He Knows If You've Been Sick Or Not
Mall Santas ask for H1N1 vaccine priority.
St. Petersberg Times
TAMPA — Victoria, an infant in green pajamas, sat in Santa's lap Wednesday at WestShore Plaza representing both the joys and dangers of playing jolly old Saint Nick.
The girl didn't pout and she didn't cry. But when she reached for Santa's Christmas necklace and stuck it in her mouth, an alarmed look crossed Santa's bespectacled eyes.
'Tis the season for swine flu. And the girl, like all children, carries plenty of naughty germs.
"Now don't put that in your mouth," white-bearded Jack McElhinney said gently while pulling the necklace out.
McElhinney is known in his profession as the "Iron Santa." Seven days a week for 16 holiday seasons, the Lutz senior has not missed a day as the WestShore mall Santa. But this year, the H1N1 scare has Santas nationwide shaking in their sooty black boots.
"If the Santas across the country get sick, there's going to be a lot of disappointed kids around the world," McElhinney said. "When you think of it, I get exposed to every illness known to man and then some. I'm in a high-risk category here."
That's why many Santas think they should become a priority group to receive swine flu vaccines, which are in limited supply. Santa America, a national group, even asked an Alabama congressman for legislative help last week.
Around here, the Hillsborough County Health Department plans to stick to the Centers for Disease Control guidelines on who should get the vaccine: pregnant women, students, people with chronic conditions and health care and emergency workers.
Stephen Huard, department spokesman, didn't need to check the list twice. "Santas didn't make the priority list," he said.
Same goes for Pinellas County.
"I can picture Santa saying, 'You've been naughty, where's my shot?' " said Maggie Hall, health department spokeswoman. "Our supplies are so small, I'm sorry, Santa."
Across the nation, Santas are taking their own precautions. The Amalgamated Order of Real Bearded Santas, a trade group, featured a seminar on swine flu at a recent conference in Philadelphia. It urged members to take vitamins and use hand sanitizer.
The 200 or so Saint Nicks who volunteer to visit sick or grieving children through Santa America will be washing their suits daily instead of weekly. And they won't be wearing gloves so they can wash their hands more frequently.
At Tyrone Square Mall, officials didn't allow Santa to be interviewed or photographed. Same at International Plaza. But at both places and WestShore Plaza, hand sanitizer dispensers were in the Santa station lines.
Health officials say if Santas want the vaccine, they should check with their private physicians.
That's what McElhinney did.
"I told my doctor, 'Look, I am in a high-risk category,' and he said, 'You sure are,' " said McElhinney, 76, "And I went to the head of the list."
Beside the swine flu shot, the WestShore Santa has been taking Amantadine, used to prevent and treat the flu, and a daily regimen of multivitamins, plus extra vitamin C, D3, E, and B-complex, and Omega 3, as well as garlic, liquid glucosamine and cinnamon for his blood sugar.
He hopes it's enough.
McElhinney hears the wishes of as many as 300 children a day. They pull beards and spill drinks. Some have tender stomachs.
"Babies. Babies are always erupting on me," he said.
For all this, Santa wonders why health officials won't put old Saint Nick at the top of the H1N1 vaccine priority list.
"We represent one of the most important things in a young kid's life," McElhinney said.
Health officials don't disagree. But for Santa to get his wish, he needs to grant theirs:
Stick giant batches of vaccine for everyone under the Christmas trees.
The girl didn't pout and she didn't cry. But when she reached for Santa's Christmas necklace and stuck it in her mouth, an alarmed look crossed Santa's bespectacled eyes.
'Tis the season for swine flu. And the girl, like all children, carries plenty of naughty germs.
"Now don't put that in your mouth," white-bearded Jack McElhinney said gently while pulling the necklace out.
McElhinney is known in his profession as the "Iron Santa." Seven days a week for 16 holiday seasons, the Lutz senior has not missed a day as the WestShore mall Santa. But this year, the H1N1 scare has Santas nationwide shaking in their sooty black boots.
"If the Santas across the country get sick, there's going to be a lot of disappointed kids around the world," McElhinney said. "When you think of it, I get exposed to every illness known to man and then some. I'm in a high-risk category here."
That's why many Santas think they should become a priority group to receive swine flu vaccines, which are in limited supply. Santa America, a national group, even asked an Alabama congressman for legislative help last week.
Around here, the Hillsborough County Health Department plans to stick to the Centers for Disease Control guidelines on who should get the vaccine: pregnant women, students, people with chronic conditions and health care and emergency workers.
Stephen Huard, department spokesman, didn't need to check the list twice. "Santas didn't make the priority list," he said.
Same goes for Pinellas County.
"I can picture Santa saying, 'You've been naughty, where's my shot?' " said Maggie Hall, health department spokeswoman. "Our supplies are so small, I'm sorry, Santa."
Across the nation, Santas are taking their own precautions. The Amalgamated Order of Real Bearded Santas, a trade group, featured a seminar on swine flu at a recent conference in Philadelphia. It urged members to take vitamins and use hand sanitizer.
The 200 or so Saint Nicks who volunteer to visit sick or grieving children through Santa America will be washing their suits daily instead of weekly. And they won't be wearing gloves so they can wash their hands more frequently.
At Tyrone Square Mall, officials didn't allow Santa to be interviewed or photographed. Same at International Plaza. But at both places and WestShore Plaza, hand sanitizer dispensers were in the Santa station lines.
Health officials say if Santas want the vaccine, they should check with their private physicians.
That's what McElhinney did.
"I told my doctor, 'Look, I am in a high-risk category,' and he said, 'You sure are,' " said McElhinney, 76, "And I went to the head of the list."
Beside the swine flu shot, the WestShore Santa has been taking Amantadine, used to prevent and treat the flu, and a daily regimen of multivitamins, plus extra vitamin C, D3, E, and B-complex, and Omega 3, as well as garlic, liquid glucosamine and cinnamon for his blood sugar.
He hopes it's enough.
McElhinney hears the wishes of as many as 300 children a day. They pull beards and spill drinks. Some have tender stomachs.
"Babies. Babies are always erupting on me," he said.
For all this, Santa wonders why health officials won't put old Saint Nick at the top of the H1N1 vaccine priority list.
"We represent one of the most important things in a young kid's life," McElhinney said.
Health officials don't disagree. But for Santa to get his wish, he needs to grant theirs:
Stick giant batches of vaccine for everyone under the Christmas trees.
Retailers Ramp Up Holiday Advertising
Wall Street Journal
Wal-Mart ramped up its holiday push with its "Christmas Wish"
commercial, above, during the World Series.
Consumers will face an onslaught of elves and jolly snowmen in the coming weeks, as companies such as Target, Wal-Mart StoresKmart and Gap boost their holiday advertising spending beyond last year's levels.
Kmart began its holiday ad blitz 30 to 40 days in advance of when it started in 2008 and says it has increased what it will spend this holiday season, aiming to sway shoppers with the slogan "There's Smart and There's Kmart Smart."
"We are cautiously optimistic," says Mark Snyder, Kmart's chief marketing officer. "Last year the recession hit [the shopper] right between the eyes and she found herself scrambling. This is the year she said, 'I will do things differently,' so she is looking for deals early."
For the first two weeks of October, retailers reached 35% more viewers—their "ad weight" in industry parlance—on national cable and network television than they did in the same period a year ago, according to TNS Media Intelligence, an ad-tracking service owned by WPP.
