Business History

2008 - Top 10 Business Stories

2009-01-04T12:48:00.000-08:00

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Top 10 Business News Stories of 2008

(Results of the Associated Press Annual Poll U.S. newspaper and broadcast editors):

1) Wall Street Turmoil - Mortgage securities devaluation, freezing of debt markets, largest bank failure in U.S. history (Washington Mutual), $150 billion government loan to American International Group Inc. (took over Fannie Mae, Freddie Mac), Merrill Lynch acquired by BofA, Goldman Sachs Group Inc., Morgan Stanley transformed into commercial banks, government agreed to shoulder hundreds of billions in possible losses, plowed $20 billion into Citigroup Inc.

2) Real Estate - Foreclosures hit new highs, housing starts hit all-time low.

3) $700 Billion Rescue ('Bailout') Package - First half ($350 billion) allocated to banks, insurers, automakers.

4) World Economies - Argentina nationalized pension funds; Iceland's three main banks, currency collapsed; Japan, much of Europe fell into recession; China's exports plunged in November by largest amount in seven years.

HTML clipboard 5) HTML clipboard Oil Prices - The global economic angst produced hyper-volatile energy markets. The price of crude soared as high as $150 a barrel in July before crashing to $33 this month. In the U.S., the average price for a gallon of regular gas peaked at $4.11, then plunged below $1.70.

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6) Stock Market Losses - Everywhere; Russian authorities closed Moscow's stock market for days at a time; Wilshire 5000, broadest measure of U.S. stocks, down more than $7 trillion for year.

7) Detroit Bailout - U.S. automakers' sales down about 16% for year, GM/Chrysler running out of cash; Bush administration reversed course, offered $17.4 billion in rescue loans.

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8) Commodities Prices Rise - Prices for corn, fuel, grains soared; American shoppers grappled with substantial food inflation for first time in 17 years; USDA forecast food prices would rise 5-6% for year (compared with average 2.5% annual rise for prior 15 years).

9) $50 Billion Ponzi Scheme - Bernard Madoff earned steady returns of 7-9%/year, in good/bad markets, for almost 20 years; December - admitted returns were falsified, his investment company was a scam; could cost investors %50 billion, largest Ponzi scam in history.

10) Money Market Reserve Primary Fund - invested heavily in Lehman debt, asset value fell to 97 cents for every $1 invested; first time in money market industry in 14 years; $40 billion in redemption orders in week Lehman filed for bankruptcy.

Fed Funds Rate - Lowest in History

2008-12-17T09:28:00.001-08:00

U. S. Monetary Policy

December 16, 2008 - Federal Reserve lowered
target for overnight Fed Funds rate to range of 0.25%
(essentially 0% - similar to zero-rate policies used by Japan in
fight against deflation); lowest rate in history - July 1954
(0.80) - June 1981 (19.10) - December 2008 (0.25).

(source: http://research.stlouisfed.org/fred2/data/FEDFUNDS_Max_630_3778.png)

Consumer Spending - Retrenchment

2008-11-30T13:17:00.001-08:00

Economics - Consumption

HTML clipboardConsumption - Americans claim to be less interested in spending than at any time in last 4 decades (credit crisis, recession); will low prices still draw consumers? (Black Friday - from red ink of losses for year into black ink of profitability for retailers); 3Q 2008 - Commerce Department reported personal consumption spending, adjusted for inflation, fell at 2.7% annual rate, (biggest decline since 2Q 1980 which was helped by tax rebates from stimulus package); economy contracted 0.5%; Conference Board reported 1.9% of respondents (to its 40-year monthly survey of major-items purchase plans for next 6-months) planned to buy a house (lowest since 1982, double-digit interest rates - see below), 3.7% planned to buy a car (lowest in 40 years vs. previous low of 4.5%), 1.3% planned to buy a new car (lowest in 40 years), 8.8% think jobs are easy to find (lowest in 15 years).

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Digital Music Milestone

2008-11-26T13:22:00.001-08:00

Entertainment

November 26, 2008 - Atlantic Records, unit of Warner Music Group, said 51% of its music
sales in United States are now from digital products (downloads on iTunes, ring tones for cellphones, ringbacks, satellite radio, subscription services); first major record label to hit milestone; 4Q 2008 - digital represented 27% of its Warner's American recorded-music revenue; digital revenue for full fiscal year rose 39%, to $639 million, or 18% of company’s total revenue; 2013 - music sales in United States will decline to $9.2 billion,
from $10.1 billion in 2008 (source: Forrester Research), $14.6 billion in 1999 (source: Recording Industry Association of America); 2009 - NBC expects $1 billion in digital revenue (2007 revenue more than $15 billion); Time Inc., largest magazine publisher, about 9% of
its $2.2 billion revenue in first half of 2008 derived
from digital; online revenue accounted for 12.4% of New York Times overall revenue.

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Stock Market - Worst Year Ever?

2008-11-22T16:30:00.001-08:00

2008 - Stock Market on track for worst year since 1931:

1) November 21, 2008 - S & P 500 index traded to an intraday low of 741.02 = down 47.5% from 12/31/2007 close of 1411.63 (down 45.52% year-to-date);

2) 1931 - Dow Jones Industrial Average fell from 164.50 on 12/31/1930 to 77.90 on 12/21/1931 (down 52.64%), to 41.22 on July 8, 1932 (down 89% from September 1929 high); closed at 60.32 on December 30, 1932)

3) 1937 - DJIA closed at 120.85 on December 31, 1937, down 32.8% from 179.90 at the end of 1936

4) 1974 - worst post-Depression
year, until now; S & P 500 lost 29.7% (down to 68.56 from 97,55, worst postwar recession year);

5) October 2008 - worst-ever monthly point decline for the S&P 500, 8th-worst percentage decline.

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Crisis of Confidence for U.S. Consumers

2008-11-12T17:12:00.001-08:00

November 12, 2008 - Sales of new vehicles have dropped 32% in the third quarter 2008.Consumer spending appears likely to fall next year for the first timesince 1980 and, perhaps, by the largest amount since 1942. 1950s through the 1980s — Americans spent about91% of their income, on average, and put away the rest. Last few years - Americans have spent close to 99% and saved onlyabout 1%.

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Wall Street's 75-Year Round-Trip (Pt. 2)

2008-10-20T10:53:00.000-07:00

HTML clipboardBailout; Wall Street's 75-Year Structural Round Trip

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Bailouts, buyouts, takeovers of financial services companies in US and Europe since July 2007 (when subprime mortgage crisis began) -

July 2007 - IKN Deutsche Industriebank ($79 Billion), Sept. 2007 - Northern Rock ($216.8 B); Dec. 12, 2007 - Central banks in US, EU, Canada, Switzerland announced plan to provide at least $90 B in short-term financing to banks; Dec. 18, 2007 - European Central Bank injected $500 B into financial system; Jan. 2008 - Countrywide Financial ($172.1 B); March 7, 2008 - Federal Reserve offered $200 B in 28-day loans to investment banks, big financial institutions; March 11, 2008 - Federal Reserve offered $200 B in Treasury securities to investment banks in exchange for mortgage-backed securities; March 17, 2008 - Bear Stearns ($399 B); March 21, 2008 - European Central bank offered $24 B in loans to help banks strengthen balance sheets; Bank of England offered $10 B in loans; April 2008 - Dusseldorfer Hypothekenbank ($42.5 B); July 2008 - IndyMac Bancorp ($32.3 B); Alliance & Leicester ($153.4 B); Aug. 2008 - Roskilde Bank ($7.9 B); Sept. 7, 2008 - Freddie Mac ($879 B), Fannie Mae ($885.9 B); Sept. 14, 2008 - Merrill Lynch ($966.2 B); Sept. 15, 2008 - Lehman Brothers ($639.4 B); Sept. 16, 2008 -AIG ($1,049.9 B); Sept. 18, 2008 - HBOS ($1,356.5 B); Federal Reserve, European Central Bank, Bank of England, Bank of Japan, central banks in Switzerland and Canada made $180 B available in currency swaps; September 22, 2008 - Goldman Sachs Group nd Morgan Stanley converted to traditional bank holding companies; Sept. 26, 2008 - Washington Mutual ($309.7 B); Sept. 29-30, 2008 - Fortis ($1,533.2 B), Wachovia ($812.4 B), Hypo Real Estate ($622.2 B), Bradford & Bingley ($104 B), Gilitnir ($48.9 B), Dexia ($913 B)

October 2008 - Return to 1932 Structure: Commercial banks and Small finance boutiques (Meet the new Goldman Sachs, Kidder Peabodys, Kuhn Loebs, Morgan Stanleys -

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October 3, 2008 - President Bush signed Troubled Asset Relief Program, $700 billion program to buy illiquid debt, backed by home loans, on bank balance sheets, free flow of credit to companies and consumers.

History of U.S. Government Bailouts - Chronological Order, Cost in 2008 Dollars

(Source: ProPublica, independent, non-profit newsroom that produces investigative journalism in the public interest; http://www.propublica.org/images/articles/bailout_balloons4.gif);

Left to Right (actual $/ 2008 $) - June 1970 - Penn Central Railroad ($676.3 million in loan guarantees/ $3.2 billion); August 1971 - Lockheed (Emergency Loan Guarantee Act, $112.22 million/ $1.4 billion); 1974 - Franklin National Bank ($1.75 billion/$7.7 billion); 1975 - New York City (New York City Seasonal Financing Act, $2.3 billion /$9.4 billion); 1979 - Chrysler (Chrysler Loan Guarantee Act, $1.5 billion in loans/$3.9 billion; 1984- reported $1.7 billion in profits for second quarter, government profit of more than $660 million from bailout investment.); 1984 - Continental Illinois Bank ($9.5 billion); 1989 - Savings & Loans (Financial Institutions Reform Recovery and Enforcement Act, about $220.32 billion; taxpayers responsible for about $178.56 billion, balance covered by private sector); 2001 - Airlines (Air Transportation Safety and Stabilization Act, $5 billion in compensation, additional $10 billion in loan guarantees or other federal credit instruments/ $18.6 billion); March 2008 - Bear Stearns ($30 billion); September 2008 - Fannie Mae/Freddie Mac (U.S. government seized control, $200 billion); September 2008 - American International Group (AIG) - $85 billion; September 2008 - Autos (Congress approved more than $630 billion spending bill, $25 billion for auto industry); October 2008 - Wall Street (Troubled Asset Relief Program, $700 billion).

