Columbus08

Ireland's Unemployed Head Back to the Farm

2010-10-18T11:57:00.001+07:00

At Bank of America (BAC), David Farrell spent his days taking calls from credit-card customers in Ireland. Then came the global financial crisis, and the 40-year-old father of five decided it was time for a career change. In 2008, after five years with the bank, he quit and enrolled at Teagasc, which runs a school at Dublin's National Botanic Gardens college, to study horticulture. It turned out to be a shrewd move: Today the Irish economy is reeling, jobs are scarce in financial services, and one of the few sectors that shows any promise is agriculture. "There's a resurgence in producing food," says Farrell. "It will become something people not only want to do but may have to do."

Plenty of other Irish workers are thinking along the same lines. Farrell's college program in Dublin turned away 250 students seeking places in its agriculture-related courses last month. Enrollment for courses at Teagasc climbed to 1,128 this year, 45 percent more than in 2007, before the economy collapsed. The government agency teaches students such skills as growing organic food at sites across Ireland and supports the country's agribusiness sector.

Promoting food exports is a major priority for Irish Prime Minister Brian Cowen's government. Ireland's gross domestic product doubled in size in the decade through 2007 and has since shrunk about 15 percent after the real estate bubble burst. The government, struggling with bailing out banks and slashing public spending, is counting on food exporters, including Kerry Group and Glanbia, to help spark an economic revival. "Farming and agrifood were totally lost during the boom. It just wasn't seen as sexy compared with property and financial services," says Jim Power, chief economist at Friends First, a Dublin financial-services firm. "That's changing: High-value export industries like food are the future for us now."

After falling 12 percent in 2009, Irish food and animal exports are up 5.4 percent during the first half of 2010, according to Ireland's Central Statistics Office. About 150,000 people work in farming, still the country's biggest indigenous industry after 20 years of decline. Agriculture now accounts for about 2 percent of the Irish economy, compared with about 16 percent in the late 1970s.

Global investors have warmed up to Irish food stocks. The share price of Kerry Group, Ireland's largest food company, has risen 47 percent in the past two years. Dairy food company Glanbia has seen its stock price increase 13 percent over the same period. Unemployment has more than doubled to 13.8 percent since the peak of the "Celtic Tiger" years in 2007 and has reached 18 percent in the country's rural southeast, according to the latest government numbers.

During the boom years, construction, which accounted for about a quarter of the economy in 2006, drew agricultural workers off the land, says John Bryan, president of the Irish Farmers' Assn., Ireland's largest farmers' lobby. (Bryan is a beef farmer who oversees 230 acres in Kilkenny in southeast Ireland.) No more. "This year is the first I'd say in about 14 or 15 years that you'd have people calling to the farm to see if there is any seasonal work going," says Paul Kehoe, 34, who farms about 380 acres in Country Wexford with about 120 cows and 200 sheep.

Another factor working in agriculture's favor is the decline in land prices. Developers pushed up prices to more than €58,400 ($81,140) a hectare in 2006, the highest in Europe, according to the National Institute for Regional and Spatial Analysis, citing data from property agent Savills. Last year, farmland prices around Dublin fell 57 percent, while the average price paid in the rest of the country declined 43 percent.

Ireland's tough economic circumstances have changed perceptions about the country's agricultural sector. "Farmers have become a respected profession again," says Power, the economist. "And there's nothing else out there."

Smartphone Apps Go (Truly) Viral

2010-10-18T11:53:00.000+07:00

By Olga Kharif

In early 2009, Citigroup (C) launched a new mobile banking application for the iPhone. It let customers check their account balances and pay bills while on the go. Thanks to a bit of sloppy code, it also could have let hackers access the banking information for 118,000 customers who downloaded the app.

This story has a happy ending—Citi discovered the security flaw in June, before hackers could exploit it, and the bank says no customer lost money. However, experts say hackers may be quicker to exploit shoddy coding the next time around. "The bad guys follow the money," says Charlie Miller, principal analyst at Independent Security Evaluators, a consultancy based in Baltimore. "Criminals are going to start focusing on phones."

The number of attacks is still low. Although security experts discover hundreds of new strains of malicious code targeted at PCs every day, they've detected only 67 directed at smartphones in all of 2010, says Sean Sullivan, security adviser for the North American labs of F-Secure, a Finnish security software developer. Still, that's nearly double last year's total, and mobile devices become a larger target all the time. Morgan Stanley (MS) analyst Mary Meeker predicts that smartphones will outsell laptops and netbooks this year and will eclipse sales of all PCs, including desktops, by 2012.

That means more potential victims of malware—as in malicious software—and more customers for the security companies that protect against it. Jeff Wilson, a principal analyst at consultancy Infonetics Research, expects global revenues from smartphone security software to rise from $219 million last year to nearly $1.4 billion by 2013. Securing a foothold in the growing mobile security market was a key motivation behind chipmaker Intel's (INTC) $7.7 billion purchase of McAfee (MFE) in August and Juniper Networks' (JNPR) $70 million acquisition of SMobile Systems one month prior.

Much of the security companies' attention will likely be focused on Google's (GOOG) Android software. It's the fastest-growing mobile operating system, and may also be the most vulnerable to hackers, says David Goldschlag, vice-president for mobile at McAfee. Unlike Apple (AAPL), which vets applications before allowing users to download them to their iPhones, Google doesn't check the apps posted to its Android Market, says Miller. (Google didn't return repeated requests for comment.)

That makes it easier for hackers to create applications that surreptitiously spy on users or access phone functions without permission. In July, a Chinese security company, NetQin, found an Android app that posed as a restaurant tip calculator but also forwarded users' text messages to hackers. Such text messages can contain sensitive financial information, especially as more smartphone users engage in mobile banking.

Other hackers have built apps that automatically call expensive, premium-rate phone numbers, racking up big bills for users. SMobile Systems, which develops antivirus software for phones, estimates that 2 percent of the apps in Android Market are able to send text messages without a user's knowledge, while 5 percent can dial a number without permission.

Despite such statistics, many consumers don't consider security software as essential on a phone as it is on a PC. They're willing to pay for other security-related services, including data backup or software to locate a lost phone, but the market for such convenience products is becoming highly competitive. To differentiate their offerings, the security companies bundle their antivirus software with those popular features. In July, McAfee purchased a startup, tenCube, which runs a service that helps locate missing phones using the device's GPS. On Oct. 5, Symantec (SYMC) updated its anti-virus software for iPhone and Android with tools to remotely erase data on lost handsets. SMobile Systems also includes data-wiping controls with its antivirus software.

Lookout, a startup in San Francisco, has compiled a database of more than 1 million smartphone apps. It uses that information to detect new threats and block potentially malicious applications. The company's apps also include data backup and the ability to remotely wipe data, and are used by more than 2 million people. John Hering, the chief executive officer of Lookout, which raised $11 million in venture capital in May, says the established companies like Symantec and McAfee don't yet have a lock on the field. "The next great security company will be built in the mobile space," he says.

America's Best Young Entrepreneurs 2010

2010-10-06T11:42:00.000+07:00

By John Tozzi

It's not an easy time for young entrepreneurs. Most people in their teens or early 20s trying to start businesses today were not yet out of college when the Great Recession began in December 2007. Unlike their dot-com-era predecessors, today's startups aren't sloshing in venture capital, and business credit is tight. People under age 35 started businesses at a lower rate in 2009 than in the year before, even as the rate of entrepreneurship in the broader population is increasing, according to data from the Kauffman Foundation.

The finalists in Businessweek.com's sixth annual search for America's best young entrepreneurs reflect the times: Most of their companies are lean and focused on getting profitable before expanding. Take LiveProud, a group of clothing brands for sailors, hikers, and yoga enthusiasts that two Babson College seniors started in 2007. Founders Phil Tepfer and Charles Bogoian, both 24, keep costs down by sewing their apparel at contract manufacturers in the U.S. and Canada as orders come in. "We work on very low inventory numbers," Tepfer says. LiveProud, which gets its fabric from recycled landfill materials like plastic bottles and corn husks, became profitable within a year, and expects revenue of $375,000 this year, he says.

Others have built recession-friendly business models. Onetime Georgetown roommates Ben McKean and Dan Leahy got their idea for a service that would help high-end restaurants fill empty tables in 2009. McKean, then an analyst at Merrill Lynch, was covering the initial public offering for restaurant reservation service OpenTable (OPEN). By last September, he and Leahy had quit their Wall Street jobs to start VillageVines. Subscribers to their e-mail newsletter can pay $10 for discounts of 10 percent to 30 percent at restaurants in New York and five other cities. The service launched in May and now has more than 500,000 subscribers, McKean says. VillageVines raised $500,000 in angel investment and its New York operation became cash-flow positive in three months, and it's now investing in other cities such as San Francisco, Chicago, and Boston, he says.

Variety of Revenue Profiles

LiveProud and VillageVines are among the hundreds of young companies nominated by readers this summer and vetted by Businessweek.com reporters. Some are multimillion-dollar operations: 23-year-old Ray Land built a fleet of 40 charter buses in northern Florida that brought in $3 million last year. Others, like Bethlehem (Pa.)-based LifeServe Innovations, have no revenue yet. LifeServe's prototype, developed from the founders' university research and now in preclinical testing, is a medical device meant to help minimally trained care providers open patients' airways in emergency situations.

Each of the 25 companies in our roundup share a few qualities: Their founders were no older than 25 at the nomination cut-off date, and they appeared to hold promise based on business model, founders' experience, outside capital, and revenue. Now it's your turn to weigh in. Flip through this slide show of our 25 finalists and vote for your favorite by Oct. 21. We'll announce readers' top picks on Oct. 28.

Also in this year's report: We profile an effort at the University of Utah to nurture student startups; Smart Answers columnist Karen E. Klein evaluates funding options for aspiring business owners; and a 25-year-old New Jersey native who recently launched a Mandarin-language teaching business in Beijing describes her journey. You can find each of these features in the Related Items box at the upper right side of this overview.

Apple’s Data Needs Mean $1.7 Million, Jacuzzi for Carolina Pair

2010-10-06T11:40:00.000+07:00

By Adam Satariano

Oct. 5 (Bloomberg) -- Apple Inc. needed land owned by Donnie and Kathy Fulbright for a $1 billion data center in rural North Carolina. The couple showed no interest in moving out of their home of 34 years in the town of Maiden.

The Fulbrights say they spurned one offer, then a second. Finally, they agreed to sell for $1.7 million, county records show, opting to leave the single-story house on the less than one acre of land they purchased for $6,000.

“They told us to put a price on it and we did,” said Kathy Fulbright, 62, seated on a brown leather sofa in the living room of the home she and her husband built with the proceeds. The 49-acre property boasts a 4,200-square-foot house with a Jacuzzi in the master bathroom, as well as a manmade pond stocked with bass and catfish.

Apple was willing to pay up to get the land in its drive to improve digital entertainment services that fuel demand for iPods, iPhones and iPads. The plot is adjacent to the site where Apple is building a 500,000-square-foot warehouse-like structure that analysts say will brim with servers, generators and other gear that make it easier to deliver songs, TV episodes and movies via the iTunes online store.

“Apple’s growth has been pretty dramatic and they have probably exceeded their capacity,” said David Cappuccio, Stamford, Connecticut-based chief of research at Gartner Inc., which advises companies on the use of data centers like the one Apple is building. “Between iTunes and the video store they are going to have, you’re talking about massive amounts of data and millions of people trying to access that at the same time.”

Streaming Music, Video

The center is due to be completed by year’s end. It will help Apple customers stream and store music and videos remotely, via the so-called cloud, rather than having to download files to a hard drive, said Gene Munster, an analyst at Piper Jaffray in Minneapolis. Apple announced plans for the facility in June 2009 and began construction in August.

Apple may also use the center to help stream video to a newly revamped Apple TV set-top box, said Richard Doherty, director of the consulting firm Envisioneering Group in Seaford, New York. Cappuccio of Gartner said Apple may use the Maiden facility for initiatives the company has yet to unveil or discuss in detail, including social networking and Web search.

Apple, based in Cupertino, California, hasn’t disclosed its plans for the project. Steve Dowling, a spokesman, declined to comment.

The data center is already making a mark on Maiden, a town with a population of 3,200 located about 45 miles west of Charlotte.

‘Project Dolphin’

In its pitch for approval and tax breaks, Apple said it may employ 50 people at the center and expects to generate 250 more jobs in areas such as maintenance and security, according to a state website and records compiled by the city and surrounding Catawba County. North Carolina projected the creation of an additional 3,000 jobs related to construction of the center.

Maiden and Catawba County may receive $9.3 million in taxes and other revenue over 10 years, according to the documents. That includes $5.1 million for Maiden, which has an annual budget of $13.1 million, and $4.2 million for Catawba, which has an annual $202.2 million budget.

Locals aim for added payoff from “Project Dolphin,” as officials have dubbed the center: that Apple will lure other companies. Google Inc., owner of the world’s largest search engine, already has a facility in a neighboring county.

Microsoft, Google Centers

“Names like Google and Apple indicate you’re in the 21st century and open for business, so we hope to propel this to something greater,” said Kitty Barnes, chairman of the Catawba County Board of Commissioners.

U.S. technology companies increasingly are setting up shop in small-town America. Microsoft Corp., Facebook Inc. and Twitter Inc. all are placing data centers in sparsely populated regions, drawn by tax incentives, inexpensive labor, cheap electricity and abundant space.

Microsoft, based in Redmond, Washington, weighs more than 35 different issues when selecting a site, said Kevin Timmons, general manager of the company’s data center operations. The company plans to build a $500 million data facility in Virginia, Governor Bob McDonnell’s office said in August.

“Topping the list were factors such as its close proximity to our customers, fiber-optic networks, a large pool of skilled labor and an affordable energy source,” Timmons said.

Apple Tax Breaks

Data centers have helped bring 3,100 jobs and more than $3.6 billion in capital investments to Virginia since 2006, said Rob McClintock, director of research at the Virginia Economic Development Partnership.

“Everybody understands these projects by themselves aren’t a panacea, but it’s the window of what the future can be,” McClintock said.

To land its Apple facility, North Carolina’s legislature approved $46 million in tax breaks for the company. Local governments also trimmed Apple’s real property taxes by half and slashed personal property taxes by 85 percent, records show.

Some local officials say companies, not communities, benefit most as big providers locate operations in rural areas.

“I have a problem with government giving large multinational corporations millions of dollars in handouts,” said T.J. Rohr, a city councilman in Lenoir, North Carolina, site of a $600 million Google data center lured by incentives.

While Google has been a “good corporate neighbor,” funding Wi-Fi downtown and donating computers to local schools, tax breaks are “a lazy way to recruit business,” said Rohr, who is a member of the Libertarian party.

Combating Joblessness

Google has hired more than 80 employees at the site, said spokeswoman Emily Wood.

“We’ve had an excellent experience in Lenoir,” Wood wrote in an e-mailed statement.

Scott Millar, president of the Catawba County Economic Development Corp, who led the county’s discussions to attract Apple to North Carolina, says companies are unlikely to choose a location without a financial incentive package. Millar also acted as the liaison between the Fulbrights and Apple.

Catawba County’s August unemployment rate was 12.3 percent, compared with 9.7 percent in the state, according to the North Carolina Employment Security Commission. For much of the 1990s, the county had an unemployment rate of less than 5 percent, fueled by jobs making furniture, fiber-optic cables and textiles such as socks and pantyhose, Millar said.

“We’re trying to turn our ship around,” he said.

BMW, Hyundai Cars Get Top Score on U.S. Crash Tests

2010-10-06T11:37:00.000+07:00

By Angela Greiling Keane

(Updates with LaHood, NHTSA and auto industry comment starting in fourth paragraph.)

Oct. 5 (Bloomberg) -- Bayerische Motoren Werke AG’s 5 Series and Hyundai Motor Co.’s Sonata received the highest rating among passenger cars and trucks tested for crashes under a new U.S. rating system.

Female crash-test dummies were added to the male figures for the first time as the U.S. National Highway Traffic Safety Administration rated 34 models under a redesigned testing regime, the regulatory agency said today in a statement.

BMW’s four-door, rear-wheel-drive 5 Series and the latest model of Hyundai’s Sonata were the only vehicles in the first batch rated to receive five stars, the top overall safety score. Both cars scored five stars on side-crashes and rollovers and four stars in frontal crashes.

“We are raising the bar on safety,” Transportation Secretary Ray LaHood said at a press conference in Washington amid crash-tested cars. “We are subjecting cars to more safety tests, addressing grade inflation.”

Nissan Motor Co.’s Versa received the lowest overall rating of two stars, scoring four stars in rollovers, three in frontal crashes and two in side crashes.

Smarter Dummies

The new crash tests include dummies representing women, who tend to be smaller than the male figures used exclusively in the past and may be harmed differently in an accident, according to NHTSA. The new dummies also collect data about injuries to the chest, head, neck and legs, while the old ones measured only chest damage.

NHTSA has also begun compiling an overall rating for each model for the first time rather than reporting only the front, side and rollover collision results.

Automakers had questioned the redesigned safety ratings because they aren’t directly comparable to the ratings they replaced, potentially creating confusion.

“The new ‘Stars on Cars’ rating system will now reflect our advancements even better,” Alliance of Automobile Manufacturers Chief Executive Officer Dave McCurdy said in a statement. “But, since the tests are getting more challenging, many ratings may go down at first -- even when a model hasn’t changed.””

NHTSA plans to test 55 model year 2011 vehicles and will test more models under the new procedures next year, the agency’s Administrator David Strickland said at the press conference. The overall rating won’t be displayed on window stickers at dealer lots for 2011 models to give automakers time to redesign the labels, he said, adding that the agency decided to release ratings for models as they become available.

“It’s better for us to get this information out to the public right now so they can make better choices about cars,” he said.

The agency said it is continuing to test cars and trucks and plans to add the results as they are complete to its website at www.safercar.gov.

Companies Shed Initial Resistance to iPhone 3

2009-05-06T10:36:00.001+07:00

Companies that don't support the iPhone say they are inhibited for several reasons. Antenna Software specializes in products that help companies manage mobile devices. In December, the company released results of a survey of its customers in which 49% of respondents said the biggest barrier is the fact that AT&T (T) is the only U.S. service provider. Among respondents, 40% said they are concerned about the increased costs of supporting another mobile device. About one-third of respondents wanted better tools to manage the device, like shutting off such features as the camera or the ability to do a remote wipe of data if the phone were lost. While Apple has made it easy to download apps, it's a little bit trickier for IT departments that want to update hundreds or thousands of devices at a time—that was a concern for about 22% of respondents. "One of the big challenges for Apple is that they don't have a good story around mobile device management," says Stephen Drake, program vice-president at IDC. Forrester's Schadler says that Kraft has encountered problems with calendar synchronization.

Still, Avaya is mostly pleased with the devices. "The iPhones are a bit expensive [to operate]," says Avaya's Loo. "The majority of the expense is in the data plan, not in the voice side of it; but we're pretty satisfied with what we have right now." Apple has said it will address some outstanding issues with iPhone 3.0 this summer, but it declined to elaborate for this story.

Yet those issues aren't stopping some companies, such as IT consulting firm Dimension Data from supporting it. When iPhone 2.0 was released, the Dimension Data Americas region, with 1,000 employees, was quick to support it. Darren Augi, vice-president for IT, was the first iPhone user within the corporation, followed closely by CEO Jere Brown and CTO Mark Slaga. About 100 employees at Dimension Data Americas now use iPhones.

Augi says he'd made a hobby out of testing new mobile devices. "I had been looking for the perfect device for a long time," he says, but would often discard them in favor of the next new thing. That changed last year when Apple released iPhone 2.0. "Nothing has lured me away from it yet," he says. "It's the best device I've ever worked with—I don't see leaving it."

Companies Shed Initial Resistance to iPhone 2

2009-05-06T10:35:00.000+07:00

In 2008, about 173.6 million smartphones were sold worldwide, according to market research firm iSuppli. Nokia (NOK) sold 60.5 million, RIM sold 22.6 million, and Samsung and Apple tied for third place with 13.7 million each. In U.S. corporations today, though, the top three operating systems are BlackBerry, Windows Mobile, and the iPhone OS.

Edging into the C-Suite

Corporate hesitation also diminishes when the CEO or other high-level executives start bringing iPhones to work. Executives say they like the iPhone's Web browsing and multimedia capabilities as well as its ease of use. "IT won't tell the CEO that they won't support it," says Michael Osterman, principal at Osterman Research. This is reminiscent of the way BlackBerry made its way into corporations. Gabe Zichermann says that about 30% of the users of BeamME, his company's iPhone app for exchanging contact info, were C-level executives.

At business analytics software company SAS, co-founder John Sall was among the first to ask the IT department to support his iPhone when it was first released in 2007. "Considering his relationship and his role in the company, we managed to meet that need," says Bob Bonham, senior director of IT at SAS. When the second version of the iPhone software was released in 2008, it included ActiveSync, software that made it easy for the IT department to connect the devices to Microsoft Exchange. At that stage, SAS made iPhones available to employees if there's a business need for them. "Our predominant device is still the BlackBerry," Bonham says. He adds that SAS will eventually let employees choose whether they want to use a BlackBerry, Windows Mobile device, or iPhone. Today, employees who bring their own iPhones to work can have them hooked up to corporate e-mail. Currently, SAS supports about 1,000 BlackBerry devices, 100 to 200 iPhones, and 50 to 100 Windows Mobile devices. The company's total workforce is more than 11,000.

The tech industry isn't alone in early adoption of the iPhone. Others include transportation, entertainment, retail, and life sciences, says Forrester's Schadler. They've become especially popular with doctors. For years, Zach Hettinger, a physician in Rochester, N.Y., carried both a cell phone and a Palm (PALM) device that contained a pharmacy database and other work-related applications, such as vaccine schedules and pregnancy calculators to estimate due dates. "With the iPhone, all those references have become accessible, so that you only need one device," Hettinger says. Today he carries only an iPhone, and he says that his father, also a physician, recently made the switch as well.

Lack of Support

The iPhone isn't for every company, and it hasn't been widely adopted in certain industries, such as banking and insurance, says Forrester's Schadler. Plenty of companies haven't yet decided to let employees use iPhones at work. In July 2007, American Airlines (AMR) Chief Information Officer Monte Ford told BusinessWeek that his company would not support the iPhone due to security concerns. Today, iPhones are still verboten at American Airlines. BusinessWeek parent The McGraw-Hill Companies (MHP) also does not support the iPhone.

Companies Shed Initial Resistance to iPhone 1

2009-05-06T10:33:00.000+07:00

By Rachael King

Michael Loo didn't want to become an iPhone user at first. "I really fought it quite hard," he says. As vice-president for global IT at telecom equipment vendor Avaya, Loo was concerned that the phone might not keep corporate data secure. Another beef: the iPhone's lack of a keyboard. For a year, his company declined to provide support for employees who wanted to use the device at work. Loo held out even longer.

But Loo and his employer have had a change of heart. In July 2008, when Apple (AAPL) officially released a version of iPhone software with beefed-up security and better support for corporate e-mail, Avaya gave employees the green light. Less than a year later, Avaya counts about 998 iPhone users out of about 9,800 who carry mobile devices. Loo caved a couple of weeks ago.

Like Avaya, many U.S. corporations are embracing the iPhone after initial resistance. Research In Motion's (RIMM) BlackBerry is still the leading smartphone for U.S. corporations, but the iPhone is gaining ground. In a survey of 127 large and midsize companies conducted by consulting firm Osterman Research on behalf of software provider Neverfail, 20% said they supported the iPhone in 2008, compared with 82% that supported BlackBerry devices and 66% that supported devices that run Microsoft's (MSFT) Windows Mobile. Yet, when asked which devices they planned to support in 2009, 44% of those companies said they'd support the iPhone. Support for BlackBerry dropped to 75% and for Windows Mobile to 64%.

Gaining Ground

Apple makes it easier for companies to reverse their iPhone opposition in part through upgrades to the software that make the device more business friendly. A version due in June, iPhone 3.0, will add security and management features expected to make it more attractive to large companies. "It's too early for iPhone to be a serious competitor to BlackBerry in the enterprise, but a year from now it will be," says Ted Schadler, vice-president and principal analyst at Forrester Research (FORR) who on Apr. 14 published a report on iPhone use by enterprises. Schadler points to Oracle (ORCL) and Kraft Foods (KRFT) as two examples of companies that have made the leap. In January 2009, Oracle counted about 4,000 employees with iPhones in its global workforce of about 86,000. That same month, about 2,000 Kraft employees—almost half the company's mobile users—carried iPhones. Schadler says that by the end of 2009, Kraft expects to have 4,000 to 5,000 workers using the device. That represents about 4% to 5% of its total workforce.

Much of the impetus for widening iPhone adoption in business comes from employees themselves. People are purchasing their own smartphones and using them at work to access corporate data or networks. Almost 40% of the smart phone purchases in the U.S. in 2008 were made by individuals rather than corporations, according to IDC. Also in 2008, about 7.3 million smartphones in the U.S. were brought into the workplace. That's expected to grow 43.5%, to 21.5 million, in 2012, IDC says. Economic malaise is accelerating the trend as businesses that once frowned on employee-owned devices are revising the policy as a way to ask employees to share in the cost of equipment. "Companies are looking to tighten their belts and still keep people as productive as possible," says Sean Ryan, research analyst of mobile enterprise at IDC.

Apple + Twitter = A Better Combination Than You Might Think

2009-05-06T10:31:00.000+07:00

Posted by: Arik Hesseldahl on May 05

I’ve been waiting on this rumor for awhile, not because I have any knowledge of talks between them, but because it simply felt inevitable. As Valleywag tells it, Apple is in talks to acquire Twitter, talks which writer Owen Thomas describes as “serious.” Such a deal would have Apple paying $700 million in cash for the Web service.

Twitter is the major Web property of the moment, and so rumors about possible acquisitions aren’t a new phenomenon. Apple’s enormous pile of cash makes it a possible acquirer, meaning a rumor about such a deal was almost certain to emerge at one point or another.

I don’t know if this rumor is true, but I’m not prepared to dismiss it out of hand because it makes a great deal of sense.

Where’s the synergy, you ask?

Apple isn’t a particularly strong player on the Web — MobileMe is about the extent of it — and so Twitter would bring, among other things, a strong Web development team with a proven record for building successful products. Twitter founder Evan Williams has already sold one successful Web startup — Blogger.com — to Google.

But the real story is the iPhone. I don’t know if there are any statistics to back this up, but anecdotally I’ve noticed a lot of iPhone users tend also to be Twitter users. The Twitter client Tweetie is as of this morning ranked #32 on the list of top 100 paid iPhone applications. But the connections between the iPhone and Twitter go deeper than that.

Search the app store for the word “Twitter” and you find that not only are there a lot of Twitter clients, ranging from Tweetie to Twitterific to ZipTweet but you also notice that Twitter support is built in to an awful lot of iPhone Apps. USA Today’s iPhone app has Twitter support, for example. “Read It Later Free” does too. Several streaming radio apps let you post a link to what you’re listening to directly to your Twitter feed. “Mobile Fotos,” a photo-sharing app, supports Twitter and integrates nicely with all the major Twitter clients. I didn’t count them all, but there are lots and lot of iPhone applications that mention Twitter in their descriptions, and while some of those mentions are simply “follow us on twitter,” a great deal of them include features that integrate with Twitter in some creative manner. (If anyone knows the number, please say so in the comments.)

Apple might be seeing a trend among its applications developers that isn’t clear from the outside: If iPhone users love Twitter, then apps developers are building Twitter support into their applications. That gives you two arguments in support of an acquisition. Users love it, developers love it. Almost reason enough to bring the entire Twitter ecosystem under Apple’s control, and make it an official part of the iPhone ecosystem.

Whats the third? It’s cheap. Apple has $4.5 billion in cash plus another $20.5 billion in short term investments plus another $4.6 billion in net receivables, which all adds up to a cash hoard that’s just shy of the $30 billion mark. Paying $700 million for Twitter now would be a difficult offer to turn down for the Twitter guys, and it would give Apple control of the what’s arguably the most important Web company going right now, and thus keep it out of the hands of the likes of Google, Microsoft, and Facebook.

So while at first this seems a weird rumor — and I should be clear that I actually don’t think it is true — I’m simply not willing to completely dismiss it out of hand, because it makes a surprising amount of sense. Would Twitter be a good fit inside of Apple? That’s another question entirely.

Here’s a better scenario: Maybe Apple should invest in Twitter.

Will Financial Stocks Clean Up? 1

2009-03-25T09:50:00.000+07:00

By Ben Steverman

A couple of weeks ago, it seemingly couldn't get any worse for financial stocks, particularly banks. Equity prices hit decade-plus lows because many investors genuinely worried certain bank stocks were worthless—either because the banks were doomed or because the government would take them over.

But sentiment on Wall Street can turn on a dime these days. Stocks, particularly financial stocks, surged on Mar. 23, and the reason most commonly cited was the release of details of the U.S. Treasury's plan to set up a public-private partnership to buy up toxic assets—and remove them from banks' balance sheets. The KBW Bank index (KBX) jumped 18.6% in one day.

But investors who are buying more financial stocks—sometimes for the first time in years—say they're not jumping into the risky sector based on one government plan.

One Piece of the Puzzle

The Treasury's effort is just one part of the solving the subprime puzzle, says Michael Sheldon, chief market strategist at RDM Financial Group. "The plumbing of the financial system is slowly being put back together, piece by piece," he says.

The first signs of springtime for banks appeared a couple weeks ago. On Mar. 10 the head of one of America's most troubled big banks, Citigroup (C) Chief Executive Vikram Pandit, told his employees he was "most encouraged with the strength of our business so far in 2009." He said the bank made a profit in the first two months of 2009.

Whether investors adopted Pandit's rosy outlook or not, his comments reminded investors of one thing that has almost certainly true: If it weren't for all the pesky losses from what the Treasury calls "legacy" assets—the soured derivatives haunting banks' balance sheets—this would be a good time for the basic banking business.

The Federal Reserve has cut short-term interest rates to nearly zero, giving banks a big advantage: They can borrow at low rates and then lend at higher rates, giving them some of their widest profit margins in years.

A Cheery $1 Trillion

A week after the Pandit memo, the Fed said it would devote more than $1 trillion to buy up debt, an effort to perk up credit markets. Financial stocks rose again.

Then, on Mar. 23, the market celebrated new Washington policy again, a huge contrast to its disappointed reaction to Treasury Secretary Timothy Geithner's first attempt to announce a plan to deal with toxic assets on Feb. 18. Back then, Geithner was criticized for being vague and lacking details.

But while the Street seemed positively ebullient on Mar. 23, there are still plenty of doubters. To say there are still unanswered questions is an understatement. And many observers criticized this plan, too, saying it was un-workable or too generous to banks.

But for the first time, says Dan Genter, president of RNC Genter, "everyone is saying, 'Fine, we're at least moving in the right direction.'"

There's no simple way to fix the financial crisis, Genter says. But the basic details of Geithner's new plan remove a major fear: "The major concern," Genter says, "is that the Administration was going to make it worse."

Google Keeps Tweaking Search Results, Leaving Little Room for Rivals

2009-03-25T09:49:00.000+07:00

by: Rob Hof on March 24

Google just announced two new refinements to its search engine today, continuing to leave little room for competitors to get a foothold. The tweaks, announced in a Google blog post this morning, generally aim to produce better results for search queries with lots of keywords in them:

* There’s now a “searches related to:” list at the bottom of search results pages that provide other keyword strings related in concept to your search, especially for longer strings of words.

* Longer keyword searches of three words or more will bring up a bit of a snippet of text from relevant pages, giving people a better idea of whether that page is worth clicking on.

The first and most important change is based on the Orion search technology that Google acquired in late 2006. This so-called semantic search, which helps people find related concepts, based on the meaning of the words and not just matching the words themselves, is something many people are working on, with limited success so far. One recent entrant is WolframAlpha from noted Mathematica inventor Stephen Wolfram. Microsoft also bought the semantic search startup Powerset last year. For its part, Yahoo has been offering Search BOSS to offer other Web developers ways to use its technology to create custom search engines.

But Google clearly isn’t sitting still, so it will be as hard as ever for rivals such as Microsoft and Yahoo to catch up.