"We are seeing increases across a large number of retail advertisers," says Jon Swallen, senior vice president of research at TNS. "Clearly they are trying to jump-start" their sales efforts.
Kmart, Wal-Mart and J.C. Penney have more their doubled their ad weight during the first two weeks of October from a year earlier, TNS says, while Home Depot and Lowe's are each up by almost 50%. J.C. Penney, Lowe's and Home Depot declined to comment on their ad spending.
Kmart began its holiday ad blitz 30 to 40 days in advance of when it started in 2008 and says it has increased what it will spend this holiday season, aiming to sway shoppers with the slogan "There's Smart and There's Kmart Smart."
"We are cautiously optimistic," says Mark Snyder, Kmart's chief marketing officer. "Last year the recession hit [the shopper] right between the eyes and she found herself scrambling. This is the year she said, 'I will do things differently,' so she is looking for deals early."
For the first two weeks of October, retailers reached 35% more viewers—their "ad weight" in industry parlance—on national cable and network television than they did in the same period a year ago, according to TNS Media Intelligence, an ad-tracking service owned by WPP.
"We are seeing increases across a large number of retail advertisers," says Jon Swallen, senior vice president of research at TNS. "Clearly they are trying to jump-start" their sales efforts.
Kmart, Wal-Mart and J.C. Penney have more their doubled their ad weight during the first two weeks of October from a year earlier, TNS says, while Home Depot and Lowe's are each up by almost 50%. J.C. Penney, Lowe's and Home Depot declined to comment on their ad spending.
Gap, which operates Old Navy and Banana Republic in addition to its namesake stores, says it will increase its marketing spending by $25 million in the third quarter and by $45 million in the fourth quarter. The namesake Gap brand is also returning to TV commercials, which it hadn't bought for two years.
The increased ad spending by retailers is a reversal. Even before last fall's economic turmoil struck, retailers had been cutting ad budgets. U.S. ad expenditures by retailers fell about 6% in 2008 to $17.2 billion, according to TNS.
But retailers are grabbing for slices of a pie that has shrunk. Holiday-season consumer spending this year is forecast to remain flat, according to both consulting firm Deloitte and research firm Retail Forward, although it's an improvement over the sales plunge in 2008. Deloitte expects holiday sales this year of $810 billion. In 2008, the research company says sales fell 2.4%, the first time sales have fallen since 1967.
Target declined to be specific about its spending plans. It said there is always a seasonal peak in its advertising and marketing during the holidays but that this year it will "exaggerate that trend."
Wal-Mart Stores, one of the few retailers that continued to increase marketing during the downturn, is also spending "significantly" more this holiday on advertising, according to a person familiar with the matter. Wal-Mart declined to comment.
The world's largest retailer by revenue put its holiday push into full gear during last week's broadcast of the World Series by airing a spot called "Christmas Wish." The commercial, crafted by Interpublic Group's Martin agency, featured U.S. servicemen in the desert, stunned as it begins to snow. The scene switches to a little boy visiting a department store Santa to ask him for a present for his dad.
Even companies that are keeping ad spending flat with last year say the consumer will see an uptick in ads nonetheless, because prices for ad time and space across all media have fallen significantly this year, giving them more bang for the buck. Wal-Mart has previously said that it has been benefiting from media price deflation.
Best Buy's chief marketing officer, Barry Judge, says, "there are many low-cost advertising alternatives." Best Buy, whose ads begin Dec. 12, will use its blue-shirted store employees as Christmas carolers in TV ads. featuring such items as electronic chess games. But the electronics retailer's "Twelpforce"—a Twitter-based tech-support service—will also make use of 'tweets" and Facebook for marketing.
While each company will have a different marketing approach, they all have one thing in common: touting value. Consumers have gotten used to the deep discounts stores resorted to during the recession.
"Frugal is the new cool," says Bob Thacker, the senior vice president for advertising and marketing at OfficeMax. "Consumers may see as many Ebenezer Scrooges in ads this year as they see Santa Clauses."
OfficeMax's holiday push begins Tuesday with a plug for "Dazzling Deals" and includes the company's popular holiday gimmick "Elf Yourself," an online stunt that allows consumers to turn themselves or someone else into an animated elf that can then be sent to friends.
Sears is hawking "More Value, More Christmas" in its ads. One commercial, which begins airing this week, features Santa and his reindeer shopping in Sears and using the Sears Research Center to find the best prices on big-screen TVs.
Pushing value is "critical" this year, says Don Hamblen, Sears's chief marketing officer. "Consumers are doing their homework, now more than ever."
The increased ad spending by retailers is a reversal. Even before last fall's economic turmoil struck, retailers had been cutting ad budgets. U.S. ad expenditures by retailers fell about 6% in 2008 to $17.2 billion, according to TNS.
But retailers are grabbing for slices of a pie that has shrunk. Holiday-season consumer spending this year is forecast to remain flat, according to both consulting firm Deloitte and research firm Retail Forward, although it's an improvement over the sales plunge in 2008. Deloitte expects holiday sales this year of $810 billion. In 2008, the research company says sales fell 2.4%, the first time sales have fallen since 1967.
Target declined to be specific about its spending plans. It said there is always a seasonal peak in its advertising and marketing during the holidays but that this year it will "exaggerate that trend."
Wal-Mart Stores, one of the few retailers that continued to increase marketing during the downturn, is also spending "significantly" more this holiday on advertising, according to a person familiar with the matter. Wal-Mart declined to comment.
The world's largest retailer by revenue put its holiday push into full gear during last week's broadcast of the World Series by airing a spot called "Christmas Wish." The commercial, crafted by Interpublic Group's Martin agency, featured U.S. servicemen in the desert, stunned as it begins to snow. The scene switches to a little boy visiting a department store Santa to ask him for a present for his dad.
Even companies that are keeping ad spending flat with last year say the consumer will see an uptick in ads nonetheless, because prices for ad time and space across all media have fallen significantly this year, giving them more bang for the buck. Wal-Mart has previously said that it has been benefiting from media price deflation.
Best Buy's chief marketing officer, Barry Judge, says, "there are many low-cost advertising alternatives." Best Buy, whose ads begin Dec. 12, will use its blue-shirted store employees as Christmas carolers in TV ads. featuring such items as electronic chess games. But the electronics retailer's "Twelpforce"—a Twitter-based tech-support service—will also make use of 'tweets" and Facebook for marketing.
While each company will have a different marketing approach, they all have one thing in common: touting value. Consumers have gotten used to the deep discounts stores resorted to during the recession.
"Frugal is the new cool," says Bob Thacker, the senior vice president for advertising and marketing at OfficeMax. "Consumers may see as many Ebenezer Scrooges in ads this year as they see Santa Clauses."
OfficeMax's holiday push begins Tuesday with a plug for "Dazzling Deals" and includes the company's popular holiday gimmick "Elf Yourself," an online stunt that allows consumers to turn themselves or someone else into an animated elf that can then be sent to friends.
Sears is hawking "More Value, More Christmas" in its ads. One commercial, which begins airing this week, features Santa and his reindeer shopping in Sears and using the Sears Research Center to find the best prices on big-screen TVs.
Pushing value is "critical" this year, says Don Hamblen, Sears's chief marketing officer. "Consumers are doing their homework, now more than ever."
