By MICHAEL LIEDTKE, AP Business Writer Fri Sep 21, 10:29 PM ET
SAN FRANCISCO - Google Inc.'s stock reached a new high Friday, reflecting Wall Street's renewed faith in the Internet search leader as it introduces new ways for advertisers to reach its steadily expanding online audience.
The shares peaked at $560.79 before falling back to finish at $560.10, up $7.27, or 1.3 percent. The rally eclipsed Google's previous record high of $558.58 attained in mid-July, just days before the Mountain View-based company disillusioned investors with a second-quarter profit below analyst estimates.
Google, founded just 9 years ago, now has a market value of almost $175 billion, more than long-established technology bellwethers like Hewlett-Packard Co. and IBM Corp. The stock has increased by more than six-fold from its initial public offering price of $85 in August 2004.
The latest run-up in Google's stock represents a turnaround from a little over a month ago when the shares briefly dipped below $500 amid the stock market turmoil triggered by a home mortgage meltdown that raised fears about a recession.
Those worries have lessened because of the Federal Reserve Bank's decision to lower short-term interest rates by 0.5 percentage point in a move expected to free up more money for consumers and businesses to spend.
Google stands to benefit because it runs the largest advertising network on the world's hottest marketing medium, the Internet.
Despite aggressive challenges by rivals like Yahoo Inc. and Microsoft Corp., Google has been able to widen its lead in search — the activity that triggers the text-based ad links that have become a huge moneymaker.
In August, Google handled 54 percent of all U.S. search requests, up 50 percent at the same time last year, according to the research firm Nielsen/NetRatings Inc. Yahoo lagged well behind at 20 percent followed by Microsoft at 13 percent.
The formidable lead enabled Google to earn $1.9 billion on $7.5 billion in revenue during the first half of the year. The company usually makes even more money during the second half because of the advertising blitz that accompanies the holiday shopping season.
Google already is trying to boost its profits by rolling out other marketing options besides staid advertising links.
Last month, Google began showing video ads on its subsidiary, YouTube, the Web's most popular video channel. Earlier this week, Google dramatically increased the number of ads distributed to mobile phones and unveiled a system for displaying ads on "widgets" — mini-applications that are embedded on Web pages.
Investors are betting Google's dominance, coupled with its expansion efforts, will yield the robust earnings growth needed to support its rich valuation. Google's price-to-earnings multiple — a widely used yardstick for appraising publicly held companies — now stands at 37 times its estimated earnings for this year. By comparison, Microsoft's price-to-earnings multiple is hovering around 17.
Several industry analysts already are forecasting Google shares will soon surpass $600. The stock eclipsed $500 for the first time 10 months ago.
Saturday, September 22, 2007
Rising seas likely to flood U.S. history
By SETH BORENSTEIN, AP Science Writer 1 hour, 33 minutes ago
Ultimately, rising seas will likely swamp the first American settlement in Jamestown, Va., as well as the Florida launch pad that sent the first American into orbit, many climate scientists are predicting.
In about a century, some of the places that make America what it is may be slowly erased.
Global warming — through a combination of melting glaciers, disappearing ice sheets and warmer waters expanding — is expected to cause oceans to rise by one meter, or about 39 inches. It will happen regardless of any future actions to curb greenhouse gases, several leading scientists say. And it will reshape the nation.
Rising waters will lap at the foundations of old money Wall Street and the new money towers of Silicon Valley. They will swamp the locations of big city airports and major interstate highways.
Storm surges worsened by sea level rise will flood the waterfront getaways of rich politicians — the Bushes' Kennebunkport and John Edwards' place on the Outer Banks. And gone will be many of the beaches in Texas and Florida favored by budget-conscious students on Spring Break.
That's the troubling outlook projected by coastal maps reviewed by The Associated Press. The maps, created by scientists at the University of Arizona, are based on data from the U.S. Geological Survey.
Few of the more than two dozen climate experts interviewed disagree with the one-meter projection. Some believe it could happen in 50 years, others say 100, and still others say 150.
Sea level rise is "the thing that I'm most concerned about as a scientist," says Benjamin Santer, a climate physicist at the Lawrence Livermore National Laboratory in California.
"We're going to get a meter and there's nothing we can do about it," said University of Victoria climatologist Andrew Weaver, a lead author of the February report from the Intergovernmental Panel on Climate Change in Paris. "It's going to happen no matter what — the question is when."
Sea level rise "has consequences about where people live and what they care about," said Donald Boesch, a University of Maryland scientist who has studied the issue. "We're going to be into this big national debate about what we protect and at what cost."
This week, beginning with a meeting at the United Nations on Monday, world leaders will convene to talk about fighting global warming. At week's end, leaders will gather in Washington with President Bush.
