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Most U.S. Stocks Advance as Fed Signals Plans to Leave Interest Rates Low

April 6, 2010

By Whitney Kisling April 6 (Bloomberg) — Most U.S. stocks rose as the Federal Reserve suggested it plans to leave its benchmark interest rate at a record low to safeguard the economic recovery and banks rallied on analyst upgrades. SunTrust Banks Inc. rose 3.5 percent as Credit Suisse Group AG said the lender may be a takeover target, while Regions Financial Corp. jumped 4.4 percent as its share-price estimate was lifted. Travelers Cos. led the Dow Jones Industrial Average lower after Sandler O’Neill & Partners LP downgraded the shares. Benchmark indexes climbed to their highs of the day after minutes from the last Fed policy meeting showed some central- bank officials warned of raising rates too soon. About four stocks advanced for every three that fell on U.S. exchanges. The Standard & Poor’s 500 Index increased 0.2 percent to 1,189.44 at 4 p.m. in New York. The Dow slipped 3.56 points, or less than 0.1 percent, to 10,969.99. “The Federal Reserve is going to continue to allow money to slosh into the markets for a much longer period than they normally would because this was a much deeper recession than usual,” said William Smead , chief executive officer of Smead Capital Management, which oversees $175 million in Seattle, and portfolio manager of the Smead Value Fund. “Any signs that indicate that that elongated period is going to go on is bullish for stocks.” U.S. equities opened lower on concern a yearlong rally left the S&P 500 too expensive after the benchmark gauge closed at an 18-month high yesterday. The index is trading at 19 times the reported operating profits of its companies, the highest price- earnings ratio this year, according to Bloomberg data. Fed Lifts Stocks Stocks turned higher as the minutes from the Fed’s March meeting showed officials saw signs of a strengthening recovery while saying it could be hobbled by high unemployment and tight credit. “While recent data pointed to a noticeable pickup in the pace of consumer spending during the first quarter, participants agreed that household spending going forward was likely to remain constrained by weak labor market conditions, lower housing wealth, tight credit, and modest income growth,” minutes of the March 16 Federal Open Market Committee released today in Washington showed. Stocks rose yesterday after a report April 2 showed the biggest increase in jobs in three years. Releases on April 5 showing growth in service industries and home sales boosted optimism an economic recovery may be gathering steam. ‘Positive’ Momentum “Overall, the momentum remains positive,” said Alan Gayle , a money manager at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “The economic data of late is surprising to the upside and April tends to be a fairly good month from a seasonal perspective.” Regional banks climbed after Credit Suisse said SunTrust may be a target for overseas financial companies. The firm also increased its price estimate for Regions Financial Corp. to $8 from $7. SunTrust climbed 3.5 percent to $28.71. Regions rallied 4.4 percent to $8.55. Financial companies gained the most in the S&P 500 among 10 groups, led by bank stocks. U.S. large-cap bank shares were raised to “market weight” from “underweight” at Wells Fargo & Co., which said “fundamentals and economy support a more positive outlook.” El Paso Corp. rose after winning regulatory approval for its biggest expansion project, the $3 billion conduit that will carry gas from a trading hub in Opal, Wyoming, to interconnections near Malin, Oregon. Shares of the owner of the longest U.S. natural-gas pipeline network climbed 1.6 percent to $11.66, the highest price since October 2008. AutoNation, Alcoa AutoNation Inc. rose 3.4 percent to $18.65 after saying first-quarter profit from continuing operations was higher than its previous projection. Alcoa Inc. will kick off earnings season April 12 when it reports first-quarter results. S&P 500 companies will post 30 percent profit growth from 2009’s first quarter, according to the average of analyst estimates compiled by Bloomberg. Massey Energy Co. slumped 11 percent to $48.45, its biggest decline since June, after an explosion at one of the company’s mines in West Virginia killed 25 workers and left four miners missing, the worst accident of its kind in the U.S. since 1984. CA Inc. , the second-largest maker of software for mainframe computers, fell 1.9 percent to $23.40 after saying 2010 profit will be at the low end of its forecast range and it will cut about 1,000 jobs. Homebuilders slid. KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, was cut to “neutral” from “outperform” at Credit Suisse, which said sales may be slower once the homebuyer tax credit expires. The shares fell 2.8 percent to $16.51. Credit Suisse also cut Pulte Group Inc., rating the shares “underperform” from “neutral.” The stock dropped 2.5 percent to $11.16. Intel Corp. , the world’s largest semiconductor maker, curbed gains among a group of S&P 500 technology companies, losing 0.8 percent to $22.40. Intel’s first-quarter revenue probably won’t be a “blowout” and will be followed by “flat to slightly down, consistent with seasonality” revenue the next quarter, FBR Capital Markets wrote in a note today. FBR maintained its “market perform” rating and $27 price target on the stock. Travelers Cos. fell the most in the Dow , dropping 1.4 percent to $52.59 after it was cut to “hold” from “buy” at Sandler O’Neill & Partners LP. The S&P 500 has rallied 76 percent from its March 2009 depths as the Federal Reserve maintained record low interest rates and the economy began to recover from the worst recession since World War II. During the first quarter the gauge rallied 4.9 percent, the biggest advance to start a year since 1998. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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Apartment Rents Decline in U.S. as Vacancies Increase to Record, Reis Says

April 6, 2010

By Oshrat Carmiel April 6 (Bloomberg) — U.S. apartment rents dropped in the first quarter and the vacancy rate remained at a record as unemployment near a 26-year high limited tenant demand. Actual rents paid by tenants, known as effective rents, declined 1.5 percent from a year earlier, Reis Inc . said in a report today. Asking rents fell 1.6 percent, according to the New York-based property research firm. Vacancies were unchanged at 8 percent, the highest level since 1980, when Reis began tracking the number, said Victor Calanog , director of research. U.S. rental demand has slumped as employers cut 8.4 million jobs since the start of the recession in December 2007. The bigger drop in asking rents than effective rents in the first quarter signals that landlords are pricing their properties lower at the outset and minimizing concessions, Calanog said. “Landlords are saying: ‘Even before we talk about the free month off, and even before we talk about the free gym, we want to lower the asking rents to get you through the door,’” he said in a telephone interview. The U.S. unemployment rate was 9.7 percent for the third straight month in March, the Labor Department said April 2. The economy added 162,000 jobs in the month, a sign the labor market may be recovering. Actual rents fell year over year to an average of $967 in the first quarter, Reis said. Asking rents dropped to $1,027. Sequential Growth Rent rates rose less than half a percent from the previous quarter, the first sequential growth since the three-month period when Lehman Brothers Holdings Inc . filed for bankruptcy. The net change in occupied space, a measure of leasing known as absorption, grew by 20,424 units, the most for the first quarter since 2000, according to Calanog. “The perception that labor markets are stabilizing is probably enough to tip the demand for apartments,” he said. Effective rents fell the most, year over year, in Las Vegas; San Jose, California; Phoenix; Seattle; and San Francisco, according to Reis. Rents paid by tenants climbed the most in Colorado Springs, Colorado; Washington, D.C.; San Antonio; and Dayton, Ohio. To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net .

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New Tesoro CEO Faces State, Federal Probes After Fatal Refinery Explosion

April 4, 2010

By Jessica Resnick-Ault April 5 (Bloomberg) — Gregory Goff will take over as Tesoro Corp. ’s chief executive May 1 to face a wave of state and federal investigations following the worst industrial accident in the oil refiner’s history. A chemical explosion killed five at Tesoro’s Anacortes, Washington, plant on April 2, intensifying safety concerns among federal investigators about the nation’s refiners. Two employees remain hospitalized in critical condition, said a spokeswoman at Seattle’s Harborview Medical Center. The blast triggered the second federal investigation in six months of Tesoro, the biggest refiner on the U.S. West Coast. The Chemical Safety and Hazard Investigation Board, an independent U.S. federal agency, is investigating an Oct. 21 fire at the company’s Salt Lake City refinery. Goff, 53, will be tested in his ability to manage the company’s seven refineries, as well as the relationship with federal authorities, said John Parry , vice president of IHS Herold Inc., a consulting firm in Norwich, Connecticut. “He has more of a mandate to make some changes and shake things up,” Parry said. “This particular Congress and administration has made clear that they’re going to take regulating the oil industry more seriously.” Officials from the U.S. Environmental Protection Agency, the Washington Department of Labor & Industries, and the state’s Department of Ecology are investigating the Anacortes explosion, the company said. Growing Scrutiny The additional scrutiny of San Antonio-based Tesoro comes days after the company named a successor to retiring Chief Executive Officer Bruce Smith . Goff, formerly a senior vice president at ConocoPhillips, was selected after a seven-month search. He previously managed ConocoPhillips’ refineries in Asia and Europe, and most recently focused on supplies and trading of refined products and crude oil. Goff could not be reached for comment. “Mr. Goff is not yet an employee of the company so it would not be appropriate for him to be involved at this point,” Tesoro spokesman Lynn Westfall said in an e-mailed statement. “We intend to fully cooperate with all agency investigations to bring about a thorough analysis of the incident.” The Tesoro explosion had the most recorded fatalities at a refinery since 15 workers were killed in a blast at a Texas City, Texas, plant owned by BP Plc in 2005. The chemical safety board’s investigation into the 2005 BP explosion prompted the Occupational Safety and Health Administration, known as OSHA, to start a nationwide “emphasis program” on inspecting refineries. OSHA cited BP last month with a $3.04 million fine for violations at its Toledo, Ohio, refinery. Financial Strain Tesoro’s Anacortes refinery has been inspected by the Washington State Department of Labor and Industries, the state’s equivalent of OSHA. The plant received 17 “serious” violations last year from the state agency. Fourteen of those violations were dismissed during settlement negotiations, and fines were reduced to $12,250 from an initial $85,700 penalty. As part of the settlement, Tesoro agreed to have safety consultants review the plant. AcuTech Group Inc. started its review of the refinery’s operations in March, Hector Castro, a spokesman for the state’s Labor and Industries department, said. BP, Europe’s largest oil company after Royal Dutch Shell Plc, with a $180.6 billion market value , continued to turn a profit each year while paying more than $2 billion in legal bills and fines, and funding remediation programs at its U.S. refineries following the explosion. Tesoro, with a $2.02 billion market value , may feel more financial strain from the cost of damages and clean-up in the wake of the accident, Parry of IHS Herold said. Potential Lawsuits If Tesoro is hit with lawsuits over the deaths at Anacortes, settlements might range from $10 million to $20 million, depending on the circumstances, said David Perry , a plaintiff’s lawyer in Corpus Christi, Texas, who represented clients in the BP case. “Critical-injury burn cases, if the people survive, are among the most costly to a company,” Perry said, because of the suffering and disability typically involved. The U.S. recession has cut demand for gasoline, diesel, and other refined products, resulting in a two-thirds decline in refining margins since 2007. Unlike BP, which also profits from producing oil, Tesoro’s refineries and gasoline stations are its sole stream of revenue. Tesoro’s net income has fallen annually since 2006, and the company reported a $140 million loss in 2009. Following the Anacortes blast, Tesoro has pared production of fuels like gasoline and diesel to a third of normal levels at the plant, or about 20,000 barrels a day, Westfall said. The cutbacks could result in tighter supplies and higher prices until cargoes can be brought in from California, the Gulf Coast or other locations, said IHS Herold’s Parry. “For the units involved in the fire, it could be several weeks” before they return to production, said Andy Lipow , president of Lipow Oil Associates LLC, a Houston-based consulting company. “In the Pacific Northwest, prices are liable to rise.” To contact the reporter on this story: Jessica Resnick-Ault in New York at jresnickault@bloomberg.net .

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Tesoro Refinery Blast, Deaths Show `Disturbing Trend,’ Investigator Says

April 2, 2010

By Aaron Clark and Jessica Resnick-Ault April 2 (Bloomberg) — A blast and fire at Tesoro Corp .’s Anacortes, Washington, refinery today is likely the most fatal accident to strike a U.S. refinery since a 2005 explosion killed 15 people at BP Plc’s plant in Texas City, Texas. “It appears to have the most fatalities of any accident since BP Texas City,” Daniel Horowitz , a spokesman for the U.S. Chemical Safety and Hazard Investigation Board, said in a telephone interview. “The Board is extremely concerned about the pattern of safety problems in the refining sector.” Lynn Westfall , a spokesman for Tesoro, did not immediately return a voice mail and e-mail seeking comment. Three people died as a result of the blast and fire at the refinery, Tesoro said in a statement earlier today. A 29-year- old woman who was transported from the plant to Harborview Medical Center in Seattle for burn treatment has also died, Susan Gregg-Hanson, a spokeswoman for the center, said in a telephone interview. Three other refinery workers remain in critical condition, a 36-year-old woman and two men, ages 34 and 41, according to Gregg-Hanson. They all have burns over the majority of their bodies. The fire occurred at a naphtha unit while maintenance work was under way, the company said in a statement. The affected units have been shut down, according to Tesoro. ‘Serious’ Violations The CSB, an independent U.S. federal agency that investigates industrial chemical accidents , has sent a four- person team to investigate the Anacortes refinery accident, according to a statement from the agency. Tesoro’s 58,000 barrel-a-day Salt Lake City, Utah refinery is also under investigation by the CSB after an Oct. 21 fire occurred when flammable liquid overfilled a flare stack and ignited, Horowitz said. The agency said last year it was investigating the incident due to similarities with BP’s Texas City accident. The BP explosion occurred March 23, 2005, when an octane- boosting unit overflowed as it was being restarted. Gasoline vapors spilled into an inadequate vent system and ignited a blast that shattered windows five miles away. Fifteen people were killed and 180 injured, according to the CSB. The Anacortes refinery received 17 “ serious” violations last year from the Washington State Department of Labor & Industries. Fourteen of those violations have been deleted and a $85,700 initial penalty was reduced to $12,250. Grief Counselors Tesoro has grief counselors on site, said Joe Solomon, president of the United Steelworkers Union Local 12-591, which represents about 200 workers at the Anacortes refinery. The units that were affected by the fire were shut down and the rest of the plant is stable and operating, he said. The $2.02 billion company’s stock rose 49 cents yesterday to $14.39 on the New York Stock Exchange. The shares have risen 6.2 percent this year. Tesoro is based in San Antonio and operates seven refineries in the western U.S. Its 120,000 barrel-a-day Anacortes plant, located about 60 miles north of Seattle, is the company’s second largest and accounts for about 18 percent of its system-wide 664,360 barrel-a-day capacity. Unplanned and planned outages can increase prices for petroleum products as refiners turn to spot markets to help them meet supply contracts. Operational disruptions can also depress prices for crude oil because less feedstock is needed. “For the units involved in the fire, that could be several weeks” before they return, said Andy Lipow , president of Lipow Oil Associates LLC, a Houston-based consulting company. “In the Pacific Northwest, prices are liable to rise.” Fuel Production The plant manufactures gasoline, jet fuel and diesel for markets in Washington and Oregon. It receives oil by pipeline from Edmonton, Alberta, and by tanker from Alaska and foreign sources, according to the company’s Web site . The plant also processes intermediate feedstocks such as heavy vacuum gas oil that are produced by other Tesoro refineries or purchased in the spot market. The discount to futures for conventional, 87-octane gasoline widened 0.5 cent to 6 cents yesterday in Portland, according to data compiled by Bloomberg. The prompt delivery price gained 0.87 cent a gallon to $2.2637. Regular gasoline at the pump in Seattle, Bellevue and Everett, Washington, rose 0.3 cent to an average $3.003 a gallon, AAA, the nation’s biggest motoring organization, said today on its Web site. To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net Jessica Resnick-Ault in New York at jresnickault@bloomberg.net .

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Tesoro Refinery Explosion Near Seattle Kills Three Workers, Injures Four

April 2, 2010

By Fred Pals and Aaron Clark April 2 (Bloomberg) — Tesoro Corp. said three workers were killed and four others hospitalized following an explosion and fire at the company’s refinery in Anacortes, Washington. “Early this morning we did experience a fire in our catalytic reformer hydrotreater unit and emergency response procedures were immediately activated,” Tesoro’s Human Resources Manager John McDarment said in a phone interview. The plant ships out gasoline, diesel and jet fuel for the western Washington and Portland markets. The incident may boost gasoline prices that are already at their highest level in 18 months. Gasoline for May delivery yesterday rose 1.65 cents, or 0.7 percent, to $2.3237 a gallon in New York, the highest settlement for the front-month contract since Oct. 1, 2008. There is no Nymex futures trading today because of the Good Friday holiday. Wholesale gasoline prices on the West Coast have weakened relative to the rest of the U.S., with 87-octane selling in Portland for 6 cents a gallon less than the New York Mercantile Exchange benchmark, according to data compiled by Bloomberg. In the past year, Portland gasoline has sold for an average 5.5 cent-a-gallon premium to New York markets. Naphtha Unit The Tesoro plant, located about 60 miles (95 kilometers) north of Seattle, has a capacity of 120,000 barrels a day, according to data compiled by Bloomberg. It receives Canadian crude through a pipeline from Edmonton, Alberta, and takes Alaskan oil by tankers, according to the San Antonio-based company’s Web site . The fire occurred at 12:30 a.m. at a naphtha unit during maintenance work and was brought under control by the plant’s emergency crews at around 2 a.m. local time, Tesoro, the largest refiner in the western U.S., said in an e-mailed statement. “At this time, there is one confirmed fatality, four employees have been admitted into the local hospital for treatment and three employees remain unaccounted for,” the statement said. The cause of the incident is still unknown, McDarment said. The units that were affected have been shut down and stabilized. To contact the reporters on this story: Fred Pals in Amsterdam at fpals@bloomberg.net ; Aaron Clark in New York at aclark27@bloomberg.net

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Video: Tesoro Confirms Three Deaths at Anacortes Refinery: Video

April 2, 2010

April 2 (Bloomberg) — Tesoro Corp. said it has confirmed three fatalities after a fire occurred at the company’s Anacortes, Washington, refinery at about 12:30 a.m. Pacific time today. Four other employees have been admitted to the hospital in Seattle for treatment. Bloomberg’s Betty Liu and Adam Johnson report. (Source: Bloomberg)

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Tesoro Refinery Explosion Near Seattle Kills Three Workers, Company Says

April 2, 2010

By Heather Burke April 2 (Bloomberg) — Tesoro Corp. said it has confirmed three fatalities after a fire occurred at the company’s Anacortes, Washington, refinery at about 12:30 a.m. Pacific time today. Four other employees have been admitted to the hospital in Seattle for treatment.

