Thursday, December 03, 2009

Morning Report: Comcast Seals The Deal; Wall Street Cuts Holiday Parties

By Daniel Costello

In a deal nicely explained by Andrew Ross Sorkin in the New York Times today, Comcast Corp. announced Thursday it plans to buy a majority stake in NBC Universal for $13.75 billion, giving the nation's largest cable TV operator control of the Peacock network, a stable of cable channels and a major movie studio.

Comcast's new heft, perhaps rivaled only by Disney - which Comcast CEO Brian Roberts already tried to buy - means movies may reach cable stations more quickly after leaving theaters, and TV shows could appear faster on cell phones and other devices.

Meanwhile, troubled Bank of America Corp. announced some good news late Wednesday. It will repay $45 billion it got from the government after raising $18.8 billion selling new shares.

As for the rest of the funds? The bank says it will use $26.2 billion in excess liquidity, such as cash and other holdings that can be sold quickly, over the coming months or years. The remaining $18.8 billion will be raised by selling new stock.

And at least Wall Street is killing some compensation this year: the holiday Christmas party.

Investment banks Morgan Stanley, Goldman Sachs, Bank of America and Citigroup all said they do not plan on hosting any company-sponsored holiday events this year. A Morgan Stanley spokesperson said the company plans on giving the money that would have been allocated for a party to a yet-to-be-determined charity.
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Wednesday, December 02, 2009

Podcast: Eye On Dubai

How many snowdomes does one gulf state need? (Chris Jackson/Getty Images)

On today's Planet Money:

The announcement earlier this week, that Dubai World, a company owned by the government of Dubai, was hoping to delay payment on $26 billion in debt sent stock markets across the world plummeting. Analysts were watching to see if investors would pull out of banks and investment firms with exposure in the Middle East or flee risky markets altogether.

By now, fears of Dubai's credit crisis spreading outside the country appear to have abated, but questions about Dubai remain, like, "what in the world were they thinking?" Dr. Christian Koch of the Gulf Research Center, says Dubai has a good economic strategy, but things got too crazy, too quickly. To Jane Meikle, a Canadian who has spent the last four years living in Dubai, sure the place went a little crazy, but that's part of what makes it so great. She talks about the upside of life in a gulf state boom town, where everyone is from somewhere else.

Download the podcast; or subscribe. Music: Weezer's "Island In The Sun." Find us: Twitter/ Facebook/ Flickr.

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Wednesday, December 02, 2009

Beige Book Offers Good News; Markets Unimpressed

By Daniel Costello

The U.S. Federal Reserve Beige Book survey released Wednesday showed the economy expanded or improved modestly across most of the U.S. between October and November as consumer spending rose and manufacturing improved.

Consumer spending strengthened since the last report, with sales of both general merchandise and autos improving across much of the country. Non-auto sales were reported to have picked up in the New York, Philadelphia, Cleveland, Richmond, Atlanta, Kansas City, and San Francisco Districts; sales were described as steady or mixed in the Boston, Chicago, Minneapolis, and Dallas Districts. St. Louis described retail sales as below expectations and down from a year earlier. Auto sales generally improved since the last report, in some cases rebounding from a brief dip after the "cash-for-clunkers" program ended.

Commercial real estate and the job market remained weak, the report found.

Market conditions were reported to have weakened in virtually all Districts, with rising vacancy rates, downward pressure on rents, and little, if any, new development. Expectations for 2010 were also quite low. Boston characterized the commercial real estate outlook as "bleak," Dallas noted that construction was at "historically low levels," and Kansas City described the sector as "distressed."

Investors appeared to play down the news in afternoon trading.

The Beige Book is a U.S. Federal Reserve report on the economy issued eight times a year and is used to help set policy at regular Federal Open Market Committee meetings. The next meeting will be held in two weeks.

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Wednesday, December 02, 2009

A Pirate "Stock" Exchange

By Daniel Costello

Gun-carrying pirates have been terrorizing shipping lanes around the Horn of Africa and the Indian Ocean in recent years as if they were living in the 16th century. The gangs have made tens of millions of dollars from ransoms, which are climbing even as nations have increased anti-piracy operations off the coast of Somalia.

One reason for that? A bustling Somalia pirate "stock" exchange that is helping local investors make profits off pirates' ransoms.