HTML clipboard October 2008 - Size of Market for Derivative Products

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HTML clipboard(http://graphics8.nytimes.com/images/2008/10/09/business/1009-web-GREENSPAN.gif)

HTML clipboard October 8, 2008 - Total value of Dow Jones Wilshire 5000 = about $11.7 trillion, down $7.4 trillion (about 40%) from October 9, 2007 - stock market's all-time high; total value of all stocks = just over $19.1 trillion. Trading through October 10, 2008 below.

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(http://bigcharts.marketwatch.com/charts/big.chart?symb=%2Edji&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state= 8&sid=1643&style=320&time=8&freq=1&nosettings=1&rand=9800&mocktick=1)

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Famous Unheeded Words on Derivatives:

Warren E. Buffett presciently observed five years ago that derivatives were "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential "hydrogen bombs."

George Soros, the prominent financier, avoids using the financial contracts known as derivatives "because we don’t really understand how they work."

HTML clipboardFinally: Words of a Sage - "Those Who Aren't Being Paid What They're Worth - Should Be Happy About It!!" - 'They' never were on Wall Street.

Wall Street's 75-Year Round-Trip (Pt. 1)

2008-10-20T10:46:00.000-07:00

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Bailout; Wall Street's 75-Year Structural Round Trip

1932 - Commercial banks and Private Partnerships (family financial dynasties) - Goldman, Sachs, Kidder, Peabody, Kuhn Loeb, Lehman Brothers, others

June 16, 1933 - President Franklin D. Roosevelt signed (second) Glass Steagall Act (Banking Act of 1933) as emergency response to failure of nearly 5,000 banks during Great Depression (bank failures resulted in losses to depositors of about $1.3 billion between 1929-1933); separated commercial from investment banking (provide capital to American business); tightened regulation of national banks to Federal Reserve System; prohibited bank sales of securities; created Federal Deposit Insurance Corporation (FDIC) to insure bank deposits with pool of money appropriated from banks).

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Senator Carter Glass (D-VA, third from left); Representative Henry B. Steagall (D-AL, fourth from right) (http://www.senate.gov/artandhistory/history/resources/graphic/large/Glass.jpg)

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1930s-1970s - Relationship Banking

September 16, 1935 - Henry S. Morgan, Harold Stanley, former partners in J. P. Morgan & Co.; opened Morgan Stanley on 19th floor of 2 Wall Street; 1936 - managed $1.1 billion in public offerings, private placements in first year (24% market share); 1971 - entered sales, trading business, established M&A division.

1973 - Derivatives - Fisher Black, Myron Scholes published Black-Scholes Option Pricing Formula in Journal of Political Economy; specified first successful options pricing formula (mathematics of option pricing, dynamic hedging strategies using options and other derivatives); described general framework for pricing derivative securities, created financial engineering; one of most important mathematical tools in modem theory of finance (Black, F. and Scholes, M. [1973]. "The Pricing of Options and Corporate Liabilities". Journal of Political Economy, Vol. 86, p.637). April 26, 1973 - Chicago Board Options Exchange opened for trading (911 contracts on 16 underlying stocks); 1997 - Black (posthumously), Scholes, Merton Miller awarded Nobel Prize in Economic Sciences "for a new method to determine the value of derivatives."

1974 - Central Bank Governors of the Group of Ten countries created Basel Committee on Banking Supervision to provide forum for regular cooperation on banking supervisory matters, to enhance understanding of key supervisory issues, improve quality of banking supervision worldwide; formulates broad supervisory standards and guidelines; recommends statements of best practice; members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Spain, Sweden, Switzerland, United Kingdom, United States; represented by central bank, by authority with formal responsibility for prudential supervision of banking business where this is not central bank; 12 member permanent fifteen person Secretariat located at Bank for International Settlements in Basel, Switzerland; 1988 - Committee introduced capital measurement system (Basel Capital Accord); provided for implementation of credit risk measurement framework with minimum capital standard of 8% by end-1992; June 1999 - issued proposal for revised Capital Adequacy Framework (minimum capital requirements, supervisory review of an institution's internal assessment process and capital adequacy; effective use of disclosure to strengthen market discipline as complement to supervisory efforts); June 26, 2004 - Basel II (revised framework) issued; rules for measuring bank risk, determining capital adequacy to absorb risk.HTML clipboard

1974 - Michael Milken created market for high-yield bond trading; based on research of W. Braddock Hickman, former president of the Federal Reserve Bank of Cleveland (Corporate Bond Quality and Investor Experience, Princeton, NJ: Princeton University Press, 1958) - corporate default history 1900-1943: diversified long-term portfolio of non-investment-grade debt securities outperformed portfolio of investment-grade debt, with the same level of risk.

April 1977 - Junk Bonds - Drexel underwrote first junk bond issue, Texas International; end of 1978 - Drexel number one issuer; used financial innovation as low-cost solution to raising capital; created high-yield new-issue bond market; 1981 - issued bonds for leveraged buyouts; 1983 - provided junk bond financing for hostile takeovers (leveraged buyouts taken against incumbent directors’ will); March 1985 - completed first junk bond-financed hostile takeover.

1977 - LBOs - Kohlberg Kravis Roberts & Co. (formed in May 1, 1976 by former Bear Stearns executives Jerome Kohlberg, Henry Kravis, George Roberts) financed $26 million leveraged buyout of A.J. Industries, publicly-traded small manufacturer of brake drums and other components (66% leverage financed with senior bank debt); firms' first deal; couldn't persuade anyone to provide subordinated debt (first LBO done in 1963 - Lewis B. Cullman acquired Orkin Exterminating for $62.4 million with a $1,000 investment); May 14, 1979 - acquired Houdaille Industries in $355 million buyout; first public-to-private transaction (leveraged buyout of a publicly traded company); took almost one year to raise $355 million from several banks, insurance companies for deal with 86% leverage financed by multi-layered array of senior, subordinated securities.

1977 - Securitization - Salomon Brothers (Lewis S. Ranieri) and Bank of America Corp. (BAC ) developed first private (non-Government Sponsored Enterprise) mortgage-backed securities (MBS); bonds pooled thousands of mortgages, passed homeowners' payments through to investors (only 15 states recognized MBS as legal investments); created "securitization," converting of home loans into bonds that could be sold anywhere in world = capital markets as source of funds for housing, commercial real estate; 1982 - developed "collateralized mortgage obligation" (repackaged pools of 30-year mortgages into collections of 2-, 5-, and 10-year bonds to sell to wide range of investors; seen as template for cutting costs); led effort to obtain federal legislation to support, build the market (Tax Reform Act of 1986); 1999 - size of market was $678 billion (41.6% credit card receivables, 19.8% home equity loans, 11.8% auto loans).

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1979 - End of relationship banking - I.B.M. told Morgan Stanley that it wanted Salomon Brothers to co-manage a $1 billion debt issue; traditional corporate clients outgrew their bankers; underwriting deteriorated into low-margin business vs. trading.

1980s - Transactional banking to facilitate corporate restructuring: mergers & acquisitions, tender offers, hostile takeovers, leveraged buyouts, divestitures, spin-offs, 'junk bonds'; trading (equities, commodities, derivatives); prime brokerage for hedge funds.

November 12, 1999 - President Bill Clinton signed Gramm-Leach-Bliley Act (Financial Services Modernization Act of 1999); named for Senator Phil Gramm (R-TX), Representative Jim Leach (R-IA), Representative Thomas J. Bliley, Jr. (R-VA); repealed restrictions on banks affiliating with securities firms contained in sections 20 and 32 of the Glass-Steagall Act. Gramm's Statement at Signing ceremony (11/12/1999) - "We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth and we promote stability by having competition and freedom. "I am proud to be here because this is an important bill; it is a deregulatory bill. I believe that that is the wave of the future, and I am awfully proud to have been a part of making it a reality."

June 9, 2004 - SEC issued Final Rule on "Alternative Net Capital Requirements for Broker-Dealers That Are Part of Consolidated Supervised Entities"; permitted "a broker-dealer to use mathematical models to calculate net capital requirements for market and derivatives-related credit risk"; reduced amount of capital that had to underlie assets; allowed increased leverage.

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July 17, 2007 - Bear Stearns High-Grade Structured Credit Fund (started in 2004, posted 41 months of positive returns of about 1 - 1.5%/month) lost more than 90% of its value (about $900 million), Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund (started in 2006) lost 100% or $600 million (collateralized debt obligations + leverage + credit default swaps to hedge against moves in credit market); declines in values subprime mortgage-backed securities exceeded insurance hedge; leverage intensified losses; equivalent of 'margin call' by lenders required selling bonds to raise cash; July 31, 2007 - funds filed for Chapter 15 bankruptcy protection.

2008 - Trading Risk - What they really don't teach you at Harvard Business School: leverage (to generate returns to justify fund management fees - Bear Stearns's operated at a 33:1 leverage ratio; Lehman was 32-to-1) + concentrated portfolio (in one asset type - mortgages) + illiquidity (they 'were' the market) + event risk (unexpected collapse of subprime bond market) can = disaster (Long-Term Capital Management, Bear Stearns, Lehman Brothers Holdings, AIG, etc., etc., etc.).

Wall Street's Demise -The Early History

2008-10-20T10:43:00.000-07:00

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October 2008 - Wall Street's Sad Demise

October 10, 1818 - John A. Brown (third son of Alexander Brown) sent to Philadelphia to open John A. Brown & Co., branch office of Alexander Brown & Son (Irish linen import business established in 1800 in Baltimore, MD)

1844 - Henry Lehman, immigrant from Germany, opened H. Lehman, small dry goods shop in Montgomery, AL; 1847 - Emanuel arrived, renamed H. Lehman and Bro.; 1850 - Mayer (youngest brother) joined business, renamed Lehman Brothers; became brokers for buyers, sellers of cotton crop; 1858 - opened office in New York.