Experts say that protecting America's coastlines would run well into the billions and not all spots could be saved.
And it's not just a rising ocean that is the problem. With it comes an even greater danger of storm surge, from hurricanes, winter storms and regular coastal storms, Boesch said. Sea level rise means higher and more frequent flooding from these extreme events, he said.
All told, one meter of sea level rise in just the lower 48 states would put about 25,000 square miles under water, according to Jonathan Overpeck, director of the Institute for the Study of Planet Earth at the University of Arizona. That's an area the size of West Virginia.
The amount of lost land is even greater when Hawaii and Alaska are included, Overpeck said.
The Environmental Protection Agency's calculation projects a land loss of about 22,000 square miles. The EPA, which studied only the Eastern and Gulf coasts, found that Louisiana, Florida, North Carolina, Texas and South Carolina would lose the most land. But even inland areas like Pennsylvania and the District of Columbia also have slivers of at-risk land, according to the EPA.
This past summer's flooding of subways in New York could become far more regular, even an everyday occurrence, with the projected sea rise, other scientists said. And New Orleans' Katrina experience and the daily loss of Louisiana wetlands — which serve as a barrier that weakens hurricanes — are previews of what's to come there.
Florida faces a serious public health risk from rising salt water tainting drinking water wells, said Joel Scheraga, the EPA's director of global change research. And the farm-rich San Joaquin Delta in California faces serious salt water flooding problems, other experts said.
"Sea level rise is going to have more general impact to the population and the infrastructure than almost anything else that I can think of," said S. Jeffress Williams, a U.S. Geological Survey coastal geologist in Woods Hole, Mass.
Even John Christy at the University of Alabama in Huntsville, a scientist often quoted by global warming skeptics, said he figures the seas will rise at least 16 inches by the end of the century. But he tells people to prepare for a rise of about three feet just in case.
Williams says it's "not unreasonable at all" to expect that much in 100 years. "We've had a third of a meter in the last century."
The change will be a gradual process, one that is so slow it will be easy to ignore for a while.
"It's like sticking your finger in a pot of water on a burner and you turn the heat on, Williams said. "You kind of get used to it."
___
On the Net:
The U.S. Environmental Protection Agency on sea level:
http://tinyurl.com/2df72n
The U.S. Geological Survey on sea level rise and global warming:
http://woodshole.er.usgs.gov/project-pages/cvi/
University of Arizona's interactive maps on sea level rise:
http://tinyurl.com/ca73h
Architecture 2030 study on one-meter sea level rise and cities:
http://www.architecture2030.org/current_situation/coastal_impact.html
Ultimately, rising seas will likely swamp the first American settlement in Jamestown, Va., as well as the Florida launch pad that sent the first American into orbit, many climate scientists are predicting.
In about a century, some of the places that make America what it is may be slowly erased.
Global warming — through a combination of melting glaciers, disappearing ice sheets and warmer waters expanding — is expected to cause oceans to rise by one meter, or about 39 inches. It will happen regardless of any future actions to curb greenhouse gases, several leading scientists say. And it will reshape the nation.
Rising waters will lap at the foundations of old money Wall Street and the new money towers of Silicon Valley. They will swamp the locations of big city airports and major interstate highways.
Storm surges worsened by sea level rise will flood the waterfront getaways of rich politicians — the Bushes' Kennebunkport and John Edwards' place on the Outer Banks. And gone will be many of the beaches in Texas and Florida favored by budget-conscious students on Spring Break.
That's the troubling outlook projected by coastal maps reviewed by The Associated Press. The maps, created by scientists at the University of Arizona, are based on data from the U.S. Geological Survey.
Few of the more than two dozen climate experts interviewed disagree with the one-meter projection. Some believe it could happen in 50 years, others say 100, and still others say 150.
Sea level rise is "the thing that I'm most concerned about as a scientist," says Benjamin Santer, a climate physicist at the Lawrence Livermore National Laboratory in California.
"We're going to get a meter and there's nothing we can do about it," said University of Victoria climatologist Andrew Weaver, a lead author of the February report from the Intergovernmental Panel on Climate Change in Paris. "It's going to happen no matter what — the question is when."
Sea level rise "has consequences about where people live and what they care about," said Donald Boesch, a University of Maryland scientist who has studied the issue. "We're going to be into this big national debate about what we protect and at what cost."
This week, beginning with a meeting at the United Nations on Monday, world leaders will convene to talk about fighting global warming. At week's end, leaders will gather in Washington with President Bush.
Experts say that protecting America's coastlines would run well into the billions and not all spots could be saved.
