spotlight

WATCH: The Best Chevy Movie Scenes

by The Huffington Post on November 4, 2011

Huffington Post…

Chevrolet has been churning out cars for a century now. For 100 years, dependable Chevys have been taking their owners everywhere — to work, back home, to the grocery store and to the movies. And many Chevrolet cars have even made it to the spotlight. While some celebrity Chevys went on to glory, others crashed and burned. Take a look at the best movie scenes with El Caminos, Corvettes and more, and vote for your favorite. Happy birthday, Chevy!

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WATCH: The Best Chevy Movie Scenes

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Awaiting the services PMI from Europe, but the spotlight is on the U.S. non-farm payrolls

by on June 3, 2011

menafn.com…

Awaiting the services PMI from Europe, but the spotlight is on the U.S. non-farm payrolls

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Awaiting the services PMI from Europe, but the spotlight is on the U.S. non-farm payrolls

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FOREX TREND MONITOR: Markets Turn Spotlight on US Jobs Report

June 1, 2011

FOREX TREND MONITOR: Markets Turn Spotlight on US Jobs Report

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SEC Chair: We Didn’t Consider ‘Media Frenzy’ When Writing IPO Rules

March 15, 2011

WASHINGTON (By Sarah N. Lynch) – The U.S. Securities and Exchange Commission is reviewing the rules surrounding private securities trading and initial public offerings, SEC Chairman Mary Schapiro said on Tuesday. Speaking before a House of Representatives appropriations panel that oversees SEC funding, Schapiro indicated the agency is looking into two specific areas to determine if the rules are outdated and need some upgrades. One area involves rules determining when a company must go public and start filing periodic financial reports. The other area pertains to the rules on private placements and how firms can qualify for exemptions from registering their securities offerings with regulators. These issues have jumped into the spotlight as Wall Street banks and electronic markets offer investors a chance to buy and trade stakes in hot Internet companies such as Facebook and Twitter before they go public. The most high-profile example has been Goldman Sachs, which had planned to offer both U.S. and foreign investors a chance to own shares in Facebook through private placements. Goldman later said it would not sell the shares to U.S. investors, citing the intense media coverage of the deal. Schapiro said on Tuesday that Goldman feared the media attention might run afoul of rules that prohibit general solicitation to investors for private placements. When these rules were written, “nobody thought about media frenzy,” she said. (Reporting by Sarah N. Lynch; Editing by John Wallace) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Europe Ahead: UK trade balance and German industrial production under the spotlight

March 9, 2011

Europe Ahead: UK trade balance and German industrial production under the spotlight

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British Pound Enters the Spotlight as Traders Countdown to U.K.’s Inflation Report

February 14, 2011

British Pound Enters the Spotlight as Traders Countdown to U.K.’s Inflation Report

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Gina Harman: Scaling Microfinance: An Economic Imperative

February 11, 2011

These are troubling times, as the spotlight on microfinance has recently led to unfortunate mischaracterizations and a rush to judgment. Emotions have been confused for facts and character assassination is used to negate the very real contributions in the fight against poverty. In the current media cycle, commercialization — rather than unsavory business practices — has been identified as the cause in the case to discredit microcredit. While the lives of hundreds of millions worldwide have been enriched by opportunity once unimaginable, the words of a few threaten to change the opinions of many — a dangerous situation, indeed. The achievements of microfinance on the international stage have been very real, with collective efforts bringing positive change to 150 million of the world’s poor and the industry as a whole aiming to reach the two billion people who lack access to basic financial services. As a recent article in The Guardian made clear : what’s hurting the reputation of the industry is “unscrupulous operators — wolves in sheep’s clothing flying the flag of microfinance, but employing the tactics of loan sharks.” The wholesale refutation of an entire nonprofit and social business sector that has helped millions worldwide is clearly not the answer. As my colleague Michael Schlein suggested in a recent New York Times letter to the editor , the solution is not to abolish microlending — but to demand sound and transparent regulation. As the microfinance industry has grown, approaches have also changed to reflect real opportunities, market differences, pressures, and real grievances. Some of these strategies include commercialization, IPOs and increased competition. Here in the U.S., domestic microlending strives to put the elements of that successful model to work in very different circumstances. From unregulated to highly regulated markets, domestic microlending has grappled with the enormous need — over 10 million small business lack access to fairly priced capital — to grow, sustain or start a business. That lack of access has resulted from many factors from business type, to risk profiles and to the very high cost of delivering both the dollars and the support services needed to improve success. For many years, much of the discussion surrounding U.S. microfinance has been about how different the model and the customers are from the international scene. Those comparisons have focused on the size of the loans made, the presence of banking institutions in the domestic market, loan default rates, and an underlying assumption that the land of opportunity simply provides for those willing to work hard. Though differences exist between domestic and international models, there is also great commonality. Broadly speaking, U.S. and international microlenders share an underpinning philosophy that sufficient access to small business capital can have lasting, positive change on communities and individuals, and be a source of larger social good. Domestic microfinance organizations have grappled with defining a delivery method that will dramatically increase the numbers of businesses they can serve. That means personal relationships that begin at the application and are sustained over the life of the loan, such as providing resources from coaching to networking and financial education. All of this adds costs, and can make scaling to meet that need very challenging. But scale we must because the rewards to the economy, communities, families, and individuals are simply too large for the country to ignore. A Bureau of Labor Statistics report issued in early January showed the economy added 103,000 jobs in December . While these figures were lower than several private surveys had predicted , it is worth noting from where those job gains originated. Local governments shed 10,000 workers in December, state employers neither added nor terminated workers, and corporations didn’t do much hiring, either. That means all of December’s modest gains came from private industry, with most of those new jobs coming from small and midsize businesses. With U.S. hiring making incremental inroads, small business owners and would-be entrepreneurs — many of whom live and work outside of the financial mainstream — will be looking for sources of capital in order to grow. These recent job trends only underscore the importance of domestic microfinance efforts — and suggest how it can play an enormous role in helping to bolster the nation’s economy, providing access to financial resources, education, and training.

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USDJPY Enters the Spotlight As Traders Await the U.S. GDP Report

January 27, 2011

USDJPY Enters the Spotlight As Traders Await the U.S. GDP Report

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Google’s CEO Shakeup: Why Pick Page?

January 21, 2011

Google’s bombshell announcement that Google co-founder Larry Page will replace CEO Eric Schmidt, who has helmed the company for a decade, shocked employees and even the most seasoned Google analysts, who are divided in accounting for why the company has made the unexpected change in leadership. After all, under Schmidt’s watch the company has defended its dominance in search, seen its stock price more than triple, and triumphantly entered the mobile realm, where it has stolen share from incumbents like Apple and RIM. Yet even as it has had reason to celebrate, Google’s triumphs have been overshadowed by its failed attempts to evolve by launching successful social media and local advertising products, two areas of increasing importance. Its enormous growth–the company now has more than 20,000 employees and over $29 billion in annual revenue –has come with antitrust investigations, invited comparisons to the lumbering Microsoft and contributed to a brain drain as talented employees have fled to startups and smaller, more nimble firms. Google has positioned the transition as an effort to streamline decision making within the company. While experts see merit to this argument, they also paint a more nuanced picture of the shakeup, one of a Silicon Valley success now struggling through its awkward teen years as it attempts to refashion both its product offerings and public image with new management. Schmidt has become something of a public relations liability for a company never far from public or regulatory scrutiny. Though the outgoing CEO has apologized for some of his remarks and dismissed others as jokes, Schmidt has nonetheless made headlines with a series of controversial and inflammatory statements about personal privacy. On one occasion, he stated Google policy was to “get right up to the creepy line and not cross it.” In another instance, he advised, “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” Schmidt has had trouble distancing himself from these slips and finds himself frequently pressed on privacy and the views he has espoused. “He’s kind of a lightening rod now,” said Search Engine Land editor-in-chief Danny Sullivan of Schmidt. “Whatever he says, it seems people want to paint him into a corner as a scary guy.” By contrast, Page has a clean slate and offers a fresh face for the company. He has tended to shy away from public speaking and thus far has said little that can be held against him. At a time when Google is struggling to appear innovative, Page, known for his casual dress, middle class upbringing, and technical nature, still exudes the down-to-earth entrepreneur image. “He gives Google back their founder story, which is something that Facebook has,” Sullivan noted. Yet others believe it was Schmidt’s decision to step down as CEO, as the executive has developed career aspirations outside of Google. Some speculate Schmidt will remain executive chairman only temporarily before pursuing a career in the public sector, a field in which he has previously demonstrated interest. “He jumped, I don’t think he was pushed,” said Ken Auletta , author of Googled . “My suspicion is that he won’t stay that long.” Page’s promotion to chief executive will also change the way strategic decisions are made at the Mountain View company, a shift that may help Google become more nimble and better able to compete with rivals like Facebook, which benefits from its smaller size. Since Schmidt joined Google as CEO in 2001, the company has been led by a “triumvirate” comprised of Schmidt and Google co-founders Page and Sergey Brin. This govern-by-committee model may have worked initially, when Schmidt’s role was to provide “adult supervision” to the twenty-something entrepreneurs, but as the business and its co-founders have matured, it may be too cumbersome to allow Google to innovate at Silicon Valley speed. Facebook CEO Mark Zuckerberg has been known to boast of how much his company accomplishes with only a ” little team .” In a statement , Schmidt observed he, Page and Brin had been “talking for a long time about how best to simplify our management structure,” and looking for ways to “speed up decision making.” Though press releases frequently attempt to spin messy management changes, there seems to be truth to Google’s justification. “The problem with Google is speed,” said Jeff Jarvis , a professor of journalism at CUNY and author of What Would Google Do? . “Larry, Eric and Sergey sat down and said, ‘We’re part of the problem. Google is not as nimble as it was or as organized as it was.” While there are multiple, diverging explanations for the CEO switch, which takes effect April 4, 2011, most concur that little will to change under Page’s watch, given that he has always been an insider at the company and a pivotal figure in key decisions. “Larry Page and Sergey Brin are the face of Google. They are the heart of Google,” said Auletta. But will the job change Page? In his new role, Page will confront a host of new challenges, from overseeing large and diverse teams to facing increased scrutiny, greater pressure and more time in the spotlight. “He has the strategic sense, but does he have the management patience?” Auletta said of Page. “As CEO, you have to sit down and grind it out–not by inventing algorithms, but by dealing with personalities, people you don’t like. He’s a guy who doesn’t have patience for that.”

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Currency Traders to Place the Spotlight on the New Zealand CPI Report as Inflation Is Expected to Rise 4.1 Percent

January 19, 2011

Currency Traders to Place the Spotlight on the New Zealand CPI Report as Inflation Is Expected to Rise 4.1 Percent

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The Asian region returns to the spotlight this week

January 9, 2011

The Asian region returns to the spotlight this week

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Forex Traders Place the Spotlight on the Dollar as Nonfarm Payrolls Takes Center Stage

January 6, 2011

Forex Traders Place the Spotlight on the Dollar as Nonfarm Payrolls Takes Center Stage

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British Pound Extends Two Advance As Inflation Tops Expectations, Spotlight Shifts to the FOMC Rate Decision

December 14, 2010

British Pound Extends Two Advance As Inflation Tops Expectations, Spotlight Shifts to the FOMC Rate Decision

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Don McNay: Wealth Without Wall Street

December 11, 2010

The four points of WealthWithoutWallStreet.org are: Move your money. Take the power away from Wall Street banks and give them to banks and credit unions in your community. Don’t use credit cards. They are a tool that Wall Street uses to tie the average consumer in chains. Give back to your community. The point that I primarily want to focus on is creating and promoting a small businesss. As a writer and businessman, I know firsthand the value of a well-written media story. If you trace the history of almost any national company, you’ll find that somewhere along the way a story in a publication put that company in the spotlight. It’s like winning the media lottery. You toil for many years in relative obscurity and suddenly you become an overnight sensation. It happened to me. I was 23 when I started my structured settlement and financial consulting business, McNay Settlement Group. For a few years, it grew only by word of mouth. That all changed because of a story in the Lexington Herald Leader . Business Editor Jim Jordan wrote a feature about my work with injury victims that explained it in a way that captivated the reader. It also grabbed the attention of many national publications. We went from being a local business to a national business as a result of a few hundred well-written words. Now the shoe is on the other foot. I’m a writer. I know that comments in my newspaper column or in my blogs on the Huffington Post have tremendous power. I want to scream when I see small businesses, with the potential to be “overnight sensations,” screw it up. Journalists are not interested in being public relations or marketing people. They are interested in finding good stories. Some business people don’t seem to get that. It helps if a business has an identifiable owner or spokesperson. It’s more than just ego that made the late Dave Thomas, who started Wendy’s, or John Schnatter, who started Papa John’s, star in their company’s television commercials. It was a way to remind people that the fast food chains were not started by nameless, faceless corporations. They were started by entrepreneurs chasing the American dream. Faceless corporations do not make for a good story. Chasing the American dream does. If you have some connection to the rich, famous, or powerful, make sure the world knows about it. I watched Ted Gregory build his small Montgomery Inn, a rib joint outside of Cincinnati, into a national powerhouse. Whenever a Bob Hope or an Arnold Palmer or a well-known celebrity ate at the restaurant, Ted made sure that the world knew about it. I watched another Cincinnati restaurant owner, Jeff Ruby, use the same celebrity strategy. Not everyone has a celebrity clientele, but anyone who is successful in business knows how to sell. Ironically, that selling skill often goes out the window when dealing with journalists. Business owners who can be charming and customer friendly in business dealings can turn uncooperative, pushy or defensive when talking to the news media. Business owners need to treat journalists just like any other clients they are talking to on a one-on-one basis. They just keep in mind that the world might be listening. And as with any good client, once a media relationship is developed, the business owner needs to make sure to keep it up. The same skills that will make you a business success, like following through on commitments and saying “Please” and “Thank you,” will make you successful in communicating with the media. Don McNay, CLU, ChFC, MSFS, CSSC is the founder of McNay Settlement Group, a structured settlement firm based in Richmond Kentucky. He is also an award winning columnist and Huffington Post Contributor. McNay is a member of the Eastern Kentucky University Hall of Distinguished Alumni and has masters degrees from Vanderbilt University and the American College. He is a lifetime member of the Million Dollar Round Table.