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Henry Emanuel and Mayer Lehman (http://content.answers.com/main/content/wp/en/8/8b/Lehman_Brothers.jpg)

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March 1863 - formed partnership with John W. Durr, in warehouse and commission business, named Lehman, Durr & Co. (above, 2nd floor of 2nd building on left in 1870s; (http://216.226.178.196/cgi-bin/showfile.exe?CISOROOT=/photo&CISOPTR=3099)

Financial Panic of 2008

2008-10-20T10:38:00.000-07:00

HTML clipboard October 2008 - Financial Crisis:

Two Who Saw It Coming

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Edward M. Gramlich - Former Federal Reserve Governor, Professor Emeritus of Economics (University of Michigan) (http://www.lsa.umich.edu/UofM/Content/lsa/image/peopleimage/e_gramlich.jpg)

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Edward M. Gramlich with a foreword by Robert D. Reischauer (2007). Subprime Mortgages: America’s Latest Boom and Bust. (Washington, DC: Urban Institute Press, 120 p.). Former Federal Reserve Governor. Mortgage loans--United States; Real estate finance. How subprime market (loans at low interest rates, for little or no money down to low-income people pursuing American dream of homeownership) emerged, why it is in crisis, how to reform public policy to avert disaster.

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Nouriel Roubini (Professor of Economics and International Business, Stern School of Business, New York University) (http://pages.stern.nyu.edu/~nroubini/nouriel-roubini.gif);

February 5, 2008 - author of "The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster"

(http://media.rgemonitor.com/papers/0/12_steps_NR).

We're Back

2008-10-20T10:35:00.000-07:00

We're back with a newly redesigned website:

www.businesshistory.com

The World's Largest Seller of Books on Business and Management History

Cassette Tapes - Goodbye Old Friend

2008-07-30T07:58:00.000-07:00

Electronics

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(http://img.zdnet.com/techDirectory/_CASADPT.JPG)

March 1977 - HTML clipboard Andreas Pavel filed patent for device in Milan; came to be known as the "Walkman"; HTML clipboard July 1, 1979 - Sony introduced Sony Walkman; 1980 - began royalty negotiations with Andreas Pavel.

HTML clipboard October 1, 1982 - CBS/Sony introduced compact discs (CD) optical disc media in Japan with 112 different CD titles, CD player (Sony's CDP-101); 120-mm (4.7-in.) diameter plastic disk, used tiny pits read by laser to reproduce sound or other information; two major CD plants: PolyGram's Hanover, West Germany plant, Sony's plant in Japan; advantages over phonograph record, recording tape: smaller size, greater dynamic range, extremely low distortion; sold over 20,000 CD players; June 1983 - CBS shipped first CD "prepacks; 1983 - sales totaled about 30,000 players, 800,000 discs;

1994 - reported sales of portable tape players peaked at 18 million, dropped to 480,000 in 2007 (source: Consumer Electronics Association); 2012 sales estimated at 86,000

1997 - 173 million music tapes sold; HTML clipboard October 23, 2001 - Apple introduced iPod portable music player; 2006 - cassettes accounted for 7% of sales in $923 million audio-book market (source: Audio Publishers Association); Apple's domestic market share in flash-memory players = 68% (source: NPD Group); iPod sales reached 100 million (took Sony Walkman 14 years to sell that amount); 2007 - 400,00 music tapes sold, 1/10th of 1% of all physical, digital music sales (source: Recording Industry Association of America); 4% of 2007 model year cars sold in United States had factory-installed cassette players vs. 23% in 2005 model year (source: Ward's Automotive Yearbook);

June 2008 - Hachette released last audio book on cassette; June 19, 2008 - Apple reported more than 5 billion songs purchased, downloaded from iTunes Store; July 2008 - no Billboard magazine Top 10 album released on cassette.

Ford - Change in Product Mix

2008-07-26T09:57:00.000-07:00

Automotive

HTML clipboardJuly 25, 2008 - reported 2Q loss of $8.7 billion = worst quarterly loss in its 105-year history ($5.3-billion charge to write down value of plants that build pickups, S.U.V.s; $2.1 billion write-down by Ford Credit, auto loan division, to cover shrinking value of lease portfolio; $1 billion loss from auto operations); 2008 sales of large pickups down 25%, sales of S.U.V.s own 32% (source: Ward’s Automotive Reports); Ford's product mix (1990-2008): 1) 1995-2007: SUVs, pick-up trucks, vans dominated sales (about 15% above industry average); 2008 - 1) shift production to cars, crossover vehicles (8/14 plants in North America build trucks, S.U.V.s, full-sized vans; expected to convert three assembly plants from truck-based products to cars); 2) realign factories to manufacture more fuel-efficient 4-cylinder, V-6 engines; 3) produce six of next European car models for United States market. (source: New York Times);
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Financial Sector Performance

2008-07-23T08:48:00.000-07:00

Banking

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July 19, 2008 - 52-week change in S & P 500 Financial stocks since autumn 1990: 1) absolute performance of S & P index of financial stocks in S & P 500 (excluding dividends); 2) how many percentage points financial index outperformed or underperformed full S & P 500; July 15. 2008 - worst 52 weeks ever (in absolute, relative terms) since S & P began calculating financial index (1989), down 53% (absolute) at low (previous record down 44% in fall 1990; subsequent 52 weeks, financials rose 58%); down 31% (relative) more than overall S & P 500 (two equivalent underperformances in 1990, March 2000; previously signaled buy opportunity).

Hudson's Bay -> Lord & Taylor

2008-07-17T09:31:00.000-07:00

Retail - Department Stores

July 16, 2008 - North America's oldest retailer (338 years) to be acquired by America's oldest department store (1826).

HTML clipboard May 2, 1670 - England's King Charles II granted the "Governor and Company of Adventurers of England Trading into Hudson's Bay" a charter; trading monopoly in Hudson Bay drainage basin; March 2006 - acquired by The InterTech Group Inc. (North Charleston, SC) for $1.1billion; taken private; 2008 - Anita Zucker (widow) became first woman chief executive, or governor, in company’s 338-year history; HTML clipboard July 2008 - acquired by NRDC Equity Partners (owners of Lord & Taylor).

1826 - Samuel Lord opened first store on 47-49 Catherine Street in lower Manhattan (left in 1853); 1838 - George Washington Taylor (Lord's wife's cousin) joined firm as partner; 1859 - moved to Broadway and Grand Street; 1986 - acquired by May Company; August 30, 2005 - acquired by Federated Department Stores; June 22, 2006 - acquired by NRDC Equity Partners, LLC.

Alfred Sloan - We Need You

2008-07-15T09:35:00.000-07:00

Automotive

HTML clipboard July 15, 2008 - General Motors

1) stock traded to 54-year low ($8.81 per share);

2) suspended dividend - first time since 1922 (Pierre S. Du Pont CEO, chairman)

3) market capitalization - fell to just $4.23 billion (vs. about $162.6 billion for Toyota)

4) planned to raise $15 billion to help cover losses, turn around North American operations - suspended $1 dividend/share annual dividend (improve liquidity by $800 million through 2009, cut health care benefits for white-collar salaried retirees over 65 years old, cut cash bonuses for executives, reduce truck production capacity by 300,000 units, speed up closures of truck, sport utility vehicle factories.

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GM's share price: 1948-2008 (source: Bloomberg)

Hot Fanny, Semi-Freddie

2008-07-15T08:06:00.000-07:00

Banking

Fannie Mae, Freddie Mac -

1) Fannie Mae - founded in 1938 as Federal National Mortgage Association; Freddie Mac - founded in 1970 as Federal Home Loan Mortgage Corporation,
2) same charters, Congressional mandates and regulatory structure (stockholder – owned corporations chartered by Congress to increase
the supply of funds that mortgage lenders can make available to homebuyers, multifamily investors through mortgage purchase, credit guarantee, portfolio investment activities.), different business strategies
3) combined debts of $1.5 trillion,
4) own or guarantee $5 trillion in mortgages, about half of nation's $12 trillion mortgage market = stability, liquidity to mortgage market (guarantee each mortgage against default by the homeowner); if stop buying loans, banks may stop making new loans, freeze United States housing market; if harder for them to borrow money, mortgage interest rates,
5) contracts with other institutions worth $2 trillion more to hedge the risks behind those mortgages,
6) $11 billion in losses in the last nine months,
7) Freddie Mac stock closed at $7.75, down more than 45% for the week ended 7/11/08. Fannie Mae closed at $10.25, down 30% for the week,
8) $2.25 billion line of credit at U. S. Treasure (for past 40 years) - now considered quite small compared with the overall obligations,
9) Friday (7/11/08) - Office of Thrift Supervision (OTS) closed IndyMac Bank F.S.B. (Pasadena, CA - one of the nation’s largest independent mortgage lenders, major issuer of subprime loans), Federal Deposit Insurance Corporation (FDIC) named Conservator; largest bank failure since the 1990-1991 recession (502 banks failed in three years).

(Sources: Fannie Mae; Office of Federal Housing Enterprise Oversight; Bloomberg)

- Fannie Mae's exposure to the housing market has soared;
- outstanding guaranteed mortgages tripled from 1998 to 2007 (top left);
- delinquency rate on Fannie Mae mortgages is rising (top right);
- increases the chance that the company will have to make good on its guarantees.
- stock price of Fannie Mae, Freddie Mac down more than 75% in one year (below)

July 13, 2008 - "Bush administration hastily arranged the dramatic Sunday evening rescue of Fannie Mae, Freddie Mac after Wall Street executives and foreign central bankers told Washington that any further erosion of confidence could have a cascading effect around the world, officials said on Monday....any more turmoil threatened to reduce the value of trillions of dollars of the companies’ debt and other obligations, which are held by thousands of domestic and foreign banks, pension funds, mutual funds and other investors... could have lasting effects on economies here and abroad already struggling from slumping housing markets, spiking energy prices and sharp declines in consumer confidence." (New York Times)

Rescue Plan:

1) Federal Reserve agreed to let the companies have access to its discount lending window,

2) Congress to give officials power to inject billions of dollars into beleaguered companies through investments and loans as part of a major package of housing legislation.

