Archive for February, 2008
February 29, 2008 4:42PM
By Alexis Glick
Well here’s an ironic twist. In Thursday’s blog, I reported that Henry Vaccaro, who appeared on Money for Breakfast, had acquired a letter from former New England Patriots owner Chuck Sullivan written to Michael Jackson complaining about losing $100 million on the Jackson family victory tour. Vaccaro came to possess the letter because it was in the cache of Michael Jackson memorabilia which he received as part of the settlement of a lawsuit against the famous gloved one.
Well, it turns out that my dad, who is a music attorney, became involved in the original matter when things really started to go downhill. At the request of one of Sullivan’s vendors, my dad met with Jackson and his manager. My father said that Jackson was a very gentle gentleman and, while he was willing to make some business concessions, it was not enough to save the deal.
Speaking of my father Bob Donnelly… His law firm (Lommen, Abdo, Cole, King & Stageberg) held a huge party on Tuesday night to commemorate his 30th anniversary as a music attorney. My father started in the music business three decades ago working as in-house counsel for a fledgling management company called Leber Krebs. During the time that my father was with them, Leber Krebs grew to become the biggest management company in America, launching the careers of superstar bands like Aerosmith, AC/DC and Def Leppard.
Every one of the musicians who performed that night (like the Smithereens or the Bogmen) spoke about my father’s extraordinary commitment to the cause of artists’ rights. My father is probably best known for bringing a case against the major record labels with then-attorney general Eliot Spitzer which resulted in a return of $55 million being paid to artists in back-due royalties. Governor Spitzer sent a beautiful handwritten note which was read by my stepmother Marie. It began with the words, “It’s hard to imagine it has been 32 years since you hired me as an intern…” and ends with, “You have created the perfect world - hanging out with rock stars and getting paid for it!”
It was quite a night! I was so proud. Rock and Roll Hall of Famers like Lovin Spoonful’s Joe Butler and so many others stopped by to make a toast and sing a song with my dad, who likes to say that he has the best attorney job in North America.
The one thing that everyone says about my dad, and the thing I love most about him, is his passion. It has never been about the money. He has dedicated his life to artists’ rights and helping others! He has taught me one of the most vital lessons in life: love what you do!!!!!
February 29, 2008 2:00PM
By Alexis Glick
Earlier this morning I received some emails from my friends and colleagues on Wall Street. (As you may recall, I used to work at Morgan Stanley and Goldman Sachs.)
To quote a good friend of mine: “This was the single worst week in the credit/fixed income markets ever. Including LTC (Long Term Capital) and Enron, for you history buffs. The media missed it!” In fairness to him and us, we’re talking about it, but not enough! In large measure, I think it’s because many of us don’t understand it. Let me give you some stats that, hopefully, will demonstrate how bloody it is and why it is such an issue.
Yields on tax-free bonds surged yesterday for the 12th straight session. Why do we care? Because states, cities, and other municipalities like California have to sell bonds to fund their operations. Next week, California plans to raise $1.75 billion for infrastructure costs. If they cannot raise it or yields continue to climb as they have been — and are expected to — that suggests that investors are not interested or spooked by the quality of the investments and the insurance backing them. Remember MBIA and Ambac?
Check this out! According to the newspaper Bond Buyer, yields on an index of 40 long-term issues nationwide jumped to 5.33% yesterday, the highest level since 2002 and up from a 4.74% yield five weeks ago. Even Bloomberg’s index of 20-year California general obligations bonds yielded 5.16% from 4.63% five weeks ago.
Those bond insurers guarantee about half of the muni market nationwide. The question now is whether the moves to shore up MBIA and Ambac are enough to secure the market. The lack of demand in these markets is suggesting investors do not have confidence!
Frankly, I don’t know what to think. I am no economist, but if municipalities have to pay higher and higher yields to get the funding they need, will that cost us — the taxpayers? Just as importantly, will it cost us jobs? A lack of increased business investment (particularly from overseas investors if we cannot upgrade our infrastructure at the rate that other countries are) has to be bad news, if it in fact comes to that.