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Fed Reveals Bear Stearns Assets Swallowed to Get JPMorgan to Rescue Firm

April 1, 2010

By Craig Torres, Bob Ivry and Scott Lanman April 1 (Bloomberg) — After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout. In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information. The Fed’s vehicle known as Maiden Lane LLC has securities backed by mortgages from lenders including Washington Mutual Inc. and Countrywide Financial Corp., loans that were made with limited borrower documentation. More than $1 billion of them are backed by “jumbo” mortgages written by Thornburg Mortgage Inc., which now carry the lowest investment-grade rating. Jumbo loans were larger than government-sponsored mortgage buyers such as Fannie Mae could finance — $417,000 at the time. “The Fed absorbed that risk on its balance sheet and is now seen to be holding problematic, legacy assets,” said Vincent Reinhart , a resident scholar at the American Enterprise Institute in Washington who was the central bank’s monetary- affairs director from 2001 to 2007. “There is both an impairment to its balance sheet and its reputation.” The Bear Stearns deal marked a turning point in the financial crisis for the Fed. By putting taxpayers at risk in financing the rescue, the central bank was engaging in fiscal policy, normally the domain of Congress and the U.S. Treasury, said Marvin Goodfriend , a former Richmond Fed policy adviser who is now an economist at Carnegie Mellon University in Pittsburgh. ‘Panic’ Cause “Lack of clarity on the boundary between responsibilities of the Fed and of the Congress as much as anything else created panic in the fall of 2008,” Goodfriend said. “That created a situation in which what had been a serious recession became something near a Great Depression.” Central bankers also created moral hazard, or a perception for investors that any financial firm bigger than Bear Stearns wouldn’t be allowed to fail, said David Kotok , chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey. Policy makers’ resolve was tested months later by runs against the largest financial companies. Lehman Brothers Holdings Inc. collapsed into bankruptcy in September 2008. The ensuing panic caused the Fed to take even more emergency measures to push liquidity into markets and institutions. It rescued American International Group Inc. from collapse and allowed Goldman Sachs Group Inc. and Morgan Stanley to convert into bank holding companies, putting them under greater oversight by the central bank. Early Failure “Letting somebody fail early would have been a better choice,” Kotok said. “You would have ratcheted moral hazard lower and Lehman wouldn’t have been so severe.” The Bear Stearns assets include bets against the credit of bond insurers such as MBIA Inc., Financial Security Assurance Holdings Ltd. and a unit of Ambac Financial Group, putting the Fed in the position of wagering companies will stop paying their debts. The Fed disclosed that some of Maiden Lane’s assets were portions of commercial loans for hotels, including Short Hills Hilton LLC in New Jersey, Hilton Hawaiian Village LLC in Hawaii, and Hilton of Malaysia LLC, in addition to securities backed by residential mortgages. More than a year after Washington Mutual, the largest U.S. savings and loan, was purchased by JPMorgan Chase in a distressed sale arranged by the Federal Deposit Insurance Corp., the home loans that helped bring down the Seattle-based thrift live on in the Maiden Lane portfolio. Lending Standards For example, 94 percent of the mortgages in one security, called WAMU 06-A13 2XPPP, required limited documentation from borrowers, meaning the lender often didn’t ask customers for proof of their incomes. Almost 10 percent of the borrowers whose mortgages make up the security have been foreclosed on, and almost a quarter are more than two months late with payments, according to data compiled by Bloomberg. The portfolio also includes $618.9 million of securities backed by Countrywide, mortgages now rated CCC, eight levels below investment grade. All the underlying loans are adjustable- rate mortgages, with about 88 percent requiring only limited borrower documentation, according to Bloomberg data. About 33.6 percent of the borrowers are at least 60 days late. Countrywide is now part of Charlotte, North Carolina-based Bank of America Corp. CDO Holdings Maiden Lane has $19.5 million of securities from a series of collateralized debt obligations called Tropic CDO that are backed by trust preferred securities of community banks and thrifts. CDOs are investment pools made up of a variety of assets that provide a flow of cash. Trust preferred securities, or TruPS, have characteristics of debt and equity and their interest payments are tax- deductible. The securities created by Bear Stearns are rated C, one level above default, by Moody’s Investors Service and Fitch Ratings. CDO securities have tumbled in value as banks are failing at the fastest rate in 17 years, according to data compiled by Bloomberg. The average price of TruPS CDO debt of this rating is pennies on the dollar, according to Citigroup Inc. “The trust of the taxpayer was abused,” said Janet Tavakoli , president of Chicago-based financial consulting firm Tavakoli Structured Finance Inc. CDOs rated CCC and lower “have a high likelihood of default,” she said. Bernanke Defense Chairman Ben S. Bernanke defended the Bear Stearns deal as a rescue of the financial system. He said in a speech at the Kansas City Fed’s annual Jackson Hole, Wyoming conference in August 2008 that a sudden Bear Stearns failure would have caused a “vicious circle of forced selling” and increased volatility. “The broader economy could hardly have remained immune from such severe financial disruptions,” Bernanke said in the speech. The Fed chief, who took office in 2006 and began his second term as chairman this year, also has repeatedly called for an overhaul of financial regulations that would allow authorities to take over a failing financial institution and oversee an orderly unwinding of its positions. Bernanke said last year that nothing made him “more angry” than the AIG case, blaming the insurer for making “irresponsible bets” and a lack of regulatory oversight for the debacle. Officials “had no choice but to try and stabilize the system” by aiding the firm in September 2008, he said. Yesterday’s release by the Fed, through its New York regional bank, also identified securities acquired in the bailout of AIG held in vehicles known as Maiden Lane II and III. Market Value Assets in Maiden Lane II totaled $34.8 billion, according to the Fed, which set their current market value in its weekly balance sheet at $15.3 billion. That means Maiden Lane II assets are worth 44 cents on the dollar, or 44 percent of their face value, according to the Fed. Maiden Lane III, which has $56 billion of assets at face value, is worth $22.1 billion, or 39 cents on the dollar, according to the Fed’s weekly balance sheet. A similar calculation for the Bear Stearns portfolio couldn’t be made because of outstanding derivatives trades. “The Federal Reserve recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible,” the New York Fed said in yesterday’s statement. Deal With Chase The central bank said it reached agreement on “issues of confidentiality” for the assets with JPMorgan Chase, which bought Bear Stearns in 2008, and AIG. New York-based JPMorgan and AIG would incur the first losses on the portfolios. Joe Evangelisti , a spokesman for JPMorgan, and Mark Herr , a spokesman for AIG, declined to comment. In April 2008, Bloomberg News requested records under the federal Freedom of Information Act from the Fed’s Board of Governors related to JPMorgan’s acquisition of Bear Stearns. The central bank responded that records retained by the New York Fed “were proprietary records of the Reserve Bank, and not Board records subject” to the request, court records show. Bloomberg filed suit in November 2008 in U.S. District Court in New York, challenging the Fed’s denial, as well as the denial of a separate request made in May 2008, seeking records of four other emergency lending programs. The district court held that the Fed should release documents related to those four programs, and should search documents held by the New York regional bank to determine whether any of them should be considered records of the board of governors. The U.S. Court of Appeals on March 19 upheld the district court’s ruling on the lending programs. Representative Darrell Issa of California said in a statement that yesterday’s disclosure may “signal a new willingness to cooperate with Congress as we investigate how these bailout deals were structured and what the decision making process entailed.” To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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Fed Reveals Bear Stearns Assets Swallowed to Get JPMorgan to Rescue Firm

April 1, 2010

By Craig Torres, Bob Ivry and Scott Lanman April 1 (Bloomberg) — After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout. In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information. The Fed’s vehicle known as Maiden Lane LLC has securities backed by mortgages from lenders including Washington Mutual Inc. and Countrywide Financial Corp., loans that were made with limited borrower documentation. More than $1 billion of them are backed by “jumbo” mortgages written by Thornburg Mortgage Inc., which now carry the lowest investment-grade rating. Jumbo loans were larger than government-sponsored mortgage buyers such as Fannie Mae could finance — $417,000 at the time. “The Fed absorbed that risk on its balance sheet and is now seen to be holding problematic, legacy assets,” said Vincent Reinhart , a resident scholar at the American Enterprise Institute in Washington who was the central bank’s monetary- affairs director from 2001 to 2007. “There is both an impairment to its balance sheet and its reputation.” The Bear Stearns deal marked a turning point in the financial crisis for the Fed. By putting taxpayers at risk in financing the rescue, the central bank was engaging in fiscal policy, normally the domain of Congress and the U.S. Treasury, said Marvin Goodfriend , a former Richmond Fed policy adviser who is now an economist at Carnegie Mellon University in Pittsburgh. ‘Panic’ Cause “Lack of clarity on the boundary between responsibilities of the Fed and of the Congress as much as anything else created panic in the fall of 2008,” Goodfriend said. “That created a situation in which what had been a serious recession became something near a Great Depression.” Central bankers also created moral hazard, or a perception for investors that any financial firm bigger than Bear Stearns wouldn’t be allowed to fail, said David Kotok , chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey. Policy makers’ resolve was tested months later by runs against the largest financial companies. Lehman Brothers Holdings Inc. collapsed into bankruptcy in September 2008. The ensuing panic caused the Fed to take even more emergency measures to push liquidity into markets and institutions. It rescued American International Group Inc. from collapse and allowed Goldman Sachs Group Inc. and Morgan Stanley to convert into bank holding companies, putting them under greater oversight by the central bank. Early Failure “Letting somebody fail early would have been a better choice,” Kotok said. “You would have ratcheted moral hazard lower and Lehman wouldn’t have been so severe.” The Bear Stearns assets include bets against the credit of bond insurers such as MBIA Inc., Financial Security Assurance Holdings Ltd. and a unit of Ambac Financial Group, putting the Fed in the position of wagering companies will stop paying their debts. The Fed disclosed that some of Maiden Lane’s assets were portions of commercial loans for hotels, including Short Hills Hilton LLC in New Jersey, Hilton Hawaiian Village LLC in Hawaii, and Hilton of Malaysia LLC, in addition to securities backed by residential mortgages. More than a year after Washington Mutual, the largest U.S. savings and loan, was purchased by JPMorgan Chase in a distressed sale arranged by the Federal Deposit Insurance Corp., the home loans that helped bring down the Seattle-based thrift live on in the Maiden Lane portfolio. Lending Standards For example, 94 percent of the mortgages in one security, called WAMU 06-A13 2XPPP, required limited documentation from borrowers, meaning the lender often didn’t ask customers for proof of their incomes. Almost 10 percent of the borrowers whose mortgages make up the security have been foreclosed on, and almost a quarter are more than two months late with payments, according to data compiled by Bloomberg. The portfolio also includes $618.9 million of securities backed by Countrywide, mortgages now rated CCC, eight levels below investment grade. All the underlying loans are adjustable- rate mortgages, with about 88 percent requiring only limited borrower documentation, according to Bloomberg data. About 33.6 percent of the borrowers are at least 60 days late. Countrywide is now part of Charlotte, North Carolina-based Bank of America Corp. CDO Holdings Maiden Lane has $19.5 million of securities from a series of collateralized debt obligations called Tropic CDO that are backed by trust preferred securities of community banks and thrifts. CDOs are investment pools made up of a variety of assets that provide a flow of cash. Trust preferred securities, or TruPS, have characteristics of debt and equity and their interest payments are tax- deductible. The securities created by Bear Stearns are rated C, one level above default, by Moody’s Investors Service and Fitch Ratings. CDO securities have tumbled in value as banks are failing at the fastest rate in 17 years, according to data compiled by Bloomberg. The average price of TruPS CDO debt of this rating is pennies on the dollar, according to Citigroup Inc. “The trust of the taxpayer was abused,” said Janet Tavakoli , president of Chicago-based financial consulting firm Tavakoli Structured Finance Inc. CDOs rated CCC and lower “have a high likelihood of default,” she said. Bernanke Defense Chairman Ben S. Bernanke defended the Bear Stearns deal as a rescue of the financial system. He said in a speech at the Kansas City Fed’s annual Jackson Hole, Wyoming conference in August 2008 that a sudden Bear Stearns failure would have caused a “vicious circle of forced selling” and increased volatility. “The broader economy could hardly have remained immune from such severe financial disruptions,” Bernanke said in the speech. The Fed chief, who took office in 2006 and began his second term as chairman this year, also has repeatedly called for an overhaul of financial regulations that would allow authorities to take over a failing financial institution and oversee an orderly unwinding of its positions. Bernanke said last year that nothing made him “more angry” than the AIG case, blaming the insurer for making “irresponsible bets” and a lack of regulatory oversight for the debacle. Officials “had no choice but to try and stabilize the system” by aiding the firm in September 2008, he said. Yesterday’s release by the Fed, through its New York regional bank, also identified securities acquired in the bailout of AIG held in vehicles known as Maiden Lane II and III. Market Value Assets in Maiden Lane II totaled $34.8 billion, according to the Fed, which set their current market value in its weekly balance sheet at $15.3 billion. That means Maiden Lane II assets are worth 44 cents on the dollar, or 44 percent of their face value, according to the Fed. Maiden Lane III, which has $56 billion of assets at face value, is worth $22.1 billion, or 39 cents on the dollar, according to the Fed’s weekly balance sheet. A similar calculation for the Bear Stearns portfolio couldn’t be made because of outstanding derivatives trades. “The Federal Reserve recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible,” the New York Fed said in yesterday’s statement. Deal With Chase The central bank said it reached agreement on “issues of confidentiality” for the assets with JPMorgan Chase, which bought Bear Stearns in 2008, and AIG. New York-based JPMorgan and AIG would incur the first losses on the portfolios. Joe Evangelisti , a spokesman for JPMorgan, and Mark Herr , a spokesman for AIG, declined to comment. In April 2008, Bloomberg News requested records under the federal Freedom of Information Act from the Fed’s Board of Governors related to JPMorgan’s acquisition of Bear Stearns. The central bank responded that records retained by the New York Fed “were proprietary records of the Reserve Bank, and not Board records subject” to the request, court records show. Bloomberg filed suit in November 2008 in U.S. District Court in New York, challenging the Fed’s denial, as well as the denial of a separate request made in May 2008, seeking records of four other emergency lending programs. The district court held that the Fed should release documents related to those four programs, and should search documents held by the New York regional bank to determine whether any of them should be considered records of the board of governors. The U.S. Court of Appeals on March 19 upheld the district court’s ruling on the lending programs. Representative Darrell Issa of California said in a statement that yesterday’s disclosure may “signal a new willingness to cooperate with Congress as we investigate how these bailout deals were structured and what the decision making process entailed.” To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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Fed Reveals Bear Stearns Assets Swallowed in Rescue

April 1, 2010

By Craig Torres, Bob Ivry and Scott Lanman April 1 (Bloomberg) — After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout. In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information. The Fed’s vehicle known as Maiden Lane LLC has securities backed by mortgages from lenders including Washington Mutual Inc. and Countrywide Financial Corp., loans that were made with limited borrower documentation. More than $1 billion of them are backed by “jumbo” mortgages written by Thornburg Mortgage Inc., which now carry the lowest investment-grade rating. Jumbo loans were larger than government-sponsored mortgage buyers such as Fannie Mae could finance — $417,000 at the time. “The Fed absorbed that risk on its balance sheet and is now seen to be holding problematic, legacy assets,” said Vincent Reinhart , a resident scholar at the American Enterprise Institute in Washington who was the central bank’s monetary- affairs director from 2001 to 2007. “There is both an impairment to its balance sheet and its reputation.” The Bear Stearns deal marked a turning point in the financial crisis for the Fed. By putting taxpayers at risk in financing the rescue, the central bank was engaging in fiscal policy, normally the domain of Congress and the U.S. Treasury, said Marvin Goodfriend , a former Richmond Fed policy adviser who is now an economist at Carnegie Mellon University in Pittsburgh. ‘Panic’ Cause “Lack of clarity on the boundary between responsibilities of the Fed and of the Congress as much as anything else created panic in the fall of 2008,” Goodfriend said. “That created a situation in which what had been a serious recession became something near a Great Depression.” Central bankers also created moral hazard, or a perception for investors that any financial firm bigger than Bear Stearns wouldn’t be allowed to fail, said David Kotok , chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey. Policy makers’ resolve was tested months later by runs against the largest financial companies. Lehman Brothers Holdings Inc. collapsed into bankruptcy in September 2008. The ensuing panic caused the Fed to take even more emergency measures to push liquidity into markets and institutions. It rescued American International Group Inc. from collapse and allowed Goldman Sachs Group Inc. and Morgan Stanley to convert into bank holding companies, putting them under greater oversight by the central bank. Early Failure “Letting somebody fail early would have been a better choice,” Kotok said. “You would have ratcheted moral hazard lower and Lehman wouldn’t have been so severe.” The Bear Stearns assets include bets against the credit of bond insurers such as MBIA Inc., Financial Security Assurance Holdings Ltd. and a unit of Ambac Financial Group, putting the Fed in the position of wagering companies will stop paying their debts. The Fed disclosed that some of Maiden Lane’s assets were portions of commercial loans for hotels, including Short Hills Hilton LLC in New Jersey, Hilton Hawaiian Village LLC in Hawaii, and Hilton of Malaysia LLC, in addition to securities backed by residential mortgages. More than a year after Washington Mutual, the largest U.S. savings and loan, was purchased by JPMorgan Chase in a distressed sale arranged by the Federal Deposit Insurance Corp., the home loans that helped bring down the Seattle-based thrift live on in the Maiden Lane portfolio. Lending Standards For example, 94 percent of the mortgages in one security, called WAMU 06-A13 2XPPP, required limited documentation from borrowers, meaning the lender often didn’t ask customers for proof of their incomes. Almost 10 percent of the borrowers whose mortgages make up the security have been foreclosed on, and almost a quarter are more than two months late with payments, according to data compiled by Bloomberg. The portfolio also includes $618.9 million of securities backed by Countrywide, mortgages now rated CCC, eight levels below investment grade. All the underlying loans are adjustable- rate mortgages, with about 88 percent requiring only limited borrower documentation, according to Bloomberg data. About 33.6 percent of the borrowers are at least 60 days late. Countrywide is now part of Charlotte, North Carolina-based Bank of America Corp. CDO Holdings Maiden Lane has $19.5 million of securities from a series of collateralized debt obligations called Tropic CDO that are backed by trust preferred securities of community banks and thrifts. CDOs are investment pools made up of a variety of assets that provide a flow of cash. Trust preferred securities, or TruPS, have characteristics of debt and equity and their interest payments are tax- deductible. The securities created by Bear Stearns are rated C, one level above default, by Moody’s Investors Service and Fitch Ratings. CDO securities have tumbled in value as banks are failing at the fastest rate in 17 years, according to data compiled by Bloomberg. The average price of TruPS CDO debt of this rating is pennies on the dollar, according to Citigroup Inc. “The trust of the taxpayer was abused,” said Janet Tavakoli , president of Chicago-based financial consulting firm Tavakoli Structured Finance Inc. CDOs rated CCC and lower “have a high likelihood of default,” she said. Bernanke Defense Chairman Ben S. Bernanke defended the Bear Stearns deal as a rescue of the financial system. He said in a speech at the Kansas City Fed’s annual Jackson Hole, Wyoming conference in August 2008 that a sudden Bear Stearns failure would have caused a “vicious circle of forced selling” and increased volatility. “The broader economy could hardly have remained immune from such severe financial disruptions,” Bernanke said in the speech. The Fed chief, who took office in 2006 and began his second term as chairman this year, also has repeatedly called for an overhaul of financial regulations that would allow authorities to take over a failing financial institution and oversee an orderly unwinding of its positions. Bernanke said last year that nothing made him “more angry” than the AIG case, blaming the insurer for making “irresponsible bets” and a lack of regulatory oversight for the debacle. Officials “had no choice but to try and stabilize the system” by aiding the firm in September 2008, he said. Yesterday’s release by the Fed, through its New York regional bank, also identified securities acquired in the bailout of AIG held in vehicles known as Maiden Lane II and III. Market Value Assets in Maiden Lane II totaled $34.8 billion, according to the Fed, which set their current market value in its weekly balance sheet at $15.3 billion. That means Maiden Lane II assets are worth 44 cents on the dollar, or 44 percent of their face value, according to the Fed. Maiden Lane III, which has $56 billion of assets at face value, is worth $22.1 billion, or 39 cents on the dollar, according to the Fed’s weekly balance sheet. A similar calculation for the Bear Stearns portfolio couldn’t be made because of outstanding derivatives trades. “The Federal Reserve recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible,” the New York Fed said in yesterday’s statement. Deal With Chase The central bank said it reached agreement on “issues of confidentiality” for the assets with JPMorgan Chase, which bought Bear Stearns in 2008, and AIG. New York-based JPMorgan and AIG would incur the first losses on the portfolios. Joe Evangelisti , a spokesman for JPMorgan, and Mark Herr , a spokesman for AIG, declined to comment. In April 2008, Bloomberg News requested records under the federal Freedom of Information Act from the Fed’s Board of Governors related to JPMorgan’s acquisition of Bear Stearns. The central bank responded that records retained by the New York Fed “were proprietary records of the Reserve Bank, and not Board records subject” to the request, court records show. Bloomberg filed suit in November 2008 in U.S. District Court in New York, challenging the Fed’s denial, as well as the denial of a separate request made in May 2008, seeking records of four other emergency lending programs. The district court held that the Fed should release documents related to those four programs, and should search documents held by the New York regional bank to determine whether any of them should be considered records of the board of governors. The U.S. Court of Appeals on March 19 upheld the district court’s ruling on the lending programs. Representative Darrell Issa of California said in a statement that yesterday’s disclosure may “signal a new willingness to cooperate with Congress as we investigate how these bailout deals were structured and what the decision making process entailed.” To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

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AIG Plane-Leasing Chief Executive Plueger Retires, Is Replaced by CFO Lund

March 26, 2010

By Susanna Ray March 26 (Bloomberg) — American International Group Inc. , the insurer selling assets to repay a U.S. government rescue, said John Plueger became the second chief executive officer of its airplane-leasing unit to step down in two months. Plueger, 55, retired from International Lease Finance Corp. effective today, New York-based AIG said in a statement. Chief Financial Officer Alan Lund was named his interim successor. Steven Udvar-Hazy , the unit’s founder, stepped down as CEO on Feb. 4, and Plueger was named acting chief. Udvar-Hazy had been working on ways to buy back parts of ILFC since 2008, and in October had won backing from private-equity groups to purchase as much as a $4.5 billion piece of the portfolio, people familiar with the matter said then. “The implication would seem to be that Hazy is starting a venture and Plueger will be joining him,” said Richard Aboulafia , vice president of the Teal Group, a Fairfax, Virginia-based consulting company. Plueger declined to comment, through his assistant, and referred all calls to AIG. Christina Pretto , an AIG spokeswoman, also declined to comment. Udvar-Hazy built ILFC into the world’s biggest plane lessor and sold it to AIG in 1990. Plueger helped lead the company for more than two decades and had been president and chief operating officer since 1995. Transition AIG President and CEO Robert H. Benmosche said the company expects “a smooth transition” as it conducts a search for a permanent successor, according to the statement. Lund, CFO for 28 years, is replaced by the company’s senior vice president of finance, Fred Cromer , who joined ILFC in July 2008. ILFC hadn’t had access to its usual funding options since 2008 because of credit downgrades to its parent company amid the global recession. AIG has said it is trying to sell ILFC airplanes valued at as much as $3.5 billion after it extended a promise of support for the unit through February 2011. “ILFC and AIG are confident in the long-term potential of ILFC as a leader in its marketplace,” Benmosche said. ILFC sold $2 billion of debt earlier this month. It also secured $1.3 billion in term loans. AIG had initially planned to sell ILFC as part of an effort to repay taxpayers for its $182.3 billion bailout. The lessor has about 1,000 aircraft in its fleet valued at more than $44 billion. Douglas Steenland , an AIG board member and the former CEO of Northwest Airlines Inc., replaced Udvar-Hazy as chairman of ILFC in December. To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net .