Lowe's 30% Profit Drop Still Better Than Expected, Outlook Optimistic
NY Times
The Lowe’s Companies, the second-largest home improvement chain, posted a 30 percent drop in quarterly profit on Monday as consumers put off big renovations.
Lowe’s, like its bigger rival, Home Depot, has suffered badly in the housing slump. It has also taken longer to put in place cost controls to weather the downturn.
Robert A. Niblock, Lowe’s chief executive, said he expected the housing market to start to recover by the middle of 2010, though the company has begun to see improvements in some of the hardest-hit regions, like California and Florida.
The company’s shares closed down 11 cents on Monday, while Home Depot’s rose 1.1 percent. Home Depot is expected to report earnings on Tuesday.
Sales in the quarter fell 3 percent, to $11.37 billion, slightly above expectations of $11.28 billion. Same-store sales, or sales at stores open for at least a year, fell 7.5 percent.
Lowe’s margins rose and the retailer forecast that its operating margin would increase 0.1 percent in the final quarter, mitigating the chain’s larger-than-expected quarterly losses.
Lowe’s also took an optimistic view of the fourth quarter and forecast that profits would range from 9 to 13 cents a share, which could beat analysts’ expectations of 10 cents a share.
Lowe’s said it expected total sales in the last quarter to be flat, while same-store sales would fall 2 to 6 percent.
It plans to open 13 new stores in the fourth quarter. Lowe’s opened 12 stores and closed one in the third quarter.
Lowe’s, like its bigger rival, Home Depot, has suffered badly in the housing slump. It has also taken longer to put in place cost controls to weather the downturn.
Robert A. Niblock, Lowe’s chief executive, said he expected the housing market to start to recover by the middle of 2010, though the company has begun to see improvements in some of the hardest-hit regions, like California and Florida.
The company’s shares closed down 11 cents on Monday, while Home Depot’s rose 1.1 percent. Home Depot is expected to report earnings on Tuesday.
Sales in the quarter fell 3 percent, to $11.37 billion, slightly above expectations of $11.28 billion. Same-store sales, or sales at stores open for at least a year, fell 7.5 percent.
Lowe’s margins rose and the retailer forecast that its operating margin would increase 0.1 percent in the final quarter, mitigating the chain’s larger-than-expected quarterly losses.
Lowe’s also took an optimistic view of the fourth quarter and forecast that profits would range from 9 to 13 cents a share, which could beat analysts’ expectations of 10 cents a share.
Lowe’s said it expected total sales in the last quarter to be flat, while same-store sales would fall 2 to 6 percent.
It plans to open 13 new stores in the fourth quarter. Lowe’s opened 12 stores and closed one in the third quarter.
Gold Flirts With $1,100
Wall Street Journal
Gold prices neared $1,100 in after-hours trading after the Federal Reserve's post-meeting statement suggested that U.S. interest rates won't be going up soon which keeps potential longer-term inflation a worry among traders.The statement came out after the end of pit trading on the Comex division of the New York Mercantile Exchange, where the settlement price is set.
In pit trading, the nearby but lightly traded November futures firmed $2.40, or 0.2%, to settle at $1,086.70, a record settlement for a front-month contract. December gold rose $2.40 to $1,087.30 an ounce, a record settlement for the most-active month contract.
Then, about an hour after the Fed statement, in electronic trading after hours, gold for December delivery traded as high as $1,098.50 an ounce.
"The fact that everything remains the status quo is a positive environment for gold," said Dave Meger, director of metals trading at Vision Financial Markets.
There had been some worries that the Fed might change its rhetoric enough to be seen as signaling a hint of possibly tightening interest rates down the road.
"Any type of tilt to that effect could have supported the dollar and hence dented the gold price," Mr. Meger said. "Obviously that didn't happen. So any expectations to that effect are no longer a concern and that obviously gives a green light to the gold market to continue forward."
The Fed said conditions "are likely to warrant exceptionally low levels of the federal-funds rate for an extended period."
Continued low interest-rates mean further pressure on the dollar, especially since some nations have started raising rates, said Joe Foster, portfolio manager with Van Eck International Investors Gold Fund.
"Anything that is negative for the dollar is good for gold," he said. "Then there are the inflationary implications. The longer they maintain these historically easy monetary policies, the more that stokes potential for inflation somewhere down the road."
Gold had gained before the Fed statement on a second day of buying in the wake of news that the Reserve Bank of India has bought 200 metric tons of the metal from the International Monetary Fund who obviously know how to sell gold.
The news of the Indian purchases from the International Monetary Fund supported the market since it was seen as both reflecting strong central-bank demand and alleviating worries that the IMF's planned sale of 403.3 metric tons would hurt the market.
Central banks collectively had been net sellers of gold for more than a decade, said Fred Jheon, managing director of U.S. product development for ETF Securities.
There had been some worries that the Fed might change its rhetoric enough to be seen as signaling a hint of possibly tightening interest rates down the road.
"Any type of tilt to that effect could have supported the dollar and hence dented the gold price," Mr. Meger said. "Obviously that didn't happen. So any expectations to that effect are no longer a concern and that obviously gives a green light to the gold market to continue forward."
The Fed said conditions "are likely to warrant exceptionally low levels of the federal-funds rate for an extended period."
Continued low interest-rates mean further pressure on the dollar, especially since some nations have started raising rates, said Joe Foster, portfolio manager with Van Eck International Investors Gold Fund.
"Anything that is negative for the dollar is good for gold," he said. "Then there are the inflationary implications. The longer they maintain these historically easy monetary policies, the more that stokes potential for inflation somewhere down the road."
Gold had gained before the Fed statement on a second day of buying in the wake of news that the Reserve Bank of India has bought 200 metric tons of the metal from the International Monetary Fund who obviously know how to sell gold.
The news of the Indian purchases from the International Monetary Fund supported the market since it was seen as both reflecting strong central-bank demand and alleviating worries that the IMF's planned sale of 403.3 metric tons would hurt the market.
Central banks collectively had been net sellers of gold for more than a decade, said Fred Jheon, managing director of U.S. product development for ETF Securities.
Profit, Overall Revenue Down For Time-Warner
NY Times
Time Warner, the media conglomerate that was once the world’s largest but has lately slimmed down by shedding some businesses, said both revenue and profits declined in the recent quarter.
The results were hurt by one business that the company has said it will spin-off — AOL — and another that has been battered by the advertising recession and is not viewed by executives as central to the company’s future, the Time Inc. magazine publishing empire.
The company’s biggest business, cable networks, which includes channels such as HBO, TNT, TBS and CNN, gained in revenue and profit. Revenue at the movie unit, the Warner Brothers studio, declined mainly because of lower DVD sales, a trend that has been felt across Hollywood, although its profitability improved.
Time Warner’s performance, like the results posted Monday by a rival, Viacom, is emblematic of a mainstream media industry that is largely contracting as consumers change how they view television and movies. The trend is compounded by the recession.
So media executives are left to cut costs to maintain profitability, rather than increase the revenue pie.
“We are executing well, despite the tough environment,” said Jeffrey L. Bewkes, Time Warner’s chief executive officer, in a conference call with Wall Street analysts.
Over all in the third quarter, revenue declined 6 percent, to $7.1 billion. Net income was $661 million, down from $1.1 billion in the last year’s third quarter. Operating income decreased 10 percent, to $1.4 billion.