Gas Prices Rise, Gas Stations Fall

2008-07-08T08:47:00.000-07:00

Oil

2007 - number of gas stations down 2%

3,000 stations closed in last 12 months - 200 in New York state, 130 lost in North Dakota (source: NPN Magazine)

2008 - number of stations down to 161,368 (source: NPN Magazine)

Exxon plans to sell its 2,200 U.S. stations

Rising Costs: big cash flow required, established credit lines, higher fees to credit card companies (calculated as % of sales),

Squeezed profit margins on gasoline sales - margin between purchase/sale of gas down $.06, from 21 cents to 15 cents (source: Oil Price Information Service, Wright Express)

Stock Market - Worst June in 78 Years

2008-07-01T11:15:00.000-07:00

Wall Street - Trading

June 30, 2008 - End of 2nd Q 2008

HTML clipboardStandard & Poor’s 500-stock index down 8.6% in June 2008, down 12.8% for the first half of 2008 = worst performance in June since 1930 (down 16.5%). Index introduced March 1, 1957 (with daily) estimates (predecessor stock market indicator - Standard Statistics Company Average of Stock Prices developed in 1926 = 100). HTML clipboard

Dow Jones industrial average off 14.4% for the first half of 2008.

10 Worst Junes in Stock Market History (1926 - Present)
(source: http://allfinancialmatters.com/wp-content/uploads/2008/06/sp-tenworstjunes.gif)

Best and Worst Months for the S&P 500 Index (1926 - 2007)

(source: http://allfinancialmatters.com/2008/01/09/the-best-and-worst-months-for-the-sp-500-index-1926-2007/)

No IPOs = First Time in 30 Years

2008-06-30T09:54:00.000-07:00

Venture Capital

2Q 2008 - No VC-backed IPOs = first time since 1978: 1) weakness in capital markets, 2) investments in product markets (alternative energy, 'green' technologies) which take longer to grow.

HTML clipboard

2008 - 36 IPOs (vs. 130 during same period in 2007); raised $27 billion ($18 billion by Visa) vs. $60 billion in 2007.

Acquisitions of venture-backed companies are down:

1) second quarter - 50 mergers or acquisitions of venture-backed companies completed (down from 70 in the first quarter);

2) first half of 2008- 120 mergers or acquisitions of venture-backed companies, down 28% from 169 in the first half of 2007;

3) 2007 - median age of a venture-backed company from founding date to public offering hit a 27-year high of 8.6 years.
(source: National Venture Capital Association)

General Motors - Subcontact Share Price

2008-06-29T14:56:00.000-07:00

Automotive

June 26, 2008 - GM's stock closed at $11.43 per share, the lowest in 34 years. General Motors’s market capitalization - just $6.47 billion, vs. $162.6 billion for Toyota.

GM's share price: 1970-2008 (source: www.bigcharts.com)

Charlie Wilson, former President of General Motors from 1941-1953 and Secretary of Defense under President Eisenhower from 1953-1957, said during closed hearings of the Senate Armed Services Committee on his confirmation in 1952: "For years I thought that what was good for our country was good for General Motors, and vice versa."

Over the years Wilson's comment has usually been misquoted as "as General Motors goes, so goes the country”. But, if his opinion were the least bit true, then the U.S. is in decline.

Consumer Confidence?

2008-06-25T11:09:00.000-07:00

U.S. Economy

The Conference Board (established in 1916) reported consumer confidence index fell to 50.4 in June, down from 58.1 in May, its lowest point since January and February 1992 (1985=100). Americans feared they might lose their jobs or be unable to find work. April - home prices in the steepest annual decline since 1988, according to Standard & Poor’s/Case-Shiller home price index; average home price fell 1.4% from March and 15.3% from a year earlier (worse than the 14.3% year-over-year drop recorded in March).
(The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS, world's largest custom research company. The cutoff date for June's preliminary results was June 18th.)

HTML clipboard

iTunes - 5 Billion Strong; Music Sales Down

2008-06-19T14:52:00.000-07:00

Entertainment

IFPI (International Federation of the Phonographic Industry) reported:

1) global music sales fell in 2007
2) sales of CDs, music DVDs dropped 13%
2) music sold online rose 34%

Meanwhile, Apple reported customers had bought and downloaded more than 5 billion songs from its iTunes Store = largest music retailer in the U.S. (based on the amount of music sold during January and February as tallied by NPD Group's MusicWatch survey). Customers also rent, purchase over 50,000 movies every day, makes iTunes the world's most popular online movie store.

Housing and the Presidency

2008-06-16T10:30:00.000-07:00

Real Estate

Relationship between U. S. home prices and President's economic policies: 1) when prices rise moderately faster than rate of inflation, consumers tend to approve of economic policies; 2) when prices fall, disapproval is swift.

The Euro - 10th Anniversary

2008-06-03T09:26:00.000-07:00

Money- The History

January 1, 1998 - Euro, single European currency, introduced for use by European businesses (global currencies previously tied to dollar, linked to gold); June 1, 1998 - European Central Bank opened in Frankfurt, Germany.

January 1, 2002 - The euro became legal tender for European consumers - currency of 15 countries, 320 million people; replaced Deutsche Mark, French franc, Italian lira, Spanish peseta, Greek drachma, Austrian schilling, Belgian franc, Finnish markka, Irish pound, Luxembourg franc, Dutch guilder, Portuguese escudo; around 7.8 billion euro notes, 40.4 billion euro coins (worth €144 billion) put into general circulation by central banks of twelve participating countries of euro area; euro notes distributed by bank machines; shops started to give customers change in euro cash.

Euro - (http://www.civitas.org.uk/eufacts/ graphics/euro.jpg)

More successful than ever imagined:

1) European Central Bank has kept inflation in check
2) Prices rose an average of 2.1% /year over last 10 years
3) No politician has made serious attempt to undermine Central Bank's role
4) No country has seriously considering leaving European Union

"Behavioral influence" of common currency limited - no reform policies by unions, politicians; divergence in economic performance amongst members = distribution of risk.

Hydrox - Redux

2008-05-29T20:19:00.000-07:00

Food - Back by popular Demand

1902 - Jacob Leander Loose, Joseph Schull Loose, John A. Wiles formed Loose-Wiles Biscuit Company in Kansas City, MO; 1908 - introduced Hydrox cookie (four years before Nabisco introduced Oreo cookies; name combined water's atomic elements--hydrogen and oxygen); April 15, 1913 - registered "Hydrox" trademark first used January 1, 1910 (biscuits, cakes, cookies); 1998 - sales of $16 million vs. $374 million for Oreos; 2003- Hydrox discontinued.

2008 - More than 1,300 phone inquiries, an online petition with more than 1,000 signatures and Internet chat sites created demand for the deceased product. Kellogg responded to consumers. It will reintroduce the cookie in August, for a limited time.

The cookie's future depends on customers.

Biotech 2007 - Record Year

2008-05-20T12:26:00.000-07:00

Biotechnology

May 2008 - Ernst & Young's 2007 annual financial report on biotech industry cited:

1) financing from all sources topped $21.3 billion for U.S. biotech companies; $5.5 billion contributed by venture capital firms beat record set in 2000 (Human Genome Project);

2) of 386 publicly traded U.S. biotechnology companies, 49% have more than two years of cash on hand (27% of those) have more than five years of cash;

3) total potential value of mergers, acquisitions drug development alliances was nearly $60 billion in United States, surpassed levels in all prior years;

4) number of approvals for new drugs dropped to lowest level in two decades (FDA faced resource constraints, lawmakers pressed for more-stringent safety reviews);

5) market capitalization of San Francisco Bay Area's 77 public companies was $148.6 billion (40% of total market value of U.S. biotech companies) on revenue of $22.1 billion (34% of U.S. total for the sector); Boston area's 62 public companies had market capitalization of $65.1 billion (17.6% of U.S. biotech market capitalization).

Business History Trivia

2008-05-17T07:41:00.000-07:00

Business History Question

Hibbing, MN is the birthplace of what two famous business names?

"73 Biggest Brains in Business"

2008-05-10T22:34:00.000-07:00

Executives

May 2008 - "Condé Nast Portfolio talked to scores of C.E.O.'s, economists, and power players, identified 29 of capitalism's headliners, 44 others making a difference":

1) upstarts: Anne Wojcicki and Linda Avey - Co-founders of 23andMe (biotech); Jacqueline Novogratz - C.E.O. of Acumen Fund; Lee Scott - C.E.O. of Wal-Mart; Max Levchin - C.E.O. of Slide.com;

2) game changers: Rupert Murdoch - Chairman and C.E.O. of News Corp.; Lloyd Blankfein -
C.E.O. of Goldman Sachs; Paul Buchheit - Co-founder of FriendFeed; Ratan Tata - Chairman of Tata Group; Jamie Dimon - C.E.O. of J.P. Morgan Chase; Ngozi Okonjo-Iweala - Managing director of World Bank; Jeff Immelt - C.E.O. of General Electric;

3) connectors: Jonelle Procope - C.E.O. of Apollo Theater Foundation; Bob Barnett - Partner, Williams & Connolly; Larry Page and Sergey Brin - Co-founders of Google; Muhammad Yunus - Founder, Grameen Bank; Julian Robertson - Philanthropist, Retired (Tiger Management Group);

4) rebels: Danny Hillis - Co-founder of Applied Minds; Marc Jacobs - Co-founder of Marc Jacobs International; Steven Spielberg - Co-founder of Dreamworks SKG.

Opinions of: Rick Wagoner (CEO - GM), Sallie Krawcheck (CEO - Citgroup Wealth Management), Marc Benoff (CEO - Salesforce.com)

Consumer Price Index (1913 - )

2008-05-08T19:55:00.000-07:00

U. S. Economic History

1913 - Bureau of Labor Statistics began calculating the Consumer Price Index (CPI) - measure of average change over time in prices paid by urban consumers for market basket of consumer goods and services; 2008 - 84,000 prices in about 200 categories measured:

CPI-U 1913-2004; Source: U.S. Department Of Labor

Gaming - Las Vegas Black Jack

2008-05-06T09:03:00.000-07:00

Gaming

May 2008 - Gambling revenue (down about 4% for January, February; 58% of revenue for Las Vegas Strip resorts in 1990, 41% of revenue in 2007 - source: Deutsche Bank), hotel occupancy down (down 1.5% for January, February); resorts are slashing room rates (average daily room rates 3.8% below 2007), offering coupons or free nights, casino operators are firing hundreds of workers, stock prices have plummeted since October; credit is drying up for hotel, condominium projects planned before slowdown arrived; people are spending less in Las Vegas; huge inventory of new casinos, hotels due for completion in next few years (40,000 new rooms planned by 2012); foreigners = 13% of visitors; 2007 - average foreign visitor spent $1,200 for purposes other than gambling (up from $1,159 in 2006) vs. average spending of $701 for all visitors in 2007, down from $750 in 2006 (source: Las Vegas Convention and Visitors Authority).

