Bailout fund spurs worries about number of bad loans in financial system
NEW YORK - Stocks pulled back sharply Monday as news that major U.S. banks will set up a fund to help bail out the credit markets stirred concerns about bad debt and as oil prices surged to $86 per barrel for the first time. The Dow Jones industrial average lost more than 100 points.
The stock market’s pullback comes not only amid concerns about debt and rising energy costs but as investors await third-quarter reports due this week from more than 80 components of the Standard & Poor’s 500 index.
The concerns about banking came after Citigroup Inc., the biggest U.S. bank, reported that third-quarter results fell 57 percent. The company said it lost more than $3 billion in mortgage-backed security losses, leveraged debt write-downs and fixed-income trading losses.
The bank — along with JPMorgan Chase & Co. and Bank of America Corp. — announced the creation of a fund used to help revive the asset-backed commercial paper market. The fund will buy assets from structured investment vehicles, also known as SIVs, which buy corporate bonds and subprime mortgage debt. The bailout was orchestrated by the Treasury Department to avoid a fire sale in the market.
“It’s a reminder that this problem never was entirely put to bed. There may be financial institutions out there than are in more trouble than we thought they were,” said Aaron Gurwitz, co-head of portfolio strategy at Lehman Brothers Investment Management, referring to concerns about bad debt. He also noted that Monday’s session wasn’t unusual given the back-and-forth moves in the major indexes in recent sessions.
According to preliminary calculations, the Dow fell 108.28, or 0.77 percent, to 13,984.80.
Broader stock indicators also declined. The S&P 500 index fell 13.09, or 0.84 percent, to 1,548.71, and the Nasdaq composite index fell 25.63, or 0.91 percent, to 2,780.05.
Bonds fell following a better-than-expected economic regional economic reading in New York. The yield on the benchmark 10-year Treasury note rose to 4.68 percent from 4.65 percent late Friday. The dollar was mixed against most other major currencies, while gold prices rose.
Light, sweet crude rose to record levels, crossing $85 per barrel for the first time and rising as high as $86.22 in trading. Oil settled up $2.44 at $86.13 per barrel on the New York Mercantile Exchange as after the Organization of Petroleum Exporting Countries said crude production by countries that aren’t OPEC members is probably falling despite rising demand.
The week’s economic calendar is light, putting more of the focus on quarterly results. On Monday, the New York Empire State Index — a regional economic indicator published by the Federal Reserve Bank of New York — came in better than expected for October. The index rose to 28.75 from September’s 14.70.
Investors are keeping tabs on corporate and economic data as they try to determine how well corporate profits will fare.
“All those guys are tempering their expectations because the economy is slowing,” said Thomas Nyheim, vice president and portfolio manager at Christiana Bank & Trust Co., referring to Wall Street’s estimation for moderate growth in third-quarter profits.
The concerns over soured loans drew comments from Treasury Secretary Henry Paulson, who said in a speech Monday that the troubles with SIVs might require regulators to step in to stave off future problems, according to Dow Jones Newswires.
Wall Street’s unease Monday follows a period of calm after worries about the credit markets roiled markets around the world over the summer. During August and into September, investors were concerned that mortgages made to borrowers with poor credit that had been bundled together and sold off as investments would resurface and cause widespread losses. Indeed, some hedge funds and other investment vehicles worldwide that held subprime debt succumbed to the soured loans. It wasn’t until the Fed stepped in with reductions in short-term interest rates and the rates it charges to loan to banks that the credit markets began to show signs of recovery.
Citigroup fell $1.63, or 3.4 percent, to $46.24 after the bank raised its loan-loss provisions by $2.24 billion — a higher amount than it estimated a week ago — amid expectations of further deterioration in consumer credit. The bank also said it would delay repurchases of its shares.
Medtronic Inc. fell $6.33, or 11 percent, to $50 after the company said it suspended sales of its Sprint Fidelis defibrillation leads because of risk they could break.
Biogen Idec Inc. jumped $13.08, or 19 percent, to $82.51 after the company said it may sell itself and that it has drawn interest from potential buyers.
Declining issues outnumbered advancers by about 8 to 3 on the New York Stock Exchange, where volume came to 1.29 billion shares compared with 1.06 billion shares traded Friday.
The Russell 2000 index of smaller companies fell 11.81, or 1.40 percent, to 829.36.
credited by: www.msnbc.msn.com
2007-10-15
Home prices post steepest drop in 16 years
The decline is accelerating, with prices falling faster in every month since the start of the year.
By MSN Money staff with wire reports
The housing market just got even uglier.
A decline in U.S. housing prices in July was the steepest drop in 16 years, according to the nationwide S&P/Case-Shiller home price index released this morning.
The downturn in the U.S. housing market has been blamed for creating turbulence in international money markets and has kindled domestic concerns about a possible recession. Federal Reserve policymakers cut short-term interest rates by half a percentage point last week in an effort to bolster economic growth.
Home prices were lower in 15 of 20 metropolitan areas, the report showed. A subindex of 10 metropolitan areas fell 4.5% in July, the biggest drop since July 1991. The largest declines over the past year were in Detroit; Tampa, Fla.; and San Diego. Seattle and Charlotte, N.C., had the biggest increases.
Home prices have fallen by more every month since the beginning of the year.
David Blitzer, the chairman of the Standard & Poor's index committee, said the big declines may be done by the end of the year.
"Maybe the first stage is steep declines, and we're just about done with those," he said. "The second stage is not much gain, not much loss. The rest of the economy has to catch up to home prices."
Yale economist Robert Shiller, who helped create the indexes, said in a statement, "The further deceleration in prices is still apparent across the majority of regions." Shiller is also MacroMarkets' chief economist and perhaps is best known for predicting the dot-com bust.
Shiller told lawmakers in written comments last week that the loss of a boom mentality among consumers poses a "significant risk" of a recession within the next year.
credite by: msn.com
By MSN Money staff with wire reports
The housing market just got even uglier.
A decline in U.S. housing prices in July was the steepest drop in 16 years, according to the nationwide S&P/Case-Shiller home price index released this morning.
The downturn in the U.S. housing market has been blamed for creating turbulence in international money markets and has kindled domestic concerns about a possible recession. Federal Reserve policymakers cut short-term interest rates by half a percentage point last week in an effort to bolster economic growth.
Home prices were lower in 15 of 20 metropolitan areas, the report showed. A subindex of 10 metropolitan areas fell 4.5% in July, the biggest drop since July 1991. The largest declines over the past year were in Detroit; Tampa, Fla.; and San Diego. Seattle and Charlotte, N.C., had the biggest increases.
Home prices have fallen by more every month since the beginning of the year.
David Blitzer, the chairman of the Standard & Poor's index committee, said the big declines may be done by the end of the year.
"Maybe the first stage is steep declines, and we're just about done with those," he said. "The second stage is not much gain, not much loss. The rest of the economy has to catch up to home prices."
Yale economist Robert Shiller, who helped create the indexes, said in a statement, "The further deceleration in prices is still apparent across the majority of regions." Shiller is also MacroMarkets' chief economist and perhaps is best known for predicting the dot-com bust.
Shiller told lawmakers in written comments last week that the loss of a boom mentality among consumers poses a "significant risk" of a recession within the next year.
credite by: msn.com
Marcial: This Market Rally Has Legs
The stock market is far smarter than a lot of people think. When the Dow Jones industrial average surged to finish the third quarter with a 487-point gain, or 3.6%, to 13,895.63 -- and then went even higher -- many market watchers and media pundits were in total disbelief. They could attribute it only to what they described as a disconnect between economic reality and the market's optimism. Remember, however, the market has "fooled" a lot of people a lot of times, in both directions. It was just another of those times when the market, for reasons that admittedly are often hard to fathom, decided it liked what it saw ahead, beyond what most people observed.
There is a lot more to this market's advance than some may realize. And be prepared to ride with this rally, allowing for some speed bumps along the way, for the next 6 to 12 months. Some fearless forecasters predict that the Dow will streak to 16,000 and that the Standard & Poor's 500-stock index will go to 1,700 over the next 6 to 12 months. I agree with that forecast. Why? Let me be brief: It's the global economic boom.
The Market Is Over It Already
I'll give you a longer explanation. Through all the turbulence it has endured -- including the deep drop last summer resulting from the credit crisis -- the market returned with renewed vigor on Oct. 9 to score yet another record high. The Dow vaulted 120.8 points, or 0.9%, to 14,164.53 -- its 34th record close in 2007 and the 56th since the start of October, 2006. The S&P advanced nearly 1%, to 1,565.15, and the NASDAQ composite index jumped 0.6%, to 2,803.91.
The media attributed the gains to the Federal Reserve's nonincendiary comments at its Sept. 18 meeting that suggested the U.S. economy wasn't heading toward a recession. The decision by the Fed to cut interest rates in September was based on concerns that the credit turmoil could lead to slower growth at this time of extreme uncertainty. Such a conclusion was gleaned from recent Fed minutes, which also showed that the Fed members avoided language that could have suggested the U.S. economy will contract, as opposed to what some economists have been predicting.
But that was the excuse for the day. The real reason behind the market's continued rally, punctuated by some downswings, stems from its important role as a leading economic indicator. As such, the market has digested and moved beyond what many observers are now focusing on.
There is the disturbing plunge in home sales that has severely pulled down prices; fear that the credit crunch is not yet concluded, as major banks and financial houses are being crimped by huge losses and write-downs because of their involvement in the subprime mortgage mess. And there's more: skyrocketing crude oil prices; softening retail sales and slumping consumer confidence; weak industrial production and manufacturing activity; slowed durable-goods orders; and weakening corporate profits. And there's former Fed chieftain Alan Greenspan warning that the chances of a recession have increased. Of course, there is also the protracted war in Iraq, which is draining hundreds of billions of dollars from the national coffers. That's one big bundle of serious concerns.
No Classic Signs of a Recession
So what's there to be optimistic about, and what's the market suggesting? The market has factored in such fears and concerns early on -- and may do some further readjusting along the way. In the meantime, the market seems able to argue that the worldwide economic expansion is riding high and will benefit not only overseas markets but also U.S. companies that are broadly exposed to foreign markets' growing consumption of goods and services. It is true that the U.S. economy isn't in good fighting shape. But whereas the big worry not too long ago was inflation, now the concern has shifted to the possibility of a recession. Yet here's the good news: The traditional markers of a recession, including a fall in commodity prices, rising unemployment, and unemployment insurance claims, are nowhere to be found. And the subprime problem and its ramifications shouldn't lead to a recession, according to some market watchers.
"The stress in the housing sector alone will not trigger a recession," argues Stanley Nabi, vice-chairman of Silvercrest Asset Management Group in New York. The U.S. economy, he adds, will continue to draw strength from government outlays, capital spending, and increasing exports. An additional and major fillip is the Fed's stance of remaining "friendly," at least until 2008, in terms of managing the direction of interest rates, says Nabi. In sum, the stock market, predicts Nabi, will continue to "plod along irregularly higher even in the face of sluggish growth in the U.S. economy."
