XChange - The NBR Blog

U.S. Automakers Need More Time to Adapt to High Gas Prices

Tue, 08 Jul 2008 16:36:51 -0500

It's no secret that U.S. automakers are facing one of their worst sales years in history. J.D. Power & Associates estimates that vehicle sales here will drop to 14.9 million units this year from 16.1 last year.

So, what do the companies have in their arsenals going for the rest of the year to draw consumers into showrooms? Unfortunately, not what consumers want at the moment. Small, fuel-efficient cars are selling like hot cakes. But Detroit is coming out with muscle cars, more sport utilities, and a few crossovers.

Why no cars? Vehicle development cycles take three to four years. So, the products hitting dealerships now started on drawing boards back in 2004 and 2005 when gasoline will still about $2 a gallon.

Another reason is brand identity. As Marl LaNeve, VP of General Motors North America, puts it "We were good in trucks for so long...we don't have the market position and the brand image that we need to...capitalize on this market that we would like to."

Can the Economy Afford to Go Green?

Tue, 08 Jul 2008 16:26:28 -0500

Hey it’s Mike, the intern. I was researching some topics for a project, and two articles from this winter caught my attention. They both dealt with the state of the economy, and its impact on the “green-movement.” Since a lot has happened in oil markets and the credit industry, I thought it would be interesting to see what people think.

On one hand you can say that this is no better time for a push to go green. The cost of everything is going up, and the economy is responding. We have seen an increase in hybrid car sales and a decrease in summer vacation travel. All these factors help to reduce carbon emissions. However, as costs go up and people cut back on spending, some companies are having a hard time just staying afloat. Large and small firms around the country may have to reduce funding to green investment, and others may lack the funding to start.

The question: Is a weak economy actually helping our environment, or is it a burden to the people who are trying to go green?

The SEC Matters

Mon, 07 Jul 2008 18:05:14 -0500

The Securities and Exchange Commission is not the sexiest beat. Say SEC and many people think of the South Eastern Conference; say SEC fast and it can mistaken for the FCC (Federal Communications Commission). But what happens at the Commission (or doesn’t) can have a real bottom-line impact on the investments of millions of Americans.

With the bailout of Bear Stearns and an emphasis on beefing up the regulatory authority of the Fed over investment banks, investor advocates are worried the Securities and Exchange Commission is ceding its authority to the Fed. SEC Chairman Christopher Cox says his agency will now have greater ability, not less, to see what’s going on at commercial and investment banks. Former SEC Chief Economist Lynn Turner says the SEC should have realized that Bear Stearns was taking on way too much short term debt and using too much leverage and done something about it. Instead, the SEC put out the word that the investment banks were well capitalized.

Contemplating Guaranteed Financing on the Fourth of July

Mon, 07 Jul 2008 17:57:12 -0500

I’m sitting out in the back yard with my dog over the lazy Fourth of July weekend, listening to newsradio, when I hear a commercial for a group of surgeons. In my neck of the woods, doctors advertising are rare and most are pushing laser surgery for your eyes. But this was something different. “Ladies,” the announcer said, “Now you can have the breast procedure you’ve always dreamed about.” While the commercial was addressing women, the announcer was male and the only other voice was that of an actor playing “The Husband” and reporting how happy his wife was with the procedure, how good she looked and how much more confidence she had.

I’m not going anywhere near the issues of sexism, ethics, or the wisdom of going through surgical procedures which are not necessary from a health standpoint. No sir. What I will discuss is what I heard next. “Financing,” the announcer said, “is guaranteed, no matter what your credit rating is.”

McCain and Obama Side by Side on the Economy

Mon, 07 Jul 2008 12:00:26 -0500

Obama and McCain are talking the economy this week and I thought it would be enlightening to read their remarks side by side and decode them.

So let's dive in.

After declaring this election a "defining moment," Obama launches right into the Democratic diagnosis for the economic pain people are feeling: "You're working harder than ever to pay bills that are getting bigger than ever."

Translation: "All you working class people who voted for Hillary, I hear you. Not only that, it's not your fault the economy is bad. The economy is letting you down."

Obama adds that families are "trying to juggle the demands of work and family."

Translation: Democrats are pro-family. They want to help families. The juggler family idea started with Obama adviser Karen Kornbluh. For more check out this Atlantic article by Kornbluh.

