent share of the U.S. search market while Bing remained a distant third at just under 12 percent, according to the research firm comScore Inc. Bing recently started to power Yahoo’s U.S. search engine, whose 16 percent share ranks second to Google. Despite the huge gap, Microsoft has been encouraged by the progress it has made since it retooled its search engine and rebranded it as Bing in June 2009. Bing has about 90 million regular users now, up from 27 million when it made its debut, according to Satya Nadella, a senior vice president in Microsoft’s online services division. Some of the new features unveiled Wednesday provided a glimpse at how Microsoft hopes to capitalize on a competitive advantage that it gained in October when Facebook agreed to give Bing greater access to the 500 million people who have set up accounts on its social network Google Inc. still isn’t able to compile the same volume of Facebook information in its search index. Microsoft has been chummy with Facebook and its founder, Mark Zuckerberg, since it paid $240 million for a 1.6 percent stake in the privately held company three years ago. Microsoft believes its Facebook relationship will become an increasingly important factor in the search market as people realize how helpful it is to see the recommendations of their friends when they’re looking for information on the Web. The breadth of those recommendations is rapidly growing as people spend more time on Facebook and become more comfortable sharing their preferences. In one upcoming change, if you are searching on Bing while signed into your Facebook account, some of the links listed in the results might include notation showing that one of your Facebook friends liked the website or a product. Bing also will draw from Facebook when processing requests about people. In some instances, the results will show whether the Bing user making the search request shares any common Facebook friends with the person being researched. Microsoft also is betting it can lure Web surfers away from Google by making Bing a one-stop shop for a range of common online activities. Toward that end, Bing has formed an alliance with a specialty search engine FanSnap to enable people to buy tickets from within the results page. It also is working with OpenTable Inc. to provide more convenient access to restaurant reservations. A variety of other revisions are being made to Bing’s image and mobile search. Google also is constantly tweaking its search engine to make it faster and smarter. In the most dramatic change this year, Google in September started to display search results that change with each keystroke in the request box. It’s also trying to get better data about airline flights , a popular search topic, with a proposed $700 million acquisition of travel technology vendor of ITA Software Inc. Microsoft is among several companies pressing the U.S. Justice Department to block the ITA deal on the grounds that it would give Google too much control over online travel bookings. Google dismisses those complaints as misguided. The Justice Department isn’t expected to complete its review of the deal until next year.

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MIT Entrepreneurship Review: When Should You Think About Price?

December 14, 2010

A few years ago, I worked with a product manager for a medical device company who had a burning question for me. His game-changing product was ready to go, the sales force was lined up and beginning to make contacts with customers, and his CEO was expecting this to be a $100 M product. He now just needed to slap a price on it, and wanted to know what I thought. My response: you should have been thinking about this a long time ago. Pricing is an incredibly important aspect in the success of nearly every business. Yet somewhere in the commotion of building their enterprise, an entrepreneur often lets it slip through the cracks. Sooner or later (usually later, unfortunately) my medical device client’s question will pop up: “When should I start to think about price?” The answer is that if you have a business plan, a potential customer, a prototype, or anything beyond an idea on a napkin, you should already be thinking a lot about price. Generally speaking, if you find yourself asking that question, you are probably already late and need to start catching up. Over the next few months, we will dig into best practices and useful techniques to drive more profitable revenue in your business. However, we need to first examine the urgency of thinking about price early and often. For starters, price is one of the most effective levers a manager can pull to drive profits. But to effectively do so over the long-term, it cannot be a one-time decision. Pricing is a mindset that needs to be integrated throughout the entire lifecycle of your product and must infiltrate every functional area of your business. Effective pricing is driven by the value you are able to deliver to your customers. Managers must constantly assess this value and look for ways to increase it. In many cases, it is an economic value (e.g., labor savings, access to a new customer segment). This is most common in B2B markets. Sometimes there is a psychological value delivered (e.g., a “coolness” factor of a new gadget), which is often a factor in consumer markets. But to capture this value, to truly monetize your new business, you need to be thinking about price at all stages of the game. Launching Your Business This mindset is particularly necessary for entrepreneurs. When developing a business model or drafting your business plan, price (and accordingly, value) needs to be at the top of your mind. Why would anyone pay me for this? What are they getting? How will this specifically help to improve a company’s financial position? What are my customers using now (the next best competitive alternative, to be discussed more in a future article on quantifying value) and how is my solution better? Thinking about these questions from the moment of your business’s inception will ensure you are driving toward a profitable outcome — one where you are going to truly deliver value that the market will pay for. Remember that you are starting the business to make money, not to make stuff. The challenge for entrepreneurs is to succeed in this task by doing more with less. But the “less” comes through higher efficiency — a greater degree of focus in your actions — not through simply doing fewer things (or worse, just doing everything 50 percent of the way). Focusing on price at the planning stage and throughout the company’s lifecycle will help you keep your eye on the prize, and ensure you are spending your limited resources in the right areas — the ones that return the most money. So when you think about launching a new business, think about price. Launching New Products and Services All too often, the end goal of driving value is forgotten in the chase to make stuff. As the product begins to take shape, new features are added daily. Wouldn’t it be cool if we had an extra flashing light? It wouldn’t be hard to make the product function as a toaster, too, so let’s add that. The result of this product-centric process is a lot of time and money spent developing a more costly product that doesn’t deliver any more value to the market. When the product launches with the inevitably higher price required to cover the additional features, no one buys it, as the value delivered does not merit the high price. The product development and launch processes need to be done with price at the forefront. Will adding this feature allow us to capture higher profitability? Why? What is the value that the new feature delivers — is it a totally new value driver, or does it just increase the impact of the original value driver? Is this the most important value driver to my customer, or the 10th most important? Are the same customers interested in both of these value drivers? As an entrepreneur, your time and resources are stretched thin. Focus on developing your products in a way that creates the biggest impact on the most important value drivers. When you think about developing and launching your product, think about price. Finding and Meeting Customers Have you ever met with a potential customer, even just in exploratory conversations, having not given serious consideration to price? If so, fear not; you’re not alone. Entrepreneurs can easily get caught up with other aspects of the business and think that it’s not the “right time” to think about price. But what happens? A potential customer eventually asks, and you don’t have the answer. Do you throw out a number? Marginal cost plus 10 points? The first price mentioned to a customer, even if informally, creates a very powerful reference point. What you do today affects what your world looks like tomorrow. Pricing decisions are not made in a vacuum, and will not magically reset a year down the road when you’re ready to get into the black. Once a reference price is set, you’ve given customers an anchor that they will not quickly forget. Dramatic moves away from this initial price will not lead to pleasant conversations. What would your best customer say when you tell him or her that the price is about to double? And if you cut price in half, customers may wonder if you were being “fair” initially, or perhaps that the price is falling because no one is buying (and they can therefore get even further discounts). Instead, use these early conversations as a source of information to further develop your pricing decisions and understand how you can deliver value. Before you show up, do your research. Read a 10-K and find a line where you think you can have impact. Are you trying to impact a $1 million cost bucket, or a $500 million cost bucket? If a customer is focused on reducing costs, realize that a revenue driver may not be as attractive to them. Is there a better way to frame your value story? Talk specifically about how they would use the product in their company — what processes, divisions, people and financial line items would be affected. What are the most attractive aspects of this product and why? Don’t assume you know the answer — ask the question. Ask what could be done to improve the value of the product. When you are talking with customers, you need to be thinking about price. The “Right Time” for Pricing Thinking back to my medical device client and his innovative $100 million product, a major opportunity to drive profitability was lost by waiting until the 11th hour to think about price. After a few months of hard work using some of the strategies and tactics that we will discuss here in the coming months, the product launched at a price over ten times that of the current market leader and has been very successful. Even so, money was lost by not infusing price into the development process. For example, early stage consideration may have led them to develop studies to validate his performance claims, increase the speed of revenue growth and perhaps open additional segments in the short term. Who is to say it couldn’t have been a $500 million product? For all the reasons discussed here, the right time to think about pricing is now . Companies are by and large rational decision makers. They will buy when they get something in return that is greater than the opportunity cost. Understand why buying your product is a good decision, and use that information to become an even better supplier. In doing so, stay focused on monetizing your value at all stages of the game. Remember: you’re here to make profit, not to make products. (Special thanks go out to my friends and former colleagues on the Monitor Group’s pricing team, especially Georg, without whose support over the years, I would not have much to write about.) The post originally appeared on the MIT Entrepreneurship Review . It is written by Jim Schuchart , an MBA candidate at MIT Sloan who previously spent five years as a consultant at Monitor Group.

