Articles from 02/03/08 to 02/09/08

Consumer advocates have long complained that credit card companies have the upper hand. Essentially, credit card companies can change the terms of the credit card agreement at any time for any reason. Credit card issuers say it’s their only recourse, since there is no collateral to back up credit card debt except the borrower’s ability to repay.

Now many consumers are finding out first hand what that means. Firms like Bank of America have mailed out notices to their customers that their interest rates are going up. Not just a little, but more than double in some cases, even as the Federal Reserve is lowering rates. In response to our request, Bank of America says in 2007 “only 6 percent of credit card customers had an increase in interest rate due to default or risk-based pricing.” But for that 6%, the payment increases are hard to cope with. (Check out Credit Bloggers to see what I mean.) Borrowers can transfer debt to a new card, but consumer advocates say the credit card companies can make it hard for consumers to pay off transferred debt.

As far as the Stock Market is concerned, there’s no longer a question as to whether the U.S. economy is in a recession. And that presents a quandary for investors: with most stock sectors moving down, where is a relatively safe place to ride out the economic downturn?

The answer may be in a largely-ignored class of stocks: education-related companies. The statistics tell the story: total education spending in the U.S. is now close to $1 trillion -- more than any other service sector except healthcare. And like healthcare, education spending is largely immune to the ups-and-downs of the economy.

Of course, education is largely dependent on government funding. And if you’re a skeptic, you’re probably saying: “but isn’t there a risk that the new President -- or Congress -- could tighten up on the education purse-strings, in the interest of fiscal responsibility?”

It takes a crisis to get anything done in Washington. Take for example, GSE reform. To the uninitiated, GSE stands for government sponsored enterprise and its short-hand for mortgage securitizers Fannie Mae and Freddie Mac. Post-Enron, the two had a series of accounting scandals. At that time (circa 2003), lawmakers began to call for a strong regulator to oversee the firms. But political battling over just how to do that bogged down reform. Together Fannie Mae and Freddie Mac now hold or guarantee nearly $5 trillion, yes trillion with a “T”, worth of mortgage debt. In the housing and credit crunch, they are just about the only ones buying mortgage debt now.

Now lawmakers want Fannie and Freddie to enter the jumbo mortgage market and buy loans valued at up to $730,000. So the housing crisis has given the old debate about a strong regulator new life. The thinking now is if Congress doesn’t get it done by October of this year, it may take some other crisis to get it done.

Wall Street ended in positive territory for the first time this week. The gain for stocks comes the same day that retailers reported dismal sales for January. Wal-Mart was among the big losers with sales coming in well below estimates. Suzanne Pratt looks at new consumer spending trends in tonight's program and what they means to the economy and to the prospect of recession.

On Capitol Hill, the Senate has passed a stimulus plan that will provide one-time rebates of up to $600 for individuals and $1,200 for couples plus $300 for each child. Low income earners, including retirees on Social Security and disabled veterans who pay no income taxes, would receive checks of $300. The House was also expected to give its approval Thursday and send it to President Bush for his signature. Also on Capitol Hill, lawmakers are trying to figure out how to regulate Fannie Mae and Freddie Mac. Stephanie Dhue was there for today's debate.

And finally, Scott Gurvey wraps up his Future of Television series tonight, with a look at how its evolution to digital technology will bring viewers new options and will also impact how programs are recorded and viewed and even how news is gathered.

It has been interesting to see all the viewer comments about our Future of Television Series. Thank you all.

First a note about the Hulu web site, a joint venture of NBC/Universal and News Corp. I said in last night’s report that NBC would be selling TV shows there. In fact, the site will be ad-supported, so viewers will not have to pay to view. The site is not yet open to the public.

Also for all those who had questions about the switch to digital TV coming February 17, 2009, I’m afraid answers are not always easy to come by. The switch directly impacts only those TV sets which receive an over-the-air broadcast signal. If you are wired to a cable provider, or a central antenna system, it will be up to your provider to decide if you have to do anything to continue receiving the signal. Most likely, you will not. Nor should you have to do anything if you receive a satellite signal. As one correspondent observed, there is a whole class of “low powered” television systems which may be affected in adverse ways. This is not getting much attention because so few people are involved.

AAA says gasoline prices could fall 50 cents a gallon by spring. Forgive me for being skeptical.

