Archive for March, 2008
March 24, 2008 11:49AM
By Alexis Glick
Hi everyone! It’s me! I’m writing this blog from the Cayman Islands. I’m on vacation with my family, and we’re having a blast! I’ve never been here before. The water is crystal blue and nice and warm. Today is a little overcast so we are on our way to take our oldest two sons on a ride on a submarine. The submarine goes down between 80-100 feet. We are so excited!!!
Did you know that 80% of the hedge fund industry is domiciled in the Cayman Islands? I hosted Forbes on Fox this past weekend and some of the Forbes folks told me that as much as $1.4 trillion dollars are in offshore accounts here. Pretty big money….wouldn’t you say? 
When I think of the Cayman Islands, I can’t help but think of the John Grisham novels and movies. I think of intrigue, mystery and lawyers fighting lawyers. Speaking of intrigue and mystery, I heard about JPMorgan’s increased bid for Bear Stearns. Ten dollars…..pretty good for JPM, especially given the fact that the office building in Manhattan is valued at slightly more than $1 billion. Will this make Bear shareholders happy? What’s to stop bond holders from bidding this stock even higher? Might this deal be headed to $15 or $20? What does this say about the financials? Have they bottomed out?
Speaking of financials, did you see this mornings New York Time’s article about what the jobs losses in the financial industry could do to New York real estate? It’s a great article. The finance industry accounts for a third of all wages earned in the city and each Wall Street job supports three others. What will this mean for real estate in Manhattan when as many as 14,000 Bear employees are at risk of losing their jobs? Read it. It may give you some insight into the success and growth of the financial industry!
That’s it for now. Need to go back to being with the munchkins! I’ll be back on Monday, March 31. Have a great week
March 20, 2008 12:36PM
By Alexis Glick
For the next 16 days, many employees around the nation will be preoccupied with March Madness — and who could blame them?!
Well…maybe their employers.
According to estimates from Chicago-based global outplacement consultancy firm Challenger, Gray & Christmas, the March Madness obsession could cost employers as much as $1.7 billion in wasted work time during the tournament. People all over the nation cheer for their alma maters, many of them stuck in their office cubicles while the games are taking place.
This morning on Money for Breakfast, I spoke with Wayne Allyn Root, founder of Winning Edge International, who had a lot of interesting tidbits regarding the basketball tournament.
His take? It’s all about the gambling.
Root told me March Madness has surpassed the Super Bowl as the biggest betting event in the U.S. and estimated the 65-team tourney brings in close to $7 billion in gambling.
“Three billion dollars will be bet this year by American white collar workers at their office betting pools; another, $4 billion will be bet at online gambling sites and at your local corner bookmaker.”
March 20, 2008 11:23AM
By Alexis Glick
GM’s Vice Chairman Robert Lutz is a superstar in the auto industry. He has been in the driver’s seat for the top three auto manufacturers — GM, Ford and Chrysler — and has more than a dozen brands under his belt.
Lutz was the mastermind behind Ford’s iconic Explorer and helped remake the Jeep Grand Cherokee. At Chrysler, he overhauled the product line with the Dodge Ram pickup truck and the retro-style PT Cruiser.
Lutz joined GM six years ago, and his new project is the Chevrolet Volt, a hybrid plug-in that can go 40 miles without gas and will be in production in 2010.
So what will Volt’s price tag look like? “I kept tell everyone we are going to shoot for just under $30,000, and then when we started adding up the prices of all of the components and the lithium ion battery pack, which is a very expensive battery pack, we aren’t going to make close to 30. I almost hate to give a range now; I am now hoping we can keep it under [$40,000].”
Lutz also talked about the new federal regulations regarding fuel-efficient cars and said technology is going to be key for developing hybrids in the future. He continued to say a consumer-driven desire for fuel-efficient cars would have made this change in car production easier.
“Starting at about 2015, when the regulations start to bite we have to put more and more of this technology in, and it’s not going to be customer driven people will say, ‘Well I don’t want to put an extra $5,000 in just to get a little bit mileage and the automobile industry is going to have to say ‘We’re sorry, you’re going to have to take this because we have to meet the law.’”
