Granted, I've read only The Sun and the NYT so far, but here are two great pieces of journalism. First read Peter Hermann's oddly touching backstory of John Steele, a recently deceased homeless man and the wife who loved him.

John A. Steele Sr. was cremated without ceremony. Only his estranged wife and children attended the brief service at the Charles L. Stevens Funeral Home in Locust Point. No words were spoken. No death notice appeared in the paper. No obituary was written.

Jane Steele loved her husband but couldn't live with him. She stayed married even after kicking him out of their Clement Street rowhouse 16 years ago. He had stopped working and turned to alcohol 16 years before that. She worked then in a factory, putting labels on cans, and she sewed dresses and cleaned houses to pay the mortgage.

"As long as he was sober, he was the greatest husband in the world," Jane Steele, who is now 69, told me. "When he was drinking, he was a lion with a great big roar. ... His death broke my heart. Needless to say, I was in love with him for a very long time. But drinking took over his life. He didn't care about anything except his next bottle."

Then check out David Barstow's followup on his earlier expose of rampant conflicts of interest among the retired generals whom the national news shows use as independent "analysts" for the Iraq war and other matters. This one is on Barry McCaffrey's very impressive war profiteering record and the utter cluelessness of the TV people who use him for an "analyst." Warning: The whole thing is worth reading, but you might want to keep an airsickness bag nearby.

The company, Defense Solutions, sought the services of a retired general with national stature, someone who could open doors at the highest levels of government and help it win a huge prize: the right to supply Iraq with thousands of armored vehicles.

Access like this does not come cheap, but it was an opportunity potentially worth billions in sales, and Defense Solutions soon found its man.

Thus, within days of hiring General McCaffrey, the Defense Solutions sales pitch was in the hands of the American commander with the greatest influence over Iraq’s expanding military.

“That’s what I pay him for,” Timothy D. Ringgold, chief executive of Defense Solutions, said in an interview.

General McCaffrey did not mention his new contract with Defense Solutions in his letter to General Petraeus. Nor did he disclose it when he went on CNBC that same week and praised the commander Defense Solutions was now counting on for help — “He’s got the heart of a lion” — or when he told Congress the next month that it should immediately supply Iraq with large numbers of armored vehicles and other equipment.

And:

But it was 9/11 that thrust General McCaffrey to the forefront of the national security debate. In the years since he has made nearly 1,000 appearances on NBC and its cable sisters, delivering crisp sound bites in a blunt, hyperbolic style. He commands up to $25,000 for speeches, his commentary regularly turns up in The Wall Street Journal, and he has been quoted or cited in thousands of news articles, including dozens in The New York Times.

His influence is such that President Bush and Congressional leaders from both parties have invited him for war consultations. His access is such that, despite a contentious relationship with former Defense Secretary Donald H. Rumsfeld, the Pentagon has arranged numerous trips to Iraq, Afghanistan and other hotspots solely for his benefit.

At the same time, General McCaffrey has immersed himself in businesses that have grown with the fight against terrorism.

The consulting company he started after leaving the government in 2001, BR McCaffrey Associates, promises to “build linkages” between government officials and contractors like Defense Solutions for up to $10,000 a month. He has also earned at least $500,000 from his work for Veritas Capital, a private equity firm in New York that has grown into a defense industry powerhouse by buying contractors whose profits soared from the wars in Afghanistan and Iraq. In addition, he is the chairman of HNTB Federal Services, an engineering and construction management company that often competes for national security contracts.

And:

On NBC and in other public forums, General McCaffrey has consistently advocated wartime policies and spending priorities that are in line with his corporate interests. But those interests are not described to NBC’s viewers. He is held out as a dispassionate expert, not someone who helps companies win contracts related to the wars he discusses on television.

Posted by Jay Hancock at 11:54 AM | Permalink | Comments (2)
        

Reader Dave sends this nice letter to Obama's change.gov Web site, a propos of Saturday's column on layoffs.

Dear President-elect Obama,

Normally, I do not comment or send letters to elected officials, but since we are all looking for positive change in America, I felt it was time for me to change and offer an opinion. There is a column in the Baltimore Sun on November 22, 2008, written by Jay Hancock. "Butcher, baker, unemployment line maker." Mr. Hancock writes a financial column for The Sun and I have found him well informed and balanced with his writing.

