Archive for June 18th, 2009

NEW YORK: When it comes to raising capital in the current economic environment, being married to a Google co-founder has its advantages. Regulatory forms filed Thursday showed the internet search giant recently invested another 2.6 million in biotech firm 23andMe, which was co-founded in 2006 by Anne Wojcicki.Wojcicki is married to Google co-founder Sergey Brin. Google already has a 3.9 million stake in the company, which sells DNA analysis. It made that investment in 2007, shortly after Brin and Wojcicki were married. “We believed the technology had promise the first time we invested and continue to believe that now,” said Jane Penner, a Google spokeswoman.”23andMe helps people make sense of their genetic information,” Penner said, adding that the company’s mission is “consistent with Google’s goal of organizing the world’s information.”Google (GOOG, Fortune 500) also entered into a lease agreement with 23andMe, according to the filing. But Penner declined to comment on the details of the lease agreement and referred questions to 23andMe.A 23andMe spokeswoman could not be reached for comment.

Source:CNN

CHICAGO (Reuters) — Microsoft Corp. is willing to invest up to 10% of its operating income in its Internet search business for up to five years, Chief Executive Steve Ballmer said Thursday, as its “Bing” search engine starts to gain ground with Web surfers.Bing – part of Microsoft’s perennially money-losing online services unit – has been winning market share from rivals, according to industry data released this week, but still trails market leader Google by a long way.”Our shareholders, I told them we were willing to spend 5 to 10% of operating income for up to five years in this business, and we feel like we can get an economic return,” Ballmer told a business lunch in Chicago, without elaborating on the timeframe.The new search engine grabbed 12.1% of U.S. Internet searches for the June 8-12 work week, up from 11.3% from June 1-5 but trailing Google Inc.’s 65% of U.S. searches in May.”You don’t go from 8% to 80. You have to be patient,” said Ballmer. “We invested in Xbox for years and now it generates nice economic returns for us,” he added, referring to the company’s popular gaming console.Microsoft reported operating income of 4.4 billion last quarter, which would mean Ballmer is envisaging spending up to 440 million per quarter, or almost 1.8 billion per year, developing Bing.Microsoft does not break out investment in its various projects, so it’s not clear if that is a significant increase on previous spending. Microsoft has continued to invest in Internet projects, even though its online services business is a net drain on cash, losing 575 million last quarter alone.0:00
/01:23Google CEO dings BingBing, fully launched on June 3, is just the opening salvo in Microsoft’s campaign to counter the dominance of Google in the Web-search and related advertising business.The world’s largest software company, which is in talks with Yahoo Inc. (YHOO, Fortune 500) over a potential partnership, has long been determined to play a role in that lucrative space after watching rival Google (GOOG, Fortune 500) take a stranglehold on the market.Ballmer regretted that Microsoft (MSFT, Fortune 500) had not entered the Internet search market earlier, saying that the company understood the technology’s importance, but had not come up with a way to monetize it.”If we could have one do-over I would probably say I would start sooner on search,” said Ballmer. “Sometimes the error you make is what you don’t do and don’t see. Our mistake wasn’t that we didn’t see the technology change coming, we didn’t see the business change coming.”Shares of Microsoft closed down 0.8% at 23.50 on Nasdaq.