Health Care Costs

2008-05-04T15:22:00.000-07:00

Health Care

May 2008 - 158 million people covered by employer health insurance; since recession of 2001 - employee’s average cost of annual health care premium for family coverage has nearly doubled (to $3,300, up from $1,800), incomes have not kept up; portion of average American household’s income that goes toward health care has risen about 12%, approaching 20% of average household’s spending (source: Deloitte).

Presidents - Disapproval of American Public

2008-05-02T08:33:00.001-07:00

American Presidents

May 1, 2008 - CNN/Opinion Research Corp. survey (poll conducted by telephone from Monday through Wednesday among 1,008 adult Americans, sampling error is plus or minus 3% points) indicates that 71% of the American public disapprove of how Bush is handling his job as president. No president has ever had a higher disapproval rating in any CNN or Gallup Poll; first time that any president's disapproval rating has cracked the 70% mark. He is more unpopular than Richard Nixon was just before he resigned from the presidency in August 1974 (disapproval rating of 66%). Support for the war in Iraq has never been lower - 30% of those questioned favored the war, 68% opposed it. Bush's approval rating (28%) remained better than all-time lows set by Harry Truman (22%) and Richard Nixon (24%), but even those two presidents never got a disapproval rating in the 70s; previous all-time record in CNN or Gallup polling was set by Truman, 67% disapproval in January 1952.

Patents

2008-04-30T12:27:00.000-07:00

Innovation

April 30, 2008 - Since February 2007, Coalition for Patent Fairness has spent $2.5 million for lobbyists; Coalition for 21st Century Patent Reform (about 50 companies, including pharmaceutical and biotech companies) that guard their intellectual property, likely to sue to protect their patents) has paid $1.8 million to lobbyists to influence legislation which calls for the biggest changes in United States patent law in more than 50 years. Major impetus for the patent legislation is the desire of technology companies to limit the damage awards and legal costs they sometimes face when they are accused of infringing patents.

2007 - Number of patent applications (467,243) has nearly doubled in last 10 years, more than tripled since 1987.

What Matters to MBA Students

2008-04-27T12:50:00.000-07:00

Education & Learning

April 27, 2008

New-Home Sales - 17-Year Low; Supply of Homes - 27-Year High

2008-04-24T10:11:00.000-07:00

Real Estate

U. S. Commerce Department estimated:

1) New-home sales plunged by 8.5% to a 17-year low in March,
2) Seasonally adjusted annual rate of 526,000 was much weaker than the 577,000 pace expected by economists,
3) New-home sales down 36.6% compared with 2007;
4) April 2008 supply of homes on the market rose to 11 months, the most in 27 years,
5) Median sales prices have fallen 13.3% in the past year to $227,600.

Final Subprime Tally - $300 billion Lost, $160 Billion Raised?

2008-04-22T08:30:00.000-07:00

Banking

Charles Babbage - 1849-2008

2008-04-19T10:27:00.000-07:00

Computers

1849 - Charles Babbage invented a massive calculating machine, Difference Engine No. 2 (never completed); precursor of modern computers; used Victorian-era rods, gears, levers and linkages to perform complex mathematical calculations with 31 digits of precision.

1991 - Engineers and curators at London's Science Museum used Babbage's 20 pages of blueprints to finally complete the machine (8,000 parts of bronze, cast iron and steel, weighs five tons, measures 11' long and 7' high).

2008 - Second Difference Engine built (over a 3½-year period by engineers at London's Science Museum), funded by Nathan Myhrvold, former Chief Technology Officer at Microsoft. Delivered to Computer History Museum (Mountain View, CA) - on display for one year, beginning May 10, 2008

(source: http://www.wired.com/images/slideshow/2008/04/gallery_babbage/1.jpg)

Reading:

Non-Fiction: Doron Swade (2001). The Difference Engine: Charles Babbage and the Quest to Build the First Computer. (New York, NY: Viking, 342 p.). Technology Historian and Assistant Director of London's Science Museum. Babbage, Charles, 1791-1871; Calculators--Great Britain--History--19th century. 1821 - Inventor and mathematician Charles Babbage reviewed set of mathematical tables, found excess of errors in the results; began lifelong enterprise to design, build mechanical calculating engine, world's first computer; Babbage's 19th-century quest to build calculating machine, author's successful attempt to build replica for bicentennial of Babbage's birth.

Fiction: (Computers), William Gibson, Bruce Sterling (1991). The Difference Engine. (New York, NY: Bantam Books, 429 p.). Babbage, Charles; Difference Engine No. 2; Computers--Fiction. 1885 - Industrial Revolution is in full swing in scientifically advanced London, governed by an intellectual elite led by Prime Minister Byron, powered by steam-driven, cybernetic engines (computers). Charles Babbage perfects Analytical Engine, and the computer age arrives a century ahead of its time. Young paleontologist comes into possession of a dangerous set of perforated cards, once in the possession of an executed Luddite leader's daughter, later in the hands of "Queen of Engines" Ada Byron (daughter of prime minister Lord Byron), finally given to scientist Edward Mallory who knows the cards are a gambling device that can be read with a specialized Engine; soon threatened and libeled by the Luddites, and he and his associates confront the scoundrels in a violent showdown.

Hedge Funds - 2008

2008-04-17T12:33:00.000-07:00

Investing Advisors

April 2008 - HedgeFund Intelligence reported:

1) Global hedge fund industry assets rose to $2.65 trillion at the start of 2008 (27% growth in assets year-to-year from the $2.079 trillion in 2007, 6.6% growth in the second half )

2) Average hedge fund lost 4.4% in the first quarter (BarclayHedge Fund Index)

3) More than 390 firms globally run hedge fund assets of $1 billion or more (combined assets of $2.083 trillion, nearly 80% of industry assets),

4) 144 /390 firms based in New York (up from 123 firms in 2007),

5) 75/390 firms based in London (remains dominant hedge fund center in Europe),

6) Top 22/390 firms in Europe run 44% of European assets (up from 37% in 2007).

Money & Happiness - Correlation?

2008-04-16T12:59:00.000-07:00

Economics

1974 - Richard A. Easterlin, University Professor and Professor of Economics (University of Southern California) published "Does Economic Growth Improve the Human Lot?" in Paul A. David and Melvin W. Reder, eds., Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz (New York: Academic Press, Inc.); suggested that despite stellar economic growth in United States since World War II, "higher income was not systematically accompanied by greater happiness"; later found that people were no happier in Japan in 1987 than in 1958, despite a fivefold jump in incomes; called the "Easterlin Paradox" - fact that average self-reported happiness has not risen with average income.

April 2008 - Betsey Stevenson and Justin Wolfer, University of Pennsylvania economists, rebutted the Easterlin Paradox; argue that money indeed tends to bring happiness, even if it doesn’t guarantee it; absolute income seems to matter more than relative income; people in richer countries are more satisfied (is wealth is causing their satisfaction.? Could results reflect cultural differences in how people respond to poll questions?); has satisfaction risen in individual countries as they grew richer? (yes, in some; no in United States, China); economic growth, by itself, not enough to guarantee people’s well-being but its consequences can contribute to satisfaction.

(source: Betsey Stevenson and Justin Wolfer, Wharton School at University of Pennsylvania)

Confidence Lowest in 26 Years = Diffidence

2008-04-11T22:56:00.000-07:00

Economics

April 11, 2008 - Preliminary Reuters/University of Michigan index of consumer sentiment (monthly survey of consumer attitudes and expectations about the U.S. economy conducted by the U-M Institute for Social Research (ISR) since 1946 as a gauge of consumer anticipation of changes in the economic environment) fell to 63.2 for April — its lowest point since March 1982 — from 69.5 in March, according to Dow Jones Newswires. Economists polled by Thomson/IFR (International Financing Review) had, on average, expected a reading of 68.

Airlines - Bankruptcy

2008-04-11T12:10:00.000-07:00

Airlines

April 11, 2008 - Frontier Airlines (Denver, CO) became 5th low-fare carrier (Aloha Airgroup, ATA, Maxjet Airways, Skybus) to file for Chapter 11 bankruptcy protection in growing shake-up of global aviation record oil prices, weakening economic growth, inability to raise fares (Frontier raised average fare 21 cents over prior period, to $102.97, in nine months ended Dec. 31) = cutting domestic capacity, grounding older aircraft.

Ultimate Business Club

2008-04-08T11:17:00.000-07:00

Family Business

1980 - Gérard Glotin, Chairman of Marie Brizard (creator of first anisette in 1755) identified 74 companies with company longevity (minimum age of 200 years), permanence (family must be owner of company or majority share holder, one member of founder must still manage company or be member of board), in good financial health, modern; 30 selected; 1981 - first meeting of Heniokiens Association of Family and Bicentenary companies in Bordeaux; named for Henok (or Enoch), great patriarchs (Caïn’s son, Methuselah’s father, lived before flood, was 365 years old when he ascended to Heaven without having died); 2007 - 40 members in craft industries, trades, services, publishing, heavy industry: 15 Italian, 10 French, 4 German, 1 Dutch, 1 from Northern Ireland, 4 Japanese, 1 Belgian, 2 Swiss (at head of their companies, unique, dynamic managers).

Henokiens Association of Family and Bicentenary Companies http://www.henokiens.com
Members of the Henokiens Association, meet four criteria: they have reached a minimum age of 200 years, they are managed by a descendant of the founder, the family still owns the company or is the majority share holder and they are in good financial health.

Compensation

2008-04-06T15:00:00.000-07:00

Executive Compensation

1994 - Average pay for chief executives was 90 times average worker pay; 2005 - Average pay for chief executives was 179 times average worker pay; 1995-2005 - Average worker pay rose by a total of only 8%; median pay for chief executives at 350 largest companies rose 150%.

(source: Congressional Research Service)

Postage

2008-04-06T14:39:00.000-07:00

Office Equipment

May 12, 2008 - Price of first-class postage: $.42 (1971 - postal service office became quasi-governmental; 1983 - stopped public subsidization).

Citi/Travelers - Little Late To Say You're Sorry

2008-04-04T14:29:00.000-07:00

Banking

April 6, 1998 - Citibank announced agreement to merge with Travelers Insurance; $166 billion merger largest ever to date. Viewed as a new era in finance, a one-stop shop for consumer and corporate customers; October 8, 1998 - completed, renamed Citigroup.