Ed Yardeni, president and chief executive officer of Yardeni Research, who has written often about the major economic problems, says he isn't concerned. What could be an issue, he says, is the question of whether the stock market will be able to continue rising into record territory if the financial and transportation groups languish. Financial and transportation, he notes, together account for 28% and 21.8% of the S&P 500's earnings and market-cap shares, respectively. The only way the market can continue advancing, says Yardeni, is if industries and stocks that benefit from the global boom continue to gain earnings and market-cap shares in the S"P 500. "It assumes that the global boom will continue, as I expect," says Yardeni.
Worldwide Growth Stays Strong
With respect to the worldwide economic boom, international experts suggest that the strong pace of growth is continuing. Basically, the robust global economic growth we are witnessing -- from China, India, and Latin America to Europe -- remains intact in spite of the repercussions of the subprime crisis, says Stephen Leeb, president and chief investment officer at Leeb Capital Management, which invests heavily in both U.S. and foreign stocks.
Leeb notes that the International Monetary Fund in a recent report said that its 5% gross world product [GWP] growth forecast through 2008 hasn't been impaired by the credit crisis. The biggest impact of the global boom, says Leeb, is on U.S. companies with investments in foreign markets that aren't yet richly valued. Companies with footprints in the developed economies overseas will be the next batch of growth stocks, he says. This is one major reason why the U.S. stock market and bourses in other parts of the world will continue to rise significantly. Leeb believes the Dow will hit 16,000 in a year and the S&P should rocket to 1,700.
In the U.S. market, the big-cap stocks with vast foreign exposure such as Coca-Cola (KO), Johnson & Johnson (JNJ), Schlumberger (SLB), Boeing (BA), ExxonMobil (XOM), General Electric (GE), and American Express (AXP) will be the big winners over the next few years as the global economic expansion continues, Leeb predicts.
Strategies for Investors
On the other hand, U.S. companies that are mainly dependent on the U.S. economy for their growth will suffer. Retailers, for instance, are among those facing growth difficulties. Another group to avoid, says Leeb: Chinese stocks, including the major companies that trade in the U.S., such as PetroChina (PTR). The sharp rise of stocks in China's stock market is a concern and could affect even the Chinese stocks that trade in the U.S., should the bubble burst in that country.
Sam Stovall, chief investment strategist at Standard & Poor's, recommends investors overweight their portfolios in energy and information technology stocks because he believes they will benefit from above-average earnings growth prospects and international revenue exposure. Consumer discretionary stocks, however, should underperform, he says, as a result of the deteriorating economic environment, continued housing weakness, and high relative valuations. What's Stovall's forecast for the S&P 500? He says S&P's equity analysts, using their 12-month target prices for the companies in the S&P 500 index, project the U.S. large-cap benchmark to advance nearly 12% by the end of September, 2008, near the 1,700 level. [S&P, like BusinessWeek, is a unit of the McGraw-Hill Companies (MHP).]
To ardent market watchers, Oct. 10 is a milestone marking the bull market's fifth birthday. On Oct. 9, 2002, the S&P 500 index closed at a low of 776.76. That ended the bear market, which started on Mar. 24, 2000, that had eliminated 49% of the market's value. Will it crash by the end of its sixth year in 2008? The good news, notes Yardeni, is that while sentiment indicators have turned more bullish, the headlines warn about the soaring stock market amid dark economic news. It could all burst again. As an old Wall Street adage says, a bull market climbs a wall of worries. To that I would add another: Buy on bad news and sell on good news.
credited by: BusinessWeek.com
There is a lot more to this market's advance than some may realize. And be prepared to ride with this rally, allowing for some speed bumps along the way, for the next 6 to 12 months. Some fearless forecasters predict that the Dow will streak to 16,000 and that the Standard & Poor's 500-stock index will go to 1,700 over the next 6 to 12 months. I agree with that forecast. Why? Let me be brief: It's the global economic boom.
The Market Is Over It Already
I'll give you a longer explanation. Through all the turbulence it has endured -- including the deep drop last summer resulting from the credit crisis -- the market returned with renewed vigor on Oct. 9 to score yet another record high. The Dow vaulted 120.8 points, or 0.9%, to 14,164.53 -- its 34th record close in 2007 and the 56th since the start of October, 2006. The S&P advanced nearly 1%, to 1,565.15, and the NASDAQ composite index jumped 0.6%, to 2,803.91.
The media attributed the gains to the Federal Reserve's nonincendiary comments at its Sept. 18 meeting that suggested the U.S. economy wasn't heading toward a recession. The decision by the Fed to cut interest rates in September was based on concerns that the credit turmoil could lead to slower growth at this time of extreme uncertainty. Such a conclusion was gleaned from recent Fed minutes, which also showed that the Fed members avoided language that could have suggested the U.S. economy will contract, as opposed to what some economists have been predicting.
But that was the excuse for the day. The real reason behind the market's continued rally, punctuated by some downswings, stems from its important role as a leading economic indicator. As such, the market has digested and moved beyond what many observers are now focusing on.
There is the disturbing plunge in home sales that has severely pulled down prices; fear that the credit crunch is not yet concluded, as major banks and financial houses are being crimped by huge losses and write-downs because of their involvement in the subprime mortgage mess. And there's more: skyrocketing crude oil prices; softening retail sales and slumping consumer confidence; weak industrial production and manufacturing activity; slowed durable-goods orders; and weakening corporate profits. And there's former Fed chieftain Alan Greenspan warning that the chances of a recession have increased. Of course, there is also the protracted war in Iraq, which is draining hundreds of billions of dollars from the national coffers. That's one big bundle of serious concerns.
No Classic Signs of a Recession
So what's there to be optimistic about, and what's the market suggesting? The market has factored in such fears and concerns early on -- and may do some further readjusting along the way. In the meantime, the market seems able to argue that the worldwide economic expansion is riding high and will benefit not only overseas markets but also U.S. companies that are broadly exposed to foreign markets' growing consumption of goods and services. It is true that the U.S. economy isn't in good fighting shape. But whereas the big worry not too long ago was inflation, now the concern has shifted to the possibility of a recession. Yet here's the good news: The traditional markers of a recession, including a fall in commodity prices, rising unemployment, and unemployment insurance claims, are nowhere to be found. And the subprime problem and its ramifications shouldn't lead to a recession, according to some market watchers.
"The stress in the housing sector alone will not trigger a recession," argues Stanley Nabi, vice-chairman of Silvercrest Asset Management Group in New York. The U.S. economy, he adds, will continue to draw strength from government outlays, capital spending, and increasing exports. An additional and major fillip is the Fed's stance of remaining "friendly," at least until 2008, in terms of managing the direction of interest rates, says Nabi. In sum, the stock market, predicts Nabi, will continue to "plod along irregularly higher even in the face of sluggish growth in the U.S. economy."
Ed Yardeni, president and chief executive officer of Yardeni Research, who has written often about the major economic problems, says he isn't concerned. What could be an issue, he says, is the question of whether the stock market will be able to continue rising into record territory if the financial and transportation groups languish. Financial and transportation, he notes, together account for 28% and 21.8% of the S&P 500's earnings and market-cap shares, respectively. The only way the market can continue advancing, says Yardeni, is if industries and stocks that benefit from the global boom continue to gain earnings and market-cap shares in the S"P 500. "It assumes that the global boom will continue, as I expect," says Yardeni.
Worldwide Growth Stays Strong
With respect to the worldwide economic boom, international experts suggest that the strong pace of growth is continuing. Basically, the robust global economic growth we are witnessing -- from China, India, and Latin America to Europe -- remains intact in spite of the repercussions of the subprime crisis, says Stephen Leeb, president and chief investment officer at Leeb Capital Management, which invests heavily in both U.S. and foreign stocks.
Leeb notes that the International Monetary Fund in a recent report said that its 5% gross world product [GWP] growth forecast through 2008 hasn't been impaired by the credit crisis. The biggest impact of the global boom, says Leeb, is on U.S. companies with investments in foreign markets that aren't yet richly valued. Companies with footprints in the developed economies overseas will be the next batch of growth stocks, he says. This is one major reason why the U.S. stock market and bourses in other parts of the world will continue to rise significantly. Leeb believes the Dow will hit 16,000 in a year and the S&P should rocket to 1,700.
In the U.S. market, the big-cap stocks with vast foreign exposure such as Coca-Cola (KO), Johnson & Johnson (JNJ), Schlumberger (SLB), Boeing (BA), ExxonMobil (XOM), General Electric (GE), and American Express (AXP) will be the big winners over the next few years as the global economic expansion continues, Leeb predicts.
Strategies for Investors
On the other hand, U.S. companies that are mainly dependent on the U.S. economy for their growth will suffer. Retailers, for instance, are among those facing growth difficulties. Another group to avoid, says Leeb: Chinese stocks, including the major companies that trade in the U.S., such as PetroChina (PTR). The sharp rise of stocks in China's stock market is a concern and could affect even the Chinese stocks that trade in the U.S., should the bubble burst in that country.
Sam Stovall, chief investment strategist at Standard & Poor's, recommends investors overweight their portfolios in energy and information technology stocks because he believes they will benefit from above-average earnings growth prospects and international revenue exposure. Consumer discretionary stocks, however, should underperform, he says, as a result of the deteriorating economic environment, continued housing weakness, and high relative valuations. What's Stovall's forecast for the S&P 500? He says S&P's equity analysts, using their 12-month target prices for the companies in the S&P 500 index, project the U.S. large-cap benchmark to advance nearly 12% by the end of September, 2008, near the 1,700 level. [S&P, like BusinessWeek, is a unit of the McGraw-Hill Companies (MHP).]
To ardent market watchers, Oct. 10 is a milestone marking the bull market's fifth birthday. On Oct. 9, 2002, the S&P 500 index closed at a low of 776.76. That ended the bear market, which started on Mar. 24, 2000, that had eliminated 49% of the market's value. Will it crash by the end of its sixth year in 2008? The good news, notes Yardeni, is that while sentiment indicators have turned more bullish, the headlines warn about the soaring stock market amid dark economic news. It could all burst again. As an old Wall Street adage says, a bull market climbs a wall of worries. To that I would add another: Buy on bad news and sell on good news.
credited by: BusinessWeek.com
The G7 Will Get an Earful About the Euro
Exchange rates are once again a primary focus in Europe, as the euro has risen to all-time highs vs. the dollar -- recently above US$1.40 -- and shows no signs of reversing anytime soon. Most finance officials have put on a brave face, but it is clear that there is growing concern that the strengthening euro will curtail European growth prospects.
Thus far there is no sign that the European Central Bank [ECB] is considering rate cuts to stem the currency's rise, despite political pressure from France. Coordinated intervention among major economic powers to drive down the currency's value does not seem to be on the agenda either, and it is clear that unilateral intervention in currency markets by the ECB has little chance of success. Nonetheless, central bankers and politicians in the euro zone -- the 12 nations that share the euro as their common currency -- will push for some form of verbal intervention and a joint statement at the meeting of the Group of Seven [G7] industrialized nations next week.