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Boeing’s Four Strikes Send Union Seeking Peace Path With Spirit in Wichita

March 23, 2010

By Susanna Ray March 23 (Bloomberg) — Boeing Co. , the target of four machinist strikes in two decades, may find the road to labor peace starts in Kansas, where a supplier and the union are working on a contract they say may set an industry blueprint. Spirit AeroSystems Holdings Inc. Chief Executive Officer Jeff Turner and Tom Buffenbarger , president of the International Association of Machinists and Aerospace Workers , started meeting in January to lay the framework for longer accords that protect workers while giving companies flexibility in changing markets. One goal as formal negotiations begin today in Wichita is to reduce rancor farther up the chain at former parent Boeing, Spirit’s biggest customer and the IAM’s largest employer. Spirit profit was hurt by the last Boeing strike in 2008 and the union is smarting from the planemaker’s decision last year to build a 787 Dreamliner plant at a non-union site in South Carolina. “Boeing’s always telling them, ‘What we need are reliable suppliers,’” Buffenbarger said in an interview. “This could turn the question around where the suppliers say to Boeing, ‘What we need is a reliable customer.’” Buffenbarger, 59, says he wants to see a model agreement reached with Spirit and then followed by other suppliers and aerospace companies whose contracts are coming up for renewal, such as Textron Inc.’s Cessna. That may then steer Boeing into productive talks rather than waging “war on their workers” when the current contract expires in 2012, he said. Talks Begin Tim Healy , a spokesman for Chicago-based Boeing, declined to comment. Boeing employs 157,000 and trails only Toulouse, France-based Airbus SAS in commercial-plane making and Bethesda, Maryland’s Lockheed Martin Corp. in defense contracting. “It’s premature to speculate on whether this approach could work because there are so many gray areas attached with production and where planes will even be built,” said Michel Merluzeau , an aerospace analyst with G2 Solutions in Seattle. Neither union leaders nor Spirit officials would specify what their side will seek in talks that started today with a press conference including Buffenbarger, Turner and Spirit board member Richard Gephardt , the Missouri Democrat who is a former U.S. House of Representatives majority leader. The IAM’s contract covering about 5,900 Spirit workers ends June 25. “In a market that’s so volatile, a classical set of negotiations is going to set us up to butt heads,” Spirit CEO Turner, 57, said in an interview. If the company has a pessimistic view of the business and tries to win concessions that turn out to have been unnecessary, it breeds distrust, Turner said. Yet an unforeseen slump when wages and job levels are locked could ruin the company, he said. Starting With Spirit “We’re going to embark on a whole new model of labor negotiations” instead of “still negotiating like it’s the 1930s,” said Ron Eldridge, who leads the IAM’s effort. The IAM says it’s trying to build the new contract model with Spirit because they already have a close relationship. CEO Turner and the union’s Buffenbarger showed up together to discuss goals at a January training session for IAM negotiators in Maryland, and the pair met yesterday with shop stewards and managers in Wichita to explain each side’s needs ahead of talks. Spirit, which was formed in 2005 when Boeing sold its commercial operations in Wichita, makes parts of the fuselage and other sections for every Boeing airliner. The supplier received 85 percent of its revenue from the former parent in 2009 and 11 percent from Airbus SAS, regulatory filings show. Since the beginning of 2009, Spirit shares have more than than doubled while Boeing rose 69 percent. Spirit today gained 32 cents to $22.95 at 4:15 p.m. in New York Stock Exchange composite trading, while Boeing rose 27 cents to $72.18 Market Reaction About 4,300 call options to buy Spirit changed hands, more than 12 times the four-week average. That was about 45 times the number of put options to sell that traded today. The most-active contracts, July $25 calls, were unchanged at 80 cents. Both sides are entering talks with the same ultimate goal, Turner said: “To keep our company healthy and keep our team intact for the future.” Spirit needs an experienced, consistent workforce to succeed with complex aircraft-development programs and can’t tolerate cycles of layoffs or strikes, he said. The IAM’s offer last year to extend Boeing’s four-year contract covering 27,000 workers by an additional eight years gives some sense of the timeframe the union might consider, negotiator Eldridge said. The offer was part of the IAM’s unsuccessful effort to have the company build the new 787 line at its Seattle-area factory hub instead of in South Carolina. South Carolina Debate Boeing at the time said the union’s offer, which included raises of 3 percent a year through 2020 and work guarantees, was too expensive amid burgeoning competition from countries such as China and Canada. The union’s 57-day strike at the end of 2008 cost Boeing more than $10 million a day and incurred the ire of customers whose planes were delayed and suppliers who had to scale back their own production until Boeing’s assembly lines restarted. It also coincided with the start of a global recession that prompted the deferral and cancellation of hundreds of orders from Boeing as well as business-jet makers such as Cessna, which had to cut its Wichita workforce in half. “A three-year contract where everything is nailed down and can’t change — that’s got to go,” CEO Turner said. “But it can’t be replaced with nothing. So we want to create a longer contract that’s flexible.” To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net .

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Boeing’s Four Strikes Send Union Seeking Peace Path With Spirit in Wichita

March 23, 2010

By Susanna Ray March 23 (Bloomberg) — Boeing Co. , the target of four machinist strikes in two decades, may find the road to labor peace starts in Kansas, where a supplier and the union are working on a contract they say may set an industry blueprint. Spirit AeroSystems Holdings Inc. Chief Executive Officer Jeff Turner and Tom Buffenbarger , president of the International Association of Machinists and Aerospace Workers , started meeting in January to lay the framework for longer accords that protect workers while giving companies flexibility in changing markets. One goal as formal negotiations begin today in Wichita is to reduce rancor farther up the chain at former parent Boeing, Spirit’s biggest customer and the IAM’s largest employer. Spirit profit was hurt by the last Boeing strike in 2008 and the union is smarting from the planemaker’s decision last year to build a 787 Dreamliner plant at a non-union site in South Carolina. “Boeing’s always telling them, ‘What we need are reliable suppliers,’” Buffenbarger said in an interview. “This could turn the question around where the suppliers say to Boeing, ‘What we need is a reliable customer.’” Buffenbarger, 59, says he wants to see a model agreement reached with Spirit and then followed by other suppliers and aerospace companies whose contracts are coming up for renewal, such as Textron Inc.’s Cessna. That may then steer Boeing into productive talks rather than waging “war on their workers” when the current contract expires in 2012, he said. Talks Begin Tim Healy , a spokesman for Chicago-based Boeing, declined to comment. Boeing employs 157,000 and trails only Toulouse, France-based Airbus SAS in commercial-plane making and Bethesda, Maryland’s Lockheed Martin Corp. in defense contracting. “It’s premature to speculate on whether this approach could work because there are so many gray areas attached with production and where planes will even be built,” said Michel Merluzeau , an aerospace analyst with G2 Solutions in Seattle. Neither union leaders nor Spirit officials would specify what their side will seek in talks that started today with a press conference including Buffenbarger, Turner and Spirit board member Richard Gephardt , the Missouri Democrat who is a former U.S. House of Representatives majority leader. The IAM’s contract covering about 5,900 Spirit workers ends June 25. “In a market that’s so volatile, a classical set of negotiations is going to set us up to butt heads,” Spirit CEO Turner, 57, said in an interview. If the company has a pessimistic view of the business and tries to win concessions that turn out to have been unnecessary, it breeds distrust, Turner said. Yet an unforeseen slump when wages and job levels are locked could ruin the company, he said. Starting With Spirit “We’re going to embark on a whole new model of labor negotiations” instead of “still negotiating like it’s the 1930s,” said Ron Eldridge, who leads the IAM’s effort. The IAM says it’s trying to build the new contract model with Spirit because they already have a close relationship. CEO Turner and the union’s Buffenbarger showed up together to discuss goals at a January training session for IAM negotiators in Maryland, and the pair met yesterday with shop stewards and managers in Wichita to explain each side’s needs ahead of talks. Spirit, which was formed in 2005 when Boeing sold its commercial operations in Wichita, makes parts of the fuselage and other sections for every Boeing airliner. The supplier received 85 percent of its revenue from the former parent in 2009 and 11 percent from Airbus SAS, regulatory filings show. Since the beginning of 2009, Spirit shares have more than than doubled while Boeing rose 69 percent. Spirit today gained 32 cents to $22.95 at 4:15 p.m. in New York Stock Exchange composite trading, while Boeing rose 27 cents to $72.18 Market Reaction About 4,300 call options to buy Spirit changed hands, more than 12 times the four-week average. That was about 45 times the number of put options to sell that traded today. The most-active contracts, July $25 calls, were unchanged at 80 cents. Both sides are entering talks with the same ultimate goal, Turner said: “To keep our company healthy and keep our team intact for the future.” Spirit needs an experienced, consistent workforce to succeed with complex aircraft-development programs and can’t tolerate cycles of layoffs or strikes, he said. The IAM’s offer last year to extend Boeing’s four-year contract covering 27,000 workers by an additional eight years gives some sense of the timeframe the union might consider, negotiator Eldridge said. The offer was part of the IAM’s unsuccessful effort to have the company build the new 787 line at its Seattle-area factory hub instead of in South Carolina. South Carolina Debate Boeing at the time said the union’s offer, which included raises of 3 percent a year through 2020 and work guarantees, was too expensive amid burgeoning competition from countries such as China and Canada. The union’s 57-day strike at the end of 2008 cost Boeing more than $10 million a day and incurred the ire of customers whose planes were delayed and suppliers who had to scale back their own production until Boeing’s assembly lines restarted. It also coincided with the start of a global recession that prompted the deferral and cancellation of hundreds of orders from Boeing as well as business-jet makers such as Cessna, which had to cut its Wichita workforce in half. “A three-year contract where everything is nailed down and can’t change — that’s got to go,” CEO Turner said. “But it can’t be replaced with nothing. So we want to create a longer contract that’s flexible.” To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net .

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Stocks Show Economy Revving in U.S. as Cyclical Companies Crush Telephones

March 22, 2010

By Nick Baker and Rita Nazareth March 22 (Bloomberg) — Retailers erased their stock market losses since the collapse of Lehman Brothers Holdings Inc. and transportation companies doubled in a year, signs the advance in U.S. equities is just getting started. Amazon.com Inc. and Gap Inc. have wiped out declines of as much as 63 percent since the bear market began in October 2007 amid forecasts retailers’ profits will increase 63 percent through 2012. The Dow Jones Transportation Average, where earnings are projected to almost triple in two years, is beating the Standard & Poor’s 500 Index by 32 percentage points since March 2009, the widest gap for a rally since 1990. Investors seeking signals equities will keep rising are finding them in industries most tied to the economy, the basis for a century-old forecasting technique known as Dow Theory. While bears say the gains aren’t justified by earnings and that shares are climbing too fast , Stephen Lieber of Alpine Woods Capital Investors LLC and David Darst of Morgan Stanley are buying on speculation the expansion will revive profit growth. “This is not a junk stock rally,” said Lieber, who helps manage more than $7 billion in Purchase, New York. “This is a restoration-of-confidence rally. This is a business confidence rally.” Lieber owns Intel Corp. , the Santa Clara, California-based semiconductor maker that climbed to an 18-month high of $22.24 last week amid optimism sales to business customers are growing. Winning Streak The S&P 500 increased 0.9 percent and the MSCI World Index of stocks in 23 developed nations climbed 0.3 percent as both measures advanced for a third week. Government reports showing higher consumer spending and lower-than-expected inflation have pushed the Dow Jones Industrial Average up 3 percent in 2010, according to data compiled by Bloomberg. Futures on the S&P 500 slipped 0.8 percent as of 10:00 a.m. in London today. An exchange-traded fund that matches the performance of the U.S. benchmark index, the SPDR S&P 500 ETF Trust , rose 14 straight days through March 17, the longest streak in its 17- year history. The 11-day winning streak by the Dow transports that ended last week was the best since 1992, data compiled by Bloomberg show. Companies whose profits are most tied to changes in U.S. gross domestic product are beating those with the smallest connection to the economy by the widest margin on record. The Morgan Stanley Cyclical Index , a measure of 30 stocks from Dearborn, Michigan-based Ford Motor Co. to U.S. Steel Corp. in Pittsburgh, has surged 209 percent since March 6, 2009. It topped the Morgan Stanley Consumer Index, a gauge of companies such as Pfizer Inc. and ConAgra Foods Inc. that do relatively well during a contraction, by 147 percentage points. Twice the Gain The cyclical index has also provided almost double the return since Feb. 8, when the S&P 500 began rebounding from a three-week drop that erased 8.1 percent, according to data compiled by Bloomberg. Manufacturing and industrial stocks in the S&P 500 are up 11 percent in 2010, beating nine other groups in the index by at least 2 percentage points, data compiled by Bloomberg show. This is the first time since 1985 that the measure, which includes Chicago-based Boeing Co. , the world’s second-largest commercial plane-maker, and General Electric Co. in Fairfield, Connecticut, the biggest supplier of power turbines, has led this far into a year, according to Birinyi Associates Inc., the Westport, Connecticut-based research firm founded by Laszlo Birinyi . “We are still bullish on risk assets,” said Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, which oversees $1.6 trillion. “We see a multiyear cyclical bull market.” High Velocity The speed of the rebound in stocks since Feb. 8 is reason to doubt its sustainability, says Andrew Lapthorne , global head of quantitative strategy at Paris-based Societe Generale. The relative strength index using 14 days of data for the SPDR S&P 500 ETF rose to 76.76 on March 17, the highest level since October 2006. Surges in the RSI mean a security may have climbed too far, too fast. Rallying stocks have pushed the S&P 500’s price relative to earnings in the last 12 months to 18.6 times . The average multiple over the last 56 years is 16.6, according to data compiled by Bloomberg. “The long-term valuation expectations are way, way too high,” said Lapthorne. “I don’t think there is much value in the markets. It has the potential to drive violently downwards.” Amazon, Old Navy Investors should bet that companies with the best earnings prospects will outperform, Robert Buckland , an equity strategist at Citigroup Inc. in London, wrote in a March 17 report. Stocks that fell the most in the 2007 to 2009 bear market helped propel the S&P 500 during the past 12 months and cyclical stocks will help lead the market in the next two years, Buckland said. Amazon , the Seattle-based owner of the world’s biggest Internet retailer, has doubled since the stock market bottomed in 2009 and gained 12 percent over the last six weeks. San Francisco-based Gap, which runs namesake clothing stores and Old Navy, is up 22 percent in the past six weeks. Both stocks helped send the S&P 500 Consumer Discretionary Index , a measure of companies reliant on Americans’ spending, past its level on Sept. 12, 2008, just before Lehman’s bankruptcy froze credit markets and $1.7 trillion in bank losses spurred the worst recession in seven decades. Buffett’s Indicator The average analyst estimate for Amazon’s 2011 earnings has increased 14 percent to $4.78 a share this year. Gap’s has risen 4.8 percent to $1.73. Profit for companies in the consumer discretionary index are forecast to surge an average of 57 percent to $21.66 a share through the end of 2012, according to data compiled by Bloomberg. Warren Buffett said on Nov. 3 that he made an “all-in wager” on the strength of the U.S. economy when he bought Fort Worth, Texas-based railroad Burlington Northern Santa Fe Corp. for $27 billion, the biggest purchase of his career. Buffett, 79, the billionaire chairman of Berkshire Hathaway Inc. in Omaha, Nebraska, told ABC News last year that U.S. rail- freight traffic is among the most important measures of economic health. Trains hauled 287,837 carloads for the week ended March 13, near the highest level in a year, data from the Washington- based Association of American Railroads show. ‘Coming Back’ The rebound in shipping has helped push the Dow Jones Transportation Average up 104 percent since the market low, compared with the S&P 500’s 71 percent jump. Companies in the gauge are projected to report a 173 percent increase in profits in the next two years, led by a sixfold gain at Honolulu-based Alexander & Baldwin Inc. , which operates barges, data on operating profits compiled by Bloomberg show. By comparison, earnings among S&P 500 companies may grow 52 percent during that time, the data show. “The cyclical stocks are coming back because the economy is coming back,” said Jeffrey Saut , the chief investment strategist at Raymond James & Associates, which manages $230 billion in St. Petersburg, Florida. “I’m still bullish into the summer.” Dow Theory, developed by Wall Street Journal co-founder Charles Dow in the 1800s, suggests the rally in U.S. equities may continue. Dow’s transportation and industrial averages both reached the highest levels since October 2008 last week. Stocks that fell the most during the bear market plunge have been the biggest winners in the rebound, according to data compiled by Bloomberg. Financial shares in the S&P 500 have risen 152 percent in the past year. Investors from Paulson & Co. to Fairholme Capital Management are loading up on the group. Regulatory filings show banks, brokerages and insurers make up 19 percent of hedge fund equity holdings, the biggest allocation compared with other industries. “I’m bullish,” said John Carey , a Boston-based money manager at Pioneer Investment Management, which oversees more than $220 billion. “The economy is improving, corporate earnings look good and there’s still great value in the market.” To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloombeg.net .

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Amazon.com Expanding Further in Seattle

March 17, 2010

Amazon.com’s forthcoming relocation and expansion in Seattle just got a little bit bigger. The locally based Internet retail juggernaut signed a long-term lease for 180,000 square feet with Vulcan Real Estate at 2201 Westlake. Amazon plans to take…

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Google Rivals Asked for Statements as FTC Probes Company’s AdMob Purchase

March 10, 2010

By Todd Shields and Dina Bass March 10 (Bloomberg) — U.S. regulators are seeking sworn declarations from Google Inc. competitors and advertisers as part of their probe of the Internet company’s bid to buy AdMob Inc., indicating the government may challenge the deal, said people with direct knowledge of the matter. The Federal Trade Commission is investigating whether Google’s proposed purchase of AdMob would reduce competition in the market for Internet advertising on mobile phones. At least two companies are being asked to sign statements, said the people, who declined to be identified because the probe isn’t being conducted in public. The declarations put on paper information that Google rivals gave the FTC in its investigation of the $750 million purchase of AdMob, announced in November. AdMob sells ads that appear on Web pages and applications on mobile phones. The agency is assessing whether the purchase would let Google parlay its dominance in Internet searches on computers to phones. Agency officials typically collect declarations “when they think there is some significant chance” the agency will ask a court to block a merger, or seek to modify a deal, said Stephen Calkins , a former general counsel at the FTC who is now a professor of law at Wayne State University’s law school in Detroit. Even so, it’s not uncommon for the agency to collect affidavits and then not litigate, he said. FTC Discussions Claudia Bourne-Farrell , an FTC spokeswoman, declined to comment. Google, owner of the most-used Internet search engine, said it is continuing to talk with the FTC and provide information. “We’re not going to discuss the details of that process,” Adam Kovacevich , a spokesman for the Mountain View, California- based company, said in a statement. “We’re confident that they’ll conclude that the rapidly growing mobile advertising space will remain highly competitive after this deal closes.” Google rose $9.94 to $570.13 at 2:02 p.m. New York time in Nasdaq Stock Market trading. The stock had declined 9.6 percent this year before today. Google and AdMob combined would form the largest mobile- advertising company — the companies combined had 21 percent of the U.S. market in 2009, according to Karsten Weide , an analyst with researcher IDC in San Mateo, California. Google said on Dec. 23 that the agency had asked for more information about the transaction. “It’s difficult to envision a scenario where this development, if true, is positive for Google-AdMob,” said Thomas Ensign , counsel in the antitrust, competition and trade practice of Freshfields Bruckhaus Deringer LLP in Washington. “But it doesn’t necessarily mean the agency is going to challenge the deal.” Google’s negotiations with the FTC may persuade the agency’s staff that the deal won’t harm competition, Calkins said. When the investigation is concluded, it’s up to the agency’s commissioners to decide whether to challenge the deal in court. To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net ; Dina Bass in Seattle at dbass2@bloomberg.net

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Verizon Said to Be Aiming to Release Microsoft Phones for Teens by June