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Currency Traders Place the Spotlight on the USDJPY Ahead of the U. of Michigan Confidence Report

December 9, 2010

Currency Traders Place the Spotlight on the USDJPY Ahead of the U. of Michigan Confidence Report

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Europe Ahead: BoE Rate Decision under the Spotlight

December 5, 2010

Europe Ahead: BoE Rate Decision under the Spotlight

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Zachary Karabell: Cancun and Climate: Government Won’t Act, But Business Will

November 29, 2010

Over the next two weeks, Cancun will be in the spotlight for something other than spring break madness. As host of the annual climate summit that once saw such promise in Kyoto in 1997, Cancun in 2010 is framed by the spectacular failure of last year’s Copenhagen talks and by the stark realization that nearly 200 nations simply cannot agree on anything of consequence. No matter how unequivocal the scientific evidence is that climate is changing and human activity is a central factor, nearly 7 billion people loosely represented by a few hundred governments are agreed on nothing. We know the reasons why action on climate is frozen: emerging countries such as China, India and Brazil will not accept limits that stifle their rapid emergence; developed countries such as the United States and the European Union can’t or won’t subsidize efforts abroad; and the U.S. federal government can’t even agree on binding limits for America itself. While everyone shares the sentiment that they do not want to destroy the earth or ruin it for their grandchildren, there is no consensus on how to shift global economic activity in a more sustainable direction. That should be cause for despair, and much of the commentary this week will likely conclude that we are on an inexorable and negative path towards deleterious climate change. But that is only because we collectively focus too much on government and its failings rather than on business and its successes. For many in the self-identified community that identifies climate change as humanity’s greatest challenge, big business is seen as an obstacle to a better future. That attitude is a legacy of the 1970s, when the green movement ranked big business as a culprit that couldn’t be redeemed but might be coerced. Today, however, global businesses aren’t being pulled kicking and screaming to innovate and become more sustainable: they are racing ahead of government and may in the end be the one real hope for the future. They aren’t doing so because management has gone green or awoken to some moral environmental imperative. They’ve done so because of the current imperatives of the market: with the price of raw materials skyrocketing in the face of China rapid industrialization and economic growth in the affluent world flat-lining, companies have ample new markets but no real pricing power. In short, they can sell, but any rising input costs they have to absorb. That is a powerful spur to use less stuff, to become more efficient, and to embrace sustainable growth. My recent book Sustainable Excellence (co-authored with Aron Cramer) charts just how companies are doing that. They are too numerous to list, and range from behemoths such as Walmart (yes, Walmart – which has aggressively pushed for more sustainable products), Unilever, Nike, Marks & Spencer, Nestle, and Shell to newer less familiar companies such as Better Place (which is trying to redefine transportation), Masdar (which is building a carbon-neutral city in the deserts of Arabia), Schneider (which is at the forefront of meters and energy efficiency), ICICI Bank (an Indian financial power that is addressing rural poverty), and hundreds of others. They are addressing consumer needs and recasting global supply chains, and doing so in a way that reduces their costs and thus, their carbon footprint. They are doing so largely in spite of government inaction and inconsistency. And they show no signs of reducing their efforts after the financial crisis of the past two years. If anything, that crisis led to redoubled efforts to use less stuff and enhance efficiency. And so while there will be hand wringing and consternation at what Cancun will not achieve, that should be placed against a backdrop of incredible dynamism in corporate land, driven not by idealism but by the urgency of the market. Costs of everything raw are spiking; that includes food, fertilizer, iron ore, copper, rare earths, oil, and even coal in China. And with costs soaring, innovation is as well. It would be lovely if governments were to find concord, and better for the world. But it won’t happen in the coming weeks, and it may not need to. Humanity has always been in tug-of-war between the ability to destroy life and the inexorable capacity to save it and create it. We don’t know which force will win in the future. But we are here now, and that says something about which has come out on top so far. This post originally appeared at www.time.com at http://curiouscapitalist.blogs.time.com

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Currency Traders Place the Spotlight on the Canadian Inflation Report

November 22, 2010

Currency Traders Place the Spotlight on the Canadian Inflation Report

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FOREX: Australian Dollar Soars as RBA Hikes Rates, Spotlight Turns to FOMC

November 2, 2010

FOREX: Australian Dollar Soars as RBA Hikes Rates, Spotlight Turns to FOMC

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The Potential for Fed QE Steals the Spotlight from a Week of Major Event Risk

November 1, 2010

The Potential for Fed QE Steals the Spotlight from a Week of Major Event Risk

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The Potential for Fed QE Steals the Spotlight from a Week of Major Event Risk

November 1, 2010

The Potential for Fed QE Steals the Spotlight from a Week of Major Event Risk

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Earnings catch the spotlight from fundamentals as markets await Fed action

October 30, 2010

Earnings catch the spotlight from fundamentals as markets await Fed action

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

October 28, 2010

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

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

October 28, 2010

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

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USD Traders Place The Spotlight on the U.S. GDP Report as QE Concerns Linger

October 28, 2010

USD Traders Place The Spotlight on the U.S. GDP Report as QE Concerns Linger

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Angela Haines: How to Invest in Life Sciences

October 5, 2010

No area of investing has greater potential risks — or greater pay-offs — than companies in the life sciences sector, especially if you consider their potential benefits to society. Who doesn’t want to contribute to a cure for Parkinson’s or Alzheimer’s disease or even to the development of a “marker” to help in the diagnosis of a disease? It’s often a hugely personal decision for investors whose interest may be peaked because a family member or friend has a particular disease. But investors have to be prepared to understand what makes life sciences companies different from other investments. And they need to know what questions to ask. In a recent presentation for angel investors at a Golden Seeds forum, Anne Shehab, who holds a PhD in Chemical Engineering as well an MBA, and has filled strategic leadership posts at DuPont, Biogen, Arthur Little, and Valeritas suggests three distinguishing industry features: it’s a highly regulated industry worldwide; the value chain has an imbalanced power structure, which gives more control to the payers (insurance companies, for example) than to the ultimate beneficiary, the patient. It’s also an industry in transition in terms of delivery systems, technology, diseases in the spotlight and regulations, especially since the recent health reform act passed. So what’s an investor to do? First, understand that regulation and pathways differ substantially for drugs, devices and diagnostics. What Anne Shehab suggests is to review the impact of the company on each link in the value chain. Here are some considerations: • Hospitals are continuously challenged to allocate their scarce resources between patient care and technology. They need a good reason to switch from existing practices: new technology must not only improve patient care, but also be cost-effective. • Doctors are reimbursed based on set codes set by insurance companies or Medicare. So, as well as improving patient care, new technology or drugs have to help them make money by saving time, moving reimbursement to higher paying codes, increasing patient recruitment, or providing access to new group of patients. • Payers are also increasingly demanding cost effectiveness data before new products are reimbursed. Start-ups must collect this data during clinical trials if possible. For devices, getting reimbursement codes takes a long time, though sometimes it’s possible to make use of existing codes. This issue applies to international health care systems too. Start-ups should develop not just a US-based strategy, but also European and Asian strategies too. • A good sales rep or distributor wants to maintain and grow the use of leading brands and technology and will try to ward off low-cost competitors. To do this, they often become partners with MD’s and even assist in surgeries which use the devices they sell. Thus, a start- up is fighting a Goliath! Good investors always focus on exit strategies. Assuming the company has a quality team, a strong competitive position, patent-protected technology and demonstrated development experience, investors must also look for potential pre-launch milestones that demonstrate the company’s potential for an early exit. For example, for new drugs in pre-clinical development, investors should look for strong, tightly-linked animal data in models that can reliably predict human outcomes. Manufacturing processes should fit with existing commercial systems. For new medical devices, look for clinical studies demonstrating efficacy and proof of market acceptance with early revenue streams, and, ideally, profits! Diagnostic products require early revenues too, along with clinical studies demonstrating efficacy and cost-effectiveness, and compatibility with current lab systems. Finally investors should never hesitate to ask hard questions of life science entrepreneurs: • How will you demonstrate efficacy claims to FDA? • What type of clinical data will convince end users (including practicing physicians) to adopt the product?. • How do you plan to set pricing? Have you developed pricing scenarios based on different levels of product performance expectations? • Can you launch your product under current reimbursement codes? What data will payers want to see before developing a new code? • What’s the launch strategy for outside the US? • How will MD’s incorporate your drug or product into their current treatment modes? How will this product expand their business? • What is the distribution plan? What type of marketing partnerships might help accelerate your growth? • What milestones will offer proof of viability? What’s the likely timeline to exit? • Who are the potential exit partners, and why is your business compelling to them? One longtime diagnostics veteran, Marie Wesselhoft, who recently launched a company, MSDx Inc., which commercializes biomarkers for monitoring therapeutic effectiveness in patients with multiple sclerosis, is experiencing the challenges of a life science start-up. Her first step was to secure patents to protect her technology; the next hurdle is to address the regulatory process, both of which require hiring external expertise. But in the end, Wesselhoft observes, “life science investors are not like other investors. You have to be o.k. with a long term exits because the process takes time. But when you see a company that is going to produce a product that makes a difference at an attractive profit, you don’t look back. You know it’s worth all the trials. For me, it’s a mission and a passion with a hugely significant social goal — the health of the society.” And investors have to share that same drive, passion and patience!

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Who Is The Ultimate Game Changer In Business?

September 15, 2010

HuffPost’s Game Changers series celebrates 100 innovators, visionaries, and leaders in 12 categories who, whether working in the spotlight or under the radar, are changing how we look at the world and the way we live in it. We salute them for their willingness to look at things and take the risk of saying, “I think I have a better way.” Now it’s up to you to pick the Ultimate Business Game Changer. Click through the slideshow below, get the lowdown on why we chose each Game Changer, then VOTE for your favorite! We’ll reveal your picks in October. (Note: Only your first vote on each slide will be counted.) Click Below to Vote for the Ultimate Game Changer in All Our Categories! Business Game Changers Food Game Changers Green Game Changers Education Game Changers Entertainment Game Changers Impact Game Changers Sports Game Changers Media Game Changers Style Game Changers Politics Game Changers Technology Game Changers Travel Game Changers

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Danny Schechter: Justice on Steroids–for Ruskie Spies, Not Wall St Bigs

July 12, 2010

We just witnessed justice on steroids. Ten Russian “spies”–even if we still don’t know what they were spying on or why–were brought to court, copped a plea, and were on their way out of the country by midnight. The wheels of justice move quickly when governments want them to. Wam, bam, thank you ma’am. When a crisis is looming–in foreign affairs or even potential embarrassment for a country in the spotlight, Courts jump to; cases are rapidly disposed of and the wrath of the law is felt with dispatch. In South Africa, land of the World Cup and vuvuzelas, special courts were set up to avoid a crisis of image if an expected crime wave erupted. Noted the New York Times : To swiftly handle the anticipated caseload — to satisfy the robbed, the throttled, the burgled, the scammed — 54 courtrooms around the country were set aside, “on the ball” from 8:30 a.m. to 11 p.m. and staffed with 110 magistrates, 260 prosecutors, 1,140 court officials and 200 translators. But only 172 cases have come to the World Cup courts, the noise of the gavels no match for the vuvuzelas. The scorecard, as tallied by the Justice Ministry through July 5, reads: 104 convictions, 7 acquittals, 28 withdrawn or dismissed, 33 pending. Now contrast this approach to the handling of our financial crisis where nary a financial big shot has gone to jail or even been tried. Despite the loss of trillions and the destruction of our economy, it’s business as usual in the halls of justice where, as Lenny Bruce once quipped, “the only justice is in the halls.” The government is not pushing prosecutions and there are no special courts despite all the anger in the public at the crimes of Wall Street. According to a recent report in Forbes , the Business magazine, financial crime is growing. Mortgage fraud is on the rise, as are bogus job counseling services and frauds conducted over the Internet. Since the financial crisis erupted in 2008, the FBI’s 1,000-agent New York office has tripled its mortgage fraud investigations squad and beefed up its securities and financial fraud group. The FBI’s Internet Crime Complaint Center says it received 336,655 fraud complaints last year related to financial losses of $560 million, double the dollar amount reported the year before. Instead of “all deliberate speed” (to use a civil rights era phrase), there is no deliberate speed in going after this financial crime wave. Yes, the FBI rounded up low-level mortgage fraudsters but did not go after the firms that securitized the bogus mortgages or insured them. Instead you get cases like this one reported by Business Insider , Robert Miller, a former lawyer for the SEC (and also a former money manager) deserves a prize for his performance in court the other day. He just escaped a potential 20-year prison sentence by telling the judge that he used to be a “fearful, self-loathing suicidal alcoholic,” says the Wall Street Journal. He was just too drunk to realize that he was participating in a fraud. It’s like he told his lawyer: ‘No matter how drunk I was, I wouldn’t have” [done it had I known it was a fraud]. Now Miller won’t have to spend anytime in jail. He will just have to live under “supervised release” for 2 years. This is amazing because Miller already plead guilty to conspiracy to commit securities fraud, wire fraud and securities fraud in November. Part of the reason for this shocking judicial failure is the way the industry, through lobbying and political contributions, managed to change the laws and decriminalize their scams. It’s hard to remember that 1500 bankers went to jail after the S&L crisis. Almost none are going to jail today. That’s why we need prosecutions of criminal enterprises under the RICO laws used against the mafia. In other countries, there are more creative ideas writes financial analyst Janet Tavakoli on Huffington Post: Broadcaster Max Keiser interviewed Luc Saucier, a Parisian lawyer to the financial community and Fulbright Scholar, on how to create a fast remedy to amoral behavior in the global financial markets. …Saucier explains that labeling a financial institution “obscene” is an effective social deterrent. U.S. citizens have the right to own property and to make money. We also enjoy freedom of speech, up to a point. The Supreme Court stated that when “art” becomes obscene-and the court worked hard to define what is meant by “obscene”-it is no longer considered art and does not enjoy the protection of freedom of speech. The most highly compensated players in finance are hedge fund managers earning $1 billion to $4 billion per year. Saucier says that when you see someone making money-billions of dollars a year in bonuses by exploiting the subprime crisis-then one can take the view that part of the remuneration is obscene. The same can be said for many bank CEOs, who may earn somewhat less economic compensation, but enjoy countless valuable perks. …Mr. Saucier puts it this way:

”They are committing acts of obscenity…They are morally bankrupting society…It’s obscene like kiddie porn is obscene…On the financial front that’s what [corrupt financiers are] guilty of.” Too many Americans don’t see it this way, says another financial blogger, Martin Andelman of Mandelman Matters , I think everyone has a friend or family member who thinks the crisis was caused by irresponsible sub-prime borrowers, who are now lowing their homes and should be. They’re wrong, and you know they’re wrong, but it’s a tough argument to win. More than a few of my readers have contacted me over the last year saying that they wish I could come over and set their special someone straight, and frankly I wish I could too, because no one… and I do mean no one… has any chance of winning that argument if I’m involved, and not because I’m such a brilliant debater, but because they have their facts wrong… they are misinformed. I am not, and neither is Danny Schechter. He then goes on to call for “Plunder Parties” to show my film Plunder The Crime of Our Time because our media is not doing enough to cover the criminal basis of the crisis. Boing Boing reports that “Italy’s media is going on strike today, and practically no news will be reported. This is in protest of Prime Minister Silvio Berlusconi’s plan to ram through anti-wiretapping legislation that includes a gag order on reportage concerning government investigation (especially investigation of corruption).” Unfortunately, in our country, we don’t need laws like this. Most of the media is already complicit with little inclination and few resources to investigate institutional corruption. Give them a celebrity scandal, a sex siren like Anna Chapman or an already wealthy ballplayer like Lebron James and they will beat the story to death in a mad pursuit of ratings and revenues. Ask them to investigate the collapse of our economy and hijacking of our country and you don’t get called back. News Dissector Danny Schechter directed Plunder The Crime of Our Time http://plunderthecrimeofourtime.com) that views the financial crisis as a crime story, (Plunderthecrimeofourtime.com). Comments to dissector@mediachannel.org

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Bill Singer: Moffat’s Sex. Nietzsche’s Memory.

July 12, 2010

It used to be sex, drugs, and rock ‘n roll — now it’s sex, drugs, rock ‘n roll, politics and Wall Street. For some reason, a lot of folks just get hung up about that sex thing. For example, consider the recent revelations about Robert Moffat, Jr., the former IBM vice President who was snared in the ongoing Galleon insider trading case. In a March 29, 2010 press release from the United States Attorney for the Southern District of New York: ” Former IBM Senior Vice President Pleads Guilty in Manhattan Federal Court to Insider Trading ,” we were told in matter-of-fact style that: From August to October 2008, MOFFAT engaged in an insider trading scheme in which MOFFAT obtained material,nonpublic information (“Inside Information”) relating to IBM,Advanced Micro Devices, Inc. (“AMD”) and Lenovo Group Ltd.(“Lenovo”), and provided it to DANIELLE CHIESI, a friend who worked during the relevant time period for New Castle Partners,an equity hedge fund group affiliated with JP Morgan Chase & Co. At the time of the conspiracy, MOFFAT was a Senior Vice President and Group Executive in IBM’s Systems and Technology Group. In addition, MOFFAT also served as a non-voting member of Lenovo’s Board of Directors. From August to October 2008, MOFFAT engaged in an insider trading scheme in which MOFFAT obtained material,nonpublic information (“Inside Information”) relating to IBM,Advanced Micro Devices, Inc. (“AMD”) and Lenovo Group Ltd.(“Lenovo”), and provided it to DANIELLE CHIESI, a friend who worked during the relevant time period for New Castle Partners,an equity hedge fund group affiliated with JP Morgan Chase & Co. . . [S]pecifically, in September 2008, MOFFAT provided Chiesi with Inside Information relating to IBM’s and Lenovo’s performance in the companies’ respective fiscal quarters ending in September 2008. In addition, in August and September 2008, MOFFAT provided CHIESI with Inside Information relating to a business deal pursuant to which AMD would spin off its manufacturing business into a separate entity. . . Ah yes, Danielle Chiesi was merely “a friend who worked during the relevant time period.” Frankly, there appears to have been quite a bit more to this story than what was disclosed in the criminal plea. Fortune magazine just published a compelling article: ” Dangerous liaisons at IBM: Inside the biggest hedge fund” insider-trading ring (By James Bandler with Doris Burke, July 6, 2010). In addition to the details of Moffat’s descent into the criminal conduct of insider trading, we are presented with a nuanced glimpse into his personal life — which includes his wife dealing with multiple sclerosis and a sexual relationship with Danielle Chiesi that began in 2003. Except, well, if you believe Moffat, it wasn’t really a sexual relationship — it wasn’t really about sex. No…not really. Consider this provocative paragraph from the Fortune article: In an interview with Fortune, Moffat came across as emotional, repentant, and chastened. He wept describing the embarrassment he’d brought upon IBM, his colleagues, and family. While he showed little self-pity, he rebuffed the notion that he hadn’t paid a price for his crimes, noting that by leaving IBM he was giving up an estimated $65 million in lost stock options and pension that he would have collected when he retired at 60. “The biggest thing I’ve lost,” he said, “is my reputation.” Moffat was not allowed by his lawyer to discuss his case or his relationship with Chiesi, but when told that Fortune intended to write about the affair, he said this: “Everyone wants to make this about sex. Danielle had an extensive network of business people. And she added clarity about what was going on in the business world…I know in my heart what this relationship was about: clarity in the business environment.” He may even believe that. I recently authored a column: ” Eliot Spitzer Leaves The Farm For Wall Street ” in which I considered yet another individual whose career arc descended into the abyss, and that figure also was embroiled in a sexual relationship outside his marriage. Frankly, it seems as if we’re faced with a pandemic of sexual affairs involving politicians — if memory serves me correct, in recent years we have had allegations of sexual affairs made against President Bill Clinton, Governor Eliot Spitzer, Governor Mark Sanford, Governor Jim McGreevey, Senator John Ensign, Senator David Vitter, Representative Mark Foley, Representative Vito Fossella, Mayor Kwame Kilpatrick, Mayor Gavin Newsome, and Mayor Antonio Villaraigosa and I’m sure that I’ve missed a number of other public figures, so, go ahead, fill in the blanks. Don’t get me wrong, I’m no prude. Sex is often as much about power as anything else and some folks are adrenaline junkies. Nonetheless, if it’s just about sex, then why won’t any of these folks just come out and say it, from day one, when they’re caught? Why is it always necessary to drag the humiliated spouse into the glare of the spotlight? Why is your downfall just another opportunity to stage a media event and to deliver a faux -sincere speech about your failure? I mean, seriously, can’t one of these jerks just stand before the cameras and say “I wanted to get laid. I got laid. I enjoyed it. I didn’t mean to hurt anyone. I’m sorry that I got caught.” All of which leads me back, albeit via a somewhat tortured path, to Mr. Moffat and his explanation in Fortune about his sexual affair with Ms. Chiesi. Frankly, I don’t understand Moffat’s explanation, the whole clarity in the business environment thing. Is he serious? Of course it was about sex. When things sound silly, they usually are. When desperate men seek justification for their stupidity, the explanations that they offer to us rarely ring true. Consider Bill Clinton’s now infamous January 26, 1998, statement that said, in part: [I] want you to listen to me. I’m going to say this again: I did not have sexual relations with that woman, Miss Lewinsky. I never told anybody to lie, not a single time; never. These allegations are false. And I need to go back to work for the American people. Thank you. Imagine how much more absurd that same statement would now seem, if the former President offered this version: [I] want you to listen to me. I’m going to say this again: I did not have sexual relations with that woman, Miss Lewinsky. Our relationship was about clarity in the business environment. I never told anybody to lie, not a single time; never. These allegations are false. And I need to go back to work for the American people. Thank you. Perhaps Nietzsche said it better: “I did that,” says my memory. “I could not have done that,” says my pride, and remains inexorable. Eventually — the memory yields. Aphorism 68, Beyond Good and Evil