The euro has appreciated 8.1% vs. the dollar in the first nine months of the year, after already rising 8.2% in 2006. On a trade-weighted basis, the appreciation looks somewhat less dramatic, as the nominal trade-weighted index [TWI] rose just 3.7% year-over-year in September. Nevertheless, the TWI is also at the highest level since the start of European Monetary Union.
A stronger euro undermines the competitiveness of euro zone goods on international markets and could affect foreign demand, which has been a supporting factor for growth in the region. So far, low wage growth and larger productivity gains have cloaked the impact of the real exchange rate appreciation. Also, world growth has been robust, which helped to offset the impact of the stronger currency.
Euro Strength and World Growth
But while some companies have sufficient margins to tide them over in a period of extended euro strength, it is clear that many will come under pressure. Indeed, while European companies have, for a long time, remained relatively relaxed about the euro's rise, they are now increasingly voicing concern. The German exporters' federation, BGA, has cut its export forecast for next year on the back of the currency appreciation.
This is likely due both to the stronger currency as well as a potential slowing in Europe's major trading partners. In general, world growth is more important for export demand than the exchange rate. According to the European Union [EU] commission, a 10% drop in world demand cuts euro zone exports by 8%. And the fallout from the U.S. subprime crisis will have an impact on U.S. growth that could hit other major economies as well.
On Oct. 9 the International Monetary Fund [IMF] posted surprisingly large reductions in its 2008 growth forecast for major economies as a reaction to financial market turmoil. U.S. growth is now seen at just 1.9%, compared with 2.8% expected previously. And the forecast for world growth has been cut to 4.8% from 5.2%. Yet this is still relatively robust growth and, assuming the commission's estimate of the correlation between world growth and exports is symmetric, the positive impact from still-strong world growth would far outweigh even the impact of a 10% euro appreciation. So far, surveys suggest that confidence about the future for exports has peaked, but remains relatively strong.
Furthermore, a stronger euro also means lower import prices, which ultimately will have a downward effect on consumer price inflation. The stronger euro has helped to dampen the impact of a renewed rise in oil prices. Ultimately, the prolonged euro appreciation will improve purchasing power and may strengthen domestic demand.
Rate Hikes Or Cuts?
To the extent that the stronger euro has a positive impact on the medium-term inflation outlook, it also affects ECB policy. Earlier in the year, the ECB would clearly have preferred a tightening of monetary conditions via interest rate hikes rather than through the exchange rate channel. However, in the current situation of fragile growth and increased uncertainty about the growth outlook, a rate hike is increasingly difficult to sell and could further weigh on business sentiment. So for now, some tightening of monetary conditions from the exchange rate movement may indeed be welcome to dampen medium-term inflation risks.
This may help to explain why ECB officials have so far remained calm regarding the euro's strength. And with the exception of French President Nicolas Sarkozy, most politicians have also remained optimistic. Politicians continue to say that they prefer a strong euro to a weak currency. Nevertheless, it is clear that concern is creeping in, and with the euro appreciating further vs. the dollar there may be more support for Sarkozy's calls on the ECB to react to the strength of the currency. What options does the central bank have to stem the euro's rise?
Sarkozy has suggested the ECB may follow the Fed and cut rates to prevent currency appreciation. However, while the ECB seems to have shelved the next rate hike for now, it continues to stress that there are upside risks to price stability. ECB policy maintains a tightening bias, and overall growth would have to deteriorate further before the ECB will consider a rate cut. In the central scenario of slowing but still relatively robust growth, a rate hike remains much more likely.
Divine Intervention
The only alternative is intervention in currency markets. Currency management in the euro zone is split between politicians, who can issue general guidelines or enter global currency agreements, and the ECB, which is in charge of day-to-day management and interventions. Former ECB President Wim Duisenberg famously called himself "Mr. Euro," and the bank's current chief, Jean-Claude Trichet, has also stressed that he has the last word on exchange rates. So Sarkozy has little influence on this, and the ECB is not considering such an option.
In any case, it is clear that unilateral intervention has little chance of success, and even coordinated intervention is problematic if exchange rate movements are indeed driven by fundamentals. The fact is that euro zone growth has outstripped annual growth in Japan over the past year. And the IMF now expects 2007 euro zone growth to be stronger than U.S. growth as well. It is not surprising then that an ECB official said this week that coordinated intervention may not work.
What remains is verbal intervention and exercises in damage limitation. Officials have started to repeat the familiar G7 line that "excess volatility" in exchange markets is undesirable, and that exchange rates should reflect fundamentals. Officials will want to prevent a rapid overshooting of the currency, which does not give exporters time to adjust to a stronger currency. The ECB has also indicated that it will discuss the currency at the G7 meeting next week.
What Trichet will likely want to see is a public message to markets that the U.S. is interested in a strong currency and will not passively encourage an ongoing rapid depreciation of the dollar. The ECB will also look for allies in its attempt to persuade Asian countries to take more of a share in the ongoing dollar depreciation that is mostly driven by the large U.S. current account deficits -- largely with Asia -- that still leaves the dollar a generally overvalued currency. However, China has continued to indicate resistance to more than a gradual pace of yuan appreciation.
All in all, we are likely to see a currency statement at next week's G7 meeting that will once again stress that "excess volatility" is undesirable, and that exchange rates should reflect fundamentals, while calling for increased flexibility for Asian foreign exchange markets. Any reference to the desire for a stronger U.S. dollar is unlikely, however, given the fundamental driver of the large U.S. current account deficit. And in the unlikely event that the ECB was seeking support for intervention to cool the euro's strength, it is unlikely that Japan or the U.S. would be interested in coordinated action at the moment.
credited by: BusinessWeek.com
Thus far there is no sign that the European Central Bank [ECB] is considering rate cuts to stem the currency's rise, despite political pressure from France. Coordinated intervention among major economic powers to drive down the currency's value does not seem to be on the agenda either, and it is clear that unilateral intervention in currency markets by the ECB has little chance of success. Nonetheless, central bankers and politicians in the euro zone -- the 12 nations that share the euro as their common currency -- will push for some form of verbal intervention and a joint statement at the meeting of the Group of Seven [G7] industrialized nations next week.
The euro has appreciated 8.1% vs. the dollar in the first nine months of the year, after already rising 8.2% in 2006. On a trade-weighted basis, the appreciation looks somewhat less dramatic, as the nominal trade-weighted index [TWI] rose just 3.7% year-over-year in September. Nevertheless, the TWI is also at the highest level since the start of European Monetary Union.
A stronger euro undermines the competitiveness of euro zone goods on international markets and could affect foreign demand, which has been a supporting factor for growth in the region. So far, low wage growth and larger productivity gains have cloaked the impact of the real exchange rate appreciation. Also, world growth has been robust, which helped to offset the impact of the stronger currency.
Euro Strength and World Growth
But while some companies have sufficient margins to tide them over in a period of extended euro strength, it is clear that many will come under pressure. Indeed, while European companies have, for a long time, remained relatively relaxed about the euro's rise, they are now increasingly voicing concern. The German exporters' federation, BGA, has cut its export forecast for next year on the back of the currency appreciation.
This is likely due both to the stronger currency as well as a potential slowing in Europe's major trading partners. In general, world growth is more important for export demand than the exchange rate. According to the European Union [EU] commission, a 10% drop in world demand cuts euro zone exports by 8%. And the fallout from the U.S. subprime crisis will have an impact on U.S. growth that could hit other major economies as well.
On Oct. 9 the International Monetary Fund [IMF] posted surprisingly large reductions in its 2008 growth forecast for major economies as a reaction to financial market turmoil. U.S. growth is now seen at just 1.9%, compared with 2.8% expected previously. And the forecast for world growth has been cut to 4.8% from 5.2%. Yet this is still relatively robust growth and, assuming the commission's estimate of the correlation between world growth and exports is symmetric, the positive impact from still-strong world growth would far outweigh even the impact of a 10% euro appreciation. So far, surveys suggest that confidence about the future for exports has peaked, but remains relatively strong.
Furthermore, a stronger euro also means lower import prices, which ultimately will have a downward effect on consumer price inflation. The stronger euro has helped to dampen the impact of a renewed rise in oil prices. Ultimately, the prolonged euro appreciation will improve purchasing power and may strengthen domestic demand.
Rate Hikes Or Cuts?
To the extent that the stronger euro has a positive impact on the medium-term inflation outlook, it also affects ECB policy. Earlier in the year, the ECB would clearly have preferred a tightening of monetary conditions via interest rate hikes rather than through the exchange rate channel. However, in the current situation of fragile growth and increased uncertainty about the growth outlook, a rate hike is increasingly difficult to sell and could further weigh on business sentiment. So for now, some tightening of monetary conditions from the exchange rate movement may indeed be welcome to dampen medium-term inflation risks.
This may help to explain why ECB officials have so far remained calm regarding the euro's strength. And with the exception of French President Nicolas Sarkozy, most politicians have also remained optimistic. Politicians continue to say that they prefer a strong euro to a weak currency. Nevertheless, it is clear that concern is creeping in, and with the euro appreciating further vs. the dollar there may be more support for Sarkozy's calls on the ECB to react to the strength of the currency. What options does the central bank have to stem the euro's rise?
Sarkozy has suggested the ECB may follow the Fed and cut rates to prevent currency appreciation. However, while the ECB seems to have shelved the next rate hike for now, it continues to stress that there are upside risks to price stability. ECB policy maintains a tightening bias, and overall growth would have to deteriorate further before the ECB will consider a rate cut. In the central scenario of slowing but still relatively robust growth, a rate hike remains much more likely.
Divine Intervention
The only alternative is intervention in currency markets. Currency management in the euro zone is split between politicians, who can issue general guidelines or enter global currency agreements, and the ECB, which is in charge of day-to-day management and interventions. Former ECB President Wim Duisenberg famously called himself "Mr. Euro," and the bank's current chief, Jean-Claude Trichet, has also stressed that he has the last word on exchange rates. So Sarkozy has little influence on this, and the ECB is not considering such an option.
In any case, it is clear that unilateral intervention has little chance of success, and even coordinated intervention is problematic if exchange rate movements are indeed driven by fundamentals. The fact is that euro zone growth has outstripped annual growth in Japan over the past year. And the IMF now expects 2007 euro zone growth to be stronger than U.S. growth as well. It is not surprising then that an ECB official said this week that coordinated intervention may not work.
What remains is verbal intervention and exercises in damage limitation. Officials have started to repeat the familiar G7 line that "excess volatility" in exchange markets is undesirable, and that exchange rates should reflect fundamentals. Officials will want to prevent a rapid overshooting of the currency, which does not give exporters time to adjust to a stronger currency. The ECB has also indicated that it will discuss the currency at the G7 meeting next week.
What Trichet will likely want to see is a public message to markets that the U.S. is interested in a strong currency and will not passively encourage an ongoing rapid depreciation of the dollar. The ECB will also look for allies in its attempt to persuade Asian countries to take more of a share in the ongoing dollar depreciation that is mostly driven by the large U.S. current account deficits -- largely with Asia -- that still leaves the dollar a generally overvalued currency. However, China has continued to indicate resistance to more than a gradual pace of yuan appreciation.