Bailout: Getting Banks to Bite 3

2009-03-25T09:46:00.000+07:00

Fraud Is Another Risk

Bair emphasized that her agency's risk would be low. First, the FDIC's loans would be separate from its flagship deposit-insurance program, and the fees the agency will charge for its loan guarantees could even bolster its finances. Meantime, she noted that any given pool of assets would have to lose at least 15%—the amount put up by the Treasury and private investors—before the FDIC would be at risk of having to make good on its guarantee.

"I actually think the credit risks are pretty good for us," she said, saying several times that she expects the arrangement "to make money" for the FDIC.

Kyle argues that the relatively modest private-sector participation carries another risk: fraud. A large increase in the purchase price for a pool of assets will only cost the investors a small amount—an additional $100 million bid for a pool could cost the investors just $7 million, for example. And, because investors control the bidding, they could collude with the bank selling the assets to inflate prices and be reimbursed by the bank reaping the gains, Kyle said.

Pimco's Bill Gross Hails Plan

Treasury officials are aware of the risk, and are working with the federal bailout's Special Inspector General's office and consultants to prevent fraud, a person familiar with the matter said.

Institutional investors, however, were generally supportive of the plan. Some of them hailed it as the kind of clear, bold step that could mark a turning point in the financial crisis. Bill Gross, the high-profile bond fund manager at Pacific Investment Management Co., or Pimco, told Reuters that "this is perhaps the first win-win-win policy to be put on the table and it should be welcomed enthusiastically."

But a serious hitch could be the white-hot anger that taxpayers and their congressional representatives feel over earlier bailouts, warned Stephen Auth, chief investment officer for global equity at Federated Investors (FII). Last week, outrage boiled over regarding bonuses paid out by American International Group (AIG), the huge insurance company that has received billions of taxpayer dollars to avoid collapse. That was capped by the House of Representatives passing a 90% tax on many bonuses paid by big financial firms receiving federal aid. The possibility of becoming a similar target could spook companies that otherwise would be willing to invest alongside the government, or sell toxic assets under the new program.

A Lot Riding on the Senate

Although Treasury and FDIC officials have said the range of executive-comp rules applied to companies receiving bailout funds wouldn't be applied to participants in the new program, Auth said investors might not trust those assurances. Much depends on whether the Senate adopts the House bonus tax, or tones it down significantly, he said.

"If they put that thing through the way it's drafted now, you can forget Geithner's plan," Auth said.

Francis is a writer in BusinessWeek's Washington bureau. Sasseen is Washington bureau chief for BusinessWeek.

Bailout: Getting Banks to Bite 2

2009-03-25T09:44:00.000+07:00

Pressure from Bank Regulators

Then again, they may not have much choice. The federal government owns significant stakes in most of the big banks, giving Administration officials and key members of Congress a toehold to pressure the banks. And bank regulators hold considerable sway over the assets that banks hold, and sell, even in ordinary times.

Indeed, asked if the FDIC and banking regulators will pressure banks to sell assets under the program, Bair was vague, but suggested they would. "There will be a consultative process with the [banking] supervisors," Bair said, "and yes, this program will be among the tools available" to improve bank finances.

Administration officials said banks may actually be willing to take a hit by selling the assets at a lower price if it lets them clean up their balance sheets and get access to the now-wary capital markets again. "This will make it easier for them to raise private capital," Geithner said.

Plan Praised by Industry Group

That's a point echoed by Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents large financial institutions. The group lauded Monday's proposal. Any losses likely wouldn't be large, Talbott predicted. "This program allows them to strengthen their balance sheet and increase their presence in the lending arena."

Bair's comments on the plan suggested that the Administration fundamentally agrees with banks in the debate over how much the assets are worth. She referred at times to a "liquidity discount" that she said was present in the depressed market prices of the troubled assets. Bair also described "prices that are much, much lower than credit losses would suggest." That has prompted disbelief from some investors, who argue the market prices accurately reflect the assets' values, and say many banks are in fact already insolvent as a result. "It's not a liquidity problem—it's always been a solvency problem," said Bob Eisenbeis, chief monetary economist for Cumberland Advisors.

Critics raised other concerns as well, primarily noting that the government may well end up overpaying for the assets. Private-sector investors will set the selling prices by bidding on pools of assets; that will determine the amount the Treasury invests, and, ultimately, help determine the amount of leverage backed by the Fed or the FDIC.

Transfer of Wealth to Stockholders

But that government-backed lending will lower the risk that the investors face, which in turn will help raise the price that investors are willing to pay for a given set of assets. "It represents a huge transfer of taxpayer wealth from the taxpayers to the shareholders of financial stocks," said Albert "Pete" Kyle, a University of Maryland finance professor.

Others question the small part of the total investment the private sector will provide under the program—as little as 6% for some asset pools. But Geithner stressed that investors stand to lose everything before the government takes a hit.

Investors' "entire capital will be at risk, that's the important thing," he said. "If there's a return over time, which we expect there will be, taxpayers will share in that return."

At the evening conference, Geithner also stressed that the potential risks are far better than the other two alternatives: that either the government do nothing and let the dangerous process of deleveraging continue uninterrupted, or that the government step in on its own. That, he argues, would increasing the likelihood of overpaying for the bad assets.

"All financial crises are ultimately a debate about how much risk the government should take on," he said. To have the government shoulder the risk of cleaning up the banks on its own, he added, "is not healthy for the economy."

Bailout: Getting Banks to Bite 1

2009-03-25T09:33:00.002+07:00

By Theo Francis and Jane Sasseen

As the Obama Administration's plans to lift toxic assets off bank balance sheets took form, speculation swirled over whether private-sector investors could be enticed to take part. Now another question is looming: Will the banks participate?

On Mar. 23, Treasury Secretary Timothy Geithner unveiled the latest effort by the government to stabilize banks and unlock frozen credit markets. The long-awaited plan would use $75 billion to $100 billion of federal bailout funds—together with an equal amount of private-sector money and federal loans and guarantees that could bring the total investment to $1 trillion over time—to buy questionable, mostly mortgage-backed assets from banks.

The market soared in response, with the Dow Jones industrial average rising nearly 500 points, or 6.8%. The financial industry hailed the plan as a solid fix that could revive a moribund credit market. But while that reaction relieved some of the immediate pressures on Geithner and the Administration, it was hardly unanimous. Critics called it a series of opaque subsidies that, at best, would prop up the banks and their shareholders without doing much to revive lending. And the embattled Treasury secretary clearly knows he faces huge challenges ahead. "One day's [market] reaction does not make a plan," he said, speaking later that evening at a conference on the future of finance sponsored by The Wall Street Journal.

Funds Leveraged Sixfold

In many ways, the plan is straightforward: Private-sector investors will bid to buy a stake in pools of assets—either residential and commercial mortgage loans, or securities tied to a variety of other troubled debt—and their investments will be matched dollar for dollar by the Treasury. Those funds will then be leveraged as much as sixfold through loans backed by either the Federal Deposit Insurance Corp. or the Federal Reserve.

But the same dynamic that has stymied the normal market for these securities could discourage banks from participating, investors and financial experts say.

At the root of it, banks and investors disagree about what the assets are worth. Investors point to the dramatic collapse of the housing market and rising foreclosure rates, among other factors, that mean many of the assets are unlikely to perform as advertised, particularly as a worsening economy puts further pressure on the underlying borrowers.

Banks on Shaky Ground

Banks note that 90% or more of homeowners are current on their mortgages. They argue that most of the assets will ultimately perform—and thus are worth far more than the discounted prices investors are willing to pay. Moreover, many banks are already on shaky financial ground, and recognizing the assets at a lower value could leave them worse off, and potentially insolvent.

But while the program announced Mar. 23 contains sweeteners to entice investors to the table—chief among them government-backed financing—banks may remain reluctant to sell unless the ultimate price matches or exceeds the asset value the banks have recorded on their books. And Sheila Bair, chairman of the FDIC, made clear later in the day that she expects banks to take a hit: "They will have to take losses to sell into this facility," she said.

In that case, warned one bank analyst who works for an investment management company, "there's no incentive for banks to participate."

Obama tries to halt talk of bank nationalization

2009-02-21T08:33:00.000+07:00

By BEN FELLER

WASHINGTON

The White House on Friday insisted it's not trying to take over two ailing financial institutions, even as stocks tumbled again.

On Wall Street, talk of nationalization of Citigroup Inc., and Bank of America Corp., prompted investors to continue to balk, worried that the government would have to take control and wipe out shareholders in the process. Citigroup fell 20 percent, while Bank of America fell 12 percent in afternoon trading but also came off their lowest levels.

"This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government," White House press secretary Robert Gibbs said when asked about nationalizing the banks.

"That's been our belief for quite some time, and we continue to have that," Gibbs said.

Investors have shown decreasing confidence that U.S. banks can right themselves. Citigroup and Bank of America have already received significant help from taxpayers as the government has rushed in to try to save the financial sector, which has been choked by bad assets and seen the flow of credit shrink.

The speculation about the two banks' future continued to take a direct toll on the market.

Gibbs was pressed for more details on his answer -- specifically whether Obama would not nationalize banks. He said it was hard for him to be any clearer.

When a reporter suggested Gibbs could do that by saying point bank that Obama would never nationalize banks, Gibbs would not make that statement, but emphasized: "I think I was very clear about the system that this country has and will continue to have."

Congress Set to Curb Exec Pay at Troubled Companies

2009-02-14T09:48:00.000+07:00

By Nanette Byrnes

Congress is about to do in one vote what years of shareholder agitation has failed to accomplish: sharply curb top executives' pay at poorly performing companies. The final version of the $787 billion stimulus bill heading toward a vote in the House and Senate steered clear of the hard $400,000 cap the original Senate version of the bill had embraced, but the new terms are pretty stiff nonetheless.

President Barack Obama's Feb. 4 plan capped pay for executives at the very worst-off companies borrowing from the government at $500,000 a year, but left employers open to award millions in long-term restricted stock bonuses. Now Congress has shut that loophole by requiring that bonuses for executives at companies receiving money from the Troubled Asset Relief Program be no more than one-third of their total annual compensation, and come only in the form of restricted stock. Congress' restrictions also apply to all companies taking emergency government aid, adding hundreds of companies to the group the President singled out.

Other provisions include restricting any bonus payments until Uncle Sam is repaid, eliminating golden parachutes to departing executives, requiring bonuses be paid back to the Treasury if misleading earnings or other financial information is reported, and a mandatory "Say on Pay" in which shareholders will vote annually to approve executive compensation at all companies receiving money from TARP.
Sliding Scale

At firms receiving less than $25 million in government rescue assistance, the limits would apply to the highest-paid employee. Those who get $25 million to $250 million would see limits applied to at least the five most highly compensated executives. That doubles to the 10 highest-paid for those receiving between $250 million and $500 million, and doubles again to the top 20 employees of any company (currently including most banks and insurer American International Group (AIG)) that receives $1 billion or more, though generally traders and investment bankers appear to be exempt.

According to Equilar, which tracks executive compensation, companies with $10 billion or more in assets that took taxpayer money from TARP paid their CEO an average of $11 million last year, including an average cash bonus of $2.5 million.

Groups in line with business thinking voiced relief at Congress' decision not to put the compensation ceiling at $400,000, including the Center on Executive Compensation, which quickly praised that move.
Will Top People Flee?

But pay consultants continue to fret that these moves will result in a damaging exodus of top banking talent. "The banks will be forced to choose between keeping their top talent and accepting the benefits of government funds," says David Wise, a pay consultant at Hay Group. "The focus of the banks will be on repaying the taxpayers as quickly as possible. But ultimately what's going to be in taxpayers' best interest is for these banks to perform over a long period." And that, he notes, is hard to do without top-notch people. "Some of the objectives feel right but implementation doesn't," he says.

Those pushing for restraints on executive pay liked the new restrictions, but still argue even these restrictions don't go far enough. "I am afraid that Congress missed a huge opportunity to protect taxpayers from further bailout profiteering," says Sarah Anderson, a pay expert at the Institute for Policy Studies. "The biggest weakness of the stimulus bill is that it fails to set a clear, measurable limit on all compensation. This opens the door for boards to shift compensation from bonuses to other pots, such as salary, pensions, deferred compensation, and perks."

Anderson and others will continue to beat the drum for more pay restrictions. The Institute for Policy Studies has already met with the Obama Administration about the President's promise to investigate executive pay. "We have a social responsibility in the United States to restrain excessive CEO pay," says Institute associate fellow Sam Pizzigati. "We don't depend on corporate boards to make sure companies don't dump toxic waste into our rivers, or to make sure employers don't discriminate against women or people of color. And we don't think we should rely on corporate boards to handle executive excesses."

Ex-Employees at Heart of Stanford Financial Probe

2009-02-14T09:41:00.000+07:00

By Matthew Goldstein

Billionaire R. Allen Stanford's worst enemies may be some of the former employees who once worked for his $50 billion Stanford Financial Group.

For months now, securities regulators have interviewed dozens of former employees of Stanford Financial, trying to get to the bottom of the firm's staple investment product: a high-yielding certificate of deposit issued by Stanford's offshore banking affiliate in the Caribbean island nation of Antigua. Over the past 12 months, the stock market and hedge funds have lost huge amounts of value even as Houston-based Stanford Financial continued to pay out above-average returns

A number of former brokers that regulators are talking to are ones who previously filed industry arbitration claims, alleging that they were forced out of the fast-growing firm after questioning the ability of Stanford International Bank to justify those high CD rates. Indeed, it appears the firm had a habit of playing hardball with anyone who criticized the business model and took exception with its aggressive practice of selling CDs to wealthy investors in the U.S., the Caribbean, and Latin America. Several former brokers say they were often told to stop asking questions whenever they pressed for more information about the bank's investment strategy for the money it took in from depositors.
Lawsuit Alleged a "Ponzi scheme"

One former employee even went so far as to file a so-called private whistleblower lawsuit in 2006 against the 58-year-old Stanford and his firm. The lawsuit filed by Lawrence J. De Maria alleged a myriad of wrongdoing at Stanford Financial and its Antigua-based bank. De Maria, who had been hired in 2003 to edit the firm's internal corporate magazine, a glossy publication called Stanford Eagle, claimed he was fired "for objecting to and raising concerns" about the firm's practices that he believed "violated federal and state laws."

Specifically, De Maria, a former newspaper journalist, charged the firm "was operating a Ponzi scheme or pyramid scheme" by using money from the offshore bank "to finance its growing brokerage business." The lawsuit, filed in in 2006 in Miami-Dade County Circuit Court in Florida, also charged the firm was attracting clients to the bank by selling CDs with "artificially high yields." De Maria, also a former president of the Staten Island Chamber of Commerce in New York, said in his suit that the more questions he asked about the company's business practices, the more "marginalized" he became. De Maria was dismissed on Dec. 6, 2004.

Stanford and his firm vigorously litigated the lawsuit and denied the allegations. But on the eve of trial, the case settled on Dec. 12, 2007, for an undisclosed sum of money. The firm, which had not shown a willingness to settle the case, apparently became interested in resolving the matter after the judge gave De Maria's lawyer permission to depose Stanford. "Mr. Stanford was initially a party to the lawsuit, but he was dropped from the lawsuit by the plaintiff," says a firm spokesman, who also pointed out that De Maria was not involved with any financial activities at the firm. Dana Gallup, the Hollywood (Fla.)-based lawyer who represented De Maria, says both he and his client are barred from discussing the settlement.
SEC Investigation Goes Back Three Years

BusinessWeek previously reported that the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Florida Office of Financial Regulation all are investigating the high-yielding CDs sold by Stanford's offshore bank, as well as the investment strategy behind them. FINRA and Florida regulators began investigating Stanford Financial and its banks within the past several months. But people familiar with the probes say the SEC investigation goes back at least three years and possibly longer. A Stanford Financial spokesman, meanwhile, has characterized the investigations as "routine." The company also has said that former disgruntled employees are trying to fuel the investigations.

It's not clear if De Maria is one of the former employees that regulators have interviewed. But due diligence expert Randy Shain says De Maria's lawsuit was one of the many red flags that he turned up during an investigation of Stanford's bank that he did on behalf of a client. Shain, vice-president of First Advantage Investigative Services, says the client was considering investing some money in the CDs sold by Stanford bank. Shain says the allegations in the lawsuit mirrored too many of the concerns raised by other former employees of Stanford Financial. And that was enough, for him, to tell his client to consider putting his money elsewhere.

"There was a tremendous amount of people saying the same thing," says Shain. "This warranted our client taking a much closer look." It appears regulators are doing much the same themselves.

News You Need to Know 3

2009-01-12T09:39:00.000+07:00

Steve's Health Report

Will this finally allow Apple (AAPL) investors to sleep nights? After fretting about Steve Jobs' evident weight loss over the past year, they got reassurance in the form of an open letter from the Apple CEO on Jan. 5. Jobs blamed a "hormone imbalance" that is "robbing me of the proteins my body needs to be healthy." Treatment, he said, will be "simple and straightforward," and he will remain on the job. Doctors who treat patients in similar circumstances—Jobs had surgery for a rare, less lethal form of pancreatic cancer in 2004—say he has an excellent prognosis. Apple the next day announced new policies for iTunes, the top online music store. It will now sell songs for as little as 69 cents, and soon they'll all be free of copy protection.

See "Was Apple 'Adequate but Late' on Jobs?"

—Edited by Harry Maurer & Cristinal Linblad

One Big Downturn

Get set for "the first truly global recession of the modern economy." So writes Stephen Roach, chairman of Morgan Stanley Asia. Roach says that while the crash began with the U.S. subprime meltdown in the summer of 2007, "there were bubble-dependent growth models in a surprisingly large number of countries—all now bursting." Asia's export bubbles, for instance, were inflated by the U.S. consumer-spending bubble. So he expects the recovery to be slow and anemic at best. (Foreign Policy)

—Edited by Harry Maurer & Cristinal Linblad

Scandal at Satyam

Just what Corporate India didn't need right now: an accounting scandal at one of its star outsourcers. On Jan. 7, Ramalingam Raju, chairman of Satyam Computer Services, quit and admitted he had cooked the books. Raju said he had overstated cash on hand by $1 billion and inflated profits and revenues in last year's September quarter. Satyam shares sank 78%, and the benchmark Sensex index lost 7.3% that day, as other outsources fretted about how the news would affect their reputations.

See "India's Madoff? Satyam Scandal Rocks Outsourcing Industry"

—Edited by Harry Maurer & Cristinal Linblad

Natural Gas Face-Off

It's turning into an annual affair: Russia's Gazprom and Ukraine fighting about the price of natural gas. But this time matters got out of hand, and on Jan. 6, Russian Prime Minister Vladimir Putin cut off deliveries to Europe through Ukraine. At one point the two countries weren't far apart—Ukraine said it would pay $235 per 1,000 cubic meters, just $15 less than Russia wanted. So why couldn't they make a deal? Some experts suspect corruption is playing a role.

See "Ukraine and Russia: The Role of a Middleman"

—Edited by Harry Maurer & Cristinal Linblad

Citgo's About-Face

Propaganda is a tricky business. For three cold winters, Venezuelan President Hugo Chávez took delight in distributing free or discounted heating oil to poor families in the U.S. while lambasting President George W. Bush. But on Jan. 5, former Representative Joseph P. Kennedy II, whose Citizens Energy administered the program for Venezuelan-owned Citgo, announced that falling oil prices had prompted the company to ditch the largesse. Whoops—two days later, Citgo said it would continue the program after all, offering 100 gallons for free.

—Edited by Harry Maurer & Cristinal Linblad

News You Need to Know 2

2009-01-12T09:38:00.001+07:00

Whitman Eyes a Run

So what will they call her—The Auctionator? It sure looks as if former eBay CEO Meg Whitman will make a bid to succeed Arnold Schwarzenegger, who can't run again, as California's governor. According to a source close to Whitman, who left eBay (EBAY) earlier this year as the online marketplace struggled, she will make a decision on the 2010 race in four to six weeks. In preparation, she resigned on Jan. 6 from the boards of eBay, Procter & Gamble (PG), and DreamWorks Animation (DWA). Whitman got a taste for politics when she worked on the Presidential campaigns of former boss Mitt Romney and John McCain.

—Edited by Harry Maurer & Cristinal Linblad

Red Ink at Time Warner

Last year was ugly for a lot of companies, including Time Warner (TWX). But it got a whole lot uglier for the media giant on Jan. 7, when it said it would post a net loss for 2008 instead of previously projected profits. It added that it would likely take a $25 billion impairment charge for the falling value of some businesses, including cable and AOL (TWX). Reasons for the red ink: a legal judgment against the Turner Broadcasting unit; a charge related to a lessee declaring bankruptcy; and building up reserves for potential losses from customers who have gone under.

—Edited by Harry Maurer & Cristinal Linblad

The CEO Carousel

More bad news from the chicken coop: A month after Pilgrim's Pride (PGPDQ) filed for bankruptcy, the CEO of rival Tyson Foods (TSN) quit on Jan. 5. Dick Bond's exit came as Tyson old-timers such as Don Tyson, son of the founder, and his ally Leland Tollett have recently reasserted authority over the nation's No. 2 chicken processor, whose stock has dropped by half since April as the meat industry suffers its most rotten stretch in decades. Tollett, 71, was named interim CEO. Another corner office changed hands the same day as beleaguered bookseller Borders Group (BGP) replaced George Jones with Ron Marshall, 54.

—Edited by Harry Maurer & Cristinal Linblad

IndyMac's New Owners

It's a star-studded lineup: hedge fund heavy-hitters George Soros and John Paulson, plus computer king Michael Dell. They're on the team of investors who agreed on Jan. 2 to buy failed IndyMac bank from the feds. The buyers will pony up $1.3 billion in new capital for a bank with 33 branches and $16 billion in loans.The FDIC will absorb losses above a certain level, and the group will continue the process of tweaking mortgages for 46,000 IndyMac borrowers behind on their payments.

—Edited by Harry Maurer & Cristinal Linblad

Death of a Billionaire

As the German government squabbles over a stimulus package that should bring more money into consumers' pockets, the credit crunch claimed a prominent victim. Adolf Merckle, 74, estimated to be the fifth-richest man in Germany, killed himself on Jan. 5 by throwing himself under a train. Merckle's holding company, VEM, which encompassed outfits such as generic drugmaker Ratiopharm and HeidelbergCement, was in trouble after Merckle lost hundreds of million of euros speculating on VW shares, while the downturn caused HeidelbergCement shares to plunge. For months, Merckle had been pressed by banks to find bridge loans or sell his core businesses.

—Edited by Harry Maurer & Cristinal Linblad

News You Need to Know 1

2009-01-12T09:37:00.001+07:00

Obama Hits the Hill Running

There may be only one President at a time, but for now there appear to be two. Barack Obama arrived in Washington on Jan. 4 and jumped right into negotiations with Congress over an economic stimulus package. Aides say the President-elect is pressing for about $775 billion worth of stimulus over two years, including some $300 billion in tax relief for individuals and businesses. Balanced budgets? Forget about it. On Jan. 6, Obama said: "Potentially, we've got trillion-dollar deficits for years to come." The tax cuts in the package should win over some Republican lawmakers. Struggling sectors such as autos, banking, and homebuilding are excited that Obama may support a measure giving them refunds on past years' taxes. It would lengthen the period for money-losing companies to write off operating losses against previous profits from the current two years to four or five.

—Edited by Harry Maurer & Cristinal Linblad

Cutbacks at Alcoa

Only a year ago, Alcoa (AA) was getting scolded for not expanding fast enough as commodity markets boomed. Now, with aluminum prices down by half from last summer as customers slash orders, the top U.S. producer said on Jan. 6 it will cut 15,000 jobs, or 15% of its global workforce. It will also chop capital spending by 50% this year. Another commodity biggie is ailing even more: Chemical maker LyondellBasell put its U.S. unit into Chapter 11 on Jan. 6.

—Edited by Harry Maurer & Cristinal Linblad

Chipped Chipmaker

Next in the parade of companies unveiling nasty numbers: Intel (INTC). Having already forecast, on Nov. 12, its biggest quarter-on-quarter sales drop, the chip king on Jan. 7 said it now expects fourth-quarter revenue to be worse yet: $8.2 billion, down nearly $2 billion from forecasts in the fall and 20% from the third quarter. Demand for PCs and servers is cratering. Also on the tech front, Verizon Wireless surprised nearly everyone by saying on Jan. 7 that it will tap Microsoft (MSFT), not Google (GOOG), for search and ad services on its phones.

See "Intel Sales Take a Nosedive"

—Edited by Harry Maurer & Cristinal Linblad

Detroit's December

Be careful what you wish for. Carmakers couldn't wait for 2008 to end: U.S. auto sales sank 35% in December, closing out an annus horribilis that saw 13.2 million vehicles roll off the lot, the fewest since 1992. Making matters worse, soaring fuel prices last summer scrambled truck sales, where Detroit makes its richest margins. For the first time since 2000, Americans bought more passenger cars than trucks. Even mighty Toyota Motor (TM) says it will lose money this year. In fact, Toyota's sales are so skimpy that on Jan. 6 the company said it would idle 12 plants in Japan for 11 days in February and March to keep inventory from piling up. And that's the problem. As bad as 2008 was, it might look good compared with 2009.

—Edited by Harry Maurer & Cristinal Linblad

CEO Pink-Slip Watch

2009-01-12T09:29:00.000+07:00

By Nanette Byrnes

In terms of job security, America's corporate chiefs are coming off a good year. As layoffs among rank-and-file employees surged to multi-decade highs, CEO turnover actually dropped.

That could change in 2009 as boards that were reluctant to fire leaders at the height of the credit crisis face more shareholder pressure. For many CEOs, 2009 could be a make-or-break year. "If you're in a growth cycle and your company is in the bottom half of its industry, that's not so good, but [at least] you're still growing," notes executive coach Marshall Goldsmith. "If your whole industry is tanking and you're in the bottom half, it becomes a lot harder to massage the numbers."

One high-profile laggard is Brenda C. Barnes, who heads Sara Lee (SLE). The food company's share price decline and operating margins were among the worst in the industry in 2008. Barnes recently announced that Sara Lee will cut 700 jobs, but weakness in Europe threatens to derail her efforts to boost profits in 2009. "She has a lot to prove," says Marian L. Kessler, a portfolio manager and analyst with the Becker Value Equity Fund (BVEFX), who praises Barnes' focus on higher-margin businesses but says investors are wary of the company's frequent restructurings. "Brenda has been CEO since 2005 with not a great deal of success," says Kessler. Sara Lee declined to comment.

Chief executives of retailers with high debt levels are especially vulnerable, says retail consultant Howard Davidowitz. He points to Terry J. Lundgren, CEO of Macy's, as someone who needs to make significant progress after poor 2008 results and the ill-timed acquisition of May Co. "It's life or death," says Davidowitz. A spokesman for Macy's disputes the idea that Lundgren is under pressure, saying the company has outperformed competitors by some measures and has strong cash flow. Another CEO who Davidowitz says may feel pressure is Neiman Marcus chief Burton Tansky. The high-end retailer in December posted an 84% quarterly profit plunge. "The question," says Davidowitz, "is whether Tansky is enough of a change agent in a time when luxury is absolutely out of step with the consumer." Neiman declined to comment.

Perhaps the most obvious place to find CEOs on the hot seat is the financial sector. One who could feel pressure in 2009 is Morgan Stanley (MS) chairman and CEO John J. Mack, who returned to lead the firm in 2005 and quickly embraced riskier strategies that came back to bite him in 2008 as the financial crisis worsened. Morgan also lost market share in the mergers-and-acquisitions business. Mack is expected to retire when his contract expires in 2010, but some say poor results this year could prompt calls for an earlier exit. Michael Garland, a director at CtW Investment Group, says the issue of Mack's status will be raised this spring. Morgan Stanley declined to comment.
"DEARTH OF TALENT"

American International Group (AIG) wasn't the only insurer to be battered in 2008. Hartford Financial Services Group chief Ramani Ayer has to answer for more than $2 billion in losses in the firm's portfolio last year, not to mention high executive churn. Given all of the blowups in the finance sector already, it's not easy to see who might step into vacant roles. Says Jeffrey W. Arricale, portfolio manager of the T. Rowe Price Financial Services Fund (PRISX): "There's a dearth of talent." Hartford declined to comment.

Citigroup (C) chief Vikram Pandit, meanwhile, is at what one headhunter calls "the tipping point." He needs to clean up the bank's finances quickly—and show that taxpayer money is being well spent. A Citi spokeswoman says the bank remains focused on Pandit's strategy of dumping bad assets and cutting costs. Pandit took over in 2007, before the full extent of Citi's problems became clear. Even executives who prepare for trouble ahead can be swept up in events beyond their control. Says Arricale: "It's not like [Pandit] planned any of this."

How Our Best Managers Have Fared Over the Years

2009-01-12T09:25:00.001+07:00

By Peter Carbonara

Flipping through BusinessWeek's past surveys of the best managers is a lot like taking a peek at your high school yearbook. It evokes nostalgia, pride, and—on occasion—embarrassment.

Sure, we lauded Jamie Dimon back in 2003, predicting the Bank One CEO "may deal his way into greatness." Six years, two big acquisitions, and one financial crisis later, Dimon runs the largest bank in the U.S. by market value, JPMorgan Chase (JPM). He's also one of the few big bankers whose reputation remains intact.

We were also right to criticize Gerald Levin, the chief architect of the megamerger between Time Warner (TWX) and America Online (TWX), back in 2002. The conglomerate is still struggling to prove the online service provider makes sense as part of a media company. Levin now runs a holistic mental health center in Santa Monica, Calif., which the company's Web site describes as a place to "revel in the wonder of you."

There are, however, lots of choices we'd rather forget. In 2002 we singled out Dennis Kozlowski, then head of Tyco International (TYC), as one of the best managers for his "relentless dealmaking and lean operating style." Unfortunately the "lean" style also included his $30 million New York condo and its now-infamous $6,000 shower curtain. Kozlowski is currently serving an 8- to 25-year sentence for fleecing his former company.

We highlighted Lehman Brothers (LEH) CEO Dick Fuld as a best manager in 2002 for consistently "proving naysayers wrong." He wasn't a bad call at the time. After all, he fought insolvency rumors triggered by the collapse of hedge fund Long-Term Capital Management in 1998 and silenced skeptics after the September 11 terrorist attacks left Lehman homeless. But years later, Fuld's tough-as-nails attitude seemed more delusional than inspirational in the face of the crisis. He told anyone who would listen that the bank had plenty of capital—right up to the point when Lehman filed for bankruptcy this past September.

ARMs DEALER
In 2004, Ken Thompson, then CEO of Wachovia (WB), got kudos from us after a string of acquisitions. The industry veteran, we noted, "has rewritten the book on bank mergers." That turned out to be true—just not in a good way. Thompson's hurried acquisition in 2006 of Golden West Financial, a big California bank crammed with risky adjustable-rate mortgages, was a fiasco. Thompson was forced out last year, and a wounded Wachovia was swallowed up by Wells Fargo (WFC).

After transforming UnitedHealth Group (UNH) from a regional medical insurer into a diversified health-services giant, William McGuire rocketed to the top of our annual roundup in 2004. Three years later the former pulmonologist paid $468 million to settle allegations by the Securities & Exchange Commission that he received a slew of backdated stock options.

Some of our top picks have more ambiguous legacies. Consider Maurice "Hank" Greenberg. We applauded the autocratic leader of American International Group (AIG) in 2002 for turning the company into a financial giant and championing "innovative products that insure almost any type of risk." Greenberg, however, was forced out in 2005 amid allegations of fraud by the New York state attorney general—charges he contests to this day.

But Greenberg's successors bear the brunt of the blame for AIG's current state. As the housing bubble inflated, AIG pushed aggressively into credit default swaps, insuring some $426 billion worth of debt, including subprime mortgages. After those deals began to sour, the government had to come to its rescue.

Which crusading regulator brought down Greenberg back in 2005? None other than Eliot Spitzer, whose probes into investment banks and mutual fund firms helped change Wall Street's ways. In 2004 we saluted Spitzer for "wielding his staff of 1,800 like a battering ram against the fortress of Wall Street privilege." Spitzer rode the reformer image to the New York governor's mansion two years later, but in 2008 he resigned in disgrace after a dalliance with a high-priced prostitute. We had expected Spitzer to uncover the "next great scandal"—not to become it.

Wall Street: The Bright Side of a Bad 2008

2009-01-12T09:21:00.001+07:00

By Roben Farzad and Ben Levisohn

Last year was that rare wrinkle in history when everything that could go wrong did go wrong. Stocks and real estate imploded. Bank failures abounded. Fannie Mae, Freddie Mac, and AIG became wards of the state, while the Federal Reserve had to double its balance sheet in the course of a few weeks.

