Archive for June 24th, 2009

NEW YORK (Reuters) — Warren Buffett said Wednesday that the U.S. economy has “no bounce” and will take time to recover, but there is no risk of deflation to push it further into despair.Speaking on CNBC television, the world’s second-richest person also praised efforts by the Obama administration and Federal Reserve to jump-start economic activity.He lamented that the slowdown has hurt his insurance and investment company Berkshire Hathaway Inc., which runs close to 80 businesses and in the January-to-March period had its first quarterly loss since 2001.”We have had no bounce” in the economy, Buffett said on CNBC television in New York. “There are a lot of excesses to be wrung out, and that process is still under way, and it looks to me it will be under way for quite a while.”Asked whether the economy was still in a “shambles,” as he had said in February, Buffett said: “I’m afraid that’s true.”U.S. gross domestic product fell at a 5.7% annualized rate in the first quarter.0:00
/2:24Buffett: No recovery, yetGovernment efforts to stimulate business activity remain a work in progress, and President Barack Obama Tuesday again said the nation’s jobless rate will rise above 10%.”They’re doing things, but they take a while to have an effect,” Buffett said. “You can’t produce a baby in one month by getting nine women pregnant.”Yet he added that “I don’t worry about deflation at all,” and maintained his long faith in the stock market, saying it is “attractive over the next 10 years” relative to alternatives.Asked whether Obama should reappoint Ben Bernanke to lead the Federal Reserve when the chairman’s term expires next January, Buffett said: “I don’t see how you could do better.”Stocks for the long runIn a separate interview, Buffett told Fox Business Network he expects the United States to maintain its “triple-A” credit rating for decades. Berkshire lost its equivalent rating this year.Buffett also said he plans to keep his Goldman Sachs Group Inc. (GS, Fortune 500) warrants, which now show a paper profit.Last September, Goldman agreed to sell Berkshire 5 billion of preferred stock carrying a 10% annual dividend, and warrants to buy 5 billion of common stock at 115 per share.”We’ll make a lot of money off Goldman,” Buffett said.0:00
/2:17Bernanke: ‘No one better’Goldman earlier this month repaid 10 billion of federal bailout money taken from the Troubled Asset Relief Program.Buffett spoke just before a scheduled lunch with Zhao Danyang, a Hong Kong-based investor who in an auction last June agreed to pay 2.11 million to dine with the billionaire.An auction for a similar lunch to benefit the Glide Foundation, a San Francisco nonprofit offering housing, job training, health and child care, and meals for the poor, is being conducted this week on eBay Inc’s (EBAY, Fortune 500) website.As of 3:30 p.m. ET, the top bid was 135,678. The auction ends Friday.Berkshire’s Class A (BRK.A) closed up 1,000 to 86,800 on the New York Stock Exchange.

Source:CNN

NEW YORK (Reuters) — Time Warner Inc. and Comcast Corp. have banded together to test ways to allow people to watch more TV shows over the Web, while making sure they keep paying for their traditional cable or satellite TV services.The partnership by two major media companies underscores the pressure the TV industry is under to protect its revenue but also satisfy consumers who want to watch their favorite drama or comedy at a time and place of their choosing.Time Warner (TWX, Fortune 500) and Comcast (CCW) are banking on an approach that would essentially allow viewers to see any show at any time over any sort of device they wanted — whether that is a TV set, computer or cell phone. One catch: they must first prove they are a cable or satellite customer, meaning they already pay a monthly subscription fee for TV.In announcing the partnership Wednesday, Time Warner Chief Executive Jeff Bewkes stressed that he viewed the plan as a “free gift” for consumers that simply “expands” their entertainment choices. Time Warner is the parent company of CNNMoney.com.”If this approach gets adopted … it will clearly be the biggest story in video-on-demand and Internet video,” Bewkes said.Shares of both companies were up more than 1%.In testing whether the system will work, both technically and strategically, Time Warner and Comcast will begin a national trial of the service in July.The roughly 5,000 customers in the trial will be able to access full episodes of shows from Time Warner’s TNT and TBS networks like “The Closer” and “My Boys” on Comcast.net just hours after they air on TV.0:00
/05:46Google CEO: TVs are foolishBewkes said he was “talking to pretty much all the satellite, telephone and other cable companies” about similar initiatives. For his part, Comcast Chief Executive Brian Roberts said he expected other networks to join the approach and offer their own hit shows.”It’s kind of like iTunes but it’s better because you don’t have to pay,” Bewkes said.Bewkes has made no secret of his desire to move the industry toward what he calls “TV Everywhere,” a catchphrase for an approach that boils down to a requirement that viewers prove they they pay for a TV service before they can watch shows on the Web. Comcast calls it “On Demand Online.”Whatever the name, getting audiences to keep paying for a TV service is paramount for cable operators like Comcast. It is hardly less essential for cable networks like TBS, since they collect fees from cable operators that carry their programs.The fear within the industry is that by failing to protect their shows from the free, open world of the Web, the TV industry will suffer the same devastation as the publishing and music worlds.But the TV industry remains divided on how to approach the issue.In one case, three of the major broadcast networks — News Corp’s (NWSA) Fox, General Electric Co’s (GE, Fortune 500) NBC, and Walt Disney Co’s (DIS, Fortune 500) ABC — have joined together to form Hulu.com, which carries mostly broadcast TV shows but also some content from cable.That’s a point of irritation for some in the cable business — since audiences are suddenly able to watch a TV show over that Web that previously they could see only if they subscribed to a pay-TV service.When asked about the industry’s challenge, both Bewkes and Roberts denied that were reacting belatedly or defensively to the threat of the Web.”This is offensive,” Bewkes said. “Make no mistake about it.”Comcast shares were up 5 cents at 13.84 on Nasdaq, while Time Warner rose 19 cents to 24.74 on the New York Stock Exchange.