After all, high gasoline prices haven’t altered consumer driving habits in the past. But AAA says what’s different now is worries about recession. The motor club says consumers are nervous about losing their jobs -- so they’re trying make fewer shopping trips. It says businesses are making fewer sales calls and short haul deliveries.

AAA is a reliable source. And I’m sure there are some businesses and consumers changing their driving patterns. But I can’t think of any in my neighborhood, off the top of my head.

The way Wall Street is falling all over itself to invest in the “new media” companies which have been created to create and distribute television in the Internet age you’d think the “old media” television companies were nearly extinct. Not true. They have learned from the music industry’s mistakes and are spending billions trying to design a business model which lets them ride the new wave instead of trying to resist it. Some have been more successful than others and we’ll take a look at them tonight in part three of our special series, “The Future of Television.”

What a day on Wall Street! Today's market plunge on recession fears had everyone from the Treasury Secretary to my dad scratching their heads. Testifying on the budget in front of the Senate Finance Committee today, Treasury Secretary Henry Paulson said he's paying close attention to what's going on in the financial markets. Meanwhile my dad, an 80+ retiree surfed the Web looking for answers. When we spoke this afternoon, I asked him the magic question, "Did you sell on the news?" His answer, "No."

I talked with our regular Street Critique guest Hilary Kramer about what she's seeing in the market. She likened it to a classic sports "head fake," saying just when investors were feeling a bottom was nearing on the Fed's aggressive rate cuts, today's ISM services data showed new signs of contraction. She'll be on with Jeff Yastine tomorrow night, with advice on some sectors to avoid and maybe even a bargain or two in the making. So, how are you doing with the market gyrations? Are you sitting on the sidelines waiting for the rate cuts to turn the tide, or are you out there hunting for bargains?

Can you name the company which sold for more than one and half billion dollars after just three years in operation? Tune in tonight for the answer in part two of our series, 'The Future of Television."

It used to take lots of expensive equipment to make television, and skilled operators to make it work. Now, just like the computer industry when the PC arrived, the television industry must face a world in which anyone with a web cam or video generating cell phone can make TV.

It's called, "Democratization," which basically means everybody can do it. Tonight we'll look at this new world, with a particular focus on companies which have, and which may soon, benefit from this developing trend.

I have a beef about Google. The company preaches “openness” for all things involving the internet. But the company doesn’t practice what it preaches when it comes to communicating. The company has gotten better in the past year. It opened a Washington, DC office and there is a person I now know there who will respond to interview and information requests. But there has never been an interview and not much information.

Analysts tell me that large investors are wary of Google because it doesn’t share financial information as openly as other companies do. I find it ironic that a company that calls for “openness” is itself incredibly closed.

The White House is calling the Fiscal Year 2009 spending plan an "e-budget." Instead of printing up 3,000 copies for lawmakers, journalists, and lobbyists, the Bush Administration canceled the usual order, hoping to save 20 tons of paper and $1 million by delivering the 2,200 page document over the internet.

Rather than download, lawmakers went old school. As one Congressional staffer told me, "Members wanted hard copies." Turns out, reading the fine print for, say, "Royalties and Offshore Minerals Management" is not so easy online. A few Senators and Congressmen asked the Joint Committee on Printing to order up some copies from the Government Printing Office. The Joint Committee on Printing are the folks who issue the pocket copies of the Constitution that members carry around. (I gave one to my kids, but they lost interest when I told them the Bill of Rights does not apply to anyone under 18 living in my house.) As this blog went live, I was underable to find out how many copies GPO printed, but judging by the pallets arriving on Capitol Hill, I'll bet many hundreds. You can still get a printed copy of the entire budget from GPO for $213.

So…the boss says, “How about taking a look at television?” I figured, “Why not?” I watch television. This is a good excuse to watch some more.

Of course, he had something more complicated than that in mind. Thus began a multi-month project, the fruit of which you will see beginning tonight, as I begin a four part series of reports titled, “The Future of Television.” Our goal at Nightly Business Report is to give you the information you need for wise investing and money management. So our series will be devoted to indentifying the trends and the players, information you may be able to use to your advantage.

We’ll begin tonight with a look at the technology. When I was a kid, growing up in Chicago, we had five TV stations. One each affiliated with CBS, NBC, ABC and PBS and a fifth “independent”. TV watching meant the family gathering around the big black and white set in the living room, watching what the stations were offering when the stations wanted to offer it.