Articles from 06/15/08 to 06/21/08

The Saudi summit is an unprecedented opportunity to develop a global action plan to lower energy prices. Never before have heads of state, energy companies, oil ministers, and representatives of consuming countries come together in one place for a common goal.

I hope the opportunity won’t be squandered. However, judging by the market’s lack of reaction, most traders don’t seem to be expecting much from the meetings.

It’s true the Saudi Oil Minister plans to detail his nation’s decision to raise production by at least 200,000 barrels per day. But if that is it, in terms of tangible results, it will have been a huge waste of time and money.

Personally, what I’d like to see is the development of a partnership among nations and/or private firms to invest in energy infrastructure – like refineries. I’d also like to see participants discuss partnerships to invest in alternative fuels.

We don’t always get time to air an interview in its entirety. It can be an agonizing process deciding what to keep and what to leave out. Today, I didn’t have much time to agonize, so a couple of newsworthy questions were left out. I asked House Financial Services Committee Chairman Barney Frank about the FBI’s operation “Malicious Mortgage” and also about Treasury Secretary Paulson’s call for greater powers for the Federal Reserve to regulate. To me, these ideas fit hand and hand. (Unfortunately, they didn't fit into the time allotted to the interview.) Perhaps if someone was actually checking the loan documentation, or requiring that documentation in the first place, the portfolio funds would not have held these funds and there were be no reason to hide them from investors.

Some people argue that you can’t regulate ethics and some people will cheat. This may be true, but tighter reigns on the players in the real estate and mortgage market may have save a lot of pain.

Prosecutors today charged two former Bear Stearns hedge fund managers with nine counts of securities and wire fraud. The two men are accused of lying to investors about the true state of the bad investments they made in subprime markets.

Is that mortgage fraud?

The Justice Department thinks so. News of the indictment was lumped in with the announcement of "Operation Malicious Mortgage," an investigation that has netted 400 defendants. Their alleged scams include foreclosure fraud, arranging straw buyers and manufacturing bogus appraisals.

Does that sound like the kind of high finance practiced in the Bear Stearns case? Not to me. The Bear Stearns indictment, if true, is a serious securities fraud. That the investments were in subprime markets seems almost incidental. The two hedge fund managers did not originate mortgage-backed bonds, they bought them.

Classic mortgage fraud ends up separating a homeowner from his or her equity in their house.

When I asked about the connection between the Bear Stearns case and Malicious Mortgage, Deputy U.S. Attorney Mark Filip said "Bear Stearns is one example of how this is a complex area that could all be fairly included under the idea of mortgage fraud."

That's a very broad view of mortgage fraud. If the Justice Department intends to move forward with such a sweeping mandate, Wall Street should be very nervous.

So far, nonfarm payrolls have avoided the -200,000 to -300,000 monthly declines typically seen in recessions, and GDP growth has avoided the outright declines typically used to define a recession. Net, it is very clear that the current economic weakness lacks the depth typically seen in noteworthy contractions (recessions).

Lacking depth, the question then turns to duration, and whether or not this slowdown causes a typical amount of pain by hurting less for a longer amount of time.

The first table in this PDF document refers to the past six recessions (column 1), and compares the length of the recession in number of months (column 3) to the length of the expansion (column 2) preceding each recession. Column 4 relates the number of recession months to the number of expansion months.

It's me, Mike the intern again. The buzzword of the day had to be “bellwether.” I was quite confused when I first heard it this morning. A quick search online informed me that the term is used to describe a stock that predicts the direction of the whole marketplace.

FedEx Corp. made a textbook example of this today when its quarterly report caused investors to worry, sending stocks down to new lows. I didn’t know what bellwether meant before, but I certainly will remember it now.

A recent news item in Variety caught my eye. It said, "Out-of-context theater reviews in advertisements that make a theatrical turkey sound like the second coming of Hamlet are now subject to criminal prosecution in Britain.” Theater owners found guilty of misleading theatergoers can be fined as much as $9,000.

You know what the Brits are after; the ad for a play that attributes the words, “Terrific… Smashing…” to the critic who really wrote, “I left the theater with a terrific headache and felt like smashing the playwright’s face for wasting my time.”

It turns out that this new law is not a British idea. It was enacted in response to a European Union regulation. It is hard to imagine such a law being enacted in the United States, but it is just the kind of thing the EU seems to spend a lot of time and money worrying about. We do have restrictions on demonstrably deceptive marketing in the US. But we don’t try to police the hyperbole which is expected in advertising.

All of the cow video in our story tonight about wholesale inflation, got me thinking about milk products. And, I can't think of dairy without be reminded of my children and their unstoppable consumption of ice cream. One of my kids' favorite summer pasttimes is a trip to the local ice cream shop. In my small town, pricey Maggie Moos is the only option. There is a Carvel shop about 10 minutes away by car, but with the price of gas....yada yada yada.

Anyhow, a child-size cone or cup at Maggies' is about $4 dollars. And, that's if you are 6 or younger. For my three kids (ages 6, 5 and 3) it's a whopping 12 bucks in total for their ice cream. Last year, that same treat ran me closer to $10. What will next summer bring? So much for producers not passing on those higher prices to consumers!

I am Mike Ricchiuto, a junior at Rutgers University studying economics and journalism. And, now I’m also an intern in Nightly Business Report’s New York bureau. Seems like a perfect fit, right? Well as much training as one can receive in the academic world; nothing can quite prepare you for real life.

My first day at NBR had me a bit nervous. The staff was great in helping me get up to speed and threw me right into the action. From day one I was involved in setting up appointments, going out in the field to assist with interviews, and helping to research topics. It was this immediate involvement that built up my confidence quicker than ever before.

I have learned that there is so much more useful information given to us in a ten minute long interview with an industry expert, than a twelve-second sound bite can justify. It is my hope to therefore use this blog to offer deeper coverage and expand upon the stories that I have the pleasure to work on.

If you are a member of Congress, you certainly don't want to blame yourself for doing nothing about oil prices. And you didn't get elected by blaming your constituents for driving big cars and, in general, using more oil and gas and coal per capita than the rest of the world.

So, who can you blame?

Well, the other guys come to mind. Today Sen. John McCain is blaming Democrats for blocking oil exploration offshore. Let's not discuss whether he opposed that kind of exploration in the past.

If you are a Democrat like Barack Obama, you blame Washington insiders for not standing up to the oil industry.

FCC Chairman Kevin Martin will soon be circulating a proposed merger agreement between satellite radio providers XM and Sirius. The firms have agreed not to raise prices for three years, offering a smaller package, and opening up its manufacturing so there is competition for satellite radios. But it’s still a bit of a nail biter as to whether this will have the votes to pass.