April 4, 2008 - John Reed, CEO of Citicorp in 1998, said the 1998 merger was a “mistake that failed to benefit the financial services conglomerate’s investors, customers and employees; turned out to be a “sad story. The stockholders have not benefited, the employees certainly have not benefited and I don’t think the customers have benefited because our franchises are weaker than they have been."

Citigroup 10-Year Stock Price Performance: April 6, 1998 (closed at $36.50 after announcement of merger with Travelers Group) - April 2, 2008 ($24.02 per share).

(source: http://bigcharts.marketwatch.com)

Female Professionals and Divorce

2008-04-02T15:15:00.000-07:00

Women

A) Robin Fretwell Wilson, Professor of Law at Washington & Lee University, analyzed data on new professionals in business, law and medicine (part of a National Science Foundation Survey of 100,000 professionals); found that:

1) women with MBAs (12%) were twice as likely to divorce or separate as their male counterparts (5%). Large number of professionals, especially women, remain in the workplace, "opt out" of having families;

2) women with law (10%) or medicine (9%) degrees divorced less often than those with bachelor's degrees but were still more likely to divorce than male counterparts (7% of male lawyers, 5.1% of male doctors).

B) Sylvia Ann Hewlett, economist and founding president of the Center for Work-Life Policy, conducted a 2001 study of high-achieving women (high earners, graduate degrees). Found the more women earned, more likely they would be single and without children.

Rice - All-Time High

2008-03-31T15:57:00.000-07:00

Commodities

March 26, 2008 - Rice prices jumped 30 per cent to an all-time high (doubled since January); global rice stocks are at their lowest since 1976 (foreign sales restrictions have removed about a third of the rice traded in the international market):

1) Egypt, leading exporter, imposed a formal ban on selling rice abroad to keep local prices down,
2) Philippines (world’s largest buyer of the grain) announced plans for a major purchase of the grain in the international market to boost supplies,
3) Indian government imposed further restrictions on the exports of rice to combat rising local inflation),
4) Indonesia stopped its farmers from selling rice abroad ( joined Vietnam, Egypt, China, Cambodia, India in banning foreign sales),
5) Australian rice production collapsed due to draught - down 98% since 2003

(source: Australia wine and rice producers; New South Wales Rice Marketing Board; Australian Wine and Brandy Board)

6) April 15, 2008 - Rice futures in Chicago rose to all-time high of $22.17 per 100 pounds, up 63 per cent since January

TFC Commodity Charts
Rice (RR, CBOT)
Monthly Price Chart

(source: http://futures.tradingcharts.com/charts/RIM.GIF)

FTSE - Worst Start in History

2008-03-31T09:16:00.000-07:00

Trading

March 31, 2008 - London’s FTSE 100 index closed at 5702.1, off 11.9 per cent for the first three months of the year = the index’s worst opening quarter since it was launched 24 years ago on January 3, 1984 (3Q 2000 -fell 20%).

Reasons - subprime crisis, slowing housing market (Building Society reported 5th consecutive drop in housing prices), consumer confidence in the UK is at its lowest for 15 years (data from pollsters GfK/NOP showed the confidence worsened for a seventh month in a row, lowest level since 1993).

(source: http://ichart.europe.yahoo.com/c/5y/_/_ftse)

Restaurants in Recession

2008-03-30T13:25:00.000-07:00

Food Service

Convenience and enjoyment overcome fear and penny pinching. Attention to quality, price, portions and promotion means restaurant traffic does not always fall during a recession (source: NPD Group).

M&A History

2008-03-28T19:09:00.000-07:00

Mergers & Acquisitions
Automotive

March 26, 2008 - Ford Motor Company agreed to sell its Jaguar line (acquired in 1989 for $2.38 billion) and Land Rover line (acquired in 2000 for $2.73 billion) of luxury cars to Tata Motors (India’s third-largest passenger carmaker) for $2.3 billion; ended first modern-day cross-border acquisition between United Kingdom.

From The Deal Professor by Steven M. Davidoff (March 26, 2008):
(http://dealbook.blogs.nytimes.com/2008/03/26/fords-ma-legacy)

Ford’s acquisition of Jaguar plc in 1989 was made via a cash tender offer. However, unlike in previous cross-border takeovers, Jaguar had a large shareholder presence.

Jaguar’s American Depositary Securities were quoted on the Nasdaq and registered under the Exchange Act, at least 25 percent of Jaguar’s holders were located in the United States, and Ford itself held about 13.4 percent of Jaguar’s securities.

The Ford offer was therefore required to comply with the governing takeover codes in two jurisdictions: the Williams Act in the United States; and the City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisition of Securities, issued by the U.K. Panel on Takeovers and Mergers. This first attempt to harmonize the two systems was quite a nightmare, required extensive cooperation between the regulators of both nations. It involved many a late night for lawyers attempting to coordinate the process across the Atlantic — all this before e-mail became common and when phone calls were actually expensive.

It was the first true cross-border acquisition and it stirred the Securities and Exchange Commission to begin a decade-long process to adopt specialized rules for cross-border takeovers, culminating in the Cross-Border Release Exemptions adopted in 1999. Truly a landmark transaction.

Stock Market - 3rd Decade of No Gain

2008-03-26T17:29:00.000-07:00

Trading

10-Year periods since 1925 - stocks have gained 98.6% of the time (source: Ned Davis Research);
except:
1) 1929-1942;
2) 1966-1982;
3) 1999-2008

April 1999 - S&P 500 index closed at 1362.80

March 25, 2008 - S&P 500 index closed at 1352.99 (accounts for half of $1 trillion invested in index funds); down 18.6% from October 9, 2007 high

10-Year Total Return (adjusted for dividend reinvestment, inflation) = 1.3%/year average

10-Year Annualized Total Returns (not adjusted for inflation)
S&P = 2.46%
Foreign Stocks = 7.18%
U.S. Long-Term treasury Bonds = 7.68%
Inflation-Protected Treasury Bonds = 8.42%
U.S. Small Cap Stocks = 11.92%
REITs = 14.11%
Gold = 14.51%
Commodities = 17.92%
Emerging Market stocks - 19.38%

9-Year Returns = -0.37%/year; worst performing vs. commodities, real estate investment trusts, gold, foreign stocks, U.S. Treasury bonds (up 4.7%/year, up 5.8%/year since March 2000)
8-Year Returns = -1.4%/year
(source: Morningstar Inc.)

Biggest IPO in U.S. History

2008-03-19T14:30:00.000-07:00

Finance

Top 10 Initial Public Offerings in the U.S.:

March 18, 2008 - Visa Inc. - $17.9 billion
April 26, 2000 - AT&T Wireless Services - $10.6 billion
June 12, 2001 - Kraft Foods - $8.7 billion
November 9, 1999 - United Parcel Service - $5.5 billion
May 3, 2006 - KKR Private Equity Investors - $5.1 billion
July 1, 2002 - CIT Group - $4.9 billion
June 21, 2007 - Blackstone - $4.8 billion
October 21, 1998 - Conoco - $4.4 billion
March 21, 2002 - Travelers Property Casualty - $4.3 billion
March 27, 2001 - Agere Systems - $4.1 billion
(source: Dealogic)

Sayonara Bear Stearns

2008-03-18T20:27:00.000-07:00

Investment Banks & Brokers

March 16, 2008 - JPMorgan agreed to buy Bear Stearns, 85-year-old, 5th largest brokerage firm (14,000 employees), for $2 a share or $260.5 million (closed at $30/share on Friday, March14); Bear was unable to meet a surge in margin calls by investors who were worried about its ability to weather the credit crunch; customers were unwilling to trade with the firm; great fear was that failure might have touched off a panic - banks and brokerage firms might have refused to lend to each other, financial system might have melted with unknown consequences for the broader economy.

Last days of trading (source: Clearstation.com)

Subprime Run on the Bank

2008-03-15T13:02:00.000-07:00

Investment Banks & Brokers

March 14, 2008 - Lenders and hedge funds wanted their money back from Bear Stearns = capital and liquidity crisis. JP Morgan Chase (main clearing bank for Bear Stearns), Federal Reserve Bank of New York threw financial life preserver (secured line of credit) to 85-year old Bear Stearns to keep it above water for the next 28 days until it either improves its financial condition or it finds a buyer for itself. As a result, biggest one-day drop in trading history of stock of Bear Stearns, down $27 (47%, down $30.15 or 53% at intraday low); lowest close in more than 9 years (October 14, 1998); 2008 - lost $6.8 billion (66%) of its market capitalization

In addition, Lehman Brothers announced it had secured a 3-year credit line from its banks...its stock sank 15%.

Witches Brew

2008-03-14T09:13:00.000-07:00

Economic Indicators

March 13, 2008:

1) The Dollar ($) - The dollar fell to a record low against the euro ($1.5651) and a record low against the yen (Y99.85). March 13 - hit record low against the Swiss franc

2) Gold - March 13 - price of gold touched $1,000 per troy ounce.

3) Oil - March 13 - traded as high as a record $111 a barrel

The Day the Bubble Burst

2008-03-10T15:31:00.000-07:00

Trading

March 10, 2000 - The Day the Technology Bubble Burst

NASDAQ Composite Index traded to an intraday high of 5132.52, closed at 5048.62, the peak of the Internet bubble; October 2002 - hit low of 1108, a loss of 78%.

(source: http://bigpicture.typepad.com/comments/images/wsj_infonasbubble0503_3.gif)

Recession 2008?

2008-03-08T12:12:00.000-08:00

Economic Indicators - Recession?

March 7 - 2008 - The U. S. Labor department estimated the the nation lost 63,000 jobs in February 2008 =

1) most jobs lost in 5 years,
2) second consecutive monthly decline,
3) third drop in private-sector jobs, largest fall in payroll
4) number of officially unemployed has risen by 500,000
5) number of people outside the labor force (not working, not looking for a job) has risen by 1.3 million
6) median household income was $48,200 in 2006 (vs. $49,200 in 1999

The recession-dating committee of the National Bureau of Economic Research (seven academic economists based in Cambridge, MA) defines a recession as a "significant, protracted decline in activity that cuts across the economy, affecting measures like income, employment, retail sales, and industrial production," (New York Times). It is the most often cited judge of recessionary periods. It declared the last recession, which began in November 2001, in 2003.