And it's not just a rising ocean that is the problem. With it comes an even greater danger of storm surge, from hurricanes, winter storms and regular coastal storms, Boesch said. Sea level rise means higher and more frequent flooding from these extreme events, he said.
All told, one meter of sea level rise in just the lower 48 states would put about 25,000 square miles under water, according to Jonathan Overpeck, director of the Institute for the Study of Planet Earth at the University of Arizona. That's an area the size of West Virginia.
The amount of lost land is even greater when Hawaii and Alaska are included, Overpeck said.
The Environmental Protection Agency's calculation projects a land loss of about 22,000 square miles. The EPA, which studied only the Eastern and Gulf coasts, found that Louisiana, Florida, North Carolina, Texas and South Carolina would lose the most land. But even inland areas like Pennsylvania and the District of Columbia also have slivers of at-risk land, according to the EPA.
This past summer's flooding of subways in New York could become far more regular, even an everyday occurrence, with the projected sea rise, other scientists said. And New Orleans' Katrina experience and the daily loss of Louisiana wetlands — which serve as a barrier that weakens hurricanes — are previews of what's to come there.
Florida faces a serious public health risk from rising salt water tainting drinking water wells, said Joel Scheraga, the EPA's director of global change research. And the farm-rich San Joaquin Delta in California faces serious salt water flooding problems, other experts said.
"Sea level rise is going to have more general impact to the population and the infrastructure than almost anything else that I can think of," said S. Jeffress Williams, a U.S. Geological Survey coastal geologist in Woods Hole, Mass.
Even John Christy at the University of Alabama in Huntsville, a scientist often quoted by global warming skeptics, said he figures the seas will rise at least 16 inches by the end of the century. But he tells people to prepare for a rise of about three feet just in case.
Williams says it's "not unreasonable at all" to expect that much in 100 years. "We've had a third of a meter in the last century."
The change will be a gradual process, one that is so slow it will be easy to ignore for a while.
"It's like sticking your finger in a pot of water on a burner and you turn the heat on, Williams said. "You kind of get used to it."
___
On the Net:
The U.S. Environmental Protection Agency on sea level:
http://tinyurl.com/2df72n
The U.S. Geological Survey on sea level rise and global warming:
http://woodshole.er.usgs.gov/project-pages/cvi/
University of Arizona's interactive maps on sea level rise:
http://tinyurl.com/ca73h
Architecture 2030 study on one-meter sea level rise and cities:
http://www.architecture2030.org/current_situation/coastal_impact.html
Thursday, September 20, 2007
What the Federal Rate Cut Means for Homeowners
By Jane J. Kim and Ruth Simon
From The Wall Street Journal Online
Consumers should soon start feeling the impact of Tuesday's Fed rate cut in the form of lower borrowing costs and stingier savings rates. But the rate cut doesn't offer much help for the key problems bedeviling many mortgage borrowers.
The Federal Reserve said it lowered short-term interest rates by half a percentage point, to 4.75%, to combat the effects of a weaker housing market and tighter credit on the broader economy. The steep reduction in the Fed funds rate surprised many on Wall Street who expected a more modest rate cut. Stocks rose sharply after the Fed's announcement, with the Dow Jones Industrial Average gaining 335.97 points, or 2.5%, to 13739.39.
The rate cut should reduce payments on many home-equity lines of credit, credit cards and some car loans. Perversely, however, some economists say it could lead to higher rates on fixed-rate mortgages down the road if bond markets expect the Fed move will spur higher economic growth or inflation.
There also is likely to be little immediate relief for borrowers with certain types of adjustable-rate mortgages. That's because the rates on some of these loans are tied to the London interbank offered rate, or Libor, which recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets. Libor, which has drifted downward recently, is an interest rate charged by banks for short-term loans to each other.
"If Libor doesn't come down, there is no relief" for many mortgage borrowers, says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.
Borrowers who should see immediate benefits from the Fed cut are those holding loans tied to U.S. banks' prime rate. Consumers can contact their lenders to inquire how their rates are calculated. Many banks cut their prime rates by half a percentage point after yesterday's Fed move.
Here is a look at what the Fed's action means for consumers:
* Homeowners. The rate cut is good news for borrowers with home-equity lines of credit, and savings could show up as soon as the next monthly statement. Borrowers looking for a new fixed-rate home-equity loan could also see lower rates. There are likely to be regional differences, with lenders most likely to cut rates on these loans in areas where the housing market is healthy and the local economy is robust, says Doug Duncan, chief economist of the Mortgage Bankers Association. Before the Fed's latest move, rates on home-equity lines averaged 8.72%, while home-equity loans averaged 8.29%, according to HSH Associates.