The results, though, were better than Wall Street forecast, and the company raised its financial outlook for the remainder of the year. Excluding certain items, the company reported earnings-per-share of 61 cents, better than the 55 cents expected by Wall Street, according to Thomson Reuters.
AOL posted a 23 percent drop in revenue, to $777 million. But the company plans to complete its spin-off of the unit by the end of the year. At Warner Brothers, revenue fell 4 percent, while operating income increased 6 percent to $291 million.
Warner Brothers, like other studios, is facing a decline in DVD sales, which once drove growth in Hollywood. But the performance of the unit, particularly the increase in profits, surpassed what many on Wall Street expected. The studio’s major release in the quarter was “Harry Potter and the Half-Blood Prince.” “I think the most noteworthy thing in the quarter is film,” said Anthony DiClemente, an analyst at Barclays Capital. “They’ve grown operating profits at film for each of the past six quarters. “A lot of it is streamlining and cost cutting,” he said.
The only division of Time Warner to post revenue growth was its cable networks. Revenue there rose to $2.87 billion, from $2.73 billion in the quarter a year ago. Operating income rose to $938 million from $909 million.
Time Warner confirmed that it would take a $100 million restructuring charge to lay off hundreds of workers at Time Inc., which publishes titles like Time, Sports Illustrated, People and Fortune. Also Tuesday, the company said it would close Fortune Small Business, which is produced by Time Inc. but owned by American Express. In the quarter, Time Inc.’s revenue declined 18 percent to $914 million, while its operating income declined 40 percent, to $97 million, from last year’s third quarter.
Advertising revenue declined by $129 million, or 22 percent, while subscriptions declined 13 percent, to $49 million.
Mr. Bewkes said he believed much of the downturn in magazine advertising a result of the recession rather than permanent shifts of readers turning away from print and toward the Internet. This view runs counter to that of many others who believe that print is on a steady decline and will never return to the growth it once enjoyed.
The results were hurt by one business that the company has said it will spin-off — AOL — and another that has been battered by the advertising recession and is not viewed by executives as central to the company’s future, the Time Inc. magazine publishing empire.
The company’s biggest business, cable networks, which includes channels such as HBO, TNT, TBS and CNN, gained in revenue and profit. Revenue at the movie unit, the Warner Brothers studio, declined mainly because of lower DVD sales, a trend that has been felt across Hollywood, although its profitability improved.
Time Warner’s performance, like the results posted Monday by a rival, Viacom, is emblematic of a mainstream media industry that is largely contracting as consumers change how they view television and movies. The trend is compounded by the recession.
So media executives are left to cut costs to maintain profitability, rather than increase the revenue pie.
“We are executing well, despite the tough environment,” said Jeffrey L. Bewkes, Time Warner’s chief executive officer, in a conference call with Wall Street analysts.
Over all in the third quarter, revenue declined 6 percent, to $7.1 billion. Net income was $661 million, down from $1.1 billion in the last year’s third quarter. Operating income decreased 10 percent, to $1.4 billion.
The results, though, were better than Wall Street forecast, and the company raised its financial outlook for the remainder of the year. Excluding certain items, the company reported earnings-per-share of 61 cents, better than the 55 cents expected by Wall Street, according to Thomson Reuters.
AOL posted a 23 percent drop in revenue, to $777 million. But the company plans to complete its spin-off of the unit by the end of the year. At Warner Brothers, revenue fell 4 percent, while operating income increased 6 percent to $291 million.
Warner Brothers, like other studios, is facing a decline in DVD sales, which once drove growth in Hollywood. But the performance of the unit, particularly the increase in profits, surpassed what many on Wall Street expected. The studio’s major release in the quarter was “Harry Potter and the Half-Blood Prince.” “I think the most noteworthy thing in the quarter is film,” said Anthony DiClemente, an analyst at Barclays Capital. “They’ve grown operating profits at film for each of the past six quarters. “A lot of it is streamlining and cost cutting,” he said.
The only division of Time Warner to post revenue growth was its cable networks. Revenue there rose to $2.87 billion, from $2.73 billion in the quarter a year ago. Operating income rose to $938 million from $909 million.
Time Warner confirmed that it would take a $100 million restructuring charge to lay off hundreds of workers at Time Inc., which publishes titles like Time, Sports Illustrated, People and Fortune. Also Tuesday, the company said it would close Fortune Small Business, which is produced by Time Inc. but owned by American Express. In the quarter, Time Inc.’s revenue declined 18 percent to $914 million, while its operating income declined 40 percent, to $97 million, from last year’s third quarter.
Advertising revenue declined by $129 million, or 22 percent, while subscriptions declined 13 percent, to $49 million.
Mr. Bewkes said he believed much of the downturn in magazine advertising a result of the recession rather than permanent shifts of readers turning away from print and toward the Internet. This view runs counter to that of many others who believe that print is on a steady decline and will never return to the growth it once enjoyed.
Whole Foods Has Profitable Fourth Quarter
Austin American-Statesman
Whole Foods Market Inc. ended what company executives describe as its most difficult year with another quarterly profit, but the natural foods grocer saw its stock drop after it forecast lower-than-expected earnings for the coming fiscal year.
The company on Wednesday reported net income of $36.4 million on sales of $1.83 billion in its fiscal fourth quarter, which ended Sept. 27, with $28.7 million after deducting dividends on preferred shares. In the same quarter a year ago, profit, reduced by several one-time items, was $1.5 million on sales of $1.79 billion.
Whole Foods made 20 cents a share in its most recent quarter, beating analyst expectations of 18 cents per share.
"We believe our sales have stabilized and officially turned the corner," CEO John Mackey said in a conference call with analysts.
But citing the down economy, Whole Foods executives forecast sales growth of 5 to 8 percent for the company's fiscal year 2010, including growth in same-store sales — sales made at stores open at least a year — of 1 to 4 percent. The company projected earnings of $1.05 to $1.10 per share, below analyst expectations of $1.11 per share.
In addition to the recession, company executives said Whole Foods' continued value push, which includes cutting prices and offering bundle deals to customers, could also affect sales. Whole Foods stock dropped by 7.7 percent, to $29.50, in after-hours trading Wednesday.
JPMorgan Chase & Co. analyst Charles Grom said he thought the company was "appropriately conservative" in its forecast.
"They're not out of the woods, so it makes sense to be conservative," he said.
Hurt by a decline in consumer spending, Whole Foods had been in a slump for several quarters. In its most recent quarter, same-store sales dropped by 0.9 percent from the year-ago quarter, but that was an improvement from a 2.5 percent drop in its fiscal third quarter and a 4.8 percent drop in its second quarter.
The company also discussed the decision by Los Angeles private equity firm Leonard Green & Partners LP to convert its 425,000 shares of preferred stock to common stock, making the firm Whole Foods' biggest shareholder by far, with more than 17 percent of the company.
Last November, the firm acquired the stock with a $425 million investment in Whole Foods, providing a cash infusion at a time when the grocer was struggling amid the recession. The agreement included a provision that allowed Whole Foods to trade the shares for common stock under certain circumstances.
The conversion will save Whole Foods about $34 million in preferred cash dividends per year, the company said. The company paid $7.7 million in preferred dividends in its most recent quarter and $28 million in its fiscal year 2009.
Although Whole Foods will have to issue 29.7 million new shares in the transaction, the company said that should not have a material impact on future earnings per share.