March 5, 2010

By Amy Thomson and Dina Bass March 5 (Bloomberg) — Verizon Wireless , the largest U.S. wireless carrier, will introduce two phones from Microsoft Corp. in about May or June that are targeted at teenagers, two people with knowledge of the companies’ plans said. The models will have easy access to social-networking sites and include keyboards for text messaging, according to one of the people, who asked not to be identified because the plans aren’t public. The phones will be made by Sharp Corp. and carry the Microsoft and Verizon Wireless brands, the other person said. Until now, Microsoft has focused on providing its mobile Windows software to phone makers, rather than offering a model under its own brand. The move would parallel Google Inc.’s decision to sell the Nexus One phone, which uses that company’s Android operating system. Microsoft is seeking to recapture a larger share of the phone market after Android and Apple Inc. ’s iPhone lured away customers from Windows. By moving directly into wireless phones, Microsoft and Google could risk hurting their relationships with other manufacturers and service providers. Microsoft will continue to work closely with handset companies that make Windows phones and the mobile carriers that sell them, the person said. Microsoft executive Robbie Bach , who oversees the mobile- phone business, said in January that it would be “very, very difficult” for Google to sell its own phone while keeping manufacturers and carriers for other Android handsets happy. Different Tack With its phone, Microsoft will take a different tack than Google, said the person familiar with the matter. While the Nexus One is only available from Google, Microsoft ’s phone will be sold by Verizon, the person said. The phone stemmed from a Microsoft project code-named “Pink.” Brenda Raney , a spokeswoman for Basking Ridge, New Jersey- based Verizon Wireless, declined to comment, as did Jay Cudal, a spokesman for Microsoft. Chris Loncto , a spokesman for Osaka, Japan-based Sharp, also declined to comment. Verizon is increasing its lineup of smartphones in a bid to get more revenue from data plans, which customers must buy to access the Internet or download applications. Smartphone shipments will increase 46 percent worldwide this year, research firm Gartner Inc. said. That compares with estimates for total mobile-phone market growth of as much as 13 percent. Cliq, Sidekick The phone is intended to address a similar audience as Motorola Inc. ’s Cliq or T-Mobile USA Inc.’s Sidekick, one of the people said. In 2008, Microsoft acquired Danger Inc., which makes the software for the Sidekick. The Cliq includes software called Motoblur, which serves up Twitter messages, pictures and contacts to the phone’s home screen. Microsoft will probably spend more money marketing its new mobile Windows software than the Pink phone, said Matt Rosoff , an analyst at Kirkland, Washington-based Directions on Microsoft. That will smooth over relationships with handset makers and carriers that are Microsoft partners, he said. Microsoft said last month that the software, called Windows Phone 7 Series, will be available in handsets by the holidays. “They will say, ‘Windows phones is where our investment is going. You should be betting on that,’” Rosoff said. “They did keep a team working on the successor to the Sidekick and that’s what this is. This is a legacy of Microsoft being a big decentralized company doing a lot of things and seeing what wins. It’s not quite the same situation as with Google.” Touch Screens Rosoff said the Pink phones won’t run the new Windows software. Windows Phone 7 will offer touch-screen features, letting handsets work more like the iPhone. The software, unveiled at a conference last month, also has a new design and connects with Microsoft ’s Xbox Live online games and Zune music service. Microsoft’s Windows dropped to a 7.9 percent share of the worldwide smartphone software market in the fourth quarter, from 12.5 percent a year earlier, while the iPhone and Android posted gains, according to ABI Research . The iPhone took 16.6 percent of the market in the fourth quarter, up from 10.8 percent the previous year, Oyster Bay, New York-based ABI said. Android climbed to 8.5 percent from 1.7 percent. The Wall Street Journal reported last month that the Pink phones would be made by Sharp and go on sale as early as the spring. Technology Web site Gizmodo posted yesterday what it said were photos of one model. Microsoft rose 17 cents to $28.63 yesterday in Nasdaq Stock Market trading. Verizon Communications Inc. , co-owner of Verizon Wireless, gained 14 cents to $29.27 on the New York Stock Exchange. To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net ; Dina Bass in Seattle at dbass2@bloomberg.net

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Novell Gets $2 Billion Bid From Elliott Associates; Shares Top Offer Price

March 2, 2010

By Dina Bass and Mary Childs March 2 (Bloomberg) — Novell Inc. , a seller of network software whose stock has slid 85 percent in the past decade, received an unsolicited takeover bid from shareholder Elliott Associates LP that values the company at about $2 billion. Novell’s shares jumped as much as 35 percent to $6.40 in extended trading , indicating that investors see the $5.75-a- share offer as too low. Elliott, a money management firm that owns about 8.5 percent of Novell’s shares outstanding, made the cash offer public in a letter today to the company’s board. Elliott’s bid could trigger more offers from companies such as Cisco Systems Inc., Hewlett-Packard Co. and Microsoft Corp., said Richard Williams , an analyst at Cross Research. Waltham, Massachusetts-based Novell reported its sixth straight quarterly sales decline last week, and Chief Financial Officer Dana Russell predicted “muted” revenue in the current quarter. “Management is under pressure because essentially this is providing an alternative option to shareholders ,” said Williams, who is based in Livingston, New Jersey. He recommends buying Novell shares and doesn’t own any. “If nothing else, I would think we’ll see a higher bid.” Ian Bruce, a spokesman for Novell, declined to comment. Scott Tagliarino , a spokesman for Elliott, declined to comment beyond the statement. Novell’s Russell said last week that management was focused on improving sales and cutting costs, rather than selling the company, which he didn’t rule out. Novell fell 5 cents to $4.75 today in regular Nasdaq Stock Market trading. The shares are up 14 percent so far this year. Elliott Investments Elliott has more than $16 billion under management, the company said. It was one of several parties in a 2006 buyout of Metrologic Instruments Inc., a maker of bar-code scanners. Elliott provided some debt and financing to fund the 2009 acquisition of MSC.Software Corp. by private-equity firm Symphony Technology Group LLC. Elliott, based in New York, was also among several creditors last year who purchased Delphi Corp., a spun-off auto- parts unit of General Motors Co. that was in bankruptcy for almost four years. Delphi exited bankruptcy in October. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Soros Signals Gold Bubble as Momentary Buyer While Goldman Predicts Record

March 1, 2010

By Nicholas Larkin and Pham-Duy Nguyen March 1 (Bloomberg) — George Soros is helping drive up gold prices by doubling his bet in a market even he considers a “bubble” as Goldman Sachs Group Inc., Barclays Capital and HSBC Holdings Plc predict more gains before it bursts. Soros Fund Management LLC, which manages about $25 billion, increased its investment in SPDR Gold Trust, the world’s largest exchange-traded fund for the metal, by 152 percent in the fourth quarter, a Feb. 16 Securities and Exchange Commission filing shows. While prices have fallen 8.9 percent since reaching a record on Dec. 3, 15 of 22 analysts in a Bloomberg survey say gold will reach a new high, with the median forecast predicting a 16 percent advance to as much as $1,300 an ounce this year. “When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment,” Soros said at the World Economic Forum’s annual meeting in Davos, Switzerland, in January. “The ultimate asset bubble is gold,” he said. In a Jan. 28 Bloomberg Television interview, the 79-year- old billionaire recalled that former Federal Reserve Chairman Alan Greenspan warned of “irrational exuberance” in financial markets three years before the technology bubble burst in 2000. The Standard & Poor’s 500 Index rose 89 percent in the period. Buying at the start of a bubble is “rational,” Soros said. Gold’s fourfold rally since the end of 2000 has also attracted money managers John Paulson , Paul Tudor Jones and David Einhorn . Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 by betting that subprime mortgages would plummet. Einhorn said in October that his Greenlight Capital Inc. bought gold to bet against the dollar. ‘Just an Asset’ Tudor Investment Corp., based in Greenwich, Connecticut, increased its stake in Newmont Mining Corp., the largest U.S. gold producer, almost fourfold in the final quarter of 2009. Gold is “just an asset that, like everything else in life, has its time and place. And now is that time,” Paul Tudor Jones said in an October letter to clients. Funds of the four-biggest ETF firms hold 1,583 metric tons of the metal, according to data compiled by Bloomberg. Only the central banks or governments of the U.S., Germany, Italy and France and the International Monetary Fund hold more. Investment demand , including in bars and coins, doubled to 1,820 tons last year as investors sought a refuge from the global recession, according to GFMS Ltd. That exceeded jewelry demand for the first time in three decades, the London-based research firm said Jan. 13. Prices reached the record $1,226.56 a decade after the metal fell to a 20-year low of $251.95 amid sales by central banks. Gold was at $1,117.15 today in London. Dollar Rally The price fell as the economic recovery sparked a dollar rally that has pushed the U.S. Dollar Index , a gauge against six counterparts, up 3.5 percent this year. Gold ended last week at $1,117.60, up 18 percent in the past 12 months and 21 percent since the start of the third quarter, when Soros accumulated 2.44 million shares of the SPDR Gold Trust. “Perhaps Soros thinks gold is going to bubble but the bubble is going to last for a while and he wants to profit from it,” said Jeffrey Nichols, managing director of American Precious Metals Advisors and an adviser to central banks and mining companies. “We could have a bubble but gold can reach $2,000 or $3,000 before it’s over.” Soros’ New York-based firm became the fourth-biggest investor in the SPDR Gold Trust by the end of 2009, 17 years after he made $1 billion breaking the Bank of England’s defense of the pound. The SPDR fund holds 1,107 tons, more than either Switzerland or China. Paulson, Einhorn Paulson & Co. is the ETF’s biggest investor, with 31.5 million shares, regulatory filings show. With each representing almost a 10th of an ounce of gold, the hedge fund firm’s stake is the equivalent of about 96 tons, exceeding the holdings of Australia and Kuwait. New York-based Paulson is also the biggest investor in Johannesburg-based AngloGold Ashanti Ltd. , Africa’s top producer. The Market Vectors Gold Miners ETF is Einhorn’s seventh-largest holding, according to a Feb. 16 filing. Goldman predicts gold will reach $1,235 in three months and $1,380 in 12 months. Barclays Capital says the metal will average $1,235 in the fourth quarter. HSBC says it may peak at $1,300 this year. “I absolutely believe it’s heading into a bubble, but that’s why you buy it,” said Charles Morris , who manages $2.5 billion at HSBC Global Asset Management’s Absolute Return Fund in London. “A bubble is good,” he said, forecasting the metal may rise to $5,000 in five years to explain why 11 percent of his fund is in gold. World Economic Growth The metal dropped from the record high as recovering economies pushed up the dollar. The Washington-based IMF increased its forecast for world economic growth in 2010 to 3.9 percent in January, from 3.1 percent in October. Gold may drop 28 percent to $800 this year if the U.S. raises interest rates, said New York-based Tom Winmill , who manages $120 million at the Midas Fund. Gold generally only earns interest for banks that lend it, so its lure over cash diminishes as borrowing costs increase. Fed Chairman Ben S. Bernanke said Feb. 24 that the U.S. economy is in a “nascent” recovery that still requires low borrowing costs. U.S. policy makers likely will start raising the target rate for overnight loans between banks from the record low range of zero to 0.25 percent in the third quarter, according to the median estimate of 72 economists. ‘Very Expensive’ “Gold looks very expensive right now,” said Brian Nick , an investment strategist at Barclays Wealth in New York, which manages $221 billion. “Yes, rates are low but are they low enough to produce runaway inflation? Actual inflation numbers haven’t pointed to a worrying trend” that would prompt Fed action to cool an overheating economy, he said. U.S. consumer prices will rise 2.15 percent this year, compared with last year’s 0.35 percent decline, according to the median of 60 estimates. Stock-option traders are boosting bearish bets against gold-mining companies’ shares, paying the most in more than a year for options to protect them from declines. Bearish options on the Market Vectors Gold Miners ETF, which tracks 31 producers, were 12 percent more expensive than bullish ones last week, the highest premium since December 2008, according to data compiled by Bloomberg. Hedge funds and speculators are paring bets that gold will keep rising. There were 200,622 more outstanding futures contracts that profit on the metal gaining than wagers that pay when prices fall as of Feb. 23, down from 262,331 in November, U.S. Commodity Futures Trading Commission data show. More Bullish Traders remain more bullish than in past years, with speculative long bets on gold on the New York Mercantile Exchange outnumbering short wagers by more than 7-to-1, compared with less than 5-to-1 in the three years before the September 2008 collapse of Lehman Brothers Holdings Inc. spurred demand for gold’s perceived safety. Central banks likely will expand their reserves for a second straight year, said CPM Group, a New York commodities researcher. The last time they added to stockpiles, in 1988, gold fell 15 percent and then took 15 years to recoup its losses, suggesting they may not be the best indicator of investment timing. Central banks hold about 18 percent of all gold ever mined. Through the end of last year, gold was up about 29 percent since its 1980 peak. In that same period, Treasuries rose about 1,090 percent. The S&P 500 earned more than 2,300 percent with dividends reinvested over the three decades. Even cash in the average U.S. checking account outdid gold, gaining 92 percent. Premature Bubble The combined holdings of the biggest ETF providers — State Street Corp., ETF Securities Ltd., Zuercher Kantonalbank and Barclays Capital — rose more than 16 times from 95 tons five years ago. It may be premature to declare a bubble by the standards of other commodities. Copper rose 188 percent in the year to May 2006 before falling 38 percent in nine months. Crude oil doubled in about 11 months before peaking in July 2008 and slumped 77 percent in the next five. Gold hasn’t had a 12-month gain of more than 55 percent since October 1980. Adjusted for inflation , it’s still worth about half of its 20th century peak of $850 on Jan. 21, 1980. Touradji Capital Management LP founder Paul Touradji said in a March 2008 letter to his hedge fund clients that the commodity market was a “buying orgy” of inflated prices. Oil, which had gained 80 percent in the previous 12 months, went up 35 percent more in the next four months. Touradji’s largest equity holding at the end of the fourth quarter was a stake in Toronto-based Barrick Gold Corp., the world’s biggest producer of the metal. “Gold makes sense as an investment,” said Jeffrey Christian , the managing director of CPM Group. “Just because the price of gold is going up for the 10th year doesn’t mean it’s a bubble.” To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net ; Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net .

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Frank Quattrone’s First IPO Since Comeback Leaves Investors With Losses

February 17, 2010

By Michael Tsang Feb. 17 (Bloomberg) — Frank Quattrone’s return to the initial public offering market is leaving investors with losses. QuinStreet Inc., Silicon Valley’s first IPO this year, has yet to close above its $15 offering price since it began trading on Feb. 11, dropping 2.5 percent even as the Nasdaq Composite Index climbed 3.1 percent. Quattrone’s Qatalyst Partners was paid $2.1 million to help QuinStreet choose underwriters for its $150 million offering and negotiate terms of the deal, according to filings with the Securities and Exchange Commission. The initial sale marked Quattrone’s first involvement with an IPO after winning a legal battle stemming from allegations in 2003 that he gave out shares to favored executives. QuinStreet’s performance contrasts with the technology companies that Quattrone took public in the 1990s, when offerings from Cisco Systems Inc. and Amazon.com Inc. helped make him one of the highest-paid bankers during the Internet boom. “Quattrone does what any good advisor does, he basically tries to estimate what the market will be like and he was a little bit too optimistic,” said Raphael Amit , a management professor who studies venture-capital financing at the University of Pennsylvania’s Wharton School in Philadelphia. “We are in a different world. The bar for an IPO is much higher now” than in the 1990s, he said. Quattrone declined to comment through his spokesman Robert Chlopak . Telephone calls to Douglas Valenti , chief executive officer at QuinStreet, and Kenneth Hahn , the company’s chief financial officer, weren’t returned. Nasdaq, S&P 500 QuinStreet’s shares have underperformed the broader market even after the Foster City, California-based company cut the price of its IPO by as much as 21 percent. Shares of the online advertiser increased 0.6 percent to $14.63 yesterday on the Nasdaq Stock Market, while the Nasdaq Composite advanced 1.4 percent and the Standard & Poor’s 500 Index climbed 1.8 percent. On its first day of trading, QuinStreet rose as much as 3.7 percent before closing unchanged at $15. The Internet marketer’s initial sale came as a slump in IPOs deepened. At least six U.S. offerings have been postponed or delayed this year, while the 10 companies that completed IPOs have cut the size of their deals by 30 percent on average, data compiled by Bloomberg showed. Half have declined since listing their shares. QuinStreet’s drop is “more about the fact that capital markets are not where we’d like them to be,” Amit said. Cisco, Amazon.com The first-day gains of IPOs that Quattrone arranged burnished his reputation in the 1990s. San Jose, California- based Cisco jumped 24 percent after its sale in February 1990, while Amazon.com of Seattle climbed 31 percent in May 1997. The former head of technology banking at Credit Suisse First Boston made more than $200 million in compensation from 1998 to 2001. Quattrone was forced out of the financial industry after the NASD in 2003 accused him of giving out IPO shares to executives to win investment banking business and federal prosecutors charged him with obstructing justice. NASD dropped its case in 2006 and a U.S. judge formally approved dismissal of charges against Quattrone in August 2007. He started Qatalyst Partners, a San Francisco-based advisory firm focused on technology companies, in March 2008. With Qatalyst as its financial adviser, QuinStreet picked Credit Suisse Group AG of Zurich, Charlotte, North Carolina- based Bank of America Corp. and JPMorgan Chase & Co. in New York to lead its initial sale. Duncan King , a spokesman at Credit Suisse, declined to comment, as did Bank of America’s John Yiannacopoulos and Brian Marchiony of JPMorgan. Relative Value The IPO priced 10 million QuinStreet shares at $15 each after the company and its underwriters set a range of $17 to $19. A midpoint IPO price of $18 a share would have given a market capitalization of $808 million to QuinStreet, which runs marketing Web sites for clients such as for-profit education companies and gets paid when visitors click for more information and become customers. That valued the advertiser at 39.4 times its net income of $20.54 million last year, almost double the median 19.8 times earnings for 27 online marketing and information companies globally, according to data compiled by Bloomberg. At $15 a share, QuinStreet is 66 percent more expensive. Rusal, Energizer QuinStreet isn’t alone in hiring a financial adviser for its share sale. N M Rothschild & Sons Ltd. served as United Co. Rusal’s financial adviser for its HK$17.4 billion ($2.2 billion) sale in January. Moscow-based Rusal, the world’s largest aluminum producer, declined 22 percent since its Hong Kong listing through last week. Rothschild provided “corporate finance advice” related to the IPO, according to the prospectus. Energizer Holdings Inc., the St. Louis-based battery-maker known for its indefatigable bunny, paid former UBS AG investment banker Kenneth Moelis’s advisory firm, Moelis & Co., $1.75 million for its $465.5 million share sale in May. To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net .

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Midas Fund’s Winmill Turns Gold’s Rise into 83% Return With Bets on Miners

February 11, 2010

By MaryAnn Busso Feb. 11 (Bloomberg) — Gold had a good year in 2009. Tom Winmill ’s Midas Fund had an even better one. The $125 million fund, which invests in companies that mine or process metals or other commodities, rose 83 percent last year. That return beat 95 percent of the fund’s peers, according to data compiled by Bloomberg. This year, the fund dropped 7.6 percent through Feb. 10. Its average annual return was a decline of 4.8 percent over three years and a gain of 13.5 percent for five years. Winmill, 50, says his training as a lawyer helps him sift through engineering reports on mining deposits, Bloomberg Markets reports in its March 2010 issue. “That’s much more important than putting on your hiking boots and walking around the mine,” he says. Among the items high on Winmill’s checklist when picking stocks: a miner’s ability to start production on time and on budget and to preserve the value of its shares. “I like to see a mining company that pays a dividend, occasionally does a stock buyback — instead of constant stock issuance — and doesn’t make dilutive acquisitions in order to extend their empire,” Winmill says. Those three things, combined with a good project, are key, he says. $1,500 Forecast As of January, Winmill had the majority of the fund’s assets in stocks of gold-mining companies. Returns on miners’ shares tend to amplify the returns on gold because of the companies’ operating leverage, Winmill says. That gave the fund a boost from a bullish market as investors sought to protect the value of their holdings. “The devaluation of the dollar and the bursting of the bond bubble are going to hurt a lot of investors,” Winmill says. “And inflation is going to hurt a lot of savers.” In January, Winmill predicted gold prices will average $1,200 an ounce (31 grams) during the first quarter and increase to $1,500 by the end of the year. Gold rose 24 percent last year. This year, it dropped 2 percent to trade at $1,072 an ounce on Feb. 10. Among the miners that meet Winmill’s investment test is Northern Dynasty Minerals Ltd. The Vancouver-based company is developing Alaska’s Pebble gold and copper project in partnership with Anglo American Plc. Shares of Northern Dynasty, which is 20 percent owned by Rio Tinto Group, rose 124 percent in 2009. This year, the stock rose 3 percent to trade at $8.52 on Feb. 10. “They’ve got experienced, well-capitalized partners who really know how to get the ore out of the ground,” Winmill says. Gold and Silver Midas also owns shares of Jaguar Mining Inc. The Concord, New Hampshire-based company is bringing older gold mines in Brazil back into production. Winmill says Jaguar’s output might reach 600,000 ounces in about five years, up from 115,000 ounces in 2008. He says the company is likely to be acquired. Jaguar’s shares jumped 114 percent in 2009. This year, they fell 14 percent to trade at $9.60 on Feb. 10. Midas’s holdings also include Silvercorp Metals Inc. and Fresnillo Plc . Shares of Vancouver-based Silvercorp, which has been buying high-grade mines in China, rose 210 percent last year. Stock of Mexico City-based Fresnillo, which operates silver mines in Mexico, was up 244 percent in 2009. Winmill says he looks at gold through four filters: U.S. fiscal policy, U.S. monetary policy, market supply and demand, and geopolitical events. Preserving Value Growing U.S. budget deficits will reduce the dollar’s purchasing power, he says. From 2001 through 2009, U.S. money supply almost doubled to $8.5 trillion. During the next decade, U.S. gross domestic product of about $14 trillion is likely to grow an average of only 1 to 2 percent a year, Winmill says. “We’ll double the supply of dollars and have about the same amount of wealth, so the dollar will have about half the purchasing power that it has today,” he says. Given that assumption, gold will be a way to preserve value, he says. As the deficit expands, the U.S. Federal Reserve will have less ability to control inflation, Winmill says. He forecasts a 3 percent inflation rate by the end of this year and as much as 5 percent in 2012. The U.S. consumer price index rose 2.7 percent in December from a year earlier. The Fed is holding its target for the federal funds rate at zero to 0.25 percent to stimulate manufacturing and exports , and that’s driving the dollar down, Winmill says. “It’s great for the price of gold,” he says. “As the dollar goes down, it’s going to take more dollars to buy the same ounce of gold.” Supply and Demand The supply-and-demand outlook is mildly bullish: Scrap supply is up, jewelry demand is down, central banks have been buyers of gold and mined supply is trending lower, Winmill says. The least-important filter for analyzing gold is geopolitical events such as impending wars, he says, since prices usually reflect the worst expectations. For a short-term strategy, it’s better to buy gold when things calm down and sell when there’s maximum pessimism, he says. Winmill, who grew up in Locust, New Jersey, graduated from Yale University in 1981 and earned a law degree from the University of Washington four years later. After working as a lawyer in Seattle, he joined Bull & Bear Group Inc. in 1988. The New York-based investment management firm, which was headed by his father at the time, changed its name to Winmill & Co. in 1999. The firm bought the Midas Fund in 1995. After gold dropped to a low, the firm terminated its agreement with the fund’s subadviser in 1999, leaving Winmill to help reorganize the fund’s investments. He took over as portfolio manager of the fund in 2002. ‘Terrific Spot’ In 2008, Winmill and his wife moved from New York to Walpole, New Hampshire, to be closer to their two sons, who were going to school in the state. Winmill says he’s taken to rural life. He splits wood and taps the maple trees on his land. Last spring, he boiled the sap to make maple syrup. “We got about 2- 1/2 gallons,” he says. The steam from the process also peeled some wallpaper in his 1866 house, he says with a laugh. The Midas Fund isn’t only about gold, Winmill says. “I’m not a gold bug,” he says. “I’m a capital-appreciation bug.” To find returns for investors, the fund has the flexibility to invest in platinum, copper and other commodities, he says. At the moment, it doesn’t have to. “Right now, I think gold is in a terrific spot,” he says. To contact the reporter on this story: MaryAnn Busso in New York at mbusso@bloomberg.net ;