But in a twist, the Fed cut could boost rates down the road for 30-year fixed-rate mortgages. These rates are typically influenced by rates on 10-year Treasurys, which have moved lower recently in anticipation of a quarter-point cut in rates and because of a flight to quality in bond markets. But if markets expect a higher level of economic growth than previously anticipated, or a pickup in inflation, borrowers could see "some modest increase in fixed-rates going forward, though not necessarily immediately," Mr. Duncan says.
Recent news has been mixed for borrowers with adjustable-rate mortgages. Borrowers with ARMs that are tied to Treasury averages have benefited from a recent decline in rates. For those who are facing their first rate reset on Oct. 1, "that reset will be less painful than it would have been had it taken place a couple months ago," says Greg McBride, a senior financial analyst with Bankrate.com.
But higher borrowing costs may still be in the offing for homeowners whose adjustables are tied to Libor. Libor is frequently used to set rates for subprime adjustables, loans made to borrowers with scuffed credit. As for non-subprime ARMs, roughly half of these originated in recent years are also tied to Libor, estimates Keith Gumbinger, a mortgage analyst with HSH Associates. Borrowers can determine which index their adjustable is tied to by checking their loan documents.
The rate cut isn't likely to do much for the biggest problem facing the mortgage market: a liquidity crunch that has made it tougher for many borrowers to get a loan. "People have been characterizing this as a bailout for housing, but I don't think that's accurate," says Mr. Duncan of the Mortgage Bankers Association. The rate cut is "much more about the broader economy," while the mortgage market's troubles are "all about credit and property values."
* Savers. Savers could soon see lower payouts on their savings accounts, certificates of deposit and money-market mutual funds. In fact, some banks have already started to reduce their rates or scale back their deals. Bank of America Corp., for instance, recently shortened the maturities on its promotional CDs paying 5% to four months from eight months.
Nevertheless, banks are going to be reluctant to cut rates before their competitors, in part because consumer deposits remain one of the cheapest sources of funds available for the banks, says Bankrate.com's Mr. McBride. In fact, average CD rates have barely budged in recent months with yields on five-, three- and one-year CDs currently at 4%, 3.77% and 3.76%. "That is very uncharacteristic," since CD yields normally move well in advance of a Fed action, he says. "Savers are getting a break."
Average yields on money-market mutual funds, which have been hovering at 5% for about a year, are likely to drop to about 4.5% in the next month, says Pete Crane of Crane Data LLC. But part of the fall in yields may be counteracted by some managers' moves to buy higher-yielding asset-backed commercial paper, he says. As a result, there may be a benefit to shopping around since money managers can differentiate their funds' performance by investing in the higher-yielding securities.
* Credit Cards. Many credit-card customers should soon see some relief. About 85% of all credit cards carry variable rates. But many holders of these cards will see a benefit only if their current rate exceeds any floors established by the issuers, typically around 14% to 15%, below which their rates can't fall. Today, most interest rates are in the 18%-to-19% range.
Since most issuers adjust their pricing on a monthly basis, about half of all variable-rate cards should see an adjustment in October, with the rest in November, says Robert McKinley, chief executive of CardWeb.com. "Consumers could find some money in their pockets in about a month." The half-percentage-point drop in rates should result in a savings of about $30 a month for the typical household, which carries a median credit-card debt of $7,000, he says.
* Auto Loans. A rate cut isn't likely to have a big impact on new-car loans in part because more than half of all auto loans are already offered at reduced rates due to heavy manufacturer incentives, says Art Spinella, president of CNW Marketing Research Inc. But the Fed's move could make it cheaper to get a used-car loan because many people turn to banks and credit unions to finance their purchase, he says.
Still, consumers could start seeing better financing deals if the Fed continues to cut rates. Auto-loan rates, generally tied to the movement in Treasurys, already had started to ease given the recent drop in Treasury yields. Average rates on five-year new-car loans are 7.72%, versus 7.81% on July 4, according to Bankrate.com.
* Student Loans. Students with private, variable-rate student loans pegged to the prime rate may see their rates adjust more quickly than borrowers with loans tied to Libor. (Loans pegged to Libor or the prime rate are split about equally.)
But that doesn't automatically mean that borrowers should switch to prime-based loans. Historically, loans pegged to Libor have tended to yield a slightly lower rate than loans tied to prime over the life of the loan, says Mark Kantrowitz, publisher of FinAid.org.
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, September 18, 2007, at 6:00 p.m. EST.
The FOMC voted unanimously to cut both the Fed funds interest rate and the discount rate by 50-basis points today. Stock prices rallied strongly after the 2:15 p.m. announcement. At the close, the Dow surged 336 points, closing at 13,739, while the Nasdaq soared 70 points, closing at 2,651. Oil closed up $0.94 to $81.51 per barrel, and gold closed down $0.10 at $723.70 an ounce.