Oh, and Wall Street as we knew it pretty much died.

But the crash was good in one small (O.K., minuscule) sense: It separated the truly wise managers in finance from the highly paid pseudo-geniuses whose years of success turned out to be a bull market mirage. The few bankers and hedge fund pros who stuck to the basics of lending and investing during the mortgage boom are now inheriting the earth. Most of the rest are exploring other career options. With any luck, some of the physicists and engineers who flocked to trading floors in recent years will flock back to science labs to create things.
ASLEEP AT THE WHEEL

Where was the foresight? Almost all of the managers who were supposed to see the wreck coming did not. Most glaring were Bear Stearns' James E. Cayne and Lehman Brothers' Richard S. Fuld Jr., who morphed from bond gurus to credit casualties practically overnight. Much of the blame for the meltdown also lies with the phalanx of highly compensated executives just below the C-suite—the risk managers and trading chiefs who failed to avoid the carnage.

Two managers who did sidestep the crash are in position to help shape the future of banking. JPMorgan Chase (JPM) CEO Jamie Dimon got federal help to acquire Bear Stearns and Washington Mutual and now sits at the helm of a dominant global firm. Bank of America's (BAC) Kenneth D. Lewis snatched Merrill Lynch (MER) from the jaws of bankruptcy, a move that could vault BofA near to the top of investment banking.

And what of the supposed sophisticates managing the world's biggest hedge funds? Most of them blew it, too. Now some are closing up shop—and throwing hundreds of onetime masters of the universe out of work. Chicago's Hedge Fund Research says hedge funds lost an average of 19.4% through November as billions of investor dollars fled. SAC Capital Advisors saw its Multi-Strategy Fund lose 13% through November, even though the fund is supposed to make money in any environment. The two main funds of Kenneth C. Griffin's Citadel Investment Group were hit with $1.2 billion in withdrawal requests.

Most hedge funds charge clients 50% of their profits and 2% of assets under management. None has agreed to refund to clients half their losses, but Renaissance Technologies' James Simons has waived the management fee for his year-old futures fund, which lost 12% in 2008. Perhaps he has started a trend.

The small winner's circle included longtime subprime skeptic John Paulson, whose largest fund returned 38% through Dec. 19. But the biggest hedge fund victor may be James Chanos, whose Kynikos Associates (Greek for cynic) shorted its way to a 50%-plus gain through November. That, of course, is cold comfort for the millions of ordinary investors who had their money in stocks.

Return to the Best Managers Table of Contents

BusinessWeek Senior Writer Farzad covers Wall Street and international finance. Levisohn is a staff editor at BusinessWeek covering finance and personal finance.

DuPont's Swift Response to the Financial Crisis 2

2009-01-12T09:13:00.000+07:00

Holliday had to weigh whether the gathering financial storm was serious enough to warrant implementing the plan or whether declaring a crisis might frighten the company's 60,000 employees needlessly. As the evidence of a deepening economic downturn quickly mounted, he decided that activating Corporate Crisis Management was right.

Immediately, 17 standing teams met at DuPont headquarters. Over four days of meetings, it became clear that the nature of the crisis was strictly financial, and eight teams—those that dealt with such issues as security and plant safety—stood down. At the end of the four days, the remaining nine had determined what needed to be done to ensure DuPont's viability. It was time to let the troops around the world know what was going on.

Holliday enlisted the company's chief economist and the head of its pension fund, both of whom are highly regarded in the organization, to explain in nontechnical language the roots of the crisis and the way it was affecting DuPont. The pension fund manager also took time to develop some instructional material advising employees about investment options for their $18 billion in retirement funds.

Within 10 days of the crisis plan's creation, every employee in DuPont had a face-to-face meeting with a manager who explained what the company needed to accomplish. Employees were asked to identify three things they could do immediately to help conserve cash and reduce costs. Within a few days after the communications program was rolled out, the company conducted polling to see how well employees understood the nature of the crisis and to determine their psychological reaction. Were they scared, or were they energized and ready to confront the crisis? The company also wanted to see whether the rank and file were doing what they needed to be doing.
TOO CONFIDENT?

Overall, the employees seemed to get it. It helped that the news media were full of stories about the developing financial crisis. The actions aimed at conserving cash took hold quickly. Travel was curtailed sharply, internal meetings were canceled, and consultants and contractors were eliminated where possible.

Yet Holliday felt people still didn't grasp the urgency with which they needed to be acting. "In hindsight, maybe we were too good at giving them the reassurance and confidence that we could come through this," Holliday says. "We gave them so much confidence that they just weren't responding as fast as the slowdown demanded."

Together with his chief operating officer and chief financial officer, Holliday took the time to spend an hour and a half with each of the company's top 14 leaders. They were asked to explain what they were doing to cope with the crisis. They all brought long lists, and it seemed they were doing a lot. But the problem was how fast it was getting done. "They were talking about things that would be implemented by January or February, but they were things we needed implemented in October," Holliday says. So Holliday and his senior team assigned the executive vice-presidents sharply revised targets for cost, working capital, and other metrics for the rest of 2008 as well as the first quarter of 2009.

Even as immediate measures were being taken, DuPont had three top executives looking at longer-term actions the company needed to embrace. It would take a while to figure out which production facilities could be closed permanently or shut temporarily to reduce costs. So the fastest way to save the most cash was to cut back as much as possible on the more than 20,000 outside contractors the company was using. In most cases a contractor could be released with one week's notice and without any severance costs. Where possible, employees whose operations were slowing or would be closed were shifted into what was formerly contract work.

DuPont's initial reaction to the spreading crisis took place in less than six weeks. There will be much more to do, depending on how the global economy fares over the next year or two. And when the slowdown ends, Holliday predicts that inflationary trends will reassert themselves. But DuPont will be ready for resurgent inflation—and any other emergency—if and when it happens.

The lesson CEOs should draw from Holliday's experience: You must recognize reality. This is the single most important task confronting a CEO, and it is extremely difficult to do in this environment. Facing wrenching uncertainty, many become fearful. Others indulge in wishful thinking: "We'll soon be back to normal." Don't believe it. Though we don't know what the new world will look like, we can be certain it won't look the way it did before.

Return to the Best Managers Table of Contents

Ram Charan, co-author of the international best-seller Execution and an adviser to business leaders and corporate boards worldwide, is the author of Leaders at all Levels: Deepening Your Talent Pool to Solve the Succession Crisis, to be published by Jossey-Bass in December, 2007.

DuPont's Swift Response to the Financial Crisis 1

2009-01-12T09:09:00.000+07:00

By Ram Charan

In Leadership in the Era of Economic Uncertainty: The New Rules for Getting the Right Things Done in Difficult Times (McGraw-Hill), renowned management consultant Ram Charan offers chief executives a detailed guide to surviving the worst financial and business crisis since the Great Depression. The key, Charan says, is "management intensity"—deep immersion in the operational details of the business and the outside world, combined with hands-on involvement and follow-through.

Plans and progress must be revisited almost daily. Big-picture, strategic-level thinking cannot be abandoned, but every leader now must be involved, visible, and in daily communication with employees, customers, and suppliers. In this world, CEOs need detailed, up-to-date, and unfiltered information. And they have to act decisively when trouble looms. "If you don't prepare for the worst," says Charan, "you will put both your company and career at risk."

What follows is an excerpt from Charan's book that describes how one of his major clients, chemical and life sciences giant DuPont (DD) , has responded to the crisis. CEO Charles O. Holliday Jr. reacted with maximum speed, rallied his entire company to confront the emergency, and put a sharp focus on maintaining cash flow, which Charan considers the lifeblood of any company in a severe downturn.

The first clear sign that the economic crisis was spreading globally came to DuPont CEO Chad Holliday in early October of last year, while he was visiting a major customer in Japan. The CEO of the Japanese company, among the largest and most highly regarded in its global industry, told Holliday he was worried about his company's cash position. The Japanese boss had ordered his executives to conserve cash in case the financial contagion affected his ability to raise capital.

That conversation was a wake-up call. When Holliday's plane landed back in the U.S., he immediately summoned the six top leaders in his company to a meeting at 7 a.m. the next day. He asked them the following questions: How bad is it now? How bad could it get?

The answers that came back over the next few days were grim. The financial industry's problems were pervading many aspects of DuPont's business both at home and abroad. What had seemed to be a crisis of confidence on Wall Street had the potential to become a global crisis as panic swept Western Europe, Russia, and most of Asia. Credit was disappearing, leaving companies struggling to finance their operations.

Evidence of how serious the problems were becoming appeared in different places. Wilmington, Del., where DuPont has its headquarters, is usually a hotbed of legal activity: Many companies are chartered in the state, and corporate lawsuits are routinely filed in Delaware Court of Chancery in Wilmington. Yet bookings at the hotel DuPont owns in the city's downtown had plunged more than 30% in 10 days. Lawyers handling litigation for companies had canceled their reservations when their clients decided to settle their disputes and stop incurring legal fees.
SPRINGING INTO ACTION

More telling was the rate at which production at many companies was slowing. DuPont paint covers more than 30% of all American automobiles, and the company generally manufactures the paint less than 48 hours before it is sprayed on new cars. To maintain such a short lead time, the automobile companies share their production schedules with DuPont. Suddenly there weren't any production schedules. The automakers didn't know what they were going to produce in the face of collapsing sales.

Clearly it was time to take action.

DuPont has long stressed the paramount importance of contingency planning. Its Corporate Crisis Management plan, if invoked, instantly brings together senior managers to appraise the cause of the crisis and put appropriate disaster control procedures in place. The plan is seldom activated. It was used in the wake of the September 11 attacks and in the aftermath of major hurricanes.

Managing Through a Crisis: The New Rules 2

2009-01-12T09:07:00.000+07:00

In just one year, the difference in the cost to borrow between a typical investment-grade company and a noninvestment-grade company has tripled.

Getting to financial health will require sacrifice, from selling off assets at bargain prices to issuing stock in a down market. "If your stock was at $50, it may not feel good to issue stock when it is $20," says Marc Zenner, managing director at J.P. Morgan's (JPM) Capital Structure Advisory & Solutions group. "But if you don't do it, the situation could be a lot worse."

Washington (D.C.)-based power utility Pepco Holdings (POM) chose to raise the nearly $1.6 billion it needed for infrastructure spending this year by issuing shares and bonds three months ago when markets were in flux. Chief Financial Officer Paul Barry worried that raising money in 2009 could be even harder. "We just bit the bullet and went ahead and got it done," he says. Now Pepco is well positioned to improve its reliability by building transmission lines.
MAKE A MOVE FOR MARKET SHARE

The pie is getting smaller, and less nimble rivals are getting weaker. Don't wait for your competitors to fall to the ground. Hire away their best people while taking steps to make sure they don't grab yours. Or buy assets from cash-strapped rivals on the cheap. Take steps to solicit new customers at a time when others are cutting back on service.

Abandon strategies or products that don't fit the core business. Wal-Mart (WMT) last year jettisoned its policy of stuffing a wide variety of products into stores to broaden its appeal. Instead, the world's largest retailer focused on simplifying its mix and lowering prices of its most popular products, according to Chief Merchandising Officer John Fleming. The result: more share in hot-selling categories like flat-screen TVs.
RETHINK YOUR REWARD SYSTEM

It's tempting to cut compensation across the board. Now is the time to differentiate more than ever and focus on rewarding your best. If you have to cut costs, start at the top. When FedEx (FDX) CEO Frederick W. Smith announced broad salary cuts last month, he took the largest hit, with a 20% pay cut. As New York-based organizational psychologist Ben Dattner says: "The last thing you want is for people to perceive that you're in it for yourself."

If you can't give staff more money, look for ways to give them more power. Shell Refining (RDS), for one, singled out top supervisors at its Port Arthur (Tex.) refinery last year and asked their advice on how to improve the plant's performance. The result was higher morale, according to refinery general manager Todd Monette, and a 30% reduction in unplanned maintenance work.
DARE TO INNOVATE

Innovating now can leave you nicely situated for a turnaround. Pfizer broke apart both its research and business units last year to help spur new ideas. Corey Goodman, head of Pfizer's Biotherapeutics & Bioinnovation Center in San Francisco, says the move has made "Pfizer more efficient and more entrepreneurial."

For those who are willing to take some risks, 2009 can be a time of great possibilities. "A leader is someone who doesn't do what everyone else does," says Richard S. Tedlow, a professor of business administration at Harvard Business School. "If you have a product you believe in, now is the time to make a bigger investment—not a smaller one."

Business Exchange: Read, save, and add content on BW's new Web 2.0 topic network
Profits of Doom

There is plenty of literature on making the most of a crisis. Some standouts: Winning in Turbulence, by Bain consultant Darrell Rigby, and Boston Consulting Group's "Collateral Damage" essay series, which suggests ways to survive the year ahead. Meanwhile, Alexander J. Field, a professor at Santa Clara University, bucks conventional wisdom with a paper calling the Great Depression "the most technologically progressive decade of the century."

To check these out, go to http://bx.businessweek.com/management-ideas/reference/

Return to the Best Managers Table of Contents

Thornton is a senior writer for BusinessWeek.

Managing Through a Crisis: The New Rules 1

2009-01-12T08:55:00.001+07:00

By Emily Thornton

What do Carnegie Steel and Hewlett-Packard (HPQ) have in common? Both were born at a time when people thought the world was falling apart. Andrew Carnegie launched his first steel mill during the Panic of 1873, the start of a long depression. He took advantage of low costs to build an industrial giant that made him the world's richest man. Bill Hewlett and Dave Packard showed similar courage when they launched HP from a Palo Alto (Calif.) garage toward the end of the Great Depression.

History has shown that crisis breeds opportunity. Business leaders may have to cut costs to survive 2009, but the smart ones are also out there looking for prospects. They are willing to take the type of bold move that IBM (IBM) made during the recessionary days of 1981 when CEO John R. Opel aggressively rolled out the company's landmark personal computer just as PC demand soared. Even in the current downturn, there are companies like AT&T (T), which recently announced plans to buy two companies for a total of $1.2 billion. "A recession creates winners and losers just like a boom," observes Mauro F. Guillen, a professor of international management at the University of Pennsylvania's Wharton School.

Managers are now dealing with everything from shattered consumer confidence to tighter credit, not to mention the likelihood of a tougher regulatory environment. Decisions that made sense two years ago may prove disastrous in this climate—from giving outsize rewards to those who take big risks to borrowing heavily just because interest rates are low. Years of excessive borrowing have taken a toll: An unprecedented two-thirds of nonfinancial American companies covered by Standard & Poor's have speculative-grade, or junk-rated, debt. (S&P, like BusinessWeek , is a unit of The McGraw-Hill Companies (MHP).) On the whole, U.S. businesses face a $238 billion wave of debt maturities that will come due by the end of 2009. "Many companies are questioning their survival," says Gerry Hansell, a senior partner at Boston Consulting Group.

Executives have to lead "their people out of a psychological funk and at the same time tailor their business to focus on a new reality," says management consultant Ram Charan. That's good advice during any business cycle but especially important today. Here are some new rules for managing through a tough 2009—and beyond:
CHANGE YOUR MINDSET

Money is scarce. Markets are volatile. Morale is harder to boost in an atmosphere of anxiety. Acknowledge to yourself and your team that the world has changed. Dennis Carey, a senior partner at Korn Ferry International (KFY), argues that now is the time to question every technique that worked during boom years. "You can't rely on a peacetime general to fight a war," says Carey. "The wartime CEO prepares for the worst so that his or her company can take market share away from players who haven't."

Many of the best managers in 2008 were gearing up for battle during good times. Mark Hurd at Hewlett-Packard, for example, has made drastic cost cuts, shed marginal businesses, and focused on playing to HP's strengths over the last few years. Jamie Dimon of JPMorgan Chase (JPM) made substantial changes that shored up his bank's balance sheet and left him ready to pounce as rivals fell.
GET YOUR FINANCIAL HOUSE IN ORDER

A key issue for many companies right now is getting the funds needed to help a business grow. Only those with strong balance sheets stand a chance. Everyone used to have easy access to capital. No more.

A year after $100, oil prices cut in half part2

2009-01-03T08:55:00.000+07:00

Activity in the U.S. oilfield already reflects expectations for anemic demand. Baker Hughes Inc. reported Friday the number of rigs actively exploring for oil and natural gas in the United States fell by 98 last week to 1,623. That's nearly 16 percent fewer rigs at work than when oil prices peaked in July, and 9 percent below the year-ago figure.

The Department of Energy said Friday it plans to take advantage of the huge drop in crude prices and is soliciting bids to buy 12 million barrels of oil this year to replenish the nation's Strategic Petroleum Reserve. The reserve is an emergency depot maintained by the Energy Department and can hold as much as 727 million barrels of oil in salt caverns along the Gulf Coast. The DOE said the new supplies will replace those used after hurricanes Katrina and Rita severely crimped oil supplies in 2005.

The February contract for crude rose $5.57 on Wednesday, the last trading day of 2008, to settle at $44.60 after Russia threatened to cut off natural gas supplies to Ukraine. Russia followed through with that threat Thursday, though both countries pledged they would keep supplies to the rest of Europe flowing.

As of late Friday afternoon, no interruptions outside Ukraine were reported.

Analyst Olivier Jakob of energy analysis firm Petromatrix in Switzerland said Ukraine has enough reserves to avoid an immediate risk to its supplies, as long as both parties find an agreement by the end of next week.

The European Union depends on Russia for about a quarter of its gas, with about 80 percent of that delivered through pipelines controlled by Ukraine.

Concerns that the week-old conflict between Israel and Hamas in Gaza could disrupt supplies in the oil-rich Middle East helped keep prices from falling further.

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has announced production cuts totaling more than 4 million barrels per day in the last few months. Analysts say crude's direction in the early part of 2009 will be linked largely to whether the cartel adheres to the new quotas.

The national average at the pump rose slightly overnight but remains well below year-ago levels. The national average for regular unleaded rose eight-tenths of a cent to $1.626 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Still, prices are down 17.7 cents from a month ago and $1.426 from a year ago.

In other Nymex trading, gasoline futures rose 4.85 cents to $1.11 a gallon. Heating oil rose 3.8 cents to settle at $1.48 a gallon, while natural gas for February delivery jumped 24.9 cents to $5.971 per 1,000 cubic feet.

In London, February Brent crude rose $1.32 to settle at $46.91 a barrel on the ICE Futures exchange.

"If there is a disruption in natural gas supplies to Europe, then you will see an increase in the usage of oil instead of natural gas. It will have an impact on oil prices," Jakob said.

A year after $100, oil prices cut in half part1

2009-01-03T08:54:00.000+07:00

By JOHN WILEN AP Business Writer | AP

Exactly one year after crude eclipsed $100 a barrel for the first time, 2009 trading began Friday with prices roughly half their year-ago levels, and some believe oil could be headed even lower.

Oil markets kicked off the new year with crude climbing above $46 a barrel. A variety of factors were likely at work, including continued violence in Gaza and expectations that OPEC would carry out its largest production cut ever to stem historic price declines.

Oil market activity was also light as many traders took a long holiday weekend, and that can lead to price swings.

"I have a feeling, more than anything, it's the thin trading conditions pushing the price higher," said Peter Beutel of energy consultancy Cameron Hanover.

Light, sweet crude for February delivery rose $1.74 to settle at $46.34 a barrel on the New York Mercantile Exchange.

Oil's surge into triple digits for the first time one year ago was the start of a climb that would peak above $147 a barrel by July. Since then, amid fears of a prolonged global recession and crumbling worldwide demand, crude prices have plunged more than 70 percent.

Gasoline prices ticked up a bit overnight, but the average price for a gallon of unleaded is still more than $1.40 cheaper than a year ago.

"Thank goodness that's over!" Raymond James & Associates said in a note to clients Friday, summing up what many traders feel after the most volatile year since crude futures were first offered on Nymex in 1983.

The same gloomy economic data that drove prices into the mid-$30s in the final month of the year continued into 2009.

A private group's measure of manufacturing activity fell more than expected in December, hitting the lowest reading in 28 years as new orders and employment continue to decline. The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December from 36.2 in November. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.

Any reading above 50 signals growth, while a reading below 50 indicates contraction. The index has fallen steadily for the last five months.

A weakened manufacturing sector suggests demand for energy will not rebound any time soon.

Where to Locate Your Business part 2

2009-01-03T08:29:00.001+07:00

Most small companies aren't simply looking for the cheapest place to do business, Ubalde says. Instead entrepreneurs tend to ask where they can find the best workers,, as Rousselle did. That's why cities like New York and San Francisco remain attractive despite their high costs, Ubalde says.

Aside from the labor pool, tax rates differ significantly from state to state, and they may be more important for small businesses with few employees. S-corporations and other companies that don't pay corporate income taxes can benefit from states that have low personal income tax. Moving from California to Washington state, for example, could save a small business owner 9% or 10% of taxable income, according to data from the Tax Foundation, a nonprofit Washington, D.C. research group.
Haphazard Approach Not Uncommon

Areas with low taxes often also have lower costs, and the combination can entice entrepreneurs who are priced out of places that are more in-demand, says Tax Foundation economist Josh Barro. "If you're looking for a place where you can start your small business with reasonable costs, you might not be able to do it in New York or New Jersey, but you might be able to do it in Florida," he says. (For a look at the Tax Foundation's list of 25 states with the lowest projected tax rates for 2009, flip through this slide show.)

Those small businesses in a position to create jobs can appeal to local economic development groups for help. Blaine Kern, CEO of forensics lab Human Identification Technologies, found an expansion site in September in Kirkesville, Mo., through Site Selection Network. The Mission Viejo (Calif.) company offers a free service that distributes proposals from companies to 162 economic development groups, who pay for membership in the network. Kern plans to hire between 100 and 200 workers there over the next five years. His current lab, in Redlands, Calif., has fewer than 20 employees and around $7 million in revenues. "If you look at our ability to lower price point and increase profit margin, the labor pool in Missouri is about 41% less expensive when it comes to salary," he says. That's savings on top of refundable tax credits from the state.

Small business owners have long taken a haphazard approach to choosing a location, says ZoomProspector's Ubalde, which puts them at a disadvantage. That might be a minor drag in good times, but in a downturn it can mean the difference between survival and failure. "For some businesses it's the difference of literally millions of dollars each way in affecting the bottom line," Ubalde says.

Tozzi covers small business for BusinessWeek.com.

Where to Locate Your Business part 1

2009-01-03T08:28:00.000+07:00

By John Tozzi

Adam Rousselle needed to move. His firm, then based in Doylestown, Pa., uses sophisticated technology to identify trees that threaten to take down power lines, and demand from power companies was surging. By last summer, he expected to increase Utility Risk Management's eight-person staff with dozens of new engineers, programmers, and mathematicians. But 25 miles outside Philadelphia, his 3-year-old, $10 million company was too small a player to attract that much talent that quickly.

So in July, Rousselle relocated to the ski town of Stowe, in Vermont, a state with roughly the same population as Bucks County, Pa. He now has the attention of Vermont Governor Jim Douglas and other leaders in government, industry, and academia, all eager to bring technology jobs to a state heavily reliant on tourism. It's attention his small firm didn't get in Pennsylvania. "The governor came to welcome 18 people who came to my job fair," Rousselle says. He now plans to hire 26 people before the end of February.

Each year, entrepreneurs start or expand some 650,000 small companies, according to data from the Small Business Administration. Choosing the right place can mean the difference between profitability and failure. But few small business owners put the same care into locating their companies that Rousselle did, consultants who specialize in site selection say.
State Incentives a Plus

Large corporations typically pay professionals high fees to find the best location for new plants, offices, or stores. But the cost can be prohibitive for small companies, ranging from $50,000 to $125,000 or more. Small firms may hire consultants for key projects, but they more often work with local economic developers, says Mark Arend, editor of Site Selection, a trade publication covering the industry."

Rousselle considered three states besides Vermont to relocate Utility Risk Management: Michigan, Florida, and elsewhere in Pennsylvania. In the end, he says, the labor force, financial incentives, and support from state officials made Vermont the best fit. In addition to mobilizing state leaders to recruit for the company, Utility Risk Management will benefit from an estimated $380,000 in cash incentives through the Vermont Employment Growth Incentive program. Rousselle says he can get up to $5,000 per employee each year to train them in specific skills his customers want. And, he says, he can offer lower salaries than he needed to in Bucks County and still be competitive in the labor market.

The choice won't be as clear cut for most small business owners. Many factors affect whether a place is a good location for a particular business, including the labor force, tax rates, distance from suppliers and distributors, access to transportation, and the local market for the company's products or services. "Is there a perfect location? There is no such thing," says Anatalio Ubalde, co-founder of GIS Planning, a San Francisco company that analyzes geographic data for economic developers. "Is there a better location than another one? The answer is yes."
ZoomProspector Offers Free Help

GIS Planning launched a site three months ago called ZoomProspector.com, designed to help entrepreneurs find and evaluate potential sites based on what attributes of a place matter most to their business. Other Web sites like City-data.com provide local information, but Ubalde says ZoomProspector's proprietary data, much of it collected from the company's economic development clients, offers small business owners access to the same information large companies use when they decide where to site new locations. ZoomProspector is free for users and makes money by selling geographically targeted advertising, Ubalde says.

Mortgages: What You Need to Know in 2009 part 2

2009-01-03T08:27:00.000+07:00

Check Your Finances

The hurdles to get one of those low fixed-rate loans are high because Fannie Mae (FNM) and Freddie Mac (FRE) have tightened standards for the loans they'll buy or guarantee, even though the two mortgage finance giants are now under government conservatorship. You'll need a FICO score of at least 720 for the best interest rate, although for a big enough fee Fannie and Freddie will guarantee loans with FICO scores down to the mid-600s. You may also need a down payment of 20%. In the boom times you could get a "piggyback" loan to shrink your down payment, but those are history. Even private mortgage insurance, which used to cover some of the financing gap up to 20%, is much harder to get now because the issuers have suffered big losses.

Lately, says LendingTree's Findlay, the highest hurdle for many buyers has been lenders' debt-to-income standards. Here are the numbers, as of late December, according to LendingTree: For a Fannie or Freddie conforming loan, monthly mortgage payments cannot exceed 28% of gross income, while all debt payments (including student loans, etc.) cannot exceed 36% of gross income.

For a Federal Housing Administration-guaranteed loan, the corresponding figures are 29% for mortgage debt and 41% for all debt.
Before Making an Offer, Get Pre-Qualified

Home sellers are likely to give you a better deal on a house if you're pre-qualified for a mortgage. Why? Because it shows you can get the deal done quickly. In this market, nothing burns a seller more than being strung along by a buyer who wants the house but can't qualify for a loan to buy it.
First-Time Borrowers: Get Credit Counseling

A lot of the mess we're in now could have been avoided if first-time home buyers had paid attention to warnings about getting overextended. If you don't want to listen to your parents or nosy brother-in-law, then visit a credit counseling agency. Says Rick Sharga, marketing vice-president at RealtyTrac: "Most people getting into the market for the first time seriously underestimate the cost of maintaining a home, from taxes to upkeep. What happens if that water heater blows? Do you have enough money to pay for it without missing a mortgage payment?"
Think Hard About Refinancing Now

The decision about when to refinance comes down to personal risk preferences. Of course, you should also run your numbers through one of the many online calculators (a rough rule of thumb is that it makes sense to refinance if the new rate is a full percentage point below your current rate and you don't plan to move soon).

The argument to wait, as expressed by BanxQuote.com President Norbert Mehl, is that the Federal Reserve and Treasury Dept. are determined to force mortgage rates lower in 2009 and are bound to have their way. Says Mehl: "The pressure on the banks will continue to mount to bring down interest rates, not just on mortgages but on all kinds of personal loans."

In contrast, LendingTree.com's Findlay says that while it's reasonable to guess that rates will fall more, nothing's for sure. "Rates have come down so fast that trying to pick the bottom is a mistake," he says. "Their propensity to slingshot back up is high." He votes for refinancing now if the numbers work.

So, pull the trigger or wait? Nobody but you can decide this one.

Coy is BusinessWeek's Economics editor.

Mortgages: What You Need to Know in 2009 part 1

2009-01-03T08:26:00.000+07:00

By Peter Coy

With all the doom and gloom over housing, you might be surprised to know that this is a fantastic time to get a mortgage. Not if you have poor credit, to be sure. But you can get a great deal on a 30-year, fixed-rate, conforming loan these days if you have a solid FICO score, a manageable debt burden, and proof positive of a reliable income.

You have to go back to around 1961 to find a time when 30-year mortgages had rates this low, according to Keith Gumbinger, a vice-president at financial publisher HSH Associates in Pompton Plains, N.J. For that, thank the U.S. government, which is trying to jump-start the stalled housing market by buying up mortgage-backed securities. On Dec. 31, Freddie Mac reported that average rates on 30-year fixed mortgages dropped to 5.1% for the week, down about 1.3 percentage points since late October and the lowest since its survey began in 1971.

Rates are probably headed even lower in 2009, raising the question of whether you should borrow now or wait for a better deal. The experts are sharply divided over this one. Put it this way: If you're a gambler, wait. If you can't sleep at night worrying that rates will go up from here, borrow now.

Here are some key things you need to know about today's mortgage market:
Now More Than Ever, Shop Around

In ordinary times, one loan is about as good as another because most lenders' offers on 30-year loans are clustered within around a quarter of a percentage point. Not now. With the economy so shaky, lenders are all over the map in how much risk they're willing to take in making loans. So it really pays to shop around. And keep checking, because rates are constantly changing. One day in late December 2008, Wells Fargo (WFC) was offering 30-year conforming loans at 5.0% plus one point, while Bank of America (BAC) was offering the same kind of loan at 6.625% plus one point, according to Cameron Findlay, chief economist of LendingTree.com, a division of Home Loan Center. No offense to Bank of America, but only a sucker would have borrowed from it instead of Wells Fargo that day.
For New Loans, Get a Fixed Rate

Forget what you were told in quieter times about the pros and cons of fixed- vs. adjustable-rate mortgage loans. These days, all the best deals are on fixed-rate loans because that's the segment of the market that the government has been targeting with support. The securitization of adjustable-rate loans has mostly dried up, so banks don't want to originate ARMs, therefore they don't offer attractive rates on them, says HSH's Gumbinger.
If You Have an ARM, Keep It for Now

On the other hand, if you got an ARM in the past and it's coming up on an interest rate reset, don't rush to unload it. Short-term interest rates have gotten so low that you're very likely to see your monthly payment fall. Thank your lucky stars if your ARM happens to be indexed to the one-year Treasury bill, whose yield has fallen below half a percent. Even with the typical spread added on, you're still paying only around 3.25% a year, says Gumbinger. ARMs indexed to LIBOR (the London Interbank Offered Rate) are resetting these days to the low 4s, which is still excellent.

2 big banking sector acquisitions completed

2009-01-03T08:25:00.000+07:00

By HARRY R. WEBER

ATLANTA

Two mega acquisitions in the banking sector have been completed following the biggest financial crisis to hit the United States since the 1930s, capping a year in which Wall Street stocks were hammered, home foreclosure rates soared and job losses mounted.

Bank of America Corp. said Thursday it has completed its $19.4 billion all-stock purchase of Merrill Lynch & Co., while Wells Fargo & Co. said it has completed its $12.7 billion all-stock purchase of Wachovia Corp.

Merrill Lynch's sale to Charlotte, N.C.-based Bank of America, announced Sept. 15, creates the nation's largest financial services company. San Francisco-based Wells Fargo's purchase of Wachovia, a deal that was announced Oct. 3, creates a coast-to-coast powerhouse with community banks in 39 states and the District of Columbia.

Shareholders of Merrill Lynch received 0.8595 shares of Bank of America common stock for each common share of Merrill Lynch they owned. That valued Merrill Lynch at $19.4 billion based on 1.6 billion Merrill common shares outstanding as of the last filing date and Wednesday's Bank of America closing stock price of $14.08.

Wachovia shareholders received 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock they owned. That valued Wachovia at $12.7 billion based on 2.16 billion Wachovia common shares outstanding as of the last filing date and Wednesday's Wells Fargo closing stock price of $29.48.

Besides acquisitions, the turmoil in the banking sector has brought announcements of big job cuts and loans to several banks from the government's $700 billion rescue fund.

