Articles from 05/11/08 to 05/17/08

Here are a couple questions I put to Carly Fiorina, a top adviser to the McCain Campaign, which I did not have room to put on the air:

Would the former CEO of HP press John McCain to ramp up the number of H-1b visas the government offers to high tech companies in need of overseas talent? It's a big issue in Silicon Valley and a bitter complaint of software engineers who fear their jobs will be outsourced.

Her response:

John McCain has been a supporter of the H-1b visa program for many, many years. He has also been a supporter of making the R&D tax credit permanent, of banning permanently taxation of the internet. All of those issues are very important to Silicon Valley executives and to the information technology industry in general. I think it is also fair to say John McCain understands that this must be a nation of laws and he has been forthright in saying this also has to be a nation of immigrants. It gives us economic vitality. So I think you are going to see him, as he did yesterday in his speech say, "you know what, we do have to secure our borders, but then we also must have a guest worker program that functions effectively."

And I couldn't resist asking whether Fiorina, who was publicly fired after leading HP in a new direction, felt vindicated by the EDS deal.

You decide:

Fiorina: "I'm very proud of what HP has done. I did the right things for HP, I made the right decisions at the right time and we executed them well. And when I see HP achieving the goals that we set out. Becoming the first $100 billion information technology company in the world and proceeding to successfully consolidate the software industry, in larger measure and the services industry, yeah, it makes me proud.

Gersh: Good deal?

Fiorina: It will depend on how it is executed as all deals do."

If Fiorina executes well for the McCain campaign, don't be surprised to see her in the cabinet or maybe running for office in California.

It’s clear that high fuel prices are taking their toll on many small businesses, threatening profit margins. This is a troubling development when you consider the importance of small businesses to the U.S. economy. 99.7% of all employer firms in America are small businesses (defined as fewer than 500 employees). Small businesses pay about half of US private payrolls, and they have generated 60-80% of net new jobs annually over the last decade. (I got these statistics from the Small Business Administration.)

For this reason, I love covering small business trends. I have a lot of admiration for entrepreneurs and people who start their own firms. To me, small businesses are a component of the American Dream -- the idea that through hard work, courage and determination a person can achieve financial prosperity.

There is a lot of focus on how individuals are feeling the pain at the pump, but I think less thought has been given to the pain state and local governments are feeling. As I was reminded while preparing my report for NBR's upcoming "Pain at the Pump" series, the combination of higher costs and lower property tax revenue is going to end up costing taxpayers either through higher taxes or reduced services. It’s hard enough to make ends meet these days, so that’s not something I’m looking forward to.

My family budget is already tightening. I cringe every time I drive by a gas station, thinking I should fill up before the price goes up again. I already take public transportation (those fares have increased, too). We’ve reduced going out to eat. I plan my routes and don’t take unnecessary trips. It’s getting harder to save. My local government is raising property taxes, and the schools have cut back on planned programs. There was talk of cutting the bus to my daughter’s school, but that didn’t happen this time. The state coffers are running dry too, and the legislature is considering new fees.

If you're like me, you may have certain items you look at it in the grocery store which help measure whether the store is well-priced or over-priced. For me, my kids' favorite box of corn muffins is one such item. Now, with the rising cost of ingredients that go into those muffins, I wonder if they're still a good measure. The price of milk, eggs, corn and flour are all up in recent months. And, it looks like those prices will continue to climb for the forseeable future. On top of that, the cost of fuel is surging, which means getting those muffins to my local supermarket costs more. The only thing I can hope for is that demand for those muffins drops as the economy slows...or that the store opts to absorb some of those higher costs.

Maybe my family needs to eat something else for breakfast.

Cellulosic ethanol is one of those energy techologies that's very exciting to explore, but the excitement has to be tempered with a hard look at the costs of production and how those costs stack up relative to other fuels. There's still a lot of debate about whether the true "carbon costs" of producing cellulosic ethanol might actually add more carbon to the atmosphere than the carbon presumably saved by not burning an equivalent amount of gasoline. Nevertheless, research and funding is streaming into this category.