February 29, 2008 11:38AM
By Alexis Glick
In the past 24 hours I have received a ton of responses to my interview and subsequent blog about Rep. Ron Paul. Many of you have thanked me for having him on and have asked me to invite him back on the show to discuss the two bills he recently introduced in Congress, “Honest Money Act” (HR 2756) and “Free Competition in Currency Act” (HR 4683). You’ll be happy to know that I did ask him at the end of the interview and that I am writing a note to him as we speak to reiterate the request. I, like many of you, was very impressed! His points on the U.S. dollar’s weakness and on the mounting inflationary concerns were well taken. He has ideas but he also has solutions. His grasp of the economy and his desire to get the message out in an honest and sincere manner struck me. I am thrilled to see a real and dynamic political and economic conversation going on in this country. I think all of the candidates are touching the issues and bringing Americans to the table.
“Ron” (not Ron Paul) wrote in response to my earlier blog that “Freedom scares some, so does the truth, thanks for giving us a glimpse at both.” I think he’s right. We are hearing the truth and in some cases we may not like it or think that it is politically motivated but the truth whether it be about the economy, housing or the war in Iraq has to be discussed. Some suggest that Bernanke talks about the economy through rose-colored glasses. I disagree. He’s telling us the cold hard facts and some may not like that but that is his job. The solution is the real issue at hand. Bernanke believes he has the right strategy in place. Only time will tell.
In reference to Rep. Paul’s use of the term “Inflationary Pressure,” my colleague and Fox Business Economist Mark Lieberman, who joined me after my interview with the Congressman, did some homework and found a paper written by Charles Baird in May of 1971 called “Inflationary Recession - A Diagrammatic Representation.”
Here are some brief excerpts and my thoughts below:
“No existing geometric model accurately pictures (much less explains) the commonly observed coxistence of continuing inflation with growing unemployment upon the heels of a restrictive monetary policy implemented to restrain an inflation.”
What happens in this case when the restrictive monetary policy is using rebates to stimulate the economy? Doesn’t that add to the inflation concerns?
“Usually decreases in the rate of growth of the money supply are followed after 2-3 quarters lag, by decreases in the rate of growth of real output. After an additional lag of three to four quarters the rate of growth of the price index starts to decline. As the rate of growth of prices diminishes so the does the unemployment rate.”
But does inflation diminish with a more restrictive monetary policy when global demand is stronger than ever? Is that what we have today and what does the weak dollar do to this theory both for the US and for the Countries who are holding dollar denominated assets?
What do you think? Is this an Inflationary Recession or as some people suggest Stagflation? Bernanke on the Hill yesterday said no. Do you agree? Weigh in!
February 29, 2008 6:20AM
By Alexis Glick
As I look back on the past week it can be described in two words: NEWSWORTHY and BUSY! It all began on Monday with my interview with Ralph Nader. He announced on Meet The Press the day before that he intended to run for president as an independent. As many of my friends and colleagues know, I am a HUGE fan of Tim Russert’s and watch him religiously. This Sunday I missed Meet The Press, but part of my regular Sunday routine is emailing my executive producer during the show. He, too, is a fan. Only, this Sunday my dad e-mailed me and said, “You are going to get Nader, right?” I immediately e-mailed my executive producer to find out what he said on Russert and found out that he announced his candidacy. I said go for him. Let’s get him on tomorrow (Monday). Well, we got him and happened to be the second network other than the initial interview with Russert. Not bad! I was psyched. Little did I know that this interview with Nader would draw so much attention and scrutiny!