All in all, we are likely to see a currency statement at next week's G7 meeting that will once again stress that "excess volatility" is undesirable, and that exchange rates should reflect fundamentals, while calling for increased flexibility for Asian foreign exchange markets. Any reference to the desire for a stronger U.S. dollar is unlikely, however, given the fundamental driver of the large U.S. current account deficit. And in the unlikely event that the ECB was seeking support for intervention to cool the euro's strength, it is unlikely that Japan or the U.S. would be interested in coordinated action at the moment.
credited by: BusinessWeek.com
Sizing Up the Next Crash
The following is an excerpt from the author's October, 2007 report, The Next Crash.
Wall Street and Main Street will remember and chronicle the 1990s for a variety of reasons: the emergence of the Internet, the dot.com boom and bubble, excessive valuations, and eventually a bear market. It was also a time of reform, as new rules, regulations, and practices led to what we might term the deregulation of financial services.
Somewhat like what had happened in telecommunications and the airlines, the landscape emerged far different than what had existed. Our focus and interest is on the equity markets, but the revolution on Wall Street has affected other markets as they became significantly larger, expanded their products, and introduced new measures and techniques. The new measures include: Regulation FD; Sarbanes Oxley; decimalization; extended trading hours, crossing networks; electronic, online trading; and ETFs and other instruments.
These measures were undertaken under the guise of protecting the individual investor from biased or prejudiced research, unsavory operators, scrupulous corporate officers, and accountants whose alleged objective was not to conform to "standard accounting practices" but rather to "what do you want it to be?" We were concerned at the time of their introduction that many of the proposals and measures were political, expedient reactions to real, but isolated or limited problems or circumstances.
Disenfranchising the Average
Our concern today is two-fold. First, the markets of the first decade of the 21st century are prone to systemic failure as a result of technological innovations and utilization, rapid growth of sophisticated, but not necessarily vetted, instruments, and other changes in the wide world of finance. We will readily note that this is not solely a function of Wall Street, but also reflects the quickened pace of the overall environment, lower cost of technology in all its forms, the continuing demise of the manufacturing/operating economy to one of finance and service, and so forth.
Secondly, we believe that the various structural reforms of the 1990s have not achieved the desired effect with regard to the individual and have in fact disenfranchised, even more so than before, the individual who might work 50 hours a week, have 2.5 children, and cut his lawn on weekends. Instead they have provided the affluent and institutional investor with even more of an opportunity to enrich himself.
On the first point, we're concerned about the large number of system failures and computer glitches that appear to receive little or cursory attention. For example, on Feb. 27, 2007, there was a 230-point drop in the Dow Jones industrial average because of "an error in the calculation." Again, on July 26, 2007, the Dow average was not calculated from 2:55 p.m. to 3:08 p.m. Eastern Time because the system was "overloaded." It should be disturbing that these events occur, and the implicit hope that this will not happen during a significant crisis or period of stress is naive.
Derivatives and Other Instruments
We are not alarmists and we are not predicting a market meltdown. Rather we are concerned about the potential for a major disruption, which would then be the subject of analysis, legislative hearings, and finger pointing.
An issue that could lead to another crash is that of derivatives and other instruments. We are admittedly negative about the subject in part because of our experience in 1994. At the end of 1993, our Wall Street Week picks included a put on the Hang Seng Index. The Hang Seng complied with our hopes and declined 30% that year but our put [in the form of a warrant; ETFs were unavailable] also declined 30%.
Derivatives concern us as several examples of seemingly innocuous instruments have had major impacts. The Japanese market, for example, might eventually have declined because of bad loans, inflated real estate, or some other fundamental factor, but the "smoking gun," inflection point, or pin prick, was -- we contend -- the introduction of put warrants, which were a huge success in terms of activity and performance virtually coincident with that market's peak. The warrants, available only offshore, allowed investors to both hedge and take a negative view of that market, which they surely did.
Quality of the Data
Financial futures, derivatives, and ETFs have benefited distributors, consumers, and, in some, but not all, instances, producers. The mortgage-backed, mortgage-related, and CDO issues of June and July, 2007 are other instances of the reality that it is a long way from the laboratory [or design lab] to the market place. As exchanges seek growth and new opportunities, our concern is that their basis or expected results will largely be on past events, which, as we all know in the stock market business, is often unrelated to future ones.
Our concern is that many strategies and packages are based on historical data, relationships, and analysis. Increasingly, we question the depth and quality of the data employed in so doing. For example, in 2004, S&P understated the total return of the S&P 500 by 37 basis points, a fact that S&P was reluctant to acknowledge. And we've found that virtually every story on stock buybacks understates the amount and extent of activity.
We believe that individual investors have not benefited from the various new regulations and products. It was the hope and intention of officials in the 1990s to take away the institutional advantage. We believe that the net effect has made life and investing more difficult and more complex for the individual.
Away From Paternal Corporate Relationships
For one, weighted fund returns, as many have pointed out, lagged average fund returns in the 1990s. From 1990 to the market peak in March, 2000, mutual funds returned 10% on average annually, vs. nearly 18% for the S&P 500 index. When we extend that analysis, we find the situation has not improved. From 1990 to April, 2007, mutual funds have gained 5.16% on average each year, vs. 11.4% for the S&P 500.
One of the discernible trends in American business has been the shift from a paternal corporate relationship to one where the employee is increasingly in charge of his own health and retirement benefits. In the case with retirement, the traditional, defined benefit plan has been replaced or augmented with 401[k]s, IRAs, and self-directed plans. Figures from the FRB report that the average balance for those between 55 and 64 in 401[k] plans is $60,000, far below what they will probably require upon retirement. At a time when financial advice and services are probably more critical than ever, the markets of the day are generally less responsive to individuals.
Stock research is becoming less valuable and visible. And there have been numerous stories questioning whether investors ultimately benefit from ETFs, long-short funds, and other new instruments.
We can proffer no detailed solutions, but investors should recognize the risks -- beginning with the regulatory void.
credited by: BusinessWeek.com
Wall Street and Main Street will remember and chronicle the 1990s for a variety of reasons: the emergence of the Internet, the dot.com boom and bubble, excessive valuations, and eventually a bear market. It was also a time of reform, as new rules, regulations, and practices led to what we might term the deregulation of financial services.
Somewhat like what had happened in telecommunications and the airlines, the landscape emerged far different than what had existed. Our focus and interest is on the equity markets, but the revolution on Wall Street has affected other markets as they became significantly larger, expanded their products, and introduced new measures and techniques. The new measures include: Regulation FD; Sarbanes Oxley; decimalization; extended trading hours, crossing networks; electronic, online trading; and ETFs and other instruments.
These measures were undertaken under the guise of protecting the individual investor from biased or prejudiced research, unsavory operators, scrupulous corporate officers, and accountants whose alleged objective was not to conform to "standard accounting practices" but rather to "what do you want it to be?" We were concerned at the time of their introduction that many of the proposals and measures were political, expedient reactions to real, but isolated or limited problems or circumstances.
Disenfranchising the Average
Our concern today is two-fold. First, the markets of the first decade of the 21st century are prone to systemic failure as a result of technological innovations and utilization, rapid growth of sophisticated, but not necessarily vetted, instruments, and other changes in the wide world of finance. We will readily note that this is not solely a function of Wall Street, but also reflects the quickened pace of the overall environment, lower cost of technology in all its forms, the continuing demise of the manufacturing/operating economy to one of finance and service, and so forth.
Secondly, we believe that the various structural reforms of the 1990s have not achieved the desired effect with regard to the individual and have in fact disenfranchised, even more so than before, the individual who might work 50 hours a week, have 2.5 children, and cut his lawn on weekends. Instead they have provided the affluent and institutional investor with even more of an opportunity to enrich himself.
On the first point, we're concerned about the large number of system failures and computer glitches that appear to receive little or cursory attention. For example, on Feb. 27, 2007, there was a 230-point drop in the Dow Jones industrial average because of "an error in the calculation." Again, on July 26, 2007, the Dow average was not calculated from 2:55 p.m. to 3:08 p.m. Eastern Time because the system was "overloaded." It should be disturbing that these events occur, and the implicit hope that this will not happen during a significant crisis or period of stress is naive.
Derivatives and Other Instruments
We are not alarmists and we are not predicting a market meltdown. Rather we are concerned about the potential for a major disruption, which would then be the subject of analysis, legislative hearings, and finger pointing.
An issue that could lead to another crash is that of derivatives and other instruments. We are admittedly negative about the subject in part because of our experience in 1994. At the end of 1993, our Wall Street Week picks included a put on the Hang Seng Index. The Hang Seng complied with our hopes and declined 30% that year but our put [in the form of a warrant; ETFs were unavailable] also declined 30%.
Derivatives concern us as several examples of seemingly innocuous instruments have had major impacts. The Japanese market, for example, might eventually have declined because of bad loans, inflated real estate, or some other fundamental factor, but the "smoking gun," inflection point, or pin prick, was -- we contend -- the introduction of put warrants, which were a huge success in terms of activity and performance virtually coincident with that market's peak. The warrants, available only offshore, allowed investors to both hedge and take a negative view of that market, which they surely did.
Quality of the Data
Financial futures, derivatives, and ETFs have benefited distributors, consumers, and, in some, but not all, instances, producers. The mortgage-backed, mortgage-related, and CDO issues of June and July, 2007 are other instances of the reality that it is a long way from the laboratory [or design lab] to the market place. As exchanges seek growth and new opportunities, our concern is that their basis or expected results will largely be on past events, which, as we all know in the stock market business, is often unrelated to future ones.
Our concern is that many strategies and packages are based on historical data, relationships, and analysis. Increasingly, we question the depth and quality of the data employed in so doing. For example, in 2004, S&P understated the total return of the S&P 500 by 37 basis points, a fact that S&P was reluctant to acknowledge. And we've found that virtually every story on stock buybacks understates the amount and extent of activity.
We believe that individual investors have not benefited from the various new regulations and products. It was the hope and intention of officials in the 1990s to take away the institutional advantage. We believe that the net effect has made life and investing more difficult and more complex for the individual.
Away From Paternal Corporate Relationships
For one, weighted fund returns, as many have pointed out, lagged average fund returns in the 1990s. From 1990 to the market peak in March, 2000, mutual funds returned 10% on average annually, vs. nearly 18% for the S&P 500 index. When we extend that analysis, we find the situation has not improved. From 1990 to April, 2007, mutual funds have gained 5.16% on average each year, vs. 11.4% for the S&P 500.
One of the discernible trends in American business has been the shift from a paternal corporate relationship to one where the employee is increasingly in charge of his own health and retirement benefits. In the case with retirement, the traditional, defined benefit plan has been replaced or augmented with 401[k]s, IRAs, and self-directed plans. Figures from the FRB report that the average balance for those between 55 and 64 in 401[k] plans is $60,000, far below what they will probably require upon retirement. At a time when financial advice and services are probably more critical than ever, the markets of the day are generally less responsive to individuals.
Stock research is becoming less valuable and visible. And there have been numerous stories questioning whether investors ultimately benefit from ETFs, long-short funds, and other new instruments.