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Possible Larry Summers Replacements Said To Be Narrowed To 3

December 13, 2010

As Larry Summers nears the end of his term as director of the National Economic Council, the list of potential replacements has been whittled down to three, according to Obama administration officials familiar with the deliberations: Treasury adviser Gene Sperling, Wall Street banker Roger Altman and Yale president Richard Levin . The three represent a range of ideologies, from sympathy for Wall Street to vigilant consumer protection. At this critical point in the economic debate, the president’s choice will send a powerful signal about the administration’s leanings. If it’s Sperling or Altman, critics say, the country can likely expect a continuation of a Wall Street-sympathetic approach to policy for the next two years. The stakes are high, both for how the administration is perceived and how it determines policy. As Peter Orszag, Obama’s former director of the Office of Management and Budget, has taken a senior position at Citigroup, pundits like Joe Klein and Jim Fallows are griping about the government’s ties to Wall Street. “This move only reinforces my growing sense that the Democratic party has to pry control of its economic policy away from the Wall Street caucus — the Rubin, Summers, Geithner, Rattner and now Orszag etc. gang,” Klein writes. On the other hand, Wall Streeters have been whining in recent months that Obama — despite presiding over a policy of historic bailouts and, more recently, record corporate profits — isn’t sympathetic enough to their interests. “He hurt their feelings,” said Dean Baker, co-director of the Center for Economic Policy and Research in Washington. When Summers’ departure was first announced in September, pundits speculated that the replacement would be someone with real-world business experience . Altman, and even Sperling, would fit that bill. The appointment of either Sperling or Altman would cement the administration’s symbolic ties to the financial sector. A Levin appointment, however, would signal a break from previous policy, and a step toward tight Wall Street regulation, with a more muscular job-creation agenda. Judging by Sperling’s record in government and on Wall Street, he would likely favor a policy of lenient regulation of the banking sector. Like Summers, Sperling has ties to Robert Rubin, the former Treasury Secretary, Goldmanite and, more recently, chairman of Citigroup, who pushed for deregulation under President Clinton. After serving as deputy NEC director, Sperling took the commission’s top spot in 1996, overseeing a policy of deregulation of Wall Street. Under Sperling’s watch, Congress repealed the Glass-Steagall Act, a rule-easing that many believe contributed to the financial crisis less than a decade later. Sperling has made his share of Wall Street cash. Before becoming adviser to Treasury Secretary Tim Geithner, he did time at Goldman Sachs. The year before taking office, he reportedly earned nearly $900,000 as a Goldman consultant. If Sperling’s background is mostly policy with some business experience, Altman’s is mostly business with some policy. Altman is the founder and chairman of Evercore Partners, a boutique mergers and acquisitions firm that advised General Motors through its bankruptcy, pulling in fees that the Department of Justice called “unreasonably rich.” In the early years of the Clinton administration, Altman served as a deputy Treasury secretary. It seems likely that Sperling or Altman, if appointed, would continue the policies of their predecessor. But Sperling, for his part, would likely depart from Summers in style. Whereas Summers has been known for his assertiveness in the administration, Sperling is more inclined to defer to others’ opinions, Baker said. “The biggest difference is if they’re a Summers type, calling the shots, or a bureaucratic type, getting the ideas,” Baker said. “[Sperling's] particular views on stimulus probably wouldn’t matter much.” While it’s difficult to say how assertive Levin would be as NEC director, his views make him stand out from the pack. As HuffPost has reported, his appointment would signal a departure from previous administration policies, a move toward the Elizabeth Warren camp of tight Wall Street regulation and proactive job-creation. According to Robert Shiller, Levin’s colleague at Yale, and judging by speeches Levin gave last year, the Yale president would likely support a second stimulus , with job-creation as a focus.

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Video: Rein Says Chinese IPOs in U.S. Ripe for Short Sellers

December 10, 2010

Dec. 10 (Bloomberg) — Shaun Rein, managing director of China Market Research Group, talks about the outlook for Chinese stocks listed in the U.S. during 2010. He speaks from Shanghai with Francine Lacqua on Bloomberg Television’s “On The Move.”

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Dan Dorfman: Jobs Shocker: Fact or Fiction?

December 5, 2010

It was big news over the weekend, front-page coverage everywhere — the unemployment shocker. That was Friday’s dismal November jobs report of a spurt in the month’s unemployment rate to 9.8% from 9.6%, an obvious sign of more economic distress. But how real were those numbers that came from the Bureau of Labor Statistics, which reported the creation of just 39,000 jobs, versus a widely expected addition to the employment rolls in some quarters of about 150,000 workers? Could the BLS report, like the illusion of a pool of water in the steaming desert, have been a mirage? The answer is an emphatic YES from TrimTabs Research, a West Coast liquidity tracker partially owned by Goldman Sachs whose TrimTabs clients include many of the country’s top hedge funds. The way TrimTabs figures it, the economy actually produced 117,000 new jobs in November, 78,000 more than what the BLS reported. Why such a disparity? As, Madeline Schnapp, TrimTabs economics skipper explains it, it’s a reflection of the radically different methodologies used by the two to determine the actual employment numbers. For example, the BLS derives its numbers through a survey of just 60,000 households, whereas TrimTabs’ figures are based on the taxes paid by all employees whose wages and salaries are subject to with-holding. Noting that the BLS is afflicted with the dilemma of having to make seasonal adjustments when it comes to issuing jobs numbers — which is especially difficult at this time of the year because of the heavy temporary retail hiring — she views its November report as a seasonally-adjusted fluke. “It’s like trying to hit a needle with a sledge hammer,” she says. “It ain’t easy.” Schnapp further believes the BLS numbers may also be fouled up because the agency failed to recognize that retailers hired their year-end workforce earlier this year than last year it did last year because of this year’s earlier launching of holiday sales. “We suspect,” she says, that October employment growth (a higher than expected 151,000 jobs) borrowed from November.” The BLS, which tells me it’s sticking by its November figures, is notorious for revising its monthly jobs numbers both up and down in ensuing months. And that’s precisely what Schnapp predicts will occur again with regard to the November report. In this case, she sees a sharp upward revision closer to the Trimtabs numbers. Interestingly, last Thursday Automatic Data Processing reported its closely watched monthly employment figures, which for November were closer to TrimTabs numbers than those of the BLS. ADP reported 93,000 new jobs, driven by growth in small business hiring. Schnapp rates the November employment showing (her estimated 117,000 job creations) as “okay, but not great,” noting a considerably higher number of new jobs (150,000 to 200,000 a month) are needed to keep pace with new entries into the work force. In recent weeks, a fair number of economists, given perkier retail numbers, including lively auto sales, and somewhat more positive consumer sentiment, have upgraded their GDP growth forecasts for 2011 to between 3% and 4%. The thought of a double-dip recession seems to have largely gone the way of the rotary telephone. Schnapp doesn’t share this ebullience. Her outlook: GDP growth next year will muddle along at about 2.5%, largely due to the drag from housing, the financial woes of local and state governments and a consumer population that is deleveraging. “We’re not on the road to a robust recovery, no way and not on your life, but stuck in a low growth mode for at least another year,” she says. “And don’t ignore the potential shockers, such as a spike in the price of oil, Iran going nuclear or North Korea attacking South Korea. As for the stock market, Schnapp sees a ho-hum 2011, with the S&P 500 (currently around 1,225) trading sideways in a narrow range of say 1,050 on the downside and 1,225 on the upside. In other words, a go-nowhere stock market; so don’t be hot to trot. What do you think? E-mail me at Dandordan@aol.com