Source:CNN

NEW YORK: Americans are being told daily that health reform isn’t just the right thing to do — it will also help save the economy.”Health care reform is not part of the problem when it comes to our fiscal future, it is a fundamental part of the solution,” President Obama said in a recent address.The crux of the problem: The United States spends far more on health care than do other developed countries, but it often gets far less bang for its buck. Meanwhile, a large number of Americans either can’t afford insurance or have insurance that doesn’t adequately cover their medical costs.The kicker, of course, is that rising costs are making the country’s long-term fiscal picture very, very ugly.For many, the Washington debate over the mind-bending details of different options obscures the issue of what’s at stake. What is the threat to the economy if no action is taken? What happens if a health system overhaul succeeds … and what are the economic perils if it fails?The economy without health reformFor 40 years, health care costs have grown faster than inflation and wages.Today, the United States — including the government, employers and individuals — spends more than 16% of its gross domestic product on health care, or 7,421 per person, according to the Kaiser Foundation.If health care costs grow unabated, the country is on track to spend more than 20% of its GDP on health by 2018. In other words, 20% of the value of goods and services Americans produce will be spent on health care alone.The more we spend on health, the less we’ll have to spend on other things. That can hamper economic growth and means there will be less and less money available to support education, defense and other priorities.Meanwhile, the country’s already record high debt is set to swell to unsustainable heights due largely to rising health care costs, which expand federal spending on Medicare and Medicaid.By 2035, the Government Accountability Office estimates that all federal revenue — taxes and fees paid by individuals and businesses — will be consumed by Medicare, Medicaid and interest on the public debt.”Virtually all of our long-term fiscal challenge is attributable to the rapid growth in health care costs. And unless we get them under control, our budget is doomed,” said Robert Reischauer, former director of the Congressional Budget Office (CBO) who is now president of the Urban Institute.Lawmakers note that higher health care costs put U.S. businesses at a competitive disadvantage because they have to pay so much more to insure their employees than do their foreign competitors.Indeed, among developed countries, the United States is the biggest spender. It spends 52% more on heath per person than the country ranked second, which is Switzerland. Despite that, the United States does not necessarily do better in terms of health care access, quality or outcomes.0:00
/2:18Boosting health reformMeanwhile, the Commonwealth Fund estimates that currently 46 million people have no insurance, while another 25 million working-age adults are underinsured.In a letter to lawmakers, the CBO made plain the consequences of letting health costs grow unrestrained. “The country faces difficult and fundamental tradeoffs between limiting the growth of Medicare and Medicaid … accepting a continuing increase in taxes … and reducing other spending … possibly to levels not experienced in this country in more than 40 years.”If health reform worksArguably, there are three measures by which to judge whether health reform is successful from an economic standpoint. It would have to pay for itself over time; reduce health spending without compromising quality; and provide affordable, accessible care for everyone.The CBO told lawmakers that a 1% reduction in the growth of federal health care spending each year for the next 20 years would pay for the cost of expanding coverage in the first decade and then provide savings that “exceed that cost in the next decade.”The desired end result of reform is less money spent for the same or better care and with better outcomes.”If we do it right, it allows us to have a more efficient health care system … and we can use the additional savings to invest in something, educate someone or pursue some other national goal,” said Douglas Holtz-Eakin, a former CBO director.Obama economic adviser Christina Romer estimates that if the annual growth rate in health care costs slows by 1.5 percentage points a year — which she concedes is a high bar — real GDP could increase by more than 2% in 2020 and by nearly 8% in 2030.But GDP isn’t the only measure of well-being.”If people get better access to health care those people are better off,” said Robert Book, a senior research fellow in health economics at the Heritage Foundation.But the physical dividends pay off economically as well. That’s because it’s easier to generate income when you’re healthy. And it’s easier to stimulate the economy with your income when you’re not bankrupted by a medical crisis.If health reform failsOne reason health reform hasn’t happened yet: It is painfully hard to figure out how to do it right.And economically, there are serious risks if health reform is done wrong.For Book, reform will have failed if everyone gets covered but has to wait for essential care. “People will be sick, less productive and not get what they paid for,” he said.He believes taxing a portion of workers’ health care benefits could lead to a more efficient use of health services. But, he said, using other tax increases to fund reform could place a drag on GDP.If that happens, that will “mak[e] it far more difficult to escape the debt trap,” wrote Harvard economist Kenneth Rogoff in a Financial Times op-ed. To Holtz-Eakin, who advised John McCain in last year’s presidential race, failed health reform would mean that “everyone gets coverage but we don’t change the underlying cost dynamics. Health care spending goes up and we haven’t solved our deficit problem.”In that scenario, health reform would make the deficit worse — which “could prove the straw that breaks the camel’s back,” Rogoff wrote.And the deficit could get worse even if lawmakers pass measures that can pay for health reform in full.Here’s why: some of the biggest savings from reform might not be realized for at least a decade because they will require key changes in how medicine works. In the interim, however, there is a risk that lawmakers will undermine those savings by tweaking reform policies — such as succumbing to political pressure to defer scheduled payment cuts for providers.If lawmakers are really serious about putting the federal budget on a sustainable path, the CBO said, that just won’t do.