At age 76, the idea of retirement is far from Lutz’s mind and he now has a huge task in front of him: how to weather an economic slowdown.
“I’ve seen during my career a lot worse than this, this to me just looks like a minor fluctuation if you had asked met he day before yesterday, I would have said ‘Yeah, its really not looking all that good,’ but with the Fed rate cut and the good reaction to that, the stock market rebounding and so forth, I am now of the opinion we are going to get this thing stabilized.”
Take a look at the interviews below.
March 20, 2008 9:05AM
By Alexis Glick
Did you know that Canadians account for more than half of all new home purchases in California, Texas and Florida? Yes, that’s right, it’s true! The strong Canadian dollar, (the looney) a declining U.S. dollar and weak housing prices due to the subprime mortgage mess have increased the appetite for Canadians to cross the border and buy real estate. What is adding to their appetite? An explosive local housing market in Canada where Canadians are seeing double-digit appreciation in their own home values. They have cash and they’re spending it! Local real estate brokers in California, Arizona, Florida and other sun belt states are seeing a ton of Canadian buyers. One broker interviewed in Sarasota said in the past six months 20% of his calls are from Canadians.
To shed light on this positive real estate investment story, I interviewed Dennis Yeskey, national director of real estate capital markets and Connie De Goot, a real estate expert with Coldwell Banker.
Take a look.
March 20, 2008 6:20AM
By Alexis Glick
Did you see what happened to the price of gold yesterday? April gold futures were down $59 to $945.30 — the biggest one day loss in two years. Last I checked, Gold futures were trading down another $31 an ounce. This, in reaction to the Fed’s decision to cut interest rates by 75 basis points and a statement that noted an increased threat of inflation. Those bold words from the Fed have begun to rock the commodities markets. Remember two dissenters in Tuesday’s meeting were Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas.
Remember Plosser, in a speech about a month ago, said this about inflation: “Containing inflation is the purpose of the ship I crew for, and if a temporary economic slowdown is what we must endure while we achieve this purpose, then it is, in my opinion, a burden we must bear, however politically inconvenient.”
The great irony of both Plosser’s speech and the Fed’s statement on Tuesday is that they are combating inflation talk which will in effect help lower commodity prices and therefore increase the U.S. dollar. Might the Fed once again be doing what the U.S. Treasury and Hank Paulson are supposed to be doing, supporting a strong dollar? History will look back on this period. Bernanke’s decisions have been scrutinized but almost everyone agrees after the past couple of moves to pump liquidity in a coordinated fashion and rescue Bear Stearns that HE is white knight! What will history say about the U.S. Treasury and its leader? Fed to the rescue!!!!
March 19, 2008 11:43AM
By Alexis Glick
Did you see Sen. Barack Obama’s speech yesterday on race relations? Whether you like him or not, plan to vote for or against him, I highly recommend you watch or read it. I have listened to a fair amount of speeches and thought this was his moment. His defining moment on the campaign trail! I was riveted and e-mailed many friends and colleagues. Some will argue that he did not denounce the Rev. Wright as aggressively as he should, but what he did do is give the speech of his career.
Here’s an excerpt from Sen. Obama’s speech:
“This time we want to talk about the crumbling schools that are stealing the future of black children and white children and Asian children and Hispanic children and Native American children. This time we want to reject the cynicism that tells us that these kids can’t learn; that those kids who don’t look like us are somebody else’s problem. The children of America are not those kids, they are our kids, and we will not let them fall behind in a 21st century economy. Not this time.
This time we want to talk about how the lines in the Emergency Room are filled with whites and blacks and Hispanics who do not have health care; who don’t have the power on their own to overcome the special interests in Washington, but who can take them on if we do it together.
This time we want to talk about the shuttered mills that once provided a decent life for men and women of every race, and the homes for sale that once belonged to Americans from every religion, every region, every walk of life. This time we want to talk about the fact that the real problem is not that someone who doesn’t look like you might take your job; it’s that the corporation you work for will ship it overseas for nothing more than a profit.
This time we want to talk about the men and women of every color and creed who serve together, and fight together, and bleed together under the same proud flag. We want to talk about how to bring them home from a war that never should’ve been authorized and never should’ve been waged, and we want to talk about how we’ll show our patriotism by caring for them, and their families, and giving them the benefits they have earned.