Located in Haradheere, about 250 miles northeast of Mogadishu, the exchange is open 24 hours a day. Business is so good the town is increasingly filled with luxury cars and other high priced goods.

"Ransoms have even increased in recent months from between $2-3 million to $4 million because of the increased number of shareholders and the risks," one wealthy former pirate named Mohammed told Reuters.

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Wednesday, December 02, 2009

The Falling Dollar And The N.H.L.

By Daniel Costello

Canada may be hockey obsessed but that hasn't always meant the Canucks had the best hockey teams. A few years back, the National Hockey Leagues even created a fund to help struggling Canadian teams pay for better players.

Oh, how things have changed -- largely because of the falling U.S. dollar. The Canadian dollar has been rising relative to the greenback since 2002 and the N.H.L. pay contract states players must be paid in dollars.

That's been a boon for the six Canadian teams.

According to Forbes's annual ranking of team valuations, released last month, is headed by the Toronto Maple Leafs, with the Montreal Canadiens and the Vancouver Canucks also in the top 10. Over all, the six Canadian teams' average ranking in the magazine's analysis is 12th in the 30-team league -- a sharp contrast with 2002, when the six Canadian teams averaged 21st.

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Wednesday, December 02, 2009

Morning Report: Fewer Job Losses In November; Google Blinks, A Little

By Daniel Costello

The U.S. private sector lost 169,000 jobs in November, according to the ADP employment report released Wednesday, signaling the labor market may be stabilizing along with other sectors of the economy.

It was the fewest jobs lost since July 2008. The private sector has shed jobs for 22 months in a row. Job losses peaked at 736,000 in March and have lessened every month since.

After mounting criticism from disgruntled media executives -- most notably News Corp. Chairman Rupert Murdoch -- Google said late Tuesday that it will begin allowing news publishers to limit the number of free articles accessed through its Internet search engine.

After failing to find other ways to get paid for online content, the media industry is considering blocking search engines' access to news content. It's unclear if such a move would push more online viewers toward newspaper web sites or simply reduce news viewership.

And North Korea has redenominated its currency by knocking two zeroes off the nominal value of banknotes to fight inflation and curb black markets, according to reports Tuesday.

The conversion rate was set at 100 to 1, so every 1,000 won bill is now being exchanged into a 10 won note. The switch essentially makes savings denominated in the old currency worthless.

Amid a lack of a modern financial and monetary system, North Korea has huge black markets that supply many of its goods, especially food. But the black markets, and the use of a growing supply of foreign currencies circulating in the country, have contributed to rising asset prices such as luxury apartment flats.

The move is likely to stem the inflation but if it cripples the operation of local markets, the consequences could be severe for the millions who depend on them for food. U.N. officials have estimated that as much as half the calories consumed by North Koreans come from food bought in black markets.

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Tuesday, December 01, 2009

General Motors' CEO Out

By Daniel Costello

After eight turbulent months at the helm of the largest U.S. automaker, chief executive Frederick "Fritz" Henderson is resigning. The company said Tuesday that Chairman Ed Whitacre Jr. will serve as interim CEO.

Henderson succeeded Rick Wagoner last spring after the Obama administration ousted the former CEO amid a government-led reorganization.

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Tuesday, December 01, 2009

Post (Climate) Game Analysis

How Mike Pesca almost (but not quite) wrecked planet earth.

By David Kestenbaum

Yesterday on the podcast we got six NPR reporters and editors together to play a game designed to look at whether the people of the world can come together to make the sacrifices necessary to combat climate change.

As it turned out we did save the planet, but just barely and at the very last possible moment.

This article lays out the basic rules.

NPR sports reporter Mike Pesca was the most selfish (sorry, strategic) player, managing to contribute very little to the global fund while keeping the most money for himself.

Mike was heavily subsidized by our counterterrorism correspondent Dina Temple-Raston who consistently put the planet's welfare before her own.

Here's a spreadsheet of how the game played out. You can see everyone's strategy, including Pesca's remarkable run of zero-contributions in four consecutive rounds.

Roughly what happened is that people donated money in the first round to try to prevent climate change, then tried to see if they could get by with less in the second round, which seemed to anger other participants, who then also lowered their contributions. But in the later rounds as doom approached people started to kick in more and more money. The largest contributions came in the final round.

Here's the original research paper laying out the experiment and a very readable commentary.