NEW YORK: BlackBerry maker Research In Motion Ltd. reported a strong quarterly profit and sales Thursday but a disappointing outlook sent the company’s stock lower. The Waterloo, Ontario-based company said first-quarter net income rose 33% to 643 million, or 1.12 per share, for the three-month period ended May 31. Results included a 175 million tax benefit and 96 million in one-time charges. Without the charge, RIM said it earned 564.4 million, or 98 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, forecasted earnings of 94 cents per share.Sales rose 53% to 3.4 billion, meeting analysts’ projections.RIM said it expects earnings of 94 cents per share to 1.03 in the current quarter which mostly beat analysts’ forecasts ranging from 88 cents to 1.06 a share. But the company really disappointed with its revenue outlook for the current quarter, saying sales will come in at 3.45 billion to 3.7 billion, on the lower end of analysts’ forecasts of ranging between 3.4 billion and 3.9 billion. Shares of RIM (RIMM) fell 5% after hours.Earlier this month, RIM competitors Apple (AAPL, Fortune 500) and Palm (PALM) unveiled the new, and widely anticipated iPhone and Pre smartphones. After the touch screen BlackBerry Storm received largely negative reviews in November 2008, RIM said it planned to unveil a touch screen BlackBerry with a physical keyboard, much like the Pre, in the coming months.

NEW YORK: The Treasury Department warned U.S. financial institutions Thursday that the North Korean government may resort to “deceptive financial practices” to get around economic sanctions. The advisory from the Treasury’s Financial Crimes Enforcement Network comes as the Obama Administration steps up its efforts to prevent North Korea from furthering its nuclear weapons program.The government said it remains concerned about “high-quality” counterfeit U.S. currency being passed from North Korea and urged banks to scrutinize attempts by North Korean customers to make large cash transactions. Banks should be wary of attempts to suppress the identity or origin of transactions made by North Korean clients, the advisory said. Money transfers made via third parties, and repeated transfers that appear to have “no legitimate purpose” should also raise red flags.North Korea drew international criticism in May for conducting a nuclear test and firing several ballistic missiles into the sea. In June, the United Nations Security Council adopted a resolution that called for stricter measures to prevent Pyongyang from obtaining financial assets that could contribute to the reclusive regime’s nuclear weapons activities.