Cash & Risk

2008-03-05T08:44:00.000-08:00

Finance

March 2008 - Cash & Risk: Total cash held by companies in S&P 500 industrial index exceeded $600 billion in February 2008, up from about $203 billion in 1998; increased risks (currency risk, political risk, commodities shortages, new competition), increased savings (decline in capital spending on fixed assets, increased spending in R&D; cash ratio (cash, short-term investments) as % of total assets as high as in 1960s (Apple - 38% in 1988 to more than 60% in 2007; Avon Products - less than 3% in 1988 to 17% in December 2007; doubled for technology companies since 2000); net debt ratio (debt minus cash as % of total assets) - less than 0 by 2004 through 2006) = on average, cash on hand could retire outstanding debt.

(Source: Prof. Thomas W. Bates, U. of Arizona, Kathleen M. Kahle, U. of Arizona, Rene M. Stulz, Ohio State University, Thomson Proprietary Research)

Oil Prices - 2008

2008-03-04T07:54:00.000-08:00

Oil

March 3, 2008 - intraday trading high of $103.95 per barrel on Mercantile Exchange.

Best/Worst Performing Stocks

2008-02-26T07:27:00.000-08:00

Wall Street - Trading (2007)

The Best 10 (+%)

1- Year / 3-Year/ 5-Year / 10-Year
First Solar-795.2 /Foster Wheeler-113.8/ Hansen Natural-142.5/ Hansen Natural-69.5
Onyx Pharm.-425.7/ Hansen Natural-113.5/ SBA Commun.-141.7/ Calgene-52
Mosaic-341.7/ McDermott Intl.-112.9/ Titanium Metals-123.2/ Apple-50.7
CF Industries-330/ Titanium Metals-106.2/ McDermott Intl.-109.6/ Immucor-40.5
Terra Indust.-298.7/ Intuitive Surgical-100.6/ Terra Industries-99/ South. Copper-38.8
Sun Power Cl A-250.8/ MEMC Electronic-88.3/ Apple-94.2/ Healthways-38
Intuitive Surg.-236.8/ Frontier Oil-84.8/ Intuitive Surgical-92.2/ Penn Nt. Gmng-37.7
Foster Wheeler-181.1/ Illumina-84.2/ NII Holdings-89.9/ NVR-37.4
ASK Steel Hold.-173.6/ Apple-83.2/ Southern Copper-84.8/ Ansys-36.8
Owens-Illinois-168.3/ Guess?-82.4/ Tesoro-84.6/ Frontier Oil-36.3

The Worst 10 (-%)

Countrywide Finl.-78.4/ Countrywide Finl.-36.5/ Tenet Healthcare-20.9/ Rite Aid-20.7
MBIA-74.1/ MBIA-36.5/ NY Times Cl A-15.7/ Ciena-16.8
Ambac Finl.-70.6/ Ambac Finl.-31.4/ MBIA-14.3/ Sirius Satellite-15.8
Wash. Mutual-68.2/ XM Satellite-31.2/ Ambac Finl.-13.7/ Level 3 Comm.-14.6
Pulte Homes-68/ Boston Scientific-31.1/ Wash. Mutual-13.1/ ADC Telecom.-14.3
Lennar Cl A-65.2/ Lennar Cl A-31/ Fifth Third Bank-12.9/ Tenet Health-13.7
MGIC Invest.-63.6/ Pulte Homes-30.5/ Boston Scientific-11.4/ Tellabs-13
Office Depot-63.6/ MGIC Invest.-30.3/ MGIC Investment-10.7/ Ford Motor-11.3
Adv. Micro Dev.-63.1/ Adv. Micro Dev.-30.2/ Interpublic Group-10.4/ Paramatric-11.3
SLM-58.5/ Wash. Mutual-27.9/ Lexmark Intl.-10.4/ JDS Uniphase-10.7

Job Creation

2008-02-17T08:00:00.000-08:00

January 2001-2007: federal government employment (excluding Postal Service) grew faster than private sector employment - potentially, first time since WW II.

(source: Bureau of Labor Statistics, via Haver Analytics)

(Microsoft + Yahoo) = Google?

2008-02-07T16:35:00.000-08:00

Internet

February 1, 2008 - Microsoft made an unsolicited $44.7 billion bid for Yahoo in attempt to better compete with Google. Why?

1) Slow Growth in Mature Product Market

2) + Slow Growth in Growing Service Market

3) = Rising Profitability and Market Capitalization?

Money Management - 2007

2008-01-31T18:24:00.000-08:00

Investment Advisors

College and University Endowments Realized 8.6 % Average 10-Year Return in 2007

1/24/08 - The 35th annual survey of 785 colleges and universities in the United States and Canada (largest participation ever) by the National Association of College and University Business Officers (NACUBO) in conjunction with TIAA-CREF Asset Management reported that:

1) college and university endowments realized an 8.6% average 10-year compounded rate of return in 2007 (superior to returns on the S&PP 500, Russell 3000 indices);

2) 1-year average rate of return of 17.2% for fiscal year ended 6/30/2007 (vs. 20.6% for the S&P 500 and 20.1% for the Russsell 3000;

3) $411.2 billiion in endowment assets, up $71 billion from 2006;

4) assets are primarily invested in equities, fixed income and hedge funds;

5) NACUBO estimates that the 1-year increase in endowment assets under management will generate approximately $3.25 billion in additional revenue during the current fiscal year.

Results were in line with the target needed to meet short- and long-term institutional spending goals while also ensuring the financial stability of colleges and universities.

Rogue Traders - Securities Fraud

2008-01-27T13:53:00.000-08:00

Wall Street - Scandal

February 26, 1995 - Barings PLC, Britain's oldest investment banking firm, collapsed after one of its Singapore-based securities traders (Nick Leeson) lost more than $1.4 billion by gambling on Tokyo stock prices; March 2, 1995 - Leeson arrested.

January 24, 2008 - Societe Generale (one of Europe's biggest banks) revealed it had lost $7.15 billion dollars at hands of a rogue trader (Jerome Kerviel, 31); January 26, 2008 - Kerviel surrendered to the police in Paris.

Biggest Trading Losses by 'Rogue Traders

Private Equity: Job Creation or Destruction

2008-01-27T13:21:00.000-08:00

Merchant Banks

January 25, 2008 (Davos, Switzerland) - The World Economic Forum announced results of a yearlong study of 5,000 private equity transactions (randomly chosen) from 1980 through 2005 to determine whether buyouts create jobs or result in more layoffs. It is titled “Economic Impact of Private Equity,” was led by Josh Lerner, professor at Harvard Business School, and Steven J. Davis, professor at University of Chicago Graduate School of Business, was guided by an advisory board that included policy makers, academics, labor representatives and private equity executives.

The study found that:

1) private equity does not create more jobs, but cut, on average, only about 1% more jobs than their peers,

2) two years before a buyout, a company cuts, on average, 4% more of its work force compared with its peers (possibly because it is preparing for a sale),

3) acquired companies, on average, cut 7% of their work force over two years, but at the same time, added jobs (usually new positions in new locations) at a pace of about 6%, resulting in a net loss of 1%,

4) by the fourth and fifth years of private equity ownership, the growth of a company’s work force becomes similar to its public peers,

5) 6% of all buyouts eventually end in a bankruptcy filing, slightly higher than the average for public companies (buyout companies defaulted at half the rate compared with those public companies with similar junk debt ratings),

6) public-to-private transactions reflected only 6.7% of the total number of buyouts since 1980 (28% of the firms acquired, measured in terms of dollar value). The study did not look at new or lost jobs abroad, did not examine what would have happened to employment had the buyouts not occurred.

Results contrasted with study commissioned by the Private Equity Council, a lobby group, of 42 large companies (selected by the buyout groups) acquired by eight private equity firms from 2002 to 2005 (World Economic Forum data did not look at deals from 2003 to 2005). Its results showed that employment grew 8.4% at acquired companies.

America for Sale

2008-01-24T10:21:00.001-08:00

Mergers & Acquisitions

Thomson Financial reported foreign investors acquired positions in American companies, factories and other properties, through private deals and purchases of publicly traded stock, valued at a record $414 billion in 2007: 1) up 90% from 2006, 2) more than double the average for the last decade, 3) more than one-fourth of all announced deals for the year.

(source: Bloomberg Financial markets)

Stock Market Declines

2008-01-18T09:02:00.000-08:00

Trading History

January 2008 - Peak to Trough Comparisons of Market Declines

L-R: January 1, 1973 - December 6, 1974 (-45.1%);

November 29, 1983 - July 24, 1984 (-15.6%);

August 25, 1987 - October 19, 1987 (-36.1%);

July 16, 1990 - October 11, 1990 (-21.2%);

July 17, 1998 - August 31, 1998 (-19.3%);

January 14, 2000 - October 9, 2002 (-37.8%);

October 9, 2007 - January 17, 2008 (-14.2%)

Subprime Bailout - 2008

2008-01-16T07:49:00.000-08:00

Investment Banks

Summary: Cash Infusions from Foreign Investors (2007 - 2008) to Offset Subprime Losses:

Guiness Record for Packaging

2008-01-12T12:40:00.000-08:00

Paper & Packaging

2006 - Guinness World Records named Lyle's Golden Syrup (first packaged in tins on January 10, 1885 at Plaistow Wharf in London's Docklands) as world's oldest branding/packaging.

William Fox Would Be Pleased

2008-01-09T11:26:00.000-08:00

Entertainment

1904 - William Fox (born Wilhelm Fuchs) acquired 146-seat Brooklyn storefront Nickelodeon theatre for $1,660.67, started Greater New York Film Rental Company; 1912 - Supreme Court ruled against movie monopoly of Motion Picture Patents Company (Thomas Edison); 1913 - Theater "chain" pioneer William Fox (born Wilhelm Fuchs) established Greater New York Film Rental, distribution firm, Fox Office Attractions Company, production company.; 1915 - consolidated companies, formed Fox Film Corporation; concentrated on acquiring, building theaters; 1916 - moved company to 13 acres in Hollywood, CA; March 3, 1929 - acquired Loew's Corporation's 500 theatres (added to existing nationwide circuit of 1100 theatres), large equity position in Metro-Goldwyn-Mayer Picture Studios; July 1929 - Fox seriously injured in car accident; October 1929 - net worth valued over $400 million wiped out; 1930 - Fox forced out as CEO; May 31, 1935 - president Sidney Kent, new owners merged company with Twentieth Century Pictures, formed 20th Century Fox; 1936 - Fox forced into personal bankruptcy; 1942 - began jail time for felony conviction of bribing judge during bankruptcy proceedings; 1985 - Twentieth Century Fox Film Corporation acquired by News Corporation; renamed Fox, Incorporated; 1989 - film production unit renamed the Fox Film Corporation; October 7, 1996 - Fox News Channel made its debut.