The Bank of America-Merrill Lynch deal was struck as the solvency of investment banks was in grave doubt, and kept Merrill, which lost billions of dollars in the subprime mortgage crisis, from a complete meltdown like the one suffered by Lehman Brothers Holdings Inc., which was forced to file for bankruptcy.

New York-based Citigroup agreed to step in and buy Wachovia's banking operations for $2.1 billion with the help of the Federal Deposit Insurance Corp. But only four days later, Wells Fargo made a higher offer that did not hinge on any government support and ultimately won the right to purchase all of Wachovia and its businesses and obligations, including all of its banking deposits.

On Dec. 11, Bank of America said it expected to cut 30,000 to 35,000 jobs over the next three years. The final number could be even higher, analysts say. Bank of America said at the time it hadn't yet completed its analysis for eliminating positions, and wouldn't until early this year. Including Merrill Lynch, Bank of America has about 308,000 employees. It said the cuts would affect workers from both companies.

Bank of America reiterated Thursday it expects to achieve $7 billion in pretax expense savings by 2012. It said the cost reductions would come from a range of sources, including the previously announced job cuts and the reduction of overlapping technology, vendor and marketing expenses.

Bank of America said it will have the largest wealth management business in the world with roughly 20,000 financial advisors and more than $2 trillion in client assets. It said the combination also adds strengths in debt and equity underwriting, sales and trading, and merger and acquisition advice, creating significant opportunities to deepen relationships with corporate and institutional clients around the globe.

As for Wells Fargo, it said that with Wachovia, it now has $1.4 trillion in assets and for the first time has a community banking presence in Alabama, Connecticut, Delaware, Florida, Georgia, Kansas, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C. As of Thursday, Wells Fargo and Wachovia customers have free use of all of the company's combined ATMs, Wells Fargo said.

There did not appear to be any plans to immediately change the Wachovia name to Wells Fargo. A Nov. 24 regulatory filing said that the plan to integrate Wells Fargo and Wachovia operations was still being developed. The filing said an estimated $1.9 billion in costs was expected to be incurred over time due to "branch and administrative site consolidations, name change and signage."

The chief of Bank of America has said previously the bank intends to keep the Merrill Lynch name intact.

Stocks to Fulfill Those New Year's Resolutions part 2

2009-01-03T08:24:00.001+07:00

Spend More Time with Family

Even when things at their workplace are relatively stable, many people view the start of a new year as a chance to rearrange priorities in order to spend more time with their families. That can be done on the cheap by staying home more frequently to play games and by volunteering time to help coach after-school sports programs. Resolutions might also include plans for family vacations and other outings.

Theme parks such as those run by Walt Disney (DIS) could benefit from such determination, but they're also more vulnerable to consumer pullbacks in the tough economic environment. Disney's theme parks generate about 20% of the company's operating income, according to Jeffrey Logsdon, an analyst at BMO Capital Markets.

David Miller, an analyst at Caris & Co. in Los Angeles, thinks the Wall Street consensus forecast for Disney's profits in fiscal year 2009 is overly pessimistic. "We believe sufficient evidence exists to suggest that Disney will block and tackle against this recession more nimbly that what is currently reflected in the stock price," he wrote in a Dec. 9 research note. Therefore the opportunity to buy shares at less than 12 times fiscal 2009 earnings is too compelling to ignore, he said.

Miller predicts Disney's theme park revenues will decline 6.4% this year, with attendance expected to drop by 7.4%, and per-person spending to improve by 1%. That translates to a projected 13.2% drop in earnings before interest and taxes—which he believes is conservative, given that Disney hasn't backed off from last August's price hikes at both U.S. parks and hasn't cut park hours, as it did during the 2001 recession.

A weakened U.S. dollar helped Disney attract visitors from overseas for most of 2008, and the recent strengthening of the greenback has taken only a little of that benefit off the table, says Jeffrey Logsdon, an analyst at BMO Capital Markets. He doubts many Europeans will opt against a Disney vacation because of minor swings in the euro's value against the dollar.

The tendency of U.S. consumers to stay closer to home during recession probably works in Disney's favor, says Logsdon. Locals account for about two-thirds of the visitors to Disneyland in California and for between 33% and 40% of visitors to Disney World in Florida, he estimates. Disney is also maintaining traffic through promotions such as offering seven nights in its hotels for the price of four, which should drive bookings at least until the summer, he predicts.
Taking Charge of Finances

After seeing so much of their hard-earned retirement savings evaporate as financial markets collapsed—plus the Bernard Madoff investing scandal—people are considering changing the way they manage their investment portfolios as well. No matter which type of investment or adviser they favored, pain has been widespread. "They're inclined to reevaluate and for that reason there's likely to be a fair amount of movement between [financial services] firms," says Jeffrey Hopson, an analyst at Stifel Nicolaus in St. Louis. But because it's clear that people who handled their own portfolios didn't necessarily do any better, it remains to be seen if there will be greater demand for online brokers, he adds.

Charles Schwab (SCHW) came through the financial debacle pretty well, and is "likely to pick up market share from traditional brokerage firms that have had bad publicity," such as Merrill Lynch, says Hopson.

Besides being fairly low-cost, Schwab's platform is also user-friendly, allowing clients to decide how they want to be serviced. They can choose telephone, Internet, or personal service from a dedicated financial adviser. Plus the company's product line doesn't have a lot of biases—meaning its advisers don't try to push certain investment products on clients. "The quality of the company and the fact they've gotten through this [financial crisis] without any issues, I think, gives people comfort," says Hopson. Another advantage is that Schwab derives less of its revenue from broker fees than many of its peers.

For now, there's no question that many people are glad 2008 is ending. They'll ring in the New Year with hopes of better times and opportunities to come.

Bogoslaw is a reporter for BusinessWeek's Investing channel.

Stocks to Fulfill Those New Year's Resolutions part 1

2009-01-03T08:22:00.000+07:00

By David Bogoslaw

As 2008 becomes a bitter and fading memory, it's fair to assume U.S. consumers are doing what they usually do as they ring in a New Year: make yet another round of resolutions that range from losing weight to eating more healthfully, and to spending more quality time with their families. This year there's a catch. Most lifestyle changes call for discretionary spending, and with the recession expected to deepen and bring more job losses, people tend to forego changes until they feel more financially secure.

Losing weight is usually the top priority when it comes to making New Year's resolutions. Over the long term the weight loss industry has been benefiting from increasing obesity both in the U.S. and abroad. Weight Watchers (WTW) and NutriSystem (NTRI) are two of the leading diet programs—and each work, says Greg Badashkanian, an analyst at Citigroup Global Markets.

Over the last two quarters, attendance in both programs has slowed a little as fewer new users have joined because of the softening economy, says Badashkanian. Feeling besieged by worries about shrinking home values and investment portfolios—as well as the looming threat of unemployment—some people may seek refuge in comfort foods and make shedding pounds a lesser priority. "January is obviously the most important time for diet companies because you have all these New Year's resolutions that dieters make," he says. "With the tough economy and the negative headlines from news stories on their minds, will they decide to go on a diet or maybe forgo that?"
Dieting can save money

Weight loss programs are a low-cost discretionary purchase compared with much more expensive items like recreational vehicles, whose sales are down more than 50%, says Badashkanian. Since NutriSystem customers get all of their food needs filled for just $10 a day, he sees that program as more of a staple. But while $10 a day for food is a bargain, NutriSystem still shows up on credit cards as a $300-a-month charge. "So,in their minds, there could be some reluctance to make that purchase," Badashkanian says.

Weight Watchers charges $10 a week for a support service with information to help people diet. That translates to a lower monthly expense, but doesn't include food, he says.

Given the weak economic outlook for 2009, Karen Howland, an analyst who covers healthy lifestyle stocks for Barclays Capital, expects the companies she follows to increase sales by only 3.3% this year, vs. 8.6% growth in 2008. "Most of our stocks have strong free cash flow and limited financing needs and should not need to access the capital markets in 2009 or 2010," she said in a Dec. 18 research note.

The $163 million of debt that Weight Watchers has to repay in fiscal year 2009 represents roughly 90% of what Barclays estimates will be the company's free cash flow, which includes the annual dividend.
Staying Fit

Health and exercise clubs such as Life Time Fitness (LTM) and Town Sports (CLUB) also typically benefit from New Year's resolutions, but economic stress may hamper their growth this year, some analysts say, In her note, Howland at Barclays warned that earnings for the healthy lifestyle stocks she covers could fall 7.9% on average in 2009—much more than the 1.9% drop projected by Wall Street, and compared with no change in 2008 from the prior year. These companies tend to be highly sensitive to consumer confidence and spending, she said.

Even though Howland trimmed her fiscal 2009 earnings estimate for Life Time to $2.09 per share, from $2.20, she predicts it will still increase profits by 4.6% over fiscal year 2008 "as centers opened in the past three years become more mature (and subsequently more profitable)."

There's also the possibility that Leonard Green & Partners, which bought a 9.2% stake in Life Time between Oct. 3 and Nov. 24, could take the company private. This "is likely to give owners of the stock some reassurance and a reason to hang on, while potentially causing short sellers (31% of the float) to cover and take profits," Credit Suisse analyst Paul Lejuez said in a Nov. 24 research note.

Investors' Wish List

2008-12-29T09:38:00.000+07:00

Posted by: Ben Steverman on December 24

1. A promise that stocks will move higher in January.
The Stock Trader’s Almanac argues for the importance of its January Barometer:

…the most crucial indicator will be the full-month January Barometer, which states as the S&P 500 goes in January, so goes the year. Devised in 1972 by Yale Hirsch, this gauge has provided an accuracy ratio of 91.4%. It will be especially indicative with the market reacting to the agendas and priorities being set by the new Obama administration and a new Congress convening in addition to regular slew of economic data releases, earnings announcements and market forecasts.

The barometer was correct in 2008, when stocks tumbled almost 8% in January, then dropped more than 40% the whole year.

2. An end to crazy volatility.

Since the start of the financial crisis — and particularly since the collapse of Lehman Brothers — we’ve gotten used to wild swings in the stock market. These moves occur not just from day to day, but from hour to hour, often apparently in reaction to no news at all.

It’s all a sign of investors’ confusion about where the market (and the economy and financial system) are headed. Volatility also has scared away investors who might otherwise have jumped into this market. Why buy now if later this afternoon stocks might be down another 3%?

3. More confidence for executives and analysts about where earnings are headed.
Lately, corporate executives have sounded as confused as everyone else about the state of the economy and their own businesses. Analysts are predicting S&P 500 earnings fall 8.5% in the first quarter of 2009, but analysts have been rapidly adjusting their estimates all year. Few investors take them seriously anymore. If investors could have more confidence analysts’ and executives’ predictions are right, they could consider buying stocks based on their fundamentals. But with the future so fuzzy, it’s hard to be sure that stocks are indeed priced cheaply.

4. Unemployment that stays near 7%.
It seems likely that the jobless rate is going up (from 6.7% in November), as demonstrated by news that initial jobless claims rose 30,000 to 586,000 for the week ending Dec. 20. More job cuts may be planned for the New Year as well. However, the unemployment rate can’t jump too high or consumer spending will plunge and prospects for a 2009 economic recovery become bleak.

5. An end to scandals, collapses and other confidence-shaking events.
The Bernard Madoff debacle is the latest of the big financial headlines to shock investors this year. It started with the collapse of Bear Stearns, continued with the demise of Lehman Brothers, the trouble at AIG and the Bush Administration’s request for a $750 billion bailout.

All these big headlines have rattled investors. It’s important to the stock market’s psychological health that conditions quiet down for a bit.

But if the bad news won’t stop, perhaps investors would settle for a more aggressive Securities and Exchange Commission. An aggressive federal regulator could help assure people their money is safe from the unscrupulous investment managers.

If you put together an investing wish list, what would be on it?

Stocks: Five Trends to Watch in 2009 (3)

2008-12-24T10:58:00.000+07:00

Some people might argue that this is the worst time to go into annuities because the market has already suffered most of its downside. But if you're a retail investor sitting on sidelines, paralyzed between your logical and emotional inclinations, for an extra fee an annuity can offer peace of mind without having to sacrifice higher returns from riskier bets, he says.

Many insurance firms that offer these structures are starting to recognize they should be charging more, given the losses they're taking in the current market environment. Marshall doubts that the insurance companies will make annuities so prohibitively expensive as to kill demand for them, but they may eliminate some of the riskier mutual fund options and require investors to invest in some sort of balanced portfolio, he adds.
Emerging Markets

Most economists believe the recession will be less severe for the U.S. than for other developed economies, especially those in Europe. The sharp drop in values for assets in emerging markets in 2008 has scared off many investors, but Peirce at State Street sees the decline as more of a correction to the outsized gains made in 2007. "They didn't really underperform that badly relative to past episodes. It reflects that they've come a long way. They've learned to handle their finances more effectively," he says.

Developed international markets may face fundamental challenges that are more daunting than those in emerging markets in the years ahead, he warns. Not only does the population growth and increase in consumer demand in emerging markets bear watching, but many of these economies have an advantage by being much less indebted than most developed countries, says Peirce.

China continues to be very export-oriented and the huge fiscal and monetary stimulus programs it has announced should enable its economy to keep growing at a reasonably fast pace. The process of moving its culture from one based on savings to one geared more toward consumption is a long one but it is happening, he says. As for the rest of Asia, the watershed financial crisis experienced by those countries a decade ago "prevented them from engaging in some of the excesses that we've spent our time doing in the last 10 years," he says.

For the broadest exposure, ETFs that track the MSCI Emerging Markets Index are worth considering.
Geopolitical Risks

One might wish that a global recession of enormous proportion was the only concern over the the next year or so, but unfortunately geopolitical risks continue to simmer. From tensions between Pakistan and India to a looming nuclear threat from Iran and other assorted minefields, the incoming Obama Administration won't have much room to make mistakes, warns Bob Andres, president of Andres Capital Management outside Philadelphia.

Expectations that President-elect Barack Obama will be able to lead the U.S. economy out of its current financial woes are running so high that if he fails to do so it's likely to diminish his international clout to broker geopolitical solutions, says Andres. He cites Vice President-elect Joe Biden's recent comment that the new President is sure to be tested on the diplomatic front.

Anything that damages Obama's ability to handle overseas threats will reduce confidence and would have a negative impact on the stock market, warns Andres. It seems that investors will have to read the international section of the paper as carefully as the business pages in 2009.

Bogoslaw is a reporter for BusinessWeek's Investing channel.

Stocks: Five Trends to Watch in 2009 (2)

2008-12-24T10:55:00.000+07:00

Government Stimulus

Another trend to watch is what form the government stimulus package takes and how quickly it works its way through the economy. There's been talk of a stimulus as big as $1 trillion but clearly the focus will be using the money in a way that gets the biggest bang for the buck.

The best results will come from "anything that allows the private sector to be more efficient and more productive," says Laufenberg at Ameriprise. That would include a large-scale effort to computerize medical records and wire schools and libraries for Internet access. And if the Obama Administration wants to preserve jobs, the answer isn't to bail out troubled companies since part of the package is likely to be requiring downsizing and job cuts farther in the future, he says.

Spending on public infrastructure projects that many states say are already in the planning stages would produce results more quickly than tax cuts, and would also be more likely to boost tax revenue over the long term than cutting taxes would, Laufenberg says.

Others, like Herrmann at Waddell & Reed, argue that tax cuts are quicker to stimulate the economy as long as they are permanent, not temporary. He believes a reduction in payroll taxes will come first and will result in higher consumer spending, which would benefit discount retailers such as Wal-Mart (WMT) more so than more expensive ones. A tax cut to corporations that accelerates the depreciation schedule on plants, property, and equipment could jump-start capital spending on technology and industrial machinery, he says.

If the stimulus package helps the economy recover faster than people currently expect, that would cause energy prices and stocks to rally, which argues for increased bets on energy and natural resources mutual funds, says Herrmann.

Laufenberg says that a sustainable expansion will depend not only on government stimulus but on some adjustment in prices, too. Lower interest rates and narrowing credit spreads are part of that process. While the market generally anticipates recovery about six months in advance, there will continue to be a lot of volatility around the economy, especially with a big drop in fourth-quarter gross domestic product and higher unemployment still to come, he says.

There will be plenty of opportunity to play sectors in the longer term, but in the meantime, Laufenberg recommends an index fund that tracks the broader market, as represented by the Standard & Poor's 500-stock index. "I don't know if you'll make money on that trade in the next week or month, but I can tell you that you will make money on that trade in the next two to three years," he says.
Continued Flight to Safety

The internal conflict for investors whose brains tell them it's time to take advantage of low valuations and start buying equities but whose emotions resist any type of risk is likely to continue in 2009, says John Marshall, co-founding partner of the Resource Group, a wealth management firm in Glendale, Calif.

For those investors, annuities could be the perfect way to get through the volatile times ahead, he says. Annuities allow you to take risk in sub-accounts through a broad menu of mutual funds while having your principal guaranteed by an insurance company in return for a fee. "I liken it to an automobile where it's going to cost you a small premium to put in extra safety features," says Marshall. "An annuity in some ways is like putting air bags on your portfolio. Even if you get into a fender-bender, you may not need the air bags, but it may be worth that expense in case you get into a major collision later on."

Stocks: Five Trends to Watch in 2009 (1)

2008-12-24T10:52:00.001+07:00

By David Bogoslaw

With the U.S. government determined to throw virtually everything in its toolbox at the recession in hopes of minimizing the economic pain, it may be all but impossible to single out any one policy element that started the recovery rolling. Indeed, there are so many moving parts right now in the economy—though the public perception may be that Bernanke, Paulson & Co. are spinning their wheels instead of moving the wagon forward—that it's tempting for investors to throw up their hands and find a nice quiet place to hole up until the recovery comes.

But you might be missing some opportunities to protect your portfolio or make some money. And that requires keeping your ear to the ground. BusinessWeek asked economists and investment strategists to identify five trends that bear watching in 2009 and that could provide clues about how to position your investment portfolio.
Deflation vs. Inflation

Deflation clearly has the upper hand over inflation for the foreseeable future, and the Federal Reserve's decision on Dec. 16 to knock down the Fed funds rate to a record low of zero to 0.25% drives home that fighting deflation is now the central bank's priority.

What few people mention, however, is the potential benefits of deflation for U.S. consumers, starting with the plunge in energy costs and a discernible easing in interest rates. That may hurt people who thrive on investment income but it's more likely to spell relief for individuals who still have jobs and companies looking to borrow or who want to refinance existing mortgages or other debt, says Dan Peirce , portfolio manager in the global asset allocation group at State Street Global Advisors (STT) in Boston.

That suggests some of the battered sectors in the equities market such as retailers, restaurants, and apparel chains may be able to beat market expectations in 2009, he says. If that's your belief, Peirce points toward sector-oriented exchange-traded funds or mutual funds that focus on consumer staples or even consumer discretionary stocks. Peirce says investors should not be dissuaded by all the front-page headlines about the auto manufacturers, which are part of consumer discretionary group but account for a much smaller portion of the sector than they once did. Even some of the more diversified media companies that focus on advertising and broadcast operations may be good bets in light of the beating they have taken, he adds.

Some strategists will tell you that as long as the deflation risk outweighs the potential for serious inflation, the bond market offers more attractive returns than equities. The real (inflation-adjusted) yields on 10- and 20-year Treasury Inflation-Protected Securities, or TIPS, compared with the nominal yields of regular Treasury notes of comparable maturity suggest that inflation will be extraordinarily low over the next 10 to 20 years, says Peirce. While the TIPS market has already priced in expectations of hugely negative inflation over the next two years, Peirce says his group doubts it will be that severe.

Although inflation probably won't be a credible threat again until at least 2010, it will become a concern much sooner in the next expansion than it had been in each of the last three expansions, Dan Laufenberg, chief economist at Ameriprise Financial (AMP) in Minneapolis, predicted in a report published Dec. 19.

If inflation returns sooner than expected, the place to be is in equities with exposure to rising commodity or asset prices, including energy and steel producers, says Hank Herrmann, chief executive at Waddell & Reed (WDR). Reducing your portfolio's allocation to fixed income would also be a good idea since inflation would push yields higher and bond prices lower, he says.

Crisis at Chrysler 2

2008-12-18T10:10:00.000+07:00

Worse, insiders at DaimlerChrysler say Chrysler is likely to post a loss in 2007 as well—an event that could seriously dent Daimler's share price and rekindle ire among institutional investors about the alliance, prompting calls for a spin-off. "If we don't see a visible improvement in 2007 at Chrysler, it's really bad news," says JP Morgan analyst Philippe Houchois.

Uebber and LaSorda, who also participated in the conference call, declined to forecast a recovery for Chrysler in 2007, noting that eight new models in the second half of 2006, and more in 2007 should help rekindle sales. By cutting production, LaSorda aims to bring unsold inventory down to around 500,000 vehicles by yearend. By the end of September, Chrysler's excess inventories were down to 534,000 from a 2006 peak of 580,000.
More Than Muddling

Beyond cutting inventory, management has launched a new initiative dubbed the "Chrysler Group Optimization Program" to study everything from product strategy and fixed costs to manufacturing capacity and quality. Seven corporate S.W.A.T. teams, which aim to slash $1,000 from the cost of building each Chrysler car, are headed by Chrysler executives but receive frequent visits from a group led by Mercedes Chief Operating Officer and restructuring ace Rainer Schmueckle.

"I don't want anyone to think we are sitting here and muddling through," said LaSorda. We are aggressively analyzing the business, including future break-even points if the market goes down."

Chrysler's third-quarter loss implies a loss of $2,600 per vehicle, Morgan Stanley analyst Adam Jonas calculated in a recent report—far greater than the per-unit loss posted at Chrysler in the depth of its crisis in 2000 and 2001. Jones now expects Chrysler to post a loss of more than $1 billion in 2007. "We cannot rule out the risk of even greater losses in 2007," Jonas says.
Guilty of Optimism

If market conditions in the U.S. remain unfavorable and Chrysler suffers another large loss in 2007, Zetsche could be forced to consider a spin-off as early as 2008, insiders say. Chrysler's double profit warning this year is an especially tough blow for Zetsche, who was hailed a year ago as the turnaround ace who fixed Chrysler when he returned from Auburn Hills to take charge of Mercedes Car Group.

A much chastened Zetsche admitted Sept. 19 to the major management blunder this year and took the blame for Chrysler's overly optimistic sales forecasts, which should have been corrected far sooner. Zetsche became CEO of the $190 billion-revenue DaimlerChrysler group on Jan. 1.

At the Paris Auto Show in September, Zetsche reiterated that the target for Chrysler's operating margin remains 5%. "When we can achieve that target is the right question," he said. "More than that, it has to be sustainable."
Back in Action

Zetsche gave the first hint of more radical solutions for Chrysler on Sept. 19 when he said he did not rule out long-term changes to DaimlerChrysler's structure. Uebber's comments on Oct. 25 seemed to confirm that a spin-off is one possible future option (see BusinessWeek.com, 9/19/06, "Turnaround Time at Chrysler—Again?").

As Chrysler veers off track, Mercedes is regaining traction. Zetsche has presided over a recovery at the $63 billion Mercedes Car Group following years of quality problems and a crisis at Smart that triggered large write-downs. Mercedes' operating profit rose 127% to $1.2 billion in the third quarter.

One-third of the profit gains came from increasing sales and higher-priced cars in the mix and two-thirds from cost-cutting. Mercedes is expected to achieve an operating profit of 7% in 2007—returning to its historic role as profit engine. Powerful profits at Mercedes could help Zetsche buy time in pondering Chrysler's future.

Edmondson is a senior correspondent in BusinessWeek's Frankfurt bureau. Welch is BusinessWeek's Detroit bureau chief.

Crisis at Chrysler I

2008-12-18T10:04:00.000+07:00

by Gail Edmondson and David Welch

The news is grim enough for Chrysler. A massive pileup of unsold vehicles this year prompted a $1.5 billion third-quarter loss—the third huge earnings bloodbath at Chrysler in six years (see BusinessWeek.com, 10/18/06, "Detroit's Oversupply Problem").

Once again German troubleshooters from parent company DaimlerChrysler's (DCX) headquarters in Stuttgart are shuttling to Auburn Hills, Mich., to analyze its ailing U.S. division. But, unlike in the past, this time there are no assurances by the Germans that Chrysler can be fixed.

Chrysler's swift decline has even raised the possibility that it could be spun off, an option top executives haven't publicly discussed but also did not dismiss. Asked at an Oct. 25 conference call with analysts and reporters whether a spin-off of Chrysler was among possible future options, chief financial officer Bodo Uebber replied, "We won't exclude anything. We are looking at structural changes. We are first doing our analysis. Then we will draw our conclusions."
Future Still Unclear

DaimlerChrysler's revenues for the third quarter declined 8% to $44 billion and its operating profit plunged 50% to $1.1 billion. Losses at Chrysler and aerospace unit EADS will outweigh gains this year at Mercedes and the truck division, forcing group profit down in 2006, Uebber said.

Nearly nine years since the merger of Daimler-Benz and Chrysler, Chrysler has become a chronic source of distress for the group's German top management. Despite billions spent to restructure Chrysler and some modest gains over the past two years, its future prospects remain murky.

The U.S. automaker continues to suffer from anemic sales—down 24% this quarter—an inability to anticipate major market trends such as the shift to fuel-efficient cars, production overcapacity, and erosion of market share. Only 16% of Chrysler's vehicles are fuel-efficient four-cylinder models, compared with an industry average of 37%.
The Cost of Conscience

Chrysler has a raft of passenger cars coming, for instance the just-released Jeep Compass crossover SUV, and soon, the new Chrysler Sebring and Dodge Avenger mid-sized sedans. But with more than 70% of its business in trucks, SUVs, and minivans, Chrysler will have to work hard to establish brand credibility among passenger car buyers, many of whom flock to Japanese and Korean models.

The company suffers from another common Detroit malady: retiree costs. Like rivals General Motors (GM) and Ford (F), Chrysler is paying for legions of retirees who rely on the corporation for their pension and medical benefits. Chrysler pays about $1,400 per vehicle in health-care costs, and the United Auto Workers union has frustrated Daimler CEO Dieter Zetsche and Chrysler chief Tom LaSorda by so far refusing to give them the same concessions on retiree benefits that saved GM $1 billion a year.

Chrysler also has a $22.3 billion pension plan that is underfunded by $1.7 billion. If Chrysler can't make up the shortfall by investing the pension fund's proceeds, it will have to spend more cash to get the plan flush.
"Really Bad News"

Auto industry analysts increasingly question whether Chrysler can escape a troubling pattern of swinging between modest profits in its best years and gushing losses in the worst ones. And that scenario makes it difficult to justify hanging on to Chrysler. "It's early to say the whole thing has to be unraveled, but they cannot keep throwing good money down the drain," says Garel Rhys, professor of automotive economics at the University of Cardiff in Wales.

Chrysler is now expected to lose $1.2 billion in 2006, dragging down group earnings and casting a shadow over a recovery under way at Mercedes Car Group.

Microsoft in Europe: The Real Stakes 2

2008-12-18T10:03:00.000+07:00

Slow-Moving Regulators

In recent years, the European Union increasingly has taken on the role of global regulator for the tech industry, filling the vacuum left behind as the U.S. Justice Dept., under the Bush Administration, took a much less active role in pursuing antitrust cases. The EU push continues under Competition Commissioner Neelie Kroes, who replaced Monti in 2004. Analysts say the outcome of this case will determine if the Commission's Competition Directorate has the legal toolkit to enforce antitrust law in the complex and fast-changing technology business.

Indeed, many observers complain that regulators and courts are far too slow ever to be effective at shaping tech competition. During the years Microsoft has squared off with the EU, its market share in server operating software has grown to more than 70%, while Windows still holds a 93% share of desktop operating systems and Microsoft Office commands a 97% share of personal productivity applications.

That's why rivals are prodding the EC to go after Microsoft again. They argue that Vista and Office 2007 demonstrate a longstanding strategy by Microsoft to eliminate alternative platforms that threaten its market control. "Microsoft continues to protect and extend its monopolies through bundling and selective denial of interoperability information," says attorney Vinje, who represents the group of tech companies going after the software giant in the latest protest. Besides IBM, Oracle, and Nokia, the coalition, which filed its complaint as the European Committee for Interoperable Systems, or ECIS, includes Sun Microsystems (JAVA), Adobe Systems (ADBE), RealNetworks (RNWK), and open-source software maker Red Hat (RHT).
Antitrust Decision's Weaknesses

The ECIS argues that the European Commission should take action to restore competition in the server market and preserve the open-source operating system Linux and the Internet as alternative computing platforms. If it doesn't, the risk is that much of the world will be locked into using Microsoft software for the next 10 years, says Carlo Piana, a partner at Milan law firm Tamos Piana & Partners who represents the Free Software Foundation Europe, an industry group that champions open-source software.

Brussels antitrust lawyers say it is possible the new complaint will go forward even if the Commission loses on several counts on Sept. 17. The EC's 2004 decision does have some potential weaknesses, say antitrust lawyers. The remedy to fix Microsoft's Media Player monopoly failed miserably, for instance: The EC forced Microsoft to sell a version of its Windows operating system without Media Player software bundled in—but only a few thousand copies of the stripped-down version were ever sold. And RealNetworks, despite the ruling, became irrelevant in the media player market.

Another problem is Microsoft has negotiated private settlements with five of the major rivals who supported the original European case: Time Warner (TWX), Sun Microsystems, Novell (NOVL), the Computer & Communications Industry Assn., and RealNetworks. That means all the evidence submitted by companies such as RealNetworks was stripped from the record before being submitted to the Court of First Instance.
Appeal Possible from Either Side

The court could, in fact, rule against the Commission on procedure, fact, or remedy. What is essential for the Commission is that the legal grounds for its decision are upheld. Without that, it may lack the legal precedent—and gumption—to proceed with new cases.

Microsoft is hoping for victory, of course, though it couches its ambitions in diplomatic language. "This isn't really a question of win or lose," says spokesman Tom Brookes. "Microsoft hopes it will get clarity on some of the big questions regarding what its responsibilities are, and hopes that will form a basis for a constructive conversation with the regulators and with the industry so we can all move forward."

Either side has two months and 10 days to appeal the judgment of the Court of First Instance to the European Court of Justice. If that happens, it is likely to take at least another 18 months for a final decision to be reached.

Schenker is a BusinessWeek correspondent in Paris.

Microsoft in Europe: The Real Stakes 1

2008-12-18T10:00:00.000+07:00

By Jennifer L. Schenker

Microsoft's legal battle with Europe's competition regulator will reach a climax on Sept. 17, when Europe's second-highest court, the Luxembourg-based Court of First Instance, hands down a judgment that could determine the future of antitrust policy in the technology sector, as well as the commercial and legal strategy of the U.S software behemoth.

The immediate issue before the court is whether to uphold the European Commission's landmark 2004 antitrust decision against Microsoft (MSFT) or to side with Microsoft in its appeal. But the stakes are much higher than just one case. If the Luxembourg court validates the Commission's order, Microsoft could face a future in which its product design decisions and licensing policies are subject to scrutiny by governments around the world. If the court sides with Microsoft, it could signal the death knell for any serious attempt by policymakers anywhere to rein in the software giant.

The issue is of vital importance in Europe and beyond. Even as both sides have waited for a ruling from the appeals court, a group representing Microsoft rivals, including IBM (IBM), Oracle (ORCL), and Nokia (NOK), filed yet another complaint against Microsoft with the Commission last year. They argue that with the new Vista version of Windows and Office 2007, Microsoft is trying to extend its dominance into even more areas of the market—and threatening the open nature of the Internet.

If the court overturns the Commission's 2004 decision, it would eviscerate Europe's antitrust effort—and likely stop movement on the new complaint. But if the justices affirm that Microsoft employed unlawful business tactics in the past, "the Commission will be empowered to prohibit their use in the future," says Thomas Vinje, a partner at the law firm Clifford Chance in Brussels who represents a coalition of tech companies behind the latest complaint. Microsoft almost certainly will press on, even if it loses: The company is expected to appeal a negative ruling to the European Court of Justice, the highest body in the bloc and final arbiter.
Moment of Truth

Microsoft has been in the crosshairs of European antitrust officials since 1998. In March, 2004, the EU's Competition Directorate, under the leadership of Mario Monti, ordered the company to offer a version of Windows without a built-in, or "bundled," digital Media Player. Microsoft also had to share proprietary technical information to help rival software products communicate better with Windows desktops and servers. And the EC ordered the company to pay a $613 million fine, imposing an additional $390 million penalty in July, 2006, for Microsoft's failure to comply with the technical disclosure remedy.