It all began with my line of questioning about why he would decide to enter the race at this late date and given the recent turnout and fundraising dollars (record fundraising numbers). At first, he made his points and I made my counterpoints where necessary. Then he talked about lack of action and the corporate crime wave. I asked what he would do about it and how he would fund it. Everything was fine. But my next line of questioning turned the tables. I talked about the political dialogue — a dialogue that I think is one of the most exciting in decades. I said Nader, a well-known and respected consumer advocate, knew better than anyone that people are turning out in record numbers to speeches and rallies and that cable and network television stations are getting record ratings for debates so why risk being referred to as the “spoiler” once again? As you may recall, he was called a “spoiler” by many in the press for running in 2000 and getting 2.74% percent of the vote. Many believe that 2.74% percent was the difference between a Democratic presidential victory for Al Gore. Nader got about 2.9 million votes in 2000, the year where only about 544,000 votes separated Bush and Gore. The rest of our interview was shocking. You can see the clip. It’s the first time anyone has ever called me a “political bigot!” (Pt. 1 | Pt. 2)
Now talk about busy! Imagine getting all of this news in one week. Fed Chairman Ben Bernanke testifies in front of the House and Senate, President Bush announces a last minute press conference where he discusses the economy, NAFTA and the vast amount of untapped oil in the U.S., Sprint takes a massive Nextel charge, Sears has greater than expected losses, MF Global, a publicly traded futures and options business, announces that a rogue trader lost the company $142M dollars, Wachovia Bank announces that the Department of Justice and the SEC have subpoenaed the company regarding the performance of two employees related to activity with some municipal securities, oil trades above $103 a barrel, the U.S. dollar makes a new low versus the euro and a trade weighted basked of securities, FNM and FRE report record losses and the government makes moves to raise the cap and the list could go on and on. Talk about a reason to follow the markets. THIS IS IT!!!!
February 28, 2008 1:04PM
By Alexis Glick
This morning, my colleague, Peter Barnes interviewed Henry Vaccaro, Sr. about the pending forced sale of Michael Jackson’s Neverland Ranch. If Jackson does not come up with the $24 million in interest and other costs by next month, his home will be auctioned off. Henry had business dealings with the Jackson family and sued them when they failed to make payments on a business venture. He is a Jackson memorabilia expert and the owner of one of the largest private Jackson memorabilia collections. He said he received two trailer loads of memorabilia as part of the legal settlement.
So what does he have or better yet, what did he bring on set? He brought a Jackson Family Motown Gold record, personal family photos and a tube of skin bleach that was in Michael’s makeup kit and a special letter from another one of Michael Jackson’s business partners who claimed to have lost $100 million dollars investing in Michael on the Victory Tour and his merchandising license. The letter is from Chuck Sullivan to Michael Jackson. Chuck’s father was the previous owner of the New England Patriots before the Kraft family bought it. Chuck’s family placed all of their assets as collateral to the institutions that loaned them money. When the loans could not be repaid, the family lost the stadium, law partnership, homes and a television company. Actual losses plus the interest amounts to over $100 million. Below are a few excerpts from the letter.
“As you know, you promised me that if I backed you on the Victory Tour and the merchandising license, that I would not get hurt…Since my Dad had helped me to back you, he was forced to sell his most treasured asset: The New England Patriots football team.”
“You told me that the name Michael Jackson would always stand behind Chuck Sullivan if I backed you. I did just as you asked me and now ask you to rescue me and live up to your promise….The Sullivan family name is ruined. My father and mother’s health is in serious condition and they are experiencing intense emotional stress.”
“My children’s future is in doubt – their health, education and welfare have all become a major concern at this time. I know your love for children. Please think of my children and me as well as my parents who are suffering for their child, me.”
Isn’t this a sad story? You wonder what Michael was and is thinking? Why is he where he is today? How did the musical icon that we all grew up with lose so much and impact and hurt so many lives along the way? What will he do next? Does he want to save Neverland? I guess we’ll know the answer to that question in one month, when Neverland goes up on the auction block if he doesn’t come up with $24 million dollars.
Take a look at Peter’s interview with Henry, Art Harris an investigative journalist from The Bald Truth, and Gracee Arthur, an estate agent from Ewing & Associates (a division of Sotheby’s) in California. It’s pretty fascinating stuff. 2800 acres! Can you imagine?
February 28, 2008 12:33PM
By Alexis Glick
Why is American Idol firing on all cylinders?
Take a look at some of these excerpts from the AP and LA Times:
3 Nights of `Idol’ Beat 1 Oscars Night: “The math is simple: three nights of “American Idol” beats one night of the Academy Awards. Fox dominated the television ratings again behind its hit competition, which was seen by roughly 29 million people on both Tuesday and Wednesday last week. A special Thursday edition had more than 23 million viewers, according to Nielsen Media Research. Meanwhile, ABC didn’t get quite the usual boost from the Academy Awards. The 32 million people who watched Sunday’s show was the smallest Oscars audience since Nielsen began keeping those records in 1974.”
