writer

Goldman Sachs Wimps Out in Buck-Breaking Brawl: David Reilly

February 2, 2010

Commentary by David Reilly Feb. 3 (Bloomberg) — Throughout the financial crisis, Goldman Sachs Group Inc. extolled the use of market prices to value holdings, saying this instills needed discipline. The firm’s hard-line stance turned to mush, though, when it came time to end a market myth that fueled 2008’s meltdown. Goldman, along with the mutual-fund industry, argues that it is fine for money-market funds to use historical values, rather than market prices, to value holdings. This helps money- market funds maintain a stable price of $1 a share. The problem: the $1 share price gives investors the false impression that money-market funds are like bank accounts and so can’t lose money. That myth was shattered in 2008, and the resulting panic worsened the credit crunch, forcing the government to backstop these funds. In the face of opposition from the fund industry and from firms such as Goldman, the Securities and Exchange Commission so far has failed to force the $3.3 trillion money-market industry to face reality by requiring the funds to show that their shares rise and fall in value, even if by miniscule amounts. This inaction creates the possibility of future market runs and the need for more government bailouts. At a meeting last week, the SEC endorsed beefed-up disclosures for money-market funds, along with other technical changes such as requiring funds to boost cash holdings. It stopped short, though, of even proposing that funds be required to post values that wouldn’t always neatly show up as $1 a share. More Action Needed SEC Chairman Mary Schapiro did say the agency would continue to evaluate money-market fund reforms, including one to require floating values. More forceful action is needed, though, especially given that there have been calls for more than a year, most notably from a group run by former Federal Reserve Chairman Paul Volcker , to require that money-market funds either use floating values — and so prepare investors for the idea that these instruments can lose money — or be regulated as if they are bank products. Recall that the failure of Lehman Brothers Holdings Inc. led to losses that caused the $62.5 billion Reserve Primary Fund , the oldest U.S. money-market fund, to “break the buck.” This meant losses fell outside a preset range, so the value of its shares suddenly fell below the fixed $1 price. Panicky Investors This led to panic as investors realized money-market funds weren’t as safe as bank accounts and weren’t insured by the Federal Deposit Insurance Corp. The federal government had to step in and insure money-market investments until September 2009. Fresh memories of the money-market panic even played a role in the decision to bail out American International Group Inc. Appearing before Congress last week, Thomas Baxter , general counsel of the Federal Reserve Bank of New York, submitted testimony saying that money-market funds couldn’t have weathered an AIG failure. While those funds held $5 billion of commercial paper issued by Lehman, they held about $20 billion in notes issued by AIG, he said. “Losses to these funds would have had potentially devastating effects on confidence and would have accelerated the run on financial institutions of all kinds,” according to Baxter’s testimony. Requiring money-market fund values to float would help head off such problems. Investors would learn that these investments are just like other mutual funds, and so can lose money. ‘Wake-Up Call’ “Our experience with the Reserve Fund and other funds is a wake-up call that stable net asset value money funds are susceptible to runs, and we must more fundamentally rethink how they are regulated,” SEC Commissioner Kathleen Casey said at last week’s meeting. Casey added that if the funds aren’t to face bank-like regulation, they need to move to floating values. The industry’s case against floating values is that investors would pull cash out of money-market funds because they want investments with a stable value. That, the argument goes, would deprive American companies of a vital source of funding, since money-market funds are big buyers of short-term commercial paper issued by companies. That is a well-worn ploy from the financial-services industry to counter any change that cuts into business. Banks used this tactic effectively in 2003 and 2004, for instance, to pressure the Financial Accounting Standards Board to water down rules that would have limited banks’ ability to use off-balance- sheet vehicles. Goldman’s Case The result was out-of-control securitization and under- capitalized banks, both of which played huge roles in crashing the financial system. Goldman made the exact same “We can’t crimp companies’ funding” argument in a September comment letter to the SEC on money-market reforms. Most egregious is that Goldman’s letter argues in favor of using historical prices for money-market fund values, even though the firm has championed the use of market values for investments and financial holdings. In an op-ed article last autumn, Goldman Chief Executive Officer Lloyd Blankfein wrote, “Markets, and ultimately investors, are better served with information that more closely reflects the judgment of the market rather than the historical price.” Now Blankfein’s boys are trying to play Jack Nicholson in “A Few Good Men,” screaming at the SEC and investors: “You can’t handle the truth!” Guess what? It’s Goldman and money-market funds who can’t handle the truth. Investors can, if it means they don’t have to face more market crashes and government bailouts. ( David Reilly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Reilly at dreilly14@bloomberg.net

Read the full article →

Cheap Broadway Eats Before the Show, From Burgers to Oxtail Soup: Roundup

February 2, 2010

Review by Yvette Fernandez Feb. 2 (Bloomberg) — It’s a family affair at Chez Napoleon, a restaurant in Manhattan’s Hell’s Kitchen that opened in 1960. On its walls are oil-lamp sconces, framed jigsaw puzzles and old family photos of its current owners, the Brunos. For theatergoers willing to walk an extra block or two before or after a Broadway show, numerous eateries west of Eighth Avenue and east, closer to Sixth, offer great food at prices lower than many central theater area restaurants. At Chez Napoleon, the family’s 88-year-old matriarch, Marguerite, can still be found in the kitchen on busy weekend nights. Her daughter Elyane takes care of the front of the house, while grandson Guillaume mans the bar. French bistro classics make up the menu: escargots ($8) or frogs’ legs ($23) in garlicky butter, coq au vin ($19), beef Bourguignon ($20), and rabbit in a mustard and wine sauce ($22). A $30 three-course, prix-fixe menu is served all evening. The night we dropped in, main courses included a whole trout with brown butter and lemon juice, and pork medallions with mushroom sauce. We ended with a fluffy Grand Marnier souffle ($16) large enough to share. Chez Napoleon is at 365 W. 50th St. between Eighth and Ninth avenues. Information: +1-212-265-6980; http://www.cheznapoleon.com Japanese Kyotofu’s streamlined cream-colored space feels like a downtown nightclub with its dim lighting and thumping music, which needs some volume adjusting before we ever go back. Still, we enjoyed tasting plates ($4 each) of barbecued eel in phyllo, pork sausage in puff pastry, grilled teriyaki chicken sliders, and a patty of curried rice, shimeji and shiitake mushrooms with arugula. Cold green tea soba noodles came with scallion and wasabi ($8), an orb of soft tofu was served with a miso-dressed salad of greens, beets and onions ($9). Great signature desserts included silken bean curd drenched with sugar syrup and green tea tofu cheesecake ($12), along with complimentary fudgy little cupcakes. Kyotofu is at 705 Ninth Ave. between 48th and 49th streets. Information: +1-212-974-6012; http://www.kyotofu-nyc.com Greek Kellari Taverna is the fanciest on this list, a warmly lit space with high ceilings, wooden beams and floors, and fresh whole fish displayed on ice. Go for the bargain $32.95 three- course prix-fixe menu served daily between 4 p.m. and 7 p.m. We started with spinach and feta cheese pie and grilled whole sardines. Next, baked sea bass wrapped in grape leaves, orzo with shrimp, mussels and clams, or simple roast chicken with mashed potatoes. For dessert, honeyed walnut cake and fig ice cream. Regular dinner main courses usually run from the roast chicken for $25.95 to a New York strip for $37.95. Fresh fish and other seafood are sold by the pound starting at about $26.95. Kellari Taverna is at 19 W. 44th St. between Fifth and Sixth avenues. Information: +1-212-221-0144; http://www.kellari.us Indian Utsav, which is Sanskrit for “festival,” serves dishes from various regions in India. Its $30 pre-theater menu is available daily from 5:30 p.m. to 7:30 p.m. Saffron-tinged fabrics are draped, tent-like, from the ceiling of the airy room. Request a banquette next to the large picture windows for a view of the sidewalk trees dotted with pin lights. We started with deep-fried samosas and lightly battered cauliflower dressed in a garlic tomato sauce. Next, yogurt- marinated chicken in a tomato cream sauce or a tender lamb stew. For vegetarians, there’s roasted eggplant, spiced spinach with cubes of soft cheese, or a mixed vegetable curry. For dessert, an ultra-sweet rice pudding, and even sweeter kulfi, a frozen milk dish similar to ice cream. Utsav is at 1185 Sixth Ave. between 46th and 47th streets Information: +1-212-575-2525; http://www.utsavny.com Thai Hell’s Kitchen is home to a number of Thai places that are easy on the pocket. For years we’ve headed to hole-in-the-wall Wondee Siam for its beautifully lacquered duck with tamarind sauce ($13.95) and beef sauteed with basil, garlic and onions. Friends swear by the rich oxtail soup with lime and chilies ($10.95) and rice with anchovy paste ($7.50) at Pam Real Thai Food. We recently dropped by Q2, with newer, slightly sleeker decor than the other two. We liked its flat noodles sauteed with shrimp, egg and basil ($9.95) and its fried rice flecked with crabmeat, carrots and tomatoes ($9.95). Wondee Siam is at 792 Ninth Ave. near 53rd Street, +1-212- 582-0355; Pam Real Thai Food is at 404 W. 49th St. near Ninth Avenue, +1-212-333-7500; Q2 is at 788 Ninth Ave. near 53rd Street, +1-212-262-2236; http://q2thainyc.com Burgers For a quick bite, there’s Five Napkin Burger with its eponymous dish ($14.95): over half a pound of ground chuck topped with gruyere cheese, caramelized onions and aioli. We liked the pub-like atmosphere and quirky decor: Naked light bulbs and meat hooks hang from its high ceilings; weighing scales are scattered about. Other sandwiches (all served with fries): the 5N foot-long dog ($14.95) with mustard, cheddar, relish, tomatoes, onions and pickled jalapenos; and the Buffalo chicken ($13.50) with hot sauce and blue cheese dressing. I thought about its dense chocolate layer cake for days. Five Napkin Burger is at 630 Ninth Ave. at 45th Street. Information: +1-212-757-2277; http://www.fivenapkinburger.com . Comfort Food At Eatery, we squeezed in with a crowd of skinny young people who nibbled on small plates and talked loudly to hear each other above the din. We fed ourselves well with riffs on comfort food: greens with Southern fried chicken, cheddar cheese, corn, pecans and buttermilk dressing ($12.95), and baked macaroni with jack cheese and fried onions ($13.95). Eatery is at 798 Ninth Ave. at 53rd Street. Information: +1-212-765-7080; http://www.eaterynyc.com ( Yvette Fernandez is an editor for Bloomberg News. The opinions expressed are her own.) To contact the writer on the story: Yvette Fernandez in New York at yferreol@bloomberg.net .

Read the full article →

Analysts Hate These Five Stocks, So Buy Them Now: John Dorfman

February 1, 2010

Commentary by John Dorfman Feb. 1 (Bloomberg) — Wall Street analysts turn up their noses at Eli Lilly & Co. On a scale where 1.0 is “sell,” 3.0 is “hold” and 5.0 is “buy,” Lilly rates only a 2.9. Five analysts say to buy shares in the Indianapolis drugmaker, six say sell, and 12 duck for cover with a neutral rating. A 2.9 score might not seem too bad, but bear in mind that brokerage houses have a positive bias. They are, after all, in the business of selling stocks. The average rating for stocks on the New York Stock Exchange is 3.8. Fully 87 percent of all U.S. stocks with a market capitalization of more than $500 million score higher than 3.0. Lilly’s low rating doesn’t discourage me. In fact, I like the company. I prefer stocks that are unpopular. If most of the major brokerage houses have already endorsed a stock, where will the impetus come from for it to gain new fans? What’s more, when earnings improve or temporary problems dissipate, such stocks can garner analysts’ endorsements and attract capital. Lilly is one of five stocks I recommend this week that analysts couldn’t care less about. Like other big pharmaceutical companies, Lilly has major drugs with patents that will expire soon. Zyprexa, prescribed for patients with schizophrenia and bipolar disorder, accounts for about one quarter of Lilly’s sales; its patent expires in 2011. Patent Plight Still, according to a March 2009 analysis by Zacks Investment Research, Lilly’s patent plight is less severe than that of some major competitors. Zacks estimates that Merck & Co. will see about 35 percent of its 2012 revenue exposed to generic competition and that Pfizer Inc. will lose patents on drugs accounting for 40 percent of its 2012 sales. Its genuine problems notwithstanding, I consider Lilly an excellent value at its recent price of about $36, down from a high of more than $100 a decade ago. The stock sells for only eight times earnings. The dividend yield is 5.5 percent, and the payout seems secure to me. Investors fret about what they see as scanty new-drug pipelines at all the big pharmaceutical companies. They worry too much, I think. Lilly, for example, has about 60 drugs in various stages of development. Analysts hold CNA Financial Corp. in even greater disdain. Only four analysts bother to cover the Chicago-based commercial insurer, and none recommends it; there are three “hold” ratings and one “sell.” Low Expectations CNA is unlikely to win any awards as the best-run insurance company around. It has posted losses in four of the past 10 years, including 2008. That year it paid out $105.20 in claims and expenses for every $100 it collected in premiums. Why do I favor it, then? I recommend it because it is cheap, and investor expectations are low. With the stock at seven times the past four quarters’ earnings and 0.7 times book value (corporate net worth), there is ample room for positive surprises. Consider this oddity. CNA is 90 percent owned by Loews Corp. , a New York-based corporation controlled by the Tisch family. CNA accounts for the majority of Loews’s revenue. Yet Loews has a buy rating from most analysts, while CNA is endorsed by none. Andrew Tisch and James Tisch , who are CNA directors, both bought CNA stock on the open market in November, as did Joseph Rosenberg , chief investment strategist for Loews. Pipeline Profits Another big yawn, according to analysts, is Enbridge Energy Partners LP , a pipeline partnership based in Houston. Ten analysts give it a neutral rating, with one “buy” and two “sells.” Enbridge, the biggest transporter of oil to the U.S. from Alberta’s tar sands, has made a profit each year since 1992, which is as far back as Bloomberg data on the company goes. The stock sells for 13 times earnings and currently offers a dividend yield of more than 7 percent. Next up is Lexmark International Inc. of Lexington, Kentucky, the second-largest U.S. maker of computer printers. (Hewlett-Packard Co. is No. 1.) Lexmark has earned a profit every year since 1994. The bad news on Lexmark is that sales and earnings have declined in the past five years. With the stock at nine times earnings and less than 0.6 times revenue, it seems that investors don’t expect much. Neither do analysts, who slap a 2.7 rating on the stock. Riding the Recovery The third quarter showed a glimmer of hope: Lexmark’s sales ticked up, compared with the previous quarter. I think the stock will be buoyed by the U.S. economic recovery that I believe is in progress. My final recommendation is St. Louis-based Patriot Coal Corp. It is the fourth-largest eastern U.S. coal company, with annualized revenue of about $2 billion. The company’s stock-market value is just $1.5 billion, and shares are trading for only 0.6 times revenue. Analysts give the stock a kissing-your-sister grade of 2.9. I think it is more exciting than that. In 2008, for example, the company earned a 33 percent return on shareholders’ equity, which is sparkling. Lately that profit measure has subsided to about a 19 percent return, which I still consider good. I like the stock at eight times earnings. Disclosure note: I own shares of Merck personally and for clients. A few of my clients own Pfizer. I have no long or short positions in the other stocks discussed in this week’s column. ( John Dorfman , chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com .

Read the full article →

War Reporter Behind Nazi Invasion Scoop Fights for Her Savings at Age 98

January 31, 2010

By Le-Min Lim Feb. 1 (Bloomberg) — In a 65-square-meter rented apartment in Hong Kong, Clare Hollingworth, 98 and almost blind, leans forward from the couch where she now spends many of her waking hours, to explain the thrills of being a war correspondent. “It’s adventurous, going out and jumping off low-flying aircraft,” says Hollingworth, who, as a novice reporter with the Daily Telegraph of London spotted German tanks massing at the border facing Poland in late August 1939, and filed a story warning of an imminent invasion. The twice-married widow evokes helping Jewish and anti- German refugees obtain papers to flee Poland, her privileged days growing up as the daughter of a boot manufacturer in Knighton, Leicester, and “foolish mistakes” with her money. She still can speak some French (“C’est mauvais!” It’s bad!) and Russian (“Khleb, vino, piva.” Bread, wine, beer.) Her eyes lit up at the mention of Katowice, the Polish border town from where she broke the news on World War II. “How much does it cost to get into Poland? Roughly,” she asks, clutching the hand of her great nephew, Patrick Garrett, who runs an airline’s Russia business and flies in regularly from Moscow to visit. Her scoop began a six-decade career as a war correspondent, covering conflicts in Algeria, Vietnam, Aden and the Middle East. She chronicled the fall of the Balkan states to Communism, Cold War espionage, including the case of the British journalist and Soviet double-agent Kim Philby, and China’s Cultural Revolution. In 1981, she came to Hong Kong to cover Asia for the Sunday Telegraph. Witnessing History “Clare is an icon. Hers was the time before the electronic media, when journalists were more important for being the eyewitnesses to historic events,” says Ernst Herb, an ex- president of Hong Kong’s Foreign Correspondents Club . Today, Hollingworth has about 50 percent of hearing in her right ear; a possible stroke in March has damaged her short-term memory and dulled her lucidity. Yet, with help from family, she’s fighting for the return of almost half her savings from Ted Thomas, an erstwhile friend and public-relations man. Thomas, who’s also a retired Hong Kong government spokesman, was told by the city’s court on Oct. 27, 2009, to pay the rest of the HK$2.23 million ($286,806) he removed from Hollingworth’s bank account in August 2003 after she fell and broke her hip. On Nov. 18, Thomas applied to the court to avoid paying the sum, alleging that most of it was legal fees incurred by Hollingworth’s side. The court rejected his request in December; Thomas says he’s deciding what to do. ‘Not Paying’ “I’m not paying,” says Thomas, 80, who looks two decades younger, in an interview at the FCC. The Poynton, Cheshire, native says he would rather file for bankruptcy than pay the full sum because the money is “paid to greedy lawyers who keep churning this case.” Garrett, with power of attorney over Hollingworth’s affairs, has been suing for her, and says he had to take Thomas to court in 2006 because he wouldn’t give a satisfactory account of what he did with her money despite repeated requests. A July 2006 court ruling backed Garrett, ordering Thomas to pay Hollingworth the cost of the lawsuit. Thomas is still holding out. Hollingworth isn’t destitute, says Garrett, 42, and uses her savings and a Telegraph pension to pay for her HK$13,500-a- month rent and two live-in Filipina helpers. Her Hong Kong savings are less than the money Thomas owes and she might have to sell her apartment in Paris in an emergency. Shoes, Passport These days, Hollingworth doesn’t mention Thomas, though she’s prone to fears of not having money that leave her sleepless. She watches the British Broadcasting Corp. news channel daily and insists on sleeping with her shoes by the bedside and having her passport within reach, as if she were in a war zone, says Garrett. “She still considers herself a journalist, not someone retired,” he says. Thomas says he took on a bigger role in handling Hollingworth’s finances around 2001 and 2002 when he saw her cry out offers of free drinks to FCC members and thought she might be “losing” her mind. In January 2003, seven months before the fall that broke her hip, Thomas says she gave him signing rights to her bank account so he could pay her bills. On Aug. 18, 2003, Thomas got a call for help from Hollingworth’s live-in maid, went to the apartment to find the aged reporter on the floor in agony and sent her to a hospital. For the next 10 days, he withdrew a total of HK$1.47 million from her Standard Chartered Plc account by means of six checks. Thomas has denied stealing the money and says it was used to help Hollingworth invest, pay hospital bills and the salary of her live-in maid while she recovered. Film Role “It’s remarkable she survived,” he says. Thomas says that he can’t repay Hollingworth even if he wanted to because he has no money. Thomas says he gets a monthly pension of HK$17,000, HK$12,000 of which is spent on renting his flat near the central business district and another part on the international-school fees of his 16-year-old son by his third wife, ex-reporter Nicola Parkinson; they separated 12 years ago. He retains membership at some of the city’s most prestigious establishments such as the Hong Kong Club , which he visits every other day to exercise and play poker. Thomas says that he had a speaking part in the 2008 film “Largo Winch,” starring Kristin Scott Thomas , that paid HK$100,000. Calling the lawsuit “an act of malice,” Thomas says he won’t bow to pressure to pay the full sum. Meanwhile, on her daily visit to the FCC, Hollingworth occupies the same corner table in the ground-floor dining room where she sat scribbling notes and reading the papers over white wine and smoked salmon in healthier years. These days, she receives the greetings of well-wishers and passers-by with dignified silence. “She’s a tough old bird,” says Garrett. “She’ll be around for a while.” To contact the writer on the story: Le-Min Lim in Hong Kong at lmlim@bloomberg.net .

Read the full article →

Sullen Republicans Sit Through Obama Stand-Up: Margaret Carlson

January 29, 2010

Commentary by Margaret Carlson Jan. 29 (Bloomberg) — By the time President Barack Obama delivered the State of the Union, much of the drama had been leeched away. As with the Super Bowl, the pre-game run-up dwarfs the event itself. The press tells the president what he “has to do” in what’s always the “speech of his life.” The anchors, Diane, Katie, and Brian, went for lunch and doled out morsels from their doggie bag the rest of the afternoon. Other authorized tidbits were dished to favored scribes. Unauthorized ones were dished to lesser journalists by lesser aides wanting to feel in the middle of things. A diligent reporter could practically have written the 71-minute speech by the time Speaker Nancy Pelosi had her moment of high honor and distinct privilege. The remaining drama is all in the demeanor of the president and that of his audience. Obama was cool without being cold, with touches of acute frustration that stopped short of sounding malaise alarms. He shed his usual oratorical cadence to be chatty and informal. There were moments of ironic detachment when he acknowledged that the right side of the aisle — which actually was to his left — just wasn’t buying a thing he said, even when he was spooning ice cream. As for the chamber, Republicans won the award for most sullen party in a closer contest than you might have expected. The only consistent thought rippling across the room was, “How does this cut for my re-election?” After three kicks in the shins in elections during the past three months, Democrats are more uneasy than Republicans about the midterms. Eye on Independents Obama was careful not to speak down to Republicans, mindful to speak up to independents, who thought he’d have this partisanship thing worked out by now. And he was conscious of not letting himself or his party off the hook. He noted that he’d had political setbacks, “and some of them were deserved.” He admonished congressional Democrats that they enjoy the largest majority in decades. “People expect us to solve some problems, not run for the hills.” Although his spine was stiff and his brain fully engaged, Obama clung throughout to his big-hearted delusion that we can all get along. For most of the evening, Republicans did what they could, at least in mime, to prove him wrong. Unlike last time, Republicans realized they were sitting in the U.S. Capitol, not in the boisterous bleachers at a ballgame. The independents they’ve been attracting in recent elections don’t like rowdiness. There were no homemade signs, no boos, no obvious napping. Alito’s Mouth The closest thing to a “You lie” moment came from strange quarters. The quiet and decorous Justice Samuel Alito shook his head in disbelief, mouthing the words “not true,” when the president dressed down the Supreme Court for overturning a century of law to allow unlimited amounts of money from corporations to flow into our politics. While acting more mature, Republicans showed no shift from being the Party of No, even when Obama reeled off programs they like — new nuclear power plants, offshore oil drilling, tax credits, an emphasis on jobs over health-care reform, and a spending freeze. When Obama said the freeze wouldn’t go into effect until next year, Republicans rustled in their seats, particularly the perpetually orange-tanned House minority leader, John Boehner , whose body language said, That’s just what we expect from you undisciplined Democrats. Noticing, Obama ad-libbed, “That’s how budgeting works.” Not even his list of tax cuts moved the GOP. Obama’s audience was as tough as the one Jay Leno will face when he replaces the deposed Conan O’Brien . “I thought I’d get some applause on that one” he lamented. Sound of Silence The Republicans’ reticence bordered on perilous when, by their silence, they appeared not to agree with Obama’s bare- knuckled statement that “we all hated the bank bailout.” It was a good half hour before he brought up health care, pledging to see it through but without offering a road map to a conclusion. It was enough to hearten wavering Democrats. Yesterday Pelosi said she had the votes in the House to pass the Senate bill, if there were promises in blood that the bad parts would be fixed. The speech reminded us of the earnest, problem-solving technocrat Obama is. It was easy to forget him while the uninspiring Senator Max Baucus seemed to be running the country as Obama’s designated health czar. Inadvertently perhaps, Republicans reminded us why Obama, with majorities in both houses, can’t get anything done. Watching them sitting stone-faced in their seats, like the board of a country club sizing up an aspiring member, it all became perfectly clear. ( Margaret Carlson , author of “Anyone Can Grow Up: How George Bush and I Made It to the White House” and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Margaret Carlson in Washington at mcarlson3@bloomberg.net

Read the full article →

Secret Banking Cabal Emerges From AIG Shadows: David Reilly

January 29, 2010

Commentary by David Reilly Jan. 29 (Bloomberg) — The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc. , you have to wonder if those folks are crazy after all. Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials. We’re talking about the Federal Reserve Bank of New York , whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny. The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc. , Merrill Lynch & Co., Societe Generale and Deutsche Bank AG , among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail. That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc. ’s own mid-September bankruptcy filing. Saving the System Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. He maintained during Wednesday’s hearing that the New York bank had to buy the insurance contracts, known as credit default swaps, to keep AIG from failing, which would have threatened the financial system. The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited. By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve. This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank. Geithner’s Bosses The New York Fed is one of 12 Federal Reserve Banks that operate under the supervision of the Federal Reserve’s board of governors, chaired by Ben Bernanke . Member-bank presidents are appointed by nine-member boards, who themselves are appointed largely by other bankers. As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.” And yet the New York Fed played an integral role in the government’s bailout of banks, often receiving surprisingly free rein to act as it saw fit. Consider AIG. Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson . Yet Paulson testified that he wasn’t in the loop. “I had no involvement at all, in the payment to the counterparties, no involvement whatsoever,” Paulson said. Bernanke’s Denials Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa , Bernanke said he “was not directly involved in the negotiations” with AIG’s counterparty banks. You have to wonder then who really was in charge of our nation’s financial future if AIG posed as grave a threat as Geithner claimed. Questions about the New York Fed’s accountability grew after Geithner on Nov. 24, 2008, was named by then-President- elect Barack Obama to be Treasury Secretary. Geither said he recused himself from the bank’s day-to-day activities, even though he never actually signed a formal letter of recusal. That left issues related to disclosures about the deal in the hands of the bank’s lawyers and staff, rather than a top executive. Those staffers didn’t want details of the swaps purchase to become public. New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa. That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself. Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals — too many counterparties, too many lawyers and advisors, too many people from AIG — to keep a determined Congress from the information.” Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark. This belies the culture of secrecy obviously pervasive within the New York Fed. Committee Chairman Edolphus Towns noted during the hearing that the bank initially refused to disclose even the names of other banks that benefited from its actions, arguing this information would somehow harm AIG . ‘Penchant for Secrecy’ “In fact, when the information was finally released, under pressure from Congress, nothing happened,” Towns said. “It had absolutely no effect on AIG’s business or financial condition. But it did have an effect on the credibility of the Federal Reserve, and it called into question the Fed’s penchant for secrecy.” Now, I’m not saying Congress should be meddling in interest-rate decisions, or micro-managing bank regulation. Nor do I think we should all don tin-foil hats and start ranting about the Trilateral Commission . Yet when unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil. ( David Reilly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Reilly at dreilly14@bloomberg.net

Read the full article →

Obama, Alito Dis Each Other in Free Speech Brawl: Ann Woolner

January 29, 2010

Commentary by Ann Woolner Jan. 29 (Bloomberg) — Whether you think it outrageous or terrific that the U.S. Supreme Court last week ruled corporate funds can pay for political ads, or if you don’t much care, there is humor to be mined in a flap the decision created this week. The case is about free speech in politics, right? But when President Barack Obama slammed the decision during his State of the Union speech, conservatives (who mostly like the ruling) ripped him for speaking so freely. Free speech has its limits, even in politics, it would seem. And yet, following a Republican tradition, ex-President George W. Bush talked down the federal bench all the time. It was a campaign theme for him to trash “activist judges.” Apparently it’s fine for presidents or candidates to excoriate rulings when the justices aren’t in the same room. But it’s an appalling breach of decorum for the president to do it right to the justices’ faces. Never before had a president used this constitutionally mandated and, now, nationally televised speech to do so. Why, it’s downright rude. Six of the nine justices, all of them robed, occupied seats roughly beneath Obama’s nose, in full view of the cameras. As is their custom, they sat there stone-faced throughout the talk to show that they are above the partisan fray. When Obama delivered lines that brought Democrats or even Republicans in the chamber to their feet in thunderous applause, the justices hardly even blinked. All the justices sat expressionless. All, save one. Alito’s Creased Brow When Obama predicted the ruling would “open the floodgates for special interests,” Justice Samuel Alito pulled his chin in, closed his eyes, shook his head “no” and creased his brow. Then he mumbled something which, to untrained lip readers such as myself, looked like “that’s not true.” Whatever he said, his head shaking made clear he thought the president had said something wrong. However inaudible, it was the judicial equivalent of Representative Joe Wilson shouting “You lie” when Obama addressed Congress in September on health care. So while the right slammed Obama for speaking his mind, the left took out after Alito for mouthing his. That was “a serious and substantive breach of protocol,” Glenn Greenwald wrote for Salon. It “only further undermines the credibility of the court” for a justice to show himself to be so partisan. Court Precedent Isn’t it a tad late to worry about that? We don’t know exactly which part of Obama’s remarks Alito was reacting to. It could have been the claim that the ruling eviscerated 100 years of law. Or it might have been the part about floodgates opening for special interests. In any case, the 5-4 ruling didn’t completely overturn a century’s worth of restrictions. But it did throw out what had been the practice for decades under federal law and court precedent. Whether last week’s ruling will open floodgates of corporate spending is anyone’s guess. No question that companies and, presumably, unions can now run pre-election ads. And they no longer have to form political action committees and seek contributions from individuals to do it. They can pour corporate funds into political advertising if they want, though they still can’t contribute directly to a candidate’s campaign fund. And this brings us to yet another twist. Conservatives define a judicial activist as a judge who legislates from the bench, who tosses out perfectly good laws simply because he doesn’t like them. Showing Disdain That is exactly what the conservative wing of the court, plus swing voter Anthony Kennedy , did when it ruled in the election case last week. The justices showed disdain, not the much-heralded deference, to elected lawmakers who held hearings and found facts and hammered away for years to fashion the law that five justices so cavalierly set aside. And the court did it even though no one asked it to. Not content with the mundane task of answering a narrow question, the justices stretched to reverse practices that neither side had complained about. And they threw out precedent, too, which they aren’t supposed to do so casually. How much more activist can you get? This is the opposite of judicial restraint. Change in Composition As the court’s dissenters pointed out, the only thing that had changed between the time of the court’s previous rulings on the topic and the latest one was the composition of the court. Let’s see. They must be talking about Bush’s two appointees, which were his answer to judicial activism. Ha! But that’s not all, as the infomercials say. While on the subject of campaign finance, let’s recall that candidate Obama pledged to forgo private contributions in favor of public funding for his campaign but changed his mind when he realized he could get more money from donors. Isn’t it funny that he now wants laws to restrict corporate financing of elections? So while I think Obama was confrontational during his speech and Alito thin-skinned, the irony of it all makes the whole thing amusing. To top it off, one of Obama’s supposed goals in the speech was to try to ease partisan sniping, to become a balm during these contentious times. What a hoot. But come to think of it, it isn’t especially funny. ( Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net .