Microsoft appealed, and now, at last, the moment of truth has arrived. Legal experts familiar with the Microsoft case—as well as with the Court of First Instance and Europe's skimpy collection of antitrust precedents—are deeply divided on the likely outcome. Some predict a split decision, with Microsoft winning on the media player (bundling) component of the case but losing on the interoperability (disclosure) part. One way or another, the Sept. 17 ruling will determine how effectively the European Commission can go forward with legal challenges to companies such as Microsoft and Intel (INTC).

That's critical because even while waiting for the appeal ruling, the Commission has launched an antitrust investigation against Intel (BusinessWeek.com, 7/27/07). On July 27, it issued a "statement of objections" that alleges Intel broke European Union law with the aim of excluding its main rival, AMD (AMD), from the market for the widely used x86 computer chip.

Nokia: High Profits in Low-End Phones 2

2008-12-18T09:57:00.001+07:00

"We have been able with our volumes and marketing money to make it very difficult for competitors to match what we can offer," says Simonson. "And in the markets where we are also selling other products with heavy advertising behind the Nokia brand, there is a big overflow of marketing money in the sub-€30 segment."
Low-End Bonanza

Take India, one of the most promising and lucrative new markets for handset makers. The Finnish phonemaker's brand is now "what Kleenex is to tissue," says Piper Jaffray's Walker. Over 50% of all of the handsets sold by Nokia in the country are under €50, or $70.91. Sales of phones for less than €30 are growing fast and are expected to represent as much as 20% of the total device market in 2007.

While rivals are leery of following Nokia into the low end, the company has plenty of competition elsewhere. During an Oct. 18 conference call with investors, Chief Executive Olli-Pekka Kallasvuo singled out Apple (AAPL) and Research In Motion (RIMM) as competitors he's keeping an eye on.

Nokia holds 50% of the world market for smartphones, the pricey devices that let people handle e-mail, Web surfing, and more. But competition is expected to intensify as RIM continues to introduce devices and Apple's iPhone goes on sale in Britain, France, and Germany. "We are investing more money so that we can not only match that competition, but beat that competition," says Kallasvuo.
Allaying Some Worries

The U.S. is one of the company's few weak spots. Its market share is well behind what it holds overall in the world, in part because of technology issues and also because powerful wireless operators such as AT&T (T) and Verizon Communications (VZ) have chosen to use more malleable handset suppliers. Kallasvuo acknowledges the challenges, but says Nokia is determined to improve its overall position in the North American market. "We are not home and dry," he says. Next year "will be a critical year."

Kallasvuo also tried to allay a few fears about the company's future. In particular, he addressed concerns that Nokia's push into services could damage its relationship with wireless operators, by putting the company into competition with its own customers. On Oct. 1 the company made its biggest acquisition ever, agreeing to spend $8.1 billion on Navteq (NVT) (BusinessWeek.com, 10/1/07), a Chicago company that provides the digital mapping information underlying navigation devices and Internet services. Nokia already offers its own music service, similar to what companies such as Verizon offer.

In the third-quarter conference call, Kallasvuo pointed to an Oct. 9 deal with Spain's Telefónica as an example of the opportunities ahead. The two said they will work together to accelerate the adoption of new Internet services on mobile devices by giving Telefónica customers easy access to Net services developed by both companies. "We have ongoing discussions with many other operators across the world, and you will hear much more about that going forward," says Kallasvuo. "We can bring a lot to the table when it comes to services."

Who says Nokia can't find opportunities to cooperate where others see only competition? Its success in low-end phones shows the Finnish phone giant is able to pull off what few others can.

Schenker is a BusinessWeek correspondent in Paris.

Nokia: High Profits in Low-End Phones 1

2008-12-18T09:55:00.000+07:00

By Jennifer L. Schenker

Maybe there is high profit potential in low-end phones. On Oct. 18, Nokia (NOK) announced that third-quarter profit soared 85%, to $2.2 billion, handily beating analysts' estimates and sending its stock surging.

The strong showing is something of a surprise, not only because it comes just as telecom equipment makers Ericsson (ERIC) and Alcatel-Lucent (ALU) are struggling, but also because Nokia is the first mobile-phone company to show it can make healthy operating margins on entry-level phones. "The profitability is stunning considering the sales in the low end of the market," says Richard Windsor, a financial analyst who tracks Nokia for Nomura Securities (NMR).

Nokia reported that third-quarter revenues rose 28%, to €12.9 billion, or $18.3 billion. Net income increased to €1.6 billion, or $2.2 billion, which works out to 40 eurocents, 6 cents more than analysts had been predicting. The report came just two days after Ericsson reported third-quarter earnings that fell far short of expectations (BusinessWeek.com, 10/16/07), wiping out some $17.5 billion in market capitalization.

Helping Nokia is the continuing strong demand for mobile phones. The company shipped 112 million units for the quarter, a record for the industry. Nokia now predicts that 1.1 billion mobile devices will be sold this year, up from 978 million in 2006. The company's results follow strong profit reports from mobile-phone rivals LG, Samsung, and Sony Ericsson in the third quarter. Michael Walkley, a wireless technology analyst at Piper Jaffray (PJC), says the fact that so many of the handset makers are doing well underscores the robust demand for mobile phones, even in a relatively benign pricing environment. Motorola (MOT), another top rival, is slated to report results on Oct. 25.
Healthy Margins

But Nokia is the only manufacturer that's managing to do well even as it pushes aggressively into the low end of the market. The company impressed financial analysts by reporting healthy operating margins, despite a sharp drop in the average selling price of its phones. The average price dropped to €82, or $116, in the third quarter, from €90, or $127, in the previous quarter. Nevertheless, the company's operating margins in its mobile-phone business increased to 22.6% in the third quarter, up from 21.2% in the second quarter. The decrease in average selling price was the result of a sharp uptick in the number of phones it sells for less than €30, or $42.54.

With the widest range of phones of any handset maker, Nokia is managing to do well in low-end phones, top-of-the-line, and pretty much everything in between. "We can make money on a €300 phone, a €150 phone, or a €30 phone, and nobody else has been able to do that last part," says Rick Simonson, Nokia's chief financial officer in an interview. "Even when we are selling a €30 device, we are making gross margins in the high 20% range," he says.

Nokia now holds 39% of the mobile-phone market globally, more than all three of its closest rivals—Samsung, Motorola, and Sony Ericsson—combined. The company predicts it will be able to match that market share in the fourth quarter, which would boost its share for the year from last year.

HSBC, Credit Suisse Swing the Axe

2008-12-18T09:54:00.001+07:00

By Sean Farrell

Another 1,150 redundancies in Britain's banking industry were announced yesterday as Credit Suisse (CS) cut 10 per cent of its UK workforce and HSBC (HBC)said it was axing 500 jobs.

Credit Suisse, which has offices in London, Birmingham and Manchester, said it would cut 650 jobs. A spokesman for the Swiss bank blamed "market conditions and projected staffing levels required to meet client needs".

HSBC also said it was making cuts because of the tough economic climate and in order to cut duplication. Most of the jobs will go from support functions such as legal and finance at the bank's London headquarters at Canary Wharf, where about 8,000 of its 58,000 employees work. The rest will be cut from HSBC's business banking operations around the country.

The bank said the cuts would affect fewer than 500 people because some would be redeployed. But Unite, Britain's biggest trade union, reacted with fury to HSBC's decision, accusing the bank of using the economic slowdown as an excuse to axe jobs at a time when staff are vulnerable. The union pledged to oppose compulsory redundancies.

Derek Simpson, Unite's joint general secretary, said: "The decision by HSBC to make 500 job cuts is a disgrace. Unite is appalled that this news has been delivered so close to Christmas. The union has seen no business rationale for these job losses. The bank has again reported an increase in half-yearly profit and continues to do well."

HSBC has had frosty relations with unions in recent years. The job cuts come soon after the bank watered down proposals to reduce benefits of its final-salary pension scheme after Unite threatened to strike over the plan.

HSBC's UK managing director, Paul Thurston, said of the cuts: "We deeply regret this step, but consider it essential to ensure our business is operating as efficiently as possible and we are best placed to deal with the downturn."

Provided by The Independent—from London, for Independent minds

European Economic Recession Ahead? 2

2008-12-18T09:51:00.000+07:00

On a trade-weighted basis, the exchange rate of the euro against the zone’s major trading partners strengthened since the beginning of 2007 to reach its highest level since 1999 in April 2008. At a time when foreign demand for Eurozone products, particularly from the United States but also from the weakening United Kingdom economy, is sliding, a strong currency is an obvious impediment.

That said, more positive factors should also be considered. One is that Eurozone exporters have benefited significantly from the rising import demand from oil-exporting countries. Export revenues of major oil-exporting countries rose to $1.3 trillion in 2007 from about $412 billion in 2002, on the back of the sustained rise in oil prices.

A study in the July 2008 issue of the European Central Bank’s (ECB) monthly bulletin showed that despite the growing share of Asian exports in these markets, Eurozone exporters have been able to maintain a high and stable market share in recent years, averaging 25% in 2007. This positive outcome must be nuanced, however, as it has been driven mainly by Russia, as Eurozone exports’ market share in other oil-exporting countries (mainly OPEC) declined slightly to 21% in 2007 from 25% in 2002.

But over that same period, the U.S. market share in total imports of oil-exporting countries (Russia included) decreased to 7.5% from 12.0%. In other words, Eurozone exporters were able to maintain or even increase (in Russia) their market share despite the handicap of a strong currency. Between 2002 and 2007 the annual growth in export volumes of goods to OPEC and Russia was on average 7% and 17%, respectively, significantly above the average growth in extra-Eurozone exports of around 5%. Strong demand from those economies will continue to boost Eurozone exports in 2008 and 2009.

The second mitigating factor comes from the outlook for the euro exchange rate itself. Our baseline forecast expects the euro exchange rate to peak against the U.S. dollar in the third quarter of 2008 near 1.60. Then, the rate should slowly decline, as the fundamentals begin to turn in favor of the U.S. currency, with weaker growth prospects in the Eurozone and an increased probability of an interest rate hike in 2009 in the United States. We expect the euro to retreat toward 1.45 in the fourth quarter of 2008 and to 1.40 by mid-2009.

Overall, Eurozone export growth should drop to 4% in 2008 (6% in 2007) and 3% in 2009. German exports are likely to follow a similar trend, rising 4.7% in 2008 (8.0% last year) and 3.0% in 2009. French exports, after an upbeat performance in the first quarter of this year, should experience a very modest rise in the second half of the year, leading to an average increase in 2008 of 3.9% (3.6% in 2007). French export growth in 2009 is likely to ease further to 3.0%.

European Economic Recession Ahead? 1

2008-12-18T09:50:00.000+07:00

By Jean-Michel Six, Standard & Poor's
From Standard & Poor's Equity Research

Results for the first quarter of 2008 could have made us believe that Europe would remain relatively immune from the U.S. slowdown and the disruptions in financial markets. Since then, however, a flurry of data from across the region consistently suggests that such views were overly optimistic, and a major slowdown is about to occur in the second half of this year.

Gross domestic product (GDP) in the Eurozone contracted at a 0.8% annual rate in the second quarter. Additionally, the July survey of purchasing managers in manufacturing and services dropped to its lowest level since 2001.

Meanwhile, consumer price inflation in the Eurozone accelerated to 4.1% in the 12 months to July, its highest level since the introduction of the single currency in 1999. Inflation also accelerated in the United Kingdom to 4.4% year-on-year (3.8% in June). We consider the outlook for inflation in the next 12 months to be the most critical variable for Europe’s economies. Indeed, we think a deceleration on the back of lower oil prices would create a very different environment for monetary policies and provide a relief for hard-squeezed consumers. Until then, however, Europe should brace itself for a period of stagflation.
Economic storm gains strength

Economic reports published recently painted a bleak picture. The data are indicative that European economies are currently in the middle of a storm. Its components include:

A downturn in world trade induced by the weakening U.S. economy and whose effects are compounded by the strong euro exchange rate; the unwinding of the housing bubbles in key economies such as the United Kingdom, Spain, and Ireland, now extending to other countries such as France, Denmark, and Portugal; and accelerating retail price inflation on the back of surging commodity prices. This curtails consumers’ purchasing power and prevents central banks from adopting more supportive policies, while lenders clamp down on credit growth as wholesale funding dried up.

In the face of this slew of negative data, business and consumer sentiment is heading south. In July, the Eurozone purchasing managers index (PMI) tumbled to its lowest level in the 10-year history of the series (except for October-November 2001). The PMI decline was mirrored in the national business surveys. The August Ifo business confidence survey for Germany showed a marked decline in business leaders’ expectations of future conditions, comparable to what was seen in early 2004, when the German economy began to slow. The July ZEW indicator of economic sentiment, which focuses more on investors’ expectations in that same country, showed a similar deterioration.

Consumer surveys are similarly bleak, reporting a sharp deterioration on the back of worsening conditions in labor markets, as weak domestic demand and margin compression lead companies to curtail hiring. The biggest drop in confidence took place in Spain in June, which is hardly surprising given the fast deceleration in economic growth taking place at the moment in that country, although French sentiment also plummeted to levels not seen since early 2005 when Europe as a whole was experiencing anemic growth.

In the United Kingdom, the number of benefit claimants rose by 15,500 in June, the highest single-month increase since December 1992, highlighting a weakening labor market.

European car sales contracted by 7.9% in the month of June, according to ACEA, the European Association of Car Manufacturers. The breakdown of the ACEA numbers shows, however, that the economic slowdown is uneven across the region: In France (+1.5%) and Germany (+1.0%), the number of registrations increased, while the markets in the United Kingdom (-6.1%), Italy (-19.5%), and Spain (-30.8%) deteriorated.

All these negative signals point to the same question: Is the European economy about to enter into a period of recession, with several consecutive quarters of negative growth?

The strong euro is weighing on the performance of Eurozone exports.

How Many Countries Will Need IMF Help?

2008-12-18T09:48:00.000+07:00

By S. Adam Cardais

It's now clear that the global financial crisis has not only crossed the Atlantic into Europe, it has spanned the entire continent.

Just weeks ago the vulnerability that emerged in the United Kingdom and flashed before the world as Iceland's banking sector imploded looked confined to Western Europe. After all, many analysts said, Central and Eastern European economies are little exposed to the mortgage-backed securities behind the meltdown, and for most, their fundamentals and growth are strong.

Then came news at the end of October that the International Monetary Fund was negotiating multibillion dollar bailout packages for Ukraine and Hungary, the latter of which had already received a nearly $7 billion credit line from the European Central Bank. Suddenly, there were murmurs of an Iceland sequel in the east.

The IMF, which has now reached loan deals with both countries, seems committed to restoring confidence in battered economies, so that probably won't happen. But with regional currencies and stock markets from Riga to Budapest to Prague cratering – many down more than 50 percent this year – as panic spreads, it's not unreasonable to start talking about the "Eastern European predicament."

Economically, Central and Eastern Europe is diverse, so the individual symptoms behind the region's larger sickness are many, as are the prognoses for each country. But, ultimately, it's fairly simple: for many years, like U.S. homeowners who took out mortgages they couldn't afford, many of these economies have lived beyond their means on credit.

EAGER BORROWERS

Countries throughout the region used capital inflows from lenders, investors, and foreign governments to build up their economies after the fall of the Soviet Union and, in some cases, in preparation for European Union membership. This was a largely healthy process, but as economies matured and living standards improved, consumption ballooned. In the Baltics, Romania, Bulgaria, or Ukraine, for example, consumption became the main driver of robust economic growth, not manufacturing or exporting, according to Vasily Astrov of the Vienna Institute for International Economic Studies.

This, in turn, led to huge demand for imports. But this was not met – or, ideally, exceeded – by revenues from exports.

"So they had to borrow," Astrov says. "And they became heavily indebted."

Technically, this borrowing was tenable as long as the global financial system was flush with cash. Now it's not; credit, capital, and investors are becoming scarce; and these economies are foundering as panic spreads through stock and currency markets. The Hungarian forint, for example, is down around 30 percent against the U.S. dollar since August.

Economists call this a "sudden stop." It's as if the global economy is saying, "Hey, you know all that money we've been lending you guys? Yeah, we've got cash flow problems at the moment, so you're on your own."

Further exposing many countries are high foreign exchange loan volumes. In recent years many Hungarian homeowners and businesses, for instance, have taken loans from Western banks in foreign currencies at lower interest rates than would be offered domestically, betting that the forint would remain strong.

But with the forint tumbling, repaying those loans has become a lot more expensive – and they account for 90 percent of new mortgages since 2006, according to figures published 23 October in The Economist. This has fomented a nascent currency crisis that has many Western lenders worried about defaults and questioning whether they should roll over loans, even to sound debtors.

That's a major reason the IMF rushed to help Ukraine and Hungary. It's loaning the former $16 billion and, together with the EU and the World Bank, Hungary $25.1 billion, the largest international economic rescue package for an emerging economy since the start of the crisis.

The IMF has also created a $100 billion fund to aid other economies. The question now is, how many East European countries will need similar help?

Romania and Bulgaria likely will, but a lot will depend on whether Western banks, which own much of Eastern Europe's banking sector, keep lending, as The Economist recently pointed out.

Astrov says those economies saturated by large Western banks, such as the Czech Republic, will at least in the short term have fewer liquidity problems than countries with a lower penetration.

"In countries where the presence of foreign banks is more limited, then local banks have to borrow abroad," he says. "If there's a crisis of confidence, [foreign banks] might not lend money to someone who doesn't belong to them."

It's also true that more advanced economies such as the Czech Republic, Slovakia, and Poland appear better positioned to ride this out. The Czech Republic, for instance, has seen the Prague bourse drop around 50 percent this year and the crown lose 20 percent against the dollar since August. But its economy is export-, not consumption-based, and debt and inflation are low relative to many of its eastern neighbors.

Poland and Slovakia appear relatively safe as well, though both Slovakia and the Czech Republic – each car manufacturing hubs and large exporters to Western Europe – should be concerned about the automotive industry's decline and winnowing demand as Old Europe suffers.

After all, this crisis is collapsing on Europe – and no country, no matter how fundamentally sound, will be invulnerable.

Provided by Transitions Online—Intelligent Eastern Europe

Will Credit Crunch Destroy the Euro Zone? (part 2)

2008-12-18T09:44:00.000+07:00

Some readers will recall a time in 1988 when it was claimed that the value of a few square kilometres of real estate in Tokyo exceeded the assets of the US state of California.

The bursting of the Japanese property bubble brought with it a similar credit crunch, and fearing the worst, Japanese households cut their spending thus sending the economy deeper into recession. The Bank of Japan initially did the right thing, flooding the market with liquidity and holding nominal interest rates close to zero. But in the early 1990s, price levels started to fall—causing consumers' nominal debt to rise in real terms and leading them to postpone consumption even more. The result was nearly two decades of stagnation. As Keynes recognised, there comes a point when the use of monetary policy alone is as ineffective as 'pushing on a string'.

The fourth point—following logically from the third—is that Keynesian fiscal policy is very relevant today. Ultimately, when nobody else is willing to spend and when credit is tight, it is government which must spent its way out of the crisis. This was the lesson of the 1930s and 40s, the lesson in Europe of Marshall and the the trente glorieuses, the lesson of Japan, and it is still the lesson today. But Europe has been vulnerable to stagnation for the past decade.

Why Europe is vulnerable

Lest Europeans should think themselves smugly superior to America in terms of economics (we after all have not engaged in sub-prime lending), the reader might ponder the ECB's current obsession with inflation.

True, oil prices are rising and food is dearer (particularly in the world's poorest countries), but to raise interest rates in the face of impending recession as the ECB has recently done is little short of economic madness. Oil prices are high because of growing uncertainty about the future of the Middle East; food prices are high in good measure because of switching agricultural land to biofuel crops. Tighter money in Europe may squeeze household demand, but it will not help resolve the underlying causes of inflation.

More ominously, the Eurozone is vulnerable to crisis because of the lop-sided nature of its economic governance—a powerful central bank, but a tiny, non-adjustable EU budget, with fiscal spending at member-state level constrained by the SGP.

In this sense, the US is far better equipped to combat recession; its Central Bank is required to treat inflation as only one of three criteria, while Congress has discretionary power to use the federal budget counter-cyclically; eg, it accepted George Bush's reflationary package worth 1% of GDP, however poorly targeted the package may have been. The EU has no such discretion, but instead is bound by rules-driven automatic stabilisers inspired by bankers' notions of 'sound money'.

True, when the downswing really starts to hurt the ECB still retains plenty of scope to cut interest rates. But what happens when monetary policy becomes ineffective. In truth, Brussels will need to reconsider Keynes and the Eurozone's economic architecture will need to alter drastically, or else the very existence of the Eurozone will be in peril. For pro-Europeans like myself, that is the harshest lesson of the present crisis.

Provided by EUobserver—For the latest EU related news

Will Credit Crunch Destroy the Euro Zone? (part 1)

2008-12-18T09:43:00.000+07:00

By George Irvin

Anybody who believes the Eurozone is immune to the havoc created in the Anglo-Saxon economies by the credit crunch would do well to look again. Recent figures suggest the outlook for the EU-15 is poor—and if one factors in weakness of the Eurozone's economic governance, the outlook is positively grim.

This week marks the first anniversary of the credit crunch, the moment when it dawned on bankers that the US$12 trillion mortgage market was in meltdown and that an unknown fraction of the securitised mortgage bonds held by banks and funds was toxic.

Since nobody knew quite how much toxicity was in the system, banks started writing off bad debts and calling in loans while highly leveraged hedge funds found themselves in dire straits: last August, two of Bear Stearns hedge funds collapsed, America's largest mortgage bank (Countrywide) announced itself in distress while in France, BNB Paribas blocked withdrawals of US$2.2 billion in funds.

The US Fed and the European ECB quickly (and correctly) poured massive amounts of liquidity into the markets to prevent them seizing up altogether: US$70bn and US$ 140bn respectively. Moreover, the Fed cut interest rates drastically: whereas its rate stood at 5.25% in early 2007, it is now down to 2 percent. Still, the crunch has deepened in 2008. In the US this week, mortgage approvals hit a record low while the fall in US house prices continued to accelerate. In Britain, retailers were reporting that sales in July 2008 were at their lowest level in a quarter of a century. Both Britain and the US are headed towards recession, and there is no end in sight.

While it is widely recognised that property markets in Spain and Ireland are tumbling and that in France the market has softened dramatically, what is less known is that business sentiment is deteriorating everywhere in the Eurozone. Last week's Purchasing Managers Survey of the EU-15 revealed the worse outlook since November 2001.

In Germany, until recently thought to be bouncing back, corporate sentiment surveyed by Munich's Ifo Institute for Economic Research is at its lowest in three years, while the recent INSEE survey in France suggests the outlook there is worse. To add to the gloom, the IMF's latest Global Financial Stability Report says there is no sign of recovery from the credit crunch. In the words of Jaime Caruana, one of the IMF directors, 'As economies slow, credit deterioration is widening and deepening, and as banks deleverage [cease lending] and rebuild capital, lending is beginning to be squeezed, restricting household spending and clouding the outlook for the real economy.'

Key lessons from the crunch

Until early 2008, the orthodox view in the financial community was that the crunch was a short term affair; the real economy would soon bounce back, all the healthier for having purged the bad debt from the books.

But there were many possible triggers for recession besides toxic mortgages; one had merely to look at America's treble deficit—on current, government and household accounts—to realise that the US economy was in for a great unravelling, almost certainly taking the EU with it. As the financial journalist Larry Elliot has argued, coming to grips with the crisis requires at least four things.

First, the denial has to stop—this is not a short term crisis, nor even the beginning of a 2001 style recession—it is far more serious. Secondly, the financial system needs regulating. It is in deep trouble, largely of its own making. Yes, governments will need to pour billions of taxpayers' dollars and euros into the system if confidence is to be restored, but the quid pro quo is that the financial services sector must accept serious government intervention, minimally of the sort which existed prior to Reagan-Thatcher style 'deregulation'. Franklin Roosevelt saw this clearly in the 1930s when he pledged that government must become an effective counterweight to Wall Street's financial oligarchy.

Thirdly, the historical precedent is not the Great Crash of 1929. Rather, it is the Japanese property bubble of 1989 and the deflation and long-term stagnation which followed.

Why the ECB Can't Fix Europe 2

2008-12-18T09:41:00.000+07:00

"The history of these kinds of crises in Europe is that governments typically do disagree, they rarely come to coordinated agreements and you get this fairly inefficient solution," said Perkins at ABN Amro.

"There are very different philosophies in Europe about how you deal with these problems. You're never going to get the kind of coordinated policy response that you have in the US."

Scott Livermore, director of international macro forecasting at Oxford Economics, a leading economic consultancy in Britain, said: "Where Europe has been lacking is that they have no contingency plan at the moment and we're adopting this piecemeal."

"The problem is that if Europe is hit as hard as the US was there is no contingency plan in place, and in such a crisis you need to have a rapid response. You can say what you like about the US rescue package, it may or not be the best approach but it is there and something is happening."

Part 2: U-Turns and Vague Pledges

The actions by Europe's governments over the last week have failed to inspire confidence, as slumping equity markets show.

First the leaders of Europe's top four economies Germany, France, Britain and Italy failed to agree on a common plan at a mini-summit in Paris at the weekend.

Then German Chancellor Angela Merkel made a surprise policy U-turn by announcing an unlimited state guarantee for all private German bank deposits on Sunday, a move that sparked confusion and put governments across Europe under pressure to follow suit to prevent their nation's banks from suffering a competitive disadvantage.

On Tuesday, EU finance ministers issued a vague pledge that EU governments would not allow "system relevant" financial institutions to fail, a statement that seemed aimed at masking the absence of a pan-European approach.

"It's very important when one makes announcements such as issuing a bank deposit guarantee to be precise. Vague ad hoc announcements can sow confusion," said Polleit at Barclays Capital.

"I think it's important that politicians do more to consult people who operate in financial markets and who know how expectations gets translated into market prices. I think the crisis management now requires not just bureaucrats but experts."
Everyone for Himself

Despite all European pledges to take joint action, the underlying message this week has been that every EU nation will sort out its own mess itself. Fresh evidence of that approach emerged on Wednesday when Britain announced plans to inject up to £50 billion ($87.2 billion) into its biggest retail banks.

The country's top banks suffered a share slump this week in which some lost nearly half their market value amid investor fears they could collapse. "Extraordinary times call for bold and far-reaching solutions," British Prime Minister Gordon Brown said.

Holger Schmieding, chief economist for Europe at Bank of America, said Europe was likely to come up with effective answers to the crisis, but that it would take time.

"I'd say it's a bit more difficult for Europe to get out of the crisis than it is for the US because there are different national responses to the crisis. It takes longer in Europe but things are going in the right direction. The measures taken won't end up differing much from country to country."

"There is a certain convergence process, almost everyone is thinking about deposit guarantees and almost everyone is pledging to bail out domestic banks with government support."

Schmieding said Europe didn't need a pan-European fund to tackle the crisis, and that such a move would be difficult to implement anyway. "Taxes are a very national affair, the top prerogative of national parliaments. That makes it very difficult in practical terms and politically to set up a European fund."

Provided by Spiegel Online—Read the latest from Europe's largest newsmagazine

Why the ECB Can't Fix Europe 1

2008-12-18T09:38:00.000+07:00

by David Crossland

The European Central Bank joined the United States Federal Reserve and other major central banks in cutting key interest rates by half a point on Wednesday in a concerted move to stabilize financial markets and avert recession, but the ECB's power to stem the financial crisis in Europe is limited, economists say.

The cut brought key interest rates down to 3.75 percent in the euro zone and to 1.5 percent in the United States, the banks said in a surprise announcement that followed a dramatic slump in world financial markets this week. The Bank of England also cut its key rate by half a point.

It was the ECB's first rate cut in more than five years and the move echoed the coordinated rate cuts on Sept. 17, 2001 in the aftermath of the 9/11 attacks.

The cooperation among central banks contrasted with a divided response to the crisis from European governments this week which has undermined investor confidence and highlighted chronic weaknesses in Europe's financial architecture.

The Frankfurt-based ECB, guardian of the euro and responsible for setting interest rates for the 15-nation euro area, has been keeping the continent's financial system afloat with cash injections into the money market which has been at risk of drying up because banks are increasingly unwilling to lend each other money.

"The confidence is out of the system and you can quite clearly see that in money market interest rates and in turnover in the money market. The banks no longer trust each other," said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt.

Economists say the ECB has effectively replaced the money market, where banks trade money in overnight and other short-term loans to remain liquid.

It has been supplying tens of billions of euros via so-called "quick tenders" for money. And banks have been parking any surplus funds with the ECB rather than lending it to each other.

The reluctance of banks to lend each other money is reflected in an increase in interest rates for interbank loans—the key three-month Euribor, the euro inter-bank-offered rate, reached 5.377 percent on Tuesday, the highest level since late 1994.
Taxpayers' Money Is Key

Technically, the ECB can go on propping up the money market in this way indefinitely, and there's nothing to stop it continuing to cut interest rates aggressively. But the general loss of investor confidence that is causing the dramatic slump in share prices and putting banks in trouble can only be solved by pledging taxpayers' money to rescue major banks, economists say.

"The ECB is effectively the money market now," said Dario Perkins, senior European economist at ABN Amro in London. "Banks can get as much money as they need from the ECB so that in itself isn't the problem. In theory it can do that as long as necessary."

"The question is whether that's enough to stop these broader problems in financial markets. Clearly the evidence is that it isn't if you look at what's happening to bank share prices and broader equity markets."

Europe's chaotic response to the escalation of the crisis over the last week has highlighted an inherent weakness in the continent's financial system that central bankers have warned about ever since the launch of the ECB in 1999.

The independent ECB can dictate monetary policy by determining the price and supply of money for 320 million citizens, but it has no say over the disposal of taxpayers' money, which is in the hands of individual nation states and is the key to solving the crisis.

Central bankers never tire of exhorting EU governments to rein in their budget deficits and coordinate their fiscal policies to avoid imbalances in the system.

But despite decades of integration, the EU remains a bloc of sovereign states with separate tax and spending regimes that make it very hard to reach pan-European agreements.
Europe Less Well-Equipped than US to Fight Crisis

As a result, Europe is inevitably less well-equipped than the United States to tackle the financial crisis, economists say. The US last week agreed a $700 billion package to bail out America's banks.

Japan's SMFG to Raise $5.8 Billion in Share Sale 2

2008-12-18T09:34:00.000+07:00

Fitch adds that the unrealised gains of the eight major banks disappear completely when the TOPIX index hits 900 points. At this point, tier-1 capital starts to crumble. As of Thursday, the simple moving average of the TOPIX over the past 50 days was 878 points, and 1,052 points over the past 100 days.

Fitch estimates that the major banks' tier-1 capital would be dragged down to the minimum permissible 4% if the TOPIX slid to 600 points. SMFG's capital raising therefore makes good sense, as does that of its peers. In fact, a total of $30 billion in capital raisings have been announced this year by the Japanese banking sector.

According to the Fitch report, SMFG had a tier-1 capital ratio of 7.08% in September, compared to 7.36% for Mitsubishi UFJ Financial Group and 7.36% for Mizuho. SMFG was the only bank that saw its tier-1 capital adequacy ratio improve somewhat between March and September. SMFG had a total (including tier-2) capital ratio of 10.25% in September, down from 10.56% in March. This is not high by international standards, says Fitch.

The ratings agency welcomes additional capital, whatever the form, but notes that the quality of the mega banks' capital will not be improved by such moves. Indeed, core capital is related to shareholder equity, and is supposed to reflect the concentrated value of the company based on the original shareholders' equity and retained earnings. Using hybrid capital to complement the former shows that net earnings may not be growing at a healthy pace. SMFG's net income of ¥83 billion in the six months to September 2008 was down over 50% on the ¥171 billion it earned in the same period last year.

SMFG and the other banks are not just facing market risk via their dangerous shareholdings, they are also facing credit risk as the Japanese economy slides into recession. Credit costs for the first half of the 2009 financial year (ending March 2009) doubled for the eight major banks. SMFG has the highest net non-performing loans to tier-1 capital ratio among the major banks, at 11.5%. Problem loans appear to have risen as a result of the weakening of the real estate sector, defaults among small businesses, and losses on the exposure to Lehman Brothers, which Fitch computes at about ¥150 billion for the major banks.