Source:CNN

SEATTLE (Fortune) — We now know that Boeing’s super-cool, and super-late, 787 Dreamliner is going to be earthbound a bit longer. The world’s largest commercial aircraft maker announced that during “static” testing they noticed stress where the wings are joined to the body of the plane, a factor that hadn’t been predicted in computer models.The ground testing is rigorous; this wasn’t a case of some beefy guy with a big wrench who stepped on the wing in the wrong place. Engineers found the problem during a phase of safety testing when engineers literally take the wings of the plane and bend them until they practically touch.Still, it’s not a problem anyone wants when the world’s first mostly composite commercial airliner is days away from its critical first flight. This is a plane with a 150 million price tag that is more than two years behind its original schedule and has yet to exhibit the really nifty and useful thing about planes — flying.What this latest delay means to you depends on which part of the Boeing constituency you inhabit: the flying public; an investor; or an airline waiting for its planes. Let’s start with those of us who are going to get on this new jet: the flying public.The obvious question, is this thing going to be safe? Stress where the wings meet the body, after all, doesn’t sound reassuring. Boeing officials were clear in a conference call Tuesday that there is a simple fix for the problem, which requires a handful of reinforcing parts applied to 36 areas on the wings about the size of one or two square inches each. “We have seen nothing about what led us to the discovery that would lead us to broader concerns with the test or flight programs,” said Scott Fancher, the 787 vice president and general manager, during the conference call. If the problem had been discovered months ago, Fancher added, rather than days before the plane was supposed to fly, the 787 team would have simply fixed it and moved on, probably without any grand public statement.0:00
/1:29Unfriendly skies for airlinesFancher is not blowing smoke. It is not uncommon for new commercial planes to have issues late in the game, even so close to the first flight. What makes it more painful in this case is that it comes after so many previous delays. Designing and building a new commercial jet is a phenomenally complex process. The Dreamliner even more so. Not only does it use new materials, chiefly composites, but Boeing is also using a new process to get the plane built drawing on suppliers across the world to manufacture parts, which are assembled into the complete airliner at the company’s sprawling plant in Everett, Wash.Clearly, Boeing doesn’t have the process nailed yet, but it is building a safe plane. Not only that, with bigger windows and a climate-control system that more closely approximates sea level, it ought to be more of a pleasure to fly than the aluminum tubes in the sky today.If you are an investor you might be a little less sanguine. Boeing (BA, Fortune 500) stock has fallen more than 8% since the delay was announced Tuesday. Still, it has been on a run lately, up almost 50% since its March lows. There are plenty of folks who feel that Boeing stock got ahead of itself, after being beaten down so low earlier in the year.How you view the share price depends on whether you are investing for the next six months to a year or longer term, says Alex Hamilton, director of research at Jesup & Lamont, who has a “hold” on the stock. “Financially, first-flight means nothing, it doesn’t put another cent in Boeing’s pocket,” he says. “It was psychological more than anything. What keeps getting Boeing in trouble is setting these bogies [dates] and missing them. They need to keep quiet and just get that plane in the air.”Missing first-flight does push everything out, however, Hamilton says. “It calls into question whether we can believe they can start to deliver planes in the first quarter of 2010, whether they have the manufacturing process down, and whether they can produce ten aircraft per month as they have planned.” As things slip, so might Boeing’s earning power in the near-term. If it can’t deliver planes, it doesn’t get paid, and indeed faces penalties that it must pay customers. Boeing will assess and announce what the financial impact of the delay might be during its second-quarter earnings report next month. In the coming weeks it will also pick a new date for first flight.That’s the near-term. Longer-term as an investor, you need to consider whether Boeing gets its manufacturing process straight and if the 787 is the breakthrough aircraft Boeing thinks it is. What the 787 offers chiefly is much better fuel efficiency in a package that lowers maintenance costs and opens up new long-distance routes that were simply uneconomic. “Long-term it’s a game changer,” Hamilton says. “And if you change the game, and you are the market leader, you are in a tremendous position.”Which brings us to the airlines that are hoping Boeing will help them change the tough economics of their business. Boeing has pre-sold more than 860 of these planes, the fastest pace in history for a new airliner. When the global recession hit, the delay to the 787 wasn’t as keenly felt as it otherwise would have been, since the airline industry saw its business plummet. Not taking delivery of expensive planes that they couldn’t fill anyway wasn’t such a burden. Today, however, airlines are more eager to get delivery, as some see signs of air-travel ticking back up.Airlines in India and China are signaling they may be ready to buy new planes, as are some giant commercial-jet leasing companies that have been sitting on the sidelines during the recession. The cost of jet fuel is climbing again, and so having an efficient plane is more desirable than ever.First in line for the 787 is All Nippon Airways, which didn’t take the news of the delay well. “We are disappointed that the first flight of the 787 will be postponed, and urge Boeing to specify the schedule for the program as a whole as quickly as possible,” ANA said in a statement.But here’s the thing. No matter how disappointed they are, ANA and the dozens of other customers will wait for the 787. Sure it’s two-plus years behind, but Boeing’s only real competition in the commercial airline business, Airbus, won’t have a new plane ready with similar features until 2013 or 2014, and that assumes they don’t have their own delays. “If Boeing slips this plane another six to nine months, it might hit their 2010 earnings,” says Rick Whittington, a principal with Sarasota, Fla.-based independent aerospace research firm JSA Research. “Investors don’t like it, and the customers aren’t happy about it, but they are not going to cancel orders because there is nowhere else for them to go.”