“February sweeps month ratings… with a couple of days left in the sweep, Fox is averaging 17.8 million viewers, up 49% from last year. The other networks are down sharply, with percentage drops ranging from 13% (NBC) to 49% (CBS)…Through Monday, Fox’s biggest successes include the Super Bowl (97.5 million viewers), the post-Bowl episode of ‘House’ (30.3 million) and ‘American Idol’ (averaging 27.6 million).”
Corporate Partnerships/Sponsors
Partnership with iTunes… earlier this week, Apple and Fox unveiled a partnership that links their respective iTunes and Idol franchises. Under the terms of the deal, performances by American Idol contestants will appear on the iTunes Store the day after they’re on television. American Idol fans can also pre-order performances from their favorite contestants from the iTunes Store, which will be automatically downloaded the day after the show airs. And the store will have the music tracks of the top 24 semifinalists available for purchase for 99 cents per song.
While the financial terms of the Apple-“Idol” agreement are unclear, the show’s other sponsors (Coca-Cola, Ford and AT&T) pay around $35 million for on-air / off-air product placement and promotion, as well as weekly commercial spots.
Beatles Catolog
The music publisher that controls the Beatles’ John Lennon-Paul McCartney composed hits has given Idol the go-ahead to let its contestants have their way with the likes of “Yesterday,” “Let It Be” and, should someone be so brave, “I Am the Walrus.” Ryan Seacrest broke the news yesterday on his morning radio show in Los Angeles. “It’s something we’ve waited for for seven seasons now,” Idol executive producer Nigel Lythgoe told Seacrest. “Sony has agreed to release the Lennon and McCartney songbook to us.”
So you ask who are my top three choices for the male and female contestants?
1.) Michael Johns. The Australian is 29-year-old. His hometown is Buckhead, Ga.
2.) David Archuleta. He is the 17-year-old who sang the John Lennon song “Imagine,” two nights ago. His hometown is Murray, Utah
3.) David Hernandez sang “Papa was a Rolling Stone.” He is from Glendale, Ariz. and is 24-years-old.
4.) Carly Smithson, She is the Irish girl. Simon said she has the best vocals of all the girls. She’s 24-years-old from San Diego, Calif. She auditioned previously, but had to drop out because her Visa expired.
5.) Syesha Mercado. She is 21-years-old from Sarasota, Fla. She is stunning and has a huge voice.
6.) Ramiele Malubay. She wants to be the first “Asian Idol.” She is 20-years-old from Miramar, Fla.
Tell me. Who are your favorite choices and why do you like the show?
February 28, 2008 7:57AM
By Alexis Glick
Just finished interviewing Congressman Ron Paul about the economy and Fed Chairman Ben Bernanke’s testimony. He questioned him on the Hill yesterday about the weak U.S. dollar and how it is having negative ramifications. He says we are at a period that we have not seen in U.S. history. He did say that he thought we were in a recession but he called it an INFLATIONARY RECESSION. He is the first person that I have heard say that! He is very concerned about the dollar and currencies and talked about how more Country’s and investors are seeking hard assets (commodities) over currencies. This comes on the heels of an announcement by Calpers that it plans to invest an additional $7B in commodities. They have a $240B dollar fund and only started investing in commodities last March.
I urge you to take a look at what the Congressman had to say.
Update: Click here to watch the video
February 28, 2008 6:44AM
By Alexis Glick
After yesterday’s semi-annual testimony to the members of the House Financial Services Committee and a lousy durable goods number you may, like me, be starting to wonder how bad does the future look. Is it as bleak as it sounds?
I have interviewed many guests and economists over the past four months who fall into one of three camps.
1) We are in a recession
2) We are headed into a recession
3) We are living in a period of slow growth and rising inflation. Not quite stagflation but also not cause for alarm bells.
So what do you think?
Yesterday I had several meetings after the show and caught up with a couple of my former Wall Street colleagues. As I listened to one of them, I began to think, are we driving ourselves into a recession? Someone said to me yesterday that they were working out in the gym and up on the television screens above them were CNN, CNBC and FOX. He couldn’t hear what was being said but he could see Bernanke testifying and what we call in the industry the lower thirds or banners (the banner at the bottom of your screen where we put what the guest is saying, the topic or the name of the guest). Every single banner read “Housing Crisis,” “Mortgage Meltdown,” “Slowing Growth, ” “Dollar at Historic Lows,” “Consumer Spending Slowed Significantly,” ”Considerable Stress” in the financial markets. He said he couldn’t watch it anymore. It’s despressing me. Are things that bad? Don’t we have an economy that is almost fully employed? Isn’t the weak dollar helping the current acount deficit and exports? Aren’t sovereign wealth funds investing in our country and companies? Aren’t we witnessing one of the best election years in history? Aren’t we discovering new drugs and cures to cancer?