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Marian Salzman: Booting Up

December 3, 2010

This is the fifth in a series of 12 posts expounding on the 2011 forecasts in the annual trends report from Salzman, president of Euro RSCG Worldwide PR and an internationally respected trendspotter. Watch out in 2011 for the return of skin-thickening boot camps to toughen up kids and employees for the rigors of the 21st century. This new brand of take-it-square training is going to catch on like tinder in a world that just might be gentling its young people out of competitiveness. We might have educated our kids, stimulated them, taught them to care and share, and protected them from bad things, but we now have a generation, called millennials (at Euro RSCG Worldwide PR, the agency I run, we consider them to be currently 18 to 25 years old), that is smart, plugged-in and tech-savvy–but oversensitive. Former Wall Street Journal columnist Ron Alsop calls them trophy kids , and many corporate recruiters consider them case studies in entitlement . In the workplace, this can make for a cross-generational melee: conflicts between millennials who believe the office should be egalitarian, casual and quick to reward, and boomer-managers whose buttons get pushed by their young employees’ expectations of a gimme-ocracy. Another thing unwitting work cultures have had to face is not just the millennial employee but also his or her helicopter parents . In 2007, I told “60 Minutes” that millennials could be incorrigible. “You can’t really ask them to live and breathe the company,” I told Morley Safer, “because they’re living and breathing themselves–and that keeps them very busy.” Today, my POV is that they reflect the best and worst of all generations. Boot camps could harness their genuine passion for good and for getting businesses to clean up their act to help make them all-around strong. While there’s plenty of advice out there for corporate cultures wishing to recruit and retain this group with their needs in mind, I see a flip side: emotional resilience-conditioning workouts that will begin to prevail, tasked with toughening up young people to face that rough road called reality. Mindful of what New York Times columnist Tom Friedman has said he has wanted to tell his daughters (in a twist on how his parents used to get him to eat his dinner), “Finish your homework–people in China and India are starving for your job,” there isn’t just a lot of competition for jobs in the U.S. economy, but there’s also an achievement gap that has widened, and stuck, among Caucasian, Hispanic and African-American groups, who fall far behind Asian Americans’ generally very good school results. In California’s 2007 achievement gap report , Asian students ranked above Caucasian students in English-language arts and math proficiency by 4.3 and 13.9 percent percentage points, respectively, and performed at more than double the proficiency of Hispanics and African Americans. Two years later, these inequalities hadn’t changed . In New York City, Mayor Michael Bloomberg touted a narrowed gap between these groups in 2010, but Asian students led the pack. Michael J. Petrilli, from the education think tank Thomas B. Fordham Institute, said , “On achievement, the story in New York City is of some modest progress, but not the miracle that the mayor and the chancellor would like to claim.” Some of the shape-up responsibility for this problem, which schools already shoulder, points to parenting. An ethic of old-fashioned, hard-assed knuckling down, less evident in today’s society, often makes a more adept and resilient student than a culture of parental indulgence. If these millennials aren’t tough enough to finish, much less excel in, school–and thus help sustain American competitiveness–the ramifications are extreme. Already in California, anxiety over marshaling a globally competitive science and engineering workforce for 2020 is over the top , and there are predictions of a giant shortfall of college degree-holding workers in general by 2025 if nothing changes. So, like it or not, overprotection is bad preparation for an übercompetitive world. We know that American (or Australian or European) educators and parents aren’t about to subject kids to conditions that prevail in emerging economies, let alone emulate the Spartans who left infants out on hillsides to weed out the weak. The NYU Child Study Center says , “The best-adjusted children, particularly in terms of social competence, had parents with an authoritative, moderate parenting style.” If you’ve got a kid at home, consider trying out a bit of “authoritative.” (Or consult Ph.D.s Sam Goldstein and Robert Brooks in Raising a Self-Disciplined Child: Help Your Child to Become More Responsible, Confident and Resilient –where they describe disciplinary and parenting styles that foster self-discipline and resilience .) Still, I see toughening boot camps as a cresting wave next year, with new curricula that are to thick skin what weight training is to fit muscle. It will be fascinating to watch this evolve–and to see what regulatory mechanisms might be established for entrepreneurs who can innovate tougher-character training without straying into abuse. There are pots of gold waiting for such organizations. Emerging clues for just who will lead in this realm hark back to some of what’s been shown to work with millennials: the success-breeds-success style. Stan Smith, a national director for human resources at accounting giant Deloitte, considers millennials to be team-oriented, not challenge-averse, and picky about who should lead them. They’re not anti-establishmentarian. And Pew Research has found something that might surprise about this tattooed and body-pierced cohort: Millennials are as likely as older Americans to think that it’s because of American business success that our country is strong. But with their generation more socially group-needy, one rule for the excelling boot camp strategy might be reciprocity. Says one boot-camp mentor blogger: “The exercise of trying to evaluate the strengths and weaknesses of (bootcampers) and their performance also helps me examine my own strengths and weaknesses and how my actions may be perceived by others…. When I [maintain connections and communicate] right I cultivate reciprocal good will from my bootcampers, and having the right working relationships with future experts across the code base is incredibly useful in a company that moves as fast as ours and leaves very little documentation in its wake.” What cannot be doubted is that millennials are rising faster than sea levels, with just as unforeseeable consequences. If they just can’t or won’t see the experience of the older generation as special or valuable, it’s going to be through booting up that the values of hard work–including respecting, learning from experience and admitting when you’re wrong–are going to grow tender plants into tough stuff. Previously: “Mad as Hell–and Only Getting Madder” “Talk to the Hands” “Net Gain” “Public Mycasting System” On Monday: “Yes, We Can…Reinvent Ourselves”

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EIRO Research Names Field Chairman and President

November 30, 2010

DALLAS, TX–(Marketwire – November 30, 2010) – EIRO Research, a Dallas-based wellness company, announced today that the company promoted Bo Short to the position of Field Chairman and President. Short, who has been with the company since its inception in 2008, previously served as one of the company’s Founding Partners/Master Distributors.