We can proffer no detailed solutions, but investors should recognize the risks -- beginning with the regulatory void.
credited by: BusinessWeek.com
Lokey gives UO largest gift: $74.5M
Philanthropist Lorry I. Lokey has given the University of Oregon $74.5 million to benefit science teaching and research. The gift is the largest single academic donation in UO history.
The gift brings Lokey's total giving to the University of Oregon to $132 million over just the past four years. Lokey grew up in Portland and is a 1949 graduate of Stanford University.
Lokey founded Business Wire, an international news release wire service with 30 offices throughout the United States, Europe and Asia-Pacific. Last year, Business Wire, founded in 1961, was sold to Warren Buffett's Berkshire Hathaway.
The $74.5 million gift is the second largest single gift in UO history. Nike founder Phil Knight and his wife, Penny, gave UO $100 million this past August.
The bulk of the $74.5 million gift, about $50 million, will go toward the Lorry I. Lokey Science Advancement and Graduate Education Initiative, which features $20 million for endowed faculty support, $10 million for a quasi-endowment for additional faculty support, $10 million for endowed support for graduate students and a $10 million quasi-endowment for program support.
The funds will initially target areas of UO scientific research, including:
Fundamental genetic/molecular biology studies that advance understanding of cellular processes related to a wide range of diseases such as cancer.
Neuroscience programs that emphasize the study of cognition, behavior and brain adaptations for the use of artificial limbs, as well as rehabilitative approaches for learning disabilities and stress disorders.
Human physiology programs that will advance human performance, from the training of world-class athletes to the treatment of cardiovascular disorders.
Green nanotechnologies, which may help diagnose and treat disease.
In recognition of the gift, the university will dedicate the Lorry I. Lokey Science Complex, which will encompass the 10 existing science buildings and the two new facilities that Lokey has helped fund. The names of the individual buildings in the complex will remain the same.
The gift also includes:
$2 million for a new endowed chair in chemistry for materials science research.
$5 million support of the UO Science Library.
$3 million for an endowment supporting work at the intersection of the humanities and social sciences with the natural sciences.
$2 million for an endowed scholarship program in the School of Journalism and Communication.
$2 million for the new UO Alumni Center.
$5.5 for the President's Special Projects Fund.
Since 1990, Lokey has contributed more than $400 million to charity, with 98 percent going to universities and high schools. The largest amount has gone to the University of Oregon. For fiscal year 2006, Lokey was listed by the Chronicle of Philanthropy as one of 10 most generous donors in the country.
All of Lokey's gifts count toward "Campaign Oregon: Transforming Lives," the UO's $600 million fundraising campaign. With Lokey's most recent gift and the Knights' $100 million gift, the campaign has shot past the goal and now stands at $717.5 million. UO President Dave Frohnmayer says the campaign will continue until its scheduled end in 2008.
credited by: bizjournals.com
The gift brings Lokey's total giving to the University of Oregon to $132 million over just the past four years. Lokey grew up in Portland and is a 1949 graduate of Stanford University.
Lokey founded Business Wire, an international news release wire service with 30 offices throughout the United States, Europe and Asia-Pacific. Last year, Business Wire, founded in 1961, was sold to Warren Buffett's Berkshire Hathaway.
The $74.5 million gift is the second largest single gift in UO history. Nike founder Phil Knight and his wife, Penny, gave UO $100 million this past August.
The bulk of the $74.5 million gift, about $50 million, will go toward the Lorry I. Lokey Science Advancement and Graduate Education Initiative, which features $20 million for endowed faculty support, $10 million for a quasi-endowment for additional faculty support, $10 million for endowed support for graduate students and a $10 million quasi-endowment for program support.
The funds will initially target areas of UO scientific research, including:
Fundamental genetic/molecular biology studies that advance understanding of cellular processes related to a wide range of diseases such as cancer.
Neuroscience programs that emphasize the study of cognition, behavior and brain adaptations for the use of artificial limbs, as well as rehabilitative approaches for learning disabilities and stress disorders.
Human physiology programs that will advance human performance, from the training of world-class athletes to the treatment of cardiovascular disorders.
Green nanotechnologies, which may help diagnose and treat disease.
In recognition of the gift, the university will dedicate the Lorry I. Lokey Science Complex, which will encompass the 10 existing science buildings and the two new facilities that Lokey has helped fund. The names of the individual buildings in the complex will remain the same.
The gift also includes:
$2 million for a new endowed chair in chemistry for materials science research.
$5 million support of the UO Science Library.
$3 million for an endowment supporting work at the intersection of the humanities and social sciences with the natural sciences.
$2 million for an endowed scholarship program in the School of Journalism and Communication.
$2 million for the new UO Alumni Center.
$5.5 for the President's Special Projects Fund.
Since 1990, Lokey has contributed more than $400 million to charity, with 98 percent going to universities and high schools. The largest amount has gone to the University of Oregon. For fiscal year 2006, Lokey was listed by the Chronicle of Philanthropy as one of 10 most generous donors in the country.
All of Lokey's gifts count toward "Campaign Oregon: Transforming Lives," the UO's $600 million fundraising campaign. With Lokey's most recent gift and the Knights' $100 million gift, the campaign has shot past the goal and now stands at $717.5 million. UO President Dave Frohnmayer says the campaign will continue until its scheduled end in 2008.
credited by: bizjournals.com
East Valley Tribune debuts tab size, free distribution
The East Valley Tribune this week will debut major changes to its content and business model -- namely free distribution.
On Wednesday, the daily paper will introduce a new format that "prioritizes local news coverage," by moving all of its local news to the front section, officials said in a press release to media outlets.
Four local editions will be offered, as new editions for Gilbert and the SanTan region join the current East Valley and Scottsdale editions.
The Tribune also will be converting its front local news section to a compact size and offering it free in selected areas.
Paid subscribers will continue to get the full newspaper content, which also includes national and world news, sports, classifieds and the many weekly features in a premium package.
East Valley Tribune Publisher and Chief Executive Julie Moreno said the publication expanded its distribution to better serve readers and advertisers.
"Part of this process involves creating separate editions of the paper for the specific geographic areas we serve. That way we can bring you local news and advertising specific to where you live," she said.
Only the front local news section will be zoned, with the rest of the paper remaining the same. The full implementation of this zoning program will take several months and be launched in phases, officials said.
Executive Editor Jim Ripley emphasizes that the East Valley Tribune's commitment to local news is not changing, just it's presentation.
He said local business news, local government news, local lifestyle and entertainment news, and the local opinions and columns will be brought together in this new front section.
"Hyper-local" has been a common trait used among some daily newspapers around the country, as they face shrinking circulation and advertising revenue.
"The Tribune is one newspaper that is changing with the times by focusing on reader convenience and cleanly packing news close to home in a single section," Ripley said.
The most visible changes will be switching the front local news section to a compact size and making it available through free distribution five days a week, Wednesday through Sunday.
Officials said the compact size was chosen because it works best with the production requirements for multiple editions, and it is easy to handle and carry, and saves newsprint.
The switch will be phased in with Scottsdale on Oct. 17, followed by the Gilbert and SanTan editions Oct. 24.
The East Valley edition will continue in its broadsheet format and be converted at a later date. The free distribution will be done primarily through a network of street racks, and a list of locations will be available on the newspaper Web site, www.eastvalleytribune.com.
Arizona State University journalism professor Tim McGuire said it is a "fascinating approach," but it will have production and advertising issues.
"It's going to be really a challenge. There's going to have two different business, free and distribution. So this a very different model," said McGuire, the Frank Russell Chair for the Business of Journalism at ASU's Cronkite School of Journalism and Mass Communication.
In March, the East Valley Tribune's competitor, The Arizona Republic, underwent a major restructuring that resulted in key personnel departures and content changes to lure a younger demographics in the 24/7 multimedia news environment.
Among the changes: The Monday issue consolidated business, opinion and local items into its front-page section, however, that later was expanded back to two sections. It also included advertising on Page 1 and on the front page of the sports section, while combining classifieds and auto sales ads into a single section.
McGuire's biggest gripe is that newspapers aren't making changes, as they continue to lose readership and relevance in an increasingly digital age. He applauds the Tribune's move, but isn't guaranteeing success.
"It's really a bold move, he said. "If they pull it off without hiccups or burps, I'll be shocked."
credited by: bizjournals.com
On Wednesday, the daily paper will introduce a new format that "prioritizes local news coverage," by moving all of its local news to the front section, officials said in a press release to media outlets.
Four local editions will be offered, as new editions for Gilbert and the SanTan region join the current East Valley and Scottsdale editions.
The Tribune also will be converting its front local news section to a compact size and offering it free in selected areas.
Paid subscribers will continue to get the full newspaper content, which also includes national and world news, sports, classifieds and the many weekly features in a premium package.
East Valley Tribune Publisher and Chief Executive Julie Moreno said the publication expanded its distribution to better serve readers and advertisers.
"Part of this process involves creating separate editions of the paper for the specific geographic areas we serve. That way we can bring you local news and advertising specific to where you live," she said.
Only the front local news section will be zoned, with the rest of the paper remaining the same. The full implementation of this zoning program will take several months and be launched in phases, officials said.
Executive Editor Jim Ripley emphasizes that the East Valley Tribune's commitment to local news is not changing, just it's presentation.
He said local business news, local government news, local lifestyle and entertainment news, and the local opinions and columns will be brought together in this new front section.
"Hyper-local" has been a common trait used among some daily newspapers around the country, as they face shrinking circulation and advertising revenue.
"The Tribune is one newspaper that is changing with the times by focusing on reader convenience and cleanly packing news close to home in a single section," Ripley said.
The most visible changes will be switching the front local news section to a compact size and making it available through free distribution five days a week, Wednesday through Sunday.
Officials said the compact size was chosen because it works best with the production requirements for multiple editions, and it is easy to handle and carry, and saves newsprint.
The switch will be phased in with Scottsdale on Oct. 17, followed by the Gilbert and SanTan editions Oct. 24.
The East Valley edition will continue in its broadsheet format and be converted at a later date. The free distribution will be done primarily through a network of street racks, and a list of locations will be available on the newspaper Web site, www.eastvalleytribune.com.
Arizona State University journalism professor Tim McGuire said it is a "fascinating approach," but it will have production and advertising issues.
"It's going to be really a challenge. There's going to have two different business, free and distribution. So this a very different model," said McGuire, the Frank Russell Chair for the Business of Journalism at ASU's Cronkite School of Journalism and Mass Communication.
In March, the East Valley Tribune's competitor, The Arizona Republic, underwent a major restructuring that resulted in key personnel departures and content changes to lure a younger demographics in the 24/7 multimedia news environment.
Among the changes: The Monday issue consolidated business, opinion and local items into its front-page section, however, that later was expanded back to two sections. It also included advertising on Page 1 and on the front page of the sports section, while combining classifieds and auto sales ads into a single section.
McGuire's biggest gripe is that newspapers aren't making changes, as they continue to lose readership and relevance in an increasingly digital age. He applauds the Tribune's move, but isn't guaranteeing success.