Read the full article →

Apple IPad Will Need Content Cool as It Is: Commentary by Rich Jaroslovsky

January 28, 2010

Commentary by Rich Jaroslovsky Jan. 28 (Bloomberg) — With all due respect to Steve Jobs , he chose the wrong name for Apple Inc.’s new iPad. A far better name would be iWonder. As in, it certainly is a consumer-tech wonder. And also as in, I wonder if the content providers who may determine its success are prepared to take full advantage of it? The half-hour or so I spent playing with the iPad at its San Francisco unveiling yesterday was much too short a time to evaluate it authoritatively. What I can say is that it’s fast, beautiful and loaded with potential. The half-inch-thin iPad looks something like an iPod Touch on steroids. While it uses the iPhone/iPod Touch operating system — meaning it runs just about all the 140,000 or so applications already written for those pocket-sized devices — you can sense a little Mac DNA as well in the machined aluminum back. It feels solid and substantial in your hand — and also, at about a pound and a half, is considerably heavier than a typical e-book reader, one of its core functions. Indeed, the iPad is about consumption of media in all its forms, from storing and viewing your photos to watching high- definition movies on the beautiful 9.7-inch touch screen. I was struck by its speed and responsiveness. In the photo application, for instance, I could race through hundreds of photos in a blur. Apps originally written for the iPhone, such as Electronic Arts Inc. ’s car-racing game Need for Speed Shift , looked terrific when expanded to fit the iPad screen. They may look better still once developers begin writing specifically to the new dimensions and the capabilities of the custom Apple- designed chip that powers the unit. Turning the Page Books in the new iBooks application look much more paper- like than they do on devices such as Amazon.com Inc. ’s Kindle or Barnes & Noble Inc. ’s Nook. The process of turning a page is so smoothly animated that if you stop in the middle of the process, you see both the content of the page being turned and that of the new page peeking out from underneath, just as if you were holding a physical book. While Apple is hardly known for the value pricing of its products, the iPad may be the exception. It will be available in six models, with the least expensive — including 16 gigabytes of flash-memory storage and Wi-Fi connectivity — starting at just $499. It and two other Wi-Fi models with more memory go on sale in March. 3G Connectivity A month later, three more iPads will go on sale, adding connectivity over AT&T Inc. ’s 3G wireless network in the U.S. The top-of-the-line model, with both 3G and 64 GB storage, will cost $829. AT&T will offer no-contract data plans costing $14.99 for up to 250 megabytes per month, or $29.99 for an all-you-can- eat plan. At those prices, and if the iPad also fulfills Jobs’s battery-life promises — 10 hours of heavy-duty use, and even longer for lower-impact functions like listening to music — Apple will have delivered a true achievement. Then the question will be whether the publishing industry, which up to now hasn’t been known for forward thinking, will do the same. Will book publishers, for example, get to work producing added-value interactive versions that include author interviews and DVD-style extras to take advantage of the iPad’s multimedia capabilities? Or will they be content to use Apple’s new iBooks store to sell the same plain-vanilla e-books they currently produce, in hopes of simply lessening their dependence on Amazon.com? Life Preserver What about newspaper and magazine publishers? These, after all, are the same geniuses who decided to give away their product for free, then expressed shock when their audiences ended up valuing it no more highly than they did. Will they now recognize the life preserver Apple has thrown them and produce versions optimized for the new platform, with features that will excite their customers and re-engage their advertisers? To a larger extent than with most of Apple’s other products, the iPad’s fate is out of the company’s hands. Without compelling new content, it risks having no reason to be. If that’s the case, it may turn out that Apple’s decision to bring iWork , its Mac productivity suite, to the iPad will be crucial. The three iWork programs — a word processor, spreadsheet and presentation software — will sell for $9.99 each. With them and a Bluetooth keyboard, or perhaps the new combination keyboard-dock that Apple showed off this week, the iPad becomes a sophisticated alternative to inexpensive netbook computers running Microsoft Corp. ’s Windows software. While that might still sell a fair number of iPads, it would signal failure in the ambitious goals Jobs has set out for the device. To be truly “revolutionary,” which was the word he used to describe it, the iPad needs content as cool as it is. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

Read the full article →

The Pelosi Fed Is the Dollar’s Worst Nightmare: Caroline Baum

January 27, 2010

Commentary by Caroline Baum Jan. 28 (Bloomberg) — Within days of the Republican upset in the Massachusetts special election for the late Ted Kennedy’s seat, Barbara Boxer saw the way forward. “It is time for a change — it is time for Main Street to have a champion at the Fed,” the three-term California Democratic senator said on Jan. 22. “Dr. Bernanke played a lead role in crafting the Bush administration’s economic policies, which led to the current economic crisis. Our next Federal Reserve chairman must represent a clean break from the failed policies of the past.” California voters are sympathetic to the idea of change, too. Boxer holds a slim lead over her three main Republican challengers in the 2010 Senate race. A Jan. 14 Rasmussen poll of 500 likely voters found Boxer leading former Hewlett-Packard Chief Executive Carly Fiorina by 3 points, 46 percent to 43 percent, an ominous sign. “Any incumbent who polls below 50 percent at this point in the season is considered potentially vulnerable,” said Scott Rasmussen , president of Rasmussen Research. Boxer’s support was at 46 percent in November when Fiorina was trailing by 9 points. Boxer wasn’t the only senator to have a sudden epiphany on needed change at the Fed. Twenty of her colleagues consulted their inner candidate and decided it was in their best interest to vote no on Bernanke. (Forty-nine will vote yes while 30 are undecided or declined to comment, according to a Bloomberg News tally.) Bernanke’s four-year term as Fed chairman ends Jan. 31. Policy Debate Boxer’s desire for a Main Street champion at the Fed is a transparent excuse for opposing Bernanke in the same way “the failed policies of the Bush administration” provide economic cover for the Obama administration. If Ms. Boxer senses the California Senate race is slipping out of her grasp, she could always throw her hat in the ring for Bernanke’s job. California is such a paragon of fiscal prudence, she might bring valuable input to the monetary policy process. All kidding aside, there are legitimate reasons for the Senate to debate Bernanke’s reappointment, but kowtowing to populist sentiment isn’t one of them. As a Fed governor from 2003 to 2005, Bernanke advocated interest-rate cuts to avoid deflation at a time when the economy needed just the opposite. He became Fed chairman in February 2006 as the housing bubble was cresting, failed to see the effect intertwined mortgage derivatives could have on the financial system and told us the subprime crisis was “contained.” No Character Questions But, hey, poor forecasting never disqualified anyone from a job at the Fed! The decisions the Fed made in 2008 to create a host of credit facilities to make loans to non-banks and support various markets were made under “unusual and exigent circumstances,” as specified in the Federal Reserve Act. No one would challenge that assessment of the financial backdrop. It’s easy in hindsight to be critical of this or that policy decision and offer alternative solutions. But do any of Bernanke’s newfound critics believe he acted in anything but the public’s best interest? “You can debate his policies, but you cannot impugn his character,” said David Kotok , chairman and chief investment officer of Cumberland Advisors in Vineland, New Jersey. “His record at Princeton, as a Fed governor, as an economic adviser to the president reveals not one single element of doubt on his character.” PR Campaign When Bernanke talked about his anger at having to bail out American International Group Inc. in a “60 Minutes” interview last year, his emotion was palpable. He did what he thought he had to do to avert Great Depression II. Just maybe Bernanke’s problem is poor public relations. If he weren’t a soft-spoken academic more comfortable in the classroom than the hearing room, he might be a stronger advocate for his reappointment. So Ben, here’s my advice. Take a leaf out of President Barack Obama’s book. Every time you give a speech or testify to Congress, invoke his disclaimer. Reiterate that “we inherited the worst economy since the Great Depression.” Link the crisis to your predecessor, Alan Greenspan , and George W. Bush in their shared aversion to regulation. And give everyone a taste of what Boxer envisions when she talks about a Main Street champion at the Fed. Populist Fed No doubt it would mean leaving the benchmark interest rate at zero until the unemployment rate falls to a politically palatable 5 percent. It would mean ignoring the potential for higher inflation. It would mean undoing everything you and your fellow central bankers across the globe have learned from trial and more errors than you care to remember: That — and you’ve said it best yourself — price stability is both an end in itself and a means to achieve maximum sustainable growth in employment and output. So the next time Boxer brandishes her faux populism, just tell the public you are turning interest-rate policy over to Nancy Pelosi . The dive in the markets will jolt those populists back to reality. ( Caroline Baum , author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net .

Read the full article →

Robuchon’s $385 Vegas Marathon Meal, Gagnaire’s Strip Joint: Ryan Sutton

January 27, 2010

Review by Ryan Sutton Jan. 27 (Bloomberg) — Dinner for two at Las Vegas’s three most ambitious French restaurants can easily range from $500 to $1,000, and last well over four hours. That much money should buy you more than exclusivity and bragging rights. Pierre Gagnaire’s brand-new Twist, at the $8.5 billion CityCenter is Gagnaire’s only stateside spot. Same goes for the more mature Guy Savoy at Caesar’s Palace. And the three- Michelin-starred Joel Robuchon, the chef’s only truly formal restaurant in the Western Hemisphere, is at the MGM Grand. I had excellent, almost outstanding meals at all three. But only a few dishes made me say “wow!” Which makes me think they’re worth the trip only if you’re already there. Of course it’s all relative: Dinner at these chefs’ non- U.S. locations can be even more costly. Twist , the cheapest of the three, charges $185 for a tasting menu; a la carte entrees range from $38-$60. That’s much less than the chef’s 265 euro ($373) winter menu at Gagnaire’s eponymous, three-Michelin-starred Parisian venue. At just over a month old, Twist is on the 23rd floor of CityCenter’s Mandarin Oriental hotel. Panoramic windows overlook the iridescent Strip and the flat, sprawling suburban landscape beyond. A neighboring table of conventioneers raised a glass to their customers. It’s a sign that Vegas is on the rebound, with multiple parties of seven and one of 13 packing the 72-seat restaurant on a Friday. Shell Game Langoustines five ways is reason enough to order the chef’s menu. Gagnaire is famous for taking a single ingredient and manipulating it to showcase various flavors and textures. The delicate crustacean is firmly charred and grilled, then seared, a bit more softly, and enrobed with a slice of Iberico ham. Things get silkier with a tartare, a spongy mousseline and finally an ethereal yet intensely concentrated gelee. Other times, two disparate items are brought together to mimic each other. Squab and foie gras exhibit a similar meatiness and taste of liver. Overcooked venison is redeemed by a scoop of ice cream made with the game’s intense braising liquid and Armagnac. If Gagnaire can think up deer ice cream and make it work, perhaps the staff can be more creative with their vocabulary. “How are the flavors?” a waiter asked four times during my meal. Savoy France might have taught New York and California about seasonal, local cuisine, but the continental gastronomes had different plans for Vegas. This is the desert after all, and not much is local except for rocks and lizards, neither of which, fortunately, are served at the two Michelin-starred Guy Savoy . So how do you know it’s winter in Vegas? When you smell the black truffles in the air. Savoy bombarded me with the seasonal specialty from Perigord at least three times over the course of my 11-course meal. I call it global seasonality. It’s all for $290, much less than the 285 and 260 euro menus at Savoy’s three-Michelin starred Paris spot. A suited waiter spooned a dice of apple and truffle over raw scallops; it had just enough acid to cut through the sweetness of the mollusk, and just enough fungi to make you think these shellfish come from the earth. The soaring room, which aptly overlooks the Paris casino, was nearly full on a recent Wednesday. A server asked if we’d like a “bread pairing,” different slices with each course. Lemon-rind-spiked sourdough, bitter and fragrant, accompanied a feat of piscine cooking. Bass was barely cooked through, yet its skin was crisped and puffed up into a pork-like crackling. Bitter Radish Savoy is best known for his contributions to nouvelle cuisine, which stresses intense essences and reductions over butter and cream. Hence, foie gras was steamed and covered by a bitter radish soup. It’s one of the best riffs on borscht I’ve ever had. A trolley of petits fours, headlined by creme caramel and al dente rice pudding, finished off the three-hour meal. About two hours into my 16-course meal at Joel Robuchon, whose namesake chef has more Michelin stars than anyone in the world, I informed the wait staff I needed a break, and stepped out for a 10-minute stroll through the smoky casino. Fresh air was too long of a walk from the restaurant. Afterwards, the kitchen sent out a non-palate cleanser. Chestnut cream soup. There were still two hours left of eating. Epic Meal The main fault of Robuchon’s degustation menu is that diners are forced to appreciate faultless cuisine over a marathon session that makes it more like an Olympic event than a pleasurable experience. It challenges all reasonable senses of satiety. All this takes place in a claustrophobic room peppered with odd pictures (I sat near a Chuck Norris photo) and dubious views from some of the cramped tables for two (I had a clear sightline to the slot machines). After a heady, intoxicating mousse-like sea urchin dish was cleared, a bowl of Mediterranean seafood paella appeared seven minutes later. Resist at all costs the urge to stuff yourself with the bacon bread. I suppose there are worse ways to lose your money in Vegas, like the high-stakes tables just a stone’s throw away. Joel Robuchon is booked up every night and the long, $385 menu generally accounts for 30 to 40 percent of sales, said Alex Gaudelet, executive director of food and beverage for the MGM Grand. I believe him. Most tables were filled on the Monday I was there, usually one of the slowest nights in Vegas. As at Savoy, expect a flurry of foie gras and truffles (shaved onto thinly sliced potatoes with black truffles), and caviar (a firm, barely briny Ossetra variety over fennel cream and crab). This is the Vegas approach to luxury: expensive ingredients served perfectly. The Bloomberg Questions Cost? A lot. Sound level? Quiet, about 70 decibels at each. Date place? When I can afford it. Inside tip? Shorter, cheaper menus start at $89 at Robuchon and $98 at Savoy. Special feature? Savoy’s carrot, foie gras and truffle soup, and Robuchon’s soybean sprout risotto, both of which are don’t-miss vegetable dishes. Private room? Yes. Will I be back? They’re all a bit too pricey for me but if I won at craps I’d choose Savoy first. Twist by Pierre Gagnaire is at the Mandarin Oriental, 3752 Las Vegas Blvd. South, Las Vegas. Information: +1-702-590-8888; http://www.mandarinoriental.com/lasvegas . Guy Savoy is at Caesars Palace, 3570 Las Vegas Blvd. South, Las Vegas. Information: +1-866-227-5938; http://www.caesarspalace.com . Joel Robuchon is at the MGM Grand, 3799 Las Vegas Blvd. South. Information: +1-702-891-7925; http://www.mgmgrand.com . ( Ryan Sutton writes about restaurants for Bloomberg News. Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: Ryan Sutton in New York at rsutton1@bloomberg.net .

Read the full article →

Billionaires Make More From Ideas Than Bubbles: William Pesek

January 26, 2010

Commentary by William Pesek Jan. 27 (Bloomberg) — All the buzz about losers if Google Inc. leaves China ignores a potential winner: India. In any China-versus-India contest, 2009 belonged to China. Its 10.7 percent growth in the fourth quarter blew the doors off the 6.5 percent India may have experienced. It will be the toast of the town in Davos, Switzerland, this week at the annual meeting of the World Economic Forum. China’s “old economy” is clearly booming , and investors haven’t made a lot of money betting against it. Why, then, would China’s leaders imperil their future prospects as 2010 gets under way? That’s what they may do by letting Google, the Information Age’s biggest name, walk away. “I would look going forward for new investment increasingly to go somewhere else — probably India, Brazil and other big markets,” William Reinsch , president of the National Foreign Trade Council in Washington, said on Jan. 21. Google’s announcement this month that it is considering leaving China amid misgivings about censoring the Internet won’t change everything on its own. China’s top-down economy is thriving, while India’s is bureaucratic, inefficient and notoriously corrupt. Yet India has a track record of innovation and a stable of internationally competitive companies that China doesn’t. India also has far superior laws on intellectual property and corporate governance. And China’s willingness to blow off Google plays to India’s relative advantage in these areas. Bypassing China China should be concerned about the most influential Internet tool bypassing its $4.3 trillion economy and 1.3 billion people — and the specter of other Silicon Valley giants following suit. Executives at multinational companies who dragged their feet on diversifying investments away from China may now expedite the process. At issue is the next phase of China’s development. Too much attention is on ideas of the last century: keeping labor cheap, holding down the currency, picking and subsidizing national champions and favoring exports for growth. China’s spat with Google underlines how the Communist Party relies on the strategies of yesterday, not tomorrow. It’s really a proxy for how the past and future are colliding. Who knows, perhaps China’s mix of free-market policies and limits on free speech is a viable new model. It’s possible that China can thrive while censoring cyberspace and the media. Perhaps China will prove that it can leapfrog over years of domestic company building — as with Lenovo Group Ltd.’s purchase of International Business Machines Corp.’s personal- computer business. China does, after all, have $2.4 trillion of currency reserves to deploy around the globe. Ideas, Not Sweat The odds don’t favor it, though. Letting Google leave may dull the long-term benefits of the trillions of yuan that China is throwing at the economy. It limits the participation of entrepreneurs in an age where ideas and impulses mean more than sweat on factory floors. It also makes it less likely that massive stimulus efforts lead to the kind of self-sustaining, indigenous economy that China needs. The question is where China wants to be in five or 10 years. The world is now driven by knowledge flows, making it vital to stay attuned to the latest developments in any field. Only then can innovators ride the latest waves in international business and finance and create the hundreds of millions of jobs needed to raise living standards. India’s Billionaires Here, my thoughts are with India’s billionaires. They must be rubbing their hands together in glee as China’s leaders make an expensive miscalculation. According to a 2008 Forbes magazine poll, India may have the most billionaires by 2017. China’s ultra-wealthy are growing in numbers. It’s better, though, for one’s billions to come from new ideas than from bubbles in the Chinese stock market , which rose 80 percent last year. What China lacks is a growing roster of homegrown knowledge-based and technology outfits creating jobs, pushing the country up the value chain and inspiring young people to become the next Bill Gates . Nandan Nilekani , the co-founder of Bangalore-based Infosys Technologies Ltd., is often called India’s answer to Microsoft Corp.’s co-founder. When asked about the secret of India’s success in technology, Nilekani points to a free press and a rabid embrace of information flows. In other words, if India censored cyberspace, companies such as Infosys or Wipro Ltd. wouldn’t be what they are today. Benefits of Growth India’s challenges are overwhelming. It scores low on global efficiency scales, infrastructure is dodgy and bottlenecks to investment are many. India lags far behind China in reducing poverty. That’s where billionaires such as Nilekani re-enter our story. Millions of rural poor people claim that corrupt officials steal their paltry wages, withdrawing money from post-office accounts without providing proof of identity. India turned to Infosys to devise a fraud-proof deterrent. A year from now, Nilekani will roll out the world’s biggest biometric database to enable India’s 1.2 billion people, half of whom lack access to financial services, to open an ICICI Bank Ltd . account or sign up for a Vodafone Group Plc mobile phone. It’s not the Three Gorges Dam or the Shanghai skyline, yet India’s technology billionaires are helping the government devise new strategies and spread the benefits of growth. China, for all its advantages, could use more of that dynamic. Waving goodbye to Google won’t help. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

Read the full article →

Harvard Stargazer Sasselov Maps Last Frontier 5,000 Light-Years From Davos

January 26, 2010

By A. Craig Copetas Jan. 26 (Bloomberg) — Some 5,000 light-years from this week’s World Economic Forum and the worst earthly economic crisis since the Great Depression, astronomer Dimitar Sasselov is charting the New Frontier for investment capital over a bespoke iPhone app that connects with a planet called Sheila. “Globalization is complete,” the director of Harvard University’s Origins of Life Initiative Project says, tapping his smart phone into the radio-telescope transmissions that on Nov. 12, 2002, led him to discover OGLE-TR-56b, the exosolar world that he unofficially named after his wife. “It’s feasible that we’ll meet other sentient life forms and conduct commerce with them,” Sasselov says, pointing toward Sheila from Harvard’s astronomy-department laboratory. “We don’t now have the technology to physically travel outside our solar system for such an exchange to take place, but we are like Columbus centuries ago, learning fast how to get somewhere few think possible.” The 48-year-old Sasselov, who wears spectacles and favors open-collar shirts, is one of a sky-gazing coterie of physicists and starship builders the WEF has invited to its 40th anniversary 2010 gathering in Davos, Switzerland. Also scheduled to attend is Jill Tarter , who holds the Bernard M. Oliver Chair at SETI , the Search for Extraterrestrial Intelligence Institute in Mountain View, California. ‘Redefine Life’ In the wake of recent discoveries of Earth-like planets that may be able to support some sort of life form beyond the boundaries of our solar system, the WEF is looking to expand the horizons of 2,500 global leaders, including Deutsche Bank AG Chief Executive Officer Josef Ackermann , Google Inc. CEO Eric Schmidt and Archer Daniels Midland Co. CEO Patricia Woertz . Sasselov says he hopes to stir realization that research about other planets can “redefine life as we know it” and eventually create a market in the Milky Way and beyond. Brad Durham , co-founder and managing director of Emerging Portfolio Fund Research Inc. in Boston, isn’t laughing about sending investment bankers on a 23 million light-year journey to the Whirlpool Galaxy. “Businessmen once thought Columbus was ridiculous, but he was the adventure capitalist who helped create globalization,” the 47-year-old executive of the research group says. “People in my field pay serious attention to Sasselov’s work because what’s knowable in our business can be thrown out the window real fast. It’s likely going to take many lifetimes before we can take advantage of outer space as an emerging market, but it’s best not to be hobbled by the lack of imagination on Earth.” Planetary Condos As for the viability of conducting commerce in the cosmos, Bulgarian-born Sasselov, who studied at Sofia University and the University of Toronto, smiles at the notion and recalls one of the questions he was asked in 2003 by a property developer who attended Harvard’s Real Estate Academic Initiative seminar. “He seriously wanted to know who owned the land on these planets,” Sasselov says. “Everyone in the room said they had the same question. It’s a compelling topic.” Sasselov, whose WEF seminar on Jan. 27 is titled “Life on Other Planets,” describes the process of sparking awareness of space’s possibilities as “exotic enlightenment” and says that the statistical odds are that extraterrestrial business beings will arrive on Earth before we get to them. “Our DNA is not currently accustomed to this type of exploration,” he says. Ray Johnson is seeking to beat those odds. He’s the 54- year-old chief technology officer at Lockheed Martin Corp., the Bethesda, Maryland-based company that makes space ships, including Orion, the next-generation Space Shuttle. Lunar Express “The excitement of space-exploration systems is that they’ve moved from the extraordinary to becoming part of our everyday lives,” says Johnson, who’s scheduled to moderate a separate WEF seminar on how to avoid tragedy in outer space. “I don’t think in distance, but rather how much time it takes to get there. Our Pluto New Horizons spacecraft travels at 50,000 miles-per-hour. That’s an eight-hour trip to the moon. Imagine if we could increase the speed by a factor of 10.” That’s precisely what Lockheed Martin’s version of Hollywood’s USS Enterprise Chief Engineer Montgomery “Scotty” Scott spends his time thinking about. “The future is all about the interface between man and machine, the biological component,” Johnson explains. “The more propulsion we have, the further out we can explore.” Johnson says a more immediate problem in visiting Sheila any time soon is the garbage Earthlings have left on the path. Solar Energy “There are thousands of dangerous objects in orbit larger than 10 centimeters and they’re in the way of exploring further reaches or thinking about establishing a space colony or mining minerals from the moon,” Johnson says. “It’s difficult to imagine an affordable way to get materials in orbit for the eventual colonization of space without orbiting platforms to harvest solar energy for next-generation propulsion systems.” So Johnson’s crew members are designing “space tugs” that can seize the debris and haul it back to Earth for disposal. Another flying garbage truck under development is the Solar Orbital Debris Spacecraft, an outer-space sailboat fitted with spinnakers that convert solar energy into power. “This is the future of space exploration,” Johnson says. “We must continue to explore all concepts that might allow us to extend the duration of manned flight.” Back to Earth Yet is it prudent for WEF members to spend time and money exploring outer space when the forum’s 2010 Global Agenda Council on “Rebuilding Critical Infrastructure” estimates that $42 trillion is needed over the next 20 years to improve water, road, port and air-traffic-control systems on Earth? “What Sasselov and Johnson are offering is jaw-dropping information of extraordinary value,” says crisis consultant Robert Dilenschneider , CEO of the New York-based Dilenschneider Group Inc. and a 28-year WEF veteran. “Bankers and corporate CEOs in Davos always turn a blind eye to long-range thinking,” he says. “It’s shameful. Given the current state of the world, we need to rethink everything in the interest of survival. It’s also much more interesting than watching the movers and shakers networking Davos for their next big deal.” There are 10 trillion stars in the range of Earth’s telescopes and a space vessel traveling at 1 million miles-per- hour would take 4,000 years to reach the nearest star system. If someone out there wants to get in touch with us before we arrive, there’s a good chance that Anson Fatland will be one of the first to hear about it though he won’t be listening from Davos. Paul Allen Fatland manages the science-and-technology portfolio for the Paul Allen Foundation in Seattle. He says the co-founder of Microsoft Corp. has invested $30 million over the past 10 years to erect and maintain the 42 sky-eyes that make up the Allen Telescope Array 3,000 feet above sea level along the peaks of Hat Creek, California. The math isn’t for the squeamish: ATA has the capability to tune into the activities taking place on 4×10 to the 10th power billion stars. “This is cost-effective, transformative exploration,” the 39-year-old Fatland says of the dishes that transmit signals via the Internet to Sasselov and hundreds of other astronomers. “We collect radio waves, chart star formations and conduct galactic mapping,” Fatland says. “It doesn’t take a billion dollars to create a world-class research instrument.” Budgeting for Space NASA historian and Auburn University Professor James Hansen calculates the total global expenditure on space exploration since the 1957 launch of Sputnik to be some $1 trillion. “It’s about $17.5 billion annually over 53 years,” he says, “though it’s likely more because so much space exploration connects to military spending, which wouldn’t be included in any estimate.” Physicist David Livingston, host of the syndicated U.S. radio program The Space Show and a professor of space studies at the University of North Dakota in Grand Forks, says how Earthlings apply future expenditures is more important than the cost of getting there. Indeed, along with his colleagues, astronaut Buzz Aldrin and actor Tom Hanks at the Washington, D.C.-based National Space Society , Livingston’s Code of Ethics for Off-Earth Commerce sets the framework for how humankind should conduct business upon contact with alien bankers. “We’re committed to ensuring a free-market economy off- Earth,” Livingston says. “Treat outer space with respect, concern and thoughtful deliberation, regardless of the presence or absence of life forms.” Destination Sheila Back in his lab, Sasselov scrawls with a piece of chalk on a blackboard filled with equations aimed at helping map out a trajectory for the Kepler Mission, a NASA spacecraft aimed at finding habitable planets that is currently 100 million kilometers from Earth and moving fast. “Columbus forced everyone to rethink, redesign and rebuild their world view,” Sasselov says. “That’s what we’re doing here. To put it in 15th-century terms, we’ve reached the Canary Islands. Getting to where we ultimately want to go is a slow process that involves astronomers, aeronautical engineers, biochemists, anthropologists and businessmen.” As for what we might find on Sheila or any of the other tens of billions of potential “super-Earths” out there, Sasselov says “we’d likely experience a bit more back pain from the surface gravity, but it would be worth it to visit such a great tourist spot; the landscape would be familiar, it would feel very much like home.” To contact the writer on the story: A. Craig Copetas in Davos at ccopetas@bloomberg.net .