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Thanksgiving Sales Bring Shoppers, Grumbles

November 26, 2010

NEW YORK — Not all Americans tucked into turkey with their families on Thanksgiving. Some were out shopping, hitting sales ahead of the crowds expected Friday. After a year of cautious spending and worry over an uncertain economy and high unemployment, more stores this year extended hours into Thanksgiving Day, a day when stores are traditionally closed. Many grumble about the relentless march of commercialism creeping into the holiday. But at least some shoppers took the bait. While crowds appeared relatively light compared with the weekend ahead, the extended hours drew in overseas visitors, those who have to work Friday and some who couldn’t resist a good deal. Sears, Kmart and some Sports Authority, Gap, Old Navy and Banana Republic stores were among those open Thursday. At an Old Navy in Lutherville, Md., Brenda Tarver, 65, a retired postal employee from Baltimore, was dragged out of the house by her daughters, but was finding good deals on clothing. “They’ve got good prices and a variety of items. A lot of things are 50 percent off,” she said. Willy Gerelbest, 45, a counselor from Brooklyn, was shopping at Kmart in New York for sneakers on sale for $9.99. “I saw the advertising and just wanted to check it out,” he said. “Tomorrow I have to work.” David Friedman, president of marketing for Sears Holdings Corp. said the decision to open 7 a.m.-noon on Thanksgiving Day stemmed from positive response to a similar “early Black Friday” sale in November, as well as success with Kmart, which Sears also owns and has been open on Thanksgiving for 19 years. Workers will earn holiday pay and still be home in time for a Thanksgiving meal, Friedman said. At the Sears store at the Mall of America in Bloomington, Minn., the largest U.S. shopping and entertainment complex, sales were fueled by a charity walk at the mall. The walk – and a good sale – drew Helen Schultz, of White Bear Lake, Minn. She bought a 19-inch RCA LCD HDTV for $129.99, saving $70. But she said wouldn’t have bought it Thursday if she hadn’t been there for the charity walk. “I don’t think shopping should be done on Thanksgiving,” Schultz said. “But they need to make money.” Toys R Us CEO Jerry Storch said the company decided to open at 10 p.m. Thanksgiving Day because reaction was so positive to the stores’ midnight opening last year. Before that, stores opened at 5 a.m. on Friday. He expects brisk sales of hot toys like Santa-ma-jig, a green and red singing doll. “Customers lined up at 8 p.m. on last year. They wanted us to open earlier,” he said. A similar promotional blitz greeted online shoppers Thursday, though the holiday isn’t a bonanza there, either. Last year, consumers spent about $300 million online on Thanksgiving, compared with $887 million on Cyber Monday, according to comScore. According to Akamai Technologies, which tracks traffic to 270 retail sites, traffic peaked at 11 a.m. and was up about 14 percent from Wednesday. John Thompson, senior vice president and general manager of Best Buy Inc.’s website, said this year the company reached out to its frequent online shoppers and gave them early access to deals. “Thanksgiving Day is a day when we are seeing more and more consumers choose online as a place to begin their research and actually transact,” he said. With nearly 15 million unemployed in the U.S., some store workers were grateful for the holiday pay or extra time off that comes with working on a holiday. Bryce Humerick, 21, of Towson, Md., a sales associate at the Old Navy store in Lutherville, said he was happy to be making time-and-a-half. “I don’t mind,” he said. “My Thanksgiving dinner isn’t until later.” Not everyone was so pleased. In the hardware department of the Mall of America’s Sears, John McDonough had volunteered to work, but he bemoaned the increasing commercialization of the holiday season in general. “It’s a crying shame,” he said. “What has corporate America done to us?” ___ Sarah Brumfield in Lutherville, Md., and Steve Karnowski in Bloomington, Minn., contributed to this report.

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Insider Trading Probe Leads Investors To Wonder: Is The Market Rigged?

November 24, 2010

NEW YORK — The Wall Street insider trading investigation may lead everyday investors – already rattled by a stock market meltdown, a one-day “flash crash” and the Madoff scandal – to finally conclude that the game is rigged. “A large part of trading has to do with trust, and I don’t have it,” says Mark Swenson, a 43-year-old plumber from New Hampshire who refuses to buy individual stocks. “When a stock moves up 10 percent, you don’t know why,” he added. “We can pretend that everyone has access to the same information, but they don’t.” Even before news broke that federal investigators were looking into whether hedge funds traded on inside information, small-time investors were pulling their money out of stocks – despite a remarkable run for the market since the spring of 2009. Americans have pulled $60 billion out of U.S. stock funds this year, according to the Investment Company Institute, a trade group. Meanwhile, investors have piled money into Treasuries and bond funds that are considered safer investments, even if they don’t return as much money. And at the same time, banks like Wells Fargo have reported that money is moving into checking and savings accounts. To be sure, it’s natural for people worried about their jobs or the falling value of their homes to sock cash into more conservative investments. But this has been no garden-variety recession. It has coincided with turmoil in the stock market that goes back a decade, to the collapse of the Internet bubble and portfolio-draining scandals involving high-flying companies such as Enron and WorldCom. More recently, investors have lived through the housing bubble, the collapse of Wall Street firms such as Bear Stearns and Lehman Brothers and stomach-churning days when it wasn’t clear whether capitalism would survive. On top of that came news that financier Bernard Madoff had bilked investors out of billions. “Virtually everyone on the Street believes there are significant improprieties, and I think there is an even more important point for the massive number of investors who are not Wall Street players,” says former New York Gov. Eliot Spitzer, once known as the “sheriff of Wall Street” for aggressively prosecuting white-collar crime as state attorney general. “And that is for most of us, you can’t beat these guys at their own game.” People are nervous about the state of their assets in part because their homes are worth so much less these days, not to mention job insecurity and slow economic growth overall. Some pros on Wall Street say hesitation by small investors is good news. It means that there’s plenty of “dry powder” to propel the market higher in the next few months when and if the little guy finally relents and joins in the rally. The insider-trading probe could test that theory. The FBI this week searched the offices of three hedge funds, and some of Wall Street’s most influential firms, including Janus Capital Group, have been subpoenaed in the probe. On Wednesday, an employee of a firm that supplied market intelligence to hedge funds was arrested and charged, among other things, with conspiracy to commit securities fraud. It was not yet known whether the man dealt with the funds raided this week. For Swenson, the allegations of insider trading are unnerving, particularly on top of the “flash crash” in May, when a computerized selling program set off a chain reaction that drove the Dow Jones industrials down nearly 1,000 points in mere minutes. The sell-off was a reminder to some individual investors that hedge funds and other powerful traders use computer programs to make rapid-fire stock trades, giving them an advantage over the slower smaller investor. “The hedge funds are resorting to more questionable tactics. It’s mind-boggling,” says Swenson, who invests largely in exchange-traded funds, which track market indexes and can be traded throughout the day, unlike mutual funds. Spitzer says the new insider trading probes illustrate how the game is tilted against small investors. “If you are sitting there in front of a screen, thinking your information is going to be good enough to make smart judgments that will permit you to outperform the hundreds of thousands of people on Wall Street who have access to better information and more timely information than you, you’re mistaken,” Spitzer says. It’s not the first time small investors have been scared out of stocks. Charles Geisst, a finance professor at Manhattan College who has written 18 books on the history of markets, says investors balked at buying for years after the Crash of 1929 and Black Monday in 1987. The view both times: The odds are stacked against the little guy. To combat such an impression, the Securities and Exchange Commission was established in 1934, and “circuit breakers” were instituted after the 1987 crash to stop massive selling. But all of the safeguards don’t seem to be helping lately. “If the stock markets had any reputation for integrity, they lost it in the past year,” Geisst says. Restoring small investors’ confidence may depend on whether they see ample evidence that federal regulators are successfully cracking down on bad behavior, says Ross B. Intelisano, a securities fraud attorney with the firm Rich & Intelisano. The market needs them back. Most of the stock in U.S. companies, both public and private, is held by individuals, not institutions, according to Federal Reserve data. Small investors may be comforted to know that professional investors don’t always fare better, even with the edge they have over the masses. Numerous studies have shown that mutual funds overseen by professional stock pickers often are outperformed by computer-driven index funds. The record for hedge funds hasn’t been so impressive, either. Since 2008, when the number of those funds hit 10,000, nearly 3,000 have gone out of business, according to Hedge Fund Research in Chicago. “The edge is hugely exaggerated,” says Richard Ferri, founder of the investment advisory firm Portfolio Solutions and an advocate of low-cost index funds. “If the small investor does the right thing, he can do better than 99 percent of anyone else.” ___ Associated Press writer Michael Gormley contributed to this report from Albany, N.Y.