NEW YORK: This statement was posted on the Federal Reserve Web site on June 24, 2009.Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to 1.25 trillion of agency mortgage-backed securities and up to 200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to 300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.0:00
/2:29Stimulus blasted as wastefulVoting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Source:CNN

NEW YORK: The Federal Reserve kept its key interest rate near zero Wednesday, and said in a statement that although the U.S. economy remains weak, there are signs of a recovery.The central bank said that the pace of the nation’s economic decline is slowing and that household spending is showing signs of stabilizing. The Fed noted recent commodity price increases but said it saw little threat of inflation in the near term. The Fed also dropped the language it used in its last statement that indicated concerns about falling prices hurting economic growth.The Fed has now kept its federal funds rate, an overnight lending rate that impacts rates on various consumer and business loans, in a range of 0% to 0.25% since December. But the Fed has done much more than cut short-term rates to pump money into the economy. In March, the central bank unveiled plans to buy 300 billion of U.S. Treasurys and increase its purchases of mortgage-backed securities in order to keep longer-term interest rates low. But yields on Treasurys have been creeping up in recent months, rising by more than a full percentage point since the Fed’s March announcement.

Source:CNN

NEW YORK: The dollar was mixed against rival currencies Wednesday as investors await the Federal Reserve’s latest statement on the economy and respond to monetary policy moves in Europe. The U.S. central bank is expected to hold interest rates steady at historic lows near zero when it releases its policy statement at around 2:15 p.m. ET. But investors are hoping the bank’s comments will shed some light on the economic outlook and the Treasury bond market.”Everything is hinging on the Fed,” said Sacha Tihanyi, a currency strategist at Scotia Capital in Toronto. He said the dollar could find some support if the Fed offers a gloomy view of the economy, which would drive stock prices down and boost demand for the greenback as a safe haven. However, if the statement contains some hint as to how long the Fed plans to hold interest rates low, that could undermine the dollar’s strength, he added. The euro came under pressure Wednesday after the European Central Bank offered 442 billion euros in one-year debt to help spur lending and boost the European economy. The 16-nation currency was down 0.7% against the dollar to 1.4138, after falling to a low of 1.3949 following the ECB’s announcement. Meanwhile, the Swiss franc fell sharply after the Swiss National Bank began selling the currency in an effort to weaken the currency and support the nation’s economy, traders said. The franc fell to a low of 1.0629 before recovering to trade down 0.03% against the dollar at 1.0959.But the dollar lost ground against the British pound and the Japanese yen. It dipped 0.4% versus the pound to 1.6459. Against the yen, the dollar slid 0.3% to ¥95.48.

Source:CNN

NEW YORK: Treasurys mostly rose Wednesday after a successful auction and ahead of a Federal Reserve policy statement.The Federal Open Markets Committee will announce the conclusion of its two-day meeting at 2:15 p.m. ET. Though the rate-setting committee is expected to leave key rates steady, bond investors are keen to hear if the body sees the economy in recovery or not.Bonds were mostly selling off prior to a 1 p.m. announcement that there was plenty of open interest in Wednesday’s auction of 5-year notes. The bid-to-cover ratio for the 37 billion in debt was more than 2.5, which is stronger than the the past few 5-year auctions.Treasurys mainly turned positive on the news, though longer-term bonds struggled to get out of the red.Stock impact: Pressuring bonds during the day was a rising stock market, though a triple-digit rally in the Dow Jones industrial average fell back somewhat in the early afternoon. Though stocks have mostly fallen in recent days, they have been on a tear in the past three months as economic indicators point to a recovery