Find a Need and Fill It

2008-01-07T16:36:00.000-08:00

Business Growth & Influence

December 7, 1998 - One Hundred Great 'Things' of the 20th Century (Time magazine):

Brownie Box Camera (1900), Paper Clip (1901), Barnum's Animal Crackers (1902), Teddy Bear (1902), Safety Razor (1903), Ice Cream Cone (1904), Bakelite (1907), Model T (1908), Automatic Washing Machine (1910), Neon (1910), Electric Range (1910), Vitamins (1912), Zipper (1913), Brassiere (1914), Sneakers (1916), Insulin (1921), Band-Aid (1921), Kleenex (1924), Pop-Up-Toaster (1926), Refrigerator (1927), Penicillin (1928), Peanut Butter (1928), Strained Baby Food (1928), Domestic Air Conditioner (1928), LA-Z-BOY Chairs (1928), Television (1929), Scotch Tape (1930), Flashbulb (1930), Sliced Bread (1930), Alka-Seltzer (1931), Do-It-Yourself Hair Dye (1931), Electric Razor (1931), Stereo System (1931), Tampons (1931), Detergents (1933), Tape Recorder (1935), Kodachrome Film (1935), Garbage Disposer (1935), Blender )1937), Releasable Ski Binding (1937), Spam (1937), Fluorescent Lighting (1938), Ballpoint Pen (1938), Teflon (1938), Nylon Stockings (1938), Jet Engine (1939 and 1941), Nylon (1939), Electric Kettle (1940), Permanent-Press Fabric (1941), Velcro (1941), Cake Mix (1940s), Tupperware (1946), Automatic Electric Clothes Washer (1947), Long-Playing Record (1948), Instant Camera (1948), Electric Guitar (1948), Photocopier (1949), Computer (1951), Color TV (1953), Saran Wrap (1953), Reddi-wip (1954), Portable Home Dishwasher (1954), TV Dinner (1954), Polio vaccine (1955), Transistor Radio (1955), TV Remote (1956), Frisbee (1957), --LEGO system (1958), Hula Hoop (1958), Barbie (1959), Snowmobile (1959), Skateboard (1959), Pantyhose (1960), Tylenol (1960), Oral Contraceptive (1960), Soft Contact Lenses (1961), Compact Audio Cassette Player (1963), Metal Tennis Racquet (1963), Touch-Tone Telephone (1963), Disposable Baby Diaper (1963), Pop Top Can (1963), Microwave Oven (1967), Quartz Wristwatch (1969), Electronic Hand-Held Calculator (1972), Food Processor (1973), Cell Phone (1973), Snowboard (1978), Walkman (1979), Liquid Paper (1979), Post-It (1980), Polartec (1981), Prozac (1988).

First/Worst Trading Days of New Year

2008-01-04T10:58:00.000-08:00

Trading History

Worst first trading days of a new year for the S.&P. 500 index:

1. January 4, 1932 - down 3.7% in last year of the worst part of the Great Depression (National Bureau of Economic Research estimates recession ran from August 1929 - March 1933).

2. January 2, 2001 - down 2.8%. Recession began in March.

3. January 2, 1980 - down 2.0% as recession began that month.

4. January 3, 1949 - down 1.6%. Recession had begun in November 1948.

5. January 3, 1983 - down 1.6%. Recession had ended in November 1982.

6. January 2, 2008 - down 1.4 percent.

Numbers 1-5: came when the economy was in a recession, or not far from one.

(source: Howard Silverblatt, S&P Senior Index Analyst)

Stock Market Returns - 2007

2008-01-01T08:20:00.000-08:00

Trading History

December 31, 2007:

1) Dow Jones Industrial Average closed at 13,264.82, an annual increase of 6.43% (vs. 16.29% jump in 2006; 6.3% down from all-time high October 2007);

2) S&P 500 index (companies with median market value of $12.8 billion) closed at 1468.36, an annual gain of 3.53%, up 10% excluding financial stocks (6.2% below record close on October 9, 2007; down 3.8% in fourth quarter, first for any fourth quarter in seven years; up 67% since 2002); first November/December decline since 1974.

3) Russell 2000 closed at 766.03 (down 2.8% in 2007, first loss in five years, underperformed S&P 500 for first time since 1998);

4) Nasdaq closed at 2652.28, up 9.81% for the year (down 7.2% from record high in October 2007);

5) Dow Jones Wilshire 5000 Index (companies with median market value of $589.6 million), broadest measure of U.S. shares, closed at 14,819.58 ($115 billion decrease in value of stocks);

6) Chicago Board Options Exchange Volatility Index (VIX), market's ``fear gauge'' (rises as stocks fall), closed at 22.50 (up 95% percent in 2007, biggest annual rise in its 18-year history).

New Home Sales Down 50%+

2007-12-29T09:47:00.000-08:00

Real Estate

November 2007 - Sales of new single-family homes fell 9% (from October), to12-year low, seasonally-adjusted annual rate of 647,000; down 53.4% from high of 1.39 million in summer 2005 (steepest peak-to-trough decline since 1982), slowest pace since April 1995 (pace of 621,000); since 2006 - new-home sales nationwide down 34.4%, biggest year-to-year decline since early 1991; median sales price of new home dipped to $239,100, down 0.4% from year ago; S&P/Case-Shiller® Home Price Indices in 20 broad metropolitan areas of U.S. (measured since 1987), showed price declines in every market for two months (September, October) for the first time ever.

History's Most Influential Businessmen

2007-12-21T19:56:00.000-08:00

Most Influential Business Figures in American History
(of top 100 most influential Americans in history)

5) - Alexander Hamilton,
9) - Thomas Edison,
11) - John D. Rockefeller,
14) - Henry Ford,
20) - Andrew Carnegie,
24) - Alexander Graham Bell,
26) - Walt Disney,
27) - Eli Whitney,
37) - J. P. Morgan,
45) - Samuel F. B. Morse,
54) - Bill Gates,
67) - P. T. Barnum,
72) - Sam Walton,
73) - Cyrus McCormick,
80) - William Randolph Hearst,
94) - George Eastman,
95) - Sam Goldwyn

(Source: December 2006 - The Atlantic Monthly)

Wall Street 2007 - Shanghai, Dubai, Mumbai or Goodbye

2007-12-20T08:09:00.000-08:00

October 24, 2007 - Merrill Lynch announced $8.4 billion fourth-quarter loss, most associated with losses in subprime mortgage market; biggest loss in its 93-year history, biggest known loss in Wall Street history; October 30, 2007 - CEO, E. Stanley O'Neal, retired from company. December 24, 2007 - agreed to sell less than 10% stake: 1) $5 billion in new stock (at a discount) to Temasek Holdings (Singapore's sovereign investment company controlled by finance ministry), 2) $1.2 billion (discounted stock) to Davis Selected Advisers (Tucson, AZ); 3) will sell most of Merrill Lynch Capital, commercial finance business, for $1.3 billion to General Electric; January 17, 2008 - reported $9.8 billion fourth-quarter loss (almost matched loss reported for period by Citigroup, company three times Merrill’s size); exceeded analysts’ forecasts, reflected $16.7 billion of write-downs on mortgage-related investments, leveraged loans.

November 5, 2007 - Citicorp reported fourth-quarter write-down of between $8 billion to $11 billion related to subprime mortgages, on top of a $5.9 billion dollar write down announced in October; sold $7.5 billion stake to Abu Dhabi Investment Authority to shore up its capital base; Charles O. Prince III fired as CEO (since October 2003); January 14, 2008 - reported fourth-quarter results - $18.1 billion write-down on subprime mortgage-related exposures (much higher than early November estimate of $8 - $11 billion); disclosed $12.5 billion investment - sold $6.6 billion stakes to foreign investors (including Korean, Kuwaiti governments); $9.83 billion loss for quarter, largest quarterly loss in bank's history; 41% dividend cut planned.

December 10, 2007 - UBS, world’s largest provider of banking services to wealthy, wrote down a further $10 billion in value of its mortgage-backed assets, on top of $3.7 billion charge in October (reported first quarterly loss in 5 years); biggest casualty of American home-mortgage crisis among banks outside United States; sold more than 10% stake to investors from Singapore, Middle East - Government of Singapore Investment Corporation, G.I.C., will invest $9.7 billion, unnamed Middle Eastern investor will inject $1.8 billion into bank; January 30, 2008 - warned it would mark down additional $4 billion in securities, brought total subprime-related residential mortgage write down to about $18 billion, first annual loss since was formed in 1998 merger.

December 18, 2007 - Morgan Stanley posted fourth-quarter loss of $3.6 billion, or $3.61 a share (far surpassed analysts' expectations of $0.39 per share), first-ever quarterly loss in its 72-year history, after taking additional $5.7 billion write-down related to subprime mortgages (value reduced by $9.4 billion, one of largest devaluations on Wall Street); said would sell a $5 billion stake to China Investment Corporation (China's sovereign wealth fund), to shore up its capital = 9.9% stake; chief executive, John J. Mack, took full responsibility, said would forego bonus for 2007.

December 19, 2007 - Bear Stearns reported a steep fourth-quarter loss, the first ever in its 84-year history; lost about $854 million ($6.90 a share) for fourth quarter, compared to profit of $563 million ($4 a share) for same time last year (analysts had expected loss of $1.82 a share); wrote down $1.9 billion related to holdings in mortgages, mortgage-based securities, up from $1.2 billion anticipated last month; January 8, 2008 - James E. Cayne, CEO and 6% shareholder, retired as an employee of the firm.

Gold - 28-Year High

2007-12-15T14:31:00.000-08:00

Commodities

November 7, 2007 - gold price per troy ounce = $845.50 (28-year high)