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Ellen Galinsky: Rethinking How We Learn and Work

November 23, 2010

Why, asked psychiatrist and author Edward Hallowell, do we get our best ideas in the shower? He was addressing an audience of educators and families sponsored by the 92nd Street Y in New York City, asking them to rethink how we are raising and teaching children. Hallowell answered himself. It is the one last refuge, he said, the one place where we aren’t being bombarded by media and where we can be alone with our thoughts and feelings. Have you noticed, asked the technology thought leader Linda Stone, what happens when we sit hunched over our computers, responding to a steady stream of emails? Stone was speaking to a group of business leaders I had organized, asking them to rethink how we work and live today. Stone, too, answered herself. She said that we get “email apnea,” which she has defined as a “temporary absence or suspension of breathing, or shallow breathing while doing email.” She has written about the dangers of email apnea –how it can disturb our bodies’ balance of oxygen, carbon dioxide, and nitric oxide–and even how it can trigger a physical flight or fight stress reaction, without giving our bodies the opportunity for rest and recovery so necessary for our mental and physical health. I don’t think it’s an accident that there are so many calls to rethink how we learn and work today. Our images come from an industrial mentality. Interestingly, these images aren’t just reflected in our ideas. Schools today often still look like classrooms of the past, desks all lined up, facing the teacher, who is supposed to dispense knowledge. And although offices have migrated away from an assembly line vision, the shift into cubicles is not that different from a factory floor mentality. Technology is disrupting these visions. Barely a day goes by when I don’t hear concern about what technology is doing to us and to our children. As Linda Stone has written , we can’t continue to function on what she calls “continuous partial attention,” which she differentiates from multi-tasking. We aren’t just shifting from one task to another, she has written, but we are hyper-alert, paying attention to input coming from every direction at the same time, including listening to conversations, responding to computers and smart phones. A page one article in article in the November 21st New York Times by Matt Richtel explores what is happening to children who are “growing up digital,” asking how they can learn to focus in a world of distraction. This was the same conclusion I came to in my 10 years of research for Mind in the Making. The first essential skill I write about for children is “focus and self control.” I point out, however, that we don’t learn to focus by sitting still and listening passively but by active engagement. There are some reoccurring commonalities in these calls for rethinking how we learn and work: We need to focus on managing our attention and energy, not just our time. We tend to divide our days into time chunks. And that is definitely true for children. Think of the school day, separated into classes that change every 50 minutes or so. Now some schools are experimenting with providing longer time periods for learning and finding that it can be very effective. Linda Stone has noticed that adults who measure their accomplishments by what they can cross off their to-do lists are more burned out than those who manage their attention . And Tony Schwartz continues to show companies that they will be more effective if they focus on promoting employees’ energy, not controlling their time. We need to give ourselves time for rest and recovery. Ask anyone who is really proficient at anything–from intellectual to artistic to physical pursuits. They need time for full engagement and time for rest and recovery, as well as time for plugging in and unplugging from technology. Yet, our images of working hard at school or at work revolve around running non-stop, squeezing more and more in. And recess at schools is increasingly being abandoned, presumably to provide more time for studies–but often to the detriment of those studies. We need experiences that are first hand, engaging, meaningful, and give us some autonomy. Reviews of the research on learning for Mind in the Making make it clear that these ingredients go into the best learning environments. So the teacher who tries to pour knowledge into children as empty vessels or the boss who has a command and control approach are less successful than those who provide us with experiences where we feel can make a difference, that are meaningful to us, where we have some say in what we do, and where there is a response to what we do. This is one reason that digital media can be so engaging. We aren’t passive recipients–we do something and there is a response. The best schools and workplaces are figuring out how to use these principles in designing learning and work experiences. And let’s not forget happiness and fun. At the business conference I organized, Ross Smith of Microsoft reported that when his team created games as a part of their work, their work results were much more impressive. Playful learning continues to emerge as significant in effective education. And it is no accident that the CEO of Zappos, Tony Hsieh’s new book on Delivering Happiness is a best seller. It is time to rethink learning and working!

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Insider Trading Investigated By Feds: Criminal, Civil Charges Could Happen Soon

November 21, 2010

NEW YORK — Federal authorities are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, The Wall Street Journal reported on Saturday, citing people familiar with the matter. The three-year criminal and civil investigation could result in charges by the end of the year, the Journal reported. A federal grand jury in New York has heard evidence, the paper said. Since the investigation isn’t finished, it’s unclear what charges, if any, may be brought. One focus of the criminal investigation is whether independent analysts and consultants who work for companies that provide “expert network” services to hedge funds and mutual funds passed along nonpublic information, the Journal reported. Such companies set up meetings and calls between current and former managers and traders who want an investing edge. The newspaper said one firm under examination is Primary Global Research LLC of Mountain View, Calif., which connects experts with investors seeking information in the technology, health care and other industries. Chief Operating Officer Phani Kumar Saripella declined to comment to the Journal. The firm’s website says Saripella and the firm’s CEO previously worked for Intel Corp. Prosecutors and regulators are also examining whether bankers from Goldman Sachs Group Inc. leaked information about transactions, including health-care mergers, to the benefit of certain investors, the Journal reported, based on anonymous sources. Goldman declined to comment to the newspaper. The examination includes independent analysts and research boutiques. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., described a visit by FBI agents in an Oct. 26 e-mail to roughly 20 hedge-fund and mutual-fund clients. The Journal said Kinnucan confirmed that he wrote the e-mail, which was addressed to traders at firms including the hedge funds SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund companies Janus Capital Group, Wellington Management Co. and MFS Investment Management. None of the firms commented to the Journal, and it isn’t known whether they are under investigation for their business with Kinnucan. The investigations have been conducted by the FBI, federal prosecutors in New York, and the Securities and Exchange Commission. Ellen Davis, spokeswoman for the U.S. Attorney’s Office and SEC spokesman John Nester declined to comment. A call to the FBI wasn’t immediately returned. The probe is also examining whether traders at some hedge funds and trading firms gained nonpublic information about upcoming health-care, technology and other mergers, the Journal reported, citing people familiar with the matter. The SEC investigation includes potential leaks on takeover deals going back to at least 2007. Last fall the SEC subpoenaed more than 30 hedge funds and other investors, the Journal said.