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China’s Hu Buys Time on Yuan Valuation by Announcement Before G-20 Summit

June 20, 2010

By Bloomberg News June 21 (Bloomberg) — Chinese President Hu Jintao may have succeeded in removing the yuan’s valuation from debate at this week’s Group of 20 leaders’ summit, economists and political analysts say. How much time he’s bought depends on how flexible the currency will become. Days before China’s central bank announced on June 19 that the yuan’s “flexibility” would increase, officials said the currency’s value was not a suitable item for discussion at the G-20 meeting in Toronto. Hu will meet with President Barack Obama and other world leaders at the June 26-27 summit to discuss items ranging from the global response to the European sovereign-debt crisis to increasing the influence of developing countries in the International Monetary Fund. U.S. lawmakers threatened to thwart China’s wish to keep the yuan off the meeting’s agenda. House Ways & Means Chairman Sander Levin , a Michigan Democrat, said on June 16 that China needed to act by the end of the summit or risk U.S. legislation which could levy penalties on Chinese imports. “I think the announcement is in a sense preemptive and will probably keep currency off the agenda at the G-20 meeting, a well advertised Chinese goal,” said Nicholas Lardy , a senior fellow at the Peterson Institute for International Economics in Washington. “My view is that they have at a minimum bought some time.” Constructive Step Obama, in a statement, called China’s decision a “constructive step.” U.S. lawmakers said China’s move was insufficient. Senator Charles Schumer , the New York Democrat who is co- sponsor of legislation that would allow for duties on Chinese imports, said he was dissatisfied with a statement that didn’t indicate the timing or amount of adjustment. “We hope the Chinese will get more specific in the next few days,” Schumer said on June 19. “If not, then for the sake of American jobs and wealth, which are hurt every day by China’s practices, we will have no choice but to move forward with our legislation.” Senator Charles Grassley of Iowa, the Finance Committee’s ranking Republican, said the Obama administration and Congress “need to keep the pressure on until China takes concrete actions to appreciate its currency exchange rate in a meaningful way.” China’s central bank yesterday reaffirmed it would maintain the yuan’s 0.5 percent daily trading band and said greater yuan flexibility would help cut the trade surplus and reduce the reliance on exports as a driver of growth. Lawmakers’ Ire The yuan has been held at about 6.83 to the dollar since mid-2008. The currency appreciated 21 percent in the three years after a peg to the dollar was scrapped in July 2005 and replaced by a managed float against a basket of currencies including the euro and the Japanese yen. The persistent surplus has been a driving force of Washington lawmakers’ ire. China is the second-biggest trading partner of the U.S. after Canada and the U.S. is China’s biggest single-country export market. Two-way trade last year amounted to $366 billion, with China recording a $226.8 billion surplus, according to U.S. Commerce Department data. Should the yuan resume its appreciation against the U.S. dollar, which was suspended in July 2008 as world economic growth slowed, then China can “avoid becoming a target in the spotlight” at the G-20, said Li Cheng , head of research at the John L. Thornton China Center at the Brookings Institution in Washington. China’s Agenda That will allow China to focus on its own agenda at the meeting. Vice Foreign Minister Cui Tiankai told reporters on June 18 that China wanted to discuss new quotas for the IMF that would boost the power of developing countries, promote the overhaul of global financial regulations, speak out against trade protectionism and pay more attention to economic development in poorer countries. Zhang Tao , head of the central bank’s international department, said at the same briefing that Europe’s sovereign debt crisis was also a high priority for discussion. China, by moving on its currency ahead of the Toronto summit, has shifted attention to the budget deficits of developed nations, said Eswar Prasad , a senior fellow at the Brookings Institution and a former head of the China division at the International Monetary Fund. Vice Finance Minister Zhu Guangyao said June 18 that China’s fiscal debt was about 20 percent of gross domestic product. That compares with almost 100 percent in the U.S. Trade Surplus Still, Hu’s respite may be cut short if China’s trade surplus rises and the yuan only makes a small appreciation of about 2-3 percent against the dollar in the coming months, Lardy said. Reports this month from the U.S. and China highlighted concern that trade imbalances, which reached record levels before the global financial crisis, may be reemerging. Chinese exports climbed 48.5 percent in May from a year earlier. In the first four months of the year the U.S. posted a $71.0 billion trade deficit with China, up 5.7 percent from the year-ago period. “China could come under renewed pressure,” Lardy said. — Michael Forsythe in Beijing, with assistance from Rebecca Christie and Ian Katz in Washington and Li Yanping in Beijing. Editors: John n Brinsley , Paul Panckhurst . To contact the reporter on this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net ;

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Weekly Spotlight: Europes Outlook Progressively Worsens

June 16, 2010

Weekly Spotlight: Europe’s Outlook Progressively Worsens

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Gulf Oil Spill: BP’s Failures Amplified By Numerous Gaffes

June 11, 2010

HOUSTON — BP is already fighting an oil gusher it can’t contain and watching its mighty market value wither away. Its own bumbling public-relations efforts are making a big mess worse. Not only has it made a series of gaffes – none greater than the CEO’s complaint that “I’d like my life back” – the company hasn’t even followed its own internal guidelines for damage control after a spill. Executives have quibbled about the existence of undersea plumes of oil, downplayed the potential damage early in the crisis and made far-too-optimistic predictions for when the spill could be stopped. BP’s steadiest public presence has been the ever-present live TV shot of the untamed gusher. What BP has lacked, crisis management experts say, has been much of a show of human compassion. “All crises are personal,” said Richard Levick, who runs a public relations firm, Levick Strategic Communications, that advises companies. “Action and sacrifice is absolutely critical.” The best move for BP’s image, of course, would be to stop the leak. That has proved difficult enough, with one fix after another failing and estimates of the severity of the spill growing by the week. Failing a solution, Daniel Keeney, president of a Dallas-based PR firm, suggested putting CEO Tony Hayward in a hard hat and life vest, helping crews contain and clean up the spill. “You want to get him right in the thick of things, even if he looks somewhat uncomfortable doing it,” Keeney said. Levick suggested BP could have cut gas prices at its stations along the Gulf Coast – a show of financial solidarity. BP has taken a stab at soothing angry Americans, airing a slick, multimillion-dollar national TV spot this week in which Hayward pledges: “We will make this right.” Hayward also promised BP would clean up every drop of oil and “restore the shoreline to its original state.” President Barack Obama said the money spent on the ads should have gone to cleanup and compensating devastated fisherman and small business owners. And even those efforts violate the company’s own prescription for damage control. Its own spill plan, filed last year with the federal government, says of public relations: “No statement shall be made containing any of the following: promises that property, ecology or anything else will be restored to normal.” On top of everything else, BP can’t figure out what to say about its dividend. Lawmakers in the U.S. insist the company must look after the devastated people of the Gulf before paying its shareholders. But in Britain, legions of retirees count on the steady payouts. And earlier this week when Wall Street freaked out over the prospect of billions of dollars in BP liabilities and sent its stock to its lowest point since the mid-1990s, the company response was positively tone-deaf. “The company is not aware of any reason which justifies this share price movement,” the company said early Thursday, after its stock was hammered on New York and European exchanges. Almost from the beginning, BP has been as unable to control its public message as it has the spill itself. Hayward was ridiculed for telling reporters “I’d like my life back” earlier in the crisis, remarks the families of some of the 11 men killed in the explosion of the Deepwater Horizon rig felt were insensitive. He also suggested that the environmental impact of the spill would be “very, very modest.” Former Shell chairman John Hofmeister said it might have been more appropriate for senior U.S. executives of the company to take the heat. Hayward is an Englishman, and BP is based in Britain. “I think it was a mistake for Tony Hayward to come and put his physical presence in the U.S.,” Hofmeister said. “The U.S. has its own culture and traditions. Foreign companies can come and do business there, but they are not necessarily welcomed.” BP’s chief operating officer, Doug Suttles, an American, was rolled out for interviews, but his aides grumbled Hayward was stealing the spotlight. Hayward’s decision to present a video explaining BP’s “top kill” attempt took the company’s Louisiana command by surprise. As for Suttles himself, he insisted this week that there were no massive underwater oil plumes in “large concentrations” from the spill. To NBC, he offered that it “may be down to how you define what a plume is here.” The government had said three tests confirmed oil as far as three-fifths of a mile below the surface of the Gulf, at least 40 miles away from the site of the gushing well. Suttles also predicted the spill would be reduced to a “relative trickle” by early next week. BP later sought to walk the comments back, saying the company was optimistic but that getting the spill to a trickle would take more time. By late this week, the government had reported that the spill was spewing the equivalent of the Exxon Valdez disaster into the Gulf every two weeks or less, with the catastrophe nearing the end of its second month. Since the April 20 explosion, BP has parachuted its own staff, plus staff from at least two independent public-relations firms, to deal with the deluge of round-the-clock media inquiries. Early on in the crisis, BP and government officials held daily in-person briefings with media, allowing questions. In recent days and weeks, officials have increasingly resorted to teleconferences with reporters and have limited the ability to ask questions and the number of questions that could be asked. In Houston, where BP has set up a U.S. command center, company PR officials have grown weary of reporters going directly to engineers and other higher-ups for information, at times trying to insist media go through them first. Spokesman Robert Wine said in an e-mail to The Associated Press that media visits to the Houston center are “very carefully controlled and sparingly arranged” by design. “The rooms that are shown are full of the teams who WILL make a difference on the result of this crisis,” Wine wrote. “Every second they are not helping with media visits is time they are not doing the `day job.’” In the meantime, BP has been buying up spill-related search terms on Google and Yahoo, so that links to its own oil-response sites pop up first. BP says the idea is to help people on the Gulf find the right forms and people quickly and effectively. Others suggest it’s a move to steer searchers away from bad press for BP. “It is clearly trying to protect its brand image,” said Matthew Whiteway, director of campaign management at London consulting firm Greenlight, which says 95 percent of BP’s search listings are rated very negative. Crisis management experts say the only reliable way to repair BP’s badly tarnished image is the obvious one – to plug the hole. “Crisis management is about fixing the problem. It’s not about looking good,” said Tony Jaques, a crisis management consultant in Melbourne, Australia. “BP has done some things that have not been smart, but really, what would they have done to look good in this kind of situation anyway?” ___ McClam reported from New York. Associated Press writers Michael Liedtke in San Francisco, Tamara Lush in New Orleans and Jane Wardell in London contributed to this report.

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Papandreou’s Overhaul Hinges on Vanquishing Greek Tradition of Corruption

June 11, 2010

By Natalie Weeks and Jonathan Stearns June 11 (Bloomberg) — Socialist Prime Minister George Papandreou promised to undo decades of welfare policy to win an international bailout for Greece. Keeping the lifeline will force him to reverse another legacy left by past leaders, including his father: corruption and a bloated bureaucracy. Papandreou has promised “clean hands” to win public support for austerity measures that will cost all 11 million Greeks — from newborns to retirees — as he introduces in coming weeks a plan to overhaul the pension system, the fattest target in his deficit-cutting campaign. The nation’s financial crisis, which has sparked dozens of anti-government demonstrations including one in which three bank employees were killed, presents an opportunity for a political and economic overhaul that Papandreou must grasp, analysts and investors say. Failure by the 57-year-old, U.S.-born leader threatens default and a cataclysm that may undermine the euro. “Papandreou has a window,” said Loukas Tsoukalis , an economist at Athens University. “If he proves he can deliver the goods, and that the situation is changing, not just in terms of the budget, but the reality in Greece is changing, then he has a great chance of success.” Euro-area governments and the International Monetary Fund have vowed to halt payments from the 110 billion-euro ($132 billion) aid package approved last month should quarterly reviews show Papandreou is failing to meet targets. The threat reflects Greece’s history of understating its budget deficit. Papandreou’s challenge to Greek political tradition extends to his own family. His late father, Andreas Papandreou , founded the Socialist Pasok party. In 1981, he led Greece’s first Socialist government and increased wages for state employees. Anything Goes “It was under Andreas Papandreou that a mindset of ‘anything is allowed and nothing is controlled’ developed,” said Christos Giannaras, a philosophy professor at Aristotle University of Thessaloniki in the northern part of the country. “Policies such as getting rid of wage increases based on merit, skill and level of responsibility had unbelievable social repercussions.” Greece’s so-called core public sector has about 403,000 workers based on the latest data, according to Spyros Papaspyros , chairman of the federation of civil servants’ unions. Finance Minister George Papaconstantinou plans to start documenting the number of state employees and a report is scheduled to be published later this year. The younger Papandreou has promised austerity measures equal to 14 percent of gross domestic product in a bid to bring Greece’s deficit within the European Union limit of 3 percent of GDP in 2014 from 13.6 percent last year. He has reduced wages and pensions, increased levies on tobacco, alcohol and fuel, pledged to limit public-sector hiring to one employee for every five that depart, and promised a crackdown on tax evasion. Pension Overhaul Papandreou faces his toughest test as he seeks to overhaul the pension system. With some retirees earning more than when they worked, Greece may spend 25 percent of GDP on pension costs by 2050 unless policies are changed, the government estimates. Papandreou’s proposals would raise the retirement age to 65 from 62.5, increase it with life expectancy and index benefits to prices. He also proposes to restrict early retirement. The minimum contribution period would be raised to 40 years from 37 years by 2015 and pensions would be awarded on the basis of earnings over an entire working life, instead of the last five years. This is an “even harsher test” than the austerity measures that lawmakers approved last month, according to Sotiris Rizas, a researcher at the Academy of Athens’s Center for the Study of Neo-Hellenic History. ‘Major Reorientation’ Overall, the goal is a “major reorientation” in the 238 billion-euro economy by scaling back the role of the state to make it more efficient and restore investor confidence, according to the EU-IMF aid agreement with Greece. Papandreou, educated at Amherst College in Massachusetts and the London School of Economics, has a challenge on his hands as Greeks made 900 million euros of payoffs nationwide in 2008, according to Berlin-based Transparency International. The latest survey of 6,000 Greek citizens found that the rate for a bribe to pass a car-emission inspection was 300 euros and the cost to jump to the top of a waiting list for an operation in a state hospital was about 2,500 euros. Greece ranks as the most corrupt euro country and 71st of 180 worldwide in terms of corruption, according to the organization’s survey published last year. ‘Not Attractive’ “Greece isn’t an attractive investment nation due to the bureaucracy and inefficiencies inherent in its economy and political system,” said Nick Stivactas, business manager at Ingredients Plus Pty Ltd., a Sydney, Australia-based seller of chemicals. “I commend the Pasok government for the initiatives they have put in place.” The shrinking of the civil service must also ensure that merit-based hiring ends political parties’ decades-old practice of using state jobs to reward supporters, according to Nikiforos Diamandouros , the Strasbourg, France-based official responsible for investigating complaints about EU institutions. “I would hope that there is a sufficient degree of realization of how critical the situation is in Greece so that the government will push forward,” Diamandouros said. “The timeframe is now and not tomorrow.” Cracking down on tax cheats is also a central government objective. Papandreou has said these people deprive the state of as much as 30 billion euros a year. Target Tax Evaders The finance ministry has said it will target professions in which tax evasion allegedly runs rampant. In November, the ministry put the spotlight on evasion by doctors and vowed to stamp it out. The ministry fined 11 physicians for dodging taxes and will press criminal charges against four of them as part of a “name-and-shame” crackdown. Previous Greek governments, including the New Democracy administration of Kostas Karamanlis , whom Papandreou defeated, failed to follow through on anti-corruption promises. Greeks increasingly realize they now have no choice, said Claude Giorno, head of the Greece desk at the Organization for Economic Cooperation and Development in Paris. “There is a change in culture which is spreading, probably rapidly,” he said. “Most people are seeing the consequences of this poor management. They need to catch up pretty quickly, but in a sense there is not much alternative.” Popular Support In a poll published May 8, 54 percent of 1,000 people surveyed by ALCO for the Proto Thema newspaper said they supported the bailout and the accompanying wage and pension cuts and tax increases. A separate poll of 1,030 people by Kappa Research on May 6, the day Greece’s parliament debated the austerity program, showed 55.2 percent accepted the measures to stave off bankruptcy. Papandreou’s government has already struggled with corruption in its ranks. Deputy Culture Minister Angela Gerekou resigned on May 18 after the government said her husband owed about 5.5 million euros in unpaid taxes and fines. In another case, former Pasok Transport Minister Anastassios Mantelis said when speaking last month to a bribery probe that he received money from the Greek unit of German engineering company Siemens AG in 1998, according to Kathimerini newspaper . The OECD’s Giorno said controlling the budget depends on improving health care and education, steps that would help fight corruption. As long as “the quality of services is really poor,” Greeks will continue to make under-the-table payments to doctors for better treatment, Giorno said. They’ll also spend on private education because of dissatisfaction with state schools and engage in the “national sport” of tax evasion, he said. To contact the reporters on this story: Natalie Weeks in Athens nweeks2@bloomberg.net ; Jonathan Stearns in Brussels at jstearns2@bloomberg.net