SMFG is no doubt regretting the $1 billion it spent on its passive (voting rights are 2%) stake in Barclays PLC in June, whose share price has fallen precipitously in the interim. Its only comfort is that its rival MUFG's $9 billion investment in Morgan Stanley hasn't performed well either.

Japan's SMFG to Raise $5.8 Billion in Share Sale 1

2008-12-18T09:24:00.001+07:00

By Dan Slater

The latest capital raising exercise by Sumitomo Mitsui Financial Group (SMFG) shows that Japanese banks are weak, although for different reasons than their Western counterparts who have been hurt by their exposure to the subprime crisis. Japanese banks are suffering from a slowing economy, narrow interest margins and excessive exposure to the stockmarket. So, like Western banks, they are busy raising capital.

The ¥538.2 billion ($5.84 billion) worth of perpetual preference shares SMFG plans to issue through a private placement on December 18 should take some of the pressure off the company's capital adequacy ratios, which have become increasingly thin. An unconfirmed rumour that SMFG, the smallest of Japan's mega-banks by assets, could add an extra ¥260 billion to the sum already announced gave the market further reason to cheer, and helped push SMFG's share price 9.6% higher to ¥342,000 in Thursday's trading. (The counter reached a high of ¥1.36 million in 2006.)

According to Reuters, the preference shares will be taken up by a collection of around 20 Japanese institutional investors, including real estate and insurance companies.

SMFG's announcement on Thursday follows a decision made public on November 19 to set up a wholly owned overseas special purpose subsidiary in the Cayman Islands to issue perpetual preference shares. The proceeds will partly be used to redeem an existing series of bonds maturing on January 26, 2009, which amounts to ¥283 billion. The remaining ¥255 billion will be added to the existing tier-1 capital of ¥4.5 trillion, an increase of under 6%. That means the extra capital raising if it materialises will be welcome, since it could roughly double the percentage increase.

The structure for issuing the non-cumulative preference shares is complex but has advantages. Under the terms of the deal, the offshore group vehicle will issue the shares, and then make what is essentially an intra-company loan with the proceeds. This combines tax benefits with a boost to the tier-1 capital cushion, points out Peter Kilner, managing partner at Clifford Chance in Tokyo.

"One of the reasons for the structure is that interest paid on the loan should be deductible by Sumitomo Mitsuin Banking Corporation (SMBC) for tax purposes, which would not be the case if SMBC were to pay dividends on the preference shares direct," he explains.

SMBC is the actual bank and the main asset within the SMFG group.

The preference shares will be issued in four tranches of ¥113 billion, ¥140 billion, ¥140 billion, ¥145.2 billion, with coupons of 4.57%, 5.07%, 4.87% and 4.76% respectively. The tranches all come with fixed rates until various dates, including 2014, 2016 or 2019, before switching to a floating rate. One of the tranches comes with a step-up clause.

Even prior to the announcement earlier this month that Japan has entered a recession, SMFG was being hit by the steeply declining stockmarket. The TOPIX index has dropped by almost one-third since March this year. Reductions in unrealised stock gains initially hurt tier-2 capital, but once the gains turn to losses, essential tier-1 capital also begins to get eaten away. The decline in Japan's stockmarket over the past months has been so fast that it has raised the alarm about Japanese banks.

Observers say the fact that Japanese banks as a group own some 15% of the listed Japanese market cap is a sign that the banking sector is not yet 'normalised'. The ownership is down substantially from its peak, but still leaves the banks vulnerable to swings in the equity market. The shareholdings are part of the elaborate cross-shareholding arrangement that originally arose to protect Japanese companies from hostile often defined as 'foreign' takeovers.

Fitch Ratings writes in a recent report that SMFG's unrealised gains on stocks had fallen from ¥936 billion in March to ¥786 billion in September, while losses on bonds amounted to ¥60 billion. The cost of these figures to tier-1 capital amounted to almost half of tier-1 equity.

China's Economy is Still Heading Downward

2008-12-18T09:18:00.000+07:00

By Daniel Inman

A further slowdown in GDP growth in China and high levels of unemployment will affect the population's propensity to spend, meaning domestic consumption is unlikely to make up for falling exports.

As soon as it became apparent that the financial crisis was no temporary matter, the Chinese government was quick to put forward Rmb4 trillion ($585 billion) to bolster its economy. The latest data confirms that this support was necessary, but observers say it will take some time for the medicine to have an effect.

November was another bad month. Industrial production growth declined to 5.4% year-on-year, which is the lowest since early 2002, and the purchasing managers' index fell to 38.8%—a big reduction from October's 44.6%.

To some extent, much of this was expected as diminishing global demand was putting pressure on manufacturers. What is possibly more worrying is the slowdown in retail sales, because domestic consumption is generally seen to be a major factor that could make up for falling exports. In November, retail sales grew at 20.8% year-on-year, down from 22% in October. The growth in urban sales, which accounts for two-thirds of all retail sales in China, slowed by 1.8 percentage points to 20.3% month-on-month.

At the same time, November saw a slight decrease in fixed asset investment growth—26.8% in the period between January and November, compared to 27.2% in January to October.

In a recent note, Citi economists predict a further slowdown in GDP growth and high levels of unemployment in the cities, which will affect the income of individuals and their propensity to spend. The same note singles out department stores as a retailing area that is "likely to disappoint", while favouring an overweight position on supermarkets. "Falling food inflation could impart some downside risk to top line growth, but we believe supermarket operators are enjoying better earnings visibility into 2009."

Things are going to get worse before they get better, says Morgan Stanley in its 2009 China economics outlook. A drop in exports is only part of what the report describes as a "triple whammy"—there is also the depressed property sector, brought down by tough government policies introduced last year, and the massive levels of destocking.

Although the Morgan Stanley report says that this triumvirate of ills has most likely reached its peak, it will continue to be felt through the first half of next year, which will in turn lay the foundations for a strong recovery in 2010. The US investment bank's baseline scenario is for GDP to grow at 7.5% next year (versus 11.4% in 2007), on the assumption that declines in property sales and lower levels of exports will be balanced by infrastructure investment provoked by the stimulus package.

The downside risks relate to property. "If... real estate investment were to collapse and contract by 30% in 2009, the impact would be so big that even the fiscal stimulus package in its current form and size would not be able to make up for the growth shortfall, in our view," says the report. Under such circumstances, GDP growth could drop to 5%. Any potential upside depends very much on external factors. A growth rate of 9% is possible if the recession in China's key export markets turns out to be less bad than expected.

In the meantime, all we can do is wait until the stimulus package, much of which will be allocated towards infrastructure, starts stimulating. Jing Ulrich, head of China equities at J.P. Morgan, in a note predicts the package to start having an effect in the second quarter of 2009. Between now and then, expect more bad news to come, especially around Chinese New Year, when a poor set of corporate earnings is anticipated.

Copyright FinanceAsia.com Ltd., a subsidiary of Haymarket Media Ltd

OPEC's Big Move: Less Than Meets the Eye

2008-12-18T09:14:00.000+07:00

By Stanley Reed

OPEC's announcement at its meeting on Dec. 17 in Oran, Algeria, that it would cut 4.2 million barrels per day from September production levels sounds like a big deal. But it is less than meets the eye. That number includes 2 million barrels of previously announced cuts. If implemented, the measure would amount to around an 8% cut from current levels. Markets were not impressed, even though this represents the most serious OPEC tightening effort since the late 1990s. Prices for U.S. light, sweet crude fell $3.54 per barrel, to $40.06 per barrel.

OPEC itself has modest expectations. The idea is to begin soaking up excess oil. One delegate said it was highly unlikely that prices would move above $55 per barrel through the first half of 2009. Delegates think OPEC may well have to cut more next year.

OPEC is scrambling to catch up with a radically changed world. Thanks to an imploding world economy, demand for oil is expected by many analysts to fall this year for the first time in a quarter-century. Oil production is easily outpacing consumption as evidenced by the growing fleet of supertankers being used for floating storage. One industry source estimated there are roughly 21 such tankers carrying about 40 million barrels of crude steaming the world's seas today as opposed to just four or five at the end of October.
Plenty of Worries

OPEC is fearful the imbalance of supply over demand will accelerate next year if nothing is done. The oil ministers well remember that prices dipped below $10 per barrel as recently as the late 1990s. The organization is also worried about its almost complete lack of sway over the markets. Prices have fallen close to $100 per barrel since mid-July, even though OPEC held four meetings to manage the markets.

OPEC was clearly determined to make a big show of unity at its meeting, which was held in Algeria to honor Chekib Khelil, the Algerian minister of energy, who has served as OPEC's president this year. Even non-OPEC producers were invited to participate. Russian Vice Premier Igor Sechin brought a heavyweight delegation of the country's top oil chiefs. He promised that Russia would cut 320,000 barrels per day in 2009 if market conditions demanded such a move.

OPEC meetings are closed to journalists, but delegates wandering in and out of the meeting at the Oran Sheraton, a massive building perched on a hill above the faded port city, shared their views of the proceedings. The main issue was not whether to make a big cut. Even the Saudis, the most moderate player and leader, called for 2 million barrels a day of cutbacks from the beginning. Instead, there was disagreement over how to describe the cuts and where to draw the baseline. Venezuela, in particular, says it is producing more than most analysts estimate. Calling for cuts from September levels was a way of fudging the issue. But that obfuscation raises questions about the degree to which OPEC members will comply with the decision. Through November, OPEC had dropped production by about 1.2 million barrels per day from September levels. Nearly all of this came from Saudi Arabia, which has eased back production to about 8.5 million barrels per day, since reaching close to 9.7 million barrels per day last summer.

Market participants will now closely monitor compliance with the latest promised cuts. Having reduced production by 1.2 million barrels per day, the Saudis are unlikely to cut another 2 million barrels per day on their own. With several hundred billion dollars in the bank and a relatively small population, they can tolerate prices at today's levels much longer than big-spending Venezuela and Iran. The Saudis want to see those countries, which are the two largest OPEC producers after the kingdom, take more of the pain. The new agreement "reflects a de facto reallocation of quotas," says David Kirsch, an analyst at PFC Energy in Washington. "In September several members were underproducing their formal quotas, so they are looking for real cuts from these members," he adds. If those cuts don't materialize, dissension in the producers' club will increase, putting more downward pressure on prices.

Reed is London bureau chief for BusinessWeek.

Concept of Insurance in Islam

2008-11-29T10:01:00.000+07:00

Dear All
I have always been very confused about the idea of Insurance in Islam and its credibility. Recently, I had a discussion on this topic with three of my very close friends and have got some more insight from them. Two of my friends were in favour of Insurance in some form and had their own views about the topic, please note that these two have good knowledge of Islam. I would not call them molvis, they are moderate muslims but have good knowledge on various subjects in Islam (although this is no yardstick). I will put down my reservations, their answers and a few other views here and would like to have views from the rest of the users here. Please do participate in the discussion with your own understanding (whatever that may be) and please be open in your views as this might clarify some ambiguities they you or others might have. Thanks.

What is Sood (Interest) that is stated as Haram (forbidden) in Islam ?
My understanding is that any income that falls under the following criteria

1. Is fixed
2. Is definitely profit (no risk of loss)
3. Does not involve any effort/ work

Savings account in a Bank
To me a savings account in bank is the purest form of interest and is Haram. It gives a fixed return over an year, is always a profit over the deposited money and it does not require any work or any effort from me. No risk.

There are two other viewpoints on the bank deposits in savings accounts.
If a family does not have any sources of income and they don't know how and what business to invest in, the interest money from the bank is Halal (allowed). Just to give you an extreme example, if say a women is a widow and her children are young, and there is just the cash that they have and nothing else, the interest money from the bank is HALAL (allowed).
In early days of Islam, when interest was made Haram (prohibited), the currency used to be of GOLD and thei value did not use to depreciate. Gold used to appreciate with rising inflation and people could buy the same amout of goods even after many years of price hike. In modern times, with currency notes in fashion and value of currency depreciating everyday with rising inflation, people cannot buy the same amount of goods after one year with the same money that they have now. Keeping money in savings accounts of the banks only safeguards against the possible devaluation of money in the form of interest. So it is actually not interest and is justified.

Insurance
Now let’s talk about insurance. There are two forms of insurances, insurance of a product (object/ material) and life insurance of humans.

Product Insurance
If a person or company owns some product (e.g. car or house or goods) and wants to insure it against any possible harm (e.g. theft, fire, accident etc.), the person or company would get the product insured by some insurance company. There will be some fixed payment in the form of insurance fee that the person or company will pay to the insurance company and in-turn the product would be insured. Now if any harm is inflicted upon the product, the insurance company bears the cost to the tune it is insured. But the key point is that the payment money in the form of insurance fee is not returned, if there is no claim.

Life Insurance
Life insurance of a human is a somewhat newer concept as compared to product insurance, which has been there for many centuries (so it is known). In life insurance, a person keeps on making a certain amount of payment for a certain number of years (we have 20 years normally offered by State Life and EFU) and it covers three areas.

1. If the person dies within those 20 years, his family (beneficiaries) receives a handsome sum of money, already decided at the time of signing the insurance contract.
2. If the person does not die within those 20 years, a handsome some of money is given to him as profit incurred on the yearly installments of payments he had been making to the insurance company.
3. In some cases, in addition to one of the above, if the person falls ill, his medical expenses are borne by the insurance company during those 20 years.

Now my question specifically relates to the first 2 points. If the person dies, the family gets a fixed amount of insurance money (as is the case with product insurance). However, in life insurance, if a person does not die, he still gets a fixed profit on his actual installment payments in addition to the total actual amount paid to the insurance company.
Now this is a win-win situation and this income somewhat falls under my definition of interest i.e. Is fixed, Is definitely profit (no risk of loss), Does not involve any effort/ work.

taken from:http://www.buzzvines.com/concept-insurance-islam

Multiculturalism and Islam: Sharia vs European constitutions

2008-11-29T09:52:00.000+07:00

Multiculturalism and Islam: Sharia vs European constitutions
by Samir Khalil Samir, sj
Problems in Holland and Denmark. Great Britain as an example: decades of multiculturalism that have lead to ghettos, closure, radicalism of Islamic communities. Women ever penalized. Being European citizens involves having the duty to integrate. Third in a series of articles.

Beirut (AsiaNews) – Multiculturalist ideology, i.e. the blind tolerance of any culture or tradition, is destroying Europe and standing in the way of any positive development of Islam. Such ideology has been condemned by Ayaan Hirsi Ali, the Somali intellectual and parliamentarian who, having received death threats from Muslims for her defence of women’s rights and tired of European multiculturalism, left Holland to go work in the United States at the American Enterprise Institute. She accused Holland of excessive acquiescence, of encouraging the immobility of Muslim communities and even of letting itself be conquered by Islam and Islamic law.

In making room for Sharia, there is the risk of conflict with European constitutions. An interesting thing is taking place in Denmark, a country which is at the forefront of multi-culturality. The SIAD Party has recently been founded and it proposes the following: anyone who cites Koranic verses contrary to the Danish constitution must be punished because the constitution is superior to all other laws.

And they quote articles 67-69 of the Danish Constitution which says, “We authorize freedom of worship, as long as it is exercised within the framework of Danish laws without disturbing public order.”

All this is a clear signal that people are beginning to reflect on the possible contrast that exists between the constitutions of European countries and certain laws of the Koran. In Demark too, there exist two trends: the “left”, or the “do-gooders”, who want to respect the culture of others, saying that ours is not an absolute, or suggest that we must be tolerant and give Muslims time to take this step; and those who make no allowances, and who say that if a person is not able to integrate, he is better off going elsewhere.

But the most significant and problematic case is that of Great Britain: here, after decades of multiculturalism, instead of integrating and coexisting, Islamic communities are increasingly closing themselves into ghettos, and fundamentalistic behaviours, dangerous for all society, are emerging.

State schools and Islamic morals

The most representative association of British Muslims, the Muslim Council of Great Britain, has asked that Muslims be recognized the right to apply Islamic morals in state schools. On February 21, it published a 72-page document and presented it to the government in the name of 400,000 Muslim students attending the country’s state schools. They ask that the government accept the demands of Muslim parents and youngster on the grounds of faith concerns.

Taking their cue from their concept of modesty, they say that female students:

a) have the right to wear headscarves or the hijab (there is no mention however of the niqab);

b) have the right to not take part in physical education lessons, because Islam prohibits contact between the sexes in public and because there is the risk of girls exposing bare skin, which is prohibited by Sharia.

They also demand separate classes for girls and boys; the refusal of dancing and of sex education (which is a family matter and not a topic for school); drawings and anatomy textbooks must not show genital organs. As for faith and history, they ask for a revision of the entire teaching system in the name of Islamic morals.

The Education Ministry has not yet replied officially, but has already said that these requests will be a step backwards in terms of the tolerance that already existed.

British and Muslim

The tendency towards closure – the fruit of multiculturalism! – is apparent also at another level. Last February 19, a public survey in the Sunday Telegraph shows that 40% of British Muslims are favourable to the introduction of sharia. This demonstrates the radicalization of a substantial part of the country’s Islamic community. Forty percent feels foreign to British society and deems that it is necessary and normal to lead a lifestyle in line with the most radical of Islamic ethics.

Another element which is emerging is the detachment of these people from British society. Asked “How do you feel about the victims of conflicts in the world?”, the reply was “compassion”, “solidarity” and even “anger” with reference to conflicts involving Kashmir, Palestine, Iraq and Afghanistan. Simply put, they feel closer to Muslims than to Great Britain, which is directly involved in some of these conflicts.

From the sociological point of view, it should be said that they come from Pakistan, Bangladesh and India and belong to traditional families, but it is also worth noting that they have been in Great Britain for at least two generations. It seems clear to me that the reactions to 9/11, instead of creating more global solidarity around the idea of the fight against terrorism, have instead radicalized Muslims who are siding with each other to defend their brothers in faith.

September 11 created or reinforced, in the entire Islamic world, an identity crisis: Islam and Muslims are under scrutiny. Faced with this situation, there are those who stop to reflect on what must be reviewed in Islamic teaching behaviour, and there are those whose reaction is closure and aggressiveness so as to affirm more forcefully the radical diversity of Islam vis-à-vis the surrounding culture. This second kind of behaviour is typical of many young people of second or third generation, who fully recognize themselves neither in Islamic nor in Western tradition (despite having perfectly assimilated the latter).

In any case, this study and the requests regarding schools show that Muslims in Great Britain are increasingly identifying themselves with their religion, more than with local society and culture.

Modesty for males and citizenship

The problems raised by Muslims, for example those in Great Britain, are real. There does exist a problem of ethics in society, and thus also in the school system. An exaggerated liberalism which allows young people everything, especially at the sexual level, on the grounds that they must learn to make their own choices, is certainly unacceptable to both the Muslim and Christian communities, as well as to the human community tout court. But preventing contact between boys and girls, or preventing the teaching of all things related to sexuality is an entirely different matter. Here, it is not a question of ethics, but of customs and traditions, and this is no longer acceptable. In any given country, the norms of that country must be observed, not those of the homelands of a few parents!

Furthermore, one might ask oneself why, on the question of the relationship between sexes, it is always the woman who must be hidden or “observe modesty”, as is still said. If modesty is a virtue – and in fact it is – it applies to males as it does to females. And since modesty seems to be more spontaneous in females, it would seem more necessary to impose it upon males! In other terms, despite the best intentions, Muslims tend to confuse customs with ethics. Customs are tied to determined groups (ethnic, geographic, religious…) and do not apply to the national civil society. Ethics dictate principles which are valid for every human person, independent of their sex or religion, and therefore are worth defending and fighting to defend. It is time that we learn to defend ethics that are respectful of the human person, by starting to teach and practice them in schools, to everyone. As for special treatment for a particular group, in the name of their different culture, this is a deformation of what should be “authentic multiculturalism,” which learns to evaluate different cultures and improve one’s own on the basis of comparison.

The question behind this problem is: what does citizenship mean? Is it a piece of paper, useful to acquire so as to have advantages and few obligations? Or is it a profound reality, the result of a pondered choice, which can also demand even big cultural sacrifice?

And more: what is the identity of an Italian citizen of Egyptian or Moroccan or Chinese or Albanian origin? If it is Egyptian, Moroccan, Chinese, Albanian, then I ask: what is the sense of having requested and obtained Italian citizenship? It is not perhaps to enjoy the advantages that a country offers and then return to live in one’s country of birth or that of one’s parents? In that case, I am just an exploiter. But if it means a conscious choice, which implies changes in behaviour, the desire to build with other citizens a more just society etc, then, yes, I deserve citizenship. I think that society must help each person to make such pondered choices, helping and facilitating efforts to integrate.

taken from:bsimmons.wordpress.com

Multiculturalism and Islam: Sharia vs European constitutions

2008-11-29T09:45:00.001+07:00

Problems in Holland and Denmark. Great Britain as an example: decades of multiculturalism that have lead to ghettos, closure, radicalism of Islamic communities. Women ever penalized. Being European citizens involves having the duty to integrate. Third in a series of articles.

Beirut (AsiaNews) – Multiculturalist ideology, i.e. the blind tolerance of any culture or tradition, is destroying Europe and standing in the way of any positive development of Islam. Such ideology has been condemned by Ayaan Hirsi Ali, the Somali intellectual and parliamentarian who, having received death threats from Muslims for her defence of women’s rights and tired of European multiculturalism, left Holland to go work in the United States at the American Enterprise Institute. She accused Holland of excessive acquiescence, of encouraging the immobility of Muslim communities and even of letting itself be conquered by Islam and Islamic law.

In making room for Sharia, there is the risk of conflict with European constitutions. An interesting thing is taking place in Denmark, a country which is at the forefront of multi-culturality. The SIAD Party has recently been founded and it proposes the following: anyone who cites Koranic verses contrary to the Danish constitution must be punished because the constitution is superior to all other laws.

And they quote articles 67-69 of the Danish Constitution which says, “We authorize freedom of worship, as long as it is exercised within the framework of Danish laws without disturbing public order.”

All this is a clear signal that people are beginning to reflect on the possible contrast that exists between the constitutions of European countries and certain laws of the Koran. In Demark too, there exist two trends: the “left”, or the “do-gooders”, who want to respect the culture of others, saying that ours is not an absolute, or suggest that we must be tolerant and give Muslims time to take this step; and those who make no allowances, and who say that if a person is not able to integrate, he is better off going elsewhere.

But the most significant and problematic case is that of Great Britain: here, after decades of multiculturalism, instead of integrating and coexisting, Islamic communities are increasingly closing themselves into ghettos, and fundamentalistic behaviours, dangerous for all society, are emerging.

State schools and Islamic morals

The most representative association of British Muslims, the Muslim Council of Great Britain, has asked that Muslims be recognized the right to apply Islamic morals in state schools. On February 21, it published a 72-page document and presented it to the government in the name of 400,000 Muslim students attending the country’s state schools. They ask that the government accept the demands of Muslim parents and youngster on the grounds of faith concerns.

Taking their cue from their concept of modesty, they say that female students:

a) have the right to wear headscarves or the hijab (there is no mention however of the niqab);

b) have the right to not take part in physical education lessons, because Islam prohibits contact between the sexes in public and because there is the risk of girls exposing bare skin, which is prohibited by Sharia.

They also demand separate classes for girls and boys; the refusal of dancing and of sex education (which is a family matter and not a topic for school); drawings and anatomy textbooks must not show genital organs. As for faith and history, they ask for a revision of the entire teaching system in the name of Islamic morals.

The Education Ministry has not yet replied officially, but has already said that these requests will be a step backwards in terms of the tolerance that already existed.

British and Muslim

The tendency towards closure – the fruit of multiculturalism! – is apparent also at another level. Last February 19, a public survey in the Sunday Telegraph shows that 40% of British Muslims are favourable to the introduction of sharia. This demonstrates the radicalization of a substantial part of the country’s Islamic community. Forty percent feels foreign to British society and deems that it is necessary and normal to lead a lifestyle in line with the most radical of Islamic ethics.

Another element which is emerging is the detachment of these people from British society. Asked “How do you feel about the victims of conflicts in the world?”, the reply was “compassion”, “solidarity” and even “anger” with reference to conflicts involving Kashmir, Palestine, Iraq and Afghanistan. Simply put, they feel closer to Muslims than to Great Britain, which is directly involved in some of these conflicts.

From the sociological point of view, it should be said that they come from Pakistan, Bangladesh and India and belong to traditional families, but it is also worth noting that they have been in Great Britain for at least two generations. It seems clear to me that the reactions to 9/11, instead of creating more global solidarity around the idea of the fight against terrorism, have instead radicalized Muslims who are siding with each other to defend their brothers in faith.

September 11 created or reinforced, in the entire Islamic world, an identity crisis: Islam and Muslims are under scrutiny. Faced with this situation, there are those who stop to reflect on what must be reviewed in Islamic teaching behaviour, and there are those whose reaction is closure and aggressiveness so as to affirm more forcefully the radical diversity of Islam vis-à-vis the surrounding culture. This second kind of behaviour is typical of many young people of second or third generation, who fully recognize themselves neither in Islamic nor in Western tradition (despite having perfectly assimilated the latter).

In any case, this study and the requests regarding schools show that Muslims in Great Britain are increasingly identifying themselves with their religion, more than with local society and culture.

Modesty for males and citizenship

The problems raised by Muslims, for example those in Great Britain, are real. There does exist a problem of ethics in society, and thus also in the school system. An exaggerated liberalism which allows young people everything, especially at the sexual level, on the grounds that they must learn to make their own choices, is certainly unacceptable to both the Muslim and Christian communities, as well as to the human community tout court. But preventing contact between boys and girls, or preventing the teaching of all things related to sexuality is an entirely different matter. Here, it is not a question of ethics, but of customs and traditions, and this is no longer acceptable. In any given country, the norms of that country must be observed, not those of the homelands of a few parents!

Furthermore, one might ask oneself why, on the question of the relationship between sexes, it is always the woman who must be hidden or “observe modesty”, as is still said. If modesty is a virtue – and in fact it is – it applies to males as it does to females. And since modesty seems to be more spontaneous in females, it would seem more necessary to impose it upon males! In other terms, despite the best intentions, Muslims tend to confuse customs with ethics. Customs are tied to determined groups (ethnic, geographic, religious…) and do not apply to the national civil society. Ethics dictate principles which are valid for every human person, independent of their sex or religion, and therefore are worth defending and fighting to defend. It is time that we learn to defend ethics that are respectful of the human person, by starting to teach and practice them in schools, to everyone. As for special treatment for a particular group, in the name of their different culture, this is a deformation of what should be “authentic multiculturalism,” which learns to evaluate different cultures and improve one’s own on the basis of comparison.

The question behind this problem is: what does citizenship mean? Is it a piece of paper, useful to acquire so as to have advantages and few obligations? Or is it a profound reality, the result of a pondered choice, which can also demand even big cultural sacrifice?

And more: what is the identity of an Italian citizen of Egyptian or Moroccan or Chinese or Albanian origin? If it is Egyptian, Moroccan, Chinese, Albanian, then I ask: what is the sense of having requested and obtained Italian citizenship? It is not perhaps to enjoy the advantages that a country offers and then return to live in one’s country of birth or that of one’s parents? In that case, I am just an exploiter. But if it means a conscious choice, which implies changes in behaviour, the desire to build with other citizens a more just society etc, then, yes, I deserve citizenship. I think that society must help each person to make such pondered choices, helping and facilitating efforts to integrate.

taken from:http://www.asianews.it

Full report on Political Islam, Sharia Law and Civil Society

2008-11-29T09:25:00.000+07:00

On 10th October 2008, the Council of Ex-Muslims of Britain (CEMB) celebrated its first anniversary by holding a conference at Conway Hall in London on Political Islam, Sharia Law and Civil Society [1].

An audience of ex-Muslims and freethinkers were welcomed to Conway Hall by Giles Enders, who chairs the South Place Ethical Society, the oldest freethought community in the world, founded in 1793. He claimed that Conway Hall was the “last bastion of free speech in the UK”, since free speech in Parliament was constrained by the Speaker, the whips and various interest groups, rendering parliamentarians unwilling to pass laws against threats to apostates or the issuing of threatening fatwas. The BBC was hardly supportive of free speech either, employing much self-censorship and steadfastly refusing to allow the voices of the non-religious to be heard on Thought for the Day (a regular interlude on the otherwise popular news and current-affairs radio programme Today).

Documentary about the Councils of Ex-Muslims
Zia Zaffar, Treasurer of CEMB, then introduced a short documentary film by Patty Debonitas about the Councils of Ex-Muslims set up fairly recently in a number of European countries. The documentary featured an interview with Mina Ahadi, the founder of the movement. She said that the movement marked a renaissance: it had broken an important taboo.

The film then featured Maryam Namazie, one of the founders of the CEMB. She said that religion ought to be a personal matter. She would never have wanted to be tied to the label “ex-Muslim”, but it was necessary to break the taboo.

Footage was shown of a pro-hijab demonstration in France in 2004 that was opposed by a pro-secularism counter-demonstration against political Islam. The counter-demonstration featured veiled women being led in chains through the streets.

In a further interview, Mina Ahadi told how in Iran after the Islamic Revolution, women came onto the streets to demonstrate against forced veiling. After the first demonstration, they came back again but were attacked by bearded men who beat them. They still came back again, but this time were attacked by men with knives. When they came back again, they were attacked by men with Kalashnikovs. So fewer and fewer women came back to demonstrate.

The documentary ended with Maryam Namazie saying that they were a vast political movement that was bringing the regime in Iran to its knees, and they were going to bring the same energy to fighting political Islam in Europe.”??

Opening address
Maryam Namazie, the CEMB's spokesperson, then gave an opening address, saying that the political Islamic movement used rights and anti-racist language for western consumption so that it could go about its business as usual. While Islamic organisations in the UK talked in public relations terms, they, their courts, their schools, their leaders were nothing but extensions of Islamic states. In the end, political Islam mattered to people because it affected their lives, their rights, their freedoms. And that was why only a movement that put people first could mobilise the force needed to stop it.

Panel on Apostasy Laws and the Freedom to Renounce and Criticise Religion
Caspar Melville, editor of the New Humanist, chaired the next session, a discussion on Apostasy Laws and the Freedom to Renounce and Criticise Religion. The distinguished panel consisting of Mina Ahadi, founder of the German Council of Ex-Muslims, Professor A.C. Grayling, the eminent philosopher, Ehsan Jami, a young Dutch politician and Ex-Muslim activist, Fariborz Pooya, head of the Iranian Secular Society, Hanne Stinson, Chief Executive of the British Humanist Association, and Ibn Warraq, the well-known scholar of Islam. Each of the panel made a short opening statement and then they replied to questions from the floor.

Professor Grayling began by explaining that the idea of punishing apostasy was very old and a familiar feature of monolithic control. In ancient Rome it had taken a quasi-secular form, where failure to observe community rites brought punishment. Within historical Christianity, apostasy had been regarded as one of the worst possible crimes: “blasphemy against the Holy Spirit”.

Ibn Warraq pointed out that the drafters of the Universal Declaration of Human Rights had insisted on the inclusion of the right to change one’s religion (given in Article 18) particularly to protect Muslims who converted to Christianity. Islamic states had always objected to this part of the article.

Fariborz Pooya declared that Islam had been imposed on the people of Iran by the Iranian Revolution. Beforehand, many Iranians had lived without Islam. The Islamic regime used apostasy laws as a means to control the population. Any criticism of the administration led to an accusation of apostasy.

Ehsan Jami mentioned that many people in the Netherlands needed police protection because of Islamist threats.

Mina Ahadi reminded those present that the conference was being held on the International Day against the Death Penalty, and that those victims who had been killed for apostasy should be remembered. Thirty years beforehand in Iran she had been able to say openly that she was no longer a Muslim. In Germany in 2006, such a declaration had evoked death threats. It should be kept in mind that Islamism was a political movement, and the death penalty for apostasy was a tool of repressive government.

Ehsan Jami felt that immigrants to Europe who retained dual nationality had dubious loyalty to their country of residence. Even some members of the Dutch Parliament had dual nationality. Immigrants to Europe should follow his example and become fully committed to their new countries.

Professor Grayling suggested that there was a parallel between the divided loyalties of some European Muslims and the situation in 16th-century Europe when there could be a conflict between loyalty to one’s country and loyalty to the Pope.

Hanne Stinson emphasised the need for a secular society if freedom and democracy were to flourish. All the Abrahamic religions, and not just Islam, were strongly against apostasy.