The column strongly suggests that business in America look at other alternatives to saving money during this down time, rather than automatically cut jobs and move people into the ranks of the unemployed. He quotes Adam Smith, a Scottish philosopher. Liberally paraphrasing, if we continue to lose jobs there will be less people to participate in the recovery of the economy. I know this sounds all too simple and would be shouted down in some quarters, but we do need a balanced & thoughtful approach to our recovery.

If a company, large or small, knows that financial goals are not going to be realized, why not look to other areas to manage expenses, rather than take the easy way to cut jobs. Just this week, I heard of an individual who was a top performer in the position, but was let go due to a salary that was at the top of the pay scale. Being escorted to the parking area, this individual was reminded of the inconsistencies of some management teams, when he saw all of the executives cars being cleaned and detailed. Now is this person going to be able to purchase Christmas gifts from the local Main Street gift shops or invest on Wall Street? Probably not. Would the retention of this person and the savings of not detailing cars balance the books? No. However, an employed person will look to buy a coffee at the local shop, continue with cable service and maybe eat out once or twice a month.

Unemployed, you start to cut expenses. No man, no firm is an island. We are all interconnected. I have been out of work since July due to a downsizing. Now, I will admit I am currently evaluating my options and more than likely will make a career change, but my timetable is is not of my own doing. I have not applied for unemployment, since I am trying to figure out what I want to be when I grow up, so I am not counted in the unemployment numbers. Some people tell me I foolish not to apply, but I don't believe it is ethical to apply if I am not seriously job searching. I am fortunate at this stage to have the opportunity to take some time off to regroup, but many, many people do not have the time and the greater the ranks of the unemployed that more difficult our recovery will be. I do think America wants change, but we are also looking for accountability & responsibility from the private & public sectors. We can also handle the truth. Be straight with America. That is why you were elected.

A long E-Mail. I do hope someone on President-elect Obama's team does get an opportunity to read Mr. Hancock's column and advise Mr. Obama. If we even get a small percentage of companies to reconsider their thinking, I believe all of us will be better off in the long term.
Congratulations and Good Success with the difficult tasks ahead.

Posted by Jay Hancock at 11:38 AM | Permalink | Comments (1)
        

By Kathleen M. Howley

Nov. 25 (Bloomberg) -- U.S. mortgage rates fell more than three-quarters of a percentage point today after the Federal Reserve said it will buy as much as $600 billion of debt.

The average U.S. rate for a 30-year fixed mortgage ended the day at about 5.5 percent after falling to as low as 5.25 percent, according to Bankrate Inc. It was 6.38 percent this morning, North Palm Beach, Florida-based Bankrate said, based on a wider sampling than the so-called overnight rate published on its Web site.

The Fed said it will purchase mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, a government agency that insures bonds. Today’s lower rates indicate the central bankers may have achieved their goal of bringing liquidity to mortgage markets, said Neal Soss, chief economist at Credit Suisse Group in New York and a former aide to Fed chief Paul Volcker.

“These are not the assets that have caused all the trouble -- these are quality mortgages that have been orphaned because investors have been reluctant to part with cash,” Soss said in an interview. “The government stepping in to buy them up may hasten the day when we finally find a bottom in housing.”

Posted by Jay Hancock at 10:53 AM | Permalink | Comments (0)
        

Soaring energy costs got blamed for boosting food prices over the last few years, so you might think that plunging energy prices now would cause an equal decline for food.

But it’s not happening. I paid $1.87 for gas last week and $3.57 for a gallon of milk. The gas was less than half what I was paying last summer. But the milk was down only moderately from the $4.20 range I remember from a few months ago.

This shows up in the official stats from the Labor Department. Consumer prices fell 1 percent in October while energy dropped 8.6 percent. Regular unleaded gas fell 14.2 percent. But overall food and beverage prices rose 0.3 percent. Milk dropped 1.8 percent.

Food prices rose partly because more-expensive costs for petroleum -- used for everything from tractor fuel to fertilizers and pesticides -- got passed along to consumers. U.S. farmers were also diverting corn supplies to ethanol distilleries, which made feed corn more expensive.

But there were other factors. A weak dollar boosted U.S. food exports. Developing nations such as China increased demand for meat. Bad weather in Europe and Australia hurt supplies. The dollar has strengthened lately, and the economic slump should reduce overseas demand. Those factors along with cheaper energy should help household food budgets. Good harvests would help even more.