or at least a looming bounce back. Bonds have tumbled since the stock market rally began in March, as investors opted for higher-reward stocks rather than bonds. Furthermore, escalating U.S. debt levels got potential Treasury buyers worried that inflation would start to rise and a mass bond exit was looming.In recent statements, the Fed has said inflation is not a near-term concern, even as an economic recovery seems likely to begin later this year. Investors will also be looking for the Fed to comment on its continuing effort to buy up 300 billion in long-term Treasurys. The program, which began in March, was aimed at lowering 10-year bond yields and interest rates tied to those yields. Though initially successful, 10-year yields have rocketed back, and many have called on the Fed to buy up more bonds. Prices: The benchmark 10-year note was unchanged to 95-27/32, and its yield held at 3.63%. Bond prices and yields move in opposite directions.The 30-year bond fell 15/32 to 97-23/32, as its yield fell to 4.39%.The long bond briefly entered positive territory in the afternoon before falling minutes later.The 2-year note was up 10/32 to 99-29/32, and its yield edged down to 1.18%. The yield on the 3-month bill was 0.19%.Have you exhausted your unemployment benefits? We want to hear about your experiences. E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.

Source:CNN

NEW YORK: When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he’ll be sent to a real prison with real bars and violent offenders, not a “country club” for white collar crooks, consultants say.Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.The length of Madoff’s maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he’ll be sent to a prison instead of a minimum-security camp, according to prison consultants.”Madoff, he’s not going to a camp, ever,” said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. “His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can’t get a camp.”No camp for MadoffCamps are generally preferred by convicts, because they’re deemed as safer, with fewer restrictions, consultants said.”Prison camps are open facilities,” said Alan Ellis, an attorney, prison consultant and author of the “Federal Prison Guidebook.” “They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers.”Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized time, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That’s where Martha Stewart’s co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.Madoff will most likely serve time in a medium-security prison, consultants believe — his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.Madoff’s next homeMadoff’s lawyer, Ira Lee Sorkin, would not comment on whether he’ll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a 7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.Ellis identified the most likely prisons for Madoff’s term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.Madoff’s prison survival strategy”You’re going to find a lot of people in medium who have a violent background,” said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are “fear of prison assault” and “fear of the unknown.”Levine said that Madoff might be targeted by other prisoners as “an economic terrorist” and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.”There will be people who think that Bernie can give them stock tips, but I don’t see anyone being his big pal,” said Levine. ” I believe he’ll be treated like an outcast.”0:00
/4:18Inside Bernie’s house of cardsLevine said that Madoff should always “maintain high visibility” as a security precaution.”Try to stay in an area where there’s a lot of people watching you, where the guards are watching you,” Levine said, when asked what his advice would be for Madoff. “Do not become confrontational with anybody. Respect people; be polite. Don’t borrow anything from anyone. Don’t become beholden to anyone.”If Madoff feels that he’s in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.In this regard, Madoff’s fame — or infamy — might actually help keep him out of danger, the consultants said.”If he gets assaulted while he’s in there, that’s big news, and the BOP hates publicity,” said Levine. “If anything comes down on Madoff, it’s going to come down on the warden.”