Read the full article →

Goldman Parachute Awaits Geithner to Ease Fall: Caroline Baum

January 25, 2010

Commentary by Caroline Baum Jan. 26 (Bloomberg) — Treasury Secretary Timothy Geithner is scheduled to testify to the House Oversight and Government Reform Committee tomorrow. The hearing is certain to be good theater. Whether it reveals good government, or a government working for the few at the expense of the many, is another matter. If it turns out Geithner failed to act in the best interest of taxpayers in the bailout of American International Group, Inc ., he is unworthy of the public trust and should step down. That thought may have crossed President Barack Obama’s mind as well. When Obama proposed new limits on the size and scope of commercial banks last week, standing at his side was Paul Volcker , head of the president’s Economic Advisory Board, whose height (6 feet 7 inches) belies his diminished influence –until now. Volcker has long advocated banning commercial banks from speculating with federally insured deposits, but his voice was drowned out by the pro-Wall Street sympathies of Geithner and Larry Summers , another Obama economic adviser. The House Oversight Committee, chaired by Edolphus Towns , a Democrat from New York, subpoened documents from the Federal Reserve Bank of New York relating to the AIG bailout in September 2008, when Geithner was president of the New York Fed. The Fed turned over about 250,000 pages of documents, some of which have been leaked to the press. Lawmakers are particularly interested in the decision to pay AIG’s counterparties, including Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar to cancel, then and there, the credit default swaps the insurer sold them. They also want to know why the New York Fed pressured AIG to withhold that information in its regulatory filings. Secrecy’s Downside So do we. Secrecy surrounding the AIG bailout has worked to compound suspicions the New York Fed did something fishy, that it found a back-door way to pump money into the banks and, in the process, hosed the rest of us. Geithner has testified that the Fed’s hands were tied, that the bank could not “selectively default on contractual obligations without courting collapse.” If that’s the case, why hide the evidence? CDSs are customized, privately negotiated contracts. We have no idea how they were written. Only the parties to them do. Through a Treasury spokesman, Geithner has said he recused himself from “working on issues involving specific companies, including AIG,” after his Nov. 24 nomination as Treasury secretary. How likely is it Geithner was unaware or uninvolved in the negotiations? The New York Fed did not respond to multiple inquiries on the nature of the recusal. Body Language “It’s not necessary to speak words or render a decision to cause influence,” says Jacob Frenkel , a former federal prosecutor and Securities and Exchange Commission enforcement attorney now in private practice. “Mere presence can affect the outcome.” Geithner’s problems pre-date AIG. After Obama nominated him to the Treasury post, a job that put him atop the Internal Revenue Service, we learned he cheated on his taxes. He settled his 2003 and 2004 tax liability after a 2006 IRS audit but didn’t pay back taxes for 2001 and 2002 until Obama nominated him. Obama rushed Geithner’s confirmation process through the Senate on the grounds that he was the only man for the job. The main selling point? In his position at the helm of the New York Fed since 2003, he was familiar with the crisis story line and was involved in the various rescue efforts. He also fiddled while the biggest banks, most of which are in the New York Fed’s district, burned. Escape Clause Geithner has been a public servant his whole life, holding various positions at the Treasury, the International Monetary Fund and the Fed. Somehow he managed to shed the stigma of tax scofflaw, but now BOTH Democrats and Republicans in Congress want blood. His may be just the scalp Obama needs to pacify the populist outrage, especially since he’s perceived as being too cozy with bankers. Following the loss of the late Ted Kennedy’s Senate seat in Massachusetts, Obama is trying out his populist voice. By all rights, he should sacrifice one of his political advisers, who seem to have miscalculated the Massachusetts election and misjudged the public’s appetite for health-care reform when the chief concern is jobs . Axing Geithner might be good for president and Treasury secretary alike. Obama would be seen as an ally of the people. Geithner would be free to claim his just reward: that plum offer from Goldman Sachs. The circle would be squared. Obama would have his man on the inside. ( Caroline Baum , author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net .

Read the full article →

Wall Strasse Beats Wall Street on Obama Bank Bill: Matthew Lynn

January 25, 2010

Commentary by Matthew Lynn Jan. 26 (Bloomberg) — U.S. President Barack Obama has taken a sledgehammer to the model that Wall Street investment banks have created over the last three decades. And yet, as is always the case in business, one man’s misfortune is another man’s opportunity. If Europe plays this right, it could establish its banks and financial centers as the industry’s leaders . The dominance of Wall Street may be coming to an end. In effect, “Wall Strasse” can overtake Wall Street: European financial centers can lure refugees from the tightly regulated New York markets, and the big European banks can start offering customers the all-in-one service that their U.S. rivals won’t be able to anymore. The impact of Obama’s assault on the investment banks is clear. The U.S. plans to prevent banks from proprietary trading — that is, taking positions in stocks, bonds, currencies or other instruments on their own account. And it intends to stop them from owning hedge and private-equity funds. It remains to be seen whether the legislation can be passed, and whether the banks can find a clever way of sidestepping the rules. But Europe’s response should be very simple: The region should do precisely nothing. Resist the Pressure There will be plenty of pressure to match the U.S. proposals with their own restrictions. George Osborne , the Treasury spokesman for the U.K.’s opposition Conservative Party, has already hinted as much. Regulators in Frankfurt, Paris and Brussels will be told they should copy the new rules. They should resist. Obama’s proposals are senseless. They are driven by populist fury at the greed and irresponsibility of the banking industry rather than a cold-headed analysis of the problems. Admittedly, that is understandable. The way the banks have gone straight back to paying huge bonuses so soon after many of them collapsed has displayed breathtaking arrogance, and a lack of political savvy for which they will pay a high price. In effect, they may well have blown up their whole industry for the sake of a single year’s bonus. Not smart. Yet fury is rarely a good basis for drafting legislation. There is no reason why banks shouldn’t be allowed to own hedge and private-equity funds. There weren’t any banks that went bust because those units lost a bundle of money. Sure, some of the funds suffered in the recession of the past year. But there is no evidence they caused the crisis. Goldman as Survivor Nor is there any reason why the banks shouldn’t be allowed to trade on their own account. Again, where is the proof that it was proprietary trading that caused the crash? The bank that is among the most involved in hedge funds, private-equity funds and proprietary trading is also the one that came through the credit crunch in best shape: Goldman Sachs Group Inc. If you look at the facts, you would be forced to conclude that the banks should deepen their involvement in hedge funds, and trade their own books more, not less. So there is no reason for Europe to follow the U.S. lead. True, there is a problem with banks being “too big to fail.” That needs to be fixed. But the important words in that sentence are “big” and “fail.” What we need are rules that make sure that badly run banks can collapse without causing systemic damage. And we may well need to break up banks into smaller units. But while they may become smaller, we don’t need to micromanage bank businesses. Bank Refuge Instead, Europe should take advantage of the U.S. bank bill. It can do that in two ways. First, it can provide a refuge for the big U.S. banks concerned about the impact of the new rules. Goldman Sachs moving to London? JPMorgan Chase & Co. to Frankfurt? Why not? Companies go through huge transformations all the time to maintain and expand their businesses. Shifting the location of your headquarters across an ocean isn’t such a big deal. If that’s what you need to do, get on with it. Second, the main European banks, unshackled by these restrictions, can move into the space that their U.S. rivals will be forced to vacate. Integrated investment banks, including hedge and buyout funds, and trading their own books, weren’t created because bankers just wanted to take wild and crazy risks (although a few probably did). It was how they served their customers. Full Service A company coming to an investment bank didn’t just want advice on a merger: It wanted a bank that could arrange the finance as well even if that meant buying a subsidiary for its private-equity fund, or taking some stock onto its own books. They didn’t just want a sponsor for an initial public offering: They wanted a bank that could buy the shares as well. Once Obama’s bill is pushed through, the U.S. banks won’t be allowed to offer the full range of services anymore. That doesn’t mean the demand won’t be there. The customers will shrug and switch to the banks that give them what they want: the likes of Deutsche Bank AG, Barclays Plc, BNP Paribas SA, and Credit Suisse Group AG. For three decades, the growth of the European banking industry was constricted by their inability to become major players on Wall Street. New York was the center. If you weren’t dominant there, you couldn’t compete at the highest level. But Obama has given “Wall Strasse” the chance to overtake Wall Street. Europe’s banks should seize the opportunity to become the dominant force in global finance. ( Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net .

Read the full article →

Ten Stocks I Wouldn’t Touch With a 10-Foot Pole: John Dorfman

January 25, 2010

Commentary by John Dorfman Jan. 25 (Bloomberg) — Don’t buy Cablevision Systems Corp. Stay away from Moody’s Corp. and Dish Network Corp. Avoid Qwest Communications International Inc. and Mead Johnson Nutrition Co. Be leery of Pitney Bowes Inc., Delta Air Lines Inc., Morgan Stanley, Coca-Cola Enterprises Inc., and American International Group Inc. My reason for giving this advice: These companies, in my judgment, have some of the worst balance sheets in the U.S. The first five companies mentioned above have negative net worth; that is, their liabilities exceed their assets. Among the 727 U.S. companies with a stock-market value of $3 billion or more, only 17 have that unfortunate distinction. The next five companies have positive net worth (stockholders’ equity) but their total debt is at least five times equity, a trait shared by 26 of those 727 companies. There are compelling reasons to prefer businesses with low debt. A company with cash on hand and no bankers looking over its shoulder can buy troubled competitors or snatch assets that its debt-laden rivals need to shed. Take oil tankers as an example. Whenever I meet with tanker company executives these days, someone usually predicts that a shakeout will soon hit the industry. Ready to Pounce Tankers will be for sale cheap, they say, and they will be the shrewd ones who will pick up ships at bargain prices. Well, if such a shakeout happens, not every company can emerge as the canny victor. I put my money on Overseas Shipholding Group Inc. , a New York company with one of the strongest balance sheets in the group. Or look at how JPMorgan Chase & Co. used its balance-sheet strength during the financial crisis of 2008. Chief Executive Officer Jamie Dimon was able to take a firm stance in negotiations with the federal government, and won the right to swallow Bear Stearns Cos. at what I consider a bargain price of less than $10 a share. Bear Stearns, by the way, is a company I liked, admired, and did business with. But it got too close to the flame of excessive debt, leaving it inadequate room to maneuver when times got tough. Generally, I consider debt to be too high if it exceeds stockholders’ equity. Companies with steady cash flow — utilities, cable television operators, tobacco and liquor companies — can safely take on a bit more than that, so long as no game-changing events rock their industry. For portfolios I manage, I generally prefer companies where debt is less than 50 percent of equity. Cablevision, Moody’s Here’s my take on 10 debt-laden companies to avoid. Cablevision , based in Bethpage, New York, has posted annual losses in four of the past seven years. Like all cable operators, it faces potential competition from satellite and wireless technologies. Moody’s , a bond rating and financial information firm based in New York, has come under heavy criticism for issuing bond ratings that were too uncritical. I think profits could be hurt by lawsuits alleging biased ratings. Rivals such as Standard & Poor’s, a unit of McGraw-Hill Cos., face similar issues but have stronger balance sheets. Warren Buffett’s Berkshire Hathaway Inc. has been cutting its stake in Moody’s during the past six months. Dish Network , based in Englewood, Colorado, may struggle to pay back more than $6 billion in bonds between now and 2019. While the stock sells for about $19, corporate net worth is negative $3.09. Buggy Whips Qwest , with headquarters in Denver, offers phone and Internet service. It has a rich dividend yield of more than 7 percent, though I believe a dividend cut may occur. Also, the 2009 dividend will be taxed as ordinary income, the company said. Mead Johnson , a Glenview, Illinois, maker of infant formula, was spun off by Bristol-Myers Squibb Co. last year. Propped up by occasional takeover rumors, the stock trades for a pricey 22 times earnings. We all know the postage meters manufactured by Pitney Bowes of Stamford, Connecticut. But postage meters are a buggy-whip business in the age of e-mail. No wonder the company reduced the generosity of its pension plan in November and announced job reductions in December. Delta Air Lines , based in Atlanta, hit a 52-week high last week, partly on hopes for lower fuel prices. I believe those hopes won’t materialize and that Delta’s debt load of about 20 times equity is excessive. High Debt New York-based Morgan Stanley is the world’s biggest brokerage house, now disguised as a commercial bank. Its debt of 14 times equity makes me nervous, even though it is trying to emphasize steady businesses like asset management. Coca-Cola Enterprises , which bottles Coke’s soft drinks, has debt equal to almost 12 times equity. The Atlanta bottler has made little earnings progress since 2003. American International Group , a New York-based insurer that operates worldwide, lost so much money on derivatives that it required a costly government bailout. The government now owns 81 percent of the company, and it will take so long to repay Uncle Sam that profits for regular shareholders will probably be diluted to near-oblivion. Disclosure note: I own shares of Overseas Shipholding Group personally and for clients. I have no long or short positions in the other stocks discussed in this week’s column. ( John Dorfman , chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com .

Read the full article →

Secretive `Lord of Wine’ Valentini Made Italy’s Best White: John Mariani

January 25, 2010

Review by John Mariani Jan. 25 (Bloomberg) — I’ve been drinking wine with pleasure for a very long time and the jaw-dropping moments have been few and far between. Sometimes the wines I expected little of proved to be a revelation, which was the case when I had my first sip of Edoardo Valentini’s Trebbiano d’Abruzzo 30 years ago at a seafood restaurant in Italy. My wife and I had ordered spaghetti with clams and a grilled branzino graced only with olive oil and lemon at Guerino in the seaside town of Pescara in the Abruzzo region. Looking over the winelist I spotted Valentini’s wine at a price way above the other trebbianos. In those days $10 was a fortune to spend on an Italian white, especially trebbiano, which is made in Abruzzo in bulk and is rarely more than dry and pleasant. The other odd thing about the Valentini listing was its age, 10 years, which is about 8 years more than I would ever consider drinking a trebbiano. I was curious. The waiter poured the wine and the color was not promising, like burnished gold, usually a sign of considerable oxidation in a white wine. I swirled the glass and the aroma was very full. Then, on taking my first sip, my jaw did indeed drop. I looked at my wife and said slowly, “This is one of the greatest white wines I’ve ever tasted.” And it got better as it aerated in the glass. The richness, the body, the velvety smoothness of the fruit-acid balance, and the distinctiveness of the varietal flavor was unique. I called over the owner of Guerino and asked him about the wine. His eyes lit up. Lord of Wines “Ah, that is a trebbiano made by the Lord of the Wines in Abruzzo.” Beyond that revelation, he had no more information, almost like a Transylvanian speaking in hushed tones about the Lord of Darkness. In the years since, I have drunk Valentini’s Trebbiano d’Abruzzo whenever I could find it (as well as his superb red Montepulciano d’Abruzzo), which isn’t often enough. Information on the winery is hard to come by. Edoardo Valentini, who died in 2006 at the age of 72, was not a man to give away his secrets. He had no public relations agency and no Web site. He was notorious for refusing media visits or interviews. When Charles Scicolone, now food and wine editor of I- Italy.org , got to visit the estate a few years ago, Valentini and his family “sat there like Mussolini and were very unpleasant,” he told me. “He would not show us his winery or tell us anything about how he made the wines. He did, though, talk endlessly about how he grew the grapes, which he said was the only true clone of trebbiano, and how he covered his vines with canopies. Then he refused to sell us his wine.” Three Centuries The little information that can be pieced together about him and his winery shows that his ancestral home in Loreto Aprutino goes back three centuries, and that he studied law before devoting himself to the 170 acres of vineyards in the 1950s. That trebbiano clone may well be one reason for his wine’s superiority. Another may be Valentini’s mania for picking only the best grapes. He used only about 5 percent of the crop to make his wines (the rest was sold off to a cantina sociale). Although allowed by law to make as many as 800,000 bottles each year, Valentini never made more than 35,000 of his Trebbiano and 15,000 of Montepulciano, usually much less. And it was always hard prying any out of him. The wines are made by old-fashioned methods of vinification and aging, a tradition carried on now by his son Francesco Paolo. The wines are never released until the winemaker determines they have sufficient age, which may be five years or more. Only the greatest of white Burgundies and sweet rieslings of Germany can hold up to a decade or more in the bottle, yet Valentini’s vintages of 1985, 1988, and several in the 1990s are prized by collectors. 10 Cases Left I had occasion recently to taste the currently available vintage of the Trebbiano, 2005, and found it every bit as good as every bottle I’ve ever had. Its U.S. importer, Domenico Valentino, brought in just 30 cases of the 2005 and has only 10 left, most of it sold to restaurants. I’ve found that year selling for $75-$111. Vintages from the 1990s go for about $115. Will Edoardo’s son be more open to the world? Will he make more Trebbiano in the future? I, for one, hope not. A little mystery goes a long way, and a little wine keeps connoisseurs of Valentini panting for more. ( John Mariani writes on wine for Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: John Mariani at john@johnmariani.com .

Read the full article →

Raymond J. Learsy: Obama Finally Takes On the Banks — Commodity Futures Trading Needs Be Next!

January 22, 2010

“I’m an old man, but I’d bet my life that if the Merc (The New York Mercantile Exchange) was not in operation, there would be ample oil at reasonable prices all over the world, without the volatility.” These were the words of Leon Hess, founder and Chairman of Hess Oil before the Senate Committee on Government Affairs on November 1st 1990. Let me repeat, 1990. In this writer’s opinion, it is a truism applicable today with bells on. Eliminating the commodity exchanges that trade oil futures among other commodities, would be the ideal solution to the massive distortions in price they facilitate and rationalize. Yet it would border on the foolhardy to expect that to happen. So one needs focus on the next best thing, bringing some measure of control to the trading of such as oil contracts on the commodity exchanges, much in the manner of President Obama’s challenge yesterday calling for new limits on the size and risks taken by the nations largest banking institutions. And that is what the Commodity Futures Trading Commission (CFTC) is now proposing regarding the trading of oil futures contracts. Chairman Gary Gensler, after many months of equivocation, is now calling for federally mandated limits on speculative trading of oil, gas and other energy futures. Action on this issue, which had been anticipated since the Fall, has been held up because of the hesitation of two commissioners and opposition from Wall Street interests (please see “Wall Street Stampedes To The Aid Of The Oil Speculators” 07.12.09). Limiting positions held by oil traders/speculators will be decidedly helpful, yet provide only part of the answer. The world of oil trading is so far flung and so loosely regulated that the mantra of “if we are constrained here we will just move our trading offshore” is repeated incessantly as the KO argument to any and all efforts to tame the unabated speculation going on. A first step needs be taken. Yet to effectively bring a halt to speculative excess and attempts at manipulation, a more comprehensive program needs be initiated, calling for, among others, the following changes as well: Much higher margin requirements (please see “The Trade That Brought100/bbl Oil Teaches Us To Be Afraid, Very Afraid” 01.07.08) Imposing disclosure rules on “dark pools” and over the counter/electronic trading in order to bring transparency to trades away from ‘regulated’ markets. Reporting by brokers, trading houses, bank holding companies on all positions held directly or indirectly by themselves or their overseas subsidiaries and affiliates of all oil and petroleum product trades on both domestic exchanges and exchanges offshore such as London, Hong Kong, Dubai, Singapore, where voluminous oil contracts are negotiated. Effective reciprocal transparency between our regulatory agencies and their counterparts overseas to assure speculation and manipulation is not simply transferred to offshore venues. Making the issue of reciprocal transparency an important priority of our foreign policy to assure meaningful cooperation and compliance and to bring an end to the casino mentality that has taken hold most everywhere. Until a level of reciprocal transparency is achieved, examining the impact of arbitrage strategies of domestic traders on the price of oil and oil products traded on offshore exchanges and how their distortive pricing impact on the domestic market can best be neutralized. In less than a year the price of oil has more than doubled from $33 bbl last February to near $80 today. This, in spite of the fact that the world is overflowing with oil stocks. Virtually all land storage is filled to the brim necessitating or rationalizing the chartering of scores of supertankers holding millions of barrels of oil, sitting at anchor at sea for months at a time. Gasoline consumption is down significantly and two major refineries in the United States have ceased operations altogether this past year; Valero Energy Corp.’s 210,000 bbl/day facility in Delaware and Sunoco Inc. has closed its sizable Eagle Point refinery in New Jersey. Concurrently the U.S. Energy Information Administration informs that crude oil inventories, excluding the Strategic Petroleum Reserve has risen to 331 million barrels compared to the already bumper 326 million barrels a year ago. Only last week the U.S. Department of Energy reported that U.S. Refineries scaled back utilization rates by 2.9 percent to 78.4 percent, the lowest rate sine the 1980′s. And yet the price of oil, the raw feedstock for gasoline, has more than doubled in less than a year. Clearly something is amiss in that the price of oil has left all semblance of being determined by the market forces of supply and demand. On July 8th of last year both UK Prime Minister Brown and France’s President Sarkozy in a joint opinion piece (http://online.wsj.com/article/SB124700398437207969.html) voiced their deep concern over “dangerously volatile” oil prices that defies “the accepted rule of economics”. Regretfully neither our Department of Energy nor the upper echelons of our government have seen fit to voice their serious concern on this matter while the CFTC has haltingly been attempting to bring the issue into the forefront. Certainly speculation in the oil trading pits plays a role. To get to the root cause of what is happening on the commodity exchanges, who is trading and to what end and who stands to gain, nothing could be more constructive than to have the CFTC convene a Federal Oil Price Task Force. In an earlier post on Huffington ( ‘Oil’s Massive Distortion Militates The Reconvening Of The 1970′s Federal Oil Price Task Force” 11.03.09) the following was set forth: “In 1977 the then Department of Energy, under James Schlesinger created a task force to address oil pricing and compliance to then existing oil price regulations. Given the turbulent and irrational movement in oil prices in the past few years, the appointment of a government task force has become essential to determine whether oil prices as currently constituted are truly an unfettered response to market forces, or an endgame of far more devious and malign pricing strategies to maximize illegally, even criminally, the profits accruing to oil producers at the expense of the public’s well being.” Given the CFTC’s mandate as the government agency charged with assuring a level playing field in the world of commodity trading and particularly that of oil and oil products, they would be doing the nation, the economy, and the nation’s consumers a singularly significant service by spearheading and convening such a Task Force. This would cause the scales to fall from the eyes of a brainwashed public (i.e. “its all about supply and demand”), and impose a semblance of honest dealing to the oil patch. The transfer of hundreds of billions from the pockets of the nation’s and the world’s consumers to oil interests both here and abroad must come to an end and this administration can not, given all the other demands on its purse, continue to stand idly by and see billions being sucked up needlessly, risking our economic well being and our national security. Mr. Obama, you have finally taken on the banks. Now is also the time to take on the commodity pits!