Mina Ahadi declared that, unrecognised by most people in the West, there was a huge secular movement within Islamic countries, although it was savagely repressed. In the West, however, people were often given unwanted religious labels. When she had first travelled to Europe, people like her had been seen simply as a “foreigners”. Since 9/11, however, governments tended to label them as “Muslims”. The struggle between the Councils of Ex-Muslims and organisations such as the Muslim Council of Britain was a struggle between those who supported human rights on the one hand and fascism on the other.

The panel was divided on the issue of whether to co-operate with Muslims or not. Ehsan Jami was strongly against it, but Fariborz Pooya suggested that there were Muslims with whom they could work for a secular society where religion was a private matter.

A.C. Grayling said that the one thing that could not be tolerated was intolerance. Religions wanted to encroach more and more on the public domain and demanded more and more privileges. They had to be told that they were just one interest group among many. His attitude could be summed up as, “You may believe that there are fairies at the bottom of the garden, but don’t bother other people about it!”

Ibn Warraq stated that freedom of expression was absolute: no-one had a right not to be offended. However, in response to an objection from the floor, he agreed that there were limits in international law, under the International Convention on Civil and Political Rights (ICCPR) [2]

Speaking from the floor, an Iranian refugee from Denmark said that the struggle was one of freedom against fascism. Governments in the West should put pressure on countries such as Saudi Arabia to improve their position on human rights.

Mina Ahadi said that there was a political problem in the West, where the Left was often pro-Islam and tolerant of human rights abuse by Muslim groups and regimes, but the Right was often exploiting the issue for its own purposes. The ex-Muslims from Islamic countries were a third force, against political Islam and for human rights. A.C. Grayling suggested that although this was true, there was also a “decent Left”, who did care about these issues.

Hanne Stinson posed the question of why governments who were theoretically in favour of human rights, freedom of expression and freedom of belief did not demonstrate this in their actions. She thought that the answer was that they were in fear of speaking out.

Ehsan Jami stressed that the campaign against the death penalty should encompass a campaign against laws that punished apostasy or homosexuality.

Hanne Stinson felt that the UK Government had run into problems in its commitment to religious freedom. The New Labour Government was a very religious one and saw so-called “religious leaders” as representing communities; they tended to support group rights at the expense of individual rights.

A.C. Grayling explained that apostasy from Christianity was not well received. In Britain, it meant that it was difficult for apostate parents to obtain entrance to good schools for their children. In the USA, politicians could not get elected unless they paid lip service to religion.

Ibn Warraq was worried by the huge amount of self-censorship in western society. It was evident among scholars of Islam. Biblical criticism had been an important force in producing the Enlightenment. Koranic criticism could do the same.

Finally, Mina Ahadi reminded everyone that the councils of Ex-Muslims were fighting for the universality of human rights.

Starting the afternoon with comedy
Opening the afternoon session, Fariborz Pooya called on everyone to remember that we must be the voice of the voiceless.

As a prelude to the serious business that was to follow, the audience was treated to some quick-fire humour about religion from the comedian Nick Doody, well known from his work on TV and radio in the UK and appearances further afield in much of Europe. A few sample jokes:

• “I was raised Catholic. My brother is training to be a priest – and he doesn’t even like kids!”
•
• “Religion is like an enormous dog. If it’s yours, you love it, but it is terrifying to everyone else. Above all it should be kept away from children.”
•
• (Referring to the implications of male Muslims’ desire to keep women covered up and to forbid alcohol consumption) “I know what I’m like – if I have a pint of booze or see a lady’s chin, it’s rape, rape, rape!”
•
He finished with a true story from the time of the 7/7 terrorist bomb attacks in London. A young couple were in Tavistock Square when the bus blew up. They took refuge in the nearest building, which happened to be a pub. The pub quickly filled up with people fleeing from the carnage. After about 45 minutes an armed policeman came in and ordered the landlord to keep serving free drinks. Nick Doody’s comment was:

“That’s why we shall never have Sharia law in Britain – the response in our capital to a national emergency was a lock-in!”

Panel on Sharia Law and Citizenship Rights
The serious business of the afternoon began with a discussion of Sharia Law and Citizenship Rights. This was chaired by Andrew Copson, Director of Education and Public Affairs at the British Humanist Association. Discussion was led by another distinguished panel. Its members were Mahin Alipour, an Iranian refuges living in Sweden, where she heads Equal Rights Now – Organisation against Women’s Discrimination in Iran, the International Campaign in Defence of Womens Rights in Iran and the Scandinavian Committee of Ex-Muslims; Roy Brown, past-President of the International Humanist and Ethical Union (IHEU) and IHEU’s main representative at the UN Human Rights Council in Geneva; Johann Hari, an award-winning journalist who writes regularly for The Independent, and from time to time for the New York Times, the Los Angeles Times, Le Monde, Le Monde Diplomatique, The New Republic, El Mundo, The Guardian, The Melbourne Age, The Sidney Morning Herald and South Africa’s Star; Maryam Namazie, Spokesperson of the CEMB, and Ibn Warraq, as before.

Mahin Alinpour told her personal story. A qualified engineer, she had been prevented from working because her then husband had refused permission for her to do so. Later, she was again refused permission to work as an engineer, on the grounds that “it was not suitable work for a woman”. Finally she was employed because of a shortage of suitably qualified men, but she was forbidden from interacting with her fellow workers because they were all men. She was obliged to wear a hijab and chador and had to have a driver to take her to work – her male colleagues could drive themselves.

In the end she escaped to Sweden, where she obtained a divorce and custody of her children. Nonetheless, even in such a supposedly advanced country, she still encountered discrimination against ethnic minority women, living in ghettoes and at risk of so-called “honour killings”. Foreign women could be married at the age of 15, even though this was not allowed for native Swedes. As a result of her struggles and that of other women, this law had eventually been changed. But the Swedish Government continued to make many compromises with Islamists, such as establishing special health clinics for Muslim women.

Maryam Namazie pointed out that Sharia was not just an issue for women: it affected everyone.

Ibn Warraq explained that there were two groups who suffered most from Sharia: women, and non-Muslim minorities such as the Ahmadis, Bahais and Zoroastrians. The Sharia regime introduced in Pakistan had had a huge impact on women. The female prison population had rapidly soared by 300 per cent.

Maryam Namazie said that in Iran and some other Islamic countries the state was promoting child abuse by insisting on the veiling of young children. Imagine a young girl of seven forced to wear enveloping garments – never allowed to let sunlight touch her body, never allowed to play with boys of the same age.

Roy Brown pointed out that Islam was not just another religion. Over the past 50 years mainstream Islam had become far more radical. Saudi Arabia had poured billions into promoting its extreme form of Islam. He did not believe that the Muslims of West Ham needed a £600 million mosque. It was clear that the purpose of this mosque, which would dwarf the 2012 Olympic site, was to proclaim to the world “We are the masters now” They are not and we must not let them get away with it.

Johann Hari expressed the view that in Britain there was a problem that an immigrant was put into a box labelled “Muslim” and expected to behave in a certain way for life, instead of being seen as a human being entitled to the same rights as other citizens.

Accepting certain human rights abuses on the grounds that they were part of someone’s culture was akin to excusing slavery by claiming that it was part of the culture of the deep South. There were a lot of people from the deep South called “slaves” who had not agreed with it. They were supported by other people, and eventually they won.

An Egyptian Copt in the audience told how non-Muslims were denied justice in Egypt. A Muslim who murdered a Christian received a suspended sentence of one year. Non-Muslim lives had lower value than Muslim lives.

It was mentioned that Gordon Brown had expressed a wish that Britain should be the capital of Sharia-compatible finance. However, Baroness Cox had spoken out against the acceptance of parallel legal systems.

Johann Hari maintained that Islam could only be modernised if we could criticise it and ridicule it, but Maryam Namazie said that Islam would not be modernised unless it were deprived of power. Many women in Britain who were dealt with by Sharia courts did not know that they had another choice. The women who went to Sharia courts were those in most need of secular courts. Sharia law was heavily weighted against women. For example, in a divorce case, a father would automatically gain control over his sons when they reached the age of seven, even if he had been abusive and violent. It was not racist to oppose Sharia law; it was racist to want to drag people back to mediaeval laws.

Mahin Alipour said that Sharia was a platform for poltical Islam and was a Trojan horse within Western society. In pre-1979 Iran, Sharia law had been used for political aims. Political Islam was fighting for more power and was using Sharia as a tool to this end. The USA had been responsible for the growth of political Islam, by supporting Khomeini, the Taleban and other Islamist regimes and movements. The West was turning a blind eye to ongoing abuses such as the stoning of women and execution of children.

Ibn Warraq said that it was helpful in discussing Islam to distinguish between what he called Islam I, Islam II and Islam III. Islam I was what was in the Koran and what the Prophet was supposed to have said. Islam II was the hadith and traditions and the theological construction developed by Islamic scholars. Islam II was what Muslims actually did do, as opposed to what they should have done.

In history, Islam had not been a relentless series of philosophies. Until the 1930s, Islam III had sometimes been more tolerant than Europe, for example with respect to homosexuality. And multiculturalism, like cholesterol, came in two forms, one good and one bad. The good aspect was a respect for different cultures. The bad led to ghettoisation.

Roy Brown argued that we must not abandon Muslims to their fate. We should not fight against Muslims. We should recognise that our strongest potential allies in the fight against Sharia courts because they were Islamic, but because we stood for equal rights. And we must make it clear that there was a distinction between criticism of Islam and incitement of hatred the Sharia and political Islam were liberal Muslims and Muslim women. We could never eliminate Islam; our objective should be to push it out of politics and the law and back into the private sphere.

Ibn Warraq thought it was important to assert the positive achievements of Western civilisation, such as the Universal Declaration of Human Rights.

Johann Hari warned that there was a growing prejudice against Muslims. We must not project our own good intentions onto Western governments, who were only too happy to get into bed with evil regimes such as that of Saudi Arabia.

Maryam Namazie concluded this session by explain that “ex-Muslim” was not an identity. CEMB was for citizenship and humanity. Political Islam was not just a problem for Muslims and ex-Muslims; it was a problem for everybody. And political Islam and US militarism were not in opposition to one another: they were two sides of the same coin.

We should not accept an attitude equivalent to saying “We already have slavery” or “We already have apartheid” and “therefore we have to accommodate it and work round it”. The state had a duty to treat people as equal citizens and not hand over power to backward imams.

She called on those present to help organise a mass demonstration against Sharia. It would be appropriate to hold it in March on International Women’s Day.

Short film: Fitna Remade
The next item was a showing of a film entitled Fitna Remade. This was an adaptation of the notorious film by Gert Wilders, Fitna, edited by Reza Moradi to make it a better reflection of reality.

Harun Yahya’s Atlas of Creation
Professor Richard Dawkins, author of The God Delusion, The Selfish Gene and many other best sellers, then analysed the widely distributed book, Atlas of Creation, by Harun Yahya. He began by saluting the CEMB, which could become the nucleus of thousands of even hundreds of thousands of like-minded people.

Adnan Oktar (pen name Harun Yahya) was a naive Turkish creationist who worked hard to give the impression that the whole Muslim world was taken in by creationist nonsense. He had produced a lavish book which had been widely given away in an attempt to influence opinion formers. Professor Dawkins had asked a contact at the Oxford University Press to estimate the cost of Harun Yahya’s book, and the answer was about £500 000 for 10 000 copies.

Harun Yahya was also offering a £4.4 trillion prize to anyone who could come up with an “intermediate fossil”. Professor Dawkins calculated that this sum was about 36 times the GNP of Turkey! Since there was a sense in which all fossils were “intermediate”, it was a little hard to understand what Yahyah was looking for.

Professor Dawkins then showed a number of slides taken from illustrations in Yahyah’s book, to illustrate Yahya’s thinking and misunderstanding, or as he put it, “ the depth of his erudition”. Harun Yahya was what is known as an old-Earth creationist. He accepted the great age of the Earth as determined by science, but he believed that animals had been created by God and that there were no differences between ancient and modern animals.

One of the slides showed that Yahyah thought a crinoid (a deuterostome [3]) was equivalent to a modern annelid worm (a protostome [4]). They could not be more different! Another slide showed him equating a 95-million-year-old fossil eel with a totally unrelated modern sea snake. Then there was the brittle star that was supposed to be the same as a modern starfish. The room erupted in laughter when Professor Dawkins showed an illustration where Yahya had compared a 25-million-year-old caddis fly preserved in amber with a man-made tied fishing fly with fish-hook still attached. Perhaps Yahya really thought that caddis flies had hooks!

After reading Yahyah’s book, Professor Dawkins had finally come to understand what Yahya was looking for when he offered the prize for an “intermediate fossil”. He apparently thought it should be an animal like a “fronkey”, half frog and half monkey, or half crocodile and half squirrel, or half fish and half lizard or half lizard and half bird. But, of course, no such creatures could possibly exist according to the Theory of Evolution.

People believed in creationism because of childhood religious indoctrination. An example was Kurt Weiss, who, despite first-class scientific studies at Chicago and Harvard, declared that, if all the evidence in the universe contradicted the scriptures, he would have to choose the scriptures. There was no defence against that sort of thinking.

Adnan Oktar (aka Harun Yahyah) had claimed that Richard Dawkins had assaulted his rights and as a consequence a Turkish court had banned the Dawkins website [5], although Professor Dawkins had received no official notification of this. Despite the ban, Professor Dawkins had many Turkish supporters who had found ways to continue access to the site.

Keith Porteous Wood, General Secretary of the National Secular Society, spoke from the floor to say that the EU Enlargement Commissioner had been asked to refer to the court decision against the website in relation to Turkey’s wish to join the European Union.

Panel Discussion on Creationism, Religious Education and Faith Schools
The last panel of the day was chaired by Keith Porteous Wood. Panel members were Richard Dawkins; Terry Sanderson, President of the National Secular Society, who is a journalist and human rights and gay rights activist; Joan Smith, well known as a columnist in The Independent, The Independent on Sunday and the Evening Standard, who also writes in The Times, The Guardian and The Sunday Times and is also known as a novelist, human rights activist and former chairman of the English PEN Prison Committee; Bahram Souresh, a founding member and Executive Committee Member of CEMB, and political and social analyst and commentator; and Hamid Taqvaee, social commentator and analyst and current leader of the Worker-Communist Party of Iran, who has played an important role in opposition to the Islamic Republic of Iran.

Keith Porteous Wood started by attacking the dangerous development of publically funded minority faith schools.

Joan Smith said that the National Curriculum should insist that all publically funded schools met minimum standards, did not segregate children and had proper sex education.

Terry Sanderson referred to a publication by the Muslim Council of Britain (MCB) that outlined what they wanted for Muslim pupils: no singing, no dancing, no figurative drawing, no swimming, etc. There was political pressure for the National Curriculum to comply with this agenda and, for example, to supply segregated education for girls. The only solution was the complete secularisation of the state education system. Research in a Muslims girls’ school had shown that creationism was being allowed into biology lessons: first the scientific explanation would be supplied and then the koranic explanation.

Hamid Taqvaee maintained that religious schools were a contradiction: education was about truth and religion about faith. He objected to the labelling of people as Muslims. He came from an Islamic country; he was not a Muslim.

Bahram Soroush said that just as we protected children from sexual abuse, so we should protect them from mental and emotional abuse. Faith schools should be dismantled.

Richard Dawkins thought that calling a child a “Muslim child” or a “Christian child” was evil – a form of child abuse. Demographic projections sometimes stated that by some particular date a specified proportion of the population would be Muslim. This betrayed a hidden assumption that a child would grow up in the faith of its parents. He hoped it would be possible to demand that religious education must be about religion and not be indoctrination.

Joan Smith thought it was wrong to impose the veil or hijab on little girls of six or seven. It was dreadful that UK taxpayers were paying to force little girls to wear the hijab. And might faith schools be a way of re-introducing anti-homosexual measures by the back door?

Terry Sanderson felt that it was essential to strip the power of indoctrination in schools from all clerics.

Hamid Taqvaee said that it was not just children but also adults who unthinkingly adopted the religion of their parents. Joan Smith suggested that there was a need for research into what students thought when they emerged from faith schools.

Bahram Soroush said that religion was an industry like a huge multinational company that evaded public scrutiny. We fought against disease, tobacco, drugs and organised crime; we needed to fight against religion.

Hamid Taqvaee pointed out that in the arts, science and politics we chose our own beliefs. It was only in the case of the religion of our parents that we received a label for life. It was the 0

taken from:http://www.iheu.org

Best Islamic Investment Bank (Global Finance) : Unicorn Investment Bank

2008-11-15T08:48:00.001+07:00

Founded in 2004 and headquartered in Bahrain, Unicorn Investment Bank (Unicorn) is an Islamic investment bank, with an international presence in the United States, Malaysia, the United Arab Emirates, Turkey and Pakistan. Unicorn seeks to deliver exceptional value to clients and shareholders through a focus on innovation, professionalism and integrity – the shared values that drive the Bank’s endeavour to be a leading global provider of Shari’ah-compliant investment banking products and services.

Unicorn’s integrated business model is built around six core business lines: Capital Markets, Private Equity, Corporate Finance, Asset Management, Strategic Mergers & Acquisitions and Treasury. The Bank leverages its resources and expertise across each of these business lines to provide clients with a broad range of investment solutions tailored to meet their specific requirements.

The Bank’s integrated product offering and financial structuring skills are coupled with an ability to distribute Unicorn products and services to a broad client base across the GCC region, and the Bank is now developing the capability to do so across the wider Middle East region, Turkey and Southeast Asia.

In every aspect of its business and through every level of the organisation, Unicorn is committed to upholding the highest standards of corporate governance and transparency. The Bank’s innovative products and transactions are fully compliant with Shari’ah principles and we believe that they are consistent with international financial best practice. The Unicorn Shari’ah Supervisory Board ensures that all investment policies, structures, products and financial services and activities that the Bank is involved in are in conformity with Shari’ah principles, while the Bank’s stringent corporate governance standards seek to ensure that the Bank, its directors and its employees follow high standards of ethical conduct and adhere to the principles of fairness, transparency, accountability and responsibility in all day-to-day operations.

Unicorn has achieved uninterrupted growth since its inception and has received widespread industry recognition for excellence and vision. The Bank intends to continue to build on its track record by delivering innovative and attractive investment products and services in a professional and transparent manner.

taken from: http://globalislamnews.blogspot.com

Internal and External Environment Analysis 2

2008-11-10T08:30:00.005+07:00

Global Threat

globalization and free market really supposed as efforts increases global
efficiency. trade globally help many countries to bloom quicker. also be assumed to make developing Country to get erudition access unobtainable. globalization likely be progress that must be developing country accepted, if they want to bloom and fight against poverty effectively. but for many people in developing Country, globalization doesn't bring economy profit (stiglitz, 2002: 6).

practice globalization in developing countries must finance world efficiency by developed countries welfare. south finance global efficiency for profit in north. market failures happen everywhere, bot even be caused by demand conditional to realize market self-regulating can not be fulfilled (because assumption to realize pure free computation to form free market proved not empirik-realistik), but also caused by economy importance and non economy that must be reachesed and defended to pass efforts distortion market manifestly (swasono, 2003: 83).

Joseph E. Stiglitz

difference more wider between rich and poor show more and more person at third world has been more poorer. in 1990,2.718 billion alive citizen with money less than 2 per day, while in 1998 poor citizen totals alive with money less than 2 per day is estimated 2.801 billion. this matter happens with reference to world income total enhanced recently as big as average 2,5 % every year it (world bank, 2000: 29).

Office World Bank at Washington

globalization not yet success decrease poverty and not yet success guarantee stability. crisis at asia and latin america has threatened economics and developing country stability , even crisis 1997 and 1998 be a threat for all worldwide economy.

taken from: msuyanto.com
translated by: danang

internal and external environment analysis

2008-11-10T08:18:00.003+07:00

Operational Environment and New Industrial

organization must change for accustom with competitive environment. change related to event makes a certain with other. technology, rivalry, economy shock, social change, ecology change, work force and world policies is strength that stimulate change. sophisticated information technology can change manner compete, so that can increase superiority compete to company. internet existence makes to make geographical limits almost meaningless.
in industrial, does industrial domistik or international, what produce goods or service, covered rivalry rule in five rivalry factors, that is enter it bew comer, substitution product threat, purchase dicker power, supplier dicker power and rivalry between existing competitors (porter, 1985). rivalry in the style of porter this is necessary changed with bew rivalry rule necessary guarded, first new economy or digital economy, make market is gnawed to company revolutionary, for example amazon. com formerly it only bookstore, but now berjualan diverse product. ebay formerly only auction at internet, but now various product is being being sold.

formerly amazon bookstore

second, the free best workers, erstwhile employee for example works at company big, like AT&T, IBM, XEROX move to Google, Amazon, Ebay and as it. Third, company revolutionary seize best asset, for Example ebay erstwhile only company little, now is caning akusisi butterfield butterfield that be third biggest auction house at united america. vodafone aged bew 12 year can to buy to company eldest, biggest and most make proud at german.

vodafone office

Perhaps we do not know company like akamai technologies, imergent, palomar medical technologies, intergital communications, cybersource, perficient, lam research, ceradyne, f5 networks and armor holdings. While company be 10 company with quickest;fastest growth at world.

taken From msuyanto.com
translated by danang

Intact Leader

2008-11-08T09:10:00.004+07:00

Intact Leader

“Since 1918, when world war I introduce test use IQ massly towards united state army candidates. Score IQ average at united State has increased 24 points and similar increase also recorded at developed countries whole world. increase reason range from nutrition better, more many children that have a time to finish higher education stage. existence game computer and riddle game that help children dominates crafts with vision of up to more the so small family member total, usually correlation with score height iq in children. from research result on a large scale towards teacher and parents shows that generation children now a more regular is experiencing emotion problem is being compared earlier generation. children now according to average is growing desolately and depression, angry easier and difficult regulated, nervous and inclined worried, more impulsive and aggressive ” word Daniel Goleman.

beginning 1970, top of protest student university the whole world defy war Vietnam, a librarian at a office us. Information agency beyond the sea get job's news. a student university group will threaten will burn the library. by accident librarian has several friends among student university that take outside threat. the reaction at first foolish appear or naive or both. he invites group use library for a few their meeting. he also invites America member country concerned with present to listen them, so roger dialog rather than confrontation. librarian demonstrate the skill as negotiator, or peace agency very great, can to read situation and that's one of [the] ability that be emotion intelligence (eq).

Follow Danah Zohar and Ian Marshall, IQ and eq apart or together, insufficient to explain overall human intelligence complexity and also imagination. Computer has High IQ, because can detect rule and follow it without wrong. Many animal has high EQ, because can identified situation that occupied and detect manner receives situation correctly. But computer and animal never ask why we have rule or situation, or does rule or that situation can be changed or repaired. leader want intelligence spiritual (SQ) that can streamline iq and eq. intelligence spiritual intelligence to face and break meaning problem and value, that is intelligence to laid behavior and alive a leader in meaning context broader and rich, intelligence to evaluate that action or has meaning is compared with another person
.
spiritual values spiritual general, among others: truth, honesty, modesty, kepedulian, agreement, freedom, peacefulness, love, explanation, good charity, responsibility, care, integrity, taste believes, heart cleanliness, humility, troth, neatness, glory, courage, unitary, taste thanks god, joke, willpower, patience, justice, similarity, balance, sincere, knowledge, and persistence
.
love affection is used mahatma Gandhi to lead 3 billion Indians people to get independence. he loves class Sudra that suffer, get them as family member, even he is willing bet soul struggles to wipe off caste difference and inspire Indians nation so that fair towards fellow. Gandhi like children and always plays with children padepo, he also likes to carry baby, kiss and coddle them like the heart fruit self. after pray evening children likes to surround it. after adult this children is difficult gets fact that this audience parents actually Indians independence father. he also loves enemy and believe that everyone basically good only still closed. he is of opinion, when does words not can to soften opponent, so at least plainness, humility, and honesty will make person touched so opponent will put moved on patience, then throw away far wrong idea and not will happen mutual will kill. besides doesn't want to kill enemy, gandhi’s opinion better self that suffer so that hostile both parties mutual compassionates. the death very ironic inform us that veracity and heart kindness not will can to help fellow keeps away pressure, colonial, mutual kill, hate and action sadist. country that gandhi loved cracking to slit, farmer that payed poor permanent. battle fire under the sun not lessened, luxury giant foot treads on the poor that groan. love that really there, only better part for another person and a little for self. such write kwok yuen ming in the book mahatma gandhi.

Mahatma Gandhi

Umar bin Abdul Azis be great leader with High intelligence spiritual. besides as caliph (country leader), also as religious teacher. he is a success leader in leads country and society. After Muhammad s. a. w. and Khulafaur rasyidin, Islam never Practised in its for pure and true, except at the government time. he is success change status quo in leadership revolution with change country is ”Heaven” in short time. country realize welfare, harmony and peacefulness. the secret lays in the personality enchantment as simple builder driver in eats, dress and riding. to do pilgrim. when he see his child out house feast day with very simple clothes even torn, even if clean, among children other that fiddle around with cheerful happy with their clothes is new, out his tear is because touched. When died only 17 diners, in his matter is wealthy noble breed. five diners for the shroud cloth, 2 diners for the cemetery soil and the rest 10 diners that's that distributed to 11 the sons. when people come to their house between two lights to talk individual problem, so in advance turn off lamp that financed with country money, and turned oil from the pocket self. this is to watch over don't until used people money for matter outside official importance, bot at all permitted. umar bin abdul azis dismiss ruthless official (oppress)s, return ownership that seized, defend the people is not treated fair at court, and return church to class christian. when distributing apple to the people. suddenly little the child takes that apple then is putted into to the mouth. umar even also pat hand takes apple at that the child mouth, so that the child cries and take to the mother. final the wife goes to market buys apple. at mosque, umar jog that man, spontaneous man says ”are you crazy? ”. umar answer ”No”. hear man word, angry the guard moves to strike it, but umar prohibit the guard ”that man is no doing anything, he only ask are you crazy? I answer No. ” umar be heart low caliph, never lie and fear to hereafter torment.
SQ make possible leader to be creative, change rule and situation. SQ give leader ability to distinguish, bound moral, ability accustoms stiff rule With comprehension and love with ability equal to see to when to love and comprehension comes the limit. Leader uses sq to distinguish which good and which unrighteous, with shadow possibility not yet materialized to dream and make leader low heart. SQ make leader genuinely intact intellectually, emotional and spiritual.

Taken from msuyanto.com
Translated by danang hamdani
Original Title : “Pemimpin yang Utuh”

getting movies, mp3,games using google

2008-10-30T09:20:00.000+07:00

okay lets keep this tutorial short. you want movies and games/mp3 / games and dont' know where to get them, thank god there is google.com
goto www.google.com

put this string in

"parent directory " /appz/ -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " DVDRip -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory "Xvid -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " Gamez -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " Name of Singer or album -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

notice that iam only changing the word after the parent directory, change it to what you want and you will get lots of goods. i got plenty of movie sites heh.

Google secrets

2008-10-30T09:19:00.000+07:00

Google secrets

--------------------------------------------------------------------------------

method 1
?ww.google.com

put this string in google search:

"parent directory " /appz/ -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " DVDRip -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory "Xvid -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " Gamez -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " MP3 -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

"parent directory " Name of Singer or album -xxx -html -htm -php -shtml -opendivx -md5 -md5sums

Notice that i am only changing the word after the parent directory, change it to what you want and you will get a lot of stuff.

voila!

method 2
?ww.google.com

put this string in google search:

?intitle:index.of? mp3

You only need add the name of the song/artist/singer.
Example: ?intitle:index.of? mp3 jackson

Google Tips & Tricks

2008-10-30T09:18:00.000+07:00

==================================================
Utilizing search engines
==================================================

So much information is on the web, its mind boggling. Thankfully we have search
engines to sift through them and catagorize them for us. Unfortunatly, there is still so
much info that even with these search engines, its often a painstakingly slow process
(something comparable to death for a hacker) to find exactly what you're looking for.

Lets get right into it.

I use google.com as my primary search engine because it presently tops the charts as far as
the sites that it indexes which means more pertinent info per search.

1. Page translation.
Just because someone speaks another language doesn't mean they dont have anything useful to say. I use translation tools like the ones found at

http://babelfish.altavista.com
and

http://world.altavista.com
to translate a few key words I am searching for. Be specific and creative because these tools arent the most accurate things on the planet.

2. Directories.
These days everything is about $$$. We have to deal/w SEO (search engine optimization) which seems like a good idea on paper until you do a search for toys and get 5 pornsites in the first 10 results. Using a sites directory will eliminate that. You can narrow your search down easily by looking for the info in specific catagories. (PS google DOES have directories, they're at: directory.google.com)

3. Here are some tips that google refers to as "advanced"

A. "xxxx" / will look for the exact phrase. (google isnt case sensitive)
B. -x / will search for something excluding a certain term
C. filetype:xxx / searches for a particular file extention (exe, mp3, etc)
D. -filetype:xxx / excludes a particular file extention
E. allinurl:x / term in the url
F. allintext:x / terms in the text of the page
G. allintitle:x / terms in the html title of that page
H. allinanchor:x / terms in the links

4. OR
Self explanatory, one or the other... (ie: binder OR joiner)

5. ~X
Synonyms/similar terms (in case you can't think of any yourself)

6. Numbers in a range.
Lets say you're looking for an mp3 player but only want to spend up to $90. Why swim through all the others? MP3 player $0..$90 The 2 periods will set a numeric range to search between. This also works with dates, weights, etc

7. +
Ever type in a search and see something like this:
"The following words are very common and were not included in your search:"
Well, what if those common words are important in your search? You can force google to search through even the common terms by putting a + in front of the denied word.

8. Preferences
It amazes me when I use other peoples PCs that they dont have their google search preferences saved. When you use google as much as I do, who can afford to not have preferences? They're located on the right of the search box, and have several options, though I only find 2 applicable for myself...
A. Open results in new browser
B. Display 10-100 results per page. (I currently use 50 per page, but thats a resolution preference, and 5X's the default)

9. *
Wildcard searches. Great when applied to a previously mentioned method. If you only know the name of a prog, or are looking for ALL of a particular file (ie. you're DLing tunes) something like *.mp3 would list every mp3.

10. Ever see this?
"In order to show you the most relevant results, we have omitted some entries very similar to the X already displayed. If you like, you can repeat the search with the omitted results included." The answer is YES. yes yes yes. Did I mention yes? I meant to.

11. Search EVERYWHERE
Use the engine to its fullest. If you dont find your answer in the web section, try the group section. Hell, try a whole different search engine. Dont limit yourself, because sometimes engines seem to intentionally leave results out.
ex. use google, yahoo, and altavista. search the same terms... pretty close, right? Now search for disney death. Funny, altavista has plenty of disney, but no death...hmmm.

If you've read this far into this tutorial without saying, "Great, a guy that copied a few google help pages and thinks its useful info" then I will show you WHY (besides accuracy, speed, and consistancy finding info on ANYTHING) its nice to know how a search engine works. You combine it/w your knowledge of other protocol.

Example:
Want free music? Free games? Free software? Free movies? God bless FTP! Try this search:
intitle:"Index of music" "rolling stones" mp3
Substitute rolling stones/w your favorite band. No? Try the song name, or another file format. Play with it. Assuming SOMEONE made an FTP and uploaded it, you'll find it.

For example....I wanted to find some Sepultura. If you never heard them before, they're a Brazilian heavy metal band that kicks ass. I started with this:
intitle:"Index of music" "Sepultura" mp3 <-- nothing
intitle:"Index of msica" "Sepultura" mp3 <-- nothing
intitle:"Index of musica" "Sepultura" mp3 <-- not good enough
intitle:"Index of music" "Sepultura" * <-- found great stuff, but not enough Sepultura

At this point it occurs to me that I may be missing something, so I try:
intitle:"index of *" "sepultura" mp3 <-- BANG!
(and thats without searching for spelling errors)
Also try inurl:ftp

I find that * works better for me than trying to guess other peoples mis-spellings.

The same method applies for ebooks, games, movies, SW, anything that may be on an FTP site.

I hope you enjoyed this tutorial, and I saw that recently a book and an article was written on the very same topic. I havn't read them as of yet, but check em out, and get back to me if you feel I missed something important and should include anything else.

intitle:"index of" "google hacks" ebook

Ps. I've said it before, I'll say it again... BE CREATIVE.
You'll be surprised what you can find.