"It's really a bold move, he said. "If they pull it off without hiccups or burps, I'll be shocked."
credited by: bizjournals.com
Tektronix can grow faster with Danaher, CEO says
The purchase of Oregon's largest homegrown technology company by a conglomerate 10 times its size will help accelerate the growth of Tektronix Inc.
That's the assessment of CEO Rick Wills, who came up through the ranks since joining Tektronix in 1979 to lead the company for the past seven years.
Tektronix (NYSE: TEK) has agreed to be acquired by $11 billion, Washington, D.C.-headquartered Danaher Corp. (NYSE: DHR), in an all-cash deal valued at $2.8 billion. That's $38 per share, including Tektronix's debt and net of its cash holdings -- a premium of 34 percent over last week's closing price.
Beaverton-headquartered Tektronix, at $1.1 billion in annual revenue, will now have access to much greater capital resources that could help the business make more acquisitions to round out its technology and product line. Tektronix has made several acquisitions in recent years.
Tektronix will become part of Danaher Electronics, comprised of Fluke and Fluke Networks, based in Washington, D.C. That business is about the same size as Tektronix.
While some of Fluke's tools compete with some of Tektronix's, there's only about a 5 percent overlap, said Wills. That gives plenty of room for distributors who now sell both companies' products to start selling more of each company's products.
Danaher intends to keep both brands, said CEO Larry Culp during an early-morning conference call on Friday.
The fact that Tektronix builds "bleeding-edge" test and measurement equipment, while Fluke makes lower-end instruments used by field technicians, gives the two companies a chance to collaborate on new products, said Wills.
These are likely to be mid-priced tools for engineers working in well-established applications, rather than in leading-edge, new technologies.
Tektronix has a strong presence in Asia, while Fluke does not, as yet. Danaher's management "found that attractive," said Wills.
Danaher, which is extremely profitable, has developed a system for running its operations, based on Japanese auto company Toyota's famous system for removing cost and continuous improvement. That system will help Tektronix improve and grow, said Wills.
"We have all kinds of quality and continuous improvement programs, but we don't have their 20-year toolset that makes them profitable, year after year," said Wills.
It's inevitable that Danaher will evaluate Tektronix's operations for places where it can cut costs, including cutting some employees.
Wills says he can't concern himself with whether he will have a place in the merged company.
"I want to take myself out of this personally, and do the right thing for customers, employees and shareholders," he said.
credited by: bizjournals.com
That's the assessment of CEO Rick Wills, who came up through the ranks since joining Tektronix in 1979 to lead the company for the past seven years.
Tektronix (NYSE: TEK) has agreed to be acquired by $11 billion, Washington, D.C.-headquartered Danaher Corp. (NYSE: DHR), in an all-cash deal valued at $2.8 billion. That's $38 per share, including Tektronix's debt and net of its cash holdings -- a premium of 34 percent over last week's closing price.
Beaverton-headquartered Tektronix, at $1.1 billion in annual revenue, will now have access to much greater capital resources that could help the business make more acquisitions to round out its technology and product line. Tektronix has made several acquisitions in recent years.
Tektronix will become part of Danaher Electronics, comprised of Fluke and Fluke Networks, based in Washington, D.C. That business is about the same size as Tektronix.
While some of Fluke's tools compete with some of Tektronix's, there's only about a 5 percent overlap, said Wills. That gives plenty of room for distributors who now sell both companies' products to start selling more of each company's products.
Danaher intends to keep both brands, said CEO Larry Culp during an early-morning conference call on Friday.
The fact that Tektronix builds "bleeding-edge" test and measurement equipment, while Fluke makes lower-end instruments used by field technicians, gives the two companies a chance to collaborate on new products, said Wills.
These are likely to be mid-priced tools for engineers working in well-established applications, rather than in leading-edge, new technologies.
Tektronix has a strong presence in Asia, while Fluke does not, as yet. Danaher's management "found that attractive," said Wills.
Danaher, which is extremely profitable, has developed a system for running its operations, based on Japanese auto company Toyota's famous system for removing cost and continuous improvement. That system will help Tektronix improve and grow, said Wills.
"We have all kinds of quality and continuous improvement programs, but we don't have their 20-year toolset that makes them profitable, year after year," said Wills.
It's inevitable that Danaher will evaluate Tektronix's operations for places where it can cut costs, including cutting some employees.
Wills says he can't concern himself with whether he will have a place in the merged company.
"I want to take myself out of this personally, and do the right thing for customers, employees and shareholders," he said.
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Kapiolani building converted to condos
Realtor Abe Lee has put another condominium conversion project on the market, a 21-unit, three-building complex on Kapiolani Boulevard near Kaimuki High School.
The one- and two-bedroom units are priced from $209,000 to $259,000, with maintenance fees ranging from $148 to $245 a month. Current tenants are being given the first opportunity to purchase the fee-simple units.
The units are being sold as-is, in an effort to keep prices down. The original building was built in 1957 followed by the two surrounding buildings, which were built in 1965.
"This condo conversion offers simple, no-frills homeownership to people who want to live in town," said Lee, principal broker of Abe Lee Realty. "With pricing well below market comparisons, this is a perfect opportunity for first-time buyers."
Central Pacific HomeLoans is offering special financing.
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The one- and two-bedroom units are priced from $209,000 to $259,000, with maintenance fees ranging from $148 to $245 a month. Current tenants are being given the first opportunity to purchase the fee-simple units.
The units are being sold as-is, in an effort to keep prices down. The original building was built in 1957 followed by the two surrounding buildings, which were built in 1965.
"This condo conversion offers simple, no-frills homeownership to people who want to live in town," said Lee, principal broker of Abe Lee Realty. "With pricing well below market comparisons, this is a perfect opportunity for first-time buyers."
Central Pacific HomeLoans is offering special financing.
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Cyanotech adds two new products
Cyanotech Corp. (Nasdaq: CYAN) has added two new products to its line of microalgae and spirulina dietary supplements.
The Big Island company's new products are condition-specific. One is intended to support a healthy cardiovascular system, the other to strengthen joints and tendons.
Nearly 15,000 Cyanotech shares changed hands following the announcement Monday. Average daily volume for the stock is 6,300.
The company's stock, which hit a 52-week low of 75 cents per share on Oct. 9, closed at $1.06 Monday, up 6 percent from the previous trading day.
Also in the announcement, Cyanotech said it has received a Good Manufacturing Practices certification from the Natural Products Association, which regulates retailers and manufacturers in the United States.
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The Big Island company's new products are condition-specific. One is intended to support a healthy cardiovascular system, the other to strengthen joints and tendons.
Nearly 15,000 Cyanotech shares changed hands following the announcement Monday. Average daily volume for the stock is 6,300.
The company's stock, which hit a 52-week low of 75 cents per share on Oct. 9, closed at $1.06 Monday, up 6 percent from the previous trading day.
Also in the announcement, Cyanotech said it has received a Good Manufacturing Practices certification from the Natural Products Association, which regulates retailers and manufacturers in the United States.
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Review IDs ways to improve government efficiency
Colorado Gov. Bill Ritter said Monday that a review team has identified government efficiencies that could save the state as much as $145 million over the next five years.
Ritter, a Democrat who was sworn into office earlier this year, announced a series of reforms that he said were the result of surveying state employees about ways to save money.
The reforms outlined by the Governor's Government Efficiency and Management Performance Review Team include saving up to $47 million by using technology to prevent Medicaid fraud.
He also said the state could save $7.5 million over the five-year period by implementing a "preferred drug list" -- an executive order Ritter made earlier this year. Ritter signed the order in hopes of bringing down drug costs for the state's Medicaid program.
Other proposals include: Reducing the state's vehicle fleet, saving $2.2 million and reducing vehicle maintenance costs by $3.3 million doing repairs internally instead of contracting the work to private businesses.
In addition to those savings, Ritter said the state would improve its collections of tax dollars owed by out-of-state corporations -- an estimated benefit of $37.8 million.
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Ritter, a Democrat who was sworn into office earlier this year, announced a series of reforms that he said were the result of surveying state employees about ways to save money.
The reforms outlined by the Governor's Government Efficiency and Management Performance Review Team include saving up to $47 million by using technology to prevent Medicaid fraud.
He also said the state could save $7.5 million over the five-year period by implementing a "preferred drug list" -- an executive order Ritter made earlier this year. Ritter signed the order in hopes of bringing down drug costs for the state's Medicaid program.
Other proposals include: Reducing the state's vehicle fleet, saving $2.2 million and reducing vehicle maintenance costs by $3.3 million doing repairs internally instead of contracting the work to private businesses.
In addition to those savings, Ritter said the state would improve its collections of tax dollars owed by out-of-state corporations -- an estimated benefit of $37.8 million.
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GPEC, cities hope to woo businesses with expedited permit process
The Greater Phoenix Economic Council is hoping to make it easier for companies looking to move or expand here with an accelerated permitting process.
GPEC and its member communities say the program is necessary to compete in a global economy where businesses need to move quickly. GPEC's Community Building Consortium is leading the effort designed to get qualified companies through the municipal process in 90 days or less.
"Most companies seeking to relocate or expand need to be operational within 12 to 18 months," said Barry Broome, GPEC president and chief executive. "Expediting the permitting process enables us to better compete with other markets vying for the same quality projects."
To qualify for 90-day or less permitting, projects must meet high-wage and community criteria, involve project professionals on a development team, participate in pre-phase meetings, develop competitive timelines, submit fully developed plans and maintain a pre-determined schedule.
credited by: www.gpec.org/gpec90-day.html.
GPEC and its member communities say the program is necessary to compete in a global economy where businesses need to move quickly. GPEC's Community Building Consortium is leading the effort designed to get qualified companies through the municipal process in 90 days or less.
"Most companies seeking to relocate or expand need to be operational within 12 to 18 months," said Barry Broome, GPEC president and chief executive. "Expediting the permitting process enables us to better compete with other markets vying for the same quality projects."
To qualify for 90-day or less permitting, projects must meet high-wage and community criteria, involve project professionals on a development team, participate in pre-phase meetings, develop competitive timelines, submit fully developed plans and maintain a pre-determined schedule.
credited by: www.gpec.org/gpec90-day.html.
New interstate bridge could cost $4.2B
A new interstate bridge over the Columbia River could cost as much as $4.2 billion, according to new cost estimates released Monday.
The estimates were released by the Columbia River Crossing project team, a joint effort between the Oregon Department of Transportation and the Washington State Department of Transportation.
The group is studying five alternatives, including replacing the bridge and supplementing the existing structure.
Cost estimates today range from $3.1 million to $4.2 million, presuming construction begins between 2010 and 2017.
The bridge is considered one of the worst bottlenecks on Interstate 5, which runs from Canada to Mexico.
The group will soon hold open houses to gather public comments on the proposed alternatives. It will release additional findings next month, including funding options.
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The estimates were released by the Columbia River Crossing project team, a joint effort between the Oregon Department of Transportation and the Washington State Department of Transportation.
The group is studying five alternatives, including replacing the bridge and supplementing the existing structure.
Cost estimates today range from $3.1 million to $4.2 million, presuming construction begins between 2010 and 2017.