I would not be running for President if I didn’t believe with all my heart that this is what the vast majority of Americans want for this country.”
Will his call for change, unity and an end to the bickering change the political landscape? Will he get down to specifics especially as it relates to the economy? Can he be the candidate of change while Clinton has become the voice of the economy and McCain the voice of security and terrorism?
This morning we took a different approach. We asked three black executives and experts in their respective fields to react to his speech. Broderick C. Byers, CEO of The Employment & Career Channel, Benita Fitzgerald Mosley, the president and CEO of Women in Cable Telecommunications and Angela McGlowan, a political analyst and Fox News analyst joined me.
Benita Fitzgerald Mosley told me Obama’s speech is the best speech she has read and heard since Dr. Martin Luther King’s “I Have a Dream” speech.
“He got to the heart of the problem, it wasn’t a political speech, it was very much a heartfelt person-to-person type of a dialogue and I really appreciated getting all of those issues out on the table and speaking out about them in a way that we normally don’t in our homes, in our communities and certainly not in the business world.”
Watch the whole segment below.
March 19, 2008 11:15AM
By Alexis Glick
Did you ever meet someone and thought, “Wow, that guy is so impressive”? That happened to me today. Earlier this morning I interviewed a huge NFL star, Ovie Mughelli, a fullback for the Atlanta Falcons.
To be very honest with you I didn’t know a thing about him, and yet I am a huge football fan. Last year in March 2007 he signed a six-year deal with Atlanta making him the highest paid fullback in the NFL. That’s just one piece of this player’s story. He never intended to play football. He dreamed of becoming a sports physician. He came from very little and has made a concerted effort to give back to his community. He is a terrific role model for kids everywhere and is taking advantage of all the new programs the NFL has created to prepare players for a career after football.
Today, I became a BIG fan of Ovie’s. Meeting a person like him with tremendous humility, generosity and warmth is why I love this job!
March 19, 2008 6:29AM
By Alexis Glick
All I have to say are three things this morning.
1) Take a look at the pricing of the Visa IPO last night. The offering raised $17.9 billion dollars. It was priced at $44 dollars a share. The original price range for the 406 million shares was $37-$42. What does this tell us? The deal was oversubscribed which means more people wanted to buy shares then were available. In the world of public offerings, this is a great thing. In a market like this, this is a MONUMENTAL win! Keep an eye on where the stock trades this morning at the opening.
2) The SEC, Fed and JP Morgan (JPM) have a problem on their hands. Did Fed Chairman Bernanke rescue this market and put a floor under the financials? Yes. For now! Do shareholders of Bear Stearns (BSC) have a right to investigate how and why the fifth-largest investment bank in the world with $17 billion dollars in cash and assets on March 11 had a massive liquidation and subsequent collapse in the course of days? Absolutely! Will heads roll? Absolutely! Is the Fed between a rock and a hard place on this deal? Absolutely! Did Jamie Dimon get Bear Stearns on the cheap? Absolutely! Is there something that shareholders can do to get Jamie to up the price other than find another suitor? Probably not! Is there another commercial bank out there with the funds to buy them? Probably not! Will that bank be willing to take the risk, take the charge and deal with the headcount? Probably not!
3) Last night I went to the Rangers vs. Penguins game. Luckily we won 5-2! At the game, I saw many of my former colleagues and friends from Wall Street and elsewhere. One very close friend, who happens to be a very successful accountant and represents many small-business owners and Wall Street executives, said he had never seen anything like this. He told me a story about how he had a money market account for his business with UBS. He had $500,000 in it. He has been trying to get that money out for over a month. Today, he only has $350,000 of those dollars and he is waiting to get the remaining $150,000. He thought the money market account would be safe. Apparently, everyone else did! The fear in the marketplace has everyone else trying to liquidate, too, and the banks cannot raise the capital fast enough. He also had $450,000 in a money market account through a BlackRock fund. I went to their website this morning and if you look under the investor relations section, you’ll see a press release dated 3/17/08 BlackRock’s Closed-End Fund Board of Trustees Exploring Potential Solution for Fund Shareholders Affected by Liquidity Issues in Auction Rate Preferred Shares. Same problem, only in this case, he cannot get the money. They will loan money to him if he needs it at 4%. Sounds scary? It is! (Want the skinny on auction rate preferreds? Here’s a great column from SmartMoney.com. Here is the BlackRock press release.