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Midas Fund’s Winmill Turns Gold’s Rise into 83% Return With Bets on Mines

February 11, 2010

By MaryAnn Busso Feb. 11 (Bloomberg) — Gold had a good year in 2009. Tom Winmill ’s Midas Fund had an even better one. The $125 million fund, which invests in companies that mine or process metals or other commodities, was up 83 percent last year. That return beat 95 percent of the fund’s peers, according to data compiled by Bloomberg. Winmill, 50, says his training as a lawyer helps him sift through engineering reports on mining deposits, Bloomberg Markets reports in its March 2010 issue. “That’s much more important than putting on your hiking boots and walking around the mine,” he says. Among the items high on Winmill’s checklist when picking stocks: a miner’s ability to start production on time and on budget and to preserve the value of its shares. “I like to see a mining company that pays a dividend, occasionally does a stock buyback — instead of constant stock issuance — and doesn’t make dilutive acquisitions in order to extend their empire,” Winmill says. Those three things, combined with a good project, are key, he says. As of January, Winmill had the majority of the fund’s assets in stocks of gold-mining companies. Returns on miners’ shares tend to amplify the returns on gold because of the companies’ operating leverage, Winmill says. That gave the fund a boost from a bullish market as investors sought to protect the value of their holdings. “The devaluation of the dollar and the bursting of the bond bubble are going to hurt a lot of investors,” Winmill says. “And inflation is going to hurt a lot of savers.” $1,500 Forecast In January, Winmill predicted gold prices will average $1,200 an ounce (31 grams) during the first quarter and increase to $1,500 by the end of the year. Gold rose 24 percent last year. This year, it dropped 2 percent to trade at $1,072 an ounce on Feb. 10. Among the miners that meet Winmill’s investment test is Northern Dynasty Minerals Ltd. The Vancouver-based company is developing Alaska’s Pebble gold and copper project in partnership with Anglo American Plc. Shares of Northern Dynasty, which is 20 percent owned by Rio Tinto Group, rose 124 percent in 2009. This year, the stock rose 3 percent to trade at $8.52 on Feb. 10. “They’ve got experienced, well-capitalized partners who really know how to get the ore out of the ground,” Winmill says. Midas also owns shares of Jaguar Mining Inc. The Concord, New Hampshire-based company is bringing older gold mines in Brazil back into production. Winmill says Jaguar’s output might reach 600,000 ounces in about five years, up from 115,000 ounces in 2008. He says the company is likely to be acquired. Jaguar’s shares jumped 114 percent in 2009. This year, they fell 14 percent to trade at $9.60 on Feb. 10. Silver Miners Midas’s holdings also include Silvercorp Metals Inc. and Fresnillo Plc . Shares of Vancouver-based Silvercorp, which has been buying high-grade mines in China, rose 210 percent last year. Stock of Mexico City-based Fresnillo, which operates silver mines in Mexico, was up 244 percent in 2009. Winmill says he looks at gold through four filters: U.S. fiscal policy, U.S. monetary policy, market supply and demand, and geopolitical events. Growing U.S. budget deficits will reduce the dollar’s purchasing power, he says. From 2001 through 2009, U.S. money supply almost doubled to $8.5 trillion. During the next decade, U.S. gross domestic product of about $14 trillion is likely to grow an average of only 1 to 2 percent a year, Winmill says. “We’ll double the supply of dollars and have about the same amount of wealth, so the dollar will have about half the purchasing power that it has today,” he says. Given that assumption, gold will be a way to preserve value, he says. Controlling Inflation As the deficit expands, the U.S. Federal Reserve will have less ability to control inflation, Winmill says. He forecasts a 3 percent inflation rate by the end of this year and as much as 5 percent in 2012. The U.S. consumer price index rose 2.7 percent in December from a year earlier. The Fed is holding its target for the federal funds rate at zero to 0.25 percent to stimulate manufacturing and exports , and that’s driving the dollar down, Winmill says. “It’s great for the price of gold,” he says. “As the dollar goes down, it’s going to take more dollars to buy the same ounce of gold.” The supply-and-demand outlook is mildly bullish: Scrap supply is up, jewelry demand is down, central banks have been buyers of gold and mined supply is trending lower, Winmill says. The least-important filter for analyzing gold is geopolitical events such as impending wars, he says, since prices usually reflect the worst expectations. For a short-term strategy, it’s better to buy gold when things calm down and sell when there’s maximum pessimism, he says. Winmill & Co. Winmill, who grew up in Locust, New Jersey, graduated from Yale University in 1981 and earned a law degree from the University of Washington four years later. After working as a lawyer in Seattle, he joined Bull & Bear Group Inc. in 1988. The New York-based investment management firm, which was headed by his father at the time, changed its name to Winmill & Co. in 1999. The firm bought the Midas Fund in 1995. After gold dropped to a low, the firm terminated its agreement with the fund’s subadviser in 1999, leaving Winmill to help reorganize the fund’s investments. He took over as portfolio manager of the fund in 2002. In 2008, Winmill and his wife moved from New York to Walpole, New Hampshire, to be closer to their two sons, who were going to school in the state. Winmill says he’s taken to rural life. He splits wood and taps the maple trees on his land. Last spring, he boiled the sap to make maple syrup. “We got about 2- 1/2 gallons,” he says. The steam from the process also peeled some wallpaper in his 1866 house, he says with a laugh. The Midas Fund isn’t only about gold, Winmill says. “I’m not a gold bug,” he says. “I’m a capital-appreciation bug.” To find returns for investors, the fund has the flexibility to invest in platinum, copper and other commodities, he says. At the moment, it doesn’t have to. “Right now, I think gold is in a terrific spot,” he says. To contact the reporter on this story: MaryAnn Busso in New York at mbusso@bloomberg.net ;

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Brett King: Banking’s biggest challenge – Marketing 2.0

February 7, 2010

There are some massive changes occurring in the banking space today, but none so dramatic as what is happening in marketing and advertising. Direct mail offerings have been declining rapidly since 2006. In 2009, less direct mail was sent by banks than in the year 2000. Direct mail has declined 32 per cent since 2007 alone. In 2008 the Internet surpassed all media except television as the primary source for national and international news; this has taken its toll. In March 2009, the Seattle Post-Intelligencier or the “PI” as it was known, a 146-year old newspaper, closed down, citing rising costs, falling revenues and declining circulation. Since just January 2008, at last count, 55 regional newspapers in Britain have folded. Of the top 25 newspapers in the U.S. in 1990 (the year newspaper employment peaked), 20 of those newspapers have seen declines (on average reporting circulation down by more than 30per cent), and two have been closed down or declared bankrupt. New York Times reported a 30 per cent fall in advertising revenue, resulting in a $35.6 million loss for the 2009 third quarter alone. In 2009 TV advertising revenues in Australia fell by more than 12.6 per cent in the first half of the year. In the first quarter of 2009, the U.S. recorded losses of more than 14 per cent in TV ad revenues in normally stable locations such as the Bay Area and New York, and is expected to suffer a total decline of 22 per cent for the year. Declines of 27 per cent and more were recorded in radio ad spend for the U.S. for the first half, even worse than the decline in TVCs. Yet, in a recent report commissioned by UK’s OFCOM forecast the value of TV ads in the U.K. could fall from GBP 3.16bn in 2007 to just GBP 520m in 12 years’ time. That’s an 83 per cent decline. A location-based offer at the retail point-of-sale is at least 500% more effective than Direct Mail Bank’s are finding their brands are no longer able to just get by with brand marketing, after all BofA and Citibank have great brand marketing, but are being hammered by customers on Twitter, YouTube and elsewhere. Thus I find it amusing that ‘digital’ or interactive marketing still makes up only a fraction of marketing budgets for banks in 2010. The very fact that banks separate ‘digital’ in respect to budget or spend, signifies the challenges of changing a culture that is so dependent on direct mail, print, radio and TV – all broadcast mechanisms. Let’s play Devil’s advocate for a moment. What will the advertising space look like in 5-10 years? It’s more than likely that TVCs will be gone – with declines in revenue we’ll have to find another way to pay for TV either through subscription or download, but there is no business model that indicates Free-to-air TV can survive with out Ad revenue. Direct Mail will be relegated to very specific segments, and then only for loyalty promotions. Newspapers will be on iThingys with paywalls – we’ll subscribe to newspapers and virtually every newspaper will be digital. Billboards will be all digital, but not based on TVCs – they have to be even more efficient. Physical magazines will be a luxury item, most magazines will be digital. In this space nearly ALL advertising will be digital within 10 years. TiVo already strips out TVCs. SPAM filters on our phones and email ensure the eDM ain’t going to work. We need something more. In my book BANK 2.0 I call this “Point-of-Impact” marketing. Banks need to insert their ‘value’ message into the transaction where it will have an effect, not send out millions of messages hoping for ‘brand recall’. Brand marketing will still exist, but campaign marketing needs to shift to point-of-impact . To illustrate, when you are on BA.com, United.com or CathayPacific.com and I’m booking a flight, that is where you need to sell me travel insurance. When I’m on a real-estate website, that is where you can target me with mortgage deals. When I walk into Bloomingdales, Marks and Spencer, or Armani Exchange send me a location-based MMS coupon on my mobile offering me a discount using a specific card. Get me when I’m interested, when I need it. But this requires a complete rethink of the structure of the marketing department, and a complete new set of tools. This is the biggest fundamental change to the marketing department of the bank… well ever . I’m not surprised that quite a few of the banks I’m talking to are not sure how to make this transition, but that doesn’t make it any less likely.

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Udvar-Hazy Leaves AIG Plane-Leasing Unit He Founded; Replaced by Plueger

February 4, 2010

By Susanna Ray Feb. 4 (Bloomberg) — American International Group Inc .’s Steven Udvar-Hazy stepped down as chief executive officer of the bailed-out insurer’s plane-leasing unit that he founded 37 years ago. John Plueger will take over as acting CEO of International Lease Finance Corp. , New York-based AIG said today in a statement. Plueger served as chief operating officer since 1995. Udvar-Hazy, who sold the company to AIG in 1990, gave up the chairmanship of the unit to AIG board member Douglas Steenland in December. He retirement is effective tomorrow. ILFC has been unable to tap its usual sources of funding since the insurer’s bailout, forcing AIG to prop up the unit with a $1.7 billion credit line in March and $2 billion in October. Los Angeles-based ILFC, the biggest customer for both Boeing Co. and Airbus SAS , has more than $4 billion of debt maturing in the first nine months of 2010. The plane unit was cut to the lowest investment-grade level by Standard & Poor’s on Jan. 25 on the prospect the insurer may take “several years” to sell the business. Moody’s Investors Service cut the company to junk in December on concern that AIG may cut off funding this year. AIG is selling assets to repay a $182.3 billion government rescue. The company has struck deals to raise more than $12 billion, divesting a U.S. auto insurer, an equipment guarantor and a Japanese office tower. Udvar-Hazy was in talks to buy as much as a $4.5 billion chunk of ILFC’s fleet to start a new firm, with backing from private-equity firms Onex Corp. and Greenbriar Equity Group LLC, people familiar with the matter said in October. ILFC has about 1,000 aircraft in its fleet valued at more than $44 billion. Executive Departures Udvar-Hazy is among more than 50 AIG managers to leave after the 2008 bailout. Edmund Tse stepped down in 2009 as a senior vice chairman after 48 years with the firm. Matthew Winter was named by Allstate Corp. in October to run its life insurance business after serving as AIG’s vice chairman of transition planning and administration. Kevin Kelley left AIG in 2008 to become CEO of Ironshore Inc. The uncertainty around ILFC’s ownership and financing prevented the company from placing any orders last year and weighed on sales at Airbus and Boeing. In prior slumps in air travel, leasing companies increased their pace of buying as airlines scaled back. As of Sept. 30 , ILFC had contracts to buy 125 aircraft from the two planemakers through 2019 with a purchase price of $14 billion. The company had about $31 billion in total debt at the end of the third quarter. Steenland was CEO of Northwest Airlines Inc. until the carrier was bought by Delta Air Lines Inc. in October 2008, and became a director of AIG in June 2009. To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net .

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Amazon.com Says It Will Restore Macmillan Books, Give in to Higher Pricing

February 1, 2010

By Greg Bensinger Feb. 1 (Bloomberg) — Amazon.com Inc., the world’s largest Internet retailer, said it will start selling Macmillan books on its Web site again and give in to the publisher’s demands to charge more for titles on the Kindle digital reader. Amazon.com temporarily stopped selling all Macmillan books to show the “seriousness of our disagreement,” Amazon.com said in a notice on its Web site yesterday. Macmillan, publisher of Elie Wiesel’s “Night” and Michael Cunningham’s “The Hours,” proposed new prices for electronic books last week, Macmillan Chief Executive Officer John Sargent said in an e-mail to authors and agents. “Amazon and Macmillan both want a healthy and vibrant future for books,” Sargent said. “We clearly do not agree on how to get there.” Under the new terms, Macmillan wants to be able to set the prices of electronic books individually, with most new titles costing $12.99 to $14.99. Amazon.com charges $9.99 for most best-sellers and new releases. Retailers would get a 30 percent commission under the proposal, Macmillan said. Titles such as “Sarah’s Key” by Tatiana de Rosnay and “Wolf Hall” by Hilary Mantel , listed as best sellers on Macmillan’s Web site, weren’t available for purchase directly from Amazon.com yesterday. A 2006 edition of “Night” and “The Hours” were also not available. Macmillan books are still available on Amazon.com from third-party sellers, Sargent said. Digital Future The clash highlights the struggle between Amazon.com and the publishing industry over the economics of electronic books. Some publishers are unhappy with pricing models on the Kindle and want more control over how much they charge, said Carl Howe, an analyst with Boston-based Yankee Group . “This is really a war for who wins control of the digital book publishing industry,” Howe said in an interview. Drew Herdener , a spokesman for Seattle-based Amazon.com, declined to comment beyond the notice on its Web site. Amazon lost 62 cents to $125.41 on Jan. 29 in Nasdaq Stock Market trading. The shares have lost 6.8 percent this year. Macmillan, which has offices in New York and London, is a unit of Verlagsgruppe Georg von Holtzbrinck GmbH. Eventually customers will have to decide whether it’s reasonable to pay $14.99 for a bestselling electronic book, Amazon.com said. ‘Strong Disagreement’ “We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles,” Amazon.com said. “We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms.” Amazon.com sells digital books that can be viewed on a range of devices, including the best-selling Kindle e-reader. The Kindle has about 60 percent of the U.S. market, with Sony Corp. ranking second, according to Cambridge, Massachusetts- based Forrester Research Inc. Apple Inc. ’s new iPad, debuted last week, will also display electronic books. Macmillan’s Sargent said in his e-mail that he met with Amazon.com in Seattle on Jan. 28 to propose the new pricing model. By the time he arrived back in New York, Amazon.com had told him that it planned to remove the publisher’s books. Amazon.com said Jan. 20 that it plans to offer a 70 percent commission to authors and publishers that put their titles on the Kindle. The e-books must sell for no more than $9.99 and the price must be at least 20 percent cheaper than the lowest available price for the physical version of the book, the company said. Revenue Split The 70-30 revenue split mirrors the arrangement Apple has with programmers who make applications for its iPhone and iPod Touch devices. In announcing the iPad, Apple appeared to be giving publishers more control over the price of their books for the device, Yankee Group’s Howe said. Macmillan is among five publishing houses, including News Corp.’s HarperCollins and Pearson Plc’s Penguin, that signed agreements with Cupertino, California-based Apple to distribute books on its tablet computer. “Publishers weren’t happy with the Kindle pricing before, and the release of the iPad has accelerated their displeasure,” Howe said. To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

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Microsoft Profit Beats Estimates on Release of Windows 7 Operating System

January 28, 2010

By Dina Bass Jan. 28 (Bloomberg) — Microsoft Corp. , the world’s largest software maker, reported second-quarter profit that topped analysts’ estimates after Windows 7 spurred the first sales increase in a year. Second-quarter net income rose 60 percent to $6.66 billion, or 74 cents a share, beating the 59-cent average estimate of analysts surveyed by Bloomberg. Revenue climbed 14 percent to $19 billion, the company said today in a statement. Personal-computer buyers stepped up orders last quarter as the economy recovered and Microsoft released a new version of Windows. Sales of U.S. PCs running Windows rose about 50 percent over the holiday season, the company said earlier this month, citing data from NPD Group Inc. Microsoft is counting on Windows 7 to trigger a surge of upgrades by consumers and businesses. “Microsoft is in a great position,” sent Brent Thill , an analyst at UBS AG in San Francisco, who recommends buying the shares. “They have one of the best product cycles in the last five years, maybe 10, and it spans across their three biggest divisions.” Microsoft , based in Redmond, Washington, fell 51 cents to $29.16 at 4 p.m. New York time on the Nasdaq Stock Market. The stock climbed 19 percent last quarter, exceeding the 5.5 percent gain by the Standard and Poor’s 500 Index . Today’s earnings report is the first under Chief Financial Officer Peter Klein , who was named to the post in November. Second-quarter sales included $1.71 billion in deferred revenue from previous quarters. Analysts projected total sales of $17.9 billion for the period, which ended Dec. 31. A year earlier, net income was $4.17 billion, or 47 cents a share, on sales of $16.6 billion. No Forecast Microsoft, which stopped giving earnings forecasts in January 2009, didn’t give a specific outlook for profit and sales. Microsoft reiterated an October prediction that it will spend as much as $26.5 billion on operating expenses this fiscal year. PC shipments rose 15 percent worldwide last quarter, according to Framingham, Massachusetts-based IDC, which had predicted 11 percent growth. U.S. shipments were even more surprising. They jumped 24 percent, four times the rate that IDC had projected. Microsoft ’s Windows runs more than 90 percent of the world’s PCs. Many customers skipped the last version of the software, called Vista, raising speculation that buyers will upgrade this time around. Microsoft ’s Bing search engine, released in June, has increased its market share by 2.7 percentage points, according to research firm ComScore Inc. Microsoft had 10.7 percent of the U.S. search market in December, compared with 65.7 percent for Google Inc. and 17.3 percent for Yahoo! Inc. , according to ComScore. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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Cheapest Route to Walmart from Asia May Skip Buffett’s $34 Billion Railway