Source:CNN

NEW YORK: According to some recent headlines, conditions are finally starting to improve for the unemployed.Some indicators are showing positive signs in the job market for the first time since the credit crisis caused job losses to soar last fall. But for the growing number of unemployed workers in the U.S., macroeconomic statistics aren’t worth much.After peaking in January, the pace of job losses has slowed dramatically, according to the Labor Department. Employers cut 345,000 jobs from their payrolls in May — 32% fewer than the previous month. And the number of Americans filing for continuing claims for unemployment insurance fell last week for the first time since early January.But for those unemployed workers pounding the pavement, jobs are still hard to come by.That’s because even though job cuts have slowed, employers have not started hiring just yet. According to the Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics, the number of new hires remains near an all-time low.”In general, companies have been in a wait-and-see posture,” explained Dr. Jane Goldner, a human resources expert and author of “Driven To Success: A 10-Point Checkup for Achieving High Performance in Business.” “There’s some level of confidence coming back,” but in terms of hiring, “I don’t think we’re there yet,” she said.Many unemployed workers agree.Ann Fry made a good living as professional speaker and executive coach in New York until last fall. Now the companies that hired her in the past have cut back and individual clients signed off.”I completely rely on whether conferences are happening and whether they are hiring speakers,” she explained. “What I notice is that companies are reluctant to pay for ‘extras’ like corporate training and coaching,” she said. “Also, the professional associations I speak for nationally are cutting their budgets way back.”With fewer clients and fewer gigs this year, Fry, 63, has had to tap into her savings in recent months to make ends meet. As a self-employed professional, there is no safety net such as unemployment insurance to fall back on, but she’s hopeful that business will pick up again.”I think we’re already seeing some signs of improvement,” Fry says of the economic environment. “Do I see it turning around yet?” she asked of her own employment status, “no, not yet.”"For the job seeker it’s probably not necessarily obvious right now that things are improving,” said Jennifer Schramm, the manager of workplace trends and forecasting for The Society for Human Resource Management.Although anecdotal evidence suggest that hiring expectations will improve in the second half of the year, “we have to wait a few months to see if this is a trend,” she said.Once companies stop decreasing headcount, it could still take time before hiring plans take hold, and even longer for there to be a noticeable change in workers’ attitudes.Chuck Jentlie has been through this before. His career as a recruiter for the tech industry was rocked by the dot-com bust earlier in the decade. Since then the 52-year-old went back to college at Arizona State University to get a degree in architecture.But once a growing industry, architectural services has steadily lost jobs since the beginning of the year. Now a large percentage of architects are out of work, including recent graduate Jentlie.”None of us can find a job,” he said of his classmates.Although the industry as a whole could bounce back quickly once the economy improves, “a lot of the reports seem like wishful thinking,” Jentlie said.”I’m definitely not seeing [employers] saying ‘yeah we’re looking for workers,’” he said. “Realistically I think we’re probably looking at another year.”

Source:CNN

NEW YORK: Hop on your favorite broom. Let out your best cackle. Cuddle up with a black cat and twitch your nose like Samantha. Quadruple witching day is almost here!Now for those of you who don’t follow the markets religiously, you might be wondering what I’m talking about. But many investing experts have been chattering about how Friday could be a doozy of a day for the stock market because of what is known as quadruple witching day.The term refers to the phenomenon that takes place several times a year when several derivatives contracts expire at the same time — those tied to market index futures, market index options, stock options and stock futures. That could lead to a massive surge