The bridge is considered one of the worst bottlenecks on Interstate 5, which runs from Canada to Mexico.
The group will soon hold open houses to gather public comments on the proposed alternatives. It will release additional findings next month, including funding options.
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DORA recommends more bingo games
Colorado could allow more bingo games under a proposal to come before the Legislature next year.
Allowing more bingo games is part of the recommendations issued Monday by the Department of Regulatory Agencies, which suggests changes to regulations.
The Legislature will be asked to:
Allow more bingo games.
The current regulation restricts organizations with a bingo license to 158 bingo occasions in a calendar year. The review said the rule is arbitrary and an unlimited number should be allowed.
Require cooperative electric associations and municipal utilities to give incentives to consumers who generate their own power.
Passed in 2004, Amendment 37 directed investor-owned utilities to create a standard net metering system for consumers who generate electricity through solar power or other means. The amendment excluded co-ops and municipal utilities, so nearly half of the state's electricity customers don't have access to those programs.
Remove the burden of proof now placed on companies wanting to start a taxi service.
Applicants have to prove there's a public need for a taxi service that existing companies aren't meeting. The proposed change would turn that around: Existing taxi companies would have to prove granting a new company permission to operate would harm the public.
Increase the fines allowed to be levied against collection agencies.
The Department of Regulatory Agencies is asking that the fine per violation be increased to $2,000 from $1,000. The Legislature also will be asked to remove a requirement that licensed collection agencies have an office in Colorado. An out-of-state collection agency should only need to have a registered agent in Colorado and a toll-free number.
Find a way to develop a permanent funding solution for CoverColorado.
CoverColorado is a safety-net health program created in 1991 to provide coverage for those considered uninsurable or who are unable to afford insurance because of high premiums tied to a pre-existing condition or illness. Premiums collected from those in CoverColorado provide about 60 percent of the program's costs.
The shortfall happens because federal grants, the state's unclaimed property trust fund and assessments on insurance carriers don't generate enough money. The department is calling for a task force to be created to determine a better funding source, including the possibility of an all-payer system that would charge fees to hospitals and doctors in private practice.
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Allowing more bingo games is part of the recommendations issued Monday by the Department of Regulatory Agencies, which suggests changes to regulations.
The Legislature will be asked to:
Allow more bingo games.
The current regulation restricts organizations with a bingo license to 158 bingo occasions in a calendar year. The review said the rule is arbitrary and an unlimited number should be allowed.
Require cooperative electric associations and municipal utilities to give incentives to consumers who generate their own power.
Passed in 2004, Amendment 37 directed investor-owned utilities to create a standard net metering system for consumers who generate electricity through solar power or other means. The amendment excluded co-ops and municipal utilities, so nearly half of the state's electricity customers don't have access to those programs.
Remove the burden of proof now placed on companies wanting to start a taxi service.
Applicants have to prove there's a public need for a taxi service that existing companies aren't meeting. The proposed change would turn that around: Existing taxi companies would have to prove granting a new company permission to operate would harm the public.
Increase the fines allowed to be levied against collection agencies.
The Department of Regulatory Agencies is asking that the fine per violation be increased to $2,000 from $1,000. The Legislature also will be asked to remove a requirement that licensed collection agencies have an office in Colorado. An out-of-state collection agency should only need to have a registered agent in Colorado and a toll-free number.
Find a way to develop a permanent funding solution for CoverColorado.
CoverColorado is a safety-net health program created in 1991 to provide coverage for those considered uninsurable or who are unable to afford insurance because of high premiums tied to a pre-existing condition or illness. Premiums collected from those in CoverColorado provide about 60 percent of the program's costs.
The shortfall happens because federal grants, the state's unclaimed property trust fund and assessments on insurance carriers don't generate enough money. The department is calling for a task force to be created to determine a better funding source, including the possibility of an all-payer system that would charge fees to hospitals and doctors in private practice.
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International Royalty raising $64.5 mil.
International Royalty Corp. said Monday a syndicate of underwriters is buying 10 million shares of its common stock.
The Englewood company (AMEX: ROY, TSX: IRC) said the purchase will bring in proceeds of $64.5 million.
The underwriters also will have an option to buy another 1.5 million shares until the closing date, which is Nov. 5.
International Royalty said the proceeds will be used for general corporate purposes.
The company has a royalty stake in various mineral projects, including a gold mine in Australia.
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The Englewood company (AMEX: ROY, TSX: IRC) said the purchase will bring in proceeds of $64.5 million.
The underwriters also will have an option to buy another 1.5 million shares until the closing date, which is Nov. 5.
International Royalty said the proceeds will be used for general corporate purposes.
The company has a royalty stake in various mineral projects, including a gold mine in Australia.
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Attorney general seeks to delay hospital valuation report
The Ohio Attorney General has asked a judge to delay the release of a report placing a value on the Christ and St. Luke hospitals as they leave the Health Alliance.
The valuation from VMG Health, a valuation and transaction advisory firm with offices in Nashville and Dallas, is due out this week. Attorney General Marc Dann wants the report, ordered by Hamilton County Common Pleas Court Judge Fred Nelson, kept under wraps until Oct. 31.
Dann's office has for weeks been leading negotiations between the Health Alliance and its departing hospitals. They're trying to determine details of the split, particularly how assets and debt are to be divided.
Jewish Hospital, a member of the Alliance, filed a motion Monday opposing a delay.
"Regardless of the status of negotiations with the Christ Hospital," the hospital's lawyers wrote in the filing, "the report is necessary to continue the process of effecting the withdrawal of St. Luke Hospital as the parties have not been able to reach agreement, or anything near it, in regard to that entity."
Jewish's board members "do not believe they would be properly discharging their duties if they bury their heads in the sand and turn a blind eye to information that is readily available as to the negotiations," according to the motion.
Health Alliance spokesman Tony Condia said the parties were in court Monday arguing the attorney general's motion.
Judge Nelson ruled in April that Christ and St. Luke could withdraw from the Alliance. A Health Alliance appeal of the decision is pending.
After the hospitals' attempts to negotiate details of the separation failed, Dann and University of Cincinnati President Nancy Zimpher invited the parties to negotiating sessions.
UC participates in the system on behalf of University Hospital.
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The valuation from VMG Health, a valuation and transaction advisory firm with offices in Nashville and Dallas, is due out this week. Attorney General Marc Dann wants the report, ordered by Hamilton County Common Pleas Court Judge Fred Nelson, kept under wraps until Oct. 31.
Dann's office has for weeks been leading negotiations between the Health Alliance and its departing hospitals. They're trying to determine details of the split, particularly how assets and debt are to be divided.
Jewish Hospital, a member of the Alliance, filed a motion Monday opposing a delay.
"Regardless of the status of negotiations with the Christ Hospital," the hospital's lawyers wrote in the filing, "the report is necessary to continue the process of effecting the withdrawal of St. Luke Hospital as the parties have not been able to reach agreement, or anything near it, in regard to that entity."
Jewish's board members "do not believe they would be properly discharging their duties if they bury their heads in the sand and turn a blind eye to information that is readily available as to the negotiations," according to the motion.
Health Alliance spokesman Tony Condia said the parties were in court Monday arguing the attorney general's motion.
Judge Nelson ruled in April that Christ and St. Luke could withdraw from the Alliance. A Health Alliance appeal of the decision is pending.
After the hospitals' attempts to negotiate details of the separation failed, Dann and University of Cincinnati President Nancy Zimpher invited the parties to negotiating sessions.
UC participates in the system on behalf of University Hospital.
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Hawaiian names Nardello SVP
Hawaiian Airlines on Monday named Charles Nardello its senior vice president of operations.
Nardello has oversight responsibility for daily administration of maintenance, engineering, customer service, cargo and flight operations, catering, safety and security.
He replaces Norm Davies, who retired in July.
Nardello has worked at Hawaiian, a subsidiary of Hawaiian Holdings (Amex: HA), since 2004. He previously served as vice president of maintenance and engineering.
A 22-year U.S Air Force veteran, Nardello served in Operation Desert Shield and Operation Desert Storm.
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Nardello has oversight responsibility for daily administration of maintenance, engineering, customer service, cargo and flight operations, catering, safety and security.
He replaces Norm Davies, who retired in July.
Nardello has worked at Hawaiian, a subsidiary of Hawaiian Holdings (Amex: HA), since 2004. He previously served as vice president of maintenance and engineering.
A 22-year U.S Air Force veteran, Nardello served in Operation Desert Shield and Operation Desert Storm.
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Bredesen to meet with Chinese co. Fushi International
Tennessee Gov. Phil Bredesen agreed Monday to meet with Fushi International leaders about the company's recent acquisition of Fayetteville, Tenn.-based Copperweld Bimetallics LLC, a leading manufacturer of copper-clad wire.
The acquisition was Tennessee's largest investment by a company from China.
The meeting will be held in Beijing during the governor's trade mission to China.
Bredesen will meet with Li Fu, chairman and CEO of Fushi International, Chris Finley, CEO of Copperweld and Matt Kisber, commissioner of Economic and Community Development for Tennessee.
Fushi International manufactures bimetallic composite wire products, principally copper clad aluminum wires.
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The acquisition was Tennessee's largest investment by a company from China.
The meeting will be held in Beijing during the governor's trade mission to China.
Bredesen will meet with Li Fu, chairman and CEO of Fushi International, Chris Finley, CEO of Copperweld and Matt Kisber, commissioner of Economic and Community Development for Tennessee.
Fushi International manufactures bimetallic composite wire products, principally copper clad aluminum wires.
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Foy out as Furniture Brands' president, COO
Furniture Brands will not extend President and Chief Operating Officer John "Tom" Foy's contract set to expire on Dec. 31 and will pay him a $2 million severance payment, according to an Oct. 12 company filing with the Securities and Exchange Commission.
Foy will resign from the board of directors on Nov. 1, but he will remain the company's president and chief operating officer through Jan. 31, 2008.
Last week, Furniture Brands announced the immediate resignation of Nancy Webster, who was the president and chief executive officer of Thomasville Furniture Industries Inc., and appointed Edward Teplitz president of Thomasville.
St. Louis-based Furniture Brands International Inc. (NYSE: FBN) manufactures furniture under the Thomasville, Henredon, Drexel Heritage, Maitland-Smith, Broyhill and Lane brands.
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Foy will resign from the board of directors on Nov. 1, but he will remain the company's president and chief operating officer through Jan. 31, 2008.
Last week, Furniture Brands announced the immediate resignation of Nancy Webster, who was the president and chief executive officer of Thomasville Furniture Industries Inc., and appointed Edward Teplitz president of Thomasville.
St. Louis-based Furniture Brands International Inc. (NYSE: FBN) manufactures furniture under the Thomasville, Henredon, Drexel Heritage, Maitland-Smith, Broyhill and Lane brands.
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Acquisitions a win-loss for Pierre
Two subsidiaries acquired by Pierre Foods Inc. last year boosted revenues in the second quarter and first half of its 2008 fiscal year, but related expenses threw the company into the loss column.