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Weekly Spotlight – Europes Debt Crisis Remains in Headlines

June 1, 2010

Weekly Spotlight – Europe’s Debt Crisis Remains in Headlines

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Mike Green: Is America Embroiled in an Economic War?

May 22, 2010

A constant narrative heard across the media landscape today is that miscalculations and unforeseen circumstances led to the economic crisis facing America. Yet, beneath this media refrain are voices of integrity who claim the truth is entirely different. The voices declare a decade-long financial war for control of the American economy pitted a Financial Coalition — consisting of the federal government, the Federal Reserve and Wall Street leaders — against the citizens of the United States. First Battle In 1998, one woman, Brooksley Born, engaged in battle against a group of President Bill Clinton’s closest economic advisers, the Federal Reserve and Congress. Her story ought to be mandatory study for all media and every political leader in the country. As the head of the Commodities Futures Trading Commission, Born fought to derail a corrupt system of unaccountability involving bad loans sold under the guise of derivatives on Wall Street. A number of congressional hearings were held. Alan Greenspan, Robert Rubin, Lawrence Summers and Timothy Geithner led the battle to squash the reform movement headed by one woman. Today, Born serves as a commissioner on the Financial Crisis Inquiry Commission. In an April 7, 2010 hearing, she blasted former Fed chairman, Greenspan, telling him the agency he led, “… failed to prevent the housing bubble, failed to prevent the predatory lending scandal and failed to prevent the activities that would bring the financial system to the verge of collapse.” Born politely left out the fact that she sought to prevent all of Greenspan’s failures more than a decade ago when he and his cohorts successfully lobbied Congress to rule against her warnings. She lost a valiant fight against the Financial Coalition: federal government, Federal Reserve and Wall Street. Economic Civil War Shortly thereafter, under President George W. Bush, all 50 states attorneys general fought together against the executive branch, the Federal Reserve and Wall Street executives to derail a corrupt system of unaccountability involving bad loans and predatory practices targeting the American people. Former New York Governor Eliot Spitzer wrote a Feb. 14, 2008 editorial in the Washington Post that exposed the federal government’s collusion with Wall Street and its Federal Reserve to defeat efforts to protect citizens against predatory lending practices that were at the core of the current economic crisis. As the states sued banking establishments for unlawful practices, the Office of the Comptroller of Currency in 2003 invoked an archaic federal law that undermined the efforts of the states to protect their resident consumers. All 50 states lost an epic economic battle against the Financial Coalition. Media chose to wallpaper America with Spitzer’s personal exploits, completely ignoring his public plea to investigate the Financial Coalition. Today’s notion that miscalculations and unforeseen circumstances led to the crisis belies the fact that the course of America’s economy was established through court battles and congressional hearings with several strong warnings along the way. The Financial Coalition did not innocently nor inadvertently stumble onto an economic landmine. It defeated armies of experts in its effort to maintain a strategy it devised. Face-to-Face Stark Warning Five years ago, another public warning was presented to the Financial Coalition. According to a May 21, 2010 article in Time magazine titled, ” Economic Seer Says U.S. Not Addressing Cause of Crisis “: “In 2005, Raghuram Rajan stood before a room of prominent economic policy makers celebrating Alan Greenspan’s legacy and presented a paper about how the world was headed for financial disaster. The University of Chicago economist was roundly scoffed at even though, as it turns out, he was right.” Time asked Rajan, “How do you rate the financial re-regulation coming out of Washington? Because what you’re talking about doesn’t sound like what Congress is talking about.” Rajan responded: “I would ask a more fundamental question than is being asked, which is why were markets so oblivious of the risks being taken? I would argue a big reason was because they believed the markets would be bailed out by the government, and that expectation has been confirmed, with the government intervention in the housing markets and the credit markets and the Fed pushing enormous amounts of liquidity.” In a Jan. 2, 2009 article titled, ” Mr. Rajan Was Unpopular (But Prescient) at Greenspan Party ,” The Wall Street Journal looked back at the 2005 event. “Mr. Rajan, a professor at the University of Chicago’s Booth Graduate School of Business, chose that moment to deliver a paper called ‘Has Financial Development Made the World Riskier?’ “His answer: Yes. “Mr. Rajan quickly came under attack as an antimarket Luddite, wistful for old days of regulation. Today, however, few are dismissing his ideas. The financial crisis has savaged the reputation of Mr. Greenspan and others now seen as having turned a blind eye toward excessive risk-taking. “He says he had planned to write about how financial developments during Mr. Greenspan’s 18-year tenure made the world safer. But the more he looked, the less he believed that. In the end, with Mr. Greenspan watching from the audience, he argued that disaster might loom. “He pointed to ‘credit-default swaps,’ which act as insurance against bond defaults. He said insurers and others were generating big returns selling these swaps with the appearance of taking on little risk, even though the pain could be immense if defaults actually occurred.” Media Spotlight Credit-Default Swaps soon attracted the interest of Bloomberg business reporter Mark Pittman. He died while embroiled in a battle with the Federal Reserve to crack its secrets regarding the whereabouts of more than $2 trillion in U.S. securities. Bloomberg paid homage to Pittman in its Nov. 30, 2009 article titled, ” Mark Pittman, Reporter Who Challenged Fed Secrecy, Dies at Age 52 .” A statement made by a financial editor revealed a lot about Pittman and the rest of his journalist colleagues: “‘Who sues the Fed? One reporter on the planet,’ said Emma Moody, a Wall Street Journal editor who worked with Pittman at Bloomberg News. ‘The more complex the issue, the more he wanted to dig into it. Years ago, he forced us to learn what a credit-default swap was. He dragged us kicking and screaming.’” Pittman is yet another warrior who fought to shed light in the dark corners of the financial sectors. He was an award-winning business reporter for Bloomberg, whose dogged determination to expose the risks involved in the market drew harsh criticism from ratings agencies and skepticism from leading business editors across the nation. Pittman pushed the Federal Reserve to respond to Freedom of Information Act requests it ignored . At the time, Timothy Geithner was the head of the New York Federal Reserve, the most powerful of all Fed branches. Today, Geithner advises President Obama as his Treasury Secretary. Can Geithner open up the Fed? Has anyone asked? Despite an elevated percentage of economic news over most any other news, most Americans are still so ill-informed about the economic crisis that LIBOR has no meaning, though its rates impact banking institutions and consumers nationwide. Yet even the most unsophisticated and infrequent news consumer will inevitably stumble across a report on the top money-making Hollywood films and easily rattle off the names of top-grossing movies. Media narratives often inform us that miscalculations, misfortune, mistakes and an inability to foresee the future are the culprits that caused the economic crisis. This narrative is regurgitated garbage thrown up by financial executives who were dragged before Congress in a toothless dog-and-pony exhibition that amounted to little more than more media fodder. Harvard student sheds more light musicforyouth.org Following in the footsteps of the award-winning Pittman, ironically, is a Harvard University student possessing no investigative journalism experience at all. While most media have remained content to regurgitate the blame-tossing chatter of financial executives and spineless excuses offered by elected leaders, Anna Katherine Barnett-Hart decided to delve into one of the real causes of the economic crisis. Her thesis, ” The Story of the CDO Market Meltdown: An Empirical Analysis ,” should be required reading by every journalist involved in business reporting. It might be a good idea for media to invite Barnett-Hart to teach business reporters about collateralized debt obligations and myriad other complex debt instruments that confound both consumers and reporters. Celebrated author Michael Lewis contacted Barnett-Hart last year after reading her thesis. Lewis’ book , “The Big Short: Inside the Doomsday Machine,” highlights the unsung heroes inside the financial industry who capitalized upon the broken infrastructure. The irony remains that many still perceive those who bet against the U.S. economy as unpatriotic or worse. It’s difficult to understand how people can become so allied to deception and outright lies that they take offense with those who discover and embrace truth and use it to their advantage in the same capitalism game. New Coalition In 2006, Sheila Bair was named head of the FDIC. She soon began to peek into areas of suspicious banking activities within the realm governed by the Federal Reserve, according to Time magazine (May 24, 2010). In 2007, Bair began meeting with banking executives to “renegotiate entire categories of loans to avoid massive foreclosures that could erode home values.” Her efforts failed and she went public with news of the pending crisis. Despite the fact that 25 banks failed in 2008, 140 more failed in 2009 and 68 have failed thus far this year, Bair’s private efforts to help reform a system before it imploded have yet to be adopted by those who run the system. Bair lost the struggle to save those banks that drowned in a flood of economic disaster. Consumers were also washed away in the aftermath of ignorant arrogance exhibited by banking executives. Elizabeth Warren, the appointed head of the committee that oversees the Troubled Assets Relief Program, explained part of the process of confusion banks used to trap consumers. In the May 24, 2010 issue of Time magazine, an article titled, “The New Sheriffs of Wall Street: The women charged with cleaning up the mess,” quotes Warren: “For Bank of America’s credit card in 1980, the agreement was 700 words long. The average credit card agreement by the mid-2000s was 30 pages long, and it was loaded with ‘double-cycle billing’ and ‘LIBOR-linked’ — terms no one understood.” Today, the Financial Coalition is on its heels while a different coalition is forming comprised of heroic women: SEC Chair Mary Schapiro (who cast the deciding vote to initiate a lawsuit against Goldman Sachs), Elizabeth Warren (head of the TARP oversight committee), Sheila Bair (FDIC head) and Brooksley Born (Financial Crisis Inquiry Commission). I’m optimistic these women will embrace the 24-year-old Harvard-educated Anna Katherine Barnett-Hart and welcome her into the sisterhood. The economic battles still rage today, as economic reform continues to be the political football tossed back and forth by the same old men who waged war on the American people. Meanwhile the same faces in the Treasury, Federal Reserve and congressional banking and finance committees have yet to change. But don’t worry. All is not lost. There’s a new coalition coming. Perhaps its the Calvary we need to win the economic war for the American people … for a change.

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Secretive Speed Traders In Spotlight After Flash Crash On Wall Street

May 15, 2010

NEW YORK — If you saw a penny on the sidewalk, would you pick it up? You may think it’s not worth the effort, but a breed of investors who have been in the news do. Using super-fast computers, high-frequency traders in effect bend down to pick up pennies lying about in the stock market – then do it again, sometimes thousands of times a second. More than a week after the Dow Jones industrial average fell nearly 1,000 points, its biggest intraday drop ever, regulators are still sifting through buy and sell orders to figure out what sparked it. One big focus are orders placed by high-frequency traders, or HFTs, and for good reason. These quick-buck firms barely existed a few years ago but now account for two-thirds of all U.S. stock trading. In other words, all those TV pictures of the stately New York Stock Exchange building on the evening news are an illusion. The real action on Wall Street is far away in Kansas City, Mo., and in New Jersey, in towns like Carteret and Red Bank, where HFTs named Tradebot and Wolverine and Tradeworx ply their trade. High-frequency trading firms, which number over 100, use computers programmed with complex mathematical formulas to comb markets for securities priced too high or too low because traders haven’t had to time to react to the latest data. The computers then buy or sell in a split second, locking in a profit. The opportunities seem hardly worth noting. They’re not just fleeting, but small, often a penny or less. But those pennies can add up to a lot of money, enough to draw the attention of Goldman Sachs Group Inc., the giant Chicago hedge fund Citadel Investment and other big financial firms. In recent years they’ve paid hundreds of millions of dollars for stakes in high-frequency trading companies. The money has stoked what was already fierce competition among the firms for a leg up. To spot opportunities and act on them before others, HFTs are constantly hunting for faster computers. They also locate themselves close to the big exchanges’ data centers. That can cut their trade times by milliseconds. One way these traders make money is by exploiting the fact that stock indexes sometimes don’t immediately reflect falling or rising prices of their component stocks, said Manoj Narang, chief executive at Tradeworx of Red Bank, N.J. If Microsoft shares rise 5 percent but an index fund that includes it such as the SPDR S&P 500 lags by a fraction of second to adjust, his computers will automatically buy shares of SPDR S&P 500 at the lower price and then sell them again when they are fully valued. Or maybe Microsoft is trading in London at a penny less than it’s trading at the same moment in New York. A high-frequency trader will buy shares in London and wait for them to rise. Since the discrepancy lasts a mere fraction of a second, speed is key. Narang boasts it takes only 15 millionth of a second for his computers to place a buy or sell order after detecting an opportunity. Or, as he puts it, “If you try to pick up the penny, we’ll probably beat you to it.” So is that good or bad for the market? If you listen to HFTs, all their fast trading benefits big and small investors alike. More trading means more bids and asks for shares, and that cuts the time needed to find someone willing to buy what you’re selling or vice versa. Costs also fall. With more bids and asks, the difference between the price you seek and the price offered (what traders call the “spread”) will likely narrow. You get to keep more of your money. High-frequency traders see themselves as part of a long tradition of using technology to shake up Wall Street. For decades an order to buy or sell a security went to a person in a trader’s jacket standing on the floor of an exchange, often at the NYSE in Lower Manhattan. If you wanted to sell stock in General Electric, for instance, these so-called specialists would find a buyer. If they couldn’t find one, they bought it themselves. In exchange for their services, the specialists pocketed some of the difference between the price at which you were willing to buy and the price at which a GE holder was willing to sell. This system came under attack in the early 1980s from Nasdaq, a rival marketplace for stocks, which began using computers to make trades. The pitch was it could match buyers and sellers faster than humans, and for less money. Then, starting in the late ’90s, the NYSE specialists got hit again, this time with a series of blows: new rules encouraging computer matching of buyers and sellers, a shift to quote stock prices in minute increments of decimals instead of fractions, and a decision to cut the minimum spread that specialists or other middlemen could grab for themselves from 6.25 cents per share to a penny. “It used to be an oligopoly, an old boy’s club,” said Irene Aldridge, head of an HFT shop called Able Alpha Trading and author of “High-Frequency Trading.” “But now it’s a completely level field.” Critics of high-frequency trading say all this talk about narrowing spreads for ordinary investors distracts from a key problem: Split-second trading without human supervision is a recipe for disaster Exhibit A: the May 6 crash. One theory about the drop is that, unlike the NYSE, the new exchanges and trading networks catering to HFTs didn’t apply any “circuit breakers.” These are designed to halt trading momentarily during a freefall to stop selling from feeding on itself. In others words, without circuit breakers the computers went crazy. Another theory holds that it wasn’t quick-fire trading by HFTs that made things worse but a lack of it. Some reportedly pulled back when stocks started dropping, removing liquidity when it was needed the most. Whatever the answer, this much is true: These secretive firms are likely to grab the spotlight for a while now. And their trading might get even more frenetic. After the May 6 freefall, all manner of trading rules are up for debate. But it’s worth noting that until recently regulators were considering cutting the minimum spread again, possibly to half a penny. “People will be needing even better computers,” said author Aldridge.