Posted by Jay Hancock at 10:45 AM | Permalink | Comments (1)
        

Just made my pledge. It's going to be a rough 2009 for some folks, and donations to United Way and other charities always dip in recessions. More needs. Fewer resources. You can pledge online here. It takes less than five minutes.

Posted by Jay Hancock at 3:05 PM | Permalink | Comments (0)
        

NEW YORK (AP) -- Consumer confidence rose in November amid receding gas prices, but Americans' views on the economy remain the gloomiest in decades as they grapple with massive layoffs, slumping home prices and dwindling retirement funds.

The New York-based Conference Board said Tuesday its Consumer Confidence Index now stands at 44.9, up from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967.

Posted by Jay Hancock at 12:08 PM | Permalink | Comments (0)
        

Typealyzer pretends to do a brain scan of blog authors, based on their posts. Typealyzer says the author of this blog is:

The charming and trend savvy type. They are especially attuned to the big picture and anticipate trends. They often have sophisticated language skills and come across as witty and social. At the end of the day, however, they are pragmatic decision makers and have a good analytical abilitity.

They enjoy work that lets them use their cleverness, great communication skills and knack for new exciting ventures. They have to look out not to become quitters, since they easily get bored when the creative exciting start-up phase is over.

Surely the program is reading posts I QUOTE, not those I wrote myself.

Food blogger and Baltimoresun.com star Elizabeth Large is:

The entertaining and friendly type. They are especially attuned to pleasure and beauty and like to fill their surroundings with soft fabrics, bright colors and sweet smells. They live in the present moment and don´t like to plan ahead - they are always in risk of exhausting themselves.

The enjoy work that makes them able to help other people in a concrete and visible way. They tend to avoid conflicts and rarely initiate confrontation - qualities that can make it hard for them in management positions.

Peter Schmuck is:

The independent and problem-solving type. They are especially attuned to the demands of the moment are masters of responding to challenges that arise spontaneously. They generally prefer to think things out for themselves and often avoid inter-personal conflicts.

The Mechanics enjoy working together with other independent and highly skilled people and often like seek fun and action both in their work and personal life. They enjoy adventure and risk such as in driving race cars or working as policemen and firefighters.

Posted by Jay Hancock at 11:23 AM | Permalink | Comments (1)
        

JHU Professor of Applies Economics Steve Hanke says this is no Great Depression. From his latest column in GlobeAsia.

The financial crisis of 2008 has prompted many commentators to claim that we are about to enter another Great Depression. Yes, we are entering a serious slump— one that will probably last until late 2009 or early 2010. That said, the current slump is not (and will not be) comparable to the Great Depression of 1929-1933. Before they manufacture a greater crisis, the chattering classes should stop scaring the public and check the facts. Unlike the current crisis, the Great Depression was “great.” The money supply in the United States, measured by currency, plus demand deposits (M1), dropped by 25% (see Table 1). And not surprisingly, a sharp deflation occurred, with all major price indices registering significant declines (see Table 2).

National income in the United States was cut by more than
half (53.5%). Unemployment rose from 3.1% in 1929 to 24.7%
in 1933, with manufacturing accounting for the largest decline
in employment—falling from 21.6% of the labor force in 1929 to
14.3% in 1933. Trade (exports, plus imports), as a portion of the
gross national product, collapsed and didn’t regain its pre-Great
Depression levels until the early 1970s. Economic prospects were
so dismal in the U.S. that more people were emigrating than
immigrating—a very abnormal occurrence.

One of the most significant features of the Great Depression was the collapse of private domestic investment. On a gross basis, it fell from 19.6% of GNP in 1929 to 4.4% in 1933—thanks, in part, to a dramatic drop in business inventories. By 1932, net private domestic investment was negative, indicating that the economy’s capital stock was shrinking.

Profits are the reward of the active capitalists—the
entrepreneurs. In contrast, interest is the reward of the
passive capitalists. The impact of inflation and deflation on
the distribution of income to these two types of capitalists is
noteworthy. Profits are derived from purchasing something at
a particular time and selling it later at a higher price. When all
prices are rising, this is relatively easy to do; when all prices are
falling, it’s very difficult. Accordingly, deflation shifts income
from profits to interest. The surge in the portion of national
income going to “net interest” (from 5.6% in 1929 to 10.4% in
1933) and the decline in the portion going to profits (from
11.3% in 1929 to -3.8% in 1933) was as unsurprising as it was
catastrophic.