January 28, 2010

By Kyunghee Park and Eric Sabo Jan. 28 (Bloomberg) — Chinese toys and sneakers headed to Wal-Mart Stores Inc. and Target Corp. on the U.S. East Coast may bypass Warren Buffett’s $33.8 billion railway as the expansion of the Panama Canal slashes the cost of shipping them by sea. The deeper, wider canal will allow A.P. Moeller-Maersk A/S, China Ocean Shipping Group Co. and other lines to ship more cargo directly to New York and Boston instead of unloading it on the West Coast for trains and trucks to finish the journey east. That could save exporters 30 percent, the canal operator said. The $5.25 billion Panama Canal project, scheduled for completion during its centennial in 2014, may take business from ports including Los Angeles and Seattle, and railroads including Berkshire Hathaway Inc.’s Burlington Northern Santa Fe Corp. It costs as much as $1,000 more per cargo container to use trains than ships, said Lee Sokje , a shipbuilding analyst at Mirae Asset Securities Co. in Seoul. “It is inevitable that railways, such as Burlington Northern, will lose some of their cargo once the Panama Canal is expanded,” said Jee Heon Seok , a shipping analyst for NH Investment & Securities Co. in Seoul. “Many more containers can be moved in a single voyage on a ship than going through the West Coast ports.” More Cargo China, poised to overtake Japan this year as the world’s second-biggest economy, may boost exports by 20 percent during the first quarter as the global economy recovers, according to Macquarie Securities Ltd. and Royal Bank of Scotland Group Plc. China Cosco Holdings Co. , Asia’s biggest shipping company by market value, and 14 other container lines said Jan. 14 they expect a “significant” increase in transpacific cargo this year on rising U.S. consumer sentiment. That prospective growth spurred Berkshire to pay $26 billion for the remaining 77.4 percent of Fort Worth, Texas- based Burlington Northern it didn’t already own. Buffett, the Berkshire chairman, said the largest U.S. railroad will benefit from “moving around more and more goods.” The acquisition is pending and expected to be completed by March 31. Burlington Northern customers in Gulf of Mexico ports — including Houston and Galveston, Texas — may benefit from more traffic going through a wider canal. Buffett didn’t respond to a request for comment. A Burlington Northern spokeswoman, Suann Lundsberg, said trains deliver cargo from the West Coast to the East Coast as many as nine days faster than ships using the canal. 30 Percent Savings Rail traffic is expected to continue growing, although probably at a slower rate than in the past, Lundsberg said. “We know he doesn’t make short-term investments,” Art Wong , spokesman for the port in Long Beach, California, said of Buffett. “He must be making it because he thinks it’s a great long-term investment.” About 43 percent of Asian cargo shipped to East Coast ports — including Savannah, Georgia, and Jacksonville, Florida –goes through the Panama Canal, said Rodolfo Sabonge, director of marketing for the Panama Canal Authority. That share may increase to 49 percent by 2025. “It will become less expensive overall to ship through the canal,” Sabonge said. “Savings could go up to 30 percent.” The expansion project , started in 2007, is building locks on both sides of the 50-mile canal, digging a new channel linking the locks and deepening the waterway connecting the Pacific Ocean with the Caribbean Sea. New York Harbor Currently, ships loading fewer than 5,000 20-foot boxes use the canal. The expansion will accommodate vessels carrying about 12,600 containers and may generate cargo growth of about 5 percent a year, Sabonge said. “It will, of course, help reduce costs for exporters to the U.S.,” said Victor Fung , chairman of outsourcer Li & Fung Ltd., the world’s biggest supplier of toys, clothes and furniture to retailers including Walmart, Target, Macy’s Inc. and Marks & Spencer Group Plc. The company reported HK$46.3 billion ($5.96 billion) in sales during the first half of last year, with 61 percent of that coming from the U.S. East Coast ports are readying for the changes. The Port Authority of New York and New Jersey is deepening more channels to 50 feet and considering options for a 78-year-old bridge between New Jersey and New York City that may be too low. “Increasing numbers of big ships are anticipated at our port facilities following an expansion of the Panama Canal,” the agency said in September. Ports, Railroads Collaborate Hanjin Shipping Co. , South Korea’s largest shipping company that operates two California terminals, is building its first East Coast terminal in Jacksonville to handle an increase in cargo through the canal. The facility opens in 2013. The ports around Charleston, South Carolina, are dredging to accommodate vessels carrying more than 8,000 20-foot containers. Six ports on the opposite coast — Los Angeles; Long Beach; Oakland, California; Seattle; Tacoma, Washington; and Portland, Oregon — handle about 70 percent of containerized trade between Asia and the U.S., according to an Oct. 12 statement. They are collaborating with Burlington Northern and Union Pacific Corp. to convince Asian exporters they are better options than the canal for reaching East Coast markets. They cite advantages including deep-water terminals, connections to inland transportation networks, and storage and distribution facilities. Trains also use less fuel, reducing costs and carbon emissions, they said. “We don’t think those alternative gateways will go away,” said Tay Yoshitani , chief executive officer for the Port of Seattle. “If we don’t improve our competitiveness, we could lose a lot of cargo.” To contact the reporters on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net ; Eric Sabo in Panama City at esabo1@bloomberg.net .

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Higher-End Home Prices Rose in 12 U.S. Cities in November, Including Miami

January 26, 2010

By Prashant Gopal Jan. 26 (Bloomberg) — Prices for the most expensive U.S. homes rose in 12 of 17 cities tracked by S&P/Case-Shiller indexes in November, indicating efforts to help first-time homebuyers are also leading to move-up purchases. Miami, Boston, Phoenix and San Francisco all registered gains at the top end of their markets, according to seasonally adjusted data from S&P Case-Shiller, which produces so-called tiered indexes for 17 cities that divide the housing market into thirds according to price. The bottom third, with the biggest share of first-time buyers and foreclosure purchases, also increased in 12 metro areas. “It does indicate that this is real demand and not just a statistical aberration,” said Karl Case , a co-creator of the indexes. “The ones coming in and buying are very optimistic about this being a good time to buy.” A government tax credit for first-time home buyers due to expire in November helped boost home sales in November, contributing to higher prices in some markets. Foreclosed homes are selling at an average discount of 28 percent compared with similar properties that haven’t been seized by banks, according to Seattle-based real estate data provider Zillow.com, which studied 16 U.S. metropolitan areas. High-end home prices increased in Atlanta, Boston, Cleveland, Denver, Los Angeles, Miami, Phoenix, Portland, San Diego, San Francisco, Seattle and Washington. The dividing lines between the three segments vary according to the market. For example, in Los Angeles, the top third starts at $495,996. Those houses have gained for six consecutive months, according to S&P/Case-Shiller. Phoenix high-end homes, defined as above $182,934, have risen for six straight months, and in Miami, prices for homes above $267,424 have climbed for five of the last six months. The composite index , which combines all three segments, gained in all 20 cities followed on a seasonally adjusted basis. To contact the reporter on this story: Prashant Gopal in New York at Pgopal2@bloomberg.net

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Google Threatening To Leave China Over Hacking, Email Leak

January 12, 2010

SAN FRANCISCO — Google Inc. will stop censoring its search results in China and may pull out of the country after discovering that computers hackers had tricked human rights activists into opening their e-mail accounts to outsiders. The change-of-heart announced Tuesday heralds a major shift for Google, which has repeatedly said it will obey Chinese laws that require some politically and socially sensitive issues to be blocked from search results that are available in other countries Google disclosed in a blog post that it had detected a “highly sophisticated and targeted attack on our corporate infrastructure originating from China.” Further investigation revealed that “a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists,” Google said in the post written by Chief Legal Officer David Drummond. Google did not specifically accuse the Chinese government. But the company added that it is “no longer willing to continue censoring our results” on its Chinese search engine, as the government requires. Google says the decision could force it to shut down its Chinese site and its offices in the country. An excerpt from Google’s blog post about Google.cn : We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.” These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China. It’s unclear how much of a blow to its business Google would suffer by pulling out of China. The country has the world’s largest population of Internet users but research firm Analysys International said last year that Baidu.com handled 62 percent of Web searches in China compared with 29 percent for Google. Clothilde Le Coz, Washington director for Reporters Without Borders, called Google’s willingness to stop censoring results a positive step, but added it doesn’t necessarily mean more information will be available to the average Chinese person. “The Chinese government is one of the most efficient in terms of censoring the Web,” she said. The media watchdog group has long criticized Google and other Internet companies for caving to China’s censorship regime. A spokesman for the Chinese consulate in San Francisco had no immediate comment. Google first agreed to censor search results in China in 2006 when it created a version of its search engine bearing China’s Web suffix, “.cn.” Previously, Chinese-language results had been available through the company’s main Google.com site. To obtain its Chinese license, Google agreed to omit Web content that the country’s government found objectionable. At the time Google executives said they struggled with how to reconcile the censorship concessions with the company’s motto of “don’t be evil.” By then Yahoo had come under fire for giving the Chinese government account information of a Chinese journalist who was later convicted for violating state secrecy laws. ___ AP Technology Writers Barbara Ortutay in New York and Jessica Mintz in Seattle contributed to this story. ___ On the Net: Google post: http://bit.ly/6vGb9S

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Seattle Seahawks Fire Coach Jim Mora After One Season, Fox Sports Reports

January 8, 2010

By Aaron Kuriloff Jan. 8 (Bloomberg) — The Seattle Seahawks have fired coach Jim Mora after one season with the National Football League team, Fox Sports reported. Mora was fired after the Seahawks finished 5-11, one win better than a year ago, with a roster depleted by injuries, Fox Sports said. Candidates for his replacement include Leslie Frazier , defensive coordinator for the Minnesota Vikings, the network reported without saying where it got its information. Mora joined Seattle after serving as coach of the Atlanta Falcons, where he led the team to the National Football Conference championship after the 2004 season. He previously spent seven seasons with the San Francisco 49ers, including five as defensive coordinator. To contact the reporter on this story: Aaron Kuriloff in New York at akuriloff@bloomberg.net .

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Browns’ Eric Mangini Is NFL Coach Most Likely to Be Fired, Oddsmakers Say

December 30, 2009

By Erik Matuszewski Dec. 30 (Bloomberg) — Odds are that Eric Mangini won’t be back for a second season as coach of the Cleveland Browns. Mangini is given a 3-2 chance of being fired before the 2010 National Football League season, the shortest listed odds for any coach according to BetUS.com. The online gambling Web site didn’t post numbers for Washington’s Jim Zorn because the Redskins have already conducted interviews for a new coach. Mangini’s fate will be determined by Mike Holmgren , who last week was hired as team president to restore a franchise that’s made the playoffs once in the last decade. The Browns have a 4-11 record under Mangini and Holmgren has said he is undecided on whether he’ll make a change. “I wouldn’t be a big fan of just allowing a guy to coach one year and out, but having said that, I haven’t made any decisions yet,” Holmgren said during a conference call on Dec. 28. Mangini, 38, was among six NFL coaches fired after the 2008 season, when his New York Jets lost four of their final five games to miss the playoffs. There were two head coach firings after the 2007 NFL season and four the previous year. At odds of 3-2, a winning $100 bet on Mangini being fired would return $150 along with the initial stake. Raheem Morris , who has a 3-12 record in his first season with the Tampa Bay Buccaneers, is the second most-likely coach to lose his job at 2-1, according to Costa Rica-based BetUS.com. Behind him is another rookie coach in the St. Louis Rams’ Steve Spagnuolo , who has a league-worst 1-14 record. Vikings’ Childress Jim Mora Jr . of the 5-10 Seattle Seahawks has 7-2 odds of being fired, as does Brad Childress of the Minnesota Vikings. Although Minnesota has an 11-4 record and won the National Football Conference’s North Division title, the Vikings have lost three of four games and Childress had a well-publicized sideline dispute with quarterback Brett Favre . While that incident came after Childress sought to remove the 40-year-old Favre from a game the Vikings were losing, ESPN reported there’s also been tension between the coach and quarterback about play- calling. Childress said this week that the disagreement was behind them and that he has a “good relationship” with Favre. Norv Turner of the San Diego Chargers is among a group of five coaches with 4-1 odds of being dismissed. The Chargers have a 12-3 record and won the division title for the fourth straight year, including a third time under Turner. San Diego has had a 3-3 record in the playoffs during that stretch. Others with 4-1 odds of being fired are Carolina’s John Fox , Jacksonville’s Jack Del Rio , Houston’s Gary Kubiak and Buffalo interim coach Perry Fewell , according to BetUS. Wade Phillips of the Dallas Cowboys follows with odds of 6- 1. Phillips has a 32-15 record in three seasons with the Cowboys but has yet to win a playoff game. Dallas hasn’t won in the postseason since 1996. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net .

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Giants on Edge of NFL Playoff Elimination After 41-9 Loss to Panthers

December 27, 2009

By Erik Matuszewski Dec. 27 (Bloomberg) — The New York Giants moved to the edge of elimination from the National Football League postseason with a 41-9 loss to the Carolina Panthers in their final game at Giants Stadium. Two seasons after winning the Super Bowl, the Giants fell to 8-7 with one game remaining, against the Minnesota Vikings in Minneapolis next week. The Vikings are 11-3 going into tomorrow night’s game against Chicago and assured of a playoff spot. The Panthers moved to 7-8 for the season. The Giants started the season 5-0. With the Green Bay Packers leading the Seattle Seahawks late in their game in Wisconsin, the Giants’ only postseason chance lies with the Dallas Cowboys (9-5), who can clinch the final National Football Conference playoff spot by beating the Washington Redskins (4-10) tonight. If the Cowboys lose tonight, the Giants still can claim a postseason spot if they beat the Vikings and the Cowboys lose to the Philadelphia Eagles next week in Dallas. The Eagles have clinched a postseason spot. Today’s game was the final regular-season contest for the Giants at Giants Stadium in East Rutherford, New Jersey. The Giants and New York Jets are moving to a new stadium next door for the 2010 season. The Jets play a home game against Cincinnati on the final day of the regular season next week. For related news & information: To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Giants on Edge of NFL Playoff Elimination After 41-9 Loss to Panthers

December 27, 2009

By Erik Matuszewski Dec. 27 (Bloomberg) — The New York Giants moved to the edge of elimination from the National Football League postseason with a 41-9 loss to the Carolina Panthers in their final game at Giants Stadium. Two seasons after winning the Super Bowl, the Giants fell to 8-7 with one game remaining, against the Minnesota Vikings in Minneapolis next week. The Vikings are 11-3 going into tomorrow night’s game against Chicago and assured of a playoff spot. The Panthers moved to 7-8 for the season. The Giants started the season 5-0. With the Green Bay Packers leading the Seattle Seahawks late in their game in Wisconsin, the Giants’ only postseason chance lies with the Dallas Cowboys (9-5), who can clinch the final National Football Conference playoff spot by beating the Washington Redskins (4-10) tonight. If the Cowboys lose tonight, the Giants still can claim a postseason spot if they beat the Vikings and the Cowboys lose to the Philadelphia Eagles next week in Dallas. The Eagles have clinched a postseason spot. Today’s game was the final regular-season contest for the Giants at Giants Stadium in East Rutherford, New Jersey. The Giants and New York Jets are moving to a new stadium next door for the 2010 season. The Jets play a home game against Cincinnati on the final day of the regular season next week. For related news & information: To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Tax credit fuels home-sales bounce, but will it be just a blip? (Seattle Times)

December 26, 2009

The first-time homebuyers’ tax credit helped resuscitate the Seattle real-estate market in 2009. The market remains fragile, most insiders say, and the outlook for late 2010, after the credits are scheduled to expire, is especially murky.

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Mike Holmgren Agrees to Join 3-11 Cleveland Browns as Team President

December 21, 2009

By Erik Matuszewski Dec. 21 (Bloomberg) — Mike Holmgren has agreed to become president of the Cleveland Browns, taking control of a franchise that hasn’t won a playoff game since 1994. Holmgren, 61, captured a Super Bowl title during seven years as coach of the Green Bay Packers and led the Seattle Seahawks to their only appearance in the National Football League’s championship game. “We will spend the rest of the week finalizing the details of the agreement and will make a formal announcement next week,” Browns owner Randy Lerner said in an e-mailed statement. Lerner had offered Holmgren the option of holding “any and all” of the roles of president, general manager and coach, ESPN reported, citing Holmgren. The cable sports network also said Holmgren was offered $50 million over 10 years to take over a team that’s 3-11 in its first season under coach Eric Mangini . It wasn’t announced whether Holmgren will retain Mangini, bring in a new coach or assume coaching duties in addition to running the team’s football operations. The Browns have two games remaining this season. The Browns have been to the playoffs only once since the latest edition of the franchise was placed in Cleveland in 1999, posting a losing record in nine of 11 years. While they’ve won two straight games after a 1-11 start this season, the Browns are still tied for the worst record in the American Football Conference. Holmgren ranks 11th among NFL coaches with 161 wins, going 75-37 with the Packers and 86-74 with the Seahawks. He led the Packers to two Super Bowl appearances, winning the title after the 1996 season, and guided Seattle to the championship game following the 2005 campaign, losing to Pittsburgh. Holmgren left the Seahawks after the 2008 season. He declined to return last week after the club offered what it called a senior leadership position. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Jets’ Playoff Chances Take Hit With Loss; Chargers, Eagles Extend Streaks

December 21, 2009

By Erik Matuszewski Dec. 21 (Bloomberg) — The New York Jets’ National Football League playoff chances were dented when the Atlanta Falcons pulled out a 10-7 victory on a fourth-down touchdown reception by Tony Gonzalez with 1:38 remaining. The Jets had their three-game winning streak snapped yesterday, when the San Diego Chargers, Arizona Cardinals and Minnesota Vikings clinched division titles, and the Philadelphia Eagles wrapped up a spot in the NFL playoffs. “I don’t know what’s going to happen with the playoffs, but we really let this one slip by,” Jets cornerback Darrelle Revis told reporters. Mark Sanchez threw three interceptions and the Jets botched three field goals in falling to 7-7. With two weeks left in the regular season, New York is in a six-team tie for seventh place in the American Football Conference. Six teams in each conference make the playoffs. The Jets, who next play the 14-0 Indianapolis Colts, are one game behind Baltimore and Denver in the race for the AFC’s two wild-card playoff berths. The wild cards go to the teams with the best records outside of the four division winners. The defending Super Bowl-champion Pittsburgh Steelers joined the AFC teams at 7-7 after snapping a five-game losing streak with a 37-36 win over the Green Bay Packers. Ben Roethlisberger threw for 503 yards and three touchdowns, including a 19-yard scoring pass as time expired as Pittsburgh kept alive its playoff chances. Chargers’ Streak The Chargers clinched the AFC West title with a 27-24 win over the Cincinnati Bengals, who were grieving after the death of wide receiver Chris Henry four days ago. Nate Kaeding kicked a 52-yard field goal with three seconds left as the Chargers (11-3) extended their winning streak to nine games and improved to 17-0 in December games since 2006. The Bengals fell to 9-5 and failed to clinch the AFC North title for the second straight week. The unbeaten Colts, who defeated the Jacksonville Jaguars 35-31 on Dec. 17, are the only other AFC team to have sealed a playoff berth. New England moved a step closer to the AFC East title with a 17-10 win over the Buffalo Bills that gives the Patriots (9-5) a two-game division lead over Miami and the Jets. Baltimore and Denver are in position for the AFC wild card spots at 8-6. The Ravens yesterday beat the Chicago Bears 31-7, while the Broncos lost to the Oakland Raiders 20-19. Along with the Jets, Dolphins and Steelers, the Tennessee Titans, Houston Texans and Jaguars are all 7-7. The Titans beat the Dolphins 27-24 in overtime yesterday, while the Texans defeated the St. Louis Rams 16-13. Cardinals Win West The Cardinals wrapped up the NFC West by beating the Detroit Lions 31-24 on Kurt Warner’s five-yard touchdown pass to Anquan Boldin with 1:54 left. It’s the first time Arizona (9-5) has won consecutive division titles since 1974-75. The Vikings lost to the Carolina Panthers 26-7, though clinched the NFC North title when the Packers lost to the Steelers. Minnesota is 11-3 and Green Bay slipped to 9-5. The Packers and Dallas Cowboys are currently in position for the NFC’s two wild-card playoff spots. The Cowboys two days ago beat New Orleans 24-17, sending the NFC South-champion Saints to their first loss. Dallas is one game behind Philadelphia in the NFC East. The Eagles beat the San Francisco 49ers 27-13 yesterday to seal a postseason trip and extend their winning streak to five games. The New York Giants are in seventh place in the NFC at 7-6, sitting 1 1/2 games behind Green Bay and Dallas. The Giants visit the Washington Redskins tonight. Only two games yesterday didn’t have playoff implications. Tampa Bay defeated Seattle 24-7, while Jerome Harrison and Josh Cribbs had record-setting performances to lift the Cleveland Browns to a 41-34 win over the Kansas City Chiefs. Harrison rushed for 286 yards to eclipse Jim Brown’s single-game franchise record and scored the last of his three touchdowns with 44 seconds left to snap a 34-34 tie. Cribbs scored on kickoff returns of 100 and 103 yards, setting an NFL career record with eight kickoff runbacks for touchdowns. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net .