August home foreclosures were up 115 percent over the same period a year ago. Nevada, California and Florida had the most foreclosures. Bank repossessions jumped to 42,789 in August compared to 20,116 a year earlier.
The Bank of England (BoE) has nationalized the U.K.'s mortgage market. Last week, the Bank of England tried to stop the run on Northern Rock by providing emergency funding for the mortgage lender. When that didn't stop deposit withdrawals, the BoE yesterday guaranteed all the deposits of Northern Rock and all solvent banks in the U.K. The greatest monetary bailout of all time should work to sustain the global boom.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, September 21, 2007, at 6:00 p.m. EST
The FOMC voted unanimously to cut both the Fed funds interest rate and the discount rate by 50-basis points today. Stock prices rallied strongly after the 2:15 p.m. announcement. At the close, the Dow surged 336 points, closing at 13,739, while the Nasdaq soared 70 points, closing at 2,651. Oil closed up $0.94 to $81.51 per barrel, and gold closed down $0.10 at $723.70 an ounce.
August home foreclosures were up 115 percent over the same period a year ago. Nevada, California and Florida had the most foreclosures. Bank repossessions jumped to 42,789 in August compared to 20,116 a year earlier.
The Bank of England (BoE) has nationalized the U.K.'s mortgage market. Last week, the Bank of England tried to stop the run on Northern Rock by providing emergency funding for the mortgage lender. When that didn't stop deposit withdrawals, the BoE yesterday guaranteed all the deposits of Northern Rock and all solvent banks in the U.K. The greatest monetary bailout of all time should work to sustain the global boom.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, September 21, 2007, at 6:00 p.m. EST
Saturday, September 15, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, September 14, 2007, at 6:00 p.m. EST.
Blue-chip downgrades couldn’t push the Dow Industrial Average down today. At the close, the Dow gained over 17 points, closing at 13,442, while the Nasdaq rose slightly over one point, closing at 2,602. Oil closed down $0.99 to $79.10 per barrel, and gold closed down $0.10 at $717.80 an ounce.
August retail sales, up only 0.3 percent, missed expectations, but auto sales were up 2.8 percent, the biggest increase since July 2006.
Today’s volume was weak, as traders and investors wait for the FOMC meeting next Tuesday. Wall Street is expecting a Fed funds rate cut at 2:15 p.m. on September 18.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, September 18, 2007, at 6:00 p.m. EST
Blue-chip downgrades couldn’t push the Dow Industrial Average down today. At the close, the Dow gained over 17 points, closing at 13,442, while the Nasdaq rose slightly over one point, closing at 2,602. Oil closed down $0.99 to $79.10 per barrel, and gold closed down $0.10 at $717.80 an ounce.
August retail sales, up only 0.3 percent, missed expectations, but auto sales were up 2.8 percent, the biggest increase since July 2006.
Today’s volume was weak, as traders and investors wait for the FOMC meeting next Tuesday. Wall Street is expecting a Fed funds rate cut at 2:15 p.m. on September 18.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, September 18, 2007, at 6:00 p.m. EST
Former Fed chair Greenspan criticizes Bush in book
By Mark Felsenthal Sat Sep 15, 6:23 PM ET
WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan Greenspan in a memoir to be released on Monday criticized President George W. Bush and congressional Republicans for abandoning fiscal discipline and for putting politics ahead of sound
In his book, "The Age of Turbulence: Adventures in a New World," Greenspan said he was surprised Bush was unwilling to temper his campaign promises with fiscal reality once elected in 2000, as previous Republican administrations had done.
"Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he said. The book was made available by its publisher, The Penguin Press.
"Much to my disappointment, economic policymaking in the Bush administration remained firmly in the hands of White House staff," he said.
Greenspan, now 81, was the second longest-serving chairman in the Fed's 93-year history when he stepped down in January 2006.
Praise has been heaped on the New York native and self-described "libertarian Republican" for overseeing the longest U.S. economic expansion on record.
Greenspan built his reputation as Fed leader with his calm handling of the stock market crash of 1987, the 1997-1998 Asian and Russian financial crises, and the economic turbulence that followed the September 11, 2001, attacks on the United States.
But he has also come under fire for policies that some say led to bubbles in technology and housing. His successor, Ben Bernanke, is coping with a prolonged housing downturn and credit-market turbulence.
Greenspan's long association with Republican administrations and his reputation for independence add clout to his criticism of Bush and of other Republicans who led Congress until 2006.