As explain in tonight's "Green Options" report, this type of ethanol is brewed from the tough, fibrous material of leftover plant material. We're talking about sugar cane stalks, wood chips and bark, specially grown types of grasses, or even yard waste.

The Wall Street know-it-alls keep trying to bury this economy. But they just can’t do it. Today’s retail sales report, as well as Wal-Mart’s 1st quarter earnings statement, show that while things may be slow, they are not declining.

The people I talked to today see more of the same, flat or just above in terms of sales and growth through the summer, with improvement by the fourth quarter.

An update on the last post about the Great Housing Crash of '08. Interest rate resets are an important factor in triggering foreclosures. Many people who took out adjustable rate mortgages at low "teaser rates" are now finding their loans reset to much higher market rates. When that happens, families fall behind on their payments.

According to First American CoreLogic LoanPerformance databases, as of February 2008, 66% of subprime ARM loans had already reset and 40% of prime ARM loans had already reset.

If you were dreading first quarter earnings season, you’re probably feeling some relief now. Although earnings in the financial sector were dreadful, many investors are happy that things weren’t worse.

Excluding financials, results for S&P 500 firms were up over 7-percent, in line with the long-term historic average for the market as a whole. And, although profits at financial firms fell 79% in the first quarter, that’s still better than the fourth quarter -- when the sector lost money.

Consumer Discretionary was the only other negative sector. It fell 23%. Some sectors, like energy and consumer staples, actually rose double digits.

Ethanol bashing is all the rage these days. If you’ve been to the grocery store lately, you know why. Food prices are rising faster than they have in decades, and one factor – among many – is that corn crops once used for food and animal feed are now being converted into corn-based ethanol.

For my "Green Options" story (which will be broadcast this Thursday, May 15th), I met with a scientist-turned-businessman who is also talking trash when it comes to ethanol – but in a good way. His company Zymetis grows a bacterium that basically eats up waste materials – scrap paper, woodchips, cellulose fibers from waste streams – and spits out ethanol. So instead of using food to generate ethanol, Zymetis uses trash.

As a reporter well into my second decade of covering news, it is always fascinating to watch a story evolve. I covered bioengineered crops, also known as genetically modified organisms, when they hit the market a little more than a decade ago. Gmos aimed to revolutionize farming by creating hardier and more innovative crops. But, they did a lot more than that.

Bioengineered crops set off a storm of controversy. Environmental groups said the crops could be a health hazard and labeled them "Frankenfood." Gmo seeds were banned in most countries and many U.S. farmers were slow to adopt them. But, the global attitude towards genetically altered crops is changing.

This year the National Corn Growers Association estimates between 75 and 80 percent of the corn planted in the U.S. will be gmo. Monsanto, one of the largest producers of seeds, says genetically altered seeds are now planted in the largest agriculture producing countries in the world. And, the European Union is expected to vote on a plan soon that would allow farmers in member countries to plant genetically modified crops for the first time.

Over the weekend some friends asked me whether the subprime mess was getting better or worse. Good question, and I had a strong sense the answer was no.

Today I am trying to offer a more detailed look at where things stand.

The result is my new housing cheat sheet. Use it to impress your friends better than I did. But be careful: if you get known as the housing expert, you will be expected to offer updates at every dinner party you attend.

A little over a year ago, I produced an NBR special called “America’s Changing Demographics.” It exposed me to some astounding numbers about the aging of America. What really shook me up was that the baby boom generation’s move to senior status would soon turn the U.S. into a giant version of my home state, Florida. (I’m referring to the fact that Florida now has the nation’s highest percentage of residents age 65+, about 17%).

To paraphrase a former GM Chairman, I figured that whatever is good for America is good for NBR. So I suggested that we produce a series aimed at the millions of Americans who would soon be retiring -- and who would also be facing lots of crucial financial decisions. The FINRA Investor Education Foundation* saw this as an area of critical need and graciously agreed to fund the project. Then US News and World Report came on board, adding its expertise and reporting capabilities to our own.