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Goldman Sachs Set to Face Senate’s Levin in a Post-Crisis Day of Reckoning

April 27, 2010

By Christine Harper April 27 (Bloomberg) — Goldman Sachs Group Inc. , Wall Street’s most profitable firm, will face off against a U.S. Senate subcommittee today in a pivotal hearing that could have repercussions for the future of the financial industry. Carl Levin , a Michigan Democrat who leads the Senate’s Permanent Subcommittee on Investigations , released documents that he said showed the company “put its own interest and profit ahead of the interests of its clients,” a conflict he called on Congress to end. Lloyd Blankfein , Goldman Sachs’s chairman and chief executive officer, will dispute that assertion and argue the firm was merely managing its own risk. The hearing takes place as the Senate debates financial reform legislation that could prevent banks from trading for their own accounts and require them to separate derivatives businesses from regulated depository subsidiaries. It also follows a U.S. regulator’s civil-fraud lawsuit against Goldman Sachs and an employee, Fabrice Tourre , for misleading investors in a mortgage-linked investment, charges the firm denies. “This market is not free until it is free of self-dealing and until it is free of conflict of interest,” Levin, 75, said at a press briefing yesterday. “It is not free until it ends the gambling operation that results in gambling debts that the public ends up paying.” Tourre, Blankfein The hearing, set to begin at 10 a.m. in Washington, will start with questioning of Tourre; Michael Swenson , a managing director in the structured-products group; Joshua Birnbaum , a former managing director in the same group; and Daniel Sparks , a former partner who ran the mortgage department. Later in the day, the subcommittee will hear from David Viniar , the firm’s chief financial officer, and Craig Broderick , the chief risk officer. Blankfein , 55, will be the final witness, facing the panel alone at the end of the hearing. “We didn’t have a massive short against the housing market and we certainly did not bet against our clients,” Blankfein will tell the committee, according to a prepared text of his remarks. While the firm contests the SEC’s complaint, “I also recognize how such a complicated transaction may look to many people,” Blankfein said in his remarks. “We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky.” Shares Fall Goldman Sachs fell 0.4 percent to $151.43 by 12:23 p.m. in Germany, after dropping 3.4 percent to $152.03 in New York Stock Exchange composite trading yesterday, before Levin’s statements were made public. The shares have tumbled 17 percent from their level before the SEC filed its suit and are down 10 percent so far this year in New York. Yesterday U.S. Senate Republicans blocked Democrats from advancing their plan to overhaul Wall Street regulation as the two sides debate provisions including consumer protections and derivatives. Both parties are trying to tap into voter anger at Wall Street and the bank bailouts that took place as Americans grappled with record home foreclosures and rising unemployment. Goldman Sachs would probably be hardest hit among large U.S. banks if Congress bans firms from trading for their own account. Viniar, the CFO who’s scheduled to testify today, estimated in January that approximately 10 percent of the company’s revenue derives from trading that has no connection with customer business. That would have been about $4.5 billion last year. Employees of Goldman Sachs, which set a Wall Street pay record in 2007 when Blankfein was awarded a $67.9 million bonus, are among the biggest political donors in the last two decades. Campaign Contributions Nine of the 10 members of Levin’s committee have accepted campaign finance donations from the firm’s employees, both individually and through a political action committee, since 1989, according to the Center for Responsive Politics , a Washington-based research group. The exception is Senator Edward Kaufman , a Democrat from Delaware, who never raised money for an election because he was appointed to fill Vice President Joseph Biden ’s former seat and hasn’t run for a full term. Arizona Republican John McCain , who ran for president in 2000 and 2008, has accepted the most of any member of the subcommittee with $337,065, while Jon Tester , a Democrat from Montana, has taken just $6,400, the group’s data show. While the spotlight is on Goldman Sachs at today’s hearing, Levin emphasized that the firm’s actions represent practices that he said are widespread on Wall Street. “To sell to customers at the same time you’re betting against what you’re selling — we think it’s not uncommon and think it ought to end,” Levin said yesterday. “We think there are a number of banks engaged in similar conduct, but we had to focus on one.” ‘Heavy Bets’ Levin, whose committee first subpoenaed information from Goldman Sachs in June, estimates that the firm made $3.7 billion in 2007 by placing “heavy bets” against mortgage-linked securities, including some it created. The figure doesn’t take into account losses Goldman Sachs suffered on mortgage-related securities it held, he said. “We respectfully disagree with Chairman Levin’s statement,” Lucas van Praag , a spokesman for Goldman Sachs, said yesterday. “We did not have a big bet against the housing market, as our performance in residential mortgages demonstrates, and we believe we at all times worked appropriately with our clients.” Goldman Sachs released data on April 24 that showed the firm reaped gains on its mortgage trading activities in 2007 and then lost money in the same unit in 2008. ‘Real Bad Feeling’ Among the evidence Levin released yesterday was an internal e-mail that describes how the firm’s mortgage derivatives desk started the quarter with a $6 billion “long” position on BBB- rated mortgages “and shifted the position to net short $10bn notional.” An October 2007 internal e-mail sent to Sparks , who ran the mortgage business and is among those testifying today, includes the comment “real bad feeling across European sales about some of the trades we did with clients. The damage this has done to our franchise is very significant. Aggregate loss of our clients on just these 5 trades along (sic) is 1bln+.” Swenson , the managing director in the structured-products group who is also to appear today, boasted in his 2007 performance review that “I said ‘no’ to clients who demanded that GS should ‘support the GSAMP’ program as clients tried to gain leverage over us,” he said, referring to the name for Goldman Sachs’s own mortgage-backed deals. “Those were unpopular decisions but they saved the firm hundreds of millions of dollars.” Conveyor Belt In a September 2007 e-mail to Blankfein, an employee describes having met with 10 or more individual “prospects” and clients and tells Blankfein about how their attitudes differ from those of institutional clients. “The institutions don’t and I wouldn’t expect them to, make any comments like ur (sic) good at making money for urself (sic) but not us,” the e-mail said. “The individuals do sometimes, but while it requires the utmost humility from us in response I feel very strongly it binds clients even closer to the firm, because the alternative of take ur (sic) money to a firm who is an under performer and not the best, just isn’t reasonable. Clients ultimately believe association with the best is good for them in the long run.” Goldman Sachs built a “conveyer belt” of mortgage deals and then bet against them, Levin said, actions that he said contributed to the worst financial crisis since the Great Depression. Conflicts of Interest Levin said his committee isn’t responsible for determining whether any crimes occurred, although he said the panel will decide after the hearing whether to refer the matter to the SEC or the Justice Department. “The SEC and the courts will resolve the legal question of whether Goldman’s actions broke the law,” Levin said. “The question for us is whether Goldman’s actions in 2007 were appropriate and whether we should act, legislatively, to bar similar actions in the future.” While Levin said he is ready to vote on a financial regulation package in the Senate this week, he said he thinks it could be strengthened. He has proposed an amendment that would help resolve the conflicts of interest among Wall Street firms that he said are embodied in the documents. He also endorsed banning so-called naked credit-default swaps, or bets on a decline in creditworthiness by parties that have no exposure to the underlying loans or bonds. ‘Cherry-Picked’ After Levin posted internal Goldman Sachs e-mails on his Web site on April 24 that he said show the firm “made a lot of money by betting against the mortgage market,” the firm responded with more than 70 pages of e-mails and other documents that it said showed the firm lost money on mortgages in 2008 and that executives didn’t have any kind of consensus that the market would fall. Goldman Sachs disputes the SEC’s claims that the firm defrauded investors when selling a collateralized debt obligation tied to mortgages by failing to inform them of the role played by hedge fund Paulson & Co. The company said on April 24 that Levin’s committee “cherry-picked” the evidence it released and jumped to conclusions “even before holding a hearing.” As other banks struggled throughout the financial crisis, Goldman Sachs posted record earnings in 2007 and then topped that in 2009. In late 2008, following the collapse of Lehman Brothers Holdings Inc. , the firm was allowed to convert to a bank under the oversight of the Federal Reserve and received $10 billion of taxpayer money, which it repaid with interest about eight months later. ‘Ultimate Harm’ While Levin said his committee hasn’t found any evidence that Blankfein was himself aware of the firm’s positions on specific deals, he said the documents show that Blankfein knew the firm was shorting the market in 2007. “The ultimate harm here is not just to the clients who were not well-served by their investment bank, the harm here is to all of us,” Levin said yesterday. “The toxins that Goldman Sachs and others helped inject into our financial system have done incalculable harm to people who have never heard of a synthetic CDO and who have no defenses against the harm that such exotic Wall Street creations can cause.” To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net .

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Goldman Mortgage Traders Bet On Burger-Eating Contests

April 25, 2010

Goldman Sachs Group Inc.’s mortgage traders, under the spotlight because of the U.S. government’s fraud lawsuit against the securities firm, made markets in more than just bonds during the real-estate bubble. They also cast bets on a White Castle hamburger-eating contest.

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Clegg Rise in Polls Means More Scrutiny on Euro Adoption, Prison Sentences

April 21, 2010

By Thomas Penny and Robert Hutton April 21 (Bloomberg) — Liberal Democrat Nick Clegg is coming under increased scrutiny over his support for the euro and easing jail sentences after his surge in polls turned the British campaign into a three-way race before the May 6 vote. A YouGov Plc survey this week showed most voters oppose those positions, as well as Liberal Democrat policies that would cede more powers to the European Union, grant amnesty to some illegal immigrants, ban atomic-power plant construction and cut the nuclear arsenal. “The policies that are going to be their weakness are Europe, crime and immigration,” said YouGov pollster Anthony Wells . “There are a chunk of people who say they will vote Liberal Democrat but don’t actually like some of their policies.” Clegg’s April 15 debate performance against Conservative leader David Cameron and Labour Prime Minister Gordon Brown led to his surge in the polls. In tomorrow’s second debate, he’ll likely be attacked by Cameron, 43, the front-runner until recent days. Brown has benefited, with estimates showing the three-way race may give him a plurality in the next Parliament . A Populus Ltd. poll for the Times of London released last night showed the Liberal Democrats climbing 10 points over the past week to 31 percent. The Conservatives fell 4 points to 32 percent and Labour dropped 5 points to 28 percent. The poll was conducted April 18 and yesterday, the newspaper said. Populus questioned 1,501 voters. No margin of error was published. Divided Parliament The divided Parliament that would result from this close a vote may roil markets, because a government without a majority would be too weak to narrow a record budget deficit, some economists say. The pound slumped 1 percent in the two days after the debate last week. It had lost 5 percent against the dollar this year to $1.5379. Fifty-five percent of voters who told YouGov in a separate poll this week that they’ll vote Liberal Democrat said they didn’t agree with proposals to give the EU more say over judicial matters, bank regulation and climate-change policy. Fifty-three percent oppose ditching the pound for the euro when conditions are right. The Liberal Democrat policy of allowing criminals sentenced to less than six months to do community service was opposed by 37 percent of self-described Liberal Democrat supporters. ‘Shine a Spotlight’ “Until the end of last week, no one was taking any notice of the Liberal Democrat policies,” Philip Hammond , who speaks on the economy for the Conservatives, told Sky News. “Now we need to shine a spotlight on those policies so people understand what Nick Clegg stands for.” Labour, which has governed for 13 years, is also seeking to highlight Clegg’s less popular policies, though pollsters suggest Brown will benefit more than the Conservatives from the growth in Liberal Democrat support because of the way electoral districts are distributed across Britain. Brown, 59, has begun to attack Liberal Democrat plans not to replace the submarine-based Trident nuclear-weapons system and for an amnesty for illegal immigrants who have been in the U.K. for 10 years. Chancellor of the Exchequer Alistair Darling said in an interview yesterday that some Liberal Democrat budget policies are “pretty flaky.” ‘Progressive Alliance’ In an interview with today’s Independent newspaper , though, Brown said he wanted to see a “progressive alliance” of Labour and Liberal Democrat supporters to keep the Conservatives out of power. In Oxford East , the Liberal Democrats are trying to overturn a 1,000-vote Labour majority in a district of around 70,000. Clegg may benefit from a none-of-the-above vote against two parties that have dominated British politics for 90 years. He has sought to lump Brown and Cameron together, casting himself as an agent of change. “The more they attack each other, the more they sound exactly the same,” Clegg, 43, said of them in the debate last week. “We can do something different this time.” Clegg attacked Brown’s overtures at a news conference in London this morning. “There is something frankly desperate about a Labour Party and their leader Gordon Brown who now tries to present themselves as agents of reform and progress, when for 13 years they have been a stubborn block to reform and progress,” he said. Chris Underhay, 26, an unemployed would-be screenwriter in Oxford, said he plans to vote for the party, even though he says he doesn’t know much about their policies. ‘Open Politics’ “I pretty much decided after Thursday’s debate,” he said. “I don’t know their policies very specifically. I just like the idea that they’re for open politics. I haven’t had a look at their manifesto, but I heard it’s got actual numbers at the back of it. I like that.” The 108-page Liberal Democrat program contains four pages detailing a tax overhaul and plans to cut the deficit. Neither the Conservative nor Labour manifesto contains such tables. The Liberal Democrats’ main tax pledges are supported by 81 percent of people who say they would vote for the party. They would raise the annual threshold for paying income tax to 10,000 pounds ($15,367), a step the party says would cost the Treasury 16.8 billion pounds in 2011-12. Clegg would pay for the measure by cracking down on tax evasion, cutting pension-tax breaks for the wealthy and imposing a 10 percent levy on bank profits. With other tax increases, including a tax on homes valued at more than 2 million pounds, the party says it would raise 19.2 billion pounds. Clegg, who was greeted by 17 television cameras at a press briefing in London yesterday, joked that he was pleased at the scrutiny he and his party are now under. ‘Forensic Interest’ “I’m absolutely delighted that people are taking such a forensic interest in our policies,” Clegg said, before acknowledging that he was aware his party’s popularity could be short-lived. “Bubbles burst and I’m acutely aware that we’re in a very fluid stage in this election campaign,” he said. Back in Oxford, Liberal Democrat candidate Steve Goddard, a university lecturer in French, says he’s seen no sign support for his party is ebbing. “Our policies are a lot better known now than they were this time last week,” he said yesterday. “There’s no evidence they’re scaring people off. I suspect people don’t think about parties in terms of policies — they’re looking at values.” To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net ; Robert Hutton in London at rhutton1@bloomberg.net .