TAX CUTS AND SPENDING
Greenspan said Bush's combination of tax cuts and spending on the military and prescription drug benefits, while not "unrealistic" in 2000 after several years of federal budget surpluses, was not appropriate with growing deficits that returned in 2002.
The former Fed chair said he urged Bush to veto a string of "out-of-control" spending bills, but to no avail. He was told the president wanted to avoid antagonizing Republican political leadership.
"To my mind, Bush's collaborate-don't-confront approach was a major mistake -- it cost the nation a check-and-balance mechanism essential to fiscal discipline," Greenspan said.
White House spokesman Tony Fratto said on Saturday the administration conducted "rigorous" analysis and that tax cuts sped up the U.S. economic recovery after the 2001 recession.
"Because Congress worked with us, vetoes weren't necessary. We're not going to apologize for increased spending to protect our national security," Fratto said.
But Greenspan said Republican lawmakers sowed the seeds of their political defeat in 2006 by abandoning fiscal prudence.
"They swapped principle for power. They ended up with neither. They deserved to lose," he added.
A consummate Washington political insider linked to former presidents Richard Nixon and Gerald Ford before becoming Fed chairman in 1987, Greenspan also has been criticized for backing Bush's tax cuts plan before Congress in January 2001.
Greenspan said that position was balanced with a call for safeguards in case the fiscal situation deteriorated. But in his memoir, he ruefully acknowledged he underestimated how his words would be selectively interpreted.
"While politics had not been my intent, I'd misjudged the emotions of the moment," he said.
Fending off criticism that rock-bottom borrowing costs early this decade fueled the housing bubble that has caused a burst of foreclosures, Greenspan said the unusual risk of a downward price spiral was serious and had to be dealt with.
"We wanted to shut down the possibility of corrosive deflation; we were willing to chance that by cutting rates we might foster a bubble ... It was a decision done right," he wrote.
Looking at the U.S. economic future, Greenspan warned that to keep the inflation rate between 1 percent and 2 percent in coming years the Fed may need to force interest rates into double digits.
If the Fed succumbs to political pressure to keep interest rates low, inflation rates could rise to an average of 4 percent to 5 percent by 2030, and yields on 10-year Treasury notes would rise to at least 8 percent, he wrote.
WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan Greenspan in a memoir to be released on Monday criticized President George W. Bush and congressional Republicans for abandoning fiscal discipline and for putting politics ahead of sound
In his book, "The Age of Turbulence: Adventures in a New World," Greenspan said he was surprised Bush was unwilling to temper his campaign promises with fiscal reality once elected in 2000, as previous Republican administrations had done.
"Little value was placed on rigorous economic policy debate or the weighing of long-term consequences," he said. The book was made available by its publisher, The Penguin Press.
"Much to my disappointment, economic policymaking in the Bush administration remained firmly in the hands of White House staff," he said.
Greenspan, now 81, was the second longest-serving chairman in the Fed's 93-year history when he stepped down in January 2006.
Praise has been heaped on the New York native and self-described "libertarian Republican" for overseeing the longest U.S. economic expansion on record.
Greenspan built his reputation as Fed leader with his calm handling of the stock market crash of 1987, the 1997-1998 Asian and Russian financial crises, and the economic turbulence that followed the September 11, 2001, attacks on the United States.
But he has also come under fire for policies that some say led to bubbles in technology and housing. His successor, Ben Bernanke, is coping with a prolonged housing downturn and credit-market turbulence.
Greenspan's long association with Republican administrations and his reputation for independence add clout to his criticism of Bush and of other Republicans who led Congress until 2006.
TAX CUTS AND SPENDING
Greenspan said Bush's combination of tax cuts and spending on the military and prescription drug benefits, while not "unrealistic" in 2000 after several years of federal budget surpluses, was not appropriate with growing deficits that returned in 2002.
The former Fed chair said he urged Bush to veto a string of "out-of-control" spending bills, but to no avail. He was told the president wanted to avoid antagonizing Republican political leadership.
"To my mind, Bush's collaborate-don't-confront approach was a major mistake -- it cost the nation a check-and-balance mechanism essential to fiscal discipline," Greenspan said.
White House spokesman Tony Fratto said on Saturday the administration conducted "rigorous" analysis and that tax cuts sped up the U.S. economic recovery after the 2001 recession.
"Because Congress worked with us, vetoes weren't necessary. We're not going to apologize for increased spending to protect our national security," Fratto said.
But Greenspan said Republican lawmakers sowed the seeds of their political defeat in 2006 by abandoning fiscal prudence.
"They swapped principle for power. They ended up with neither. They deserved to lose," he added.
A consummate Washington political insider linked to former presidents Richard Nixon and Gerald Ford before becoming Fed chairman in 1987, Greenspan also has been criticized for backing Bush's tax cuts plan before Congress in January 2001.