There was no mention during Wednesday's earnings call of a boycott movement that started last quarter after a controversial op-ed column written by Mackey appeared in The Wall Street Journal. Although some shoppers, angered by Mackey's opposition to President Barack Obama's health care plan, vowed to stay away from Whole Foods, the company found support from conservative groups who urged "buycotts" in support of Mackey.
Mackey alluded to the controversy when asked in the conference call about the recent sales rebound.
"Could be a bunch of buycotters," he said. "You never know."
The company on Wednesday reported net income of $36.4 million on sales of $1.83 billion in its fiscal fourth quarter, which ended Sept. 27, with $28.7 million after deducting dividends on preferred shares. In the same quarter a year ago, profit, reduced by several one-time items, was $1.5 million on sales of $1.79 billion.
Whole Foods made 20 cents a share in its most recent quarter, beating analyst expectations of 18 cents per share.
"We believe our sales have stabilized and officially turned the corner," CEO John Mackey said in a conference call with analysts.
But citing the down economy, Whole Foods executives forecast sales growth of 5 to 8 percent for the company's fiscal year 2010, including growth in same-store sales — sales made at stores open at least a year — of 1 to 4 percent. The company projected earnings of $1.05 to $1.10 per share, below analyst expectations of $1.11 per share.
In addition to the recession, company executives said Whole Foods' continued value push, which includes cutting prices and offering bundle deals to customers, could also affect sales. Whole Foods stock dropped by 7.7 percent, to $29.50, in after-hours trading Wednesday.
JPMorgan Chase & Co. analyst Charles Grom said he thought the company was "appropriately conservative" in its forecast.
"They're not out of the woods, so it makes sense to be conservative," he said.
Hurt by a decline in consumer spending, Whole Foods had been in a slump for several quarters. In its most recent quarter, same-store sales dropped by 0.9 percent from the year-ago quarter, but that was an improvement from a 2.5 percent drop in its fiscal third quarter and a 4.8 percent drop in its second quarter.
The company also discussed the decision by Los Angeles private equity firm Leonard Green & Partners LP to convert its 425,000 shares of preferred stock to common stock, making the firm Whole Foods' biggest shareholder by far, with more than 17 percent of the company.
Last November, the firm acquired the stock with a $425 million investment in Whole Foods, providing a cash infusion at a time when the grocer was struggling amid the recession. The agreement included a provision that allowed Whole Foods to trade the shares for common stock under certain circumstances.
The conversion will save Whole Foods about $34 million in preferred cash dividends per year, the company said. The company paid $7.7 million in preferred dividends in its most recent quarter and $28 million in its fiscal year 2009.
Although Whole Foods will have to issue 29.7 million new shares in the transaction, the company said that should not have a material impact on future earnings per share.
There was no mention during Wednesday's earnings call of a boycott movement that started last quarter after a controversial op-ed column written by Mackey appeared in The Wall Street Journal. Although some shoppers, angered by Mackey's opposition to President Barack Obama's health care plan, vowed to stay away from Whole Foods, the company found support from conservative groups who urged "buycotts" in support of Mackey.
Mackey alluded to the controversy when asked in the conference call about the recent sales rebound.
"Could be a bunch of buycotters," he said. "You never know."
Cable-TV, Film Lift Profits For News Corp.
Wall Street Journal
News Corp.'s net income climbed 11% in the latest quarter, as gains in its cable-television networks and film business offset declines at its newspaper and broadcast-TV divisions.
Reflecting what media executives say are improving but still cautious conditions in advertising spending and the economy, News Corp. expanded the range of its earnings guidance for its full year, ending next June.
The New York-based media company said it expects profits to increase in a percentage range from the high single digits to the low double digits, excluding special items. Three months ago, News Corp. said it expected profits to rise by a high-single-digit percentage.
Reflecting what media executives say are improving but still cautious conditions in advertising spending and the economy, News Corp. expanded the range of its earnings guidance for its full year, ending next June.
The New York-based media company said it expects profits to increase in a percentage range from the high single digits to the low double digits, excluding special items. Three months ago, News Corp. said it expected profits to rise by a high-single-digit percentage.
News Corp.'s broadcast-TV business isn't doing as well as
its cable-TV. Above, 'So You Think You Can Dance.'
Economic conditions are "clearly in better shape than they were a year ago," though a recovery is still a "little fragile," Chairman and Chief Executive Rupert Murdoch said on a conference call.
News Corp., which owns The Wall Street Journal, reported net income of $571 million, or 22 cents a share, for its fiscal first quarter, ended Sept. 30. A year earlier, net income was $515 million, or 20 cents a share. The year-earlier results also included a $422 million write-down of News Corp.'s investment in a German TV company now known as Sky Deutschland. Revenue fell 4.1% to $7.2 billion.
The cable-TV division posted another strong performance. Gloom continued, however, for the broadcast TV and newspapers business. In general, results were helped by cost cutting at several businesses.
As advertising spending has eroded, News Corp. businesses across the glob have stressed alternative ways of making money. In the U.S., News Corp. is pressing cable- and satellite-TV companies to pay cash fees for the rights to pipe the Fox network into people's homes. Traditionally, network owners haven't been paid cash for their broadcast networks.
Mr. Murdoch said the company may not make a self-imposed deadline of next summer to start charging user fees to access all the company's news Web sites. Analysts say it may be difficult to retain ad revenue if subscribers flee paid Web sites for free alternatives.
Operating income at the film-and-TV production unit rose 56%. Box office returns from the latest installment of the "Ice Age" series and DVD sales of the most recent "X-Men" movie helped drive the increase. The year-earlier period also included a weaker slate of films.
Operating income rose 41% for News Corp.'s cable channels, which continue to benefit from higher fees paid by cable- and satellite-TV companies. Advertising sales slipped for the cable channels from a year earlier, however, as they did in the prior quarter. Investors worry the fees may not have much room to grow, removing a major growth engine for the company.
News Corp. executives said international cable channels are a new growth area.
At News Corp.'s broadcast-television division, which includes the Fox network and local TV stations affiliated with Fox, operating income dropped by about half to $38 million in the quarter. News Corp. executives said trends for local television stations are improving from a year earlier, when Mr. Murdoch said "business just stopped" at the height of the financial crisis.
The newspapers unit posted an 81% drop in operating profit. Reduced expenses couldn't offset steep ad declines. In addition to The Journal, News Corp. publishes the New York Post in the U.S., four U.K. national papers and a string of papers in Australia. Mr. Murdoch said The Journal is profitable but "barely."
He also said the company plans to keep "absolute control" of the name and content of its Dow Jones Indexes business, which News Corp. has put up for auction. He said he couldn't comment on whether the company would merge Dow Jones Indexes with another index.
The division housing the MySpace social-networking site posted a loss as ad sales fell. MySpace has slashed its work force, installed new management and shifted tack to focus on its online video, games and music offerings as it faces competition from Facebook and other popular Web hangouts.
"It's clearly still a work in progress," said Chase Carey, News Corp.'s president and chief operating officer, said on the conference cal.
News Corp. has had preliminary discussions about a deal to buy at least parts of NBC Universal, an alternative to Comcast Corp.'s negotiations to acquire a controlling stake in the TV-and-movie company from General Electric Co. Mr. Murdoch said on the call Wednesday that the company wasn't interested in NBC "as such." "When things come around, we'll kick the tires, but we're not in any talks with anybody at the moment," he said.