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CEOs Defy Obama With More Cash Compensation Instead of Pay-for-Performance

March 25, 2010

By Alexis Leondis, Jessica Silver-Greenberg and Tara Kalwarski March 25 (Bloomberg) — Total compensation for U.S. chief executive officers shrank by 8.6 percent last year, according to data compiled by Bloomberg BusinessWeek. Boards offset some cuts in stock awards and options by boosting CEO salaries and bonuses, the data show. With pay packages under pressure from President Barack Obama and shareholder activists, average compensation fell by 8.6 percent to $9.81 million for the 81 CEOs whose companies’ proxy statements were examined. While option awards were slashed by 30 percent, cash earnings, including non-equity incentive rewards, rose 8.3 percent. Cash became king in corner offices because boards acquiesced to CEOs’ desire for dependable income, according to interviews with 15 compensation experts. Executives, whose pay packages were typically negotiated in 2008 and early last year, weren’t willing to give up salaries for long-term, stock-based awards that could decline in value. “When the economy is reeling, the most stable form of pay isn’t stocks, it’s cash,” said Sam Pizzigati, an associate fellow at the Institute for Policy Studies in Washington who has written about executive compensation and shareholder activism. “In rough times, the surest thing is cash, and that’s what they went for.” That isn’t the direction preferred by the White House. “To the extent there is more emphasis on cash than stock, that’s unfortunate,” said Kenneth Feinberg , the U.S. special master on executive compensation, who was appointed by Obama in June 2009. “We’re pushing the other way.” New Disclosure Rules Assuming the trend holds for other Standard & Poor’s 500 companies, CEO compensation may have fallen for the third year in a row. The average pay package declined in 2007 and 2008, when it was off roughly 40 percent from its 2000 high of $14.6 million, according to research by assistant finance professors Carola Frydman of the Massachusetts Institute of Technology and Dirk Jenter of Stanford University. The proxies that Bloomberg reviewed include the most complete pay summaries that companies have ever been required to provide. For the first time, the Securities and Exchange Commission has mandated that the full value of stock and option awards appear in proxy statements covering the year in which they were given. The awards’ value was divided among several years in the past. For a look at how S&P 500 CEOs fared under the new disclosure rules, Bloomberg compiled data from proxies for companies whose fiscal years ended on Dec. 31, 2009, and that had been filed as of March 12. For comparison purposes, only CEOs serving in that capacity in 2008 and 2009 were included. ‘Hot Spotlight’ Printer maker Lexmark International Inc. , based in Lexington, Kentucky, cited challenging economic conditions in its proxy as the reason for freezing salaries. The CEO of Morris Township, New Jersey-based Honeywell International Inc. , David Cote , 57, requested that he not be awarded a bonus because of the recession. Directors agreed — and his total pay was reduced by 57 percent. Compensation committees also exercised caution to avoid criticism, said Tim Smith , a senior vice president at Walden Asset Management, a money manager in Boston. “The hot spotlight of public attention is on companies more than ever,” Smith said. The 20 financial institutions among the 81 companies cut CEO compensation in 2009 by almost $28.1 million to $176.1 million — accounting for 37 percent of the overall pay lost. Eleven were banks that received money from the Troubled Asset Relief Program and had to adhere to federal guidelines that restricted cash bonuses for top executives. Nothing for Lewis Vikram Pandit , CEO of New York-based Citigroup Inc. , voluntarily slashed his annual salary to $1 in February 2009. His package exceeded $38 million in 2008, when the bank’s stock price fell 77 percent. Pandit, 53, vowed not to take a raise or receive incentive compensation until Citi — 27 percent owned by the U.S. — returns to profitability. At Charlotte, North Carolina-based Bank of America Corp., Kenneth D. Lewis received no cash, bonus or equity compensation in 2009. Lewis, 62, retired on December 31. Not all TARP recipients showed restraint. Last August, San Francisco-based Wells Fargo & Co.’s compensation committee approved upping CEO John Stumpf’s base salary more than fivefold to $5.6 million, all but $900,000 of which was awarded in shares that vested over the rest of the year. Stumpf, 56, received a total pay package of $21.3 million, 136 percent more than in 2008. It was boosted because TARP rules made the bank unable to “reward him appropriately” in other pay categories, said Melissa Murray , a spokeswoman for the bank. ‘No Teeth’ Another possible explanation for the decline in overall compensation was pressure from shareholders, according to John Keenan , a strategic analyst at the American Federation of State, County and Municipal Employees union in Washington. More than 100 resolutions seeking advisory roles on executive compensation were submitted last year, up from 7 in 2006, Keenan said, and 64 companies have agreed to give shareholders a say on pay. The resolutions that have passed are typically nonbinding. “It’s policing executive pay with something that has no teeth,” said Frank Glassner , CEO of San Francisco-based Veritas Executive Compensation Consultants LLC. The gain in cash forms of pay and the decrease in stock and option awards moved the companies further away from compensation aligned with long-term performance, according to the data compiled by Bloomberg. Greener Pastures “This is exactly the opposite message that was meant to be imparted by President Obama, Feinberg and the other preachers from D.C.,” said Graef Crystal , a pay analyst who examined the data for Bloomberg. At 43 of the 81 companies, salaries and bonuses increased. Salaries alone rose an average 8.9 percent. “That is a large increase in any year, but few Americans received any raises at all and many lost their entire income,” Crystal said. “The increase for CEOs seems a gross insult.” Salaries might have gone up been because boards saw stock- based awards as too volatile and wanted to offer more stable cash income as a retention tool, said Paul Sorbera, president of the executive recruiting firm Alliance Consulting in New York. Stock options don’t have as much “holding power on executives” as they once did and some companies felt they had to offer CEOs more cash so competitors wouldn’t “steal their talent away,” said Steven Hall , managing director of New York- based Steven Hall & Partners, an executive compensation consulting company. “Some of these executives need to be paid $20 million” or they might leave for greener pastures. ‘Far Too Greedy’ Option awards declined by 30 percent, the biggest drop in any form of compensation, according to the data. Some boards didn’t want to give out large option awards because of the potential for gains that would later make the awards look excessive, according to Kenneth Raskin , a lawyer in the New York office of White & Case who represents CEOs in pay negotiations. “CEOs didn’t want the stock price to rise dramatically and in a year seem far too greedy,” said Ira T. Kay, an independent compensation consultant in New York. Boards cut stock awards by 11.7 percent, putting less emphasis on options and more on stock awards, which compensate a CEO even when a share price stagnates. For options to pay off, stock prices have to climb. The greater relative reliance on share awards “misaligned” CEO and shareholder interests, according to a February report by the Corporate Library, a shareholder governance research firm in Portland, Maine. Shortfalls and Windfalls Meanwhile, bonuses — including what the proxies call “non-equity incentive plan compensation” — rose 7.9 percent in 2009 to an average $2.07 million. Nine of the 81 CEOs took home a bonus in one category or the other, after receiving none in 2008. They included Columbus, Georgia-based Aflac Inc.’s Daniel Amos, 58, who was awarded $4.1 million, and Midland, Michigan-based Dow Chemical Co.’s Andrew Liveris , 55, who received $4.5 million. Some performance goals for long-term awards are being reduced in the still-uncertain economy, Veritas’s Glassner said. “Companies haven’t raised the bridge,” said Glassner. “They’ve just lowered the river.” Glassmaker Corning Inc., based in Corning, New York, altered its performance measurements “given the great uncertainty in accurately forecasting the impact of the global recession” in order to “alleviate any unintended shortfalls or windfalls in actual bonus payouts,” the company said in its filing. CEO Wendell Weeks , 50, received $4.8 million in an annual incentive bonus, up from $301,584 in 2008. Bigger Payday Ray Irani , CEO of Los Angeles-based Occidental Petroleum Corp., ranked first among the 81 executives with a $31.4 million pay package in 2009. Irani, 75, stands to get a bigger payday this year — a $58.5 million cash award from an incentive plan tied to the company’s return on equity, or earnings divided by book value, a common measure of performance. Irani will get the payout if Occidental attains a 54 percent cumulative return over three years, according to the company’s proxy. The company achieved a 94 percent cumulative rate in 2004 to 2006, in the three calendar years before the target was set. Occidental’s compensation committee rewarded Irani in 2009 for continuing “to place Occidental among the best performers in the oil and gas industry,” according to the company’s 2010 proxy statement. The board’s focus on return on equity is meant to encourage “the effective use of capital” in profitable, long-term investments, the proxy said. ‘An Actuarial Value’ Pension plans gained an average of 15.4 percent or $1.27 million. One reason: the 8.3 percent rise in salary and bonus drove up the current value of what companies promised to pay CEOs in retirement, typically calculated as a percentage of their annual income. While pension values in proxies are mostly book entries, not cash outlays, they reflect changes in the real amount a CEO would get if he took his pension in a lump sum. Dallas-based AT&T Inc. put $8.99 million into CEO Randall Stephenson’s pension plan, the biggest such contribution. Under the retirement plan, Stephenson, 49, will get a pension equal to 60 percent of his highest average salary and bonus in three of his last 10 years at the company. Although he’s not currently eligible for retirement, his pension is valued at an estimated $31 million today. McCall Butler , a spokesman for AT&T, said Stephenson’s pension gain was “an actuarial value, not part of his actual taxable income.” Fewer Private Planes In a letter to shareholders last April supporting a say-on- pay resolution, Carole Lovell, president of an AT&T retiree association, said that the company’s “executive compensation policies continue to exhibit all the worst excesses and abuses.” The resolution did not win a majority. In the 81 filings, “all other compensation” — including perquisites like private planes, security details and country club memberships — declined by 23.2 percent. One casualty: Lincoln National Corp. CEO Dennis Glass , 60, whose “other” pay dropped to $308,463 from $2.26 million. Glass’s 2008 perks included $82,901 for personal use of aircraft, according to the proxy. His perks in 2009 cost $16,600 for matching charitable contributions and financial planning, said Laurel O’Brien , a spokeswoman for the Philadelphia-based insurer. 180 Shareholder Resolutions Companies are backing off on criticism triggers like private planes because “these kinds of perks just aren’t worth it,” said David Gordon, an executive compensation consultant at Frederic W. Cook & Co. Inc. in Los Angeles. “They are a small fraction of overall compensation, but have the ability to get 50 percent of the attention.” Scrutiny of pay isn’t likely to go away. RiskMetrics, an investor consultant, counts 180 resolutions concerning executive compensation around the country. Legislation in Congress that would mandate say-on-pay votes may have led some activists to “feel the battle has been won,” said Doug Friske, head of the global executive compensation practice at New York-based Towers Watson & Co. The House passed the measure, which is part of the financial regulation overhaul bill in the Senate. Tim White, a partner with Dallas-based Kaye/Bassman International, an executive recruiter, ties shareholder pressure to the U.S. recession that began in 2007 and may now be abating. “In difficult times, there is always a clamoring for the fat cats to make less money,” White said. He predicted executive compensation will rise as the economy strengthens. To contact the reporters on this story: Alexis Leondis in New York at aleondis@bloomberg.net ; Jessica Silver-Greenberg in New York or jsilvergreen@bloomberg.net ; Tara Kalwarski in New York at or tkalwarski2@bloomberg.net

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CEOs Defy Obama With More Cash Compensation Instead of Pay-for-Performance

March 25, 2010

By Alexis Leondis, Jessica Silver-Greenberg and Tara Kalwarski March 25 (Bloomberg) — Total compensation for U.S. chief executive officers shrank by 8.6 percent last year, according to data compiled by Bloomberg BusinessWeek. Boards offset some cuts in stock awards and options by boosting CEO salaries and bonuses, the data show. With pay packages under pressure from President Barack Obama and shareholder activists, average compensation fell by 8.6 percent to $9.81 million for the 81 CEOs whose companies’ proxy statements were examined. While option awards were slashed by 30 percent, cash earnings, including non-equity incentive rewards, rose 8.3 percent. Cash became king in corner offices because boards acquiesced to CEOs’ desire for dependable income, according to interviews with 15 compensation experts. Executives, whose pay packages were typically negotiated in 2008 and early last year, weren’t willing to give up salaries for long-term, stock-based awards that could decline in value. “When the economy is reeling, the most stable form of pay isn’t stocks, it’s cash,” said Sam Pizzigati, an associate fellow at the Institute for Policy Studies in Washington who has written about executive compensation and shareholder activism. “In rough times, the surest thing is cash, and that’s what they went for.” That isn’t the direction preferred by the White House. “To the extent there is more emphasis on cash than stock, that’s unfortunate,” said Kenneth Feinberg , the U.S. special master on executive compensation, who was appointed by Obama in June 2009. “We’re pushing the other way.” New Disclosure Rules Assuming the trend holds for other Standard & Poor’s 500 companies, CEO compensation may have fallen for the third year in a row. The average pay package declined in 2007 and 2008, when it was off roughly 40 percent from its 2000 high of $14.6 million, according to research by assistant finance professors Carola Frydman of the Massachusetts Institute of Technology and Dirk Jenter of Stanford University. The proxies that Bloomberg reviewed include the most complete pay summaries that companies have ever been required to provide. For the first time, the Securities and Exchange Commission has mandated that the full value of stock and option awards appear in proxy statements covering the year in which they were given. The awards’ value was divided among several years in the past. For a look at how S&P 500 CEOs fared under the new disclosure rules, Bloomberg compiled data from proxies for companies whose fiscal years ended on Dec. 31, 2009, and that had been filed as of March 12. For comparison purposes, only CEOs serving in that capacity in 2008 and 2009 were included. ‘Hot Spotlight’ Printer maker Lexmark International Inc. , based in Lexington, Kentucky, cited challenging economic conditions in its proxy as the reason for freezing salaries. The CEO of Morris Township, New Jersey-based Honeywell International Inc. , David Cote , 57, requested that he not be awarded a bonus because of the recession. Directors agreed — and his total pay was reduced by 57 percent. Compensation committees also exercised caution to avoid criticism, said Tim Smith , a senior vice president at Walden Asset Management, a money manager in Boston. “The hot spotlight of public attention is on companies more than ever,” Smith said. The 20 financial institutions among the 81 companies cut CEO compensation in 2009 by almost $28.1 million to $176.1 million — accounting for 37 percent of the overall pay lost. Eleven were banks that received money from the Troubled Asset Relief Program and had to adhere to federal guidelines that restricted cash bonuses for top executives. Nothing for Lewis Vikram Pandit , CEO of New York-based Citigroup Inc. , voluntarily slashed his annual salary to $1 in February 2009. His package exceeded $38 million in 2008, when the bank’s stock price fell 77 percent. Pandit, 53, vowed not to take a raise or receive incentive compensation until Citi — 27 percent owned by the U.S. — returns to profitability. At Charlotte, North Carolina-based Bank of America Corp., Kenneth D. Lewis received no cash, bonus or equity compensation in 2009. Lewis, 62, retired on December 31. Not all TARP recipients showed restraint. Last August, San Francisco-based Wells Fargo & Co.’s compensation committee approved upping CEO John Stumpf’s base salary more than fivefold to $5.6 million, all but $900,000 of which was awarded in shares that vested over the rest of the year. Stumpf, 56, received a total pay package of $21.3 million, 136 percent more than in 2008. It was boosted because TARP rules made the bank unable to “reward him appropriately” in other pay categories, said Melissa Murray , a spokeswoman for the bank. ‘No Teeth’ Another possible explanation for the decline in overall compensation was pressure from shareholders, according to John Keenan , a strategic analyst at the American Federation of State, County and Municipal Employees union in Washington. More than 100 resolutions seeking advisory roles on executive compensation were submitted last year, up from 7 in 2006, Keenan said, and 64 companies have agreed to give shareholders a say on pay. The resolutions that have passed are typically nonbinding. “It’s policing executive pay with something that has no teeth,” said Frank Glassner , CEO of San Francisco-based Veritas Executive Compensation Consultants LLC. The gain in cash forms of pay and the decrease in stock and option awards moved the companies further away from compensation aligned with long-term performance, according to the data compiled by Bloomberg. Greener Pastures “This is exactly the opposite message that was meant to be imparted by President Obama, Feinberg and the other preachers from D.C.,” said Graef Crystal , a pay analyst who examined the data for Bloomberg. At 43 of the 81 companies, salaries and bonuses increased. Salaries alone rose an average 8.9 percent. “That is a large increase in any year, but few Americans received any raises at all and many lost their entire income,” Crystal said. “The increase for CEOs seems a gross insult.” Salaries might have gone up been because boards saw stock- based awards as too volatile and wanted to offer more stable cash income as a retention tool, said Paul Sorbera, president of the executive recruiting firm Alliance Consulting in New York. Stock options don’t have as much “holding power on executives” as they once did and some companies felt they had to offer CEOs more cash so competitors wouldn’t “steal their talent away,” said Steven Hall , managing director of New York- based Steven Hall & Partners, an executive compensation consulting company. “Some of these executives need to be paid $20 million” or they might leave for greener pastures. ‘Far Too Greedy’ Option awards declined by 30 percent, the biggest drop in any form of compensation, according to the data. Some boards didn’t want to give out large option awards because of the potential for gains that would later make the awards look excessive, according to Kenneth Raskin , a lawyer in the New York office of White & Case who represents CEOs in pay negotiations. “CEOs didn’t want the stock price to rise dramatically and in a year seem far too greedy,” said Ira T. Kay, an independent compensation consultant in New York. Boards cut stock awards by 11.7 percent, putting less emphasis on options and more on stock awards, which compensate a CEO even when a share price stagnates. For options to pay off, stock prices have to climb. The greater relative reliance on share awards “misaligned” CEO and shareholder interests, according to a February report by the Corporate Library, a shareholder governance research firm in Portland, Maine. Shortfalls and Windfalls Meanwhile, bonuses — including what the proxies call “non-equity incentive plan compensation” — rose 7.9 percent in 2009 to an average $2.07 million. Nine of the 81 CEOs took home a bonus in one category or the other, after receiving none in 2008. They included Columbus, Georgia-based Aflac Inc.’s Daniel Amos, 58, who was awarded $4.1 million, and Midland, Michigan-based Dow Chemical Co.’s Andrew Liveris , 55, who received $4.5 million. Some performance goals for long-term awards are being reduced in the still-uncertain economy, Veritas’s Glassner said. “Companies haven’t raised the bridge,” said Glassner. “They’ve just lowered the river.” Glassmaker Corning Inc., based in Corning, New York, altered its performance measurements “given the great uncertainty in accurately forecasting the impact of the global recession” in order to “alleviate any unintended shortfalls or windfalls in actual bonus payouts,” the company said in its filing. CEO Wendell Weeks , 50, received $4.8 million in an annual incentive bonus, up from $301,584 in 2008. Bigger Payday Ray Irani , CEO of Los Angeles-based Occidental Petroleum Corp., ranked first among the 81 executives with a $31.4 million pay package in 2009. Irani, 75, stands to get a bigger payday this year — a $58.5 million cash award from an incentive plan tied to the company’s return on equity, or earnings divided by book value, a common measure of performance. Irani will get the payout if Occidental attains a 54 percent cumulative return over three years, according to the company’s proxy. The company achieved a 94 percent cumulative rate in 2004 to 2006, in the three calendar years before the target was set. Occidental’s compensation committee rewarded Irani in 2009 for continuing “to place Occidental among the best performers in the oil and gas industry,” according to the company’s 2010 proxy statement. The board’s focus on return on equity is meant to encourage “the effective use of capital” in profitable, long-term investments, the proxy said. ‘An Actuarial Value’ Pension plans gained an average of 15.4 percent or $1.27 million. One reason: the 8.3 percent rise in salary and bonus drove up the current value of what companies promised to pay CEOs in retirement, typically calculated as a percentage of their annual income. While pension values in proxies are mostly book entries, not cash outlays, they reflect changes in the real amount a CEO would get if he took his pension in a lump sum. Dallas-based AT&T Inc. put $8.99 million into CEO Randall Stephenson’s pension plan, the biggest such contribution. Under the retirement plan, Stephenson, 49, will get a pension equal to 60 percent of his highest average salary and bonus in three of his last 10 years at the company. Although he’s not currently eligible for retirement, his pension is valued at an estimated $31 million today. McCall Butler , a spokesman for AT&T, said Stephenson’s pension gain was “an actuarial value, not part of his actual taxable income.” Fewer Private Planes In a letter to shareholders last April supporting a say-on- pay resolution, Carole Lovell, president of an AT&T retiree association, said that the company’s “executive compensation policies continue to exhibit all the worst excesses and abuses.” The resolution did not win a majority. In the 81 filings, “all other compensation” — including perquisites like private planes, security details and country club memberships — declined by 23.2 percent. One casualty: Lincoln National Corp. CEO Dennis Glass , 60, whose “other” pay dropped to $308,463 from $2.26 million. Glass’s 2008 perks included $82,901 for personal use of aircraft, according to the proxy. His perks in 2009 cost $16,600 for matching charitable contributions and financial planning, said Laurel O’Brien , a spokeswoman for the Philadelphia-based insurer. 180 Shareholder Resolutions Companies are backing off on criticism triggers like private planes because “these kinds of perks just aren’t worth it,” said David Gordon, an executive compensation consultant at Frederic W. Cook & Co. Inc. in Los Angeles. “They are a small fraction of overall compensation, but have the ability to get 50 percent of the attention.” Scrutiny of pay isn’t likely to go away. RiskMetrics, an investor consultant, counts 180 resolutions concerning executive compensation around the country. Legislation in Congress that would mandate say-on-pay votes may have led some activists to “feel the battle has been won,” said Doug Friske, head of the global executive compensation practice at New York-based Towers Watson & Co. The House passed the measure, which is part of the financial regulation overhaul bill in the Senate. Tim White, a partner with Dallas-based Kaye/Bassman International, an executive recruiter, ties shareholder pressure to the U.S. recession that began in 2007 and may now be abating. “In difficult times, there is always a clamoring for the fat cats to make less money,” White said. He predicted executive compensation will rise as the economy strengthens. To contact the reporters on this story: Alexis Leondis in New York at aleondis@bloomberg.net ; Jessica Silver-Greenberg in New York or jsilvergreen@bloomberg.net ; Tara Kalwarski in New York at or tkalwarski2@bloomberg.net