NEW YORK: When Ponzi scheme mastermind Bernard Madoff is sentenced on Monday, he’ll be sent to a real prison with real bars and violent offenders, not a “country club” for white collar crooks, consultants say.Madoff, age 71, faces a maximum sentence of 150 years in the federal prison system. This is based on his confession to 11 felony counts for orchestrating the largest Ponzi scheme of all time. For decades, Madoff stole billions of dollars from thousands of victims, while masquerading as a legitimate businessman through his investment firm.The length of Madoff’s maximum sentence, which is based on the sweeping magnitude of his crimes, gives him an incentive to escape and virtually ensures that he’ll be sent to a prison instead of a minimum-security camp, according to prison consultants.”Madoff, he’s not going to a camp, ever,” said Larry Levine, founder of Wall Street Prison Consultants and a former inmate of the federal prison system. “His sentence is too long, so he becomes a flight risk. And then it gets into the severity of his crime. If you have more than 10 years, you can’t get a camp.”No camp for MadoffCamps are generally preferred by convicts, because they’re deemed as safer, with fewer restrictions, consultants said.”Prison camps are open facilities,” said Alan Ellis, an attorney, prison consultant and author of the “Federal Prison Guidebook.” “They are not surrounded by a fence. They generally house first-time offenders, non-violent offenders, people who are not going to be troublemakers.”Larry Levine speaks from first-hand experience. During his 10-year sentence for ties to organized time, he said he served in 11 federal facilities, including high, medium and low security prisons, and minimum-security prison camps.He said his favorite facility was Federal Prison Camp Nellis, on an air force base near Las Vegas. That’s where Martha Stewart’s co-conspirator in insider trading, Peter Bacanovic, served five months. The facility has since closed.Madoff will most likely serve time in a medium-security prison, consultants believe — his non-violent history will keep him out of maximum-security, but his sentence is too long to justify low-security.Madoff’s next homeMadoff’s lawyer, Ira Lee Sorkin, would not comment on whether he’ll request a specific prison for his client. The Federal Bureau of Prisons has the final say in such matters. BOP spokeswoman Felicia Ponce said the bureau tries to place inmates within 500 miles of their families, but she would not comment on where Madoff will be sent.But Alan Ellis believes Madoff will probably land in one of the closest medium-security prisons to his family in Manhattan, where he lived in a 7 million apartment until his March 12 guilty plea. Since then, he has been incarcerated in the Metropolitan Correctional Center in lower Manhattan, a temporary federal facility, prior to his prison transfer.Ellis identified the most likely prisons for Madoff’s term as Federal Correctional Institution Otisville, about 70 miles northwest of New York City, and FCI Fairton in nearby New Jersey. He said that Madoff might also be sent to FCI Ray Brook in upstate New York and FCI McKean in northwestern Pennsylvania. All are medium-security.In a medium-security prison, prisoners are fenced behind a double-layered razor-wire perimeter with electronic detection systems, according to Felicia Ponce of the BOP. Inmates share cells, which are closely monitored after lights-out by patrolling officers, she said. They are subject to cell searches and pat-downs in the near-constant search for weapons and other contraband. They work menial jobs, often in kitchens or laundry rooms, where they are paid 12 to 40 cents an hour.Madoff’s prison survival strategy”You’re going to find a lot of people in medium who have a violent background,” said Ellis, noting that the top concerns of his soon-to-be-incarcerated clients are “fear of prison assault” and “fear of the unknown.”Levine said that Madoff might be targeted by other prisoners as “an economic terrorist” and blamed as a general scapegoat for the financial woes of family members on the outside, even if they had nothing do with his Ponzi scheme.”There will be people who think that Bernie can give them stock tips, but I don’t see anyone being his big pal,” said Levine. ” I believe he’ll be treated like an outcast.”0:00
/4:18Inside Bernie’s house of cardsLevine said that Madoff should always “maintain high visibility” as a security precaution.”Try to stay in an area where there’s a lot of people watching you, where the guards are watching you,” Levine said, when asked what his advice would be for Madoff. “Do not become confrontational with anybody. Respect people; be polite. Don’t borrow anything from anyone. Don’t become beholden to anyone.”If Madoff feels that he’s in danger, then he can report the threat to correctional officers and request protective custody, said Ponce. If that happens, he would be separated from the general inmate population and put into a special housing unit while the prison staff investigated his claims, she said.In this regard, Madoff’s fame — or infamy — might actually help keep him out of danger, the consultants said.”If he gets assaulted while he’s in there, that’s big news, and the BOP hates publicity,” said Levine. “If anything comes down on Madoff, it’s going to come down on the warden.”