March 18, 2008 11:36AM
By Alexis Glick
This morning on The Opening Bell I interviewed Former Fed Governor and Director of Princeton’s Center for Economic Policy Studies, Alan Blinder. Take a look at the video below and the op-ed piece he wrote in this morning’s Washington Post.
On the show he told me that until last summer, most people hadn’t even heard of a subprime mortgage. “On a trend, it’s getting worse, not better, here we are into March and its enveloping all kinds of financial markets, even including the dollar. That kind of track suggests to me, and obviously suggests to the Fed also, that pretty decisive actions are needed on a broad front.”
He also said the Treasury Secretary Henry Paulson needs to play a more active role in easing the financial turmoil. “Whoever occupies that job is the chief financial officer of the United States, he is also a political appointee who can and does speak for the president so I think leadership really ought come from the top.,” he said. “When it comes from putting taxpayer money on the line, whether they are actually spending it or putting it at risk which the Fed has now started to do, it really ought to be the Treasury, the administration or Congress that are doing this rather than the Federal Reserve.”
The Fed Can’t Do It Alone
By Alan S. Blinder - Tuesday, March 18, 2008; A19 The Washington Post
Psychology has now overwhelmed economics. What started last summer as a serious problem in a little-known — but not so little — corner of the U.S. mortgage market has blossomed into a worldwide financial panic, the sort we read about in history books. Except within the Republican Party, laissez-fairy tales have been discarded, and government support is being both sought and given.
The financial markets live or die on confidence. If you sell a security, you must believe the other guy will pay. You must also believe that something worth $30 at Friday’s close, such as shares of Bear Stearns, will not be worth $2 at Monday’s open. Such confidence looks to be draining from the system.
Who can restore it? Once upon a time, it was J.P. Morgan — the man, not the company. Today, it must be the world’s leading central banks and treasuries, starting with our own.
Unfortunately, this past weekend was a bad one for Team USA. On Friday, President Bush gave a speech at the Economic Club of New York that left people wondering whether he was in touch. On Sunday, Treasury Secretary Henry Paulson, who has been eerily silent as this crisis unfolded, made the rounds of the morning talk shows. It was not reassuring to see this former titan of Wall Street recite his talking points. Wolf Blitzer asked him five times, “Why did you bail out Bear Stearns?” He never got an answer.
Actually, the Treasury didn’t bail out Bear Stearns; the Federal Reserve did. Chairman Ben Bernanke and the Fed have been working overtime; they have slashed interest rates and lent or offered money to almost everyone potentially involved in this mess. On Sunday, the Fed even put its own balance sheet at risk to smooth the way for J.P. Morgan (the company, not the man) to “buy” Bear Stearns. But the stunningly low purchase price, far below even the value of Bear Stearns’s Manhattan building, did not exactly inspire confidence.
Earth to the White House and Congress: The Fed cannot do this job alone.
But isn’t the central bank the fabled “lender of last resort”? Yes, and the Fed is performing that role extensively. But central banks are designed to lend money to banks that are illiquid but not insolvent. It is not supposed to spend taxpayer money or even put much of it at risk. Those political decisions are properly made by elected leaders.
So what can be done now?
Click here to read the rest of the article from the Washington Post
March 18, 2008 11:20AM
By Alexis Glick
Are we right back where we were 30 years ago?
Take a look at this. According to Mark Bloomfield, the president and CEO of the American Council for Capital Formation, we may very well be. He thinks this environment is more reminiscent of the 1973-1975 period than the early 90s as some economists and strategists have suggested.
He believes the “current triple whammy of asset deflation, credit contraction and commodity inflation” are responsible for what he calls “not a normal recession.” His concern is Washington D.C., taxes and how the next president will lead us on a path to recovery.
Take note of his statistical reference to a cut in the capital gains tax and how that helped create jobs, investments, increased GDP and raised federal tax receipts.