Read the full article →

Cadillac Turns Dad’s Dweeb-Mobile Into $51,000 Dude Wagon: Jason H. Harper

January 22, 2010

Review by Jason H. Harper Jan. 21 (Bloomberg) — While owning a station wagon was once the equivalent of birth control — you could forget about scoring a date, ever — modern-day equivalents are becoming cool. These days, in an effort to lure buyers of sport utility vehicles, they’re called sport wagons. And so the persuasion begins. Take the new CTS Sport Wagon from Cadillac . It’s got five doors and buckets of room just like the dweeb mobiles of yore, but pricing starts at a luxury-minded $39,000 and there’s no mistaking its air of masculinity. This is a dude mobile. Also, it’s from an American carmaker. In Europe, where gasoline is expensive and roads slender, wagons have long been a staple. And while European models, like the Mercedes E-Class wagon and five-door Audis and BMWs, are exported to the U.S., the attempt feels half-hearted. Now and then, the makers will even bestow on us really fast, powerful wagons, like the Audi S4 Avant. Tens of tens of U.S. buyers will scoop them up, and then like favorite, critically acclaimed TV programs, those imports will be summarily canceled. The last really cool American offering was the Dodge Magnum, an offshoot of the Chrysler 300 with a bullet shape not unlike a hearse from Hell. I loved it. (Date of death: 2008.) Old Ford Let’s compare the CTS to the station-wagon staple that I best remember while growing up in the 1970s, the Ford Country Squire. That ubiquitous, long-bodied beast was manufactured from the early 1950s until the early 1990s, and was equipped with the most desirable of options, faux-wood side paneling. (Who wouldn’t want fake trees on the outside of their ride?) The Ford came in nifty color-combinations like green-and- brown, yellow-and-brown and the winning brown-on-brown. Everybody knew someone who owned one. Even at age 7, I felt a whiff of embarrassment when riding to school with my best friend’s father in his well-worn 1974 model. Its interior smelled of menthol cigarettes and middle-class defeat. My modern CTS tester is painted “black raven” (as Caddy calls it), with an ebony interior. Not geeky at all. Riding atop optional 19-inch tires and gleaming eight-spoke rims, the body reflects Cadillac’s modern design ethos of sharp creases and rounded folds, a form full of tension and release. Automatic Tailgate The front looks like the excellent CTS sedan from which it’s derived, but in the rear its haunches flare over the wheel wells and carry through to a voluminous back. When the automatic tailgate lifts out of the way, the sharp, vertical taillights remain, craftily integrated into the frame. Old-school wagons could carry as many as nine passengers (sometime with seats that faced backward); but they were also some 18.5 feet (5.6 meters) long and weighed more than 4,500 pounds. The CTS’s 16 feet of length will only allow five, but hey, everybody’s divorced these days anyhow. Back seats in place, rear storage is 25 cubic feet; down, that more than doubles to 58 cubic feet. Obviously this baby would run your daddy’s paneled station wagon right off a canyon road. Yet the Cadillac wagon is actually better than it has to be. My test version is a “premium” rear-wheel-drive model with a 304-horsepower, direct- injected, 3.6-liter V-6. Pricing in this configuration starts at $51,000. With that hefty sticker it had better be cool. Average Mileage The smaller 3.0-liter V-6 is standard with 270 hp and a super-powerful 556-hp CTS-V model should be available down the road. All-wheel-drive is a $1,900 option. The mileage is only average, with city of 18 miles per gallon and 26 on the highway. Of course, that’s still a lot better than a 1975 Ford Country Squire, which had some 160 horsepower, got less than 10 mpg and was even offered with an auxiliary gas tank. The CTS is supple on the highway, though on back roads I preferred the traction settings in sport mode. At a stop sign leading to a deserted intersection, I wrenched the wheel right and stomped on the gas. Holy fishtail, Batman! The back wheels broke loose and I swung mightily onto the road. No dork wagon could pull that maneuver. The CTS has buttons behind the overly large steering wheel allowing you to effect up- and downshifts on command, and the CTS wagon is hard-charging when you want it to be. It’s heavier than the regular sedan, and you can feel that added weight in the corners with more pronounced body roll. The interior is also from the CTS, with a pop-up touch screen and controls that sit readily at hand. The massive sunroof floods the interior with light. I felt as comfortable in it as I do many top-notch $100,000-plus luxury cars. So, come back, America. Like spinach, sport wagons are good for you. The CTS wagon has all the load capacity and none of the embarrassment. Faux wood isn’t even an option. The 2010 CTS Sport Wagon At a Glance Engine: 3.6-liter V-6 with 304 horsepower and 273 pound- feet of torque. Transmission: 6-speed automatic. Speed: 0 to 60 mph in 7 seconds. Gas mileage per gallon: 18 city; 26 highway. Price as tested: $54,635. Best feature: Super-bad looks with a station wagon’s practicality. Worst feature: The price will put it out of many deserving families’ hands. Target buyer: The family woman or guy who doesn’t want to drive a dweeb mobile. ( Jason H. Harper writes about autos for Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: Jason H. Harper at Jason@JasonHharper.com .

Read the full article →

Self-Absorbed? Don’t Blame Me, Blame My Genes: Rich Jaroslovsky

January 22, 2010

Commentary by Rich Jaroslovsky Jan. 22 (Bloomberg) — I have fascinating genes. At least, they fascinate me. For the last several weeks, I’ve been getting up close and personal with my DNA as I compared three major do-it-yourself genetic-testing services. These services, which can indicate your risk of certain diseases, are outgrowths of the multibillion-dollar, multiyear effort to map the human genome . It’s where biotech meets infotech. Caveats are in order. First, biology isn’t destiny: Heredity may play only a small part in determining whether you actually develop a condition. Also, there’s a chance the services, two of which also provide ancestry information, turn up things you’d rather not know. If you can get past those issues, they represent perhaps the ultimate in self-absorption. To compare the three services — Navigenics , 23andMe and deCODEme — I signed up for all of them simultaneously. Once I registered and paid online, each sent me a kit to collect genetic material and a mailer to return it. I also returned the kits simultaneously. Navigenics and 23andMe both use saliva samples for analysis. DeCODEme has a slightly more involved process, using a scraping of the inside of your cheek. I was a little concerned about messing things up, but a video on the Web site showed me how to do it. Results were made available on password-protected Web sites, along with resources to help interpret the findings. Of the three, the $999 Navigenics service was generally the speediest and did the best job of keeping me posted on the process. Its kit arrived in a week, and my results were ready 11 days after I returned it. Solely on Health Navigenics, which is based in Foster City, California, focuses solely on health, covering 27 conditions from brain aneurysms to psoriasis. Findings are displayed on an easy-to- understand color-coded grid, with orange boxes indicating risks that may merit particular attention. Clicking on any box plunges you deeper into the results, including detailed explanations of the variations in your genes that may constitute disease markers, tips to mitigate your risk through controlling non-genetic factors and links to support groups and other resources. Navigenics also provides a toll-free number to discuss your results with a licensed genetic counselor; the one I talked to was clear and highly knowledgeable. The site also provides tips and tools for sharing results with your doctor. Slowest to Report 23andMe is based in Mountain View, California, not far from one of its investors, Google Inc. It was the slowest of the services to report: While the kit arrived just four days after I placed my order, it took 18 days for the company to acknowledge receiving my sample, and an additional 17 days before it posted results. I spent the weeks filling out 30 or so simple surveys whose results 23andMe uses for research purposes. Offsetting the long wait, the $499 test was the cheapest of the three, provided some of the most interesting (if not always important) information and incorporated social-networking and fun stuff along with the serious health material. My results were presented as “clinical reports” covering 48 diseases and traits, and “research reports” on less vital conditions or areas where scientific consensus hasn’t quite jelled. All Me The site does a good job of explaining the results, and genetics junkies can dive deeply into how their risks were assessed. Here is also where I learned that only about 4 pounds (1.8 kilograms) of my body weight can be blamed on genetics; the other 20 or so pounds I could stand to lose are all me. Unlike Navigenics, 23andMe provides ancestry information, and can scour its database to come up with an anonymous list of potential relatives — in my case, almost 1,000 of them, ranging from a possible second cousin to others far more distant. Users can message each other through the service with invitations to share names and family histories, and compare genomes. DeCODEme comes from DeCode Genetics Inc. , a Reykjavik, Iceland-based company that filed for bankruptcy protection in the U.S. just as I was signing up for the $985 service. The deCODEme kit was the last of the three to be delivered, 11 days after I ordered it. My results were available 22 days later, but only sort of. When I logged into the site, every item I clicked returned this message: “You cannot view further details until a health-care provider has reviewed your results.” Doctor’s Note Questions were referred to a toll-free customer-service number. The woman who called back politely explained that I needed to provide a letter from my doctor stating that he was prepared to discuss the findings with me, and pointed me to deCODEme’s terms of service. Buried in eight computer screens’ worth of legalese, New Jersey, where I live, is listed as one of 11 states requiring that “a qualified health-care professional is involved in the ordering and the delivery of results.” The other two services didn’t require such hoop-jumping. After I provided the doctor’s note, deCODEme required me to individually consent to see the results on each of the 48 health items it reported on. Even then I couldn’t get directly to my information; for each item, a pop-up window encouraged me to answer several optional research questions first. Once I finally waded through everything, deCODEme provided an impressive amount of material to put my health results in perspective. But I found the ancestry information confusing and generic, compared with 23andMe’s. The best part was a Facebook- like friend function where I could troll for and invite other deCODEme users to share information. I only felt a little like a DNA stalker. Broad Agreement Overall, the findings of the three services, which broadly agreed with each other, are undoubtedly a lot more interesting to me than to you. Among things I found out: While Type 2 diabetes runs on both sides of my family, the tests showed I have less of a genetic risk than most people — which may mean I got lucky in the gene pool, or just that there are other markers the tests don’t yet pick up. On the other hand, I may have slightly greater than average odds of developing glaucoma, though there’s no family history of it. Oh, and according to 23andMe, I metabolize caffeine faster than most people, which may explain why my four-shot Starbucks cappuccinos don’t send me rocketing through the ceiling. If you’re thinking there’s something just a bit narcissistic in all this: You’re right. So enough about me. Let’s talk about me. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

Read the full article →

Guys, Gals Hooking Up Is Sexy Idea to Trim Debt: William Pesek

January 20, 2010

Commentary by William Pesek Jan. 21 (Bloomberg) — Music shops in Tokyo would be wise to stock up on their Barry White . That may be among the more intriguing side effects of Finance Minister Naoto Kan this week asking his staff to work shorter days so they have more time for dates. He’s making good on his pledge to rein in the bureaucrats who run the economy. OK, so it sounds a bit creepy. Governments such as Singapore’s have created dating programs that drummed up more ridicule than long-term hook-ups. Yet there are three reasons to applaud Kan’s racy suggestion. One, it may increase Japan’s birthrate. Two, it may boost productivity. Three, it may help alter the mechanisms of Japan Inc . Progress in all three areas is vital to reducing a debt that is roughly double the size of Japan’s $4.9 trillion economy. And yet no finance minister has made an impression on any of them in the last two decades. It’s time for fresh thinking and unconventional policies. Anything that improves Japan’s plight even marginally is worth a try. First, the birthrate. Some demographers predict Japan may become Asia’s Switzerland, proving that living standards need not shrink with a nation’s population. Others point out that Japan’s enthusiastic embrace of robotic technology will lessen the fallout from a rapidly aging population. Demographic Fate Such views only make sense if a government aggressively plans for its demographic fate. The Liberal Democratic Party , which ran Japan virtually uninterrupted for 54 years until August, certainly didn’t. The current government has been preoccupied with short-term challenges, including a recession. Kan’s Democratic Party of Japan is working to tweak tax policies to encourage families to have more kids. Government inaction in general, though, has put the onus on private industry. In November 2008, for example, Keidanren , Japan’s biggest business organization, urged member companies to encourage employees to have more sex. Japan, after all, routinely scores low on annual sexual- frequency surveys by condom maker Durex. In the latest , 34 percent of Japanese respondents said they have sex once a week, compared with 87 percent in Greece and 53 percent in the U.S. That may go a long way to explaining why Japan’s population, now 126 million, is shrinking. Avoiding Japan Investors such as Jim Rogers , author of “A Bull in China,” cite the disconnect between Japan’s massive debt and declining birthrate when asked why they tend to avoid Asia’s biggest economy. Encouraging candle-lit dinners, seductive music and romance is hardly the purview of finance ministers. It’s still heartening to see Kan tiptoeing up to an issue that has been neglected for too long. Productivity is also an obstacle, particularly as the influence of low-cost China and India grows. The only way for high-cost Japan to maintain its prosperity is to get workers to produce more. The trick is to do that while enhancing a work- life balance for which Japan Inc. has rarely had any regard. “U.K. Treasury officials finish work at 6 p.m. or within regular hours and their productivity or work quality” isn’t inferior to Japan’s, Kan said at a Jan. 19 press conference. Japan Airlines Corp .’s bankruptcy shows the extent to which the corporate culture needs a giant rethink. Halting the tradition of pouring state funds into uncompetitive companies is a vital step. So is getting Japanese out of the mindset that they need to work 10 or 12 hours a day when eight should do. Fewer smoking breaks might help. Population Drag The Organization for Economic Cooperation and Development has long argued that increased labor productivity in Japan — which it puts at 30 percent below the U.S. level — is needed to offset the drag from an aging population. Bureaucrats personify barriers to getting there. One reason they work into the night and don’t date much is to craft talking points for Cabinet officials. Here’s a revolutionary thought: Let them speak for themselves, unencumbered by input from unaccountable apparatchiks pursuing their own agendas. Too many bureaucrats work for themselves, not Japanese taxpayers. The aim is to ride the “amakudari” gravy train. The word, meaning “descent from heaven,” refers to the offensive practice of public servants getting cushy gigs in industries they oversaw in government. Their incentive is to look out for their future employers, not the average Japanese household. The DPJ vows to curtail the practice, though that’s easier said than done. Such arrangements are the Japanese version of Whac-a-Mole. Just as you find one and knock it down, another pops up. Japan must kill this corrupt game for good. Getting staffers to go home earlier might reduce government personnel costs. The bigger issue is seeing to it that parliamentary members and Cabinet officials stop relying on entrenched desk-jockeys to do a job better done by themselves. Japan has relied on bureaucrats for decades and look where its economy is. It’s time for a change. If it helps to leave work at 6 p.m. and date more, then so be it. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

Read the full article →

Six Messages for Democrats in Senate Shocker: Margaret Carlson

January 20, 2010

Commentary by Margaret Carlson Jan. 21 (Bloomberg) — It is hard to exaggerate the profound historical defeat suffered by Democrats in Massachusetts on Tuesday. A smooth guy in a GM pickup who posed nude for Cosmopolitan magazine won a U.S. Senate seat in the most highly educated, relatively prosperous, “don’t blame me, I voted for McGovern” state in the union. That doesn’t mean there won’t be hyperbole. Fox News’s Glenn Beck said he doesn’t trust Senator-elect Scott Brown and warned that Brown’s term in Washington “could end with a dead intern.” What does this clown — Beck takes a comedy act on the road — drink before his show? Brown himself says his win wasn’t a referendum on Barack Obama : “It’s bigger than that.” Hard to be bigger than a thunderbolt. So what did we learn, if anything, on Tuesday? Message One: If you look the slightest bit in, you are out. In 2008, voters didn’t choose Obama; they chose the outsider promising to be the new sheriff in town. Democrat Martha Coakley , as Massachusetts’ sitting attorney general, was the sheriff in town, but not a new one. In the narrative of us vs. them, the banks vs. the bank depositors, the insurance companies vs. the insurance buyers, Coakley became the “them.” Message Two: Don’t get Coakleyed. Democrats just crawling out from under their beds are swearing off complacency, wholesale campaigning and pinstripes in favor of pressing the flesh, traveling by truck and giving the impression you just fell off one. Also, don’t take a Caribbean vacation in the midst of a campaign — maybe no vacation, anywhere. It’s true no one wanted Coakley drowning out “Jingle Bells” over Christmas. That doesn’t mean you should flee someplace warm when your constituents are freezing over the holidays, worried about jobs. Other things on the not-to-do-list: Don’t complain about shaking hands outside Fenway Park in the early-morning chill. Don’t insult your homeboys by not knowing the local hero. Don’t pour salt on the insult by insisting the hero, former Red Sox pitcher Curt Schilling , is a Yankee fan. Message Three: Resist impulse to over-attribute loss to an unusually bad candidate. (That is, take Message Two with a grain of salt.) So Coakley’s a doofus, OK. One of the few worthwhile insights gained from dwelling inside the Beltway is that we’ve met our share of doofuses who call the Senate home. You can count on one hand the number of people not related by blood or marriage to the non-geniuses in charge of the Senate, Mitch McConnell and Harry Reid , who feel warmly toward them. Message Four: Don’t believe that the rejection of a Democrat translates into sudden love for Republicans who crippled the economy, redistributed wealth from the middle class to big business and the rich, and waged a trillion-dollar war in the wrong country. There’s no mandate to back off fixing our problems. Message Five: It’s not only about health care. It’s about the shady banks, and joblessness, too. But it’s partly about health care. Massachusetts is the canary in the mine. If universal, government-subsidized health care isn’t working there, why would residents of that state support the similar yet inferior national plan that would be implemented under the Senate bill? Put another way: If Massachusetts, with one of the smaller state deficits, can’t afford Romney -care, imagine how the country — with a proportionally much bigger deficit, more uninsured and an economy in worse shape — is going to do with a similarly flawed plan. Message Six: What happened in Massachusetts is a free glimpse into the future for Obama. President Bill Clinton had to lose the whole Congress in 1994 to waken from his stupor and take on the deficit, balancing the budget and welfare reform. At this very moment, Democrats in tough races, and even those in easier ones, are dreaming of ways not to have to vote for the health-care bill. Obama looked at the picture from the Bay State and told ABC in an interview that Congress shouldn’t try to “jam” health-care legislation through before Brown is seated. To get support from Democrats, much less Republicans, Obama is going to have to break health care into smaller pieces the public can understand and that Republicans can’t so easily demonize. How can Republicans go home and explain they voted in favor of Aetna and against their constituents, or in favor of cherry-picking healthy policy-holders while dropping sick people? Young and Old Government shouldn’t be the ogre forcing people to buy insurance under draconian penalties. People want insurance when they can afford it. Young people can be lured in with cheap catastrophic policies. Seniors’ drug costs should be covered above the current $2,250 cutoff. And who could be against computerizing medical records so people don’t get the wrong blood type or drug that will kill them? Obama should be cutting deals with Republicans instead of bribing Democrats with smelly deals that benefit a few. Give the GOP malpractice reform (not a bad idea anyway) in exchange for a public-option trigger and reform of the-fee-for-service payment structure that’s crippling us financially without healing us medically. Oh, and broadcast it all on C-Span. ( Margaret Carlson , author of “Anyone Can Grow Up: How George Bush and I Made It to the White House” and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Margaret Carlson in Washington at mcarlson3@bloomberg.net

Read the full article →

Earnings Growth Drives Me to These Five Stocks: John Dorfman

January 19, 2010

Commentary by John Dorfman Jan. 19 (Bloomberg) — Lots of companies are showing improved profits these days, but only a few can boast that their profits doubled in the latest quarter from the previous year. For this column, I screened about 1,700 U.S. stocks with a market value of $1 billion or more, and found about 100 that can make that claim. By no means would I buy all of these stocks. Some are too indebted. Others sell for a high multiple of earnings or have business strategies that leave me skeptical. Yet several seem to me to have investment merit. My favorite in the group is Merck & Co. The Whitehouse Station, New Jersey, pharmaceutical company earned $3.4 billion in the quarter ended Sept. 30, compared with $1.1 billion in the same quarter of 2008. Merck’s appeal starts with its gargantuan pretax profit margin of more than 41 percent. From there I move on to its 4 percent dividend yield, which is amply covered by earnings. Yes, the company hasn’t increased its quarterly dividend of 38 cents since 2004, but unlike many others, Merck didn’t need to reduce or eliminate it during the recession. Then there’s growth, the very quality that detractors say drug stocks don’t have. As with many of its peers, Merck saw earnings decline from 2003 through 2007. However, earnings more than doubled in 2008 from 2007’s depressed level. Estimated earnings for 2009, at $3.29 a share, seem to me to justify a share price around $49, or $10 above recent quotes. Merck’s Strengths Another criticism often leveled at pharmaceutical companies is that they have many important drugs going off patent (this part is true) and that they will be unable to come up with new blockbuster drugs to replace them (false, in my opinion). Merck has about 47 drugs in the latter phases of development, including ones it inherited through its acquisition of Schering- Plough Corp. in November, according to its Web site. Merck shares are up about 90 percent since I recommended them on March 9, coincidentally the day the U.S. stock market bottomed. The shares are not cheap by every measure, but they sell for 12 times earnings, a valuation I find attractive. Lancaster Colony Corp. stands out in this group because it is completely debt-free. The Columbus, Ohio, company makes specialty food products, glassware and candles — the sort of items that make a nice gift for your aunt and uncle at Christmas time. Lancaster Colony earned $28 million in the September quarter, up from $11 million in the same quarter a year ago. Chief Executive Officer John B. Gerlach Jr . owns more than 900,000 shares of the stock, or about 3 percent of the company, a situation I like to see. Few Followers Only four analysts cover Lancaster Colony. They split evenly between “buy” and “hold” ratings. That, too, is a situation I like to see, since some academic research suggests that under-followed stocks perform better than heavily researched ones. The company just increased its quarterly payout to 30 cents a share, from 28 cents. In my opinion, Lancaster could afford to boost the dividend even higher — and should. Chubb Corp. , a property and casualty insurance company out of Warren, New Jersey, is next up. It notched profits of $596 million in the September quarter, compared with $264 million a year earlier. Chubb shares are up about 25 percent since I recommended them in May. Yet they are hardly pricey, trading at eight times earnings and only a little over book value (corporate net worth per share). Profits Climb Chubb made close to a 12 percent profit on underwriting last year. That is, the premiums it collects exceeded claims (58 percent of premiums) and company expenses (30 percent). By contrast, many insurance companies break even or worse on underwriting and try to make up for it with investment income. I also like Unum Group . This Chattanooga, Tennessee, company specializes in group and individual disability insurance. Unum’s profits rose to $221 million in the September quarter from $108 million a year earlier. Frankly, this surprised me, because traditionally, disability insurers face rising claims during times of recession and high unemployment. I give Unum credit for navigating a difficult environment. Also, I like its low valuations — eight times earnings and less than book value. However, profits, while improved, still are not robust: Return on stockholders’ equity was only 9.3 percent last quarter. Arch Capital At the risk of being top-heavy in insurance, my final choice is Arch Capital Group Ltd. , a reinsurer with headquarters in Bermuda. Reinsurance is a tricky, but often profitable, business. Arch and its brethren take on the excess risks that regular insurance companies wish to lay off. In the September quarter, Arch earned $280 million, up from $33 million a year earlier. Several other measures of profitability are perking up, too. The stock sells for eight times earnings and just over book value. Disclosure note: I own Merck and Arch Capital shares personally and for clients. I have no long or short positions in the other stocks discussed in this week’s column. ( John Dorfman , chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com .

Read the full article →

Google Sends Right Message to China’s Police State: David Pauly

January 19, 2010

Commentary by David Pauly Jan. 19 (Bloomberg) — Here’s hoping Google Inc. makes good on its threat to quit China. It’s time someone in the U.S. stopped coddling the Chinese police state. The American government can’t, or won’t. Though Google is late coming around as an advocate of free speech in China, it still deserves applause. The company said last week it would stop censoring its Chinese search engine, Google.cn, as the communist government dictates — and might even close the business. Google got religion after discovering that last month hackers — read Chinese government technicians — tried to access accounts of, and managed to steal information from, human-rights activists who used Google e-mail. Hackers went after at least 20 other companies’ computers, Google said. Adobe Systems Inc. , the leading maker of graphics design software; Juniper Networks Inc. , the second-biggest maker of computer networking gear; and Rackspace Hosting Inc. , which manages Web sites, said they also had been attacked. Google can exit China without hurting its stockholders, at least in the short run. The company’s revenue from China would be as much as $350 million this year, about 1.5 percent of total sales, according to a report from Citigroup Inc. Still, the potential market is huge. Some 330 million Chinese use the Internet. The company could sell its Nexus One mobile phone to the Chinese. Market Shares Google’s departure would benefit search rival Baidu Inc. no end. The Beijing-based company now has 58 percent of the country’s Internet search market against Google’s 36 percent, according to researcher Analysis International. With only 6 percent of the market left for others, Google’s U.S. competitors in China clearly could afford to thumb their noses at the police state. Yahoo! Inc. and Microsoft Corp. do business there with partners. Microsoft Chief Executive Office Steve Ballmer said he has no plans to leave the country. It’s easy to see why most companies choose Chinese profit over political stands. China is now the U.S.’s No. 2 trading partner after Canada, with 2008 transactions of $409 billion. U.S. companies manufacture there. Money managers invest there. American companies keep doing business with the communist state in the face of complaints from the auto parts, steel, insurance and electronics industries that China manipulates its currency to help its exporters, prices products at unfairly low levels and protects its home markets from competition. Look Elsewhere Perhaps U.S. companies should seek cheap labor elsewhere. The U.S. government has both economic and political reasons for not challenging a government that muzzles its people and kills them if they get too obstreperous. China has been the biggest purchaser of U.S. debt at a time when the U.S. is borrowing massively to right its economy and financial system. China held about $800 billion of Treasury securities on Oct. 31. Still, China has nowhere else to invest its huge trading gains. The U.S. won’t have to borrow so heavily if its budget deficits begin to decline. The political front may be tougher. Barack Obama’s administration needs China’s cooperation, for example, in its effort to curtail the nuclear weapons capability of Iran and North Korea. Google may eventually compromise with China. That would be a shame. Someone in the U.S. has to let the dictatorship know what we stand for. Google slamming the door as it leaves China would be a welcome step. ( David Pauly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Pauly in Fort Myers, Florida dpauly@bloomberg.net

Read the full article →

Cadbury Bids Leave Investors With Cash to Burn: Matthew Lynn

January 19, 2010

Commentary by Matthew Lynn Jan. 19 (Bloomberg) — It takes a lot for the British to discover a sense of economic patriotism. Selling carmakers Jaguar and Land Rover to an Indian company was fine. Handing over Heathrow Airport to a Spanish firm didn’t ruffle too many feathers, either. But losing Cadbury Plc , which makes the Wispa bar and the Creme Egg, to the U.S.? That is a nibble too far. The potential sale of the company is provoking a backlash, both political and popular, in the U.K. Most of the arguments for keeping Cadbury British are either irrelevant or bogus. It doesn’t make any difference that it is a fine old business. Nor is there any point in the U.K. trying to emulate French-style national champions. There is, however, one solid reason for the shareholders to support the current management, and reject the bids. Cadbury is exactly the kind of asset that investors should want to own for the coming decade. If they get rid of it, they will just have to reinvest the money in something exactly the same. The contest for Cadbury is shaping up into the big trans- Atlantic merger battle of the year. Northfield, Illinois-based Kraft Foods Inc. has already offered 11 billion pounds ($18 billion) for the business — a bid that was rejected by management. Now Hershey, Pennsylvania- based chocolate maker Hershey Co. is preparing an offer. Once a bidding war gets going, it is very hard for a company to survive. Amid the competing bids, the price gets pushed up to a level where shareholders can hardly say no. National Pride And yet both Kraft and Hershey now have to reckon with one force they probably thought wouldn’t play a part in their calculations: British national pride. Over the past decade, the U.K. has been happy to sell many of its national assets to foreign owners, without a moment of regret or a whisper of protest. The British simply pocketed the cash and let someone else worry about how the country would earn its living. Cadbury is proving to be the one bid they find hard to swallow. U.K. Business Secretary Peter Mandelson has reminded institutional shareholders that they must focus on the long-term interests of the U.K. economy, not short-term profits, and he’s telling companies making acquisitions that they must show “real corporate stewardship.” The unions, perhaps predictably, have been complaining about the proposed takeover. But so has the Mail on Sunday, one of the U.K.’s biggest-selling newspapers, which is running a campaign to “ Keep Cadbury British .” Ridiculous Arguments In reality, most of the arguments for fighting off a foreign bid are ridiculous. They can be easily dismissed. First, it may well be true that Cadbury is an old company, with a tradition and history it can be proud of. And it may also be the case that it has legions of devoted snack lovers: Just take a look at the 785,000 fans its Wispa bar has on Facebook . But so what? Neither Kraft nor Hershey will pay 11 billion pounds for the company and then run it into the ground. They will nurture the brands just as carefully as the current owners have done. They might even invest more. After all, they will need to expand the business fast to justify all the money they are offering. They certainly aren’t going to destroy it. Second, the U.K. needs to rebalance its economy away from financial services, and that makes the timing of a hostile takeover for one of its few remaining world-class manufacturing companies particularly unfortunate. French Nationalism But there is no point in the British moving toward French- style economic nationalism now. The country doesn’t have much of a manufacturing base left to defend, nor has it ever had the kind of industrial-political elite that can make a strategy of building national champions work. Economic nationalism hasn’t been a great success in France — and it certainly isn’t going to work in the U.K. So what’s the case for rejecting the bid? It is this: There is nothing better for investors to do with their money. Let’s say the bid is successful. What are the shareholders going to do with that 11 billion pounds? Looking forward to the next decade, there are very few safe places to invest. Interest rates are so low you don’t want to be in cash. Vast deficits mean government bonds will inevitably collapse in price one day. Gold is already close to a record high — and you seldom make money by investing at the top of the market. Emerging markets may well have the brightest prospects, but it’s probably too late to buy into that boom. Safe Bet The few assets you would want to buy right now are safe, blue-chip consumer companies, with loyal customers and reliable profits and dividends. Such as? Well, Cadbury . If they take the cash, shareholders will be looking to reinvest it in something very similar. But the fewer of those companies there are, the harder it will be to invest in them, and the higher prices will get. Appeals to sentiment, or arguments about rebuilding the U.K. economy, are irrelevant to this battle. But in their own self-interest, shareholders should keep Cadbury British because it is precisely the kind of asset that is the safest home for their cash right now. ( Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net .