Pierre posted second-quarter revenue of $151.5 million, up 53 percent from $98.9 million in the second quarter of 2006. The net loss was $8.2 million versus net income of $130,000 a year ago. Earnings before interest, taxes, depreciation and amortization (EBIDTA) were $5.5 million versus $12.7 million in the year-ago period.
The company doesn't provide earnings-per-share figures, and its stock doesn't trade publicly.
Year to date, Pierre reported revenue of $309 million, up 51 percent from $204.7 million in the same fiscal 2007 period. The net loss was $12.5 million compared to net income of $810,000 a year ago. and EBIDTA was $16.4 million, down from $26 million.
Pierre said in a news release that the net loss was due to higher costs for goods, sales, administration, interest and depreciation, all the result of its purchases of food companies Zartic and Clovervale in 2006.
The expenses were partially offset by higher revenues and lower income tax expenses of about $4.7 million.
The company also said it had one-time expenses of about $1 million related to downtime at its Rome, Ga., plant, and integration and administrative costs of about $900,000.
Pierre Foods, headquartered in Cincinnati, manufactures, markets and distributes pre-cooked and ready-to-cook foods, meals and convenience sandwiches.
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Pierre posted second-quarter revenue of $151.5 million, up 53 percent from $98.9 million in the second quarter of 2006. The net loss was $8.2 million versus net income of $130,000 a year ago. Earnings before interest, taxes, depreciation and amortization (EBIDTA) were $5.5 million versus $12.7 million in the year-ago period.
The company doesn't provide earnings-per-share figures, and its stock doesn't trade publicly.
Year to date, Pierre reported revenue of $309 million, up 51 percent from $204.7 million in the same fiscal 2007 period. The net loss was $12.5 million compared to net income of $810,000 a year ago. and EBIDTA was $16.4 million, down from $26 million.
Pierre said in a news release that the net loss was due to higher costs for goods, sales, administration, interest and depreciation, all the result of its purchases of food companies Zartic and Clovervale in 2006.
The expenses were partially offset by higher revenues and lower income tax expenses of about $4.7 million.
The company also said it had one-time expenses of about $1 million related to downtime at its Rome, Ga., plant, and integration and administrative costs of about $900,000.
Pierre Foods, headquartered in Cincinnati, manufactures, markets and distributes pre-cooked and ready-to-cook foods, meals and convenience sandwiches.
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BofA, others plan credit superfund
Bank of America Corp. and several other financial institutions have agreed to launch a fund to buy illiquid assets in exchange for new short-term debt.
Charlotte-based BofA (NYSE:BAC), Citigroup Inc. (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) have agreed to create a single master liquidity enhancement conduit to purchase assets from structured investment vehicles, according to a BofA press release.
Access to such liquidity will allow sellers to meet pending redemptions and facilitate asset-backed commercial paper rollovers, BofA says.
According to The Wall Street Journal, the banks hope to have the $100 billion fund up and running within 90 days.
The U.S. Department of Treasury facilitated the discussions among the consortium of banks and investment managers. The fund is widely seen as a method to prop up the troubled credit markets.
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Charlotte-based BofA (NYSE:BAC), Citigroup Inc. (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) have agreed to create a single master liquidity enhancement conduit to purchase assets from structured investment vehicles, according to a BofA press release.
Access to such liquidity will allow sellers to meet pending redemptions and facilitate asset-backed commercial paper rollovers, BofA says.
According to The Wall Street Journal, the banks hope to have the $100 billion fund up and running within 90 days.
The U.S. Department of Treasury facilitated the discussions among the consortium of banks and investment managers. The fund is widely seen as a method to prop up the troubled credit markets.
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Coke expands in world of coffee
The Coca-Cola Co. will team up with Trieste, Italy-based illycaffè to create a joint venture that will produce a ready-to-drink coffee beverages.
Atlanta-based Coca-Cola (NYSE: KO) said specifics on brands and distribution have not yet been finalized. The final joint venture agreements will be signed by the end of the year.
"Illy is a proven leader with an uncompromising commitment to high-quality espresso coffee and a strong history of innovation with whom we are proud to partner," said Muhtar Kent president and chief operating officer of Coca-Cola. "We will be able to bring our brand building and distribution expertise together with illy's premium brand reputation. This partnership demonstrates our commitment to meeting evolving consumer demands while creating additional value for our system, our customers and our shareowners."
Coca-Cola said the ready-to-drink coffee category is worth about $10 billion globally. The ready-to-drink coffee category, excluding Japan, has grown at an average rate of 10.1 percent over the past five years.
Coke already has a coffee partnership with Caribou Coffee Co.
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Atlanta-based Coca-Cola (NYSE: KO) said specifics on brands and distribution have not yet been finalized. The final joint venture agreements will be signed by the end of the year.
"Illy is a proven leader with an uncompromising commitment to high-quality espresso coffee and a strong history of innovation with whom we are proud to partner," said Muhtar Kent president and chief operating officer of Coca-Cola. "We will be able to bring our brand building and distribution expertise together with illy's premium brand reputation. This partnership demonstrates our commitment to meeting evolving consumer demands while creating additional value for our system, our customers and our shareowners."
Coca-Cola said the ready-to-drink coffee category is worth about $10 billion globally. The ready-to-drink coffee category, excluding Japan, has grown at an average rate of 10.1 percent over the past five years.
Coke already has a coffee partnership with Caribou Coffee Co.
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BabyUniverse, eToys Direct merge
BabyUniverse of Jupiter has merged with eToys Direct and will be moving to the company's Denver headquarters.
BabyUniverse (NASDAQ: POSH) is an online marketer of baby and toddler merchandise. eToys Direct is an online marketer of toys and other products for older children.
The combined company will be renamed The Parent Co., pending shareholder approval. It will trade under the BabyUniverse ticker, POSH, until the name change. It will then trade on NASDAQ under the ticker KIDS.
Under the terms of the previously announced merger, eToys Direct shareholders now own about two-thirds of the new company and BabyUniverse shareholders own one-third.
Shares closed Friday at $12, a 52-week high. The 52-week low was $5.07 on Jan. 26.
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BabyUniverse (NASDAQ: POSH) is an online marketer of baby and toddler merchandise. eToys Direct is an online marketer of toys and other products for older children.
The combined company will be renamed The Parent Co., pending shareholder approval. It will trade under the BabyUniverse ticker, POSH, until the name change. It will then trade on NASDAQ under the ticker KIDS.
Under the terms of the previously announced merger, eToys Direct shareholders now own about two-thirds of the new company and BabyUniverse shareholders own one-third.
Shares closed Friday at $12, a 52-week high. The 52-week low was $5.07 on Jan. 26.
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Real estate wrap: Marcus & Millichap cinches up 2 deals
Marcus & Millichap recently arranged the sale of two Bucks County community retail properties.
U.S. Real Estate Acquisitions of East Brunswick, N.J., bought Country Square Shopping Center, an 80,000-square-foot center off Route 309 in Quakertown, Pa., for $9.5 million. Saul Associates of Bryn Mawr, Pa., was the seller. The property garnered 15 offers, most from out of state including New York, New Jersey and Maryland.
In another sale, Walnut Street Capital, a Philadelphia real estate investment firm headed by Joe Grasso, bought Warminster Plaza, a 130,000-square-foot strip, at the corner of York and Street roads in Warminster, Pa., for $12.4 million. The buyer was drawn to the property because of its dense, high-income demographics, said Brad Nathanson, a broker with Marcus & Millichap who arranged the sale of both centers. Walnut Street was also attracted to the property's value-add play. Two of the center's anchors, Rite Aid Pharmacy and Staples, left the center, giving Walnut the opportunity to totally reposition it with new retail tenants. Walnut also plans roughly $5 million in renovations, including totally redoing the façade, adding parking, putting in additional pad sites and adding to the square footage of the center, Nathanson said.
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U.S. Real Estate Acquisitions of East Brunswick, N.J., bought Country Square Shopping Center, an 80,000-square-foot center off Route 309 in Quakertown, Pa., for $9.5 million. Saul Associates of Bryn Mawr, Pa., was the seller. The property garnered 15 offers, most from out of state including New York, New Jersey and Maryland.
In another sale, Walnut Street Capital, a Philadelphia real estate investment firm headed by Joe Grasso, bought Warminster Plaza, a 130,000-square-foot strip, at the corner of York and Street roads in Warminster, Pa., for $12.4 million. The buyer was drawn to the property because of its dense, high-income demographics, said Brad Nathanson, a broker with Marcus & Millichap who arranged the sale of both centers. Walnut Street was also attracted to the property's value-add play. Two of the center's anchors, Rite Aid Pharmacy and Staples, left the center, giving Walnut the opportunity to totally reposition it with new retail tenants. Walnut also plans roughly $5 million in renovations, including totally redoing the façade, adding parking, putting in additional pad sites and adding to the square footage of the center, Nathanson said.
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Geo to expand Colorado facility
Geo Group said it will begin expanding a Colorado Immigration and Customs Enforcement center by 1,100 beds in the fourth quarter of 2007.
The Aurora ICE Processing Center in Aurora, Colo. is owned and managed by Geo under contract with U.S. Immigration and Customs Enforcement. It currently has 400 beds.
The Boca Raton-based correctional, detention and residential treatment firm said the expansion will cost about $72 million. It expects to finish construction in the third quarter of 2009.
At 90 percent capacity, Geo expects the additional beds to generate about $30 million in annual revenue.
Shares closed Friday at $28.64. The 52-week high was $32.93 on Sept. 19. The 52-week low was $16.94 on Dec. 20.
credited by: bizjournals.com
The Aurora ICE Processing Center in Aurora, Colo. is owned and managed by Geo under contract with U.S. Immigration and Customs Enforcement. It currently has 400 beds.
The Boca Raton-based correctional, detention and residential treatment firm said the expansion will cost about $72 million. It expects to finish construction in the third quarter of 2009.
At 90 percent capacity, Geo expects the additional beds to generate about $30 million in annual revenue.
Shares closed Friday at $28.64. The 52-week high was $32.93 on Sept. 19. The 52-week low was $16.94 on Dec. 20.
credited by: bizjournals.com
Bandits, NLL season in jeopardy
The National Lacrosse League said it will cancel the 2008 season unless a new collective bargaining agreement with its players is reached by Monday.
Talks between the NLL, which includes the Buffalo Bandits, and the Professional Lacrosse Players Association broke off Sunday. The sides are said to be far apart on salary levels and length of contract.
According to the league, no talks are scheduled.
The NLL added an expansion team in Boston this year, the league's 14th franchise.
The average salary for the NLL is about $14,500 over a 16 game season.
With attendance of over 12,000 per game, the Bandits were the third-largest drawing team last season.
credited by: bizjournals.com
Talks between the NLL, which includes the Buffalo Bandits, and the Professional Lacrosse Players Association broke off Sunday. The sides are said to be far apart on salary levels and length of contract.
According to the league, no talks are scheduled.
The NLL added an expansion team in Boston this year, the league's 14th franchise.
The average salary for the NLL is about $14,500 over a 16 game season.
With attendance of over 12,000 per game, the Bandits were the third-largest drawing team last season.
credited by: bizjournals.com
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