The Great Depression was one of the most extraordinary
episodes in U.S. economic history, if not the entire capitalist world.
To compare the current crisis to the Great Depression is stretching
the facts beyond the breaking point.

And that’s all not. The purveyors of Great Depression
myths—such as this year’s Nobel laureate in Economics Paul
Krugman—assert that the fiscal stimulus which accompanied
World War II rescued the economy from the Great Depression.
In fact, the Great Depression was followed by a spontaneous
recovery, with the unemployment rate falling from 24.7% in 1933
to 14.2% in 1937. This recovery was interrupted by a sharp slump
in 1938-1939. It was concentrated in the manufacturing sector
and was associated with a decline in gross private domestic
investment.

Even though a spontaneous recovery occurred before World
War II, it is important to stress that scholarship by Robert
Higgs, and other economic historians, shows that—contrary
to legend—the New Deal held down the spontaneous recovery
and contributed to the 1938-1939 slump. Indeed, Higgs’
evidence demonstrates that investment was depressed by New
Deal initiatives because of regime uncertainty—“a pervasive
uncertainty among investors about the security of their property
rights in their capital and prospective returns.” (Robert Higgs,
Depression, War and Cold War: Studies in Political Economy. New
York: Oxford University Press, 2006, p.5).

In short, investors were
afraid to commit funds to new projects because they didn’t know
what President Roosevelt and the New Dealers will do next.
This brings us to the Troubled Asset Relief Program (TARP).
This $700 billion bailout program is, among other things, a
bureaucratic nightmare that is as confused as it is confusing.
Add to that Treasury Secretary Henry Paulson’s major shifts in
the TARP’s direction, as well as the circus on Capitol Hill, and
we have all the ingredients for a royal case of regime uncertainty.
It shouldn’t be surprising, therefore, that each time Secretary
Paulson makes a pronouncement or the Congress performs
another act, the stock market takes a dive.

Posted by Jay Hancock at 10:09 AM | Permalink | Comments (2)
        

Some magazine is compiling a list of the worst calls of 2008, and they asked blogger Barry Ritholtz for nominations. Naturally he queried the blogosphere, which responded in droves and will make the magazine's list superfluous for many when it finally appears. Nominators are very enthusiastic about Jim Cramer and Larry Kudlow. Bill Miller also makes an apperance. A few of the nominations so far:

E Says:

November 23rd, 2008 at 7:00 pm
Technically, this was in 07, but it was so spectacularly bad that it should be considered:

===========================

The Recession Debate Is Over [Larry Kudlow, December 2007]

There ain’t no recession.

Today’s ADP private jobs survey of 189,000 could produce a 200,000 non-farm payroll job gain for November. I don’t know — these wacky BLS numbers are subject to huge revisions. But the ADP was a huge number. In fact, jobs seem to be picking up major steam from their August low, rising in September and October. And now I’m expecting a good increase in November to be reported by the BLS this Friday.

F. Horne Says:

November 23rd, 2008 at 7:18 pm
I would like to propose an entry for the Bad Call Hall of Fame:

Larry Kudlow’s repeated gloating assertions back in 2003 or so, that the Iraq War would pay for itself with its own oil revenue. He presented the war–which was then prospective–as a leveraged buyout.

Marcus Aurelius Says:

November 23rd, 2008 at 7:20 pm
“The fundamentals of our economy are strong…”

- George W. Bush

Scott F Says:

November 23rd, 2008 at 8:03 pm
Don’t hate investment bankers for raking in millions. Invest in their absurdly profitable (yet still undervalued) outfits and share the wealth.

* By James J. Cramer
* Published Apr 30, 2007

jswede Says:

November 23rd, 2008 at 8:12 pm
Cramer most famously called July 15th the bottom - with conviction, and more than a few times, in several outlets. I recall a good half-dozen, of not a full dozen, doing the same in Aug though.

Rightline Says:

November 23rd, 2008 at 9:40 pm
Don’t have any links right now but my pick is Bill Miller. Constantly calling the bottom and doubling down into the hole on FNM FRE, and anything housing or financial. His top 10 holdings 2008 was a who’s who to short list.

Posted by Jay Hancock at 11:08 AM | Permalink | Comments (0)
        

This may be the biggest daily increase ever. I have no idea what it means.