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Virgin Galactic SpaceShipTwo: Space Tourism Craft To Be Unveiled

December 7, 2009

LOS ANGELES — After five years of secret construction, the cloak is coming off a privately funded spacecraft designed to fly well-heeled tourists into space. The long-awaited glimpse of SpaceShipTwo, slated for rollout Monday in the Mojave Desert, could not come sooner for the scores of wannabe astronauts who have forked over part of their disposable income for the chance to float in zero gravity. “We’ve all been patiently waiting to see exactly what the vehicle is going to look like,” said Peter Cheney, a 63-year-old potential space tourist from Seattle who was among the first to sign up for suborbital space rides marketed by Virgin Galactic. “It would be nice to see it in the flesh.” Virgin Galactic spokeswoman Jackie McQuillan promised a “theatrical unveil” followed by a cocktail party for paying passengers and other VIPs. SpaceShipTwo’s debut marks the first public appearance of a commercial passenger spacecraft. The project is bankrolled by Virgin Galactic founder, British billionaire Sir Richard Branson, who partnered with famed aviation designer Burt Rutan, the brains behind the venture. SpaceShipTwo is based on Rutan’s design of a stubby white prototype called SpaceShipOne. In 2004, SpaceShipOne captured the $10 million Ansari X Prize by becoming the first privately manned craft to reach space. Since the historic feat, engineers from Rutan’s Scaled Composites LLC have been laboring in a Mojave hangar to commercialize the prototype in heavy secrecy. The last time there was this level of hoopla in the high desert was a little more than a year ago when Branson and Rutan trotted out to great fanfare the twin-fuselage mothership, White Knight Two, that will ferry SpaceShipTwo to launch altitude. Despite the hype, hard work lies ahead before space journeys could become as routine as air travel. Flight testing of White Knight Two has been ongoing for the past year. The first SpaceShipTwo test flights are expected to start next year, with full-fledged space launches to its maximum altitude by or in 2011. It remains unclear when Virgin Galactic customers will receive their astronaut wings, but it will largely depend on how the test program fares. Some 300 clients have paid the $200,000 ticket or placed a deposit, according to the company. SpaceShipTwo, built from lightweight composite materials and powered by a hybrid rocket motor, is similar to its prototype cousin with three exceptions. It’s twice as large, measuring 60 feet long with a roomy cabin about the size of a Falcon 900 executive jet. It also has more windows including overhead portholes. While SpaceShipOne was designed for three people, SpaceShipTwo can carry six passengers and two pilots. “It’s a big and beautiful vehicle,” said X Prize founder Peter Diamandis, who has seen SpaceShipTwo during various stages of development. The ability to view Earth’s curvature from space has been limited so far to government astronauts and a handful of wealthy people who have shelled out millions to board Russian rockets to the orbiting international space station. After SpaceShipOne’s history-making flights, many space advocates believed private companies would offer suborbital space joyrides before the end of this decade. George Washington University space policy scholar John Logsdon called the milestones to date “measured progress.” “They’ve been appropriately cautious and making sure that every step is done correctly,” he said. Tragedy struck in 2007 when an explosion killed three of Rutan’s engineers during a routine test of SpaceShipTwo’s propellant system. The accident delayed the engine’s development. Virgin Galactic plans to operate commercial spaceflights out of a taxpayer-funded spaceport in New Mexico that is under construction. The 2 1/2 hour trips – up and down flights without circling the Earth – include about five minutes of weightlessness. SpaceShipTwo will be carried aloft by White Knight Two and released at 50,000 feet. The craft’s rocket engine then burns a combination of nitrous oxide and a rubber-based solid fuel to climb more than 65 miles above the Earth’s surface. After reaching the top of its trajectory, it will fall back into the atmosphere and glide to a landing like a normal airplane. Its descent is controlled by “feathering” its wings to maximize aerodynamic drag. Virgin Galactic expects to spend more than $400 million for a fleet of five commercial spaceships and launch vehicles. It’s not the only player in the ultra-secretive commercial space race. A handful of entrepreneurs including Amazon.com Inc. Chief Executive Jeff Bezos, computer game programmer John Carmack and rocketeer Jeff Greason are building their own suborbital rockets with dreams of flying people out of the atmosphere.

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Amanda Knox, Boyfriend Found Guilty of Killing Her U.K. Roommate in Italy

December 4, 2009

By Flavia Krause-Jackson Dec. 5 (Bloomberg) — Amanda Knox , a 22-year-old American student, was found guilty by an Italian court of the 2007 murder of her roommate Meredith Kercher in Perugia. She was sentenced to 26 years in prison. Knox, a Seattle native, has been jailed for two years while standing trial for the murder along with Raffaele Sollecito , her Italian ex-boyfriend, who was also convicted today, to 25 years in prison. Rudy Hermann Guede , an Ivorian immigrant, was found guilty of the killing in July in a separate “fast-track” trial and sentenced to 30 years in prison. The half-naked body of Kercher, 21, was found in her bedroom, strangled and stabbed to death, on Nov. 2, 2007, in a house she shared with Knox and two other women. Prosecutor Giuliano Mignini told the court that Knox masterminded a drug- fueled sex game involving Sollecito and Guede that turned violent, leading to Kercher’s murder. Knox and Sollecito then staged a burglary to cover the crime, he said. Knox’s defense team, led by Carlo Dalla Vedova , argued that there was insufficient evidence to tie Knox to the crime and said leaks to the media had swayed public opinion against her. Prosecutors had asked the court to sentence Knox and Sollecito to life in prison. Knox, Sollecito and Guede have all given different versions of events and maintained their innocence. Each has the right to appeal the verdict twice until the Court of Cassation, Italy’s highest appeals court, has the final say. Italy has no death penalty. Kercher, a London native and Leeds University student, had enrolled at Perugia’s University for Foreigners through the Erasmus exchange program shortly before she was killed. Knox was also a student at the university. Both women worked at a bar run by Patrick Diya Lumumba, who Knox named as the possible killer before police corroborated his alibi. Lumumba was held for two weeks before being cleared. The Knox story has garnered media attention around the world. A Dec. 3 opinion piece in The New York Times said an innocent verdict for Knox would be the “obvious” decision based on “the standard that the law calls for.” The London- based Times reported a claim by Guede that Kercher thought her American roommate was “a drugged-up tart.” Italian newspapers have reported on everything from the love letters Knox has received from admirers to the outfits she’s worn in court. Knox was arrested on Nov. 6, 2007, in connection with the death of Kercher and formally charged with murder, theft and sexual assault on July 11, 2008. To contact the reporter on this story: Flavia Krause-Jackson in Rome at fjackson@bloomberg.net

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Amanda Knox, Boyfriend Found Guilty of Killing Her U.K. Roommate in Italy

December 4, 2009

By Flavia Krause-Jackson Dec. 5 (Bloomberg) — Amanda Knox , a 22-year-old American student, was found guilty by an Italian court of the 2007 murder of her roommate Meredith Kercher in Perugia. She was sentenced to 26 years in prison. Knox, a Seattle native, has been jailed for two years while standing trial for the murder along with Raffaele Sollecito , her Italian ex-boyfriend, who was also convicted today, to 25 years in prison. Rudy Hermann Guede , an Ivorian immigrant, was found guilty of the killing in July in a separate “fast-track” trial and sentenced to 30 years in prison. The half-naked body of Kercher, 21, was found in her bedroom, strangled and stabbed to death, on Nov. 2, 2007, in a house she shared with Knox and two other women. Prosecutor Giuliano Mignini told the court that Knox masterminded a drug- fueled sex game involving Sollecito and Guede that turned violent, leading to Kercher’s murder. Knox and Sollecito then staged a burglary to cover the crime, he said. Knox’s defense team, led by Carlo Dalla Vedova , argued that there was insufficient evidence to tie Knox to the crime and said leaks to the media had swayed public opinion against her. Prosecutors had asked the court to sentence Knox and Sollecito to life in prison. Knox, Sollecito and Guede have all given different versions of events and maintained their innocence. Each has the right to appeal the verdict twice until the Court of Cassation, Italy’s highest appeals court, has the final say. Italy has no death penalty. Kercher, a London native and Leeds University student, had enrolled at Perugia’s University for Foreigners through the Erasmus exchange program shortly before she was killed. Knox was also a student at the university. Both women worked at a bar run by Patrick Diya Lumumba, who Knox named as the possible killer before police corroborated his alibi. Lumumba was held for two weeks before being cleared. The Knox story has garnered media attention around the world. A Dec. 3 opinion piece in The New York Times said an innocent verdict for Knox would be the “obvious” decision based on “the standard that the law calls for.” The London- based Times reported a claim by Guede that Kercher thought her American roommate was “a drugged-up tart.” Italian newspapers have reported on everything from the love letters Knox has received from admirers to the outfits she’s worn in court. Knox was arrested on Nov. 6, 2007, in connection with the death of Kercher and formally charged with murder, theft and sexual assault on July 11, 2008. To contact the reporter on this story: Flavia Krause-Jackson in Rome at fjackson@bloomberg.net

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Amanda Knox Verdict Due From Jury as Italian Student Murder Trial Closes

December 4, 2009

By Flavia Krause-Jackson Dec. 4 (Bloomberg) — An Italian jury will likely deliver its verdict late today or early tomorrow on Amanda Knox , a 22- year-old American student charged in the 2007 murder of her roommate, Meredith Kercher, in the hillside city of Perugia. Knox, a Seattle native, and Raffaele Sollecito , a 25-year- old Italian who’s her ex-boyfriend, have been jailed for two years while standing trial for the murder. Verdicts and sentences for both defendants will be delivered by a six-member jury of Perugia residents and two judges. Rudy Hermann Guede , 22, an Ivorian immigrant, has already been found guilty of the killing in a separate “fast-track” trial in July. He was sentenced to 30 years in prison. Kercher, a 21-year-old Briton, was found dead in her bedroom, half-naked and strangled and stabbed to death, on Nov. 2, 2007. She was killed in a villa she shared with Knox and two other women. Prosecutor Giuliano Mignini said in court that Knox masterminded a drug-fueled sex game involving Sollecito and Guede that turned violent and ultimately led to Kercher’s murder. The three then staged a burglary to cover up the crime, he said. “I’m afraid of having the mask of a murderer forced onto my skin,” Knox, on the verge of tears, told the jury yesterday. “I’m afraid of being defined as someone I am not and for acts I didn’t commit,” she said, speaking in Italian. Media Leaks Knox’s defense team, led by Carlo Dalla Vedova , argued that there was insufficient evidence to tie her to the crime and claimed that leaks to the media swayed public opinion against Knox. Sollecito’s lawyer, Giulia Bongiorno, compared Knox to the naive heroine of the 2001 French film “Amelie.” Prosecutors have asked for life sentences for both Knox and Sollecito. Italy has no death penalty. Knox, Sollecito and Guede have all given different versions of events and maintained their innocence. Each can appeal the verdict twice until the Court of Cassation, Italy’s highest appeals court, has the final say. Kercher, a London native and Leeds University student, had enrolled at Perugia’s University for Foreigners through the Erasmus exchange program shortly before she was killed. Knox was also a student at the university. Both women worked at a bar run by Patrick Diya Lumumba, who Knox named as the possible killer before police corroborated his alibi. Lumumba was held for two weeks before being cleared. The Knox story has garnered international attention, particularly in Britain and the U.S. A Dec. 3 opinion piece in The New York Times said an innocent verdict for Knox would be the “obvious” decision based on “the standard that the law calls for.” Italians have also been fascinated by the case, with newspapers reporting on the love letters Knox has received from admirers, the outfits she’s worn in court and an appearance she made in a documentary about the inmates at her prison. Knox was arrested on Nov. 6, 2007, in connection with the death of Kercher and formally charged with murder, theft and sexual assault on July 11, 2008. To contact the reporter on this story: Flavia Krause-Jackson in Rome at fjackson@bloomberg.net

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Holiday Sales Will Drop 1% in U.S. as Forecasters See `Disciplined’ Buying

November 30, 2009

By Lauren Coleman-Lochner Nov. 30 (Bloomberg) — More consumers went shopping over the Thanksgiving holiday weekend, yet spent less than last year as they hunted for bargains on toys and electronics, according to the National Retail Federation. Spending at stores and on Web sites from Nov. 26 to Nov. 29 rose 0.5 percent to an estimated $41.2 billion from $41 billion a year earlier, the Washington-based trade group said yesterday, citing a survey conducted by polling firm BIGresearch. The higher turnout and lower average spending were in line with expectations, the NRF said. The group is sticking to a forecast for a 1 percent drop in spending this holiday season. Price cuts on small appliances, toys and winter clothes helped bring shoppers into chains including Macy’s Inc. , J.C. Penney Co. and Wal-Mart Stores Inc. On so-called Cyber Monday today, 96.5 million people plan to shop on the Internet to take advantage of limited-time offers and free shipping, according to the NRF. That would be a 14 percent increase from 2008. “People are going to be very disciplined,” said Gerrick Johnson, an analyst at BMO Capital Markets in New York. “They know their budget and they have a budget.” Thirteen percent more shoppers visited at least one department store this year, the NRF said. Internet spending on Black Friday, the day after Thanksgiving, rose 11 percent from a year ago, to $595 million, ComScore Inc. , a Reston, Virginia- based research firm, said yesterday in a statement. Cyber Offers Target Corp. , the second-biggest U.S. discount chain after Bentonville, Arkansas-based Walmart, for the first time this year advertised an online-only sale on Thanksgiving. J.C. Penney , the third-largest U.S. department-store company, started Cyber Monday specials a day earlier this year. Amazon.com Inc., based in Seattle, is the largest online retailer and plans a series of “lightning deals” for limited time periods today. The average shopper spent $343.31 in stores and online over the holiday weekend, less than $372.57 a year ago, the NRF said. The number of shoppers rose to 195 million from 172 million a year earlier, according to the NRF. The group is the world’s largest trade association, according to its Web site. “ Shoppers proved this weekend that they were willing to open their wallets for a bargain,” said Tracy Mullin , NRF’s president and chief executive officer, in a statement. “While retailers are encouraged by the number of Americans who shopped over Black Friday weekend, they know they have their work cut out for them to keep people coming back through Christmas.” More Discounts Average spending declined as prices for flat-screen televisions dropped and retailers offered a greater number of items at unprofitable prices to lure shoppers, Scott Krugman , a spokesman for the NRF, said on a conference call yesterday. Vee Weaver, a certified nurse’s aide from Atlanta, bought a set of knives, a red shirt and a purse at Macy’s and J.C. Penney after she was persuaded by a friend to shop on Black Friday. “I have a job and I’ve saved all year,” Weaver, 65, said at The Shops at Wiregrass, an outdoor shopping mall near Tampa, Florida. The black leather purse she got was $14.97 marked down from $59.98. “I had to jump up and down and blink,” she said. On Black Friday, Richfield, Minnesota-based Best Buy Co. , the biggest electronics chain, had bigger early-morning crowds and more online visitors than last year, said CEO Brian Dunn . “Those are both directionally important indicators for us,” he said in a Nov. 27 Bloomberg Television interview. $300 Laptops Holiday sales make up a third or more of retailers’ annual profit. The International Council of Shopping Centers, another industry trade group, predicted sales at stores open at least a year will advance 1 percent in November and December after a year-earlier 5.8 percent decline, the worst in 40 years. Walmart, the world’s largest retailer, attracted consumers with $298 Hewlett-Packard laptop computers and other specials that went on sale at 5 a.m. the day after Thanksgiving. The stock declined 33 cents to $54.63 in New York Stock Exchange composite trading on Nov. 27. Renee McDonald, 40, started waiting at 5 a.m. outside a Walmart in Houston, hoping to purchase a television. When the store ran out, she bought a digital camera instead. Black Friday shopping at J.C. Penney stores was strong throughout the U.S., the Plano, Texas-based retailer said in an e-mailed statement on Nov. 28. J.C. Penney and other retailers plan to report November sales on Dec. 3. The retailer fell $1.07 to $29.57 on Nov. 27 on the New York Stock Exchange. At the Macy’s in New York’s Herald Square, shopper traffic appeared greater than a year ago, and continued to flow in after the initial rush, Chairman and CEO Terry Lundgren said. Jewelry and housewares were selling “briskly,” he said. Macy’s , based in Cincinnati, dropped 59 cents to $16.97 in Nov. 27 trading. “Last year we were just getting rid of the inventory we bought six months before,” Lundgren said. “This year we’ve had a year to think through what is the sales trend.” To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net .

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Colts Rally Past Texans to Clinch Playoff Spot, Remain Undefeated in NFL

November 29, 2009

By Erik Matuszewski Nov. 30 (Bloomberg) — The Indianapolis Colts became the first National Football League team to clinch a playoff berth, overcoming a 13-point halftime deficit to beat the Houston Texans 35-27 and remain undefeated. Peyton Manning threw three touchdown passes for the Colts, who improved to 11-0 and wrapped up the American Football Conference’s South Division title yesterday when Jacksonville lost 20-3 to the San Francisco 49ers. Indianapolis is the fourth team in 19 years to clinch a division crown by its 11th game, joining the 1997 San Francisco 49ers, 2004 Philadelphia Eagles and 2007 New England Patriots. The Colts are the first club in NFL history to come back from a fourth-quarter deficit in five straight games. “When things aren’t going the way we want them to, we don’t panic, we don’t yell, we don’t throw helmets,” Manning said during his post-game news conference. “We try to put the series behind us and move onto the next one.” The New Orleans Saints can join the Colts at 11-0 with a win against the New England Patriots tonight at the Superdome. The NFL has never had two teams open a season with 11 straight wins in its 87-year history. The Colts have won 20 regular-season games in a row overall, one shy of the league record set by the Patriots from 2006-08. Indianapolis will next face the Tennessee Titans, who have won five consecutive games since a 0-6 start. Titans Win Again The Titans beat the Arizona Cardinals 20-17 yesterday as Vince Young capped a 99-yard drive by throwing a 10-yard touchdown pass to Kenny Britt as time expired in Nashville. Young passed for 387 yards for Tennessee and Chris Johnson rushed for 154 yards and a touchdown. Johnson has run for at least 125 yards in six straight games, tying an NFL record held by Hall of Fame running backs Earl Campbell and Eric Dickerson . Brett Favre passed for a season-high 392 yards and three touchdowns as the Minnesota Vikings improved to 10-1 by romping past the Chicago Bears 36-10 in Minneapolis. The New York Jets ended a three-game losing streak with a 17-6 win over the Carolina Panthers. Darrelle Revis scored the Jets’ first defensive touchdown of the season, returning one of the team’s four interceptions 67 yards for a first-quarter score at Giants Stadium in East Rutherford, New Jersey. The Jets improved to 5-6 with the win, their second in the past eight games. The Baltimore Ravens sent the defending Super Bowl-champion Pittsburgh Steelers to a third straight loss, winning 20-17 in overtime on a 29-yard field goal by Billy Cundiff . In the other Week 12 games, it was Seattle 27, St. Louis 17; Cincinnati 16, Cleveland 7; Buffalo 31, Miami 14; Philadelphia 27, Washington 24; Atlanta 20, Tampa Bay 17; and San Diego 43, Kansas City 14. Three games were played on the U.S. Thanksgiving holiday on Nov. 26. The Denver Broncos beat the New York Giants 26-6, Dallas topped Oakland 24-7 and Green Bay routed Detroit 34-12. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Tandem Expansion

November 28, 2009

Denver-Boulder Edmonton Kitchener-Waterloo Montréal Ottawa Portland Seattle South-Florida Toronto Vancouver Victoria Home»Directory»Global» Tandem Expansion Tandem Expansion is a private growth capital fund seeking to invest in small and mid-sized

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Giants Snap Four-Game Losing Streak Against Falcons; Colts, Saints Go 10-0

November 23, 2009

By Erik Matuszewski and Dex McLuskey Nov. 23 (Bloomberg) — The New York Giants snapped their four-game losing streak with a 34-31 overtime victory against Atlanta, while wins by the Indianapolis Colts and New Orleans Saints gave the National Football League a pair of 10-0 teams for just the third time. Lawrence Tynes kicked a 36-yard field goal on the first possession of overtime yesterday at Giants Stadium in East Rutherford, New Jersey, as New York (6-4) got its first win since Oct. 11. The Giants had started the season 5-0. “There are not many better feelings than being in a locker room after a win,” said Giants quarterback Eli Manning , who passed for 384 yards and three touchdowns. “Especially when you haven’t had that feeling in a while.” The Colts and Saints both remained perfect, with Indianapolis holding on for a 17-15 victory in Baltimore and New Orleans rolling to a 38-7 win at Tampa Bay. There were only two previous occasions when a pair of teams opened an NFL season with 10 straight wins: 1934 (Chicago Bears and Detroit Lions) and 1990 (Giants and San Francisco 49ers). The New York Jets’ slide continued, as rookie quarterback Mark Sanchez threw four interceptions in a 31-14 loss to the New England Patriots. It was the Jets’ sixth loss in seven games. The Kansas City Chiefs stunned the defending Super Bowl- champion Pittsburgh Steelers 27-24 in overtime, while the Oakland Raiders were 20-17 winners over a Cincinnati Bengals team that had won seven of its first nine games. Rookie Record Top draft pick Matthew Stafford tied a rookie record with five touchdown passes in Detroit’s 38-37 win over Cleveland, and Brett Favre threw four scoring passes as Minnesota beat Seattle 35-9 to improve to 9-1. It was Favre’s 22nd game with at least four touchdowns, passing Pro Football Hall of Fame member Dan Marino for the most in league history. In other Week 11 games, it was Dallas 7, Washington 6; Green Bay 30, San Francisco 24; Jacksonville 18, Buffalo 15; Arizona 21, St. Louis 13; San Diego 32, Denver 3; and Philadelphia 24, Chicago 20. Tennessee is at Houston today. At Giants Stadium, New York pulled out the victory after blowing a 14-point lead in the fourth quarter. The Falcons scored two touchdowns in the final six minutes and forced overtime on Tony Gonzalez’s 11-yard reception with 28 seconds left. The Giants won the coin flip in overtime and drove 49 yards in eight plays to set up the winning field goal. “We were miserable around here for a month,” Giants coach Tom Coughlin said during a news conference. “It’s nice to win. We didn’t necessarily start the game out all that well. We did finish it okay.” Visitors’ Loss Kevin Boss had two touchdown receptions for the Giants, who had been 0-5 against Atlanta at Giants Stadium. It’s the first time in the past 13 meetings between the Giants and Falcons that the visitors have lost. Atlanta got two rushing touchdowns from Jason Snelling , who started in place of the injured Michael Turner . Matt Ryan threw two fourth-quarter scores for the Falcons, who lost for the fourth time in five games. The Colts (10-0) held on for a two-point win over Baltimore as linebacker Gary Brackett intercepted a pass from Joe Flacco at the Indianapolis 13-yard line with 2:42 remaining. The Ravens were in position to attempt a sixth field goal when Brackett stepped in front of Flacco’s pass to running back Ray Rice at M&T Bank Stadium. Dallas Clark and Joseph Addai scored touchdowns for the Colts, who have won 19 straight regular-season games stretching back to an Oct. 27, 2008, to move within two wins of matching the Patriots’ NFL record. Peyton Manning passed for 299 yards and has now led the Colts to six consecutive wins over Baltimore (5-5). Saints’ Surge At Raymond James Stadium in Tampa, Florida, the Buccaneers opened a 7-0 first-quarter lead before the Saints ran off the next 38 points to remain unbeaten. Robert Meachem caught two of Drew Brees’s three touchdown passes in the first half and Mike Bell had a pair of rushing touchdowns in the second half for the Saints (10-0). Josh Freeman threw three interceptions as Tampa Bay fell to 1-9. At Gillette Stadium in Foxboro, Massachusetts, Leigh Bodden had three of the Patriots’ four interceptions and returned one 53 yards for a touchdown. Laurence Maroney had two rushing scores, while Tom Brady passed for 310 yards and hooked up with Randy Moss for a four- yard touchdown as the Patriots improved to 7-3. Sanchez finished with five turnovers for the Jets, who fell to 4-6 on the season. “Without question, he made a lot of mistakes,” Jets coach Rex Ryan said. “There were some other guys that made a lot of mistakes today, but he’s got to learn from them.” To contact the reporters on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net Dex McLuskey in Dallas at dmcluskey@bloomberg.net