Read the full article →

Hedge-Fund Guy Seduces Buffett to Safeguard Bonus: Mark Gilbert

January 13, 2010

Commentary by Mark Gilbert Jan. 14 (Bloomberg) — Dear investor, it’s that time of the year when we share our thoughts on how we plan to invest your money here at My, What Lovely Deep Pockets That Nice Mr. Warren Buffett Has Asset Management. Some of you may be wondering about the decision to rebrand our hedge fund. Hey, if a favor-currying name-change is good enough for the tallest building in the world, it’s good enough for us. We, too, would have doffed our caps to the sheikhs of Abu Dhabi, if we didn’t think they’ve got enough on their plates keeping the tower cranes of Dubai upright. If Mr. Buffett would like to show his gratitude, we take gold, Californian IOUs, or anything that isn’t a U.S. Treasury. I plan to pay my bonus this year in Venezuelan bolivars, just as soon as I can work out which of the multiple exchange rates is most advantageo . . . I mean, most appropriate. We are dismayed to say that the stellar profit we were hoping to deliver to you along with this report has been obliterated after a massive, coordinated, highly sophisticated attack on our computerized trading systems by a shadowy cabal known only as “the global trading community.” We suspect the hackers responsible are based in Beijing. Or Greenwich, Connecticut. Or possibly Mayfair, London. Anyway, they say life is binary, and by the close of trading last week all that was left in our profit-and-loss account was a lot of zeroes without that all-important “1” at the beginning to keep us afloat. So much for betting that our lenders would never be able to foreclose on our sinking Dubai real-estate investments. Flights of Fancy We considered telling you that we tied a bunch of balloons to your profits and claiming that they floated away on a strong breeze; our chief economist said the story would be about as believable as a Greek economic statistic. We thought about seeking a bailout from the International Monetary Fund, figuring Turkey will get its cash soon, and wanting to get in line before Greece finally realizes it’s about as popular with its fellow euro members as an orphaned suitcase at an airport. Frankly, we’d get better terms from Big Louis the Loan Shark; how is the global economic recovery supposed to take hold if I have to sell my Bentley? So, instead of a large dividend payment, enclosed with this report you will find a pair of flimsy plastic spectacles, through which we suggest you view the accounts printed at the end of the missive. Hey, if three-dimensional viewing works for a movie about blue-skinned aliens, it should easily enhance the optical aesthetics of our balance sheet. Secrets and Lies Some of you may be puzzled by the plethora of sentences that have been blacked out in this report. Our new lawyer, who used to work at the Federal Reserve Bank of New York when Treasury Secretary Timothy Geithner ran the shop, brought his special Goldman Sachs Group Inc. “anti-highlighter” pen with him. If anyone wants to know about the secret payments made to my Cayman Islands account, you know where to send the subpoena. The burning question we face for the coming year is how to grow your investments and the size of our fund so that we can join the “Too Big to Fail” gang, along with the global investment banks, thus ensuring an adequate level of taxpayer support will always be available should our sophisticated trading algorithms mistakenly choose red instead of black at the roulette table. One of the plans currently under consideration is whether we should split the portfolio in two to create a “good fund” and a “bad fund.” Unfortunately, rigorous statistical modeling designed to filter the current holdings of the fund through the gauze of a Gaussian screening filter suggests one fund will be left empty, while the second will contain a steaming pile of what, at the risk of descending into scatology, can only be described as two- year Greek government notes. The confidential nature of our proprietary analytical software precludes me from revealing which is which. Yours, Hedge-Fund Guy. ( Mark Gilbert is the London bureau chief and a columnist for Bloomberg News. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net

Read the full article →

Volt’s `Top Chef’ Gives Kitchen Diners Pork Belly, Close-Up View, No Hell

January 8, 2010

Review by Jim O’Connell Jan. 8 (Bloomberg) — Don’t expect coddling from “Top Chef” contestant Bryan Voltaggio just because you’ve paid $121 to sit two feet away while he runs the kitchen at Volt in Frederick, Maryland. The owner/chef isn’t being rude. He’s just concentrating on preparing the 21 delightful dishes served to diners at Table 21, inside the kitchen of his restaurant about 50 miles from Washington and Baltimore. The “restaurant-within-a-restaurant” concept, also found at Jose Andres’s six-seat Minibar in Washington’s Cafe Atlantico, gives chefs a chance to show off their artistry and, in least one case, their mastery of liquid nitrogen. At Volt , four diners sit inside the busy kitchen, so close to the action they could be asked to dice an onion or two. At Minibar, six people sit on bar chairs in front of a counter. Behind the counter is a small kitchen crammed with so many cooking gadgets that it looks like a combination of “ Iron Chef ” and “ Bill Nye, the Science Guy. ” Andres has more unusual ingredients (sea urchin), odd combinations (cotton candy-wrapped eel) and techniques to transform the familiar into the exotic (honey and freeze-dried yogurt). It’s a carnival filled with novelties, highlighted by a mojito in a gelatin bubble. ‘Top Chef’ Voltaggio’s presentation has fewer jaw-dropping fireworks, but offers more meals in miniature and individual items that you might want as an entree. Kitchen diners at Volt, located in a converted red-brick mansion in Frederick’s historic district, are surrounded by waiters and cooks, most of whom have large arm tattoos like Voltaggio. Voltaggio finished second to his brother Michael on the sixth season of “ Top Chef ,” where chefs compete before a panel of judges. At Volt, Voltaggio personally and quietly directs the cooks, inspects each plate of food and hands them to waiters with directions on where to deliver them. Diners at Table 21 get to taste a tiny version of virtually everything on his menu. While nibbling, they can watch the cooks pull brioche out of a large toaster and delicately place sizzling pieces of sea bass on artfully arranged plates. The standouts are dried prosciutto chips with potato foam; sweet and smoky slow-braised pork belly with calypso beans; monkfish with ruby quinoa and black trumpet mushrooms; and a guacamole macaroon with intense avocado flavor. Voltaggio concentrates on local ingredients, and the cheese ravioli with butternut squash is a savory example. Dragon’s Popcorn Andres’s Minibar , which costs $120 a head, is on the second floor of the three-story Cafe Atlantico . On a recent weekend, the two chefs on duty (Andres wasn’t there) described their backgrounds, their mentors and their favorite restaurants in almost nonstop patter. They assembled and presented the dishes, describing them and suggesting how many bites were needed to consume them. Sometimes they urged speed, lest the dainty dishes melt or explode. The food, like the atmosphere, can be exotic. For instance, there’s an “olive oil bon-bon’ that looks like a hard-shelled balloon and “dragon’s breath” caramel popcorn, prepared with liquid nitrogen so that when you munch on it, steam pours out of your mouth. If that’s not weird enough, sample some chocolate-covered bacon. Philly Cheesesteak More down to earth is salmon wrapped in pineapple and a twist on the Philly cheesesteak — cheese-filled brioche topped with thin slices of beef. The corn with Huitlacoche features Mexican truffles so dark and earthy you may be tempted to pick up a shovel. Volt is chilly and professional, while Minibar is friendly and a touch eccentric. Volt’s food fulfills, while Minibar’s entertains. Combine the two and you’d have the perfect dining experience. Volt Restaurant is at 228 North Market St., Frederick, Maryland; Information: +1-301-696-8658; http://www.voltrestaurant.com . Cafe Atlantico is at 405 8th St., Washington. Information: +1-202-393-0812; http://www.cafeatlantico.com . ( Jim O’Connell is an editor for Bloomberg News. Any opinions expressed are his own.) To contact the writer of this story: Jim O’Connell in Washington at joconnell3@bloomberg.net .

Read the full article →

Chef Wareing Adds Staff, Installs New Kitchen as Ramsay Delays: Food Buzz

January 7, 2010

By Richard Vines Jan. 7 (Bloomberg) — Marcus Wareing says he’s taking on more chefs, front-of-house and office staff and installing a new kitchen in the space below his restaurant at the Berkeley hotel as he tries to improve standards while keeping up with demand. “We’re full for January and we’re receiving 250 to 300 calls a day,” Wareing said in a telephone interview. “We’ve got 23 in the kitchen and I’m hoping to take that to 28 to 30. I want to raise the level of food and service, and we have the level of business to do that. We’re putting in a brand new kitchen downstairs, including a separate pastry section.” There’s still no opening date for Petrus, which Gordon Ramsay — Wareing’s former colleague — is opening nearby. Ramsay’s Web site says “early 2010.” An e-mail from the restaurant says it can “confirm” what it calls the “reopening” from January 2010. Ramsay’s spokeswoman says it “will be most likely in the first quarter of 2010.” The original plan was for April 2009. “The opening of a rejuvenated Petrus builds upon the success and prestige of the restaurant’s previous incarnation but with new and dynamic themes,” Ramsay’s Web site says. The previous incarnation was the venue now known as Marcus Wareing. Russell Norman, the owner of Polpo, said yesterday he’s looking for a second site within walking distance of his Soho bar-eatery. While he says he already has the concept and menu sorted out, the name is undecided and may or may not include “Polpo.” As for timing, he said he’s sign tomorrow if he found the right place, which is likely to be in Covent Garden. Diners at Texture can bring along a bottle of their own wine this month, without being charged. It’s a bonus for those of us who eat in restaurants, but not a particularly good sign for the state of the catering industry when such a high-quality establishment has to lure customers this way. Still, this is the quietest time of the year for eateries and I’m optimistic that people will want to return to Texture. The dining Web site Toptable.com is giving away 500 free meals and has a series of offers , including one at the Boxwood Cafe, which will close in April. I don’t get too excited by the set meals, but it’s hard to argue with promotions of a 50 percent discount for food. The Avenue on St. James’s Street reopens on Jan. 18 with a fresh lick of paint and a new chef, Mikko Kataja, who arrives from another restaurant belonging to the D&D London catering group, Launceston Place, where he worked for Tristan Welch. The menu will be based on small plates of food you may share, as at Maze or La Petite Maison, only the cuisine will be British. If wine bargains don’t do it for you, how about hula hoops? The Ebury is offering hourlong classes for 15 pounds ($24) that are designed to get us back into shape after the holidays. There’s also a healthy menu complete with a calorie count. I wasn’t in shape before Christmas, so feel no need to take part. Good luck to all of you who have forsaken alcohol and/or fattening food. If you’re looking for an unusual coffee, try Philippine Alamid Kopi Luwak, whose beans are retrieved from the waste of the civet. “The beans pass through the civet whole after fermenting in the stomach and that’s what gives the coffee its unique taste and aroma,” according to Sea Island Coffee Ltd. The beans are “collected from the jungle floor, and then thoroughly washed,” which is a relief. The coffee “has a heavy, caramel body and low acidity, but also a nuance in the taste that is hard to put one’s finger on.” Hmmm. It’s available at http://www.seaislandcoffee.com/ along with other marginally less exotic options such as Maui Island Estate. “Masterchef” returns to U.K. television next month for a sixth series, this time on BBC1, with John Torode and Gregg Wallace back as judges. Exact details of transmission aren’t available yet. The challenges facing contestants will include a banquet at the Tower of London, a trip to Rajasthan and preparing dishes for Alain Ducasse . Cooking doesn’t get tougher than that. Company of Cooks is sponsoring the Ministry of Food show at the Imperial War Museum that opens on Feb. 12. The exhibition will examine production, distribution and consumption of food during World War II. The catering company, which in November won the contract for the Royal Opera House, has two killer weapons: chef Pierre Koffmann is a consultant and Gordon Ramsay’s former operations director, Gillian Thomson, is managing director. I’ve received my first Valentine’s Day press release. It’s for a box-set of two half bottles of Duval-Leroy Brut Rose and a pair of engraved Champagne glasses. The price of love? 50 pounds from Harrods. “Expert in the art of seduction, this Brut Rose Champagne combines all ingredients of temptation,” I read. ( Richard Vines is the chief food critic for Bloomberg News. Opinions expressed are his own.) To contact the writer on the story: Richard Vines in London at rvines@bloomberg.net .

Read the full article →

Black Swans Abound as Year of Tiger Shows Teeth: William Pesek

January 7, 2010

Commentary by William Pesek Jan. 7 (Bloomberg) — If many of us could have turned around the moment we entered 2010 and made obscene gestures at 2009, we would have. After the wreckage of the past 12 months, 2010 has to be a good year, right? Good for governments staving off financial chaos, good for households struggling to stay afloat, good for investors wondering which rules of economics and markets still apply. It really is hard to see this year outdoing the last one in the doom-and-gloom department. Yet the Year of the Tiger might live up to its name and be a fierce one. Here are five reasons why it may come with its share of sharp teeth and “Black Swans.” 1. The bill for 2009 is coming due. Look no further than Japan, which has little to show for the hundreds of billions of dollars it’s throwing at the economy. Deflation is intensifying, unemployment is worsening, the ranks of the working poor are growing and Prime Minister Yukio Hatoyama is anything but focused on these fast-mounting challenges. Now, he faces the hangover from the 2009 borrowing binge. His 2010 budget won’t rein in deficits that threaten Japan’s Aa2 rating at Moody’s Investors Service. The plot thickens when you add a shrinking population and tax base. That’s why the cost of a five-year contract to protect $10 million of Japan’s sovereign bonds has climbed to $68,650 from $37,000 in August, when Hatoyama’s Democratic Party of Japan won power. Japan is hardly alone. Governments are pouring untold trillions of dollars into economies financed with fresh bond issuance. The debt glut is as unprecedented as it is unsustainable. Expect credit-rating companies and investors to be sniffing around for potential debt crises, be they in China, Greece, Japan or Vietnam . 2. Global demand remains elusive. Singapore, where gross domestic product shrank in the final three months of 2009 — the first time in three quarters — tells the story. It’s on the front lines of global trade and the annualized 6.8 percent drop in growth last quarter is an ominous sign. China’s almost 10 percent growth is helping commodity exporters such as Australia. Not so for the rest of Asia as it tries to fill the void left by a hobbled $14 trillion U.S. economy. An undervalued currency greatly limits the spillover benefits of China’s stimulus efforts. Skepticism is being voiced by leading economists on different ends of the ideological spectrum. Conservative Martin Feldstein , of Harvard University, and liberal Joseph Stiglitz , of Columbia University, say growth may falter as stimulus wanes. Just ask Singapore how U.S. frugality is working out for Asia. 3. Trade tensions will explode. Expect China’s peg to the dollar to become even more of an issue as unemployment rates rise from Washington to Berlin. The recent breakdown of climate-change talks in Copenhagen dispels any optimism about multilateral cooperation. It’s beggar-thy-neighbor time as global growth limps along, and no one plays the game better than China. On Jan. 1, a free-trade agreement between China and Southeast Asia came into force. It consolidated a sixfold surge in economic activity over the past decade between countries representing a quarter of the world’s population. Yet countries such as Indonesia are already concerned about lowering their guard against Asia’s rising superpower. Expect fireworks. 4. Central bankers will be on the ropes. They must find exit strategies for their monetary largess as asset bubbles inflate. Tap on the brakes too much and markets might crash. Apply them too timidly and inflation may accelerate. India is one case of monetary policy being behind the curve. Officials from Seoul to Hanoi also face balancing acts. Central-bank independence is a concern. It’s impossible politically to put rates back to reasonable levels anytime soon. They must try, though, and those efforts will make for a volatile year in Asian markets. 5. Black-Swan risks abound. Umar Farouk Abdulmutallab’s attempt to blow up a plane over Detroit on Christmas Day is a reminder that terrorism can shake markets anytime. The assassination of a major world leader also would be an unexpected event with great impact. Sovereign defaults can’t be ruled out, and troubles in small economies such as Iceland or Dubai have a way of spanning the globe. A huge dollar rally or yen plunge could upset so- called carry trades and bring down a couple of hedge funds. A crash in gold or oil prices would do the same. Perhaps Japan will get its act together and recover for real. Or maybe things will go the other way: a debt crisis in Japan, the U.S. or the U.K. Markets are hardly discounting hyperinflation, hyperdeflation, a global pension crisis, a collapse of North Korea’s repressive regime, social unrest in China or Iran, major earthquakes in Tokyo or California, or Somali pirates getting their hands on more than oil. And, more basically, what if optimism that we dodged another Great Depression is hubris and markets tank anew? Treating the symptoms of the financial crisis isn’t the same as removing the causes. We have seen how the impossible has a way of becoming possible these last two years. The one ahead may hold its own surprises as the Chinese zodiac’s tiger roars. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

Read the full article →

U.S. Debt Scolds Can’t Be Ignored Much Longer: Alice M. Rivlin

January 6, 2010

Commentary by Alice M. Rivlin Jan. 7 (Bloomberg) — The big lesson of 2009 was that financial panic can be catastrophic for the economy if caused by a bursting housing bubble with an enormously overleveraged financial structure perched on top of it. That sounds obvious, but the best minds of our economic establishment didn’t see it coming. The unforeseen losses were off the charts: millions of jobs , widespread foreclosures and business failures, plummeting wealth and confidence, and immeasurable human misery. The reassuring lesson was that policy makers and regulators, the same ones whose inaction exacerbated the crisis, acted aggressively when it hit. Massive intervention by the Federal Reserve, the U.S. Treasury Department and Congress stabilized the reeling financial sector and mitigated damage to the real economy. We now know something that was far from evident a year ago: 2010 will not be a year in which financial meltdown pushes the economy into a Great Depression. Instead — and this is truly good news — it will be the first year of a long, slow recovery from a remarkably severe recession. The enormous costs of the crisis are not only lost employment, production and economic opportunities, but also anger and disillusionment. People are angry at officials who failed to protect them and spent their tax trillions avoiding allegedly more terrible outcomes. “It could have been worse” is not a winning political slogan. Moreover, while average people may realize they were part of the problem — borrowing too much, saving too little and counting on the Tooth Fairy — they also feel betrayed by the financial titans whose reckless greed brought good times to an end. Clueless Titans The titans themselves don’t get the anger. “We are so smart and work such killer hours to make the finances function,” they say to themselves. “Why can’t people see that we deserve those bonuses?” The chasm between Wall Street and average folk will not close quickly. Nor will the budgetary costs of the crisis disappear quickly. The hard-won surpluses of the late 1990s had vanished well before the economy’s crash, as a result of tax cuts, prescription drug benefits, war costs and undisciplined domestic spending. But budget deficits before the crisis, while inappropriate in a prosperous economy, were of manageable size, and the debt, at low interest rates, not especially burdensome. Budget scolds, like me, warned of looming deficits threatening the economy as federal revenue failed to keep up with the costs of promises to an aging population compounded by rising medical spending. Our warnings were unheeded. Scary Deficits The recession slashed federal revenue, while efforts to preserve jobs and mitigate economic suffering ballooned spending. The combination pushed deficits to record levels –way above the percent of gross domestic product of the scary Reagan deficits. These deficits will recede as the economy recovers, but they won’t disappear, and their legacy is a public debt that drastically reduces our economic flexibility. Suddenly, the nation’s public debt , which was 37 percent of GDP in 2007, has risen to about 67 percent in 2010 and is projected to continue rising if we don’t change course. The built-in deficits caused by aging and medical spending for seniors are no longer looming far ahead of us. They will affect our crisis-damaged budget within the decade. If we don’t want a continuous drain on our standard of living and growing vulnerability to the demands of our creditors, especially the Chinese — both of which will undermine our influence in the world — we must stabilize the debt by moving the federal budget back toward balance. Not So Hard The biggest economic challenge for 2010 is enacting credible future deficit reduction without derailing the fragile recovery. That isn’t a hard as it sounds, because tax increases or benefit reductions sufficient to stabilize the debt would be phased in slowly and wouldn’t affect the near-term economy. Increasing the retirement age for Social Security, means- testing benefits of Medicare or adding a national sales or carbon tax would take several years to implement. Enacting such measures in 2010, however, could show our creditors we mean business and help the recovery by avoiding future interest rates increases. A congressional budget commission could provide a mechanism, but it won’t work unless both political parties have the courage to make the necessary tough decisions and soften their ideological rigidities. New Rules The second policy challenge is reforming the financial regulatory system to reduce the chances of another serious crisis. That will require consolidating regulation of financial institutions in one agency with stronger rules so firms can’t shop for the weakest regulator. Capital requirements also must be increased, as financial institutions grow in size and complexity, to discourage too big to fail. Financial rules also need to be modernized to keep up with smart financiers who invent ways around them. We also need to create a strong agency that protects consumers from predatory practices and to make sure that regulators focus on threats to the whole system, not just on keeping individual institutions from taking excessive risk. Is our political system up to these challenges? We will learn a lot about that in 2010. ( Alice M. Rivlin , a senior fellow in economic studies at the Brookings Institution and a visiting professor at Georgetown University, is former vice chairman of the Federal Reserve and the founding director of the Congressional Budget Office. The opinions expressed are her own.) To contact the writer of this column: Alice Rivlin at arivlin@brookings.edu

Read the full article →

Bond Auctions Survive Credit Freeze, Bankers’ Hex: Joe Mysak

January 5, 2010

Commentary by Joe Mysak Jan. 6 (Bloomberg) — Selling municipal bonds the old- fashioned way, at auction , still hasn’t gone out of style. This is welcome news for all those who believe in good government, and who also know that inviting banks to bid on bonds can save borrowers money. States and localities sold $60.6 billion in bonds at auction in 2009, or 15.6 percent of the $389 billion in fixed- rate issues marketed during the year, according to Bloomberg data. That’s down from 18.6 percent in 2008. Of the 11,583 bonds sold, 3,775, or about one-third, were sold at auctions. It looked like bankers’ four-decade push to eradicate auctions, or competitive sales, would succeed in 2009. For one thing, issuers began selling a new kind of security, Build America Bonds. New varieties of bonds are best sold through negotiation, with issuers awarding the business to a bank before setting the price. The thinking here is that new securities require additional sales efforts to educate investors about how the new products work. That’s the thinking. Also portending doom for auction sales was the state of the market as 2009 began: departures in the ranks of underwriters, flagging institutional demand and the collapse of the bond insurance industry. After the credit markets froze in September 2008, dozens of issuers canceled or postponed sales, afraid they wouldn’t get bids. Even AAA issuers selling tax-backed bonds, such as Utah and Georgia, found they could save money through negotiation. Reducing Risk Bankers prefer negotiation because it is less risky. In this process, issuers choose who is going to sell their bonds, sometimes soliciting requests for proposal, sometimes not. The bank then decides how to price the bonds. In a competitive sale, the issuer sets a date for an auction and collects bids. The bid that produces the lowest cost of funds wins the bonds. There’s a risk that the bank won’t be able to re-sell them to investors. Auction was the preferred way of sale since the beginnings of the municipal market in the 1800s. In the 1960s, bankers began persuading issuers to negotiate all deals, not just those for new or weak credits, or for large amounts. Negotiated sales outnumbered competitive ones in 1976, and have dominated since. For their part, issuers liked negotiation because it meant less work and gave politicians a new batch of goodies — bond underwriting assignments — to distribute. Pre-Sale Work I would like to think that issuers saw things that didn’t put negotiation in a very good light and acted accordingly. Take those Build America Bonds. In return for selling taxable debt, the issuer gets a 35 percent subsidy from the U.S. Treasury that lowers the cost of the debt even below the tax- exempt level. In 2009, issuers sold $64 billion in BABs. Experts say they will sell double that amount this year. What did we see almost from the beginning? BAB deals were priced, and within days the institutions that bought the bonds resold them at higher prices — flipping them exactly as those favored with shares of initial public offerings used to do. In other words, issuers paid too much in yield. What happened to all the pre-sale work that was the promise of negotiation? Then there is the Securities and Exchange Commission’s case filed in November against two former JPMorgan Chase & Co. bankers in connection with their work in Jefferson County, Alabama. In order to get the county’s business, the SEC alleges, the bankers paid local firms whose principals or employees were close friends of certain county commissioners, who appeared to be concerned solely with giving out patronage. The bankers say they will fight the charges. It was unseemly. Required Skill Or take the Chicago official who told his water authority’s board members this summer that he didn’t bother to set up a process to choose a financial adviser because of the “high degree of professional skill required.” State law allows agencies to dispense with the formalities in just such circumstances. I find that unseemly, too. I’d like to say that public officials saw these episodes and chose competition because it’s clean. Maybe some did. What saved competitive sale was a market rally that extended from June through September. While it ran, the Bond Buyer index fell 92 basis points, to its lowest level since the 1960s. Fueling the rally was a relative scarcity of tax-exempt bonds — so many issuers had decided to go the BAB route. I asked Eric Johansen , debt manager for Portland, Oregon, and a proponent of competitive sale, how auction sales have survived. Pushing Negotiation “I guess I should be happy that the competitive share hasn’t fallen even lower than it has, given the market turmoil of 2008,” he said in an e-mail. “However, it tells me that there are still far too many issuers relying on financial advice from investment bankers that are pushing negotiation.” “It would be interesting to determine the percentage of fixed-rate sales that meet the Government Finance Officers Association’s criteria for factors favoring a competitive sale, namely good ratings, strong security and straightforward debt structure,” he continued. “My sense is that the percentage of bonds meeting these criteria is probably well over 50 percent.” The SEC’s inquiry into anticompetitive practices in the municipal market is going to produce a series of sordid revelations. Maybe that will boost auction sales in 2010. ( Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net