Comcast and GE, which is the majority owner of NBC Universal, have worked out the general outlines of a deal, according to people familiar with the matter. An announcement could be ready as early as next week or the week after, those people and others familiar with the talks say.
News Corp., which owns The Wall Street Journal, reported net income of $571 million, or 22 cents a share, for its fiscal first quarter, ended Sept. 30. A year earlier, net income was $515 million, or 20 cents a share. The year-earlier results also included a $422 million write-down of News Corp.'s investment in a German TV company now known as Sky Deutschland. Revenue fell 4.1% to $7.2 billion.
The cable-TV division posted another strong performance. Gloom continued, however, for the broadcast TV and newspapers business. In general, results were helped by cost cutting at several businesses.
As advertising spending has eroded, News Corp. businesses across the glob have stressed alternative ways of making money. In the U.S., News Corp. is pressing cable- and satellite-TV companies to pay cash fees for the rights to pipe the Fox network into people's homes. Traditionally, network owners haven't been paid cash for their broadcast networks.
Mr. Murdoch said the company may not make a self-imposed deadline of next summer to start charging user fees to access all the company's news Web sites. Analysts say it may be difficult to retain ad revenue if subscribers flee paid Web sites for free alternatives.
Operating income at the film-and-TV production unit rose 56%. Box office returns from the latest installment of the "Ice Age" series and DVD sales of the most recent "X-Men" movie helped drive the increase. The year-earlier period also included a weaker slate of films.
Operating income rose 41% for News Corp.'s cable channels, which continue to benefit from higher fees paid by cable- and satellite-TV companies. Advertising sales slipped for the cable channels from a year earlier, however, as they did in the prior quarter. Investors worry the fees may not have much room to grow, removing a major growth engine for the company.
News Corp. executives said international cable channels are a new growth area.
At News Corp.'s broadcast-television division, which includes the Fox network and local TV stations affiliated with Fox, operating income dropped by about half to $38 million in the quarter. News Corp. executives said trends for local television stations are improving from a year earlier, when Mr. Murdoch said "business just stopped" at the height of the financial crisis.
The newspapers unit posted an 81% drop in operating profit. Reduced expenses couldn't offset steep ad declines. In addition to The Journal, News Corp. publishes the New York Post in the U.S., four U.K. national papers and a string of papers in Australia. Mr. Murdoch said The Journal is profitable but "barely."
He also said the company plans to keep "absolute control" of the name and content of its Dow Jones Indexes business, which News Corp. has put up for auction. He said he couldn't comment on whether the company would merge Dow Jones Indexes with another index.
The division housing the MySpace social-networking site posted a loss as ad sales fell. MySpace has slashed its work force, installed new management and shifted tack to focus on its online video, games and music offerings as it faces competition from Facebook and other popular Web hangouts.
"It's clearly still a work in progress," said Chase Carey, News Corp.'s president and chief operating officer, said on the conference cal.
News Corp. has had preliminary discussions about a deal to buy at least parts of NBC Universal, an alternative to Comcast Corp.'s negotiations to acquire a controlling stake in the TV-and-movie company from General Electric Co. Mr. Murdoch said on the call Wednesday that the company wasn't interested in NBC "as such." "When things come around, we'll kick the tires, but we're not in any talks with anybody at the moment," he said.
Comcast and GE, which is the majority owner of NBC Universal, have worked out the general outlines of a deal, according to people familiar with the matter. An announcement could be ready as early as next week or the week after, those people and others familiar with the talks say.
Acquisition Of NBC Would Put Comcast Among Media Elite
San Jose Mercury News
At a dinner 12 years ago in Redmond, Wash., Brian Roberts challenged the richest man in the world to invest in his business — cable TV.
Other guests, cable industry executives older than Roberts, then a 30-something scion of a cable industry family that owns Comcast, looked at their shoes. Someone quickly changed the subject by asking Bill Gates about his vacation plans.
Two days later, one of Gates' deputies at Microsoft called Roberts, and a month later the company invested $1 billion in Comcast, a vote of confidence in an industry that was struggling to adapt to the Internet and slow to build broadband services.
Roberts is on the verge of his next big moment, a takeover of NBC Universal. The $30 billion deal, the final details of which are still being negotiated, will catapult Comcast from being the top cable operator to a major producer of television and movies, and will elevate Roberts to the top ranks of the media industry elite.
For Roberts, 50, acquiring NBC Universal will be the capstone of years of carefully plotting how to control both the distribution of content into homes and the production of it.
The path from Roberts' moment with Gates to his prominence today is terrain marked by successes big and small — the biggest being the $30 billion deal for AT&T Broadband in 2002, which made Comcast, based in Philadelphia, the largest cable company in the country. It was also marked by one big failure, a hostile takeover bid for Walt Disney Co. in 2004.
After that defeat, Roberts took a small-ball approach to building the company's content assets — focusing on networks such as Versus, the Golf Channel, and E the Entertainment Channel.
He still harbored ideas of a big play for content, but he learned that his approach had to be friendly, as Comcast's own shareholders reacted negatively to the Disney bid. The Disney offer was an all-stock bid for the entire company, while in the case of NBC Universal, Comcast is proposing to use only cash to buy a majority stake.
"In today's world," Roberts said at a recent Internet conference, "people want to get connected to content they love." As they find more ways to connect, "you could make a case" that content "is going to grow in value, and is going to be a healthy business."
Other guests, cable industry executives older than Roberts, then a 30-something scion of a cable industry family that owns Comcast, looked at their shoes. Someone quickly changed the subject by asking Bill Gates about his vacation plans.
Two days later, one of Gates' deputies at Microsoft called Roberts, and a month later the company invested $1 billion in Comcast, a vote of confidence in an industry that was struggling to adapt to the Internet and slow to build broadband services.
Roberts is on the verge of his next big moment, a takeover of NBC Universal. The $30 billion deal, the final details of which are still being negotiated, will catapult Comcast from being the top cable operator to a major producer of television and movies, and will elevate Roberts to the top ranks of the media industry elite.
For Roberts, 50, acquiring NBC Universal will be the capstone of years of carefully plotting how to control both the distribution of content into homes and the production of it.
The path from Roberts' moment with Gates to his prominence today is terrain marked by successes big and small — the biggest being the $30 billion deal for AT&T Broadband in 2002, which made Comcast, based in Philadelphia, the largest cable company in the country. It was also marked by one big failure, a hostile takeover bid for Walt Disney Co. in 2004.
After that defeat, Roberts took a small-ball approach to building the company's content assets — focusing on networks such as Versus, the Golf Channel, and E the Entertainment Channel.
He still harbored ideas of a big play for content, but he learned that his approach had to be friendly, as Comcast's own shareholders reacted negatively to the Disney bid. The Disney offer was an all-stock bid for the entire company, while in the case of NBC Universal, Comcast is proposing to use only cash to buy a majority stake.
"In today's world," Roberts said at a recent Internet conference, "people want to get connected to content they love." As they find more ways to connect, "you could make a case" that content "is going to grow in value, and is going to be a healthy business."
M and A Tech Battles
International Business Times
Major technology companies seem to be launching multibillion-dollar acquisitions every other week, and those who don't join the race may be at risk of getting run over.Hewlett-Packard Co challenged Cisco Systems Inc this week by announcing a $3 billion deal for network equipment maker 3Com. It came after Cisco stepped up its dealmaking and expanded into the server market to compete with HP, IBM and Dell Inc.