Posted by Jay Hancock at 5:04 PM | Permalink | Comments (1)
        

Whenever chaos rules the economy and financial markets, I try to find financiers who have fended off the storm and resisted the temptations that brought down their competitors. It's always a bit of a risk. The company that appears strong today may be on the ropes tomorrow. Amid the turmoil of 2002-2003 I repeatedly portrayed T. Rowe Price as a disciplined, upright firm that had avoided the mistakes and crimes of its mutual fund rivals. That portrait held up.

A year ago I wrote that Baltimore's Provident Bankshares "will be harmed if we head into a recession, but so far it has navigated the housing storm better than many of its rivals." That probably overstated the case. Today's financial hero is Old Line Bank, based in Bowie. Let's hope for their sake and the economy's that the column is not the kiss of future writedowns. From today's column:

As the economy slumps, one Maryland bank has not only stayed out of trouble but has burnished the kind of 24-karat lending record that rivals would covet even in a boom.

Bowie-based Old Line Bank has lent more than $200 million to local homebuilders, hoteliers, auto repair shops, lawyers, homebuyers and landscapers. But as banks fail nationwide at the greatest rate since 1993, so far every one of Old Line's borrowers is paying interest and principal as planned.

A church that was behind on payments is catching up. Other than that, Old Line has zero "nonperforming" loans, defined as at least 90 days overdue. It doesn't even have a loan that is 30 days overdue.

There's no guarantee that it won't take some lumps. But Old Line's performance so far in the greatest financial crisis in decades is up there with pitching a perfect game against the 1927 Yankees or bowling 300 wearing mittens.

Posted by Jay Hancock at 10:01 AM | Permalink | Comments (0)
        

Here is Ed Yardeni's very interesting take:

I know what Ben Bernanke will do next, and it should be very bullish for stocks, bonds, commodities, and real estate. He soon will target the 10-year Treasury yield at 2.50%. It was at 3.40% yesterday. That would immediately bring the mortgage rate down to 4%-5%. The inventory of unsold existing and new homes will plunge as homebuyers swarm back into the real estate market. Home prices would stop falling, and might start rising again. The stock market would jump 25% within a few days. By the spring of 2009, housing starts and auto sales will rebound. The worst of the recession will be behind us after the first quarter of next year.

How do I know all this? Ben told me. He told everyone. He said he would do this under certain dire circumstances, which are rapidly unfolding right at this time...

So what is the Fed to do? Here is what Ben Bernanke said he would do under these circumstances back in 2002: “One relatively straightforward extension of current procedures would be to try to stimulate spending by lowering rates further out along the Treasury term structure--that is, rates on government bonds of longer maturities. There are at least two ways of bringing down longer-term rates, which are complementary and could be employed separately or in combination. One approach, similar to an action taken in the past couple of years by the Bank of Japan, would be for the Fed to commit to holding the overnight rate at zero for some specified period. Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time--if it were credible--would induce a decline in longer-term rates. A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well.”

Posted by Jay Hancock at 10:12 AM | Permalink | Comments (0)
        

Everybody knows the markets and economy would be fine if we didn't have newspapers and TV stations blabbing about them all the time. Shut down those independent reporting sources, the way they used to do in Soviet Russia, and nobody will be wiser. The only things between us and Dow 36,000 are the Wall Street Journal, the New York Times and Jim Cramer. (We're all making up the housing crisis because we want America to fail.)

Hedge fund manager Barry Ritholtz dares to question this truth. He links to three decades of bad-news TIME magazine covers and audaciously claims that the stories were based on reality at the time and that the economy eventually recovered and thrived, traitorous media notwithstanding.

The market makes the news — not the other way around.

Far too many investors fail to understand that. When the news is very negative, its usually AFTER the market has been deeply whacked. They are reporting what has already occurred; That’s their jobs.

My goal here isn’t to bash the Press (that stuff is silly). Rather, it is to show you that the media is not telling you what is most probably going to happen next. To investors, news mostly old — its pretty much history as far as sock prices are concerned. What matters most to your portfolio is what the near future holds.

As an example, consider this collection of Time Magazine covers.