Yes, There are Pros and Cons to a 4 Day Work Week

Thu, 03 Jul 2008 16:18:59 -0500

The story I report tonight looks at the four-day work week trend. The shortened schedule is being implemented by some cities and counties, and at least one state government. Employees still work forty hours a week, but they put in ten hours a day instead of eight. It's a cost-saving measure for many agencies, allowing them to keep the lights off one extra day a week. The switch can also help employees spend less money on gas by reducing the number of times they commute to work each week.

Just how much can a county save by keeping the lights off one extra day? How about $250,000 of the taxpayers' money? That tidbit comes from Jacqueline Byers, the director of research for the National Association of Counties, who says one of the group's members -- Marion County,Florida -- went to a four-day week as an experiment and saved a quarter of a million dollars in lower energy and vehicle fleet gasoline bills.

Building Green Buildings

Thu, 03 Jul 2008 16:15:18 -0500

When a lot of people hear the words “green building,” they think of slapping some solar panels on the roof or using wind energy to power the electricity. Fini.

But in doing tonight's story, I found that building green shouldn’t mean just replacing your energy sources with alternative energy. Green buildings should use less energy, no matter where that energy comes from.

For new buildings like the ones I describe in my story, that’s a reasonably straightforward task. You’re starting from scratch, so you might plan on insulated windows (to keep the office cooler), an improved HVAC unit, eco-friendly ways to deal with storm water runoff and an open layout that maximizes access to natural light.

Once I finished the story, however, I realized there is a huge challenge – and opportunity – for dealing with existing commercial buildings…e.g. the very building in which I sit, typing this blog.

Markets at Midyear - Why Investors Need to Keep Things in Perspective

Thu, 03 Jul 2008 14:09:18 -0500

On the surface, there's not a lot for investors to be happy about this July 4. To quote correspondent Suzanne Pratt, it was a "horrible" first half of the year for stocks -- with the DJIA, S&P 500 and NASDAQ composite indices all down by double-digits. June offered few signs of hope, with the Dow dropping more than in any month since 1930. Unless you were invested in oil, commodities or the Brazilian market, chances are you lost money.

I won't go into the reasons here (if you're interested, tune into our July 4 holiday special), but clearly, people are getting scared about putting money into stocks. You can see that in the slowing of inflows to mutual funds and from reports that workers are starting to reduce their contributions to 401(k) funds. We recently put together a segment for our retirement series where several financial advisors said that retirees need to keep some money in stocks in order to keep pace with inflation. In light of the current market, I'm expecting lots of e-mails from viewers asking how we can present such "irresponsible" advice!

Economic News Around the Country

Thu, 03 Jul 2008 10:08:56 -0500

Here's a quick look at how the economy is playing in newspapers around the country.

Charlotte Observer: A look at retailer Family Dollar:

Family Dollar's earnings slumped 30 percent in its previous quarter, which ended in March 1. But by then the company was already in the midst of taking steps to adjust, Levine said. After noticing “a big slowdown” in November, he said, Family Dollar increased its focus on selling consumables – laundry, food, cleaning and paper products.

Changes are continuing, he said. They include ongoing efforts to remodel and reorganize stores and install a new transaction system that will enable all stores to take food stamps, debit and credit cards. Currently, a little less than half of the company's more than 6,500 stores have that capability.

Full Story Here

Detroit News on Merrill Lynch Analyst John Murphy's GM bankruptcy warning which prompted the stock to fall to a 50-year low.

"The Merrill Lynch analyst was one of the last tepid bulls on GM," said David Sowerby, senior portfolio manger at Loomis, Sayles & Co. LP investment management in Bloomfield Hills. "He was the last guy defending the bunker."

Full Story here.

Trade Agreements and Lame Ducks

Wed, 02 Jul 2008 18:33:22 -0500

President Bush sent the Colombia free trade agreement to Congress in April, under what are called “fast-track” rules. The move was meant to force Congress into an up or down vote on the agreement within 90 days. But instead, led by House Speaker Nancy Pelosi, the House voted to void the timetable, with a 224-195 vote. Now it’s unclear if the agreement is not ratified in this Congress that it can be ratified at all.

Stanford Group Company trade analyst Joanne Thornton says the agreement could pass in a lame duck session of Congress. Some lawmakers doubt there will be a lame-duck session, but that’s not unusual either. There is resistance to a lame-duck session, until lawmakers don’t get their work done and come back to finish things off after the election. According to the Congressional Research Service, it has happened 16 times since 1940, most recently in 2006. While a lame-duck session can be used to avoid controversial votes before an election, oftentimes lawmakers punt those issues until after the new President and Congress are seated.