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Giants Snap Four-Game Losing Streak Against Falcons; Colts, Saints Go 10-0

November 23, 2009

By Erik Matuszewski and Dex McLuskey Nov. 23 (Bloomberg) — The New York Giants snapped their four-game losing streak with a 34-31 overtime victory against Atlanta, while wins by the Indianapolis Colts and New Orleans Saints gave the National Football League a pair of 10-0 teams for just the third time. Lawrence Tynes kicked a 36-yard field goal on the first possession of overtime yesterday at Giants Stadium in East Rutherford, New Jersey, as New York (6-4) got its first win since Oct. 11. The Giants had started the season 5-0. “There are not many better feelings than being in a locker room after a win,” said Giants quarterback Eli Manning , who passed for 384 yards and three touchdowns. “Especially when you haven’t had that feeling in a while.” The Colts and Saints both remained perfect, with Indianapolis holding on for a 17-15 victory in Baltimore and New Orleans rolling to a 38-7 win at Tampa Bay. There were only two previous occasions when a pair of teams opened an NFL season with 10 straight wins: 1934 (Chicago Bears and Detroit Lions) and 1990 (Giants and San Francisco 49ers). The New York Jets’ slide continued, as rookie quarterback Mark Sanchez threw four interceptions in a 31-14 loss to the New England Patriots. It was the Jets’ sixth loss in seven games. The Kansas City Chiefs stunned the defending Super Bowl- champion Pittsburgh Steelers 27-24 in overtime, while the Oakland Raiders were 20-17 winners over a Cincinnati Bengals team that had won seven of its first nine games. Rookie Record Top draft pick Matthew Stafford tied a rookie record with five touchdown passes in Detroit’s 38-37 win over Cleveland, and Brett Favre threw four scoring passes as Minnesota beat Seattle 35-9 to improve to 9-1. It was Favre’s 22nd game with at least four touchdowns, passing Pro Football Hall of Fame member Dan Marino for the most in league history. In other Week 11 games, it was Dallas 7, Washington 6; Green Bay 30, San Francisco 24; Jacksonville 18, Buffalo 15; Arizona 21, St. Louis 13; San Diego 32, Denver 3; and Philadelphia 24, Chicago 20. Tennessee is at Houston today. At Giants Stadium, New York pulled out the victory after blowing a 14-point lead in the fourth quarter. The Falcons scored two touchdowns in the final six minutes and forced overtime on Tony Gonzalez’s 11-yard reception with 28 seconds left. The Giants won the coin flip in overtime and drove 49 yards in eight plays to set up the winning field goal. “We were miserable around here for a month,” Giants coach Tom Coughlin said during a news conference. “It’s nice to win. We didn’t necessarily start the game out all that well. We did finish it okay.” Visitors’ Loss Kevin Boss had two touchdown receptions for the Giants, who had been 0-5 against Atlanta at Giants Stadium. It’s the first time in the past 13 meetings between the Giants and Falcons that the visitors have lost. Atlanta got two rushing touchdowns from Jason Snelling , who started in place of the injured Michael Turner . Matt Ryan threw two fourth-quarter scores for the Falcons, who lost for the fourth time in five games. The Colts (10-0) held on for a two-point win over Baltimore as linebacker Gary Brackett intercepted a pass from Joe Flacco at the Indianapolis 13-yard line with 2:42 remaining. The Ravens were in position to attempt a sixth field goal when Brackett stepped in front of Flacco’s pass to running back Ray Rice at M&T Bank Stadium. Dallas Clark and Joseph Addai scored touchdowns for the Colts, who have won 19 straight regular-season games stretching back to an Oct. 27, 2008, to move within two wins of matching the Patriots’ NFL record. Peyton Manning passed for 299 yards and has now led the Colts to six consecutive wins over Baltimore (5-5). Saints’ Surge At Raymond James Stadium in Tampa, Florida, the Buccaneers opened a 7-0 first-quarter lead before the Saints ran off the next 38 points to remain unbeaten. Robert Meachem caught two of Drew Brees’s three touchdown passes in the first half and Mike Bell had a pair of rushing touchdowns in the second half for the Saints (10-0). Josh Freeman threw three interceptions as Tampa Bay fell to 1-9. At Gillette Stadium in Foxboro, Massachusetts, Leigh Bodden had three of the Patriots’ four interceptions and returned one 53 yards for a touchdown. Laurence Maroney had two rushing scores, while Tom Brady passed for 310 yards and hooked up with Randy Moss for a four- yard touchdown as the Patriots improved to 7-3. Sanchez finished with five turnovers for the Jets, who fell to 4-6 on the season. “Without question, he made a lot of mistakes,” Jets coach Rex Ryan said. “There were some other guys that made a lot of mistakes today, but he’s got to learn from them.” To contact the reporters on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net Dex McLuskey in Dallas at dmcluskey@bloomberg.net

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Giants Win First Game in Five as Jets Lose 3rd Straight; Colts, Saints Win

November 22, 2009

By Dex McLuskey Nov. 22 (Bloomberg) — The New York Giants beat the Atlanta Falcons 34-31 to snap a four-game losing streak, while the Indianapolis Colts and New Orleans Saints won to remain the only undefeated teams in the National Football League. The Giants won on a 36-yard field goal by Lawrence Tynes three minutes, 54 seconds into overtime after Atlanta tied the game with a touchdown with 35 seconds to play. The Saints eased to a 38-7 win at Tampa Bay and the Colts beat Baltimore 17-15. New York improved to 6-4 by winning for the first time in its past three games at Giants Stadium in East Rutherford, New Jersey, while Atlanta fell to 5-5. The Giants, coming off a bye last week, had slumped to 5-4 after winning the first five games of the season. “We were miserable around here for a month,” Giants coach Tom Coughlin said in a news conference. “It’s nice to win.” It’s the first time in 13 meetings between the Giants and Falcons that the visitors have lost. New York beat Atlanta for the first time in six games at Giants Stadium. Tynes got a 39-yard field goal for the only score of the opening quarter and Atlanta went ahead 7-3 less than a minute into the second quarter on Jason Snelling’s seven-yard scoring run. The Giants retook the lead midway through the second quarter when Kevin Boss caught a 28-yard pass from Eli Manning , who threw for a career-high 384 yards and three touchdowns. Manning again connected with Boss for a four-yard score with 18 seconds left in the first half to make it 17-7. Snelling’s Second Score Snelling blasted into the end zone from a yard out for his second touchdown on Atlanta’s opening drive of the second half, and the Giants retaliated three minutes later on two-yard run by Brandon Jacobs to take a 24-14 lead. Jason Elam made a 25-yard field goal on Atlanta’s next drive to draw the Falcons within seven points before the Giants scored from three yards on a pass from Manning to Madison Hedgecock three minutes into the fourth quarter. Atlanta again made it a one-score game with six minutes remaining when Eric Weems caught a four-yard touchdown pass from Matt Ryan , and an 11-yard scoring reception by Tony Gonzalez sent the game into overtime. The Giants got the first possession and secured the win eight plays later after moving to Atlanta’s 18-yard line. Other Results In other Week 11 games, it was Dallas 7, Washington 6; Detroit 38, Cleveland 37; Green Bay 30, San Francisco 24; Kansas City 27, Pittsburgh 24 in overtime; Jacksonville 18, Buffalo 15; and Minnesota 35, Seattle 9. Also today, St. Louis is at Arizona, New England hosts the New York Jets, Oakland travels to Cincinnati and Denver plays at San Diego. Philadelphia hosts Chicago tonight, while Tennessee is at Houston tomorrow. Ahead of the Eagles’ game at the Bears, the Giants moved into second place in the National Football Conference East Division, one game behind the Cowboys. It took the Colts less than four minutes to take a 7-0 lead at M&T Bank Stadium in Baltimore as they went 87 yards in seven plays on the opening drive that culminated in Dallas Clark making a one-handed touchdown catch. Baltimore took a 9-7 lead with three first-half field goals by Billy Cundiff from 46, 44 and 38 yards before the Colts regained the advantage 1:28 before the interval on a five-yard touchdown run by Joseph Addai . Baltimore Leads Cundiff’s 36-yard kick seven seconds before halftime cut the Colts’ advantage to two points and, after a scoreless third quarter, Baltimore went 15-14 ahead with 10 minutes to play on the kicker’s fifth field goal, from 20 yards. The Colts secured the win on their next drive when Matt Stover got a 25-yard field goal. The Colts have now won 19 straight regular-season games stretching back to an Oct. 27, 2008, and are two shy of matching the Patriots’ NFL record. Peyton Manning has now led the Colts to six consecutive wins over Baltimore (5-5). At Raymond James Stadium in Tampa, Florida, the Buccaneers opened a 7-0 first-quarter lead before the Saints ran off the next 38 points to remain unbeaten. Robert Meachem caught two of Drew Brees’s three touchdown passes in the first half and Mike Bell had a pair of rushing touchdowns in the second half for the Saints (10-0). Josh Freeman threw three interceptions as Tampa Bay fell to 1-9. To contact the reporter on this story: Dex McLuskey in Dallas at dmcluskey@bloomberg.net

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Giants Beat Falcons 34-31 to EndFour-Game Losing Run; Colts, Saints Win

November 22, 2009

By Dex McLuskey Nov. 22 (Bloomberg) — The New York Giants beat the Atlanta Falcons 34-31 to snap a four-game losing run in the National Football League. New York secured its first home win in three starts at Giants Stadium in East Rutherford, New Jersey, to improve to 6- 4, while Atlanta fell to 5-5 with the loss. The Giants won on a 36-yard field goal by Lawrence Tynes on the opening possession of overtime after Atlanta tied the game with a touchdown with 35 seconds remaining in regulation play. The Giants, coming off a bye last week, had slumped to 5-4 after winning the first five games of the season. The visitor had won the past 12 games between the Giants and the Falcons, with Atlanta leaving Giants Stadium victorious on its previous five visits. Elsewhere, the Indianapolis Colts and the New Orleans Saints remained the only undefeated teams in the league. Indianapolis beat Baltimore 17-15 and the Saints won 38-7 at Tampa Bay. In other Week 11 games, it was Dallas 7, Washington 6; Detroit 38, Cleveland 37; Green Bay 30, San Francisco 24; Kansas City 27, Pittsburgh 24; Jacksonville 18, Buffalo 15; and Minnesota 35, Seattle 9. Also today, St. Louis is at Arizona, New England hosts the New York Jets, Oakland travels to Cincinnati and Denver plays at San Diego. Philadelphia hosts Chicago tonight while Tennessee is at Houston in tomorrow’s game.

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Barnes & Noble Says Nook E-Book Reader Sold Out, Next Shipment in January

November 20, 2009

By Mark Clothier Nov. 20 (Bloomberg) — Barnes & Noble Inc. ’s Nook device for reading digital versions of books, introduced last month, is sold out and new orders won’t ship until after Christmas. The retailer said last month when it introduced the $259 device that it would ship purchases by Nov. 30. Orders placed after Nov. 19 will ship the week of Jan. 4, the New York-based company said today. Shoppers who want to give the product as a gift can have a holiday certificate shipped to the recipient. “While we increased production based on the high consumer interest, we’ve sold out of our initial Nook allotment available for delivery before the holidays,” Mary Ellen Keating , a Barnes & Noble spokeswoman, said in an e-mail. The Nook is Barnes & Noble’s entry into an electronic- reader market dominated by Amazon.com Inc. and Sony Corp. The Nook has a color touch-screen for navigation not found on Amazon.com’s Kindle or Sony’s Reader. Barnes & Noble, the biggest U.S. bookstore chain, fell 1 cent to $22.30 at 4:01 p.m. in New York Stock Exchange composite trading . The Wall Street Journal reported the shipping delay earlier today. Amazon.com, based in Seattle, controls about 45 percent of e-reader sales in the U.S., followed by Tokyo-based Sony , with 30 percent, according to ISuppli Corp., an El Segundo, California-based research company. To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net

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Kindle, Sony Electronic Readers May Get Biggest Payoff From Textbook Sale

November 20, 2009

By Joseph Galante Nov. 20 (Bloomberg) — As Sony Corp. ’s e-book devices vie with the Kindle to win over readers, the real showdown may come later: when a shift to electronic textbooks at schools threatens to eclipse the current market for the products. Sony and Amazon.com Inc. ’s Kindle are both expanding into the academic world. Students at Blyth Academy in Toronto do all their reading on Sony devices, and five U.S. universities are testing the Kindle. The days of students lugging around heavy textbooks may be numbered, said Sony executive Steve Haber . “The only ones upset about this are going to be chiropractors,” Haber, who oversees the digital reading unit, said this week in an interview. “It makes perfect sense to move to education.” Within five years, textbooks will be the biggest market for e-book devices, dwarfing sales to casual readers, predicts Sarah Epps , an analyst at Forrester Research Inc. in Cambridge, Massachusetts. Corning Inc. , which is developing glass screens for e-readers, expects textbooks to fuel about 80 percent of demand for those components by 2019. “Print will expire faster in the textbook world than in the trade book world,” Epps said. “The technical barriers will disappear and five years is enough for the content to catch up with demand. The potential is there.” Wave of Products The Kindle accounts for about 60 percent of the U.S. digital reader market, while Tokyo-based Sony has 35 percent, according to Forrester. Sales of digital reading devices will double next year to 6 million units, Forrester estimates. While the Kindle and Sony lead the field, Barnes & Noble Inc. has developed its own e- reader. And a wave of startups, including IRex Technologies BV and Plastic Logic Ltd. , aim to win customer loyalty while the market is still young. “When we talk to the folks in the industry, whether it’s at the university or publishing level, everybody thinks, ‘Yes, things could be a lot less expensive if delivered electronically,” said Ian Freed , a vice president at Amazon.com . “With textbook publishing there is an opportunity to make everything a lot more convenient at a lower cost.” Amazon.com , based in Seattle, fell 7 cents to $128.92 at 10:56 a.m. New York time in Nasdaq Stock Market trading. Sony declined 2.4 percent to 2,410 yen in Tokyo trading today. Textbook companies are open to the idea of electronic versions, in part because they could reduce sales of used textbooks. An electronic book can’t be transferred to another Kindle, so there’s no “used” version to worry about. “That’s a revenue stream publishers and authors are not participating in,” said Frank Lyman, executive vice president at CourseSmart LLC , an online marketplace started by five publishing companies to sell their textbooks. Twenty Percent E-textbooks accounted for about 3 percent of total U.S. college textbook spending during the current school semester, according to Student Monitor LLC in Ridgewood, New Jersey. Digital textbooks may reach 20 percent of total textbook sales in five years, CourseSmart’s Lyman said. McGraw-Hill Cos. started a digital learning service this year called Connect. The format lets it bundle more interactive learning tools with books, the company says. The transition to digital “can’t happen quickly enough,” said Rik Kranenburg , group president for higher education professional and international publishing at New York-based McGraw-Hill. “The books and digital products will merge and become much larger than the market for traditional content providers.” Blind Students E-readers face other challenges in the textbook market. The University of Wisconsin-Madison and Syracuse University said last week that they won’t recommend the Kindle for their schools unless Amazon.com makes it easier for blind students to use the product. Intel Corp. introduced a handheld device this month for $1,499 that reads printed text aloud. The market for digital textbooks goes beyond colleges. There are 68 million potential customers in the U.S. if you include primary and secondary schools, according to the National Center of Education Statistics . The shift also could be a boon for component makers, including Corning . “I see a lot of possibilities for electronic textbooks,” said Jill VanDewoestine, a program manager at the Corning, New York-based company . “The availability of color displays is really going to enable this whole new market.” For now, most e-readers are black and white. The Kindle DX model, which Amazon.com released in May, has a 9.7-inch screen and costs $489. IRex, based in Eindhoven, Netherlands, makes a device with an 8.1-inch screen for $399. Sony has multiple versions of its reader, including a touch-screen model, and Barnes & Noble unveiled a $259 reading device called the Nook last month. “The Millennials are very comfortable reading things online in a way their parents and grandparents are not,” said San Jose State University Professor Joel West, referring to the generation born in recent decades. “We will be seeing electronic textbooks become commonplace in the next 10 years.” To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

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Zack Greinke Wins AL Cy Young Award Over Hernandez, Verlander, Sabathia

November 17, 2009

By Erik Matuszewski Nov. 17 (Bloomberg) — Zack Greinke of the Kansas City Royals won the American League Cy Young Award after recording almost a quarter of his team’s 65 victories this season. The 26-year-old right-hander beat out Felix Hernandez of the Seattle Mariners, Justin Verlander of the Detroit Tigers and CC Sabathia of the New York Yankees in balloting by the Baseball Writers Association of America for the AL’s best pitcher. Greinke had a 16-8 record for a Royals team that went 65-97 to tie Cleveland for the AL’s second-worst record behind Baltimore (64-98). While Greinke’s 16 wins equaled the fewest for a Cy Young-winning starter in either league, his 2.16 earned-run average was the lowest by an AL pitcher since 2000, when Pedro Martinez won the award with a 1.74 ERA for Boston. “My main goal was to focus on every pitch and not give in to any batter the whole entire year,” Greinke said today during a media conference call. “I felt that if I didn’t make mistakes and be myself, the results would end up being good at the end of the year.” Greinke received 25 of the 28 first-place votes to claim the award, four years after he led the AL with 17 losses. He spent two months away from the sport in 2006 because of a social-anxiety disorder and didn’t become a full-time starter again until 2008. “I’ll try to get a little better from a physical aspect of pitching, but my mental aspect was as good as I could have done this year,” Greinke said. “I’m just going to try to keep it there and not try to change anything.” Vote Breakdown Greinke finished with 134 points to 80 for Hernandez, who received two first-place votes after going 19-5 with a 2.49 ERA. Verlander led one ballot and totaled 14 points, while Sabathia, the 2007 AL Cy Young winner with Cleveland, had 13 points. “I thought Felix had an amazing year and he would get a little more credit,” Greinke said. “I thought it would be real close between the two of us.” Votes were cast before Major League Baseball’s postseason, where Sabathia helped the Yankees win their record-extending 27th World Series championship. Sabathia was 19-8 with a 3.37 ERA in his first season with the Yankees after signing a seven-year, $161 million contract that was the largest in major-league history for a pitcher. Greinke, the Royals’ first-round draft pick in 2002, had a $3.75 million salary this season. He started the year by winning his first six starts and recording a 0.40 ERA. Greinke also finished strongly, going 6-1 with a 1.75 ERA in his last 11 starts. He pitched six complete games, including three shutouts, and was third in the majors with 242 strikeouts in 229 1/3 innings. Royals Winners The previous Kansas City pitchers to win the award were Bret Saberhagen (1985, 1989) and David Cone (1994). Cone was the only other AL pitcher to win the Cy Young with as few as 16 wins and he did it in a strike-shortened season. Brandon Webb of Arizona won the NL award in 2006 with a 16-8 record. Selected members of the writers association vote for their top three Cy Young choices, with players receiving five points for a first-place vote, three for second and one for third. The player with the most points wins. The BBWAA is scheduled to announce the winners of the Manager of the Year Award in the American and National leagues tomorrow. The NL Cy Young Award announcement is set for Nov. 19. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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