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Health-Care Fight Shifts to States, Agencies

March 22, 2010

By Alex Nussbaum March 22 (Bloomberg) — Health legislation passed yesterday by the U.S. House changes some rules immediately on insurance coverage while leaving much of the fight over how to remake the medical system to federal regulators, states and courts. Insurers led by UnitedHealth Group Inc. and WellPoint Inc. must cover children with pre-existing health problems within the first year of the legislation and let parents keep children on their insurance plans through age 26. The insurers will also be banned from revoking coverage because of severe illness and from limiting lifetime or annual benefits. Beyond those changes, it will be up to U.S. regulators and state lawmakers to structure the marketplaces where health plans will compete, write the rules governing their profit and decide which medical benefits must be covered. While insurers may gain as many as 32 million customers, the potential for pumped-up profits remains unclear, said Sheryl Skolnick , a health-industry analyst at CRT Capital Group LLC. “There’s going to be a whole other round of uncertainty associated with the implementation of this,” she said in a telephone interview March 19. “There’ll be much, much more to fight on and much, much more to write on.” The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc. , the largest U.S. chain, and its rivals. State Challenges At least a dozen states plan to challenge the overhaul in court. Florida Attorney General Bill McCollum said the mandate for individuals to obtain insurance is unconstitutional and that the case will be joined by Alabama, Nebraska, North Dakota, Pennsylvania, South Dakota, South Carolina, Texas, Utah and Washington. Michigan also will join the lawsuit, the state’s Attorney General Mike Cox said today in a statement . Virginia Attorney General Kenneth T. Cuccinelli also announced plans for a lawsuit, saying in a prepared statement that the legislation is an “unconstitutional overreach” of federal authority. Officials in Idaho have also promised legal challenges. The cases will be filed once President Barack Obama signs the revamp into law. Democrats must shepherd an additional package of changes through the U.S. Senate to complete the $940 billion overhaul. The bills subsidize coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. The tax on those earners begins in 2013. High-Risk Pools The subsidies and the expansion of Medicaid, the joint federal-state program for the poor, won’t kick in until 2014. The legislation initially bans insurers from barring coverage for children with pre-existing conditions, and adults won’t be protected until 2014. Until then, they’ll be eligible to join high-risk pools funded by $5 billion in federal grants. The drug industry, led by New York-based Pfizer Inc. , will begin offering discounted drugs to elderly Medicare patients next year, part of $80 billion in concessions agreed to by pharmaceutical companies. Generic copies of biotechnology drugs will be allowed for the first time, though the Food and Drug Administration must draft rules governing the process. Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans. Agency Power How heavy a burden that imposes on industry will depend on the health and human services department, said Carl McDonald , an Oppenheimer & Co. analyst in New York, in a March 17 note to clients. The cap will be easier to meet if it’s applied companywide rather than to individual lines of business, he said. The agency also will set formulas for Medicare payments, define the “essential benefits” that insurers must provide and draft rules on how carriers verify claims and pay doctors. Health and Human Services Secretary Kathleen Sebelius , who has spent weeks criticizing insurers’ “jaw-dropping” rate increases, will have the final verdict, McDonald said. “Over the next couple of years, HHS will be consistently churning out regulations and documents explaining exactly how health reform will be implemented,” he said. “Given the stance of this administration toward health insurers over the past year, it’s hard to see how much of this will be favorable.” Out of Spotlight Insurers may benefit by exiting the spotlight of the current political debate, said Len Nichols , a health economist at George Mason University in Fairfax, Virginia. Their arguments that premiums are rising because medical costs are outpacing inflation may hold more sway with government actuaries, he said in a telephone interview. “It’ll get out of the blatantly political and into the hands of folks who are more used to dealing with these issues,” he said. “It will move the conversation from the headlines to the arena of the actuarial gladiators, which is probably where it should be.” Health insurance company shares have gained 71 percent in the past 12 months, as measured by the six-member Standard & Poor’s 500 Managed-Care Index , led by the 124 percent increase for Coventry Health Care Inc. of Bethesda, Maryland. WellPoint, based in Indianapolis, is the biggest U.S. health plan by enrollment, and its shares have gained 80 percent. UnitedHealth , of Minnetonka, Minnesota, is second. Its shares have gained 61 percent over 12 months. Insurance Exchanges Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified. Lawmakers may merge exchanges with neighboring states, exposing carriers to more competition. They could set up government-run insurance plans for low-income buyers ineligible for Medicaid to pool their bargaining power or apply for federal waivers to impose stricter rules on insurers. The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions. A tax on high-cost “Cadillac” policies offered by health plans begins in 2018. The industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014. “We suspect that over time, the industry lobby may find ways to chip away at those payments,” said Dave Shove , a BMO Capital Markets analyst, in a March 19 note. “For now, we consider this a successful exercise in kicking the can further down the road.” To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net .

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Stocks, Crude Oil Fall on India Rate Increase, Growth Concerns

March 22, 2010

By James Regan and Shani Raja March 22 (Bloomberg) — Stocks dropped and the oil price slid for a third day after a surprise interest-rate increase in India fanned concern the global recovery will stall as economic stimulus programs are wound back. The MSCI Asia Pacific ex Japan Index fell 1.2 percent to 416.34, retreating from near a two-month high, and crude oil declined 0.5 percent to $80.25 a barrel. Futures on the U.S. Standard & Poor’s 500 Index fell 0.5 percent. The Stoxx Europe 600 Index was 0.7 percent lower as of 8:25 a.m. in London. The euro slipped for a fourth day against the yen after Germany curbed speculation the European Union will agree to financial aid for Greece at a meeting this week. Advanced economies face “acute” challenges in reining in debt which, relative to their economies, is approaching levels seen after World War II, said John Lipsky , first deputy managing director of the International Monetary Fund. The Reserve Bank of India raised its benchmark rates after local financial markets closed on March 19, a month earlier than the next scheduled review, to tame the fastest inflation in more than a year. “Some investors are increasingly jittery about the inflationary outlook and high levels of sovereign debt,” said Tim Schroeders , who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The IMF’s comments switch the spotlight to a medium-term limitation of the global economy.” The world economy will expand 3.9 percent this year and 4.3 percent in 2011, following a contraction of 0.8 percent in 2009, according to IMF estimates released in January. A report tomorrow in the U.S. will probably show existing home sales fell to an eight-month low in February, based on the median estimate of 64 economists surveyed by Bloomberg News. Inflation Risk India’s central bank raised its reverse repurchase rate to 3.5 percent from a record-low 3.25 percent and the repurchase rate to 5 percent from 4.75 percent, saying containing inflation has become “imperative.” The yield on the nation’s 6.35 percent bond due January 2020 rose as much as 20 basis points to 8.03 percent, the highest level for a benchmark 10-year note since October 2008. “The surprise factor in the RBI’s action was not that they hiked rates, but that it took place ahead of the next policy meeting, a fact that reflects the urgency to tackle inflation pressures,” Mitul Kotecha , head of global currency strategy at Credit Agricole CIB in Hong Kong, wrote today in a research note. “Further rate hikes are likely over coming months as the bank moves further to contain inflation.” Policy Tightening Policy makers in Australia and Malaysia have also increased rates since the end of February, while China has ordered lenders to set aside more funds as reserves twice this year. China and India are the world’s two fastest-growing major economies and home to about 37 percent of the world’s population. Resource companies led declines among Asian stocks on concern demand for raw materials will cool. BHP Billiton Ltd. , the largest mining company, fell 1.4 percent in Sydney and Rio Tinto Group , the third-biggest, dropped 1.5 percent. Posco , Asia’s No. 1 maker of stainless steel, declined 3.3 percent in Seoul, and PetroChina Co. dropped 2.8 percent in Hong Kong, their worst performances in six weeks. PetroChina, China’s largest energy company, and Royal Dutch Shell Plc agreed to buy Brisbane-based Arrow Energy Ltd. for A$3.5 billion ($3.2 billion) in a revised takeover bid, according to company announcements published today. Arrow Energy slid 3.6 percent in Sydney. Hong Kong’s Hang Seng Index fell 2 percent, the biggest decline among Asia’s stock benchmarks. Financial markets were closed today in Japan for a holiday. Greece Jitters The euro weakened 0.1 percent to 122.42 yen, earlier touching 122.17, the lowest since March 10. Against the dollar, the 16-nation currency slid 0.1 percent to $1.3515, near to a two-week low of $1.3503 reached on March 19. EU leaders must not create “illusions” for markets by building expectations for Greek aid, German Chancellor Angela Merkel said in an interview with Deutschlandfunk that aired yesterday. Her remarks came after Greek Prime Minister George Papandreou and European Commission President Jose Barroso said the EU should spell out its rescue plan at the March 25-26 summit in Brussels. Greece is seeking help before 20 billion euros ($27 billion) of its debt matures in the next two months. “Ahead of the EU summit, concerns about Greece’s funding difficulties are expected to weigh on the euro,” said Danica Hampton , a senior markets strategist at Bank of New Zealand Ltd. in Wellington. “Meantime, the dollar will likely remain firm as investors fret about how the global economy will cope with further stimulus removal.” Cheaper Gold Australia’s dollar declined for a third day after the price of gold, the nation’s third most valuable commodity export, dropped the most in six weeks. The currency slid to 91.23 U.S. cents in Sydney, from 91.54 in New York at the end of last week. Gold futures for April delivery were little changed at $1,106.50 an ounce after sliding 1.8 percent on March 19, the biggest drop for a most-active contract since Feb. 4. The cost of protecting bonds in Australia from default rose as benchmark credit-default swaps indexes rolled into a new series. The Markit iTraxx Australia index Series 13 was quoted at 89.5 basis points in Sydney, according to Citigroup Inc. That compares with a close of 84 basis points for Series 12 on March 19, according to CMA DataVision prices in New York. Constituent companies in the two series are the same. The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails meet its debt agreements. A basis point is 0.01 percentage point. To contact the reporters for this story: James Regan in Hong Kong at jregan19@bloomberg.net ; Shani Raja in Sydney at sraja4@bloomberg.net

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Asian Stocks Fall the Most in a Month on Concern Over Stimulus