He’s right. Like everything in life there are two ways of looking at things. You can take the glass-is-half-empty approach and you can take the glass-is-half-full approach. Are we, myself included, in the media only portraying one side of it? Is that the way to sensationalize it and draw eyeballs? Are we, in part, the reason why people are going to the polls and saying that the economy is the number one issue? Can we deliver the news, even the bad news and do it in a way that highlights both the good and bad or gives viewers options and solutions to the bad case scenario?
I think he has a point. We cannot dismiss the fact that the credit cycle managed to become one of the biggest balloons in this economy and perhaps in U.S. history. Credit was cheap, assets were mismanaged and people made too many blind investments. Housing, financial markets and growing demand for those inflation related products like oil, gas, ethanol, milk are all to blame. But now we need to reassess our financial future, make changes, adapt, take risks where necessary and in some cases, clean up the mess. And, as my friend Charles Payne would say, look at stock valuations. In many cases, the cheapest valuations that we have seen in half a decade, if not more! My guess is that the market has figured that out and that is why despite ALL of the negative headlines yesterday the market perservered.
February 27, 2008 11:33AM
By Alexis Glick
Note to John McCain:
This morning on Money For Breakfast I interviewed U.S. Deputy Treasury Secretary Robert Kimmitt. I asked him if John McCain became the next president of the United States, if he would be interested in remaining in his position. The answer? YES. He has spent the vast majority of his career in public service and has served in his current position for almost three years. He is a prominent member of the president’s financial team and has dedicated much of his time and energy on sovereign wealth funds and their investments in U.S. corporations like Citi (C) and Merrill Lynch (MER).
What is a sovereign wealth fund?
It’s a state-owned investment fund composed of financial assets such as stocks, bonds, real estate or other financial instruments. The most well-known is Abu Dhabi Investment Authority with approximately $900B in assets.
Why do we care?
Because these funds are investing big stakes in U.S. companies. Some say they could use their economic investment to sway the government politically.
How do they separate politics and economics? That is one of the secretary’s biggest mandates. He is working with the IMF and the World Bank to create a list of “Best Practices.” These practices would in essence create guidelines for investments in U.S. and European companies and ensure that they remain politically agnostic.
My issue…our issue…his issue: Do we have any or enough leverage in this environment with a weak dollar and even weaker financial institutions to give them a set of criteria for investing when we need and welcome their money?!
Check out the interview:
Oh and in case you missed it, he is rooting for the Hoyas! No.11 in AP and No.10 in the ESPN poll. He’s looking forward to March Madness 
February 27, 2008 6:42AM
By Alexis Glick
Did you know that the Texas contest next Tuesday, March 4 is a hybrid primary-caucus? I did not know that! At least it is on the Democratic side. Most delegates are awarded on the primary vote and others by caucuses held later in the evening. The clincher…..voters can participate in both! Former President Bill Clinton traveling in Texas yesterday on Senator Hillary Clinton’s behalf told voters, “You have to vote twice if you really want her to be president.”
I was reading my research for this morning’s show and just discovered it. I immediately e-mailed my executive producer. Here’s how he said it works.
IT IS THE ONLY ONE.
Texas has a two step process that is open to all registered voters. When you cast your vote in the Texas primary, in essence it’s only 75% of a full vote. 126 of Texas’ 168 votes will be allocated to candidates based on the ballots cast.
15 minutes after the polls close (7:00 p.m.) those who voted must return to their precinct. This “precinct convention” is how Texas will decide how to divide the remaining 42 delegates. The rules were originally put in place to insure that the Democratic hierarchy would have more say.
Are you as surprised as I am? I would assume this is somewhat controversial. Weigh in! What do you think? Send me your thoughts! I’ll be discussing it with several writers and radio hosts this morning.