Greenspan said that position was balanced with a call for safeguards in case the fiscal situation deteriorated. But in his memoir, he ruefully acknowledged he underestimated how his words would be selectively interpreted.
"While politics had not been my intent, I'd misjudged the emotions of the moment," he said.
Fending off criticism that rock-bottom borrowing costs early this decade fueled the housing bubble that has caused a burst of foreclosures, Greenspan said the unusual risk of a downward price spiral was serious and had to be dealt with.
"We wanted to shut down the possibility of corrosive deflation; we were willing to chance that by cutting rates we might foster a bubble ... It was a decision done right," he wrote.
Looking at the U.S. economic future, Greenspan warned that to keep the inflation rate between 1 percent and 2 percent in coming years the Fed may need to force interest rates into double digits.
If the Fed succumbs to political pressure to keep interest rates low, inflation rates could rise to an average of 4 percent to 5 percent by 2030, and yields on 10-year Treasury notes would rise to at least 8 percent, he wrote.
Thursday, September 13, 2007
Would you pay to avoid gridlock?
By Gary Richards
Mercury News
Article Launched: 09/13/2007 01:31:58 AM PDT
We all know that the Highway 101 commute in and out of Silicon Valley can be pure torture, but a fix is in the works, a fix with a price - if you're willing to pay it, that is.
Massive plans are moving ahead to transform 101 and two other vital South Bay freeways with features never before seen in the region: toll roads and, on 101 between Morgan Hill and Redwood City, a second carpool lane.
That's right, a second carpool lane each way.
The trick? Solo drivers would be able to pay their way into the lanes, skirting backups and, hopefully, easing traffic.
The Valley Transportation Authority will report to its board later this year about its strategy to widen 101 and convert that freeway and Highway 85 into roads that offer tolling.
Preliminary engineering studies could be finished in a year, giving a better sense of how much the project would cost and when work might begin. But the VTA, taking advantage of federal incentives that favor tolling projects, appears serious about moving forward, viewing toll lanes as perhaps the most effective way to raise money while also battling traffic that's expected to surge dramatically in the next two decades.
If approved, the South Bay toll lanes wouldn't be the first in the Bay Area. By 2009, work should be under way to convert the carpool lane on southbound Interstate 680 down the Sunol Grade into a toll lane. And similar plans are in the offing for I-580 around Dublin and on Doyle Drive, near the Golden Gate Bridge. Regional planners also have their eyes on I-880 from Oakland to Milpitas along with 101 in the North Bay.
The toll lanes, technically called High Occupancy Toll or HOT lanes, are common in Southern California and throughout the country.
FasTrak transponders
They work like this: Carpoolers ride free, but solo drivers might, as in the case of I-680, pay as little as $1 to as much as $7, based on time of day and traffic conditions, to jump in and get around backed-up traffic. Fees would be collected with FasTrak transponders and drivers would be able to enter and exit toll lanes only at certain locations. There would be no toll booths.
If a driver has a carpool partner along, all he needs to do is put the FasTrak transponder in the glove compartment and he avoids a toll and rides free.
Installing more HOT lanes has increasingly become a priority for the federal Department of Transportation, which recently released $1.2 billion to agencies across the country willing to charge tolls. The push has gained further momentum in the wake of last month's tragedy in Minnesota, where an Interstate 35 bridge over the Mississippi River collapsed.
The struggle to raise money to clean up that disaster has highlighted a huge shortfall in federal highway money - as much as $4 billion over the next three years. If that deficit is not covered, California, for example, faces losing $1.35 billion during that period.
"The feds are looking for dramatic, dynamic ways to get big projects moving," said John Ristow, who is overseeing the VTA's toll plan for 85 and 101. "The huge piece is there had to be tolling involved. You see that in Seattle, in New York and with Doyle Drive. That is where the trend is moving both on the federal and state level in a major way."
HOT lanes have been in use on Route 91 between Orange and Riverside counties and along Interstate 15 north of San Diego for more than a decade. But they are new to the Bay Area and the focus is on I-680 and then 85 and 101.
Double carpool lanes
Adding another carpool lane up and down 101 is the most intriguing improvement. No other Bay Area freeway has double carpool lanes. The cost could be at least $500,000 a mile on each direction of the 40-mile stretch, but probably will be much higher. The VTA's goal is to finish studies next year and, if federal money is available, be in position to put in a serious bid.
"If we want people to buy their way in, one option that could really sell that concept is having two carpool lanes each way," Ristow said. "That would be a big incentive."