"I think this is the start," said Ronald Gruia, analyst at Frost & Sullivan. "Once you have one acquisition, you can have a cascading effect."
The motivation behind this wave of dealmaking by the tech majors is to broaden product portfolios and provide for all of customers' IT needs -- from computing, security, storage and networking to online videoconferencing.
HP's 3Com deal comes after a string of M&A news including Dell's deal for Perot Systems Corp, Xerox Corp's deal for Affiliated Computer Services Inc and Oracle Corp's deal for Sun Microsystems.
IBM, which bid for but failed to win Sun, has been comparatively quiet on the dealmaking front, doing some smaller deals to expand its services business and signing sales partnerships but nothing viewed by Wall Street as a game changer.
Pressure is mounting on technology companies to diversify to satisfy shareholders' demands for more dramatic sales growth as the economy recovers, analysts said.
"There are three big enterprise infrastructure vendors today: IBM, HP, and now Cisco. And they're all competing against one another," said Broadpoint AmTech's Brian Marshall.
Smaller, niche technology firms, on the other hand, are increasingly open to buyouts as a way of securing a solid sales channel. A smaller company bought by a large vendor like Cisco or IBM could turn into a serious competitor overnight.
M&A deals are also a response to customers looking for simpler and cost-efficient ways to run data centers, which are struggling to cope with increasing data traffic.
"All of us are under pressure in the IT environment to allow businesses to do more with less," VMware Chief Executive Paul Maritz told Reuters in an interview. "People are trying to say, rather than selling everything piece by piece on an a la carte basis, requiring customers to be their own master chefs, we're going to sell more prepackaged meals here."
BROCADE, RIVERBED, F5
Companies like Riverbed Technology Inc and F5 Networks Inc, which specialize in supporting faster and more secure online applications, are widely seen as possible acquisition targets.
F5 shares have risen 75 percent in the last six months, though Riverbed is up only 18 percent. Both companies trade at around 25 times forecast 2010 earnings.
And while HP's offer for 3Com made it look like Brocade Communications Systems Inc may have missed out, some analysts said the switching and storage networking company is still an attractive target.
"I think Brocade is still definitely in play," Gruia said, adding that IBM could be a buyer. Brocade shares have fallen more than 12 percent since HP announced the 3Com deal.
Most analysts, however, said IBM is likely more interested in expanding in software and services than hardware. It has bought business analytics company SPSS Inc for $1.2 billion.
"They're really going to focus on software because that's where the value and the real margin structure in growth is," said Marshall.
Analysts say HP and Dell could also do more deals, and many see network equipment maker Juniper Networks Inc eyeing M&A to compete against Cisco.
Other acquisition targets include wireless technology firms as well as companies specializing in online video, analysts said. They are particularly focused on Polycom, whose bigger rival Tandberg is being courted by Cisco. The Tandberg deal is not yet final as some shareholders are seeking a higher price.
PARTNERSHIPS
Polycom CEO Robert Hagerty said that rather than find a buyer, it was trying to boost sales partnerships with vendors like HP and IBM. That is similar to the strategy at Brocade, which has forged more deals with IBM and non-Cisco vendors.
Analysts said depending solely on such partnerships may leave many companies vulnerable. Resale partnerships can be cast aside when one party enters an M&A deal with another.
For example, video network infrastructure company Radvision is a close partner of Cisco, but analysts say some of its sales are at risk if the Tandberg deal goes through.
But some also note that acquisitions themselves are high-risk endeavors. Cisco chief John Chambers has said that around 90 percent of acquisitions fail, in general.
"As we all understand, the vast majority of acquisitions fail, and truly meaningful strategic alliances have an even poorer success rate," Chambers told analysts recently.
The cross-Atlantic merger of Alcatel-Lucent, which posted its 12th straight loss in the third quarter, is widely cited as a failure.
Fed To Hold Steady On Interest Rates
NY Times
The Federal Reserve signaled on Wednesday it was not close to raising interest rates, saying that the economy remained weak even though the recession appeared to be over, Edmund L. Andrews writes in The New York Times.
In a move that could spell the continued success of investment banks’ fixed-income units, the Fed said it would keep its benchmark interest rate at virtually zero, and it made no change to its longstanding mantra that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.”
For practical purposes, analysts said, policy makers are still at least six months away from tightening monetary policy.
“Economic activity has continued to pick up,” the central bank said in a statement after its two-day policy meeting. But policy makers quickly cautioned that consumer spending would be sluggish, businesses were still cutting back and economic growth would be “weak for a time.”
Despite speculation that the Fed might hint about raising interest rates in order to head off future inflation, it was unclear on Wednesday whether policy makers even discussed a change in the wording of their guidance.
Policy makers did elaborate on the economic indicators they will be watching most closely. Those will be the level of “resource utilization,” which primarily means the unemployment rate, the trend in inflation, and the stability of inflation expectations.
In a move that could spell the continued success of investment banks’ fixed-income units, the Fed said it would keep its benchmark interest rate at virtually zero, and it made no change to its longstanding mantra that economic conditions were likely to warrant “exceptionally low” rates for “an extended period.”
For practical purposes, analysts said, policy makers are still at least six months away from tightening monetary policy.
“Economic activity has continued to pick up,” the central bank said in a statement after its two-day policy meeting. But policy makers quickly cautioned that consumer spending would be sluggish, businesses were still cutting back and economic growth would be “weak for a time.”
Despite speculation that the Fed might hint about raising interest rates in order to head off future inflation, it was unclear on Wednesday whether policy makers even discussed a change in the wording of their guidance.
Policy makers did elaborate on the economic indicators they will be watching most closely. Those will be the level of “resource utilization,” which primarily means the unemployment rate, the trend in inflation, and the stability of inflation expectations.
officials have made it clear they thought unemployment and slow growth were still the main economic threats
The government estimated last week that the nation’s economy grew at an annual pace of 3.5 percent in the third quarter, its first quarterly expansion in a year. But much of that activity stemmed from temporary stimulus measures like the home buyers’ tax credit and the “cash for clunkers” program.
The Fed chairman, Ben S. Bernanke, has cautioned that the recovery was fragile and that unemployment would remain high through the end of next year. The average forecast of Fed policy makers anticipates that the jobless rate, now 9.8 percent, will peak above 10 percent next year and remain well above 9 percent until some time in 2011.
Within the central bank, officials have begun debating when they should start signaling a rollback of its rescue measures. But while some of the Fed’s more hawkish policy makers have publicly suggested it might soon be time for tighter policy, Mr. Bernanke and other officials have made it clear they thought unemployment and slow growth were still the main economic threats.
The central bank did make a tiny reduction in its effort to prop up the mortgage market. It said it would buy slightly fewer bonds issued by agencies that guarantee home loans — $175 billion, rather than $200 billion it originally expected. But it said the change stemmed from a shortage of such securities. The Fed made no change to its much bigger program to buy $1.25 trillion worth of mortgage-backed securities by the end of next March.
“The one consistent theme with all the Fed speakers is that they’re not going to raise rates any time soon,” said Drew Matus, a senior economist at Bank of America-Merrill Lynch. “That is the one consistent theme that gets hammered home time and again.”