The game illustrtes how participants (countries or individuals) have an incentive to drag things out until the last minute, which perhaps helps explains the endless international climate treaty talks.

The research also shows that when there is perceived uncertainty about the consequences (how bad climate change will be) cooperation gets much more difficult.

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Tuesday, December 01, 2009

How Harvard Lost All That Money

By Daniel Costello

The Boston Globe had a terrific story this week looking at just how Harvard came to lose $1.8 billion in its cash accounts (separate from its massive endowment losses) over the past year. The tally could run even higher in the form of interest payments on bonds issued to cover the losses.

The story, by staffer Beth Healy, describes warnings from top officials about how risky some of Harvard's investment choices were becoming in recent years. At the top of the list of those who ignored many of those warnings? Harvard's then President Larry Summers, the former Treasury Secretary and current director of President Obama's National Economic Council and the White House economic team.

According to the story:

"In the Summers years, from 2001 to 2006, nothing was on auto-pilot. He was the unquestioned commander, a dominating personality with the talent to move a balkanized institution like Harvard, but also a man unafflicted, former colleagues say, with self-doubt in matters of finance.

Certainly, when it came to handling Harvard's cash account, the former US Treasury secretary had no doubts. Widely considered one of the most brilliant economists of his generation, Summers pushed to invest 100 percent of Harvard's cash with the endowment and had to be argued down to 80 percent, financial executives say. The cash account grew to $5.1 billion during his tenure, more than the entire endowment of all but a dozen or so colleges and universities."

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Tuesday, December 01, 2009

The Changing U.S. Labor Market

Employment changes in recessions past. (Howard Rosen)

By Caitlin Kenney

Ahead of this week's White House jobs summit, Howard Rosen of the Peterson Institute sent us his thoughts on the current state of employment in the U.S.

He writes:

Current slow growth in job creation is result of recent changes in the US labor market -- a change in the nature of unemployment. Over the last 30 years, despite long-term declines in the unemployment rate, the average duration of unemployment has steadily increased. This signals a shift from temporary layoffs to permanent job losses. The average duration of unemployment is currently the highest in over 40 years, and unemployment is no longer primarily due to cyclical factors; structural factors, e.g. technology change, increased domestic and international competition, have become increasingly important.

Rosen's also got some advice for the government on how to increase employment:

Worker assistance and training programs were beaten down over the last 8 years, and it is difficult to immediately expand them to meet new interest and demand. The administration has significantly increased funding for training, but we need to provide more resources to rebuild capacity, e.g. local career centers, training providers, including community colleges.

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Tuesday, December 01, 2009

Morning Report: Dubai Stocks Fall Again; Japan Worries About Deflation

By Daniel Costello

On Tuesday, investors again rushed to unload shares of Middle East companies expected to bear the brunt of a possible downturn in the region's economy amid Dubai's growing debt crisis. The sell-off came even as the government-owned investment giant, Dubai World, said it is making strides in renegotiating its troubled real-estate debt.

In Dubai, the main stock index ended down 5.6% to 1,831 points. Elsewhere in the region, Qatar's main stock index tumbled 8.4% to 6,592 points on Monday, the first trading day for the market since Nov. 25.

Global markets have been gyrating since Dubai World stunned investors last week by announcing plans to hold off paying its short-term debt. Emerging markets and Asia were hard hit last week, but bounced back in recent days as investors appeared to decide for now that Dubai's problems will remain contained.

The Dubai financial market will be closed starting Wednesday because of the National Day of the U.A.E. The market will resume Sunday.

In Japan, central bankers appeared to blink in their growing riff with politicians by announcing they would pump short-term funds into the banking system in an effort to jolt the moribund economy and counter resurgent deflation.

At a emergency meeting on Tuesday, the Bank of Japan's board voted to provide $115 billion in short-term loans to commercial banks to bolster liquidity. It's unclear just how effective the relatively small program will be, making the move potentially more symbolic.

Japan's Prime Minister, Yukio Hatoyama, has challenged the Bank of Japan in recent months to ease monetary policy as the country faces renewed deflation fears and its rising currency threatens to wipe out a six-month-old recovery. The yen climbed to a 14-year high against the dollar last week, dealing a blow to Japan's exports as a strong yen makes Japanese goods more expensive abroad.

The move bucks a global trend toward tighter monetary policies in recent months as governments continue to scale back emergency monetary easing and support of super-low interest rates as the global economy rebounds.