NEW YORK: If this recession has taught us anything, it’s that debt can kill.Consumers seem to have figured this out. They are starting to cut their debt loads and save more. But there’s also a lesson here for investors and Corporate America. Firms that are heavily in hock should be avoided. In fact, shares of companies with higher-than-average debt levels have underperformed their less-levered peers by a wide margin.According to figures from Thomson Baseline, shares of S&P 500 companies with a long-term debt to capital ratio below 34% — the S&P 500 average — are up an average of 10.3% this year. The S&P 500 stocks with debt loads above 34% are up only 1.2%.This holds true for smaller companies too. Firms in the S&P SmallCap 600 with a below-average debt load are up 7.2% this year while those with higher debt loads are down 1.6%. And if investors really want to maximize their returns, they might be better off investing in companies with no debt at all. Shares of S&P 500 firms that are debt-free are up an average of 15.6% this year. Debt-free tech giants Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500) have both surged more than 30%. Mark Travis, president of Intrepid Capital Funds, a Jacksonville Beach, Fla.-based money management firm, said that a strategy of sticking with conservative companies that have strong balance sheets is definitely worthwhile in an environment such as this. His firm’s Intrepid Capital fund is up 10.5% this year while its Intrepid Small Cap fund is up 12.5% year-to-date. Travis said some of the top picks in those funds are companies that may not seem overly exciting, such as Harry Potter publisher Scholastic (SCHL), telecom equipment firm Tellabs (TLAB) and Tidewater (TDW), a marine vessel contractor for the oil industry. But they all have pristine balance sheets and their stocks are up this year.”When it comes to stocks, we are anti-leverage and that looks sexy now. There is the famous quote from Warren Buffett about when the tide rolls out, it’s easy to see who’s swimming naked,” Travis said.Talkback: How worried are you about the debt loads of consumers, businesses and the government? Are you taking steps to cut your debt? Leave your comments at the bottom of this story. Sure, raising money through the sale of corporate bonds could be necessary to help finance expansion. And as long as companies are responsible with how they handle their balance sheets, debt doesn’t have to be a four-letter word.”In times like this, companies with high cash and low debt levels are in a better position to survive and take advantage of opportunities to grow through acquisitions,” said Craig Callahan, founder of ICON Advisers, a Greenwood Village, Colo.-based investment firm with 3.5 billion in assets under management. Still, companies that rely on debt could be in for a rude awakening given that the credit markets remain shut fairly tight, despite the Federal Reserve’s repeated attempts to pry the window open by keeping interest rates near zero.”The Fed has its foot pushed to the floor in a Porsche 911 S,” Travis quipped. “But it took a while to get into this credit crisis and it will take a while to get out.”0:00
/3:32America’s growing debt dilemmaAnd investors may not be forgiving of companies that go on debt binges — even though money is cheap. “Many companies in 2005, 2006, and 2007 looked at how low rates were and borrowed money to buy back shares so they could boost earnings per share. It looks like the recession has put an end to that,” Callahan said. “Investors in general have changed their risk tolerance during the past two years.” Plus, now that the rating agencies are on a crusade to show that they have teeth, even solid companies risk downgrades if they lever up too aggressively.”Any type of financing is tough to come by. And in cyclical businesses, firms with no or little debt have a competitive advantage,” Travis said.So even if the market rally resumes and signs of an economic recovery become more evident, don’t get suckered into companies that are piling on debt just because rates are low. Lehman Brothers, General Motors (GMGMQ) and mall operator General Growth Properties (GGWPQ) — just to name a few recent big bankruptcies — should serve as sobering reminders of what happens when debt burdens become an albatross.Talkback: How worried are you about the debt loads of consumers, businesses and the government? Are you taking steps to cut your debt?
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