Beyond saying that “economic conditions” would continue to warrant “exceptionally low” rates, policy makers said those conditions included “low rates of resource utilization,” “subdued inflation trends” and “stable inflation expectations.”
Fed officials face competing challenges as they try to get monetary policy back to normal over the next several years. They need to make a judgment about timing — tightening too early could send the economy back into a downturn, as happened during the late 1930s; waiting too long would set the stage for inflation.
But policy makers also want to avoid jolting financial markets, which will require them to communicate their plans in advance. They are also grappling with novel questions about their exit strategy. In their statement on Wednesday, Fed officials made it clear they were still seeing little risk of higher inflation, adding that “substantial resource slack” — a euphemism for high unemployment and unused factory capacity — would keep inflation “subdued.”
The Fed’s preferred measure of inflation, which excludes prices of food and energy, has climbed by less than 1.5 percent over the last year, well within Mr. Bernanke’s unofficial comfort range of 1 to 2 percent.
The overnight Federal funds rate, the interest rate that banks charge for lending their reserves to each other, has been held between zero and 0.25 percent since last December.
In addition, the Fed has tried to pump up financial markets and the economy by more than doubling the size of its balance sheet, creating more than $1 trillion in new money for its emergency credit programs and to drive down long-term interest rates by buying Treasury bonds and mortgage-backed securities.
Fed officials have already cut back some of their emergency loan programs and stopped buying Treasury bonds, and they have said they would soon stop buying mortgage securities.
To tighten monetary policy, Fed officials will have to raise interest rates and start cutting the size of its balance sheet by selling the securities it has acquired.
New Water Laws In California Will Cap Usage
NY Times
Prompted by a protracted drought — which has reduced water supply, harmed the fishing industry and contributed to crop loss — environmentalists and agricultural interests have agreed to broad concessions.
The plan calls for a comprehensive ecosystem restoration in the Sacramento-San Joaquin River Delta — a collection of channels, natural habitats and islands at the confluence of the Sacramento and San Joaquin Rivers that is a major source of the state’s drinking water.
It also calls for new dams, aggressive water conservation goals and the monitoring of groundwater use, which other Western states already do. And it paves the way for a new canal — once the third rail of California’s byzantine water politics — that would move water from the north of the state to the south.
The series of bills, which Gov. Arnold Schwarzenegger has said he will sign, include an $11.1 billion bond issue, which voters will be asked to approve next November. The rest of the roughly $40 billion project would be paid for by localities, largely through new user fees.
The pressing sense among lawmakers that they needed to do something other than oversee the nation’s largest budget crisis provided Mr. Schwarzenegger with one of his largest — and most likely final — policy victories as governor.
“This is the most comprehensive water resources action that California has taken since the state water project in the ’60s,” said Richard Little, the director of the Keston Institute for Public Finance and Infrastructure Policyat the University of Southern California. “First of all, there is so much in it,” Mr. Little said. “And for the first time, they are tying ecosystem enhancement and environmental restoration directly to the infrastructure.
“Before, we always planned the projects and then mitigated the impacts,” he said. “Now it is all on coequal footing.”
Many environmentalists still believe that the bill’s penalties for misusing the water supply do not go far enough. But they won oversight of the ailing estuary, checks and balances on future dams and some mild penalties for failures to conserve water. Local agencies will also monitor groundwater.
Republicans in the state’s Central Valley, who object to water restrictions and always push for more conveyance from the north to the south, also had to back down. “This is a huge step forward for California,” said Laura Harnish, the regional director for the Environmental Defense Fund. “It marks big progress toward managing our water supply and ecosystem in a 21st-century manner.”
Oversight of the Delta canal “has been resisted for a number of years for political reasons,” she said. “We think today, that if there is a canal that is going to come, it is going to be of a size and operated in a manner that” environmental groups could tolerate.
Water usage has been at the center of a statewide battle for decades, particularly concerning the delta, which is near collapse because of overpumping. Further, a three-year drought and a federal order last year forcing water authorities to curtail the use of large pumps in the Sacramento-San Joaquin Delta to help preserve dying smelt has reduced water flows to agriculture and resulted in dust-bowl-like conditions for many farms.
In 2008, more than 100,000 acres of the 4.7 million in the Central Valley were left unplanted. Additionally, environmental problems in the Sacramento River have resulted in a collapse of the Chinook salmon population, closing salmon season off the coast of California and much of Oregon for two years in a row.
At the same time, the state has not built any new water infrastructure in years, even as the state’s population has increased, making it harder to move water north to south — the goal of proponents of a new canal — and to capture excess water in wet years to use in dry years.
Collecting data on groundwater levels — which many rural constituents have resisted because they fear such monitoring will lead to new restrictions and penalties — is likely to help the state better manage both water supply and the problems that can be caused by overuse of that groundwater.
However, the state will not be doing the monitoring, as environmentalists and the Schwarzenegger administration sought; it will be done by the local water authorities with the aid of business VoIP services, and refusal to go along could result in the loss of local bond money.
Environmentalists also sought hard penalties on what they call “illegal diversions” of water, but that move proved too controversial among Democratic and Republican lawmakers, who threatened to bring down the whole package over its inclusion.
The administration now has to sell large bond offerings to the California public, which may be wary of taking on new debt at a time of great fiscal crisis. But such a move may presage other efforts to fix areas of the state’s infrastructure beyond its ailing water system.
Job Loss Rate Slows
Private-sector employment declined 203,000 in October, the seventh-straight month of moderating job losses and the smallest decline since July 2008, according to a report released Wednesday by payroll firm Automatic Data Processing Inc.
Meanwhile, job cuts announced by employers declined for the third-straight month, down 16% from September to 55,679, outplacement firm Challenger, Gray & Christmas said. That was the best reading since March 2008 and less than half the cuts made in October 2008.
The reports came against a faster decline in service-sector employment in the Institute for Supply Management's nonmanufacturing survey. The overall ISM reading slipped to 50.6 in October from 50.9 the previous month, showing slightly slower growth for the sector. (Figures above 50 indicate expansion.) The ISM's employment index fell to 41.1 from 44.3 in September as purchasing managers in the survey reported more layoffs and hiring freezes as companies assess the sustainability of the economic recovery.
Just three of 18 industries in the service-sector survey reported increasing employment in October: real estate, rental and leasing; mining; and management of companies and support services, which includes temp firms.
"The employment piece of the puzzle is what's really holding back this recovery," said Anthony Nieves, a senior vice president at Hilton Hotels Corp. who directs the ISM survey. "Companies are cautious. The consumer is cautious. Everybody is very nervous and holding things close to the vest right now."
The latest reading for the service sector came after the ISM's manufacturing index this week showed continued improvement, particularly in jobs. Manufacturers appeared to be recalling some workers and expanding work schedules, offering hope that other sectors could follow.
The losses in the ADP report are worse than economists' consensus estimate that employers, including the government, cut 175,000 jobs in October. The Labor Department, which releases its estimate of October employment on Friday, previously reported that payrolls fell 263,000 in September.
"The number of unemployed is not the only issue," notes overtime lawyer Verne Elron. "Underemployment and cut-backs in hours are still seriously affecting those who still technically have jobs."
Despite stabilization in the economy, employment "is likely to decline for at least a few more months," said Joel Prakken, chairman of the forecasting firm Macroeconomic Advisers, which produces the private-sector report with ADP.
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