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IRONIC: Florida Foreclosure Firm Under Investigation May Default On Loan

November 16, 2010

NEW YORK (By Jonathan Stempel) – A mortgage business run by a Florida lawyer whose foreclosure practices are under investigation may be forced to close if it fails to resolve a default with its lender, a regulatory filing shows. DJSP Enterprises Inc, run by the lawyer David Stern, on Monday said its DAL Group LLC unit defaulted on a credit line and an equipment note after failing to repay money advanced by Bank of America Corp. It also said DAL has missed November office rent payments. According to regulatory filings, DAL holds DJSP operating businesses including DJS Processing LLC, Professional Title and Abstract Co of Florida LLC and Default Servicing LLC. Shares of DJSP fell as much as 33.7 percent. The defaults come less than two weeks after mortgage financing companies Fannie Mae (FNMA.OB: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FMCC.OB: Quote, Profile, Research, Stock Buzz) said they had ended their ties with Stern’s law firm, David J Stern PA. Businesses run by Stern have cut roughly half their staff in recent weeks because Fannie, Freddie and other clients have stopped sending work. [ID:nN04217594] Florida Attorney General Bill McCollum is investigating whether documents that Stern’s firm submitted in foreclosure proceedings were defective. “DAL intends to seek longer-term forbearance agreements with the bank and its other creditors as it implements plans to restructure its ongoing operations to reflect its significantly reduced revenues and operations,” the filing said, referring to Bank of America. “If it is unable to accomplish any of the foregoing, it will not be able to continue its business operations.” Jeffrey Tew, a lawyer for Stern, did not immediately return requests for comment. A spokeswoman for McCollum said the attorney general’s investigation is continuing. Attorneys general in all 50 U.S. states are probing alleged foreclosure abuses, including banks’ use of “robo-signers” to certify hundreds of documents at a time without proper review. Banks often turned to law firms to handle their foreclosures, creating a lucrative business for many lawyers. The DAL defaults were revealed in a Monday filing with the U.S. Securities and Exchange Commission. DAL said it owes $12 million in principal on the credit line and $1.85 million on the note. It also said Bank of America agreed not to act on the credit line default until Nov. 26, giving the Plantation, Florida-based company time to prepare a business plan. DJSP shares were down 20.9 cents, or 29.4 percent, at 50.1 cents in afternoon trading on the Nasdaq, after earlier falling to 47.1 cents. They traded as high as $13.65 on April 26. (Editing by Dave Zimmerman and Steve Orlofsky) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Jane White: Why Are Academics Among the Few Americans Who Can Afford to Retire?

November 16, 2010

As an advocate for 401(k) participants, I’ve found that the only thing more frustrating that the media’s cluelessness about America’s retirement crisis are the academics who not only don’t understand we have one, but who happen to be among the few Americans who can afford to retire. For example, University of Texas economist James Galbraith recently told The Huffington Post’s Dan Froomkin that we should boost employment by lowering Social Security’s normal retirement age so that Boomers can retire and younger people will be able to fill their jobs. But if most Americans only need Social Security payments for their retirement, why the heck would we need pensions? The purpose of Social Security is to replace the wages of the poorest 40% of us who don’t have pensions. Unfortunately for the middle class and upper-middle class, only 10% of the private sector can count on a pension and the 401(k) plan’s measly employer contribution rate of 3% of pay makes it a “pretend pension.” What’s even worse, 50% of the private sector population isn’t covered by a pension or a 401(k) plan. Whether it’s a private sector plan or Social Security or a combination of both, the goal for most of us is to have at least 70% of our paychecks replaced at retirement. So if you’re making $20,000 at age 65 and retire at 66, Social Security will do just fine, coughing up about 67% of your paycheck, or about $14,000 a year. However, if you’re earning $102,000 you would only receive around $28,000, or about 27% of it. As I pointed out in an earlier post, if the median amount that American workers near retirement have saved in their 401(k) accounts is a mere $77,000 and their median salary is $61,000 their savings won’t last them more than a few years. Galbraith isn’t the only academic weighing in on retirement issues who doesn’t seem to know the rules for adequacy. As I pointed out in my book America, Welcome to the Poorhouse , Theresa Ghilarducci of the New School of Research has proposed replacing the 3% 401(k) employer matching contributions with an annual measly government deposit of $600 even though this would shrink the nest eggs of anybody earning $20,000 or more. Another academic, Alicia Munnell of the Center for Retirement Research at Boston College, says that “in theory workers could accumulate substantial wealth” by contributing 6% of pay and ending up with $380,000, which only works if you’re making $38,000 at age 65, since the formula for adequacy is accumulating 10 times your salary. Ironically, these three academics can retire because their employers contribute at least twice as much to their version of a 401(k) account. For example, Munnell’s employer contributes 8% of pay for those with fewer than 9 years of service and 10% for those with more, Ghilarducci’s contributes 7% for those with fewer than six years and 10% for those with more and Galbraith’s contributes 6% and certain staff can get an additional 7.5% contribution. In fact, most universities have offered generous plans since the 1940s when the increase in college enrollments thanks to the GI bill increased the demand for professors, who in turn demanded better compensation. Do you think that you may be one of the few people who have saved enough to support yourself in retirement? The only website I know that helps you figure this out is run by a retired pension actuary, Ken Steiner. Here’s a link to his website where you can find out whether you’re on track. Go to the “spending calculator” link below the headline “Self-insuring your retirement.” Unfortunately, most employers outside of academia not only don’t contribute enough so that we can retire — not to mention “suspending” contributions to our accounts when times are tough — but aren’t required to tell us that our nest eggs aren’t adequate. With the first wave of Boomers turning 65 next year, we are looking at a retirement nightmare. If you agree and think we need reform, please go to my website and click the link on the upper right hand side of the page: Stop the 401(k) Nightmare. I thank you and our kids thank you.

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Mark Engler: Tax Cuts and Trade: Is Obama Triangulating?

November 13, 2010

It was about this far into his first term, back in late 1994 and early 1995, when President Bill Clinton truly fell under the spell of malevolent strategist Dick Morris. Stung by the heavy losses brought on by the “Republican Revolution” in the 1994 midterms, Clinton began to believe that his only route to reelection was to tack to the right and steal some of the conservatives’ thunder on issues like welfare reform and federal deficits. Morris, who was only forced out of the White House after a sex scandal and who has since exposed his true political stripes as a Fox News commentator , thought triangulation both a brilliant political strategy and a generator of fine public policy. The remaining liberals in the Clinton administration disagreed. As the Economist notes, George Stephanopoulos incisively labeled it “a fancy word for betrayal.” Not yet two weeks after the 2010 midterms, and just two years after Obama’s campaign of “hope” and “change,” there are troubling signs that the current president might be tempted to follow the same path as Clinton. Obama’s first move after the midterms, already much criticized by progressives, was to express his willingness to cave on Bush tax cuts for the rich. This one felt to me more like a gutless compromise than a calculated shift to the right. And, on the hopeful side, the White House is now backpedaling , indicating that the story was overblown and Obama’s pre-midterms position hasn’t changed. There’s no detectable silver lining, however, to the president’s drive to push forward the Bush-negotiated, NAFTA-style trade agreement with Korea. While it appears the deal has stalled for the time being, the denunciations of the neoliberal “free trade” program that Obama once used to attack rival candidate Hillary Clinton in the Democratic primaries are now long gone . Given the composition of the administration’s economics team, this flip-flop is not surprising. There were signs of it already back in 2008, when Obama quickly tried to moderate his earlier stances during the general election campaign. Nevertheless the maneuver is a sad one. While triangulation arguably worked for Clinton (he was reelected at any rate), rightward moves promise few benefits for Obama. A too-small stimulus meant that unemployment remained higher and anger about the economy greater than might otherwise have been the case going into the midterms. It also produced an uninspired Democratic base, resulting in a low-turnout election that favored Republicans. Likewise, the trade deals on deck with Korea, Colombia, and Panama are bad not only because they seek to expand a flawed economic model, but also because “free trade” is a political loser. The Democratic base is firmly in the “fair trade” camp, disenchanted with neoliberal policies, and an anti-NAFTA message also resonates with the wider electorate. As Public Citizen has documented , “House Democrats that ran on fair trade platforms in competitive and open-seat races were three times as likely to survive the GOP tidal wave than Democrats who ran against fair trade.” Global Trade Watch Research Director Todd Tucker has gone so far as to call compromising with the Republicans on pending trade deals a ” political death wish ” for a president who will soon be seeking reelection. After Obama’s first year in office, I gave the administration a “B” on trade policy, on the grounds that no news is good news. As long as unfinished “free trade” deals remained bogged down in negotiations and are not an administration priority, I am willing to judge the situation as no harm, no foul. But it’s a different story if the White House starts investing any real political capital in advancing these deals. Even worse would be if Obama keeps his backbone as well hidden from public view as it has been since the midterms and turns to triangulation, imagining that moving right on trade would be politically beneficial. Cross-posted from the “Arguing the World” blog at Dissent magazine.