March 22, 2010

By Shani Raja March 22 (Bloomberg) — Asian stocks fell the most in a month on concern the region’s central banks will boost efforts to curb inflation, and after an International Monetary Fund official said economies will struggle to tackle public debt. BHP Billiton Ltd. , the world’s largest mining company, lost 1.4 percent in Sydney as commodity prices slumped after India’s central bank unexpectedly raised interest rates last week. PetroChina Co. , the nation’s biggest energy producer, dropped 2.7 percent in Hong Kong after agreeing to take over Australia’s Arrow Energy Ltd. Posco, Asia’s biggest maker of stainless steel, sank 3.3 percent in Seoul on speculation global demand will slow. “Investors are increasingly jittery about the inflationary outlook and high levels of sovereign debt,” said Tim Schroeders , who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The IMF’s comments switch the spotlight to a medium-term limitation of the global economy.” The MSCI Asia Pacific ex Japan Index fell 1.5 percent to 415.27 as of 7:24 p.m. in Tokyo, its biggest drop since Feb. 19. About four times as many stocks declined as advanced. The gauge gained 1.3 percent last week after the U.S. Federal Reserve pledged to keep borrowing costs near zero for an “extended period” and as the Bank of Japan expanded a bank-loan program. Hong Kong’s Hang Seng Index fell 2.1 percent, the biggest decline among Asia-Pacific equity benchmarks, as developers dropped after Beijing suspended some land sales. South Korea’s Kospi Index lost 0.8 percent, Australia’s S&P/ASX 200 Index fell 0.9 percent, and China’s Shanghai Composite Index gained 0.2 percent. Japan’s markets were closed today for a holiday. Rate Surprise Futures on the Standard & Poor’s 500 Index fell 0.8 percent. The gauge declined 0.5 percent on March 19 as India’s surprise rate decision that day spurred speculation that withdrawal of economic stimulus policies will curtail global growth. India’s central bank raised interest rates for the first time in almost two years, saying that controlling price-gains was imperative after inflation accelerated to a 16-month high. “India raising rates is seen as a precursor to other big- spending economies tightening fiscal measures, and we know how traders will react to that,” said Chris Weston , a Melbourne- based research analyst at IG Markets. “The narrative from the IMF shows it’s going to be a bumpy ride for 2010, but the potential pullback should also entice some fresh investment opportunities.” ‘Acute’ Challenges Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures won’t come close to bringing deficits back to prudent levels, John Lipsky , first deputy managing director of the International Monetary Fund, said in a speech yesterday at the China Development Forum in Beijing. Materials-related companies fell the most among the 10 industry groups in the MSCI Asia Pacific ex Japan Index after crude oil retreated the most in three weeks in New York on March 19, slumping 1.9 percent to settle at $80.68 a barrel and copper futures dropped 0.7 percent to $3.3725 a pound. BHP Billiton dropped 1.4 percent to A$42.59, and Rio Tinto Group , the world’s third-biggest mining company, lost 1.5 percent to A$75.03. Jiangxi Copper Co. , China’s biggest producer of the metal, slipped 1.9 percent to HK$16.52 in Hong Kong. Cnooc Ltd. , the country’s biggest offshore oil explorer, sank 2.7 percent to HK$12.32, while in Sydney, Santos Ltd. , Australia’s No. 3 oil and gas producer, dipped 1.2 percent to A$14.08. PT Bumi Resources, Asia’s largest exporter of power- station coal, fell 9.7 percent to 2,325 rupiah in Jakarta. Commodities, Valuations PetroChina slumped 2.7 percent to HK$8.97. The company and Royal Dutch Shell Plc agreed to buy Australian coal-seam gas producer Arrow Energy after raising their offer to A$3.5 billion ($3.2 billion). Arrow fell 3.6 percent to A$5.10 in Sydney. Shipping lines dropped after the Baltic Dry Index, a measure of freight rates for commodities, had its first weekly decline in five weeks. Orient Overseas (International) Ltd., Hong Kong’s biggest container line, retreated 6 percent to HK$54.50. Hanjin Shipping Co. , South Korea’s largest container- box carrier, lost 4 percent to 30,000 won. Today’s drop in the MSCI Asia Pacific ex Japan Index wiped out its increase this year. Concern that governments will withdraw policies that have fueled economic growth, and that Greece will struggle to curb its deficit, has offset optimism from reports showing improving U.S. manufacturing and employment. Shares in the Asian gauge trade at 14.4 times estimated earnings, compared with 15.1 times for the MSCI World Index. The world index has risen 1.5 percent this year. ‘Cause for Optimism’ “There is still cause for optimism,” said Pengana’s Schroeders. “Valuations overall remain attractive, bolstered by increasing levels of merger-and-acquisition activity as consolidation amongst companies in certain sectors continues.” Posco sank 3.3 percent to 529,000 won in Seoul, while in Hong Kong, Aluminum Corp. of China Ltd. lost 4.1 percent to HK$8.06. Baoshan Iron & Steel Co., China’s largest publicly traded steelmaker, declined 1.1 percent to 8.19 yuan in Shanghai. BlueScope Steel Ltd. , Australia’s biggest steelmaker, retreated 2.5 percent to A$2.75 in Sydney. China Overseas Land & Investment Ltd. , a developer controlled by China’s construction ministry, sank 3.8 percent to HK$16.32 in Hong Kong. Hang Lung Properties Ltd. , which gets about 40 percent of sales from China, retreated 4.6 percent to HK$30.35 and was the biggest drop in the Hang Seng Index. Beijing halted a land transaction in the city’s central business district as regulators decided to suspend some purchases to stabilize the property market, the Beijing News reported today, citing the Beijing Land Coordination and Reservation Center. China’s property prices rose at the fastest pace in almost two years in February, fueling concern record lending and inflows of capital from abroad are creating asset bubbles in the world’s third-biggest economy. “Record property prices in cities like Beijing and Shanghai are prompting the government to do something,” said Pauline Dan , Hong Kong-based chief investment officer at Samsung Investment Trust, which oversees about $77 billion in assets. “China is relying primarily on administrative measures to cool the property market and is delaying raising interest rates.” To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net .

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Health-Care Fight Shifts to U.S. Regulators, Statehouses After House Vote

March 22, 2010

By Alex Nussbaum March 22 (Bloomberg) — Health legislation passed yesterday by the U.S. House changes some rules immediately on insurance coverage while leaving much of the fight over how to remake the medical system to federal regulators, states and courts. Insurers led by UnitedHealth Group Inc. and WellPoint Inc. must cover children with pre-existing health problems at once under the legislation, headed for a Senate vote, and let parents keep children on their insurance plans through age 26. The insurers will also be banned from revoking coverage because of severe illness and from limiting lifetime or annual benefits. Beyond those changes, it will be up to U.S. regulators and state lawmakers to structure the marketplaces where health plans will compete, write the rules governing their profit and decide which medical benefits must be covered. While insurers may gain as many as 32 million customers, the potential for pumped-up profits remains unclear, said Sheryl Skolnick , a health-industry analyst at CRT Capital Group LLC. “There’s going to be a whole other round of uncertainty associated with the implementation of this,” she said in a telephone interview March 19. “There’ll be much, much more to fight on and much, much more to write on.” The U.S. Health and Human Services Department will have two years to set penalties on hospitals with high readmission rates and longer to test new payment systems for Franklin, Tennessee- based Community Health Systems Inc. , the largest U.S. chain, and its rivals. Officials in Idaho and Virginia have promised lawsuits over the bills’ mandate that all Americans get insured. Senate, Obama Democrats must shepherd the package of changes through the U.S. Senate before President Barack Obama can sign their $940 billion health-care overhaul, one of his top domestic priorities, into law. The measures subsidize coverage for uninsured Americans, financed by Medicare cuts to hospitals and fees or taxes on insurers, drugmakers, medical-device companies and Americans earning more than $200,000 a year. The tax on those earners begins in 2013. The subsidies and the expansion of Medicaid, the joint federal-state program for the poor, won’t kick in until 2014. Other changes will take effect with Obama’s pen stroke. While the measure immediately bans insurers from barring coverage for children with pre-existing conditions, adults won’t be protected until 2014. Until then, they’ll be eligible to join high-risk pools funded by $5 billion in federal grants. The drug industry, led by New York-based Pfizer Inc. , will begin offering discounted drugs to elderly Medicare patients next year, part of $80 billion in concessions agreed to by pharmaceutical companies. Generic copies of biotechnology drugs will be allowed for the first time, though the Food and Drug Administration must draft rules governing the process. Revealing Costs Insurers also will have to reveal how much of members’ premiums they spend on medical care, as opposed to executive salaries or other administrative costs. Next year, they’ll owe a rebate to customers if the insurers spend less than 80 percent on benefits for people in individual or small-group plans. How heavy a burden that imposes on industry will depend on the health and human services department, said Carl McDonald , an Oppenheimer & Co. analyst in New York, in a March 17 note to clients. The cap will be easier to meet if it’s applied companywide rather than to individual lines of business, he said. The agency also will set formulas for Medicare payments, define the “essential benefits” that insurers must provide and draft rules on how carriers verify claims and pay doctors. Health and Human Services Secretary Kathleen Sebelius , who has spent weeks criticizing insurers’ “jaw-dropping” rate increases, will have the final verdict, McDonald said. Out From Spotlight “Over the next couple of years, HHS will be consistently churning out regulations and documents explaining exactly how health reform will be implemented,” he said. “Given the stance of this administration toward health insurers over the past year, it’s hard to see how much of this will be favorable.” Insurers may benefit by exiting the spotlight of the current political debate, said Len Nichols , a health economist at George Mason University in Fairfax, Virginia. Their arguments that premiums are rising because medical costs are outpacing inflation may hold more sway with government actuaries, he said in a telephone interview. “It’ll get out of the blatantly political and into the hands of folks who are more used to dealing with these issues,” he said. “It will move the conversation from the headlines to the arena of the actuarial gladiators, which is probably where it should be.” Health Shares Health insurance company shares have gained 71 percent in the past 12 months, as measured by the six-member Standard & Poor’s 500 Managed-Care Index , led by the 124 percent increase for Coventry Health Care Inc. of Bethesda, Maryland. WellPoint, based in Indianapolis, is the biggest U.S. health plan by enrollment, and its shares have gained 80 percent. UnitedHealth , of Minnetonka, Minnesota, is second. Its shares have gained 61 percent over 12 months. Starting in 2014, states have their say. The legislation leaves it to them to set up and run the online marketplaces, known as exchanges, where customers will comparison-shop for coverage. Among other powers, the exchanges will be able to banish plans for premium increases deemed to be unjustified. Lawmakers may merge exchanges with neighboring states, exposing carriers to more competition. They could set up government-run insurance plans for low-income buyers ineligible for Medicaid to pool their bargaining power or apply for federal waivers to impose stricter rules on insurers. The legislation also creates an Independent Payment Advisory Board to suggest cuts in spending by Medicare, the government health program for the elderly and disabled, that could threaten payments for drug and device-makers. Starting in 2014, the panel’s recommendations would take effect unless federal lawmakers substitute their own reductions. A tax on high-cost “Cadillac” policies offered by health plans kicks in in 2018. The industry also faces about $60 billion in additional fees under the health bill through 2018, and more beyond, though it was able to postpone the levy until 2014. “We suspect that over time, the industry lobby may find ways to chip away at those payments,” said Dave Shove , a BMO Capital Markets analyst, in a March 19 note. “For now, we consider this a successful exercise in kicking the can further down the road.” To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net .

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Asian Stocks Drop the Most in a Week on Concern Over Stimulus, Inflation

March 21, 2010

By Shani Raja March 22 (Bloomberg) — Asian stocks fell the most in a week after an International Monetary Fund official said advanced economies will struggle to tackle public debt, and on concern central banks in Asia will step up efforts to curb inflation. BHP Billiton Ltd. , the world’s largest mining company, fell 1.5 percent in Sydney as commodity prices slumped after India’s central bank unexpectedly raised interest rates last week. Rio Tinto Group, the third-biggest, dropped 1.3 percent. Newcrest Mining Ltd. lost 1.3 percent in Sydney after gold prices tumbled the most in six weeks in New York on March 19. Posco, Asia’s biggest maker of stainless steel, sank 2.6 percent in Seoul on speculation global demand will slow. “Investors are increasingly jittery about the inflationary outlook and high levels of sovereign debt,” said Tim Schroeders , who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “The IMF’s comments switch the spotlight to a medium-term limitation of the global economy.” The MSCI Asia Pacific ex Japan Index fell 1.2 percent to 416.39 as of 11:07 a.m. in Tokyo, with five times as many stocks declining as advancing. The gauge gained 1.3 percent last week after the U.S. Federal Reserve pledged to keep borrowing costs near zero for an “extended period” and as the Bank of Japan expanded a bank-loan program. Japan’s markets are closed today for a holiday. South Korea’s Kospi Index lost 1 percent, the biggest drop among Asia- Pacific equity benchmarks. Australia’s S&P/ASX 200 Index retreated 0.7 percent and China’s Shanghai Composite Index rose 0.3 percent. Rate Surprise Futures on the Standard & Poor’s 500 Index fell 0.7 percent. The gauge also declined 0.5 percent on March 19 as India’s surprise rate decision that day spurred speculation that withdrawals of economic stimulus will curtail global growth. India’s central bank raised interest rates for the first time in almost two years, saying that controlling price-gains was imperative after inflation accelerated to a 16-month high. “India raising rates is seen as a precursor to other big- spending economies tightening fiscal measures, and we know how traders will react to that,” said Chris Weston , a Melbourne- based research analyst at IG Markets. “The narrative from the IMF shows it’s going to be a bumpy ride for 2010, but the potential pullback should also entice some fresh investment opportunities.” Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures won’t come close to bringing deficits back to prudent levels, John Lipsky , first deputy managing director of the International Monetary Fund, said in a speech yesterday at the China Development Forum in Beijing. Materials-related companies fell the most among the 10 industry groups in the MSCI Asia Pacific ex Japan Index. Crude oil retreated the most in three weeks in New York on March 19, slumping 1.9 percent to settle at $80.68 a barrel, while copper futures for May delivery dropped 0.7 percent to $3.3725 a pound. To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net .

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US GDP takes the spotlight

March 21, 2010

US GDP takes the spotlight

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Bahrain to come under CNN spotlight

March 4, 2010

04 Mar 2010 Bahrain will be in the spotlight of CNN International from next week as the broadcaster explores the kingdom in its latest iList series. The country’s economy, politics, culture and soc…

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Greece Now, U.K. Next as Scots Investors Ready for 20-30% Plunge in Pound

February 28, 2010

By Rodney Jefferson March 1 (Bloomberg) — While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next. Turcan Connell , which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt. Concern that Greece won’t be able to cut its budget deficit helped send the euro 5 percent lower against the dollar this year. “Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate , head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.” Money managers in Edinburgh, where investment decisions have been made on behalf of insurers, pensioners and the wealthy for two centuries, are maneuvering to protect assets from the U.K. economy as it limps out of its worst recession on record. Bruce Stout , whose Murray International Trust Plc in Edinburgh has doubled over the past five years, said the chance of a plummeting pound are “better than even” and his biggest holdings are in Asia and Latin America. He called sterling a “very vulnerable currency.” U.K. fund managers at Aegon Asset Management and Scottish Widows Investment Partnership, together responsible for more than 30 billion pounds ($45 billion), said in January they are buying companies that do the bulk of their business abroad. ‘Very Dire’ “When there’s a fiscal crisis, the markets tend to punish that country very quickly,” said Bathgate, who is responsible for 560 million pounds. “I don’t think Britain is in nearly as bad a position as Greece. We’ve got a good taxation system, however the position of the economy is very dire.” The U.K.’s budget deficit is roughly the same as Greece’s, both exceeding 12 percent of economic output. Moody’s Investors Service and Standard & Poor’s said last week they may cut Greece’s credit rating as the five-month-old government struggles to curb spending and control its debt. British Prime Minister Gordon Brown’s government in December increased its planned gilt sales for the financial year ending this month to a record 225.1 billion pounds from the 220 billion pounds announced in April. Moody’s Investors Service said in December the U.K. may “test the Aaa boundaries.” Brown must call an election by June and some polls signal that no party will emerge with a clear majority. Hung Parliament A so-called hung parliament or signs retail sales and economic growth aren’t recovering as expected might be the catalysts for the pound to accelerate declines, Bathgate said. The Office for National Statistics last week revised up the rate of economic growth for the fourth quarter to 0.3 percent from a previous estimate of 0.1 percent. “There could be a number of triggers,” he said. “If there’s indecision about how you deal with a problem, that’s when things start to fall apart. We could be in the position where the spotlight turns to the U.K.” The pound may fall below parity with the euro and drop to the lowest level against the dollar since the mid-1980s should the U.K. cut spending too quickly, Mansoor Mohi-Uddin , chief currency strategist at UBS AG, said in a Feb. 24 report. Sterling slid to a nine-month nadir against the dollar last week, trading at $1.52. Zurich-based UBS, the world’s second- biggest currency trader, predicted it could fall “quickly back” to $1.05 or below. ‘Devalue the Currency’ The pound may come under further pressure with the Bank of England resuming its quantitative-easing program, a process of injecting new money into the economy, within the next three to four months, Bathgate said. Policy maker Adam Posen said Feb. 24 the central bank may expand the 200 billion-pound asset-purchase plan should the economic recovery prove weaker than expected. “If it comes back then we’re likely to be the only people doing that in the world at that time,” said Bathgate. “My strong view is the government is trying to create inflation and devalue the currency.” Bathgate said he sold conventional U.K. government-bond investments at the end of 2008 and only holds index-linked securities because of concern inflation may accelerate. The firm also has reduced holdings in corporate bonds because of the potential “knock-on impact” from a decline in government securities. The yield on the benchmark 10-year gilt dropped 24 basis points to 4.03 percent last week. The yield on Greek 10-year bonds fell 6 points to 6.39 percent. German bunds, the region’s benchmark debt, declined 18 points to 3.10 percent. Turcan Connell, whose clients typically have at least 5 million pounds to invest, was founded in 1998 and oversees about 1 billion pounds in total. Bathgate is responsible for allocating money to different funds, and half is currently in stocks portfolios with 30 percent in hedge funds and other so- called alternative investments. To contact the reporter on this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.net

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Blurry outlook in UK amid mixed economic while euro zone drops out of the spotlight this week

February 20, 2010

Blurry outlook in UK amid mixed economic while euro zone drops out of the spotlight this week

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