Australia on Tuesday raised interest rates by a quarter of a percentage point for a third straight month. The U.S. Federal Reserve said this week it soon may scale back its trillion-dollar portfolio of mortgage-backed securities and start unwinding its massive effort to prop up financial markets over the past year.

And after weeks of corporate brinkmanship, General Electric and French telecommunications company Vivendi have finally agreed to a deal allowing GE to buy Vivendi's 20% stake in NBC Universal. GE needs to buy the minority stake in order to complete its planned sale of its NBC Universal media assets to cable giant Comcast. The Comcast sale is seen as a bellweather deal for valuing A-list broadcasting companies as they suffer continued declines in viewership and advertising.

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Monday, November 30, 2009

Podcast: Fixing Climate Change Is Going To Cost You

How much would pay to save these guys? (Paul J. Richards/AFP/Getty Images)

On today's Planet Money:

Economists see climate change as a tragedy of the commons problem. We benefit by putting carbon into the atmosphere because it means cheap electricity and cheap gasoline. It saves us money in the short term, but eventually if we continue, we'll all suffer.

Nobel prize winner Elinor Ostrom says the answer to fixing rising temperatures has to come from the people not the government. But reducing our carbon emissions is expensive and some economists wonder if we're willing to pay for it. To answer that question, German zoologist, Manfred Milinski come up with a game that tests how much we would be willing to pay now to save the Earth later. Joined by a special group of NPR staff, the Planet Money teams plays his game and gets a surprising result.

After the jump, the self proclaimed "King of Eco Rap," says "stop with the excuses and make a contribution."

Download the podcast; or subscribe. Music: Kayne West's "Heartless." Find us: Twitter/ Facebook/ Flickr.

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Monday, November 30, 2009

Premiums To Remain Stable for Most Under Health Reform

By Daniel Costello

Most Americans would not see much change in the cost of their insurance premiums as a result of the health care legislation pending in Congress, according to a widely awaited budget analysis. But millions of people who buy insurance on their own, rather than through work, could see higher costs, a fact that could become fodder for health reform critics.

The nonpartisan Congressional Budget Office released a study Monday that found the cost of insurance premiums for the nearly 80% of people who receive insurance through work or other group policies would remain stable or slightly fall by 2016, as compared to projections of premium prices under current law.

The majority of the rest of insured Americans who buy so-called "individual insurance" would see an increase between 10 percent to 13 percent, partly because the benefits in their new plans would be richer under the current legislation. With government subsidies proposed under the plan, up to half of them could see as much as 59 percent lower costs than is now the case.

An estimated 16% of Americans have no health coverage today and many would receive insurance under the proposed reform plans.

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Monday, November 30, 2009

Reading Up On The Financial Crisis

By Daniel Costello

Over Thanksgiving, I finally got to reading the latest edition of Foreign Affairs. I'm a huge fan and enough of a nerd that I'm giving a subscription as a holiday gift to a few family and friends. Anyway....

The magazine has a suggested list of the best recent articles and books on the financial crisis. Among the suggestions:

Recent articles:

"The Long Climb: A Special Report on the World Economy." By Simon Cox. Economist, October 3, 2009

"The Origins of the Financial Crisis." By Martin Neil Baily, Robert E. Litan, and Matthew S. Johnson. Initiative on Business and Public Policy at Brookings

The books:

"In Fed We Trust: Ben Bernanke's War on the Great Panic: How the Federal Reserve Became the Fourth Branch of Government," By David Wessel, the terrific Wall Street Journal economics writer.

"The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Market Meltdown. By James R. Barth and John Wiley

Bonus: For Foreign Affairs subscribers, there's a good cover story by Peterson Institute for International Economics director, C. Fred Bergsten, on why Washington must embrace lower deficits, balance the budget and support a falling dollar -- or risk another crisis.

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Monday, November 30, 2009

Analysts Expect Flat Auto Sales

By Daniel Costello

Manufactures are expected to report flat U.S. auto sales for November compared to a year ago, suggesting the worst of the industry's four-year slump may be over. But high unemployment and low consumer confidence remain drags on the industry.

U.S. auto sales in November are expected to come in at 10.5 million units on the annualized rate tracked by the industry, according to a median forecast of 36 industry analysts.

November 2008 sales were 10.4 million units on the annualized rate and October 2009 sales were 10.5 million units.

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