Read the full article →

Van Gogh’s Secrets, Penn’s Celebs Put on Show: European Arts Preview 2010

January 5, 2010

Review by Martin Gayford Jan. 5 (Bloomberg) — Vincent van Gogh’s letters and Irving Penn’s portraits of Nicole Kidman and Marlene Dietrich will be among star exhibits at European art shows in 2010. Van Gogh once more steps into the limelight in a year that is the 120th anniversary of his suicide at the age of 37. The most important Van Gogh show that London has seen in 40 years opens at the Royal Academy this month, centered on private correspondence that the organizers say shows the artist had a powerful intellect to match his erratic genius. “ The Real Van Gogh : The Artist and his Letters” (Jan. 23 to April 18) is likely to be popular, though it remains to be seen whether the number of visitors pouring in will exceed the 800,000-plus who saw “Monet in the 20th Century” at the Academy in 1999, the London record for an art show. While the curators have secured a remarkable list of loans, the concept sets a tricky problem in exhibition design. The idea is to compare and contrast Van Gogh’s paintings with drawings and the sketches in the letters of the same subjects. The crowds of spectators may have to peer at small works on paper without causing traffic jams in the galleries. Meanwhile, Vincent’s old houseguest Paul Gauguin is the star of a tightly focused show at the Van Gogh Museum , Amsterdam. “Paul Gauguin: The Breakthrough into Modernity” (Feb. 19 to June 6) looks at the artist in 1889, immediately after his fraught sojourn in Arles with Van Gogh. Hardcore Gauguin fans in the U.K. will be tempted to cross the North Sea to enjoy this, though others may wait for the Gauguin show at Tate Modern next autumn. Lady Jane Grey At London’s National Gallery , the spotlight falls on an earlier 19th-century painter, Paul Delaroche (1797-1856). He was one of those artists who achieve commanding reputations during their lifetimes which then slump. Nonetheless, his “Execution of Lady Jane Grey” (1833), the focus of the Feb. 24-May 23 exhibition, is one of the gallery’s more popular pictures. To my mind, Delaroche’s painting is the visual equivalent of ham costume drama — Errol Flynn as Robin Hood. Still, I’m prepared to be convinced. The sculptor Henry Moore is an artist whose reputation has not quite settled. Moore (1898-1986) was acclaimed in Britain when he was alive and has faded a little in recent decades. Can the Tate Britain retrospective (Feb. 24 to Aug. 8) return him to the art-historical forefront? A successful little Moore show at Kew Gardens a couple of years ago suggested a revival is possible. One problem for any gallery exhibition of Moore is that his major works tend to look much better outdoors than in. Ofili Assessed On the contemporary-art front, Tate Britain offers a mid- career assessment of Chris Ofili (Jan. 27 to May 16), the painter whose Virgin Mary, with applique elephant dung, caused a kerfuffle when “Sensation” was shown in New York in 1999. (It passed largely without comment in London). The question is, has an artist born in 1968, as Ofili was, had time to produce enough to sustain an exhibition of this size and prominence? No such questions can be asked in the case of Lucian Freud , born in 1922. This giant of contemporary British art has an exhibition at the Pompidou Center , Paris, this spring (March 10 to July 19). Freud may feel, as his old friend Francis Bacon did on a similar occasion, that acceptance by the Parisian art world is the ultimate accolade. This season, Tate Modern is presenting a couple of shows devoted to 20th-century classics. “Van Doesburg and the International Avant-Garde” (Feb. 4 to May 16) looks at the Dutch painter/architect who was one of the most idealistic modernists of the 1920s. The exhibition also includes work by contemporaries who shared Van Doesburg’s idealization of simple geometric form. Expect plenty of straight lines, squares and angular objects. Gorky’s Abstracts “Arshile Gorky” (Feb 10. to May 3), also at Tate Modern, will investigate a different and slightly later variety of avant-gardism. Gorky (circa 1904-1948) was one of the leading abstract expressionists, his work full of flowing brush-strokes and soft forms: half abstract, half organic. More geometric patterns, and, surprisingly, contemporary art turn up in “Quilts 1700-2010” at the V&A (March 20 to July 4), which will range from 18th-century bedding to the expletives-not-deleted efforts of Tracy Emin . The photographic show of the season looks likely to be “Irving Penn Portraits” (Feb. 18 to June 6), a big retrospective at the National Portrait Gallery devoted to the celebrated American master of the camera who died last year. Edith Piaf to Pablo Picasso are also among those featured. Ife Sculptures At the British Museum, “Kingdom of Ife: Sculptures from West Africa” ( March 4 to June 6 ) doesn’t have such a stellar historical character at its center as the museum’s current “Moctezuma.” It may be a more beautiful exhibition because the bronzes and carvings made in Ife (part of modern Nigeria) in the 12th to 15th centuries are a high point of art history. Michael Landy’s “Art Bin” at the South London Gallery (Jan. 29 to March 14) may be the most eccentric show of early 2010. The gallery will be transformed into a garbage tip for the disposal of unwanted works of art — or, as Landy calls it, “a monument to creative failure.” It’s a safe prediction that, as always, there’ll be plenty of that to report in 2010. ( Martin Gayford , the author of books on Van Gogh and Gauguin and on Constable, is chief art critic for Bloomberg News. The opinions expressed are his own.) To contact the writer on the story: Martin Gayford in London at martin.gayford@googlemail.com .

Read the full article →

Washington, Bernanke, Still Fighting Wrong War: Amity Shlaes

January 5, 2010

Commentary by Amity Shlaes Jan. 5 (Bloomberg) — Sometime soon the U.S. Senate is expected to confirm Federal Reserve Chairman Ben Bernanke for a second term. Soon the Senate will also vote on legislation to overhaul the financial industry. Neither action directly determines the U.S. monetary outlook. Yet a monetary assumption underlies all of Washington’s finance- or banking-related activity these days. The shared belief is that the potential for deflation or credit-and- deflation-related spirals deserve our near-exclusive attention. One task for the Financial Services Oversight Council that would be created by the House reform bill, for example, is to sort out which are the too-big-to-fail institutions and prevent future Lehmans . In other words, we need to further systematize the dumping of cash into companies and the economy or face apocalypse. Our leaders treat an inflation crisis as the lesser threat, a remote possibility that warrants lip service, at most. Thus over the weekend Bernanke mentioned the possibility of having to increase interest rates at some later point — but it was really just a passing reference. Depressions, in the general line of thinking, come from deflation. Linking deflation and depression has become second nature. It almost seems an alliterative link, as though the two go together because both start with the same letters. In their recent Man of the Year portrait of Bernanke, for example, Time magazine editors seem to use the word depression as a synonym for deflation. “The first thing any Depression scholar comes to understand is that nothing — not hyperinflation, megadeficits or irked Chinese creditors — is as bad as a full-on Depression,” it said. Effects of Deflation Deflation, as we hear so often now, hurts good people, strivers who over-borrow. What’s the reality about deflation and inflation? Deflation can cause depressions, as the U.S. saw in the early 1930s, the period Bernanke has studied so intensely. In the Great Depression, there wasn’t enough money around — literally. Lacking cash, banks collapsed, and good people did lose homes or farms. More banks collapsed. Deflation doesn’t always spell apocalypse. It can coexist with prosperity — or even perpetuate it. There was deflation in the 1920s. Prices fell in 1923, and 1925 through 1928. The money shortage hit one sector, farming, hard. Overall, the economy grew. Unemployment stayed low. Vigilance on inflation kept prices stable. Stable prices made life easier. Steady Tuition As Harvard University’s alumni magazine reported recently, in wonderment, Harvard’s tuition stood at the same level, $150, between 1870 and the beginning of World War II. Such consistency is something tuition-juggling families would trade a lot of financial-aid dollars for today. What about inflation? Many economists treat inflation as an acceptable evil. Over the weekend Bernanke spoke of concerns about a “possible unwelcome decline in inflation.” The trouble is that mild inflation can become significant inflation faster than central banks can act. And significant inflation can match deflation blow for blow. In the 1970s, inflation coexisted with slow growth or outright shrinkage of the economy. Those who don’t think about inflation also didn’t think about the first half of 1980, when West Coast mortgage rates rose to 17.5 percent. That meant people could afford less house than today. The U.S. homeownership rate dropped below 65 percent and did not come back until 1996. Wheelbarrows of Cash The German hyperinflation of the early 1920s lives in memory as a black-and-white visual of men with caps pushing around wheelbarrows of cash. This cartoon obscures bitter reality. Hyperinflation isn’t the opposite of depression. It’s a kind of depression. The effects of Germany’s hyperinflation were worse than the effect of our Great Depression. Like a deflation, the German hyperinflation ruined the lives of good people, many of whom were not rich. How? By making fixed incomes — pensions, government salaries — worthless. In the same years that deflation ruined the farmer in Minnesota, inflation was ruining the bureaucrat in Germany: “A man who had been saving for 40 years and who, furthermore, has patriotically invested his all in war bonds, became a beggar,” said the author Stefan Zweig, according to “Culture and Inflation in Weimar Germany” by historian Bernd Widdig. The creepy thing about hyperinflation is that it also ruins businesses, as well as charitable and educational institutions. None can plan. As Widdig notes in his book, “The Department of Canonical Law at the University of Munich had a budget of 2,000 marks in 1922. Yet the subscription price for a single scholarly journal was already 10,000 marks.” Inflation Misery Hyperinflation has a capacity to mock virtue that deflation lacks. Even that symptom that we tend to assume is unique to the Great Depression, raging unemployment, came eventually. In 1924, unemployment among German union workers was 24 percent. Hyperinflation helped make Hitler possible. Much more recently, in Zimbabwe, hyperinflation helped keep President Robert Mugabe in power. Serious inflation has dogged Latin America for a century, causing, overall, magnitudes more misery than even the storied deflation of Japan. It is monetary narcissism on the part of the U.S. to assume that just because serious inflation hasn’t occurred here lately, it can’t materialize in 2011, 2012 or 2015. Two centuries ago, the Prussian military expert Carl von Clausewitz warned that generals who fight the last war confront defeat in the next. Clausewitz’s rule holds true for 21st century monetary policy makers as well. There is nothing about deflation that is more modern than inflation. Optimal Fed The optimal Fed fights for stable money alone, not employment as well. The optimal financial governance reform replaces discretion with a rules-based system that treats inflation and deflation like twins. The current legislative proposals won’t yield either an optimal Fed or an optimal financial reform. So it’s all up to Chairman Ben. That means not only making statements about future bubbles, but using his moral authority to push through reforms that make it easier for our system to prevent inflation as well as deflation. Herr Bernanke, meet Herr Clausewitz. ( Amity Shlaes , senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Amity Shlaes at amityshlaes@hotmail.com

Read the full article →

Tiger Woods’s Sponsors Should Forgive and Forget: Matthew Lynn

January 4, 2010

Commentary by Matthew Lynn Jan. 5 (Bloomberg) — There are few sights as ridiculous as a big corporation wrestling with a moral dilemma. In the weeks since golfer Tiger Woods was embroiled in a marital-infidelity scandal, his sponsors have been hitting him into the rough. Last week, AT&T Inc. decided he is no longer the kind of clean-cut, family-friendly corporate ambassador for its products. Accenture Plc had already made the same decision. And yet, the companies dropping Woods, 34, are guilty of two sins, both of them worse than anything he might have to put down on his scorecard when he finally checks in with St. Peter. Stupidity, most obviously. Woods will come back from this major setback, just as celebrities from Kate Moss to the Rolling Stones have done, and probably stronger than ever. And, more seriously, the sponsors have misunderstood why they wanted celebrity endorsements in the first place. They need authenticity, not bland corporate perfection. If corporations aren’t willing to accept that their “ambassadors” are real people, with all the flaws and fallibilities that come with that package, there is no point in having them on the payroll. You have to be amused by the priggishness and hypocrisy of the corporate honchos who have decided that Woods is about as socially acceptable as a Sunday afternoon golfer hacking divots into the fairways at St. Andrews . Lost Contracts Procter & Gamble Co. has said it will start phasing out Woods from promotions for its Gillette razors and shaving foams. AT&T said it was cutting all its ties with Woods. Accenture, the Dublin-based technology-consulting firm, built its marketing around his personality, but decided to drop him last month. And for what? Murder? Terrorism? No. Just infidelity, which he has owned up to, and apologized for. On his Web site, Woods issued a statement admitting he had hurt his family and saying he needed to focus on being a “better husband, father and person,” an ambition that many of us could add to our list of New Year’s resolutions. To further that aim, he said he was leaving competitive golf “indefinitely” — even though the implication that playing golf is somehow incompatible with becoming a better husband and father is more than a little troubling for the sport. What exactly do these companies think they are doing? Porn and Cocktails In fairness, they thought they were getting a squeaky- clean, family-first sportsman, not someone who can’t order a pizza without hitting on the waitress. And we can concede that there are some ways in which Woods isn’t quite living up to the image his sponsors might want to create. The porn stars and cocktail waitresses who claim to have had affairs with Woods didn’t appear to be “the best a man can get,” particularly when the man in question is a billionaire sports star. If Gillette was “ limiting his role ” in its marketing campaigns for not setting his romantic ambitions a little higher — perhaps an Oscar-winning actress or a European princess — that would be understandable. But for infidelity by itself? Why does Gillette think men buy those expensive multi-blade razors and top-of-the-line shaving gels, when they could just buy a no- name version for half the price? Could it have something to do with making themselves more attractive to women? And isn’t it the case that some of those men won’t be in happy relationships and are looking for something that may not be so long-term and mutually supportive with those other women? As for AT&T, what does it imagine most people use phones for? The entire mobile-phone industry is designed to either get people into or out of some form of romantic entanglement. What else are text messages for? And why else would you want to hide the caller ID? So your wife doesn’t know the plumber just rang? Out of Touch When corporations attempt to set themselves up as moral arbiters, they just end up making themselves look out of touch. First, no one really cares. Moss, one of the world’s most well-known models, found herself in trouble in 2005 after pictures were published allegedly showing her using cocaine. Companies such as Hennes & Mauritz AB and Chanel SA promptly canceled her contracts. Five years later, Moss is still a big brand. Likewise, the Rolling Stones packed more bad behavior into a single tour date than Tiger Woods could chalk up in a year. Yet corporations still line up to sponsor their concerts. Second, companies want to associate themselves with stars who have personality. The average Joe doesn’t identify with Accenture’s corporate-mission statements . Sponsors have to put a golfer on the brochure to get anyone to take a look because the sportsman has character and an inspiring life story. Those qualities are what people find most interesting. Appealing Foibles But don’t expect those “personalities” to be perfect. If they were, they would be as dull as the products they are promoting. And then what would be the point hiring them? It is precisely their human foibles we find appealing. Nike Inc. and Upper Deck Co. have decided to stand by Woods. Other companies should just shrug and say, “Hey, Tiger is human: He has his good points, and his bad points, just like everyone else. We wish him well despite his troubles, and hope he finds a way of working things out with his wife. And if not, we hope they remain friends. We’ll stick by him, even in difficult times, just as we hope people would stick by us if we got into trouble.” Sponsors would emerge with more respect. Instead they have made themselves look disloyal and overly judgmental. It is hard to see how that can help their brand. ( Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net .

Read the full article →

Eminem Fights Springsteen, Winehouse, U2 for Decade’s Best CD: Mark Beech

December 30, 2009

Review by Mark Beech Dec. 31 (Bloomberg) — Here’s my pick of the best rock CDs of the decade, based on listening to about 1,000 each year. U.S. STARS: “The Rising” by Bruce Springsteen was a tender response to the 9/11 attacks. Springsteen’s “Working on a Dream” was the first great record of the Obama era. Johnny Cash bowed out with his excellent “American” albums. Bob Dylan’s “Love and Theft” returned the gravel- voiced bard to top form. Brian Wilson’s “Smile” recreated what would have been the finest Beach Boys album. Tom Waits provided a songwriting master class on “Orphans: Brawlers, Bawlers & Bastards.” “Gold” by Ryan Adams is the best of the prolific North Carolina star’s work. “Illinois” is the finest from a planned series of 50 CDs named after U.S. states by Sufjan Stevens. RAP: Eminem started the decade with “The Marshall Mathers LP” and ended on “Relapse,” selling 80 million CDs along the way. Commercial and critical success don’t often fit so well. Kanye West pushed the boundaries of hip-hop with “808s and Heartbreak.” Jay-Z’s “The Blueprint” inspired Lil Wayne, 50 Cent, OutKast, Dizzee Rascal and the Streets. “The Grey Album” by Danger Mouse was an Internet phenomenon in 2004 that sadly may never see official release for legal reasons. The Black Eyed Peas capped a glorious decade with “The E.N.D.” while Gnarls Barkley offered “St. Elsewhere” with its hit “Crazy.” CHANTEUSES: Lady Gaga’s “The Fame” leaves her poised to become the next Madonna. Amy Winehouse’s “Back to Black” makes retro music a good thing. “Survivor” by Destiny’s Child paved the way for Beyonce . The Dixie Chicks shined on “Taking the Long Way.” Britain’s P.J. Harvey had a love affair with New York on “Stories From the City, Stories From the Sea.” M.I.A.’s “Arular” and “Kala” are impressive dance records. Also recommended: albums by Joanna Newsom, Eileen Rose , Lily Allen , Lucinda Williams , Cat Power, Kylie Minogue , Goldfrapp and Bjork. U.S. GROUPS: The Kings of Leon grew from the southern swamps of “Youth and Young Manhood” to the stadium stardom of “Only by the Night.” “Is This It” by the Strokes was an economic 36-minute revival of guitar rock. The Yeah Yeah Yeahs took garage punk to a new level on “It’s Blitz!” while Jack White excelled with his bands the Raconteurs, Dead Weather and the White Stripes CD “Elephant.” Green Day at last grew up with “American Idiot.” The Killers played it loud on “Hot Fuss” and Linkin Park louder on “Minutes to Midnight.” WORLD GROUPS: “Whatever People Say I Am, That’s What I Am Not” by the Arctic Monkeys was a strong debut. Damon Albarn made the underrated “Think Tank” with Blur, and also self-titled albums by Gorillaz and the Good, the Bad and the Queen. Radiohead deserves credit for escaping from mainstream rock with the experimental “Kid A.” Primal Scream’s “XTRMNTR” and the Prodigy’s “Invaders Must Die” were edgy and excellent. U2’s “All That You Can’t Leave Behind” contained “Beautiful Day.” Fleet Foxes merged plainsong with folk on a self-titled debut. Canada-based Arcade Fire created a jaw-dropping wall of sound on “Neon Bible.” Download fees vary across services. The CDs are priced from $12.98 in the U.S. and 8.99 pounds in the U.K. ( Mark Beech writes for Bloomberg News and is the author of “ The Dictionary of Rock and Pop Names .” The opinions expressed are his own.) To contact the writer on the story: Mark Beech in New York at mbeech@bloomberg.net .

Read the full article →

Microsoft Needs a Swift Kick in the Boot-Up: Rich Jaroslovsky

December 30, 2009

Commentary by Rich Jaroslovsky Dec. 31 (Bloomberg) — It took about 20 years before television viewers no longer had to wait for their sets to warm up. Yet here we are, 30-plus years into the personal computer era, and the instant-on PC remains elusive. That may be about to change. Today’s tech consumers have grown accustomed to always-on smart phones and efficient netbooks they can leave for hours in “sleep” mode without rebooting. As a result, they are losing patience with the spinning logos, hourglasses, and twiddling thumbs that define the experience of booting up most Windows PCs. And they are showing a growing interest in hardware and software that speed up the process, or can even sidestep it. By most accounts, Windows 7, the current version of Microsoft Corp. ’s operating system, is quicker off the mark than its predecessor, Windows Vista. Microsoft cites its efforts with partners such as Lenovo Group Ltd. to optimize Windows boot-up times, and its work on power management that it says makes Windows’ sleep mode the moral equivalent of instant-on. Still, making Windows faster isn’t the same thing as making Windows fast; starting a PC can take anywhere from less than one minute to more than 10, depending on its hardware and the version of Windows it’s using. And leaving computers in indefinite sleep runs counter to the U.S. government’s best advice on saving energy. So if you’re impatient for a better solution — and after all, impatience is what this is all about — here are three ways to get closer to the goal: Windows Add-On — Run an instant-on operating system in addition to Windows. A number of programs aim to work around Windows’ slow boot times by simply not booting Windows. Instead, these programs — some of which come installed on new computers from Dell Inc ., Hewlett-Packard Co. , Asustek Computer Inc. and Acer Inc. , among others — launch a stripped-down desktop that allows you to surf the Web, handle any e-mail you can view in a browser and perform other basic tasks. Windows is there, but only to be summoned when needed. I’ve been using one such program, HyperSpace from Phoenix Technologies Ltd. , on a Samsung NC10 netbook for the last couple of weeks. If it’s a quick start you’re looking for, HyperSpace provides it. Press the power button, and within 15 seconds, the Linux- based HyperSpace presents you with a customizable screen including a browser, a notepad application, RealNetworks Inc. ’s RealPlayer media software and news, weather and stock information. I could jot a quick note, view videos from YouTube and even make calls using Skype , all without ever launching Windows. Less Satisfying The experience became a little less satisfying, though, once I hit the icon on the HyperSpace desktop to launch Windows. For one thing, you can’t load Windows in the background, so using HyperSpace doesn’t eliminate waiting for it to boot, just delays it. Moreover, while the two systems exist side by side, jumping back and forth between them can pose problems. I found the speed of the switch to be highly variable: Sometimes it was quite brisk; other times, especially when running off of the Samsung’s battery, I faced long, uncomfortable pauses where nothing seemed to be happening on the screen. Do I keep waiting? Do I click again? If you’re like me, you may find yourself doing fewer and fewer things within the Windows environment. Which may be good for your productivity — but can’t possibly be good news for Microsoft. Solid-State Drives — Switch to a solid-state drive. Conventional hard drives are mechanical devices, and it takes time to locate and access your data on a spinning platter. Solid-state drives, by contrast, have no moving parts; information is stored on microchips, and is instantly accessible. As a result, SSDs are faster and use 80 percent less power, according to Samsung, which along with Intel is a major supplier of the drives. I’ve been using a Dell Latitude E4300 notebook computer outfitted with a 256 gigabyte Samsung SSD. No messing around with multiple operating systems here. Instead, it is pure Windows — at light speed. Using Windows 7, the Latitude rockets from zero to ready for action in a mere 20 seconds. As an added benefit, just about every other function gets a speed boost too. Programs launch in the blink of an eye, and the computer shuts down in five seconds. Stiff Price Alas, the speed comes at a stiff price. There’s still a vast gulf between SSDs and mechanical drives: Putting an SSD in the Latitude adds about $700 to its price, compared with a conventional hard disk of similar capacity. In other words, solid state is the way to go, but only if you’ve got the dough. — Get rid of Windows. There are more operating-system alternatives to Windows today than at any point in the last two decades. And the options are increasing. Most obviously, there’s Apple Inc. ’s OS X. The current version, Snow Leopard, boots 10 percent to 15 percent faster than Windows 7, according to most tests. While that’s good, no one would describe a Mac as “instant on.” And its advantages come at the cost of higher prices and less hardware selection than its PC equivalents. For those with less money in their wallets and more adventure in their souls, there’s Ubuntu , a free, consumer- oriented Linux environment from Canonical Ltd. with startup times comparable to HyperSpace. And lurking in the wings is Google Inc. , which is promising its own operating system, Chrome OS, for 2010. Chrome OS was designed with instant-on in mind. At its public debut this summer, Google executives showed a netbook reaching its log-in screen seven seconds after powering up, and said they were working to bring that down even more. All these developments put Microsoft on notice that it is going to have to move more quickly — literally — to retain its dominant position. Speaking for computer users everywhere, I can’t wait. ( Rich Jaroslovsky is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Rich Jaroslovsky in New York at rjaroslovsky@bloomberg.net .

Read the full article →

Bankers Get $4 Trillion Gift From Barney Frank: David Reilly

December 30, 2009

Commentary by David Reilly Dec. 30 (Bloomberg) — To close out 2009, I decided to do something I bet no member of Congress has done — actually read from cover to cover one of the pieces of sweeping legislation bouncing around Capitol Hill. Hunkering down by the fire, I snuggled up with H.R. 4173 , the financial-reform legislation passed earlier this month by the House of Representatives. The Senate has yet to pass its own reform plan. The baby of Financial Services Committee Chairman Barney Frank , the House bill is meant to address everything from too-big-to-fail banks to asleep-at-the-switch credit-ratings companies to the protection of consumers from greedy lenders. I quickly discovered why members of Congress rarely read legislation like this. At 1,279 pages, the “Wall Street Reform and Consumer Protection Act” is a real slog. And yes, I plowed through all those pages. (Memo to Chairman Frank: “ystem” at line 14, page 258 is missing the first “s”.) The reading was especially painful since this reform sausage is stuffed with more gristle than meat. At least, that is, if you are a taxpayer hoping the bailout train is coming to a halt. If you’re a banker, the bill is tastier. While banks opposed the legislation, they should cheer for its passage by the full Congress in the New Year: There are huge giveaways insuring the government will again rescue banks and Wall Street if the need arises. Nuggets Gleaned Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork: — For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery. — Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule. — Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well. More Bailouts — The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy — there are more bailouts to come. — The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis. — Don’t worry, this time regulators will have better tools. Six months after being created, the council will report to Congress on “whether setting up an electronic database” would be a help. Maybe they’ll even get to use that Internet thingy. — This group, among its many powers, can restrict the ability of a financial firm to trade for its own account. Perhaps this section should be entitled, “Yes, Goldman Sachs Group Inc. , we’re looking at you.” Managing Bonuses — The bill also allows regulators to “prohibit any incentive-based payment arrangement.” In other words, banker bonuses are still in play. Maybe Bank of America Corp. and Citigroup Inc. shouldn’t have rushed to pay back Troubled Asset Relief Program funds. — The bill kills the Office of Thrift Supervision , a toothless watchdog. Well, kill may be too strong a word. That agency and its employees will be folded into the Office of the Comptroller of the Currency . Further proof that government never really disappears. — Since Congress isn’t cutting jobs, why not add a few more. The bill calls for more than a dozen agencies to create a position called “Director of Minority and Women Inclusion.” People in these new posts will be presidential appointees. I thought too-big-to-fail banks were the pressing issue. Turns out it’s diversity, and patronage. — Not that the House is entirely sure of what the issues are, at least judging by the two dozen or so studies the bill authorizes. About a quarter of them relate to credit-rating companies, an area in which the legislation falls short of meaningful change. Sadly, these studies don’t tackle tough questions like whether we should just do away with ratings altogether. Here’s a tip: Do the studies, then write the legislation. Consumer Protection — The bill isn’t all bad, though. It creates a new Consumer Financial Protection Agency, the brainchild of Elizabeth Warren , currently head of a panel overseeing TARP. And the first director gets the cool job of designing a seal for the new agency. My suggestion: Warren riding a fiery chariot while hurling lightning bolts at Federal Reserve Chairman Ben Bernanke . — Best of all, the bill contains a provision that, in the event of another government request for emergency aid to prop up the financial system, debate in Congress be limited to just 10 hours. Anything that can get Congress to shut up can’t be all bad. Even better would be if legislators actually tackle the real issues stemming from the financial crisis, end bailouts and, for the sake of my eyes, write far, far shorter bills. ( David Reilly is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: David Reilly at dreilly14@bloomberg.net