Bob Poole, head of the Southern California think tank called the Reason Foundation, says the two-carpool lane approach on 101 would be wise, as it could keep tolls low and entice more single drivers to use those lanes without gumming up the works for carpoolers.
Poole says the experience on Highway 91 and I-15 is that drivers are willing to bypass congestion, and that it's not just the well-off who can better afford a daily driving fee.
"Most users are people who choose the HOT lane once or twice a week," Poole said, "for trips when paying the toll is better than being late to pick up the kid from day care, to avoid being late to work for the Nth time, to catch a plane, to meet an important client, to get in one more electrician appointment."
HOT lanes, he added, also are working in Denver, Houston, Minneapolis and Salt Lake City - "a pretty wide range of communities."
As for drivers, are they willing to pony up for what is now a free ride, albeit a slow one many days? A survey by the Alameda County Congestion Management Agency indicated yes - at least on I-680.
But on 101? No way, said Tom Santos, who drives from San Jose to Mountain View.
"I'm not paying a toll," he said. "I do like widening 101, but can't they come up with a better plan?"
Then there's Stanley Clancy, a Los Banos-to-San Jose commuter who calls a toll "reasonable" and would be willing to pay if the lane started farther south, in Gilroy, where he gets stuck each day.
"That would be about half of my commute," he said, noting that a 90-minute drive when he moved to the Central Valley nine years ago has become a 2 1/2-hour odyssey this year.
"The backups that are occurring going through Gilroy in both the morning and evening commutes are getting bad and are only going to get worse."
Contact Gary Richards at mrroadshow@mercurynews.com or (408) 920-5335
Sunday, September 9, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, September 7, 2007, at 6:00 p.m. EST.
A weak job creation report pounded stock prices today. At the close, the Dow plunged 249 points, closing at 13,113, while the Nasdaq lost almost 49 points, closing at 2,565. Oil closed up $0.40 to $76.70 per barrel, and gold closed up $5.10 at $709.70 an ounce.
The economy lost 4,000 jobs in August, and that pushed the dollar index below 80 for the first time in 15 years. The previous month's job creation figures were adjusted downward from 126,000 jobs to only 69,000 jobs created. Weak job creation is the first warning flag of a possible recession.
Interest rates fell this morning after the weak Jobs Report. Speculation grows that the Fed might cut the 5.25 percent Fed Funds Rate by 50 basis points at the next FOMC meeting on September 18. However, the Fed knows that cutting interest rates will not accelerate economic growth nor boost home sales. The economy runs on the availability of money, not on the cost of money. The Fed has already started to accelerate the growth of the money supply to support the housing market with mortgage money. The M2 money supply has increased by $113 billion during the past two weeks. The Fed knows that a more liquid U.S. banking system is the ultimate solution. I expect to see further acceleration in the growth of the money supply--in addition to a 4 percent Fed Funds rate--by year-end.
This latest knee-jerk reaction is setting up another great buying opportunity before stock prices soar to new highs beginning this fall.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, September 11, 2007, at 6:00 p.m. EST
A weak job creation report pounded stock prices today. At the close, the Dow plunged 249 points, closing at 13,113, while the Nasdaq lost almost 49 points, closing at 2,565. Oil closed up $0.40 to $76.70 per barrel, and gold closed up $5.10 at $709.70 an ounce.
The economy lost 4,000 jobs in August, and that pushed the dollar index below 80 for the first time in 15 years. The previous month's job creation figures were adjusted downward from 126,000 jobs to only 69,000 jobs created. Weak job creation is the first warning flag of a possible recession.
Interest rates fell this morning after the weak Jobs Report. Speculation grows that the Fed might cut the 5.25 percent Fed Funds Rate by 50 basis points at the next FOMC meeting on September 18. However, the Fed knows that cutting interest rates will not accelerate economic growth nor boost home sales. The economy runs on the availability of money, not on the cost of money. The Fed has already started to accelerate the growth of the money supply to support the housing market with mortgage money. The M2 money supply has increased by $113 billion during the past two weeks. The Fed knows that a more liquid U.S. banking system is the ultimate solution. I expect to see further acceleration in the growth of the money supply--in addition to a 4 percent Fed Funds rate--by year-end.
This latest knee-jerk reaction is setting up another great buying opportunity before stock prices soar to new highs beginning this fall.
The dollar has already lost 35 percent of its 2002 purchasing power. More rate cuts are coming and they will further weaken the dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies.
Real estate is an illiquid, high-risk investment! Do not look for real estate bargains. Renting a home or condo is cheaper than owning. When that scenario reverses, it will then be safe to buy a home or condo. Real estate analysts do not expect the housing downturn to bottom until 2009 in Florida and California.
Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, September 11, 2007, at 6:00 p.m. EST
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