in stock trading as professional investors hedge their bets. Stocks tends to be volatile leading up to a quadruple witching day and can be particularly erratic on the day the options and futures actually expire, especially in first and final hours of trading.But if you are a typical buy-and-hold, long-term investor (and not a Jim Cramer what’s the market going to do in the next tick type of trader), quadruple witching can make for a wacky day that’s best to not make too much fuss over.”For the most part it’s going to be noise,” said Mike O’Rourke, chief market strategist with BTIG, an institutional brokerage firm. “There may be a lot of hedging going on, but in the end I don’t expect a tangible move in stocks that will notably influence the market beyond Friday.”Just look at what happened the last time there was a quadruple witching day. That happened back on March 20, and the S&P 500 fell nearly 2%. But if you panicked that day and thought that it was time to bail on stocks, you’d have missed out on the market’s big rally. The S&P 500 has shot up nearly 20% since then.It just goes to show that even though Wall Street tends to get all in a lather about how the market performs in just one particular six-and-a-half hour trading session (and unfortunately we in the media are often guilty of participating in the frenzy as well), it pays to take a step back and not get too encouraged or discouraged by one day’s gyrations. “By and large, the world is full of short-term hazards and rewards. On any given day, while you can make an argument to be positive you can make an equally logical one to be negative,” said Phil Dow, director of equity strategy with RBC Wealth Management in Minneapolis.Talkback: Will the major stock indexes end the year up or down? And why? Leave your comments at the bottom of this story. So investors need to be careful of reading too much into what happens Friday. Dow thinks that regardless of what happens, it’s likely that many large institutional investors will start buying again next week since the second quarter will soon end. With the Dow 30 now only down slightly for the year and the S&P 500 and Nasdaq both in positive territory, professional money managers may take part in some portfolio “window dressing” since they don’t want to make it look like they’ve missed out on the big rally. But Dow quickly added that “fundamentals remain cloudy,” meaning that investors are still trying to figure out if the worst of the recession is truly behind us and what that will mean for corporate earnings. As I explained in Wednesday’s column, it’s hard to know whether the bull will continue charging ahead in the second half of the year until there is more evidence of improving profits. And investors should find out more details once the deluge of second-quarter reports hit the market in July. O’Rourke also pointed out that this is the beginning of the summer doldrums for the market. Volume has been relatively light as of late, which makes it even less wise to look at one-day swings in the market and ascribe any significant importance to them.So at the end of the day, the looming quadruple witching hour won’t matter much to most investors. How stocks fare for the remainder of 2009 will depend a lot more on what’s going on with the housing market, the broader economy and corporate earnings — not the expiration of derivatives contracts on a sleepy, summer Friday.Talkback:Will the major stock indexes end the year up or down? And why?
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BIRMINGHAM, Ala.(Reuters) — An Alabama court Thursday found former HealthSouth Corp. Chief Executive Richard Scrushy liable for fraud related to the company’s massive accounting scandal and ordered him to pay 2.9 billion.”The judgment is hereby entered in favor of the plaintiff and against Richard M. Scrushy in the total sum of 2,876,103,000,” said the judgment by Alabama state Judge Allwin Horn.”Scrushy knew of and actively participated in fraud,” the judgment said in a civil case brought against him by HealthSouth stockholders.He was acquitted of criminal charges related to the fraud in 2005, but is serving a seven-year prison term in a bribery case.Scrushy, who came to court in leg shackles in May to testify in the civil case, said he had no knowledge of financial problems at HealthSouth (HLS), reiterating the argument used at his 2005 criminal trial.