Posted by Jay Hancock at 3:13 PM | Permalink | Comments (0)
        

If consumers have money to buy anything with, that is. The Labor Department said this morning that consumer prices fell 1 percent in October from September levels -- the biggest decline in at least six decades. Of course prices won't continue to fall at this rate. October represented an abrupt popping of what turned out to be a summer energy bubble. But there is little inflationary pressure as far as the eye can see. Some items never experienced inflation, even at the height of the frenzy. Apparel prices fell 1 percent in October, but apparel has been on a consistent deflationary course for a decade. Clothing prices are 10 percent lower in nominal dollars than they were in 1998. If we account for the depreciation of the dollar due to overall inflation, apparel prices have fallen even farther.

Posted by Jay Hancock at 10:54 AM | Permalink | Comments (0)
        

Baltimore's own James Francis Cardinal Stafford at Catholic University last week. From CUA Tower:

His Eminence James Francis Cardinal Stafford criticized President-elect Barack Obama as “aggressive, disruptive and apocalyptic,“ and said he campaigned on an “extremist anti-life platform,” Thursday night in Keane Auditorium during his lecture “Pope Paul VI and Pope John Paul II: Being True in Body and Soul.“

“For the next few years, Gethsemane will not be marginal. We will know that garden,” Stafford said, comparing America’s future with Obama as president to Jesus’ agony in the garden. “On November 4, 2008, America suffered a cultural earthquake.”

Cardinal Stafford said Catholics must deal with the “hot, angry tears of betrayal” by beginning a new sentiment where one is “with Jesus, sick because of love.”

The lecture, hosted by the Pontifical John Paul II Institute for Studies on Marriage and Family, pertained to Humanae Vitae, a papal encyclical written by Pope Paul VI in 1968 and celebrating its 40 anniversary this year.

Stafford also spoke about the decline of a respect for human life and the need for Catholics to return to the original values of marriage and human dignity.

“If 1968 was the year of America’s ‘suicide attempt,’ 2008 is the year of America’s exhaustion,” said Stafford, an American Cardinal and Major Penitentiary of the Apostolic Penitentiary for the Tribunal of the Holy See. “In the intervening 40 years since Humanae Vitae, the United States has been thrown upon ruins.”

Amazing. From Wikipedia:

James Francis Cardinal Stafford (born July 26, 1932) is an American Cardinal of the Roman Catholic Church. He currently serves as Major Penitentiary in the Roman Curia, and was elevated to the cardinalate in 1998.

James Stafford was born in in Baltimore, Maryland, as the only child of Francis Emmett, the owner of a successful furniture store, and Mary Dorothy (née Stanton) Stafford. He moved from Loyola High School in 1950 to Loyola College in Baltimore with the intent of pursuing a career in medicine, but in 1952, the violent death of a friend caused him to rethink his future and to enter St. Mary's Seminary in Baltimore, where he earned degrees in arts, theology, and social welfare.

Stafford was ordained (along with Edward Egan another future cardinal) a priest by Bishop Martin John O'Connor on December 15, 1957. He was consecrated auxiliary bishop of Baltimore and Titular Bishop of Respecta by Archbishop William Donald Borders on January 11, 1976.

In 1982 Stafford was appointed bishop of the Diocese of Memphis. Four years later he was named Archbishop of Denver, in which capacity he served for ten years before being called to Rome. Archbishop Stafford oversaw the events which took place at World Youth Day in 1993.

Named President of the Pontifical Council for the Laity on August 20, 1996, he became Cardinal Deacon of Gesù Buon Pastore alla Montagnola in the consistory of 1998.

In 2003 Cardinal Stafford was appointed Major Penitentiary, in which position he oversees matters pertaining to indulgences and the internal forum of the Church. He is one of the highest ranking members of the Roman Curia from the United States and the second American to serve as Major Penitentiary, the other being William Wakefield Baum. His office is one of the few that is not automatically suspended upon the death of the pope, and the only official allowed to be in contact with anyone outside the conclave. Stafford was one of the cardinal electors who participated in the 2005 papal conclave that selected Pope Benedict XVI.

On the occasion of his 75th birthday in 2007, in accordance with Canon 354 of the Code of Canon Law, Cardinal Stafford submitted his letter of resignation to Pope Benedict XVI. Cardinal Stafford remains eligible to vote in any future papal conclaves that begin before his 80th birthday on July 26, 2012.

On 1 March 2008, Pope Benedict appointed him as Cardinal-Priest of San Pietro in Montorio after being ten years as a cardinal-deacon.

Posted by Jay Hancock at 12:13 PM | Permalink | Comments (62)
        

People get sick, even in recessions. Medicare and insurance companies pay for treatment in recessions.