Gurvey's Public Offering - State of N.Y. v. Richard Grasso, the End

Wed, 02 Jul 2008 16:34:02 -0500

And so it ends. Not with the big blast of headlines and news conferences with which it began; but with the whimper of two court rulings dismissing the charges. Last week New York’s highest court threw out four of six claims the state made against former New York Stock Exchange CEO Richard Grasso. Now an intermediate appeals court has thrown out the remaining two and the word from the office of Andrew Cuomo, New York’s current Attorney General, is that the state will not appeal.

Former New York Attorney General Eliot Spitzer had charged Grasso with making an unreasonably high salary. Spitzer acted under the state law governing the operation of non-profit corporations, which the NYSE was at the time Grasso was at the helm. Spitzer also charged Home Depot co-founder Frank Langone, who was chairman of the NYSE’s compensation committee, with misleading the NYSE’s board of directors on the details of Grasso’s pay.

The claim against Langone was also thrown out, the court ruling that since the NYSE is now a for-profit corporation, the state can no longer pursue claims based on the law for non-profits.

Britney Spears and the Future of Business News

Wed, 02 Jul 2008 11:35:13 -0500

Apparently, Britney Spears is the future of business news. How do I know that Britney Spears is the future of business news? I know this because I recently attended a seminar in New York for business journalists where I learned that almost any story with the name Britney Spears in it will do well on the internet.

So, if you put Britney Spears in your story, you are likely to get lots of hits from people searching for news on Britney Spears. The more you talk about Britney Spears in that story, the higher it will appear in a search engine when someone enters "Britney Spears." (Britney was the third most popular search on Google News in 2007.) This is important to business news, because we are worried that people would rather read about Britney Spears than the stock market or housing or pretty much anything else delivered via "old media" right now.

(Oh, and be sure to put "Britney Spears" in the headline. It makes it easier for the search engine to find your story!)

If you have been reading about Britney Spears and missed everything else, then you may not know that traditional journalism in general, including business news, is in trouble. Unlike news about Britney Spears, "serious" journalism is hard to sell. As traffic moves to Google and Yahoo and YouTube, newspapers and TV programs are losing market share and cutting back.

Student Loans: Ix-nay on the IBOR-Lay

Tue, 01 Jul 2008 17:51:01 -0500

Tonight I managed to write a segment on the student loan market without using the word LIBOR. In the world of television, it’s hard to mention the LIBOR without having to describe what the LIBOR is and why it’s important. And by then, your time is up and the viewer may or may not have fallen asleep. But you faithful blog readers, you’re not getting off so easy. I have all the space in the world to write about our good friend, the London InterBank Offered Rate.

LIBOR is basically the interest rate that banks charge each other for loans. The interest rates on securitizations – such as those in the student loan market – are pegged to the LIBOR index, meaning a student loan might be securitized (i.e. pooled with other loans and repackaged into securities and then sold to investors) at LIBOR plus X.

So in happy times, Sallie Mae could securitize a student loan at LIBOR plus 0.20% (or “LIBOR plus 20”), meaning that was the interest rate Sallie Mae was able to get from investors. During the worst of the credit crunch, Sallie was getting more like LIBOR plus 150 – so their cost of doing business had gone up dramatically.

A Loeb Award for NBR's India's Promise

Tue, 01 Jul 2008 16:52:39 -0500

I was waiting at home last night for the news. I figured I’d check the wires or someone would call. As it turned out, NBR Managing Editor Wendie Feinberg called with the good news. The Nightly Business Report team of Darren Gersh, Dana Greenspon, Steve Washington and Sanjay Jha had won a Gerald Loeb Award for a series of reports titled “India’s Promise.”

Darren, Dana and Steve are all assigned to our Washington DC bureau. Sanjay is a television producer in Delhi. Together this team produced both the multi part series as well as the NBR half-hour special “India’s Promise.”

Here’s what the judges had to say...

Why the Latest Crop Data Might Not Hold

Mon, 30 Jun 2008 18:09:04 -0500

The devil is always in the details. This morning the United States Department of Agriculture said American farmers planted a little more than 87 million acres of corn this past spring. That was more than the 85 million acres analysts were expecting. Grain inventories were also better than expected.

That was great news to food processors and livestock producers who watched corn futures prices skid today. But they should probably hold off uncorking the champaign. Prices could bounce back to near $8 per bushel.

While USDA field representatives are being lauded for heading out to flooded farm fields last week to get up-to-date information from farmers, some analysts aren't sure their surveys will hold. First, only 1200 producers were polled and experts aren't sure their estimates will be accurate.