Source:CNN

NEW YORK: Global warming is back.Over the last 12 months it seems lawmakers have been preoccupied with other pressing maters: bailing out the banks, saving the automakers, reforming healthcare.Global warming, a top-tier issue for much of the presidential campaign, kept a low profile. But that’s about to change. The House is set to debate a bill as early as next week that could involve 846 billion over the next 10 years. In an effort to get the climate change issue back into the spotlight, Deutsche Bank Thursday unveiled a countdown-type clock in midtown Manhattan that measures the tons of greenhouse gasses currently accumulating in the atmosphere.Earlier this week, government scientists at the National Oceanic and Atmospheric Administration said evidence of climate change was already apparent in the United States, and that “the current trend in the emission of greenhouse gas pollution is significantly above the worst-case scenario that this and other reports have considered.”It went on to say that heat waves will become more intense, leading to human health problems and affecting crop and livestock production; water shortage will increase; ocean waters will rise, killing coral reefs and impacting tourism and fisheries; greater outbreaks of insect infestations and wildfires will occur; and rising sea levels will inundate coastal buildings and infrastructure.If greenhouse gasses are not curbed, by 2010 damages from global warming could cost the country 1.8 trillion a year, according to a study by The Natural Resources Defense Council.This is where the House bill comes in. Known as Waxman-Markey after its two sponsors, Henry Waxman (D-Cali.) and Ed Markey (D-Mass.), the bill attempts to reduce greenhouse gas emissions through a system known as cap-and-trade.Under a cap and trade plan, the government requires companies emitting large amounts of greenhouse gasses to obtain a permit for each ton they emit each year. Most of these companies are electricity generators, including big industry that generates its own power. The number of permits issued each year is then reduced. As the more limited supply of permits increases their price, companies can either pay to install cleaner equipment, fund carbon-offset projects like tree farms, or buy these permits on a secondary market from other companies that have cleaned up their operations and now have extra permits to sell.The ultimate goal is to make fossil fuels, the main source of energy and of man-made carbon emissions, more expensive and low carbon technologies like wind, solar and nuclear more competitive. 0:00
/4:31Whitman’s nuclear ambitionsHow this all works is amazingly complex, but so far the bill has the backing of most of the environmental community and many of the big utilities and manufactures being regulated.What’s not at all clear is if the plan will pass Congress, and how much it will all cost.Under Waxman Markey, electricity generators will be required to pay for permits to emit carbon dioxide. They will likely pass on most of this cost to consumers. The Congressional Budget Office estimates that under a hypothetical cap and trade law, this would cost a household an average of 1600 a year for the first ten years but says the true cost to consumers will likely be significantly lower.The Waxman Markey bill pumps much of this money back into the economy and into consumers’ pockets. It requires the electricity generators to buy the permits from local utilities, which receive them free from the government, or from the government itself. Then this money will be used for a host of programs that benefit electricity users including energy efficiency retrofits, tax credits for low income families hard hit by the price increase, and subsidies for the steel, concrete and chemical industries that might suffer from competition with companies in countries that don’t have a cap-and-trade law.0:00
/2:13City funds energy upgradesThe value of this new market is expected to be 846 billion over 10 years, according to the Congressional Budget Office.Once the various rebates are figured in, the bill is expected to have a net annual cost of 90 to 140 per household, according to an analysis done by the Environmental Protection Agency.The CBO hasn’t done an analysis of the bill factoring in the rebates, but they indicated it would be closer to the EPA’s number, not the 1600.For some any price increase is too much.”I don’t think it maters what the number is,” said Laura Henderson, a spokeswoman for the Institute for Energy Research, which opposes the bill. “We’re in a recession. People can’t afford an increase in something they need so much.”The bill is bound to face stiff opposition from House members hearing similar concerns from their constituents.The Democrats themselves are not unified on the issue, as the bill would impose higher costs on regions that use carbon-heavy coal as a fuel for electricity – primarily the industrial Midwest.Waxman-Markey has a decent chance of passing in the House but will face stiffer opposition in the Senate, according to Whitney Stanco, an energy policy analyst at Concept Capital.”In a year when we haven’t seen much of an economic recovery, going forward with a bill that will raise prices is probably going to be difficult,” said Stanco.But the Obama Administration, which would like at least some domestic progress on cap-and-trade when U.S. negotiators show up in Copenhagen at the end of the year to hammer out a successor to the Kyoto Treaty, will likely keep the pressure on Congress. This is currently being done by a thinly veiled threat to use the EPA to regulate greenhouse gasses, a process most observers say would be even costlier than a cap-and-trade plan.”In our view Congress will likely be compelled to enact greenhouse gas emissions legislation rather than let the EPA regulate,” said Stanco, although she said that might not happen until after the 2010 elections.In the meantime, opponents will continue to use the cost issue to fight the bill, as well as a more ideological approach.Some, including most economists, say a simple carbon tax would be a more efficient way to reduce greenhouse gasses.Many in the political sphere oppose a cap and trade plan right now because they say the benefits don’t outweigh the costs. In short, they don’t think global warming won’t present as big of a problem as some say, and argue that it will be far cheaper to deal with the issue in the future when the costs of cleaner energy technology falls.It’s not a view shared by most scientists that study the issue.”Implementing sizable and sustained reductions in carbon dioxide emissions as soon as possible would significantly reduce the pace and the overall amount of climate change,” the NOAA report stated, “and would be more effective than reductions of the same size initiated later.”

Source:CNN

NEW YORK (Reuters) — U.S. employers will see health care costs rise 9% in 2010 and they expect their workers to pay a greater share of their health plans, consultant PricewaterhouseCoopers said Thursday.PwC’s annual medical costs trends report also said more workers are likely to utilize their health insurance coverage because they fear they will lose their jobs, and more uninsured and underinsured people will turn to Medicaid for coverage.The cost increase will be offset in part by cost declines from expected U.S. health care reforms and the potential for high deductible health plans and wellness programs, PwC said.0:00
/4:22Geithner: Health care’s criticalAccording to 500 employers surveyed by PWC, 42% will increase their workers’ share of health care costs in 2010 and 4% said they would change the design of health care plans to increase medical cost sharing.”Employers are squeezing dollars out of their programs to save money,” Mike Thompson, principal at PricewaterhouseCoopers global human resource solutions group, said in a statement.”As the economy recovers, employers will refocus on more sustainable longer term approaches to medical cost containment based on an increasingly shared interest between employers and their workers.”

Source:CNN