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Dr. Leslye Obiora, JD, Former Minister of Mines and Steel for Nigeria, Joins Sunergy Advisory Board and Adds Key High Level Business and Political Contacts in West Africa

November 8, 2010

SCOTTSDALE, AZ–(Marketwire – November 8, 2010) –  Sunergy, Inc (the “Company”) ( PINKSHEETS : SNEY ) is pleased to announce that Leslye Obiora is a tenured and full Professor of Law at the University of Arizona. She recently served as the Minister of Mines and Steel for the Federal Republic of Nigeria and is the recipient of several distinguished awards, including fellowships from the Center for Advanced Study in the Behavioral Sciences at Stanford, Institute for Advanced Studies Fellowship at Princeton, Rockefeller Foundation Bellagio Study Center, and the Djerassi Resident Artist Program. She served as the Coca Cola World Fund Visiting Faculty at Yale University in 2009; she has been the Genest Global Faculty at Osgoode Hall Law School in Toronto and the Visiting Gladstein Human Rights Professor at the University of Connecticut. Dr. Obiora is the founder of the Institute for Research on African Women, Children

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Video: Stein Says U.S., China Currency `Shootout’ Hurts Brazil

November 8, 2010

Nov. 8 (Bloomberg) — Gabriel Stein, director of Lombard Street Research, talks about currency volatility and measures taken by China and the U.S. to influence the value of the dollar and the yuan. He speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.”

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Nick Shore: Rebellion 2.0: Smart and Funny

November 7, 2010

Wit was the weapon of choice for millennials at the Rally to Restore Sanity and/or Fear. Millennials are often compared to their boomer parents in terms of their penchant for social activism and positive change. Cynically minded social commentators have also characterized the millennials’ flavor of activism as “slacktivism” or, more recently, as a “diffuse, click-and-go” activism (see Malcolm Gladwell’s article ). On Oct. 30, however, we saw a very different side of this generation. Millennials gathered in the tens of thousands to attend the Rally to Restore Sanity and/or Fear in Washington, D.C., to speak out against fear-mongering in politics. With an economy that’s no laughing matter, one might have expected to see a generational temper tantrum, but instead we bore witness to the dynamic that we at MTV have lovingly dubbed “smart ‘n’ funny as the new rock ‘n’ roll.” That is, the boundary-pushing, anti-establishment role that rock ‘n’ roll played for boomer (and even X’er) parents has been replaced, to some extent, by iconoclastic, absurd, high-wire, non-PC, super-smart humor. Consider this distinctly un-funny stat: Nearly 40 percent of millennials 18-29 are out of work, per to the Pew Research Center. And, according to our new study, the M-Edge, fielded in October with 2,000 millennials 12-24, 63 percent believe that “people my age have been most negatively affected by the economy.” Sixty-seven percent also agree that “I may have to settle for a job that just pays the bills.” And 79 percent agree that “people my age are growing up in a scarier world than my parent’s generation.” But, hey, why punch a cop if a punchline gets you there faster and without all that messy jail time? Rallying millennials voted with wit as their weapon of choice. “It’s a sad day when our politicians are comical and I have to take our comedians seriously!” read one of the placards. Another read: “There’s nothing to fear but fear…and spiders.” For more, go here .

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Dan Dorfman: Gobs of New Jobs, but Gobs of Questions

November 6, 2010

A not-so-funny thing happened on the way to the stock market Friday that mystified many an investor. Maybe you, too. In the face of an early morning positive disclosure of a surprisingly strong October employment report, namely the creation of 151,000 jobs, more than double the general expectation, the market acted like it had been hit by a bulldozer. Stocks should have soared on that kind of news — a credible sign that the jobs market was finally rebounding. Instead, they snored as the Dow, frequently in negative territory, rose a mere 9 points on the day, What alarmed some market watchers was that the jobs news came on the heels of happy tidings for Wall Street earlier in the week that drove up the Dow nearly 220 points on Thursday. So the market was clearly set to run higher on the jobs news. Those earlier stock-boosting tidings: — Strong G.O.P. gains in the mid-term elections, a repudiation of Obama’s policies, which, in turn, flashed a signal that maybe one of the elephant herd now has a legitimate shot at relocating to the White House in 2012. — A $600 billion economic-boosting QE2 (quantative easing) package from the Federal Reserve. So why a disappointing Friday? Aside from Thursday’s big gain which trumped the employment news, add some doubts about the potency of both the jobs report and QE2. Peter Morici, a professor of economics at the University of Maryland, doesn’t mince any words as he raises questions about both. “We’re not over the hump,” he says. “We’re on a plateau. Yes, we’re creating jobs, but not enough to materially improve the economy.” As for QE2, Morici doesn’t give it a passing grade, “It won’t lower interest rates or fire up the depressed housing market,” he says. “Maybe we’ll see a temporary benefit, say a 5% rise in stock prices.” As for economic growth, here again, a bum grade from our professor. He sees mediocre 2.6% GDP growth in the current quarter, and less, 2.4%, for all of 2011. At best, he says, “we’ll slog along at a mediocre pace.” In a commentary to clients Friday, David Rosenberg, the well-regarded chief economist and strategist at Gluskin Scheff & Associates, a leading Canadian wealth management firm, raised a number of questions about the overall vigor of the jobs report, noting it was not universally strong. For example, he notes the Household Survey in the report (which includes agricultural employees and self employed) showed a decline of 330,000 jobs. This survey, he also points out, served up evidence that the problem of excess labor supply has not gone away. Moreover, a barometer that many labor experts regard as the most accurate indicator of the health of the jobs market turned in a poor showing. That is the employment-to-population rate — the share of the population that is working — which fell to 58.3 from 58.5%, a 10-month low. Further, he observes, many industries still reported job declines last month, including manufacturing, commercial and residential construction, transportation, information, financial and government. As for QE2, Rosenberg says we may have well seen the last of QE. Why? Because in 2011, he notes, there will be three new voting Federal Reserve bank presidents who vocally oppose more easing initiatives, Relating his thinking to the market, Rosenberg says it’s difficult to see how equities can rally on the Fed move alone, or on the election results for that matter, seeing as both a G.O.P. victory in the House and QE2 had been widely discounted in recent months. Madeline Schnapp, economics skipper at West Coast liquidity tracker TrimTabs Research, partially owned by Goldman Sachs, also raises some questions about QE2. It may stimulate economic activity short term, she says, but it has negative long-term consequences, notably higher inflation and higher interest rates. She also cites a couple of other economic risks, namely the threat of higher taxes from expiring tax cuts and the end-of-the-month expiration of extended and emergency unemployment benefits affecting 6.2 million current enrollees. Without an extension, she points out, by the time all those enrollees fall off the unemployment insurance bandwagon, it may yank $59-$60 billion out of the unemployed pocketbooks, a potentially big negative on consumption. Given his admitted “shellacking” in the recent elections, President Obama has made it clear he’s open to a negotiating process with the Republicans. Could that open the door to more getting done in Washington? Schnapp has her doubts, noting the problem is you have a new ball game in the House next year with a decidedly left group of Democrats sitting across from a new crop of decidedly right Republicans. “Seems like a recipe of gridlock to me,” she says. I hear similar talk from Hong Kong trader Selwyn Ortz who attributes at least part of Friday’s listless market showing to what he believes is “common sense recognition that it will be gridlock and more gridlock in Washington over the next two years, with little if anything of a concrete nature getting done to create more jobs and invigorate the economy.” That means, Ortz believes, that headway in remedying the two biggest economic headaches — jobs and housing — will likely be disappointing. That’s also the thinking of Mideast trader Caise Hassan, who manages family money and is up 110% this year. A HuffPost reader in Amman, Jordan, Chicago-born Hassan tells me: “I don’t hear any great ideas from the Republicans. Maybe they’ll push big tax breaks for companies and lighten up on their criticism of Bernanke’s money printing. But what’s really needed,” he says, “is something that can benefit poor and middle America and neither party is providing that.” As far as the economic recovery goes, Hassan is somewhat skeptical, noting “I see no catalysts for job growth, no legislative catalysts and not enough being done to stimulate growth and demand.” Further, he sees mediocre economic progress for the U.S. in 2011, observing “every time it takes two steps forward, it seems to take one step back,” His view of Congress’ progress over the next two years: “I don’t think it will achieve anything.” Still, he thinks the stock market is likely is likely to trend higher over the next few months, reflecting good relative strength, solid earnings growth, an overvalued bond market, very low interest rates, the advent of QE2 and strengthening global markets. It’s worth noting that Hassan, in conversations I’ve had with him in recent months, shows he’s a brainy guy when it comes to the investment arena. He has made a number of excellent calls on the direction of the market, as well as on some solid specific investment recommendations. Chief among his current favorites are selected stocks and some commodities, which both recently climbed to a two-year high following the QE2 announcement. On the equities side, Hassan favors Joy Global, Apple, Amazon and Sina Corp., a Chinese internet company. In commodities, he likes cocoa, sugar and rice. He says he would avoid gold and silver for the next few months, believing that both are currently overbought. Interestingly, he’s short oil, currently a strong performing commodity that he notes usually declines at the end of the year. What do you think? E-mail me at Dandordan@aol.com .