Read the full article →

Truffle Breakfasts, $67,000 Wine Entice at Arnault’s Alpine Hotel: Travel

December 28, 2009

By A. Craig Copetas Dec. 29 (Bloomberg) — There’s no whiff of economic crisis in the winter wonderland built by luxury-goods magnate Bernard Arnault in the French ski town Courchevel 1850. For 47,000 euros ($67,466), the chairman of Paris-based LVMH Moet Hennessy Louis Vuitton SA can guarantee the sun rises at the Cheval Blanc hotel with a 1947 vintage bottle from famed Chateau Cheval Blanc in Bordeaux. Dawn also may be savored with a 220 euro “Dome of Black Truffles.” “Luxury’s a natural experience for us,” says the hotel’s director general, Philippe Gourgaud. “You don’t feel recession in our rooms.” The rest of the world may still be in the throes of the worst economic calamity since the Great Depression, just don’t caw about the fallout with Cheval Blanc guests living in autarky. They may be pecking at Michelin three-star chef Yannick Alleno’s supper of steamed pigeon with crushed cacao beans melted in carrot tops and mushrooms seasoned in Tonka beans. The only inflation worry inside the coddled confines of Cheval Blanc is the helium pumped into the silver balloons that deliver bedtime chocolates to your room aboard a gondola. Hyperinflation is splendid excess. For 130,000 euros, sommelier Sebastian Labe will uncork a 1990 “nabuchodonosor” (20- bottles-in-one) of the 34-room hotel’s namesake St. Emilion Premier Grand Cru Classe. (The chateau is co-owned by LVMH and Belgian billionaire Albert Frere .) Luxury Dreams “There’s no point when luxury becomes absurd,” the 41- year-old Alleno says of the hotel’s “haute couture experience,” branded “nuits so chic” by Groupe Arnault’s public-image consultants. “Man must dream at Cheval Blanc,” Alleno says. Concierge Jean-Baptiste Raud says man also must eat cake and, as was recently required of him, send a limousine on a 10- hour, 924-kilometer round-trip journey from Cheval Blanc to collect two fresh cream cakes at a Zurich bakery. Need to be clipped? Push a button for the “notoriously chic” 700 euro “Hair Room Service by John Nollet,” the barber behind actor Johnny Depp’s coiffure in the “Pirates of the Caribbean” movie. Cheval Blanc’s polo-shirt uniforms are woven from the dehaired underdown of cashmere goats. The style is flamboyant at Cheval Blanc, where staff members are called “players” and clipped Cuban cigars and century-old Armagnac materialize inside a “genuine” Mongolian yurt festooned with Savoie roebuck antlers and photographs by Chanel designer Karl Lagerfeld . Yet there’s something mischievously comforting about a hotel that chills and pours tumblers of vodka atop a 10-foot-long bar chiseled from ice, followed by a rubdown for guests in the Givenchy “snow spa.” Sky Ranch Abundant liquidity helps. Around $10,000 is essential for the 30-minute helicopter ride to Cheval Blanc from the Geneva airport. Gourgaud says there are no room discounts. Cheval Blanc’s substantial private portfolio of guests keeps occupancy rates at 90 percent and they have no difficulty paying anywhere from 1,130 euros to 20,000 euros a night on a range of accommodations that stretch from a basic single with a maxibar full of Krug Champagne to a 650-square-meter duplex sky ranch. The fifth-floor super suite’s master bedroom has appendages that include a gym, massage room, sauna, steam room, Jacuzzi and a dressing room with eight closets and 84 drawers and shelves. There’s a private elevator and the grand piano is tuned often. “Some 20 percent of our guests are from Russia and Eastern Europe,” the 37-year-old Gourgaud says. “The remainder are French and British. We have more Brazilians than we do Americans, and 80 percent of our clients are repeat visitors.” Billionaire Guest One of Cheval Blanc’s visitors in 2007 was Russian billionaire and New Jersey Nets basketball-team owner Mikhail Prokhorov , who French magistrates charged with running a prostitution ring in Courchevel. The charges were dropped last September. “All that was established was that Prokhorov and his friends had gotten together to celebrate the Russian New Year,” Prokhorov’s lawyers said in a written statement. “The detentions could have been avoided had our investigators lived a bit less in cliches.” Yet Cheval Blanc is a cliche, a dramaturgy of “tactile moments” and “perfumed pleasures,” where guests — wearing dark glasses to avoid being recognized — wander the grounds as if they were installations in a museum. The curator of this show is Cheval Blanc chief protocol officer Marie-Claude Metrot. “We deliver dreams,” says Metrot, who tutors the staff in the Hollywood home of rap star 50 Cent and now trains Cheval Blanc’s 115 players in the art of fulfilling fancies. “We don’t let guests think,” she adds. “We anticipate their desires.” Kanye West Beyond Cheval Blanc’s soundproof windows and removed from the gaze of the hotel’s bronze teddy bears created by rapper Kanye West , satisfying those cravings can mean choreographing a downhill rumpus on Courchevel’s 372 miles of ski trails. Guests also snowmobile on the landlocked Courchevel Yacht Club piste or ogle the outdoor exhibition of 14 Salvador Dali sculptures, including “Space Elephant” and “Woman in Flames.” Although Cheval Blanc isn’t solely responsible for Courchevel’s building boom of luxury hotels and private chalets, Arnault’s elite December-through-April snow palace is given much of the credit for attracting the have-yacht crowd to the city whose motto is “White Powder Gold.” “Cheval Blanc is an important contribution to Courchevel’s reputation and getting our more than 40 other hotels through the winter season,” says Nathalie Faure, manager of the local tourist office. “When Bernard Arnault builds a hotel, believe me, it’s good for the economy.” Wealthy Gathering Michel Benedetti, the 68-year-old chairman of regional construction company Benedetti SA, says Cheval Blanc’s guests over the past three years have helped sustain the city as a gathering ground for the wealthy. “Courchevel was once a small 19th-century village the Vichy regime made popular in 1942,” says Benedetti, whose company maintains many of the city’s ski slopes. “Now we redesign the pistes every year to keep them fashionable too.” Back in the kitchen, poring over a 195 euro chicken and a 120 euro turbot “deep fried in cuckoo pint,” Alleno says that “buffet lunches and dinners are no longer chic.” Cheval Blanc is on a mission, Gourgaud says. “It’s not easy,” he frets. “If even one guest departs Cheval Blanc without memories, then we are crushed.” To contact the writer on the story: A. Craig Copetas in Paris at ccopetas@bloomberg.net .

Read the full article →

Next Decade Will Be Good One for Stock Investors: Matthew Lynn

December 28, 2009

Commentary by Matthew Lynn Dec. 29 (Bloomberg) — Even the most practiced soothsayer will struggle to make any detailed predictions for the next 10 years. It’s hard enough to know what will happen in the markets in January 2010, never mind December 2019. The main thing investors need to know about the coming decade can be summed up in one of those pithy Twitter updates. Will it be good or bad for stocks? Everything else is extraneous. The answer? Good. A shortage of capital from any source other than the stock market; moderate but persistent inflation; and the probability that economic growth will be stronger than many economists expect means that “the 10s” will be a time when equities start to have some rocket fuel in their engine again. Stock markets usually work in decade-long cycles. The “noughties” were bad for shares. Most of the major markets didn’t manage to make any progress at all over the course of the whole 10 years. The U.K.’s FTSE-100 index , for example, hit a record of 6,930 in December 1999. A decade on, it is now at about 5,300. Likewise, Germany’s DAX index passed 8,000 in March 2000, but is slightly less than 6,000 now. It doesn’t make much difference what benchmark you look at. A few emerging markets aside, they all had a dismal decade. Leaving aside the simplistic point that every run of under- performance by any asset class usually comes to an end sometime, there are three solid reasons for thinking that this decade will be a lot better for stocks than the last one. Capital Shortage First, there will be a shortage of capital. One reason why equities performed so miserably during the last decade was that companies, and their chief executives in particular, really didn’t need shareholders very much. Remember, a stock market is just a place where you can raise money for building new factories, shops or warehouses. But in the last decade, if you needed cash, there were lots of people who would give it to you: a bank, the bond market or a private-equity firm. So why bother looking after a lot of irritating shareholders when you didn’t really need anything from them? In the coming decade, that will change. Capital will be in far shorter supply. The only place many companies will be able to raise money will be in the equity markets. The result? Companies will have to make sure their shareholders are being well looked after — and that means steady dividends and a rising share price. Or else there won’t be much point in asking them for more money. Rising Prices Next, inflation. There are plenty of people out there — most of them gold enthusiasts — predicting hyperinflation. That might happen eventually, if central banks keep printing money like crazy. There is another stage to get through first: moderate, persistent inflation in the 5 percent to 6 percent range. That’s pretty good for equities. The big, multinational companies that dominate the main indexes can usually lift their prices along with the inflation rate. So long as they can do that, they can keep profits and dividends ticking over nicely, roughly in line with price gains. In that scenario, equities will be one of the few asset classes that can be depended upon to keep up with inflation. Even better, they should get an additional boost as investors switch their money out of bonds — which get hammered by inflation — to protect themselves against price increases. Economic Spurs Finally, there will be a growth surprise. Given that we have just been through the worst financial crisis of the last half-century, people are pretty gloomy about the global economy right now. And, in fairness, there is plenty to worry about: a damaged banking system, the demise of the dollar, and huge government deficits. Even so, let’s maintain some perspective. Earlier generations overcame famines, plagues and world wars, so a few dodgy banks and some deficits hardly seem that bad. The chances are that growth in the new decade will give us a pleasant surprise. There are plenty of reasons to be optimistic. As Zurich-based UBS AG said in a recent research note to investors, global population in the next three to four decades will grow by about 3 billion, mostly in the emerging markets where incomes and consumption are rising rapidly. That will act as a powerful spur to the global economy, even if it will put a huge strain on the environment. The developed economies have big potential to increase the number of people in the work force if they overhaul their welfare systems. The looming fiscal crunch might well be the trigger for finally making that happen. That, too, would be an economic boost. And technology, the main driver of innovation and progress, shows no sign of slowing down. If anything, with so many more smart people being born, it should speed up. That’s another reason growth should accelerate. Of course, there will be plenty of choppy economic water ahead. Some more banks may crash, the dollar might implode, and a war or two might be fought. Even so, the stage is set for a great decade for shares. The FTSE, the DAX and the other global benchmarks should end 2019 higher than they started in 2010. ( Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net .

Read the full article →

Obama’s Next Trillion Spending Might Be Worth It: Amity Shlaes

December 28, 2009

Commentary by Amity Shlaes Dec. 29 (Bloomberg) — President Barack Obama is under fire for saying he wants to boost investment in infrastructure in the next decade. The critics say this is flawed stimulus because infrastructure projects take too long to get started and don’t boost the economy now. Obama’s best move would be to stop spending. But given that he won’t, and that he has three more years in office, the right kind of infrastructure splurge might not be such a bad idea — especially if you don’t call it a stimulus. That at least is what the record of the 1930s, 1940s and 1950s suggests, especially when it came to the classic American infrastructure project, highway construction. Back in the 1930s, presidents started with the proposition that the primary aim of all spending should be to put people to work. Road construction was viewed as one of the tools to that end. In a single year, between June 1933 and April 1934, relief workers repaired 500,000 miles of highways. As historian Mark Rose has noted , in the mid-1930s, almost $3 billion, then a good share of an annual federal budget, was poured into highway projects by relief officials and the Bureau of Public Roads. But observers, including President Franklin Roosevelt himself, began to notice flaws with this plan. For one thing, as today, road projects were not shovel-ready — their lengthy planning coincided with the direst moments of recession. By the late 1930s, Roosevelt concluded that highway programs generally “do not provide as much work as other methods of taking care of the unemployed.” Cutting Spending In early 1938 the president suggested that federal assistance to roads ought to revert to pre-Depression levels. That April, he reluctantly allowed that appropriating an extra $100 million for roads was all right, but “only for projects which can be definitely started this calendar year.” What was worse, the Hoover and Roosevelt road outlays didn’t make enough sense as infrastructure. A highway expert, Wilfred Owen , pointed out that New Deal construction had “denied congested metropolitan areas” and were instead “lavished upon local rural roads.” As the country emerged from World War II, it was clear the unprecedented 1930s spending hadn’t prepared the U.S. for exploding postwar road use. General Dwight Eisenhower , for his part, was put off by the heavy political element of New Deal outlays. Washington doesn’t shift gears easily. As the 1950s began, lawmakers therefore also presented construction as a tool to create jobs or manage the business cycle. The memory of the Depression was fresh. Recessions were still hitting with regularity — there were four between the end of World War II and 1959. Man of Action But Eisenhower, now president, was a man of action. He recalled the embarrassing number of days — 62 — it had taken a cross-country convoy to get from Washington to San Francisco in 1919. In his view, the one good thing that Adolf Hitler had done was to build the Autobahn . Where was the American Autobahn? In the end the bill that Eisenhower was able to push through Congress was straightforward. Under the Highway Act of 1956, the federal government spent billions to build new roads and piece together older ones and construct a national highway system. There were secondary goals, such as national defense and job creation, among them. But the most obvious goal, serving a country that wanted to move at 65 miles an hour, came first. Less Than Optimal The outcome of the interstate highway program wasn’t optimal. It favored truckers over cities. The roads cut off some downtowns from the commerce that had heretofore sustained them. Minorities pointed out that their communities often bore the brunt of construction. According to Rose, some black political and business leaders spoke of white men’s roads going through black men’s bedrooms. As for budgeting, the interstate so far outran its original cost estimates that Senator William Proxmire awarded it his so- called golden fleece prize for federal profligacy. But on balance, the highway achievement lasted in a way that stimulus or make-work projects did not. In the 1960s, one quarter of all productivity gains came from highway improvements. The interstate did its part to make the U.S. an economic superpower. By concentrating on one coherent infrastructure project, we helped to assure growth. There were other benefits. As early as 1959, the New York Times was publishing headlines that said things like “Pay Roads Save Time and Tempers as They Lead Tourists to Far Places.” Today the country can ill afford another trillion in stimulus. But if such an outlay is inevitable, then let that trillion go to a national Big Dig. As Eisenhower demonstrated, a growth project like a road can be superior to a new social program. A road, or a railway, or a plan to collect water in space, after all, reflects more hope. Obama will achieve the happiest outcome if he simply makes like Ike and plows forward. ( Amity Shlaes , senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Amity Shlaes at amityshlaes@hotmail.com

Read the full article →

World War Pope Sainthood Like Obama’s Nobel: Celestine Bohlen

December 28, 2009

Commentary by Celestine Bohlen Dec. 29 (Bloomberg) — It’s not at all clear that the world needs another Roman Catholic saint, let alone another canonized Catholic pope. By one count , there are already more than 10,000 saints and “beati” or blessed, accumulated since Roman times, with at least three saints already assigned for every day of the year. That’s just one good reason why Pope Benedict XVI’s decision to proceed toward the canonization of Pius XII , the church’s controversial World War II-era pope, was so surprising. Another two miracles to his name, and Pius will have cleared all the hurdles to sainthood, where he will be among the ranks of such beloved figures as Saint Francis of Assisi and Saint Joan of Arc. It’s hard to see the urgency or the necessity of an act that was sure to anger and upset large groups of people — most significantly, Jews who worry that Benedict has again delivered a setback to the difficult and delicate task of reconciling Catholicism and Judaism. There may be explanations for Pius XII’s studied silence about the Holocaust in the early 1940s: it is true that public criticism might have put more innocent people in danger, and it is also true that the Pope, like many Catholics, took risks to protect Jews. The question of Pius’ wartime record remains open, and will stay that way as long as the relevant archives are closed. Benedict himself had previously asked Vatican officials to hold off any decision on Pius until the opening of the 1939-1958 archives, now slated for 2014. This approach was endorsed by Jewish leaders, who are now left expressing puzzlement and dismay over Benedict’s decision to jump the gun and issue a decree proclaiming Pius’ “heroic virtues,” setting the stage first for beatification, and then canonization. Vatican Bureaucrat So what was the rush? The answer is politics — which does not make for an edifying religious spectacle. The common perception, disputed by the Vatican, is that by pairing Pius XII with John Paul II in the Dec. 20 decree, Benedict had hoped to satisfy both the conservative and the liberal wings of the Catholic Church. Let’s just leave aside the fact that there isn’t much of a public constituency clamoring for a Saint Pius XII (Pius IX is beatified and Pius I, V and X are already saints), as there is for a Saint John Paul II, a charismatic pope who played a key role in the collapse of Communism. At his funeral in 2005, crowds called for a quick beatification, with chants of “Beato subito.” In contrast, Pius XII — born Eugenio Pacelli, scion of Rome’s so-called black nobility, which has staffed the church’s upper ranks for centuries — was a lifelong Vatican bureaucrat- turned-diplomat, with a dour, ascetic manner. No Mother Theresa This isn’t Mother Teresa , the Albanian-born nun who spent her life caring for the poor of Calcutta and was beatified in 2002, or even Father Jerzy Popieluszko, the Polish priest who was beaten to death by the communist secret police in 1984 and who this month was put on the path to sainthood, together with Pius XII and John Paul II. Last week, the Vatican once again found itself trying to calm waters stirred by one of Benedict’s decisions. Last February, when the pope offered an olive branch to leading figures of a conservative schismatic movement who included a Holocaust-denying ex-bishop, the Vatican blamed “a management error.” This time, the Vatican press office issued a statement explaining that the pope’s decree on Pius’s “heroic virtues” wasn’t an assessment of “the historical impact of all his operative decisions,” but a confirmation that he had led a deeply Christian life. Surely, that was a requirement Pacelli met when he was chosen to be Pope in 1939. Modern Teachings Many experts think that Benedict is trying to reconcile the church with its own history, with teachings that prevailed before the Second Vatican Council, the historical gathering of church leaders convened by Pope John XXIII in the 1960s. That was when the Roman Catholic Church entered the modern age, adopting such principles as separation of church and state, freedom of religion, a more modern liturgy and a repudiation of anti-Semitism. “Benedict wants to emphasize the continuity of the church’s teachings, to make the point that the Second Vatican Council was not a break with the past,” said the Reverend Thomas Reese, a Jesuit scholar and senior fellow at the Woodstock Theological Center at Georgetown University. This isn’t a surprising line of thinking from a conservative pope who as a theologian, once kept watch over the church’s doctrine. But he didn’t need to add another pope to the roster of saints to make the point. Of the 265 popes in history, 76 are already saints: six are blessed. Perhaps now is the time to declare a halt to the practice, for liberals like John Paul II and John XXIII, as well as for conservatives like Pius XII. As Father Reese aptly noted, popes cannot be examples for ordinary Christians: Popes can only be examples for other popes. After President Barack Obama won the Nobel Peace Prize, a lot of people argued that heads of states should not be nominated for that kind of award until after they have left office. Maybe in the case of popes, sitting on the throne of St. Peter should be honor enough. ( Celestine Bohlen is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Celestine Bohlen in Paris at cbohlen1@bloomberg.net

Read the full article →

Alcott’s Potboilers Featured Drug Addicts, Cross-Dressers: Dave Shiflett

December 28, 2009

Review by Dave Shiflett Dec. 28 (Bloomberg) — Louisa May Alcott did a lot more than write “Little Women.” She was an abolitionist and a crusader for women’s rights. She wrote pulp fiction under a pseudonym. She chopped firewood. You’ll learn all about this fascinating woman in “Louisa May Alcott: The Woman Behind ‘Little Women,’” an engrossing docudrama airing tonight on PBS at 9 p.m. New York time. If you thought that Alcott was nothing but a prudish writer of family novels and children’s stories, think again. Starring Elizabeth Marvel as Alcott and Jane Alexander as her first biographer, Ednah Dow Cheney, the program reveals the many sides of the author of “Little Women,” an 1868 novel based on her childhood in Concord, Massachusetts. Alcott is portrayed as a wry, attractive free-thinker who was ahead of her time. Marvel often addresses the camera directly, delivering memorable lines from Alcott’s writings along with lively accounts of her conversations. For non-Alcott scholars, one of the surprising revelations is her authorship of crime fiction under the pen name A.M. Barnard. Those books featured drug addicts, cross-dressers and killers, a far cry from the stories for young readers that made her famous. Fruitlands Commune Alcott was no desperate housewife. She never married and made no apologies for her independence. “I’d rather be a free spinster and paddle my own canoe,” she quips in the movie, though she does mention a short-term relationship with a younger Polish lad. “We had a fine time for a fortnight,” Alcott observes, without providing salacious details. More interesting, to me at least, is her relationship with her father, Amos Bronson Alcott, a transcendentalist pal of Ralph Waldo Emerson and Henry David Thoreau . He is portrayed as a man with massive sideburns and a propensity for melancholy who let the women in his life do most of the heavy lifting. After a harrowing stint at the utopian Fruitlands community in northern Massachusetts, Louisa May’s family moved dozens of times, including a stay in one of Boston’s worst slums. ‘Moral Pap’ Dad could talk up a storm but he put few beans in the pot for his wife and four daughters. Louisa May toiled as a seamstress, laundress, teacher and wood-splitter. She never forgot those hard times, even after becoming wealthy from the publication of “Little Women” and its sequels, “Good Wives” and “Little Men.” “Though an Alcott I can support myself,” she says in a bit of understatement. She was brutally honest about her reasons for writing her best-known books. “I don’t enjoy writing moral pap for the young,” she notes, but “do it because it pays well.” The film, directed by Nancy Porter and written by Harriet Reisen, also explores Alcott’s dedication to progressive causes. “I was an abolitionist at the age of three,” she says. During the Civil War she worked at a Union hospital in Washington, where she contracted typhoid fever. She was treated with a compound called calomel, which contains mercury. Alcott thought the treatment caused chronic health problems, though the movie speculates that she may have also suffered from bipolar disorder and lupus. Like many writers, Alcott was prone to self-medication, which in her case included opium and hashish. She died on March 6, 1888, outliving her father by two days. This docudrama, part of PBS’s “American Masters” series, should spur fresh interest in Alcott, whose artistic and personal dexterity deserve wider appreciation. “Little Women” may never seem so prim again. ( Dave Shiflett is a critic for Bloomberg News. The opinions expressed are his own.) To contact the writer of this story: Dave Shiflett at dshifl@aol.com .

Read the full article →

U.S. Dollar Takes Temperature of Troubled World: Paul Kennedy

December 28, 2009

Commentary by Paul Kennedy Dec. 28 (Bloomberg) — How is one to explain the wild gyrations in the international exchange value of the U.S. dollar in recent times over the past year or so? During one month it is falling fast, in another it is rising just as fast. Since early December, it has risen about 5 percent against the yen — not a weak currency these days — and almost as much against the euro. Some older-fashioned bankers must be yearning for the days of fixed exchange-rates, for a time when a national currency was attached to the steady price of gold. Alas, no more. So it is not just the U.S. dollar and other currencies, but also the spot prices of oil, gold and other commodities that fluctuate wildly in the world markets. In sum, we live in a world of fiscal trading doubt. As a comfort, financial columnists will patiently explain why these reversals in currency values occur. Among the reasons: U.S. bond yields are ticking up; some economic indicators point to a resumption of growth; the U.S. balance of payments is forecast to shrink; Federal Reserve Chairman Ben Bernanke is talking up the dollar. One could toss in various other market forces, like the surge in sales of dollar-denominated junk bonds. So it is all markets, markets, markets. Sell the dollar short on Monday, buy it back on Tuesday. No wonder the big banks want to reward their smartest, fastest traders with epic bonuses. What goes up, must come down, until it goes up again. Even the mighty American currency is no exception here. Reasons for Unease Still, there are two other aspects to this tale of the dollar’s fate that grip me and make me uneasy in spite of the dollar’s recent gains. The first is the conviction among scholars much more learned in global financial matters than myself, that the dollar is inexorably headed to a reduction in its share of foreign- currency deposits held by national treasuries, because the latter will continually adjust to the shifts in the world’s productive balances, and thus to a currency’s relative purchasing value. This argument is most elegantly expressed in a recent article by the Italian economist, Antonio Mosconi called “The World Supremacy of the Dollar at the Rendering (1917- 1980).” But Mosconi’s sentiment exists in many other places. My own tack here on the dollar’s rises and falls isn’t a strictly economic one, but the view of someone professionally trained in the study of history and strategy. It is scarcely surprising to learn that, when crises and wars erupted, bankers and traders seek to put their money in the safest place possible, either a neutral country, such as Switzerland, or a country that seemed more likely to win than to lose (18th- and 19th-century Britain). Finding Refuge Again, if you lived in a country whose governmental policies were economically foolish, and whose national currency suffered as a result, you were only being prudent in locating some of your capital assets in a sounder place: how many of today’s worried Venezuelan or Argentine elites hold bank accounts in the U.S., Switzerland, the U.K. or the Cayman Islands? To a large degree, this benefits the host economy and keeps its currency strong. Occasionally, the national currency becomes so strong that its government imposes negative interest-rates, to stop the inflow of capital and its possible inflationary consequences. Still, it is a sign of confidence, a sort of market speculators’ Good Housekeeping Mark of Approval. Water flows ever downhill; smart money flows to where it can prosper and be secure. The history of currency movements thus becomes a not- much-understood history of relative national strengths as well as a history of international crises. World War I To give just one example: In the stormy years of repeated international crises before 1914, British Treasury officials feared that an outbreak of all-out war in Europe would cause foreign governments and private investors to drain gold from London, then the world’s only free market for gold. In fact, as soon as the July 1914 Balkan crisis seemed destined to lead to a Great-Power shootout, foreigners began to pour their gold and other assets into the pound sterling. All of this, of course, had an ironic double impact. As seen solely from the perspective of the currency markets, this was a massive vote of confidence in the British financial system. As seen from the perspective of the Foreign Office, though, this really was a bad omen; it meant that the international order, which the No. 1 power of the time had a massive interest in keeping stable, was tending toward chaos. Bad News Abroad In short, when a reserve currency strengthens sharply, even in the face of economic fundamentals such as large trade deficits, there is usually, perhaps always, bad news from abroad. This leads me to a rather gloomy conclusion, which I trust will not be proven correct, but which I think all sensible readers would like to ponder. If the above analysis is correct, then the U.S. has found itself in this first decade of an undoubtedly troubled 21st- century in a most peculiar condition as regards its twin roles, as the currency and banker of last resort, and as the key stabilizer of world security and international affairs. If global politics are relatively calm, the dollar will probably continue its gentle longer-term decline, fluctuating only in accordance with traders’ economic decisions. But if global politics are bad — war in the Middle East, the collapse of Pakistan, a shootout in the Taiwan Straits or on the Korean Peninsula, heightened Russian-Ukrainian tensions — then there will be a predictable flight to safety. It would be an exaggeration to claim that a strengthening U.S. dollar must always mean a worsening world situation. But a pattern of “stronger dollar, troubled planet” does seem to have established itself. So, given the choice, what would the Obama administration prefer: a rising national currency, with mayhem abroad or the prevalence of peace, with longer-term currency erosion? It’s worth a thought, even during our holiday celebrations. ( Paul Kennedy is a professor of history at Yale University. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Paul Kennedy at paul.kennedy@yale.edu

Read the full article →

My Casualty List Shows Stocks Ready to Rebound: John Dorfman

December 28, 2009

Commentary by John Dorfman Dec. 28 (Bloomberg) – From 1999 through early 2007, I compiled a quarterly Casualty List of banged-up stocks that I believed had good rebound potential. I’m resurrecting this idea. Here is the Fourth Quarter 2009 Casualty List, focusing on stocks that are down 15 percent or more for the quarter as of Dec. 24, and that I think are likely to recover smartly in 2010. In the leadoff spot is Jacobs Engineering Group Inc. of Pasadena, California. Joseph Jacobs , a engineer from Brooklyn, New York, founded the company in 1947. It has grown to a corporation with more than 160 offices in 20 countries, and with revenue of more than $11 billion in a year, according to the company’s Web site. A series of acquisitions fueled the growth at Jacobs. Often, acquisitive companies borrow heavily to finance their conquests. Not so with Jacobs. It carries debt equal to less than 1 percent of stockholders’ equity. Jacobs doesn’t have a nice, smooth earnings growth curve. Earnings bounce up and down from year to year. But I hope that the adoration of smoothness went out with Bernie Madoff . In any case, Jacobs has turned a profit every year going back at least to 1987, which is as far as the Bloomberg database carries me. Jacobs shares fell as much as 15 percent in a single day on Nov. 17, when the company forecast that it would earn $2.00 to $2.60 a share in 2010. Analysts had been expecting about $2.80. For the quarter, it is down about 16 percent. Room for Buyers Fidelity Management & Research, the Boston mutual fund giant, was once the largest shareholder , but it has been selling in 2009. I believe that Fidelity has now unloaded the vast majority of its stake, so that the coast is clear for buyers to come in without worrying about being trampled by an oversize seller. I like Jacobs because it has expertise in many aspects of engineering, because it has large customers who can undertake big, complex projects, and because of its sterling balance sheet. Harte-Hanks Inc. , based in San Antonio, has fallen about 20 percent this quarter. It publishes direct-mail marketing publications, notably the Pennysaver and The Flyer in California and in Florida. In its three best years, Harte-Hanks earned $1.26 to $1.39 a share. Analysts are predicting only 82 cents a share in 2010 , but I suspect the company might earn a dollar a share as the economy revives more rapidly than people expect. The stock is trading a little below $11. If I’m right, it is selling for about 11 times 2010 earnings, a pretty multiple. If I’m wrong and the analysts’ consensus is right, it’s at 13 times earnings, still reasonably attractive. Time Horizon While I think Jacobs Engineering is a good three year-to- five year pick, Harte-Hanks is more of a one-year strategy. I think the Internet will continue stealing advertising market share from print products over time. But as a play on a reviving economy, I think Harte-Hanks is timely. If you achieve a gain, I’d sell the stock as soon as the gain qualifies for long-term capital-gains tax treatment. Frontier Oil Corp. , based in Houston, is having a terrible year. Analysts expect that when it closes the books on 2009 it will have earned 26 cents a share, the worst showing since 2003, and a mere shadow of peak earnings, which were $4.62 a share in 2007. That year, Frontier shares hit a high of about $48 a share. Today they languish at less than $12. Oil Prices It seems to me that earnings between $1 and $2 a share would suffice to lift the stock price substantially. I think Frontier will enter that earnings zone in 2011, as oil prices rise. I think oil will rise because of increased demand by reviving economies in the U.S. and Europe. The price might also be pushed higher — though I hope not — by political turmoil in the Middle East, Russia or Nigeria. Frontier’s specialty is refining heavy oil, which is thicker than so-called light, sweet crude. Many refineries are unable to cope with the more gunky grades of oil. At present, demand isn’t especially heavy. When demand intensifies, the ability to refine heavy crude becomes a desirable capability — especially if light, sweet crude is in short supply. I think Frontier’s competitive position is likely to improve in 2010 and 2011, and so is its pricing power. The stock trades for eight times earnings and just over book value (corporate net worth per share). I’ll round out the list with another niche energy stock, Cal Dive International Inc. of Houston. If you need divers to lay pipe or to repair an offshore rig under water, Cal Dive is one of the leading suppliers. Earnings Decline Since it went public in 2006, Cal Dive has struggled. Diluted earnings per share declined in 2007 and 2008, and seem likely to decline again in 2009. The consensus calls for earnings of 94 cents a share this year, down from $1.91 in 2006. Why on earth would I want a stock whose earnings are in their third straight year of decline? I like it because it provides a useful service, and because the stock is just plain cheap, trading at six times earnings and at very close to book value. Disclosure note: I currently have no long or short positions in any of the stocks discussed in this week’s column, personally or for clients. ( John Dorfman , chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com .