Which helps explain why medical stocks have fallen much less than the market as a whole.
The health care segment of the Standard & Poor’s 500 stock index is down about 30 percent in 2008. Steep though that is, it’s less than any other sector except consumer staples, represented by companies such as Procter & Gamble.

Consumer-staple shares are down by about 20 percent, while the S&P 500 as a whole has fallen 40 percent. Financial stocks have plunged 60 percent.
One could have argued that medical stocks were cheap even before the financial crisis hit home.

Pfizer, which has fallen to $17 from $24 at the beginning of the year, trades for seven times profits and has $25 billion in cash.

True, there is uncertainty about how health care reform in the Obama administration will affect medical stocks.

But the population is aging and getting sicker. Companies will figure out how to make money on the trend one way or another.

The T. Rowe Price Health Sciences fund has lost 32 percent, year-to-date.
Vanguard’s Health Care Fund is down 25 percent.

Posted by Jay Hancock at 11:17 AM | Permalink | Comments (1)
        

Not that anybody doubted it, of course. But the University of Maryland has now provided Euclidean proof.

Unhappy People Watch TV, Happy People Read/Socialize

Study: Channeling Unhappiness, In Good and Bad Economic Times

COLLEGE PARK, Md. - A new study by sociologists at the University of Maryland concludes that unhappy people watch more TV, while people who describe themselves as "very happy" spend more time reading and socializing. The study appears in the December issue of the journal Social Indicators Research.

Analyzing 30-years worth of national data from time use studies and a continuing series of social attitude surveys, the Maryland researchers report that spending time watching television may contribute to viewers' happiness in the moment, with less positive effects in the long run.

"TV doesn't really seem to satisfy people over the long haul the way that social involvement or reading a newspaper does," says University of Maryland sociologist John P. Robinson, the study co-author and a pioneer in time use studies. "It's more passive and may provide escape - especially when the news is as depressing as the economy itself. The data suggest to us that the TV habit may offer short-run pleasure at the expense of long-term malaise."

UPDATE: Corey sez:

But what about reading newspaper coverage of television a la David Zurawick and then talking about who's your least favorite contestant on Top Chef with friends?

That, my friends, is not mere happiness. It is bliss.

Posted by Jay Hancock at 10:03 AM | Permalink | Comments (1)
        

That didn't take long. Six Maryland business groups, including the Maryland Retailers Associaton and the Restaurant Association of Maryland, put out a statement opposing the Employee Free Choice Act, which seems quite likely to pass the new Congress. The measure would let employees check a card to vote on whether to certify a union. Now they have to vote by secret ballot in elections supervised by the Feds. The letter, to Maryland's congressional delegation, reads:

On behalf of our over 10,000 member businesses, we are writing to express our strong opposition to the Employee Free Choice Act (H.R. 800). While this legislation failed in this session of Congress, it will be before the Congress next year and we want you to know our position.

Commonly referred to as "Card Check" bill, this legislation would
bypass the current secret-ballot process to form a union as regulated by the
National Labor Relations Board. Whether voting for President of the United
States or President of the student body, Americans have relied upon the
private ballot to protect voters from undue influence or harassment. Current
law protects the independent views of workers by providing for a federally
supervised private ballot election. Under the Employee Free Choice Act, the
private ballot would be replaced with a vote in-the-open process that would
subject independently minded workers to coercion and harassment.
Additionally, this sweeping legislation would take wage and benefit
negotiations away from employees and managers and instead rely on a single
federal arbitrator with likely little or no prior knowledge of the company to
make those decisions.

The Card Check legislation is a game changer and of the utmost
concern to our member employers. We cannot overstate the strong feelings
of our members against this legislation. Amidst the worst financial and
economic crisis since the Great Depression, enactment of card check could
not be more ill timed. Our members have enough challenges just trying to
keep the doors open and meet their payrolls.

Posted by Jay Hancock at 5:00 PM | Permalink | Comments (2)
        

This just out from the Maryland Public Service Commission. Along with Constellation Energy Group shareholders, the PSC has to approve Constellation's sale to Warren Buffett's MidAmerican Energy Holdings. The question has always been: How narrowly would the PSC interpret its brief to review the deal and what factors would it consider? Would it just look at BGE customers or would it widen its perspective to include the interests of Baltimore, Maryland and even CEG shareholders?