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Bank Research Consensus Weekly 11.01.10

November 1, 2010

Bank Research Consensus Weekly 11.01.10

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Robert Reich: Why Aren’t Business Leaders Standing Up to the Tea Party?

October 29, 2010

America’s business leaders have not exactly shied away from offering political views. Verizon CEO Ivan Seidenberg has accused President Obama of creating a hostile environment for investment and job-creation, while General Electric’s Jeff Immelt says the administration is out of sync with entrepreneurs. All of which makes particularly curious the deafening silence of business leaders about the tea party that’s now taking over the GOP and about to take over a chunk of Congress. Maybe business leaders see it as a relatively harmless fringe group advocating the fiscally responsible small-government positions most CEOs agree with. Business leaders should take a closer look. Even if it’s now on the fringe, the tea party won’t be for long. By fueling the Republican surge in the midterm elections, the tea party has become the single most powerful force in the GOP. It’s backing at least 14 Senate candidates, both challengers and incumbents, and is playing a significant role in scores of House races. It has already shaken the GOP to its core, defeating establishment Senators Lisa Murkowski in Alaska and Bob Bennett in Utah, and exerting a strong gravitational pull on many other Republicans, such as Arizona’s John McCain. It will be a force in the run-up to the 2012 presidential election. Presidential aspirant Newt Gingrich has already declared his fealty, and Sarah Palin has become its grande dame. Beyond fiscal rectitude and less spending, tea party candidates are targeting the central institutions of American government. The GOP Senate candidate from Kentucky, Rand Paul, is among several who want to abolish the Federal Reserve. They blame the Fed for creating the Great Recession and believe that the economy would be better off without a single institution in Washington setting monetary policy. Even Maine’s stolid Republican Party, now under tea party sway, has called for eliminating the Fed. In a Bloomberg poll a few weeks ago, 60% of tea party adherents wanted to overhaul or abolish the Fed (compared with 45% of all likely voters). Another tea party target is the Internal Revenue Service. South Carolina Sen. Jim DeMint, who has emerged as the Senate’s leading tea party incumbent, says that his “main goal in the Senate will not only be to cut taxes, but to get rid of the IRS.” Mr. DeMint’s goal is echoed by many tea party candidates, including Arkansas Rep. John Boozman, now running for Senate. At the least, business leaders who complain about uncertainties caused by Mr. Obama’s policies might be concerned. John Castellani, the former head of the Business Roundtable who is now running the Pharmaceutical Research and Manufacturers of America, told Bloomberg Businessweek this month, with remarkable understatement, “This kind of extremism makes it much harder to plan from a business perspective.” GE’s Mr. Immelt may be unhappy with President Obama, but he’ll be far unhappier if the tea party takes over the GOP. Tom Borelli, director of the Free Enterprise Project of the National Center for Public Policy Research, a conservative think tank and vocal supporter of the tea party movement, has demanded Mr. Immelt’s resignation, calling GE an “opportunistic parasite feeding on the expansion of government.” Among Mr. Immelt’s alleged sins: taking federal subsidies for clean energy. In a press release last week, the National Center for Public Policy Research stated clearly: “Liberal CEOs are the next target for tea party activism.” Presumably, business leaders should also be uncomfortable with the Tea Party’s nativism. At the first national convention of the “Tea Party Nation” last February in Nashville, Tom Tancredo, former Colorado congressman and now Tea-Party-sponsored candidate for governor (as an Independent), brought the crowd to its feet by denouncing the “cult of multiculturalism” and accusing immigrants of threatening America’s Judeo-Christian values. “This is our country,” he declared to wild cheers. “Take it back!” More than half of Tea Party backers say they’d be more likely to vote for a candidate who supports changing the 14th Amendment to prevent the children of non-citizens born in the U.S. from automatically becoming citizens. And Tea Partiers strongly support Arizona’s recent immigration law making failure to carrying immigration documents a crime and giving police broad powers to detain anyone suspected of being in the country illegally. “We’re all Arizonans now,” says former Alaskan Gov Sarah Palin. Many Tea Partiers similarly recoil from global institutions and agreements. Minnesota Representative Michele Bachmann, leader of the House’s Tea Party caucus, calls the Group of 20 summit “one short step” away from “one world government,” and suggests America withdraw from international economic organizations. “I don’t want the US to be in a global economy where our economic future is bound to that of Zimbabwe” she says. And a higher proportion of Tea Partiers oppose free trade than does the American population in general. In a recent WSJ/NBC poll, 61 percent of respondents who characterized themselves as Tea Partiers thought trade was bad for America. Under normal times, ideas like these wouldn’t gain much public traction. Why are they now? Because of the continuing effects of the Great Recession. History has shown that people threatened by losses of jobs, wages, homes, and savings are easy prey for demagogues who turn those fears into anger directed at major institutions of a society, as well as individuals and minorities who become easy scapegoats – immigrants, foreign traders, particular religious groups. Were it not for their ongoing economic stresses, Americans wouldn’t be receptive to abolishing the Federal Reserve and the IRS, or believe government and big business were conspiring against them, or turn nativist and isolationist. Business leaders should be standing up to the tea party. And they should be actively supporting policies to relieve the economic stresses that fuel it. Their silence in both regards is not only bad for business; it threatens the stability of our economic and political system. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Video: Borelli Says Tea Party Values Clash With Corporations

October 29, 2010

Oct. 29 (Bloomberg) — Tom Borelli, a senior fellow at the National Center for Public Policy Research, talks about the economic philosophies of the Tea Party movement and the impact of government stimulus on private enterprise. Borelli speaks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart. (Source: Bloomberg)

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