How To Find Serial Numbers On Google

2008-10-30T09:16:00.000+07:00

ok, this is a little trick that i usually use to find cd keys with google.

if your looking for a serial number for nero (for example) goto google.com and type nero 94FBR and it'll bring it up

this works great in google

HOW DOES THIS WORK?

Quite simple really. 94FBR is part of a Office 2000 Pro cd key that is widely distributed as it bypasses the activation requirements of Office 2K Pro. By searching for the product name and 94fbr, you guarantee two things.

1)The pages that are returned are pages dealing specifically with the product you're wantinga serial for.

2)Because 94FBR is part of a serial number, and only part of a serial number, you guarantee that any page being returned is a serial number list page.

I hope this trick help you finding your ccd keys easily

Enjoy :)

Play Games On PS2 Without ModChip

2008-10-30T09:14:00.000+07:00

Play Games On PS2 Without ModChip

In this guide, you will learn the very easy method of making copies of your PS2 and normal Playstaion games so that they are playable on the PS2. This guide will provide you with all the information you need to burn PS2 games.
You will need the following things to burn PS2 games:
a computer with a cd burner
a blank cd-r (don't use the re-recordable type a.k.a. cd-rw)
CDRWIN The version in this guide is 3.8D
FireBurner
PS2 patcher
GameShark 2 for PS2 - the GameShark 2 is available at most stores that sell video games, a few examples would be Best Buy, Circuit City, or Target. You want version 1.0 of the GameShark 2. I have heard that all other versions work, but I have only tested version 1.0. GameShark2 costs about 29.95. Believe me, its worth it!!!
and a PS2 to play the games.
Burning the PS2

The process of burning ps2 games is easy. It is really only a 3 step process.(read the game, patch the game, and burn the game.)

1) insert game into cd drive.

2) Open up CDRWIN and click on the extract disk/tracks/sectors button.

3) Your settings should be as follows:

For extract mode select disk image/ cue sheet
For read options select raw
For error recovery select abort
For jitter correction select auto
For subcode analysis select auto
Data Speed and Audio Speed should be the same
For read retry count type 0
For subcode threshold type 300
Make sure you selected the drive that your PS2 game is in

Make sure you typed in the file name (just type the name of the game) and Check the directory that you're putting your file in.

Then just press start

If you get an error in the middle of reading the disk that says something like can't read sections xxxx-xxxxx of disk, it is becase the disk is scratched and CDRWIN can't read it. Try to clean the disk, if that doesn't work you just have to use a different game (a different copy of the same game)

4) Once CDRWIN is done, click ok and then exit CDRWIN. Open up the PS2 patcher, select the game file you just created and patch it (make sure you select the RAW option.

5) Close the PS2 patcher, next open up Fireburner. Click on the visual cue burner button. When you created your .bin file (the game file) in CDRWIN, a .cue file should have automaticly been created. In that case, drag and drop the .cue file into the Fireburner window. If the .cue file was not created, just drag and drop the .bin file into the Fireburner window. After you have done that, right click (click with the right side button on your mouse) on your file in the Fireburner window, and select Burn/Test burn.

6) In the options window that appears, select your cdwriter, select your write speed(doesn't really matter), and make sure you select Track at once (TOA) for the recording method. As for the options on the right side of the options window, make sure only the following are checked: eject cd and close session.

When you have selected the options, click ok and your PS2 game will burn. That's all you have to do to burn a game.
Burning a Playstion (PSone) game

1) If you want, you can spend 5 minutes using the same method as above to burn your playstation game, but its not necessary. For a playstation game (not PS2) all you need to do is use a program that lets you make an exact copy or a backup disk (CDRWIN) You don't need any selected options, you just need to start the game on the PS2 the same way you would a PS2 game.
Starting the game on your PS2

1) Now for the fun part (and challenging part the first couple of times) This may sound a little complicated at first, but after you do it 3 or 4 times, it's super easy. First things first, you must remove the front of your game drive on your PS2(not a big deal, it can snap on and off).

2) Now insert your gameshark 2 cd(make sure the gameshark memory card is in one of the 2 slots, doesn't matter which one.)

3) In the gameshark options, choose start game, then without. Your screen should read Please insert game disk then press X to continue.

4) Now this part can be trickey for beginners, so I will provide pictures

-the main purpose of this starting method is to open up the PS2 and swap the gameshark disk with your burned game without the PS2 knowing you did it. DO NOT press the eject button on the PS2!!!

-with the PS2 cd tray cover removed, you will be able to look in and see a while tab inside the PS2. With a credit card (or something like it) gently slide the white tab all the way over to the right, if you did it correctly, this should allow you to manually pull open the PS2 cd tray.

5) Next, take the gameshark disk out of the PS2 and put in your burned game.

6) Gently push the PS2 cd tray fully back into the PS2 (Don't press the eject button).

7) Now you need to slide that white tab all the way back to the left (its origional position). To do this you get a strong papper clip(needs to be a strong one) stick it into the PS2 on the right side of the white tab and push the tab back to the left.

If you pushed the tab all the way back to the left and did every thing else right, you are ready to play your game. Just press X on your PS2 controler and watch as your burned game loads. ( It may load slower than an original game, depending on the cd-r you are using, I use Verbatim cd-r's and have no problems.)

Download Programs Mentioned:
http://rapidshare.de/files/961808/PS2_Play.rar.html

Free X-Box Live

2008-10-30T09:11:00.000+07:00

Anyone here think about getting xbox live but not have enough money to pay for the starter kit...

WELL GUESS WHAT!!!!!!!!

You can now get it without paying a cent (that is if you have a free 2 month trial)

First go to http://www.xbconnect.com/downloads.php and download the current version of XBConnect...

Secondly you must get a Ethernet cable and connect your X-BOX to your router (if you have, you MUST have one BTW)

Thirdly install and open xbconnect. Create a new account .......

Fourthly go on www.xbox.com/live and sign in your .NET passport and create a profile for xbox live

Fifthly open your xbox with a xbox live supported game and follow the setup for xbox live ....

And YOUR DONE!!!!!

How To Make XP GO Faster

2008-10-18T14:58:00.000+07:00

Services You Can Disable

There are quite a few services you can disable from starting automatically.
This would be to speed up your boot time and free resources.
They are only suggestions so I suggestion you read the description of each one when you run Services
and that you turn them off one at a time.

Some possibilities are:
Alerter
Application Management
Clipbook
Fast UserSwitching
Human Interface Devices
Indexing Service
Messenger
Net Logon
NetMeeting
QOS RSVP
Remote Desktop Help Session Manager
Remote Registry
Routing & Remote Access
SSDP Discovery Service
Universal Plug and Play Device Host
Web Client

--------------------------------------------------------------------------------

Cleaning the Prefetch Directory

WindowsXP has a new feature called Prefetch. This keeps a shortcut to recently used programs.
However it can fill up with old and obsolete programs.

To clean this periodically go to:

Star / Run / Prefetch
Press Ctrl-A to highlight all the shorcuts
Delete them

--------------------------------------------------------------------------------

Not Displaying Logon, Logoff, Startup and Shutdown Status Messages

To turn these off:

Start Regedit
Go to HKEY_LOCAL_MACHINESOFTWAREMicrosoftWindowsCurrentVersionpoliciessystem
If it is not already there, create a DWORD value named DisableStatusMessages
Give it a value of 1

--------------------------------------------------------------------------------
Clearing the Page File on Shutdown

Click on the Start button
Go to the Control Panel
Administrative Tools
Local Security Policy
Local Policies
Click on Security Options
Right hand menu - right click on "Shutdown: Clear Virtual Memory Pagefile"
Select "Enable"
Reboot

For regedit users.....
If you want to clear the page file on each shutdown:

Start Regedit
Go to HKEY_LOCAL_MACHINESYSTEMCurrentControlSetControlSession ManagerMemory ManagementClearPageFileAtShutdown
Set the value to 1

--------------------------------------------------------------------------------

No GUI Boot

If you don't need to see the XP boot logo,

Run MSCONFIG
Click on the BOOT.INI tab
Check the box for /NOGUIBOOT

---------------------------------------------------------------------------------
Speeding the Startup of Some CD Burner Programs

If you use program other than the native WindowsXP CD Burner software,
you might be able to increase the speed that it loads.

Go to Control Panel / Administrative Tools / Services
Double-click on IMAPI CD-Burning COM Service
For the Startup Type, select Disabled
Click on the OK button and then close the Services window
If you dont You should notice

--------------------------------------------------------------------------------

Getting Rid of Unread Email Messages

To remove the Unread Email message by user's login names:

Start Regedit
For a single user: Go to HKEY_CURRENT_USERSoftwareMicrosoftWindowsCurrentVersionUnreadMail
For all users: Go to HKEY_LOCAL_MACHINESOFTWAREMicrosoftWindowsCurrentVersionUnreadMail
Create a DWORD key called MessageExpiryDays
Give it a value of 0

------------------------------------------------------------------------------

Decreasing Boot Time

Microsoft has made available a program to analyze and decrease the time it takes to boot to WindowsXP
The program is called BootVis

Uncompress the file.
Run BOOTVIS.EXE
For a starting point, run Trace / Next Boot + Driver Delays
This will reboot your computer and provide a benchmark
After the reboot, BootVis will take a minute or two to show graphs of your system startup.
Note how much time it takes for your system to load (click on the red vertical line)
Then run Trace / Optimize System
Re-Run the Next Boot + Drive Delays
Note how much the time has decreased
Mine went from approximately 33 to 25 seconds.

--------------------------------------------------------------------------------
Increasing Graphics Performance

By default, WindowsXP turns on a lot of shadows, fades, slides etc to menu items.
Most simply slow down their display.

To turn these off selectively:

Right click on the My Computer icon
Select Properties
Click on the Advanced tab
Under Performance, click on the Settings button
To turn them all of, select Adjust for best performance
My preference is to leave them all off except for Show shadows under mouse pointer and Show window contents while dragging

---------------------------------------------------------------------------

Increasing System Performance

If you have 512 megs or more of memory, you can increase system performance
by having the core system kept in memory.

Start Regedit
Go to HKEY_LOCAL_MACHINESYSTEMCurrentControlSetControlSession ManagerMemory ManagementDisablePagingExecutive
Set the value to be 1
Reboot the computer

---------------------------------------------------------------------------

Increasing File System Caching

To increase the amount of memory Windows will locked for I/O operations:

Start Regedit
Go to HKEY_LOCAL_MACHINESYSTEMCurrentControlSetControlSession ManagerMemory Management
Edit the key IoPageLockLimit

-----------------------------------------------------------------------------

Resolving Inability to Add or Remove Programs

If a particular user cannot add or remove programs, there might be a simple registry edit neeed.

Go to HKCUSoftwareMicrosoftWindowsCurrentVersionPoliciesUninstall
Change the DWORD NoAddRemovePrograms to 0 disable it

4096 - 32megs of memory or less
8192 - 32+ megs of memory
16384 - 64+ megs of memory
32768 - 128+ megs of memory
65536 - 256+ megs of memory

How To BOOT XP Faster

2008-10-18T14:55:00.000+07:00

First of all, this tweak only apply to those who only have one HDD on their primary IDE channel (nothing else on device 0 or 1) and a CD-ROM and/or DVD-ROM on the secondary IDE channel. Each time you boot Windows XP, there's an updated file called NTOSBOOT-*.pf who appears in your prefetch directory (%SystemRoot%Prefetch) and there's no need to erease any other files as the new prefetch option in XP really improves loading time of installed programs. We only want WindowsXP to boot faster and not decrease its performance. Thanks to Rod Cahoon (for the prefetch automation process...with a minor change of mine) and Zeb for the IDE Channel tweak as those two tricks, coupled together with a little modification, result in an EXTREMELY fast bootup:

1. Open notepad.exe, type "del c:windowsprefetch tosboot-*.* /q" (without the quotes) & save as "ntosboot.bat" in c:
2. From the Start menu, select "Run..." & type "gpedit.msc".
3. Double click "Windows Settings" under "Computer Configuration" and double click again on "Shutdown" in the right window.
4. In the new window, click "add", "Browse", locate your "ntosboot.bat" file & click "Open".
5. Click "OK", "Apply" & "OK" once again to exit.
6. From the Start menu, select "Run..." & type "devmgmt.msc".
7. Double click on "IDE ATA/ATAPI controllers"
8. Right click on "Primary IDE Channel" and select "Properties".
9. Select the "Advanced Settings" tab then on the device 0 or 1 that doesn't have 'device type' greyed out select 'none' instead of 'autodetect' & click "OK".
10. Right click on "Secondary IDE channel", select "Properties" and repeat step 9.
11. Reboot your computer.

WindowsXP should now boot REALLY faster.

Brontok Made in VB

2008-10-18T14:49:00.000+07:00

Virus Brontok VB Made in the latter this time you may have heard the name I ?...... virus Brontok correct that the virus menduplikatkan himself and adjust the name of the virus based on the new folder or a file window epxlorer on the active. Characteristic of the virus is using the folder icon, so someone who can outwit view.

Why the virus this discusses ?,... I m. ... ... actually I was not too interested in discussing this, I think what I'm interested membahasnya ... I definitely think I caused some of this ..... many frenzied days ago about the virus and brontok was menginfeksi some computer teman2ku.

Ok to shorten the time it's direct

After the file structure visible from the virus was making virusnya using visual basic 6.0 ops .... it made in hell Coy .... But this is added to make interesting.

This virus consists of 1 and 1 Module form, with the name

Form -> BrontokForm
Module -> API

With the following details:

Begin VB.Form BrontokForm
Caption = "Brontok.A"
ForeColor = & & H8000000F
ScaleMode = 1
BeginProperty Fonts
Name = ""
Size = 195323.4944
Charset = 29
Weight = 774
EndProperty

Begin VB.Timer TmrBrontok
Enabled = 0 'False
Interval = 2000
Left = 2160
Top = 0
Width = 57352
Height = 1
End
End

With the name Project: Brontok.vbp, which are stored in the directory:
F: \ VPROJECT \ REHAB \ Re-1 \ BRONTOK.A

Clear that the virus was made by Maggie local programs, which have the skill Secondary Keatas.

There are few & Function procedure used by the name:

Form_QueryUnload (Cancel As interested, UnloadMode As interested)
TmrBrontok_Timer ()
Subr_004 ()
CekKoneksiInternet ()
ManipulasiExec ()
Subr_007 ()
KeluarDong ()
BronReg ()
CopyAppData ()
DownloadVir ()
StartDong ()
Startup ()
DecTeks ()
MutMutex ()
MutCr ()
DownloadFile ()
CekUpdate ()
InfekNetwork ()
Title ()
CekRemDisk ()
BikinFile ()
GetEmailFile ()
CekValidMail ()
GetTeks ()
CekKar ()
ListMail ()
GetTargetMBhs ()
GavMailer ()
BrontokMail ()
Subr_031 ()
DataEmail ()
DownMIME ()
FindFilesAPI ()
ListFileGav ()
InfekFile ()
SmallAttack ()
MinggirLoe ()
GetHostByNameAlias ()
StripNulls ()
BikinKredit ()

Fireworks and some of the functions that used anatara others:

Read Write a function to register:
Declare Function RegOpenKeyExA lib "advapi32.dll" ()
Declare Function RegSetValueExA lib "advapi32.dll" ()
Declare Function RegCloseKey lib "advapi32.dll" ()
Declare Function RegCreateKeyExA lib "advapi32.dll" ()

Declare Function Sleep lib "KERNEL32" ()

Getting Special Folder:
Declare Function SHGetPathFromIDList lib "shell32.dll" ()
Declare Function SHGetSpecialFolderLocation lib "shell32.dll" ()

Reading Contents Page Site:
Declare Function InternetOpenA lib "wininet.dll" ()
Declare Function InternetOpenUrlA lib "wininet.dll" ()
Declare Function InternetReadFile lib "wininet.dll" ()
Declare Function InternetCloseHandle lib "wininet.dll" ()

Getting From A Window Caption:
Declare Function GetWindowTextA lib "user32" ()
Declare Function GetWindowTextLengthA lib "user32" ()

Get active HWND Window:
Declare Function GetForegroundWindow lib "user32" ()

Shutdown, Reboot, LogOff Windows:
Declare Function ExitWindowsEx lib "user32" ()
Declare Function GetCurrentProcess lib "KERNEL32" ()
Declare Function OpenProcessToken lib "advapi32" ()
Declare Function LookupPrivilegeValueA lib "advapi32" ()
Declare Function AdjustTokenPrivileges lib "advapi32" ()

Media get the type of good Removable Disk, CD-Rom, etc.:
Declare Function GetDriveTypeA lib "KERNEL32" ()

Declare Function ShellExecuteA lib "shell32.dll" ()
Declare Function RtlMoveMemory lib "KERNEL32" ()

Winsock API:
Declare Function Closesocket lib "wsock32.dll" ()
Declare Function connect lib "wsock32.dll" ()
Declare Function htons lib "wsock32.dll" ()
Declare Function inet_addr lib "wsock32.dll" ()
Declare Function recv lib "wsock32.dll" ()
Declare Function send lib "wsock32.dll" ()
Declare Function socket lib "wsock32.dll" ()
Declare Function gethostbyname lib "wsock32.dll" ()
Declare Function WSAStartup lib "wsock32.dll" ()
Declare Function WSACleanup lib "wsock32.dll" ()
Declare Function WSAAsyncSelect lib "wsock32.dll" ()

Function associated with the file:
Declare Function FindFirstFileA lib "KERNEL32" ()
Declare Function FindNextFileA lib "KERNEL32" ()
Declare Function GetFileAttributesA lib "KERNEL32" ()
Declare Function FindClose lib "KERNEL32" ()
Etc. ...

Clearly visible on the functions of the fire that is used is that the transmission of the virus brontok use several ways. such as sending email, search the name of the computer that is connected with kejaringan copy itself to the folder in which the sharing and copying himself on the window explorer active. I think one of the creators of viruses have their own SMTP (whew ati-ati gold Grammy ketangkep)

If the views of the structure at the back there are some words that the Encrypt, a possibility exploit code or name gnomes. only the gods and creator of the virus that bad.

This virus has the function of the ExitWindowsEx files imported from user32.dll, this function is usually used to shut the windows.
And sipembuat create viruses that contain the triger off / restart the computer.

In addition, the structure of the file, there are words like this:
FOLDER.HTT
RORO
. HTT
. DOC
. CSV
. EML
. Cfm
. PHP
. WAB
. EML
. TXT
. HTML
. Htm
MY DATA SOURCES
California EBOOKS
MY MUSIC
MY SHAPES
My Videos
MY DOCUMENT

And address some of the sites attacked, what DDOS yes ... I'll be there .. .. I'll be there though. In addition, the virus include the manufacturer's name: - JowoBot # VM Community --

Then try to see the fire following three functions:

Declare Function GetWindowTextA lib "user32" ()
Declare Function GetWindowTextLengthA lib "user32" ()
Declare Function GetForegroundWindow lib "user32" ()

It seems the manufacturer utilize windowexplorer virus to multiply the file to another folder. Caption with how to read are active in the windows directory that contains the name / path. By using the above 2 (GetWindowTextA & GetWindowTextLengthA), while the function GetForegroundWindow used to get the Window Handle (HWND) that are active.

Marketing is not a virus can copy itself was not windowExplorer Caption in the form of Directory / path. To disable the creator of the virus in the Folder Options settings.

Then a more unique virus again read the contents page of this site, which opens on a InternetExplorer using function:

Declare Function InternetOpenA lib "wininet.dll" ()
Declare Function InternetOpenUrlA lib "wininet.dll" ()
Declare Function InternetReadFile lib "wininet.dll" ()
Declare Function InternetCloseHandle lib "wininet.dll" ()

I guess I, creator of the virus seems to find the email address on sites that are open and send the virus is based on the email address found on the pages with keywords such as mailto: ataupun@xxxx.com etc. ...

To clean up .... please read more at other sites AntiVirus ... um ... .. he's sorry that I only discuss this.

But this suitcase off the virus quickly, try entering safemode then rename the file MSVBVM60.dll become MSVBVM60.dl_
because this virus requires VB runtime. So I think it is active, we can remove some registry entry and file viruses brontoknya.

Unfortunately this virus does not use the program Compressor, making it easier for people to recognize them.
v

Hacking on XP part 3

2008-10-18T14:17:00.001+07:00

How to Forge Email with Windows XP Telnet
Want a computer you can telnet into and mess around with, and not get into trouble no matter what you do to it? I've set up my
techbroker.com (206.61.52.33) with user xyz, password guest for you to play with. Here's how to forge email to xyz@techbroker.com using
telnet. Start with the command:
C:\>telnet techbroker.com 25
Connecting To Techbroker.com
220 Service ready
Now you type in who you want the message to appear to come from:
helo santa@techbroker.com
Techbroker.com will answer:
250 host ready
Next type in your mail from address:
mail from:santa@techbroker.com
250 Requested mail action okay, completed
Your next command:
rcpt to:xyz@techbroker.com
250 Requested mail action okay, completed
Your next command:
data
354 Start main input; end with .
Newbie note: just means hit return. In case you can't see that little period between the s, what you do to end composing your email is to hit enter, type a period, then hit enter again.
Anyhow, try typing:
This is a test.
.
250 Requested mail action okay, completed
quit
221 Service closing transmission channel
Connection to host lost.
Using techbroker's mail server, even if you enable full headers, the
message we just composed looks like:
Status: R
X-status: N
This is a test.
That's a pretty pathetic forged email, huh? No "from", no date.
However, you can make your headers better by using a trick with the data command. After you give it, you can insert as many headers as you choose. The trick is easier to show than explain:
220 Service ready
helo santa@northpole.org
250 host ready
mail from:santa@northpole.com
250 Requested mail action okay, completed
rcpt to:
250 Requested mail action okay, completed
data
354 Start main input; end with .
from:santa@deer.northpole.org
Date: Mon, 21 Oct 2002 10:09:16 -0500
Subject: Rudolf
This is a Santa test.
.
250 Requested mail action okay, completed
quit
221 Service closing transmission channel
Connection to host lost.
The message then looks like:
from:santa@deer.northpole.org
Date: Mon, 21 Oct 2002 10:09:16 -0500
Subject: Rudolf
This is a Santa test.
The trick is to start each line you want in the headers with one word
followed by a colon, and the a line followed by "return". As soon as
you write a line that doesn't begin this way, the rest of what you
type goes into the body of the email.
Notice that the santa@northpole.com from the "mail from:" command didn't show up in the header. Some mail servers would show both "from" addresses.
You can forge email on techbroker.com within one strict limitation.
Your email has to go to someone at techbroker.com. If you can find any way to send email to someone outside techbroker, let us know, because you will have broken our security, muhahaha! Don't worry, you have my permission.
Next, you can read the email you forge on techbroker.com via telnet:
C:\>telnet techbroker.com 110
+OK <30961.5910984301@techbroker.com> service ready
Give this command:
user xyz
+OK user is known
Then type in this:
pass test
+OK mail drop has 2 message(s)
retr 1
+OK message follows
This is a test.
If you want to know all possible commands, give this command:
help
+OK help list follows
USER user
PASS password
STAT
LIST [message]
RETR message
DELE message
NOOP
RSET
QUIT
APOP user md5
TOP message lines
UIDL [message]
HELP
Unless you use a weird online provider like AOL, you can use these
same tricks to send and receive your own email. Or you can forge email to a friend by telnetting to his or her online provider's email
sending computer(s).

Hacking On XP part 2

2008-10-18T14:13:00.000+07:00

How to Telnet with Windows XP
The queen of hacker commands is telnet. To get Windows help for
telnet, in the cmd.exe window give the command:
C:\>telnet /?
Here's what you will get:
telnet [-a][-e escape char][-f log file][-l user][-t term][host
[port]]
-a Attempt automatic logon. Same as -l option except uses
the currently logged on user's name.
-e Escape character to enter telnet client prompt.
-f File name for client side logging
-l Specifies the user name to log in with on the remote system.
Requires that the remote system support the TELNET ENVIRON
option.
-t Specifies terminal type.
Supported term types are vt100, vt52, ansi and vtnt only.
host Specifies the hostname or IP address of the remote computer
to connect to.
port Specifies a port number or service name.
****************
Newbie note: what is a port on a computer? A computer port is sort of like a seaport. It's where things can go in and/or out of a computer. Some ports are easy to understand, like keyboard, monitor, printer and modem. Other ports are virtual, meaning that they are created by software. When that modem port of yours (or LAN or ISDN or DSL) is connected to the Internet, your computer has the ability to open or close any of over 65,000 different virtual ports, and has the ability to connect to any of these on another computer - if it is running that port, and if a firewall doesn?t block it.
****************
****************
Newbie note: How do you address a computer over the Internet? There are two ways: by number or by name.
****************
The simplest use of telnet is to log into a remote computer. Give the
command:
C:/>telnet targetcomputer.com (substituting the name of the computer you want to telnet into for targetcomputer.com)
If this computer is set up to let people log into accounts, you may
get the message:
login:
Type your user name here, making sure to be exact. You can't swap between lower case and capital letters. For example, user name Guest is not the same as guest.
****************
Newbie note: Lots of people email me asking how to learn what their user name and password are. Stop laughing, darn it, they really do. If you don't know your user name and password, that means whoever runs that computer didn't give you an account and doesn't want you to log on.
****************
Then comes the message:
Password:
Again, be exact in typing in your password.
What if this doesn't work?
Every day people write to me complaining they can't telnet. That is
usually because they try to telnet into a computer, or a port on a
computer that is set up to refuse telnet connections. Here's what it
might look like when a computer refuses a telnet connection:
C:\ >telnet 10.0.0.3
Connecting To 10.0.0.3...Could not open connection to the host, on port 23. A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.
Or you might see:
C:\ >telnet techbroker.com
Connecting To techbroker.com...Could not open connection to the host, on port 23.
No connection could be made because the target machine actively
refused it.
If you just give the telnet command without giving a port number, it
will automatically try to connect on port 23, which sometimes runs a
telnet server.
**************
Newbie note: your Windows computer has a telnet client program,
meaning it will let you telnet out of it. However you have to install
a telnet server before anyone can telnet into port 23 on your
computer.
*************
If telnet failed to connect, possibly the computer you were trying to
telnet into was down or just plain no longer in existence. Maybe the
people who run that computer don't want you to telnet into it.
How to Telnet into a Shell Account
Even though you can't telnet into an account inside some computer, often you can get some information back or get that computer to do something interesting for you. Yes, you can get a telnet connection to succeed -without doing anything illegal --against almost any computer, even if you don't have permission to log in. There are many legal things you can do to many randomly chosen computers with telnet. For example:
C:/telnet freeshell.org 22
SSH-1.99-OpenSSH_3.4p1
That tells us the target computer is running an SSH server, which enables encrypted connections between computers. If you want to SSH into an account there, you can get a shell account for free at
. You can get a free SSH client program from
.
One reason most hackers have shell accounts on Internet servers is because you can meet the real hackers there. When you've logged in, give the command w or who. That gives a list of user names. You can talk to other users with tht talk command. Another fun thing, if your shell account allows it, is to give the command
ps -auxww
It might tell you what commands and processes other users are running. Ask other users what they are doing and they might teach you something. Just be careful not to be a pest!
***************
You can get punched in the nose warning: Your online provider might kick you off for making telnet probes of other computers. The solution is to get a local online provider and make friends with the people who run it, and convince them you are just doing harmless, legal explorations.
*************
Sometimes a port is running an interesting program, but a firewall won't let you in. For example, 10.0.0.3, a computer on my local area network, runs an email sending program, (sendmail working together with Postfix, and using Kmail to compose emails). I can use it from an account inside 10.0.0.3 to send emails with headers that hide from where I send things.
If I try to telnet to this email program from outside this computer,
here's what happens:
C:\>telnet 10.0.0.3 25
Connecting To 10.0.0.3...Could not open connection to the host, on
port 25.
No connection could be made because the target machine actively
refused it.
However, if I log into an account on 10.0.0.3 and then telnet from
inside to port 25, here's what I get:
Last login: Fri Oct 18 13:56:58 2002 from 10.0.0.1
Have a lot of fun...
cmeinel@test-box:~> telnet localhost 25
Trying ::1...
telnet: connect to address ::1: Connection refused
Trying 127.0.0.1... [Carolyn's note: 127.0.0.1 is the numerical
address meaning localhost, the same computer you are logged into]
Connected to localhost.
Escape character is '^]'.
220 test-box.local ESMTP Postfix
The reason I keep this port 25 hidden behind a firewall is to keep
people from using it to try to break in or to forge email. Now the
ubergeniuses reading this will start to make fun of me because no
Internet address that begins with 10. is reachable from the Internet.
However, sometimes I place this "test-box" computer online with a
static Internet address, meaning whenever it is on the Internet, it
always has the same numerical address. I'm not going to tell you what its Internet address is because I don't want anyone messing with it. I just want to mess with other people's computers with it, muhahaha. That's also why I always keep my Internet address from showing up in the headers of my emails.
***************
Newbie note: What is all this about headers? It's stuff at the
beginning of an email that may - or may not - tell you a lot about
where it came from and when. To see full headers, in Outlook click
view -> full headers. In Eudora, click the "Blah blah blah" icon.
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Hacking On XP part 1

2008-10-18T13:59:00.000+07:00

Part I: The Magic of DOS

In this guide you will learn how to telnet , forge email, use
nslookup and netcat with Windows XP.

So you have the newest, glitziest, "Fisher Price" version of Windows: XP. How can you use XP in a way that sets you apart from the boring millions of ordinary users?

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Luser Alert: Anyone who thinks this GTMHH will reveal how to blow up people's TV sets and steal Sandra Bullock's email is going to find out that I won't tell them how.
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The key to doing amazing things with XP is as simple as D O S. Yes, that's right, DOS as in MS-DOS, as in MicroSoft Disk Operating System. Windows XP (as well as NT and 2000) comes with two versions of DOS. Command.com is an old DOS version. Various versions of command.com come with Windows 95, 98, SE, ME, Window 3, and DOS only operating systems.

The other DOS, which comes only with the XP, 2000 and NT operating systems, is cmd.exe. Usually cmd.exe is better than command.com because it is easier to use, has more commands, and in some ways resembles the bash shell in Linux and other Unix-type operating systems. For example, you can repeat a command by using the up arrow until you back up to the desired command. Unlike bash, however, your DOS command history is erased whenever you shut down cmd.exe. The reason XP has both versions of DOS is that sometimes a program that won?t run right in cmd.exe will work in command.com

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Flame Alert: Some readers are throwing fits because I dared to compare DOS to bash. I can compare cmd.exe to bash if I want to. Nanny nanny nah nah.
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DOS is your number one Windows gateway to the Internet, and the open sesame to local area networks. From DOS, without needing to download a single hacker program, you can do amazingly sophisticated explorations and even break into poorly defended computers.

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You can go to jail warning: Breaking into computers is against the law if you do not have permission to do so from the owner of that computer. For example, if your friend gives you permission to break into her Hotmail account, that won't protect you because Microsoft owns Hotmail and they will never give you permission.
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You can get expelled warning: Some kids have been kicked out of school just for bringing up a DOS prompt on a computer. Be sure to get a teacher's WRITTEN permission before demonstrating that you can hack on a school computer.
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So how do you turn on DOS?
Click All Programs -> Accessories -> Command Prompt
That runs cmd.exe. You should see a black screen with white text on it, saying something like this:

C:\>

Your first step is to find out what commands you can run in DOS. If you type "help" at the DOS prompt, it gives you a long list of commands. However, this list leaves out all the commands hackers love to use. Here are some of those left out hacker commands.

TCP/IP commands:
telnet
netstat
nslookup
tracert
ping
ftp

NetBIOS commands (just some examples):
nbtstat
net use
net view
net localgroup

TCP/IP stands for transmission control protocol/Internet protocol. As you can guess by the name, TCP/IP is the protocol under which the Internet runs. along with user datagram protocol (UDP). So when you are connected to the Internet, you can try these commands against other Internet computers. Most local area networks also use TCP/IP.

NetBIOS (Net Basic Input/Output System) protocol is another way to communicate between computers. This is often used by Windows computers, and by Unix/Linux type computers running Samba. You can often use NetBIOS commands over the Internet (being carried inside of, so to speak, TCP/IP). In many cases, however, NetBIOS commands will be blocked by firewalls. Also, not many Internet computers run NetBIOS because it is so easy to break in using them. We will cover NetBIOS commands in the next Guide to XP Hacking.