This order doesn't mention shareholders, who are unhappy with Buffett's low price. Even so, it shows that the PSC's scope will be W-I-D-E, even to the point of considering an alternative offer, such as one from major CEG shareholder Electricite de France. It also raises the possibility of requiring Buffett to return BGE's former generation plants (now owned by an unregulated Constellation affiliate) to BGE and regulatory price control.

Emphasis is mine:

Finally, although the Commission has considered the issues list submitted by the Staff, the Commission will not restrict the issues to a list at this point. The statutory public interest standard encompasses a broad array of issues and leaves the Commission the discretion to consider any others we find relevant. The Commission views its authority, and its obligation, to analyze this transaction as requiring a thorough investigation that errs on the side of inclusion. Accordingly, and as the Commission articulated at the hearing, the Commission will consider all issues bearing or potentially bearing on the public interest standard in § 6-105 of the Public Utility Companies Article, and specifically bearing on whether the Commission should approve the transaction, approve it with conditions or disapprove it.

Two issues that have attracted public attention merit a brief, specific mention.
First, the Commission will consider – and directs the Staff to analyze and raise, to the
extent other parties do not – whether approval of this transaction can or should be
conditioned on an agreement by the Applicants to return the former BGE generating
plants to BGE and/or to cost of service regulation. Second, the Commission also will
consider arguments demonstrating that the public interest would be served by a concrete
and viable alternative transaction, as well as arguments that aspects of the post-
transaction company/companies counsel in favor of or against approval.

Posted by Jay Hancock at 1:54 PM | Permalink | Comments (2)
        

Remember when people were talking about the Wall Street meltdown as if it were separate from the "real" economy. Separation no more. This AP story and last week's employment report show that the crisis is "contained" no more. No wonder Paulson wants to stimulate consumer finance by buying car loans and credit-card loans.

Retail sales plunged by the largest amount on record in October as the financial crisis and the slumping economy caused consumers to sharply cut back on their spending.

The Commerce Department said Friday that retail sales fell by 2.8 percent last month, surpassing the old mark of a 2.65 percent drop in November 2001 in the wake of the terrorist attacks that year.

The decline in sales was led by a huge drop in auto purchases, but sales of all types of products from furniture to clothing fell as consumers retrenched.

Posted by Jay Hancock at 11:41 AM | Permalink | Comments (2)
        

Verizon sent me the full letter, including signatories, of pension sponsors requesting relief from Capitol Hill.
Sez AP:

With pension funds facing billions of dollars in shortfalls as markets plunge, major companies are pushing Congress to suspend parts of a two-year-old law that they say could force them to cut jobs as they shift scarce money into ailing retirement pools.

The lobbying effort aims to change a 2006 pension reform law as part of any economic stimulus plan in a lame-duck session of Congress that begins next week. Companies say the current law could force them to tie up cash they desperately need in the face of a global recession.

Signers include: W.R. Grace, Aegon, FMC Corp., Northrop Grumman, Venable and Verizon.

Posted by Jay Hancock at 4:40 PM | Permalink | Comments (1)
        

Brad DeLong says GM and other nonfinancial companies stay in business even in Chapter 11 proceedings. Banks don't; hence the need to bail banks out. Unfortunately, banks are doing a great imitation of being out of business even though they got the bailout and their doors are still open.

We don't like to let financial firms go bankrupt because bankruptcy shuts down their business. Buying and selling financial assets is what they do, and bankruptcy requires that financial claims be largely frozen while the court sorts it out.

By contrast, there is no good reason not to let non-financial businesses go into chapter 11. They keep running--as businesses--and emerge from bankruptcy or do not.

I understand that the argument "you saved X from bankruptcy, why won't you save GM from bankruptcy?" is very hard to deal with in a soundbite. And I believe the federal government has an obligation to autoworkers and retirees. But this obligation is not well-exercised by keeping GM out of bankruptcy.

Maybe you could call it "conservatorship" or something?

Posted by Jay Hancock at 11:49 AM | Permalink | Comments (3)
        

From today's Baltimore Sun:

A Baltimore police spokesman defended yesterday the department's decision to delay notifying Mount Vernon residents of a string of rapes, saying that investigators worked to gather reliable information before notifying the public and that residents should always be careful, "whether we're looking for a suspect or not."

It's a risky world out there. But when danger is proximate and substantial, you warn people. Good thing the folks who made this decision don't run the National Weather Service or the Department of Homeland Security.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (0)
        

Blogger