Read the full article →

Elusive Monbousquet Blanc Heads My List of White Bordeaux: John Mariani

December 28, 2009

Review by John Mariani Dec. 28 (Bloomberg) — Bordeaux, famous for its magnificent red wines, also makes a few good whites. Not many rank with their better counterparts from Burgundy, yet the prices for some white Bordeaux match all but the most illustrious Grand Crus. I exempt from this discussion Bordeaux’s enchanting dessert wines, Sauternes and Barsacs. Under the famous 1855 classification of the white wines of the Gironde, none were dry. Until the mid-1980s, Graves (where most of the better known whites come from), made such a wide variety of styles — light sauvignon blancs, herbaceous semillons, wines that were oaky or oxidized — that buyers had little consistency to base decisions on. Then, in 1987, the northern communes were given a higher classification of appellation, “Pessac-Leognan,” which challenged vintners to upgrade their facilities and products. Quality has improved overall. With such a short track record, it’s difficult to accept the argument that the better white Graves need a decade to mature. Few of even the great white burgundies get better over 10 years. And who has the patience to wait that long for a white Bordeaux? Recent tastings of several of the best-known Graves whites did little to change my mind. Fans celebrate their “flinty austerity,” which is another way of saying they have minimal fruit, lean body, and a short finish. Expensive Afterthought Chateau Lynch-Bages , owned by the AXA SA insurance group, makes a Fifth Growth red wine many believe should rank higher. But the 2006 Blanc de Lynch-Bages seems little more than an expensive afterthought, selling at between $40-$70. One on-line wine site finds “fruit, citrus, young, acidic, white, nutty, mineral, nuts, lemon, Mediterranean and subtropical fruits.” I’ll agree with it being white, but the only Mediterranean reference I buy is that it’s no better than a modest pinot grigio costing one-third the price. Carbonnieux Blanc 2006 ($30-$45) is indeed austere, like a performance of John Cage’s 4’ 33,” in which the pianist sits at the piano for 4 minutes and 33 seconds and plays nothing. There is only an aroma if you imagine it, only flavor if you squint your eyes, and were it not for its alcohol, you might mistake it for mineral water. Of those whites I enjoyed, Pavillon Blanc du Chateau Margaux 2005 ($75-$135) is 100 percent sauvignon blanc and made to express that varietal’s floral, citrus and vegetal character. The high 14 percent alcohol helps rather than hinders in this case. This is not a lush Loire Valley-style sauvignon blanc, but there are mineral nuances here that make it a stand-out for Bordeaux. I do not, however, think it is getting any better after four years of age, so drink up now. Bordeaux Upgrade Chateau Smith Haut Lafitte Blanc 2005 ($70-$90) — made from 90 percent sauvignon blanc, 5 percent sauvignon gris and 5 percent semillon — shows the kind of upgrade Bordeaux whites have gone through. It’s pleasingly plump and balanced with enough acid to be refreshing while still delivering richness. With a lovely finish of minerality, it is excellent with seafood. For me, one of the great white Bordeaux is not even from Graves. It is Chateau Monbousquet , a St.-Emilion whose Grand Cru red brother has built a high reputation all its own since Parisian hypermarket magnate Gerard Perse bought and completely renovated the vineyards in 1993. I tasted the Monbousquet blanc 2004 by chance recently when I asked Emilie Garvey, sommelier at New York’s SHO Shaun Hergatt restaurant, to choose a good white wine for our dinner. ‘Fat, Buttery’ “It is a wine that is extremely allocated and difficult to get,” Garvey said. “It’s certainly not typical of Bordeaux whites, which have a lean, crisp, flinty flavor from the shells in the soil. Monbousquet has a fat, creamy, buttery taste and texture I think is the richest style in the market right now.” She’s right. The wine, which SHO sells for $220 a bottle, was a revelation — a white Bordeaux not shy about its body. In the nose, in the first sip and in the finish, here was a wine that showed the fullness of sauvignon blanc without the grassiness that can cripple the fruit. And that’s only the beginning: the blend has 35 percent sauvignon gris, 5 percent muscadelle and 5 percent semillon, each bringing nuance and floral flavors. Only about 450 cases are made each year, so the 2006 and 2007 vintages are bargains at about $40 to $70 a bottle at retail stores. By the way, if you’re going to SHO Shaun Hergatt, Garvey was only able to obtain three bottles and I drank one. So hurry. ( John Mariani writes on wine for Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: John Mariani at john@johnmariani.com .

Read the full article →

Restaurateurs Attack U.K. Banks for Tight Lending Even as Diners Return

December 27, 2009

By Richard Vines Dec. 25 (Bloomberg) — London restaurateurs are not optimistic they can get financing from banks for new eateries, even though they have fared better in the recession than they expected, said Richard Corrigan , owner of Corrigan’s Mayfair. “The banks are really negative toward our sector,” Corrigan said. “If you went in and asked them for 3 million pounds ($4.8 million) to open a restaurant, you might need a balaclava and gun to get it.” Corrigan, who also owns Bentley’s oyster bars in London and Dublin, said he started the year nervous because he opened in November 2008, just after the collapse of Lehman Brothers Holdings Inc. , which had been among the biggest customers at his London eateries. He was speaking on Bloomberg Television’s “Restaurant Review of the Year,” where the other guests at Corrigan’s Mayfair were David Moore, owner of Pied a Terre and L’Autre Pied; Russell Norman of Polpo; and Peter Prescott of Prescott & Conran Ltd., which opened Boundary and Lutyens in the past year. “It’s a strange approach from lenders at the moment,” Norman said. While the restaurateurs said business had picked up toward the end of the year after a slow start, spending on wine had generally not returned to that of the pre-recession days. “We found a turnaround in September, when all of a sudden we were getting more and more interest,” Moore said. “We’ve got the City types, bankers, not afraid to be seen spending money any more.” Lutyens, Boundary Prescott said Lutyens, his company’s new restaurant close to the financial district, still had some way to go but that spending was easier at Boundary, in Shoreditch, a fashionable part of East London that is known for its eateries and bars. At Lutyens, “We are still struggling a little bit because we are directly across the road from Goldman Sachs and there are lots of silly rumors like they can’t be seen anywhere near a glass of Champagne. We’ve seen some very good signs from October onwards. The wine spend in the City is still quite low, but fortunately it’s still reasonably good in Shoreditch.” Norman’s Polpo, which opened in Soho in September, has been a notable success with its informal ambience and inexpensive food and drinks. I’ve been a few times and seen the queues. Norman says recession may not be all bad for restaurateurs. “It’s one of the best things that we now have to work harder to keep our customers,” he said. Corrigan closed his restaurant in Soho, Lindsay House, after opening his new establishment in Mayfair. Did he have any regrets about leaving Soho, known for its night life? “Opening Corrigan’s was much better than I expected,” he said. “I took the punt and I’m very happy what it’s turned out to be. The horses have certainly come home for me on this site. But I miss all the crack dealers and the petty criminals.” The half-hour show starts on Bloomberg Television on Dec. 25 at 09:00 U.K. time and repeats through to Jan. 1, 2010. (Richard Vines is the chief food critic for Bloomberg News. Opinions expressed are his own.) To contact the writer on the story: Richard Vines in London at rvines@bloomberg.net .

Read the full article →

MGM Mirage’s James Murren Says Ground Zero Inspired CityCenter: Interview

December 24, 2009

Interview by James S. Russell Dec. 24 (Bloomberg) — If James Murren , the chairman and chief executive officer of MGM Mirage , needs any reminder of the dire state of Las Vegas, he doesn’t have far to go. Standing forlornly next door to CityCenter, the glittering new mega-resort his company co-owns with state entity Dubai World, is the defaulted, unfinished Cosmopolitan casino. CityCenter, which at $8.5 billion and 18 million square feet is by far the largest development Las Vegas has ever seen, opened this month as the city’s two-year recession showed signs of easing. Yet the complex is a long shot by any measure. I spoke to Murren, a youthful 48 with a touch of gray, while sitting at a boardroom-size table in his grand private office within the faux Tuscan splendor of the Bellagio Resort. From here he runs the 20 properties MGM Mirage owns or has investments in. Bringing in six celebrity architects to design CityCenter was Murren’s brainchild. Their sleek, glistening buildings are supposed to lure the free-spending visitors necessary to reduce MGM Mirage’s $13 billion in long-term debt. I asked Murren, who once considered a career in architecture, how big-name architects figured into a city defined by fantasy and spectacle. “In 2004, we were looking at how to develop the 67 prime acres we had between the Bellagio and Monte Carlo resorts. We were seeing designs for one theme hotel after another. It was a big yawn.” Murren said that while attending Trinity College in the “troubled, decaying” city of Hartford, Connecticut, he interned at agencies that helped house people. He also swooned over Rome during a college-sponsored sojourn. ‘Magical Time’ “That was a magical time,” he said, and one when the profession of architecture tempted him. “I wanted to examine the livability of cities.” For CityCenter, he said he also drew inspiration from the design competitions for the World Trade Center. Daniel Libeskind , whose masterplan became the basis for Ground Zero’s redevelopment, agreed to design Crystals, CityCenter’s shopping mall. Two other Ground Zero competitors, Rafael Vinoly and Norman Foster , designed hotels at CityCenter. The area devastated on 9/11 was well-known to Murren, whose career path actually took him to Wall Street. He rose to director of research and managing director at Deutsche Bank before joining MGM Mirage as chief financial officer in 1998. His wife, Heather, was the managing director for global securities research and economics at Merrill Lynch & Co. “I knew that world-class architects could make an experience that was meaningful and immersing,” Murren said. He wanted a high-density plan, with a mix of residences and hotels. Radical Notion He was determined that the development would be less like a hermetic blob on a highway strip and more public. He advanced the radical notion — at least in Las Vegas — that people might enjoy walking. He added $40 million in art. “I overlaid a significant public-art program to appeal both to tourists and people who live here,” Murren said. He demanded green design and management techniques, though they get a distinctive spin in a city devoted to heedless spending. Slot machines are energy efficient, acres of glass are protected by shading horizontal fins, and the limo fleet runs on natural gas. After Frank Gehry turned him down, Murren rounded out his design team with Manhattan’s Kohn Pedersen Fox, Chicago’s Murphy/Jahn, the New Haven firm of Pelli Clarke Pelli , and Gensler , a large international architecture and consulting firm hired to deal with the egos involved. “They all took us to places we couldn’t imagine,” he said. ‘Rugged Year’ How does he make CityCenter work in this economy? “It’s been a really rugged year, but 35 million tourists will still come. CityCenter will act as a catalyst. Visitation has grown 10 to 20 percent after a significant project opens up.” “International tourists are coming because America is on sale. We have a larger share of the Asian market in our portfolio.” Asked about prospects for Las Vegas, Murren says “there’s unlikely to be any major new development in the next five years. Everyone needs to lick their wounds, heal, and reduce leverage.” He remains bullish on the city: “You can get things done here at a speed that other places can’t imagine. Eight years after 9/11, New York hasn’t got the 11 million square feet of Ground Zero rebuilding done. Here we proposed 18 million square feet in 2004 and we opened it in 2009.” ( James S. Russell is Bloomberg’s U.S. architecture critic. The opinions expressed are his own.) To contact the writer of this column: James S. Russell in New York at jamesrussell@earthlink.net .

Read the full article →

Citigroup’s Crystal Ball Too Fogged Up to Work: Jonathan Weil

December 24, 2009

Commentary by Jonathan Weil Dec. 24 (Bloomberg) — When the Treasury Department shelved its plans to sell $5 billion of Citigroup Inc. common stock in a public offering last week, the news came only two days after the bank had said the sale was a go. The delay was a reminder that predicting the future can be a tough exercise. So imagine how difficult it must be for Citigroup to predict the amount of taxable income it will generate during the next 20 years . If you think its executives can do that, then you just might believe the $38 billion net value for an item on Citigroup’s balance sheet called deferred-tax assets , which represent 27 percent of the company’s shareholder equity . Keep in mind, this is the same Citigroup that didn’t see the credit crunch coming until it was too late, and wouldn’t have survived without a government rescue. Deferred-tax assets generally consist of tax-deductible losses and expenses carried forward from prior periods, which companies can use to reduce future tax bills. The catch is they are valuable only to companies that are making money and paying income taxes. Citigroup probably will record its second straight annual net loss , according to the average estimate of analysts surveyed by Bloomberg. It reported a $27.7 billion loss for 2008, which eclipsed its previous two years of earnings. The way it’s been able to keep those assets on its books is by assuming it will earn enough taxable income in the future so it can use them all. Otherwise, it would have to write them down by recording an offsetting reserve called a valuation allowance . This is where Citigroup’s recent assumptions look awfully bold. Always a Zero Citigroup’s allowance was zero as of Sept. 30, the same level it’s been at since 2006, when Citigroup was posting near- record profits and its net deferred-tax assets were just $4.7 billion. None of the other three U.S. commercial lenders with more than $1 trillion of assets has adopted such an extreme stance. Their tax assets also are much smaller than Citigroup’s. Even the strongest of those too-big-to-fail banks, JPMorgan Chase & Co. , had included a $1.3 billion valuation allowance in its $13 billion net deferred-tax asset as of last Dec. 31, which was the last time it disclosed a complete tax footnote in its financial filings. Wells Fargo & Co. and Bank of America Corp. also had set up at least some allowance against theirs. How could it be that Citigroup didn’t need an allowance, while those other banks did? A Citigroup spokesman, Jon Diat , declined to answer that question. This result might make sense to me if Citigroup were the healthiest, most profitable bank of them all. It’s anything but that. Looking Fishy Another reason Citigroup’s lack of allowance looks fishy is that the bank has reported a cumulative loss for the past three years. Under the Financial Accounting Standards Board’s rules on the subject, “forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years.” In its financial filings , Citigroup has said it overcame that presumption by concluding it “more likely than not” will generate at least $85 billion of taxable income over the next two decades. It also has said it has “sufficient tax-planning strategies” to fully realize the asset. That Citigroup was able to raise $20.5 billion last week, including $17 billion from sales of common stock, could help the company’s case, too. Still, the notion that Citigroup can credibly make far- ranging forecasts cries out for skepticism. Making News “It’s a mystery to me,” says Robert Willens , a tax and accounting specialist who teaches at Columbia Business School in New York. “They have the strongest possible negative evidence and the weakest source of taxable income, and somehow when you put those together they don’t need a valuation allowance.” Citigroup’s deferred-tax assets were in the news again this month, after the Internal Revenue Service granted the company an exemption so that it wouldn’t lose any of them as a result of the Treasury’s planned stock sales. Normally, such sales would be deemed an ownership change under the tax code, in which case Citigroup would have lost its right to use much of the assets. Even with the IRS exemption, though, Citigroup still must demonstrate it can use them all, to avoid writing them down for financial-reporting purposes. It wasn’t until 1992 that the FASB began letting companies record deferred-tax assets that depend on future taxable income. Banking regulators limit the amounts lenders can count toward their capital measures, because such assets can’t be used to absorb future losses. At Citigroup, $21.9 billion of its deferred-tax assets were disallowed for purposes of calculating its regulatory capital as of Sept. 30. Rich History There’s also a rich history of companies with large deferred-tax assets waiting until they’re on the verge of collapse to write them off. Among them: Fannie Mae, Freddie Mac, General Motors Corp., Bethlehem Steel Corp. and Nortel Networks Corp. Citigroup’s tax assets would have been rendered worthless last year had the government not bailed the company out. Other assets at Citigroup may need major writedowns, too. The company now has a $93 billion stock-market value , including the government’s 27 percent stake. That’s $47.5 billion less than the common shareholder equity it reported as of Sept. 30, which tells you investors still don’t trust its balance sheet. Maybe they know something Citigroup doesn’t. ( Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

Read the full article →

Sugar Plum Martinis, Seriously Bad Elf Thrill Holiday Barflies: Review

December 24, 2009

Review by Catherine Smith Dec. 24 (Bloomberg) — The bartender at The Campbell Apartment in Manhattan strained the Mistletoe Martini into a chilled glass. The woman next to me, who came from a place so far west she goes partying by tractor, asked: “Do you get a kiss with that drink?” Good idea, but the bartender wasn’t going for it. The Campbell Apartment is a swank lounge in New York’s Grand Central Terminal . Close to the trains, it’s a perfect commuter bar. In olden days, it was the opulent quarters of American financier and railroad executive John Campbell until his death in 1957. By day he conducted business there, by night he entertained friends. Right now, the red banquettes and hand-painted timbered ceiling set a perfect holiday scene, without too much annoying music. Owner Mark Grossich says Christmas tunes account for only 33 percent of the play list. The Mistletoe Martini, a new addition to their holiday drink list, is made with Grey Goose Le Poire for $13.50. They’re also serving the Sugar Plum Martini, made with Stoli Razberi for $14. You can pirouette yourself to the last train on New Year’s Eve. The Campbell Apartment is located at 15 Vanderbilt Ave. on the southwest corner of Grand Central Terminal. Sometimes it’s booked for private parties, so call ahead. Information: +1-212- 953-0409‎; http://www.hospitalityholdings.com/ Here are a few other places to take your pet reindeer or the old man with the scythe. Champagne What’s more festive than champagne? The Bubble Lounge in Tribeca sells more than 20 kinds of champagne by the glass. The house brand, Couche, is slightly fruity, but well-balanced and sells for $15 a glass or $75 a bottle. But perhaps your taste runs to a magnum of 1975 Roederer Cristal for $3,500. On New Year’s Eve a $30 cover charge will get you a complimentary drink and a night of dancing to DJ Johnny Dynell starting at 9 p.m. The Bubble Lounge is located at 228 West Broadway at White Street. Information: +1-212-431-3433; http://www.bubblelounge.com/ . Eggnog Have enough eggnog and soon you can play Santa Claus without a fat suit. My search for the best stuff took me to the Waterfront Ale House in Murray Hill. Owner Sam Barbieri has been making Holiday Eggnog for 17 years. His dairy drink is spiked with a blend of bourbon, brandy, dark rum and Bacardi 151 rum. It’s a nice mix: all that good booze makes the eggnog less cloying and highly drinkable. A 6 oz. glass is $5 and he also sells it to go for $25 a bottle. Last year he sold more than 800 one-liter bottles. Holiday Beer Christmas beers, rich brews from late-season barley harvests that sometimes include festive additions like cinnamon, ginger or honey, are big this time of year. The Waterfront will be serving Anchor Christmas Ale and Sierra Nevada Celebration Ale, both from California for $7 per pint. Seriously Bad Elf and Lump of Coal, both from England go for $8 per pint. The Waterfront Ale House is open on New Year’s Eve from 11:30 a.m. till late, and on New Year’s Day from noon. It is located at 540 Second Ave. on the corner of 30th Street. Information: +1-212-696-4104; http://www.waterfrontalehouse.com/ The Heartwarmer Four Seasons Hotel in Midtown Manhattan has a festive foyer where a 24-foot-tall Christmas tree stands in all its glory. They say it’s the largest tree in any New York City hotel. In my opinion, the real festivities take place around the corner and up the stairs at The Bar. Bar manager Shannon McCoy has created a spiced vodka that is infused with figs, cloves, cinnamon and other seasonal flavors. She’s selling about seven bottles a week and it’s the basis for her holiday Heartwarmer. It’s served either warm or cold with apple cider for $22. I had mine cold in a martini glass. The Bar is located in the Four Seasons Hotel at 57 E. 57th St. On New Year’s Eve the jazz band Straight Ahead will play from 9 p.m. to 1 a.m. Information: +1-212-758-5711; http://www.fourseasons.com/newyork/ . ( Catherine Smith writes for Bloomberg News. The opinions expressed are her own. To contact the writer on the story: Catherine Smith in New York c.smith@bloomberg.net .

Read the full article →

RBS Reviews Its $24 Million Collection of Artwork to Decide What to Sell

December 24, 2009

By Farah Nayeri Dec. 24 (Bloomberg) — Royal Bank of Scotland Group Plc , the U.K. bank majority-owned by the government, said it may sell works from its in-house art collection that is worth as much as 15 million pounds ($24 million). The lender, which has received 45.5 billion pounds in state aid in the world’s most expensive bank bailout, is reviewing its collection to determine initially whether UK national museums wish to acquire any of the items. The bank won European Union approval Dec. 14 for a restructuring plan. Under the plan, it has to get rid of 300 branches and insurance divisions over the next four years, spokeswoman Linda Harper said yesterday. “We’ll have less buildings, and less of a need for art that we’ve acquired,” Harper said in a telephone interview. She said the bank was identifying works that national museums and galleries might want, “and if there’s a surplus of art, we may look at disposals.” “No decisions have been taken yet, but we will not sell any pieces of art that are of heritage or of historical importance,” said Harper. The works will be sold when a good price can be fetched for them on the art market, she said. The bank says it has some 2,200 works of art worth more than 1,000 pounds, and another 1,500 or so limited-edition prints. The art collection grew in 2000 when RBS acquired National Westminster Bank Plc and incorporated the pieces in that collection. One of the paintings that had been part of the NatWest collection, a work by Frank Auerbach , was sold two or three years ago, Harper said. According to the Scotsman newspaper, it sold for 780,000 pounds; Harper wouldn’t confirm the figure. The oldest work currently in the RBS collection dates from around 1750, and is Johann Zoffany’s “Portrait of Andrew Drummond,” founder of Drummonds, the Scottish lender, RBS said. Other pieces include Jack Vettriano ’s “Fish Teas” and L.S. Lowry’s “At the Factory Gates,” according to RBS. The collection is valued between 10 million pounds and 15 million pounds. To contact the writer on the story: Farah Nayeri on farahn@bloomberg.net

Read the full article →

Streep, Baldwin Romp as Exes With Benefits in `Complicated’: Jeremy Gerard

December 23, 2009

Review by Jeremy Gerard Dec. 23 (Bloomberg) — In “It’s Complicated,” Meryl Streep plays Jane Adler, a mother of three grown kids who has an affair with her ex-husband as his curvy, bossy young wife watches helplessly. The apt words for Streep here — funny, sexy, poignant, determined, ambivalent and seriously beautiful — also apply to writer/director Nancy Meyers’s savory revenge fantasy for the First Wives Club. Jane runs a successful upscale patisserie in Santa Barbara, California and pads around the kind of empty nest that non-Santa Barbarians would call an estate. She’s a competition-level nurturer. Customers swoon over her breads. Her children worship her goodies. Her ex, Jake, a high-powered lawyer, goes wide-eyed and drooly at the thought of her roast chicken. Paunchy, narcissistic, Porsche -driving Jake is played with magnetic charm by Alec Baldwin , and the chemistry between Streep and him is as pungent as anything in Jane’s oven. (In 2003, Meyers paired Diane Keaton with Jack Nicholson in “Something’s Gotta Give.”) Married 19 years and divorced for a decade, Jane and Jake have fabulous sex during a trip to New York for their son’s graduation. Soon Jake’s dining chez Jane as his increasingly distraught wife stews at home, her biological clock a ticking bomb about to detonate. Chocolate Croissants Jane is being pursued by Steve Martin ’s Adam, an architect (he’s building her an even bigger home kitchen) and nice guy. When they finally have a date, they end up in the restaurant making chocolate croissants from scratch. If there are any teenage boys left in the theater by this point, watch for a mass exodus here. The closest Meyers comes to blowing stuff up is when Jane inevitably must choose between her two suitors. It goes without saying that “It’s Complicated” is not for the “Avatar” demographic. For grownups, on the other hand, she provides several memorably funny set pieces, including a pot-smoking scene with Streep and Martin and a nude romp involving all three stars and a MacBook with its camera on. “It’s Complicated” has the glossy look of culinary porn, a Sur La Table catalogue come to life. You probably won’t be surprised to learn there’s a rain-drenched scene in a Martha Stewart-worthy garden with glistening lettuce leaves the size of palm fronds. Apartment dwellers may be moved to throw tomatoes at the screen. The moments that evoke the Noel Coward of “Private Lives” underscore the contrivance at the heart of things. But what an enjoyable contrivance. It’s very hard not to have a laugh-out- loud good time when three stars in top form are so obviously enjoying themselves this much. “It’s Complicated,” from Universal Pictures, opens Dec. 25 across the U.S. Rating: *** ( Jeremy Gerard is an editor and critic for Bloomberg News. The opinions expressed are his own.) To contact the writer of this column: Jeremy Gerard in New York at jgerard2@bloomberg.net .

Read the full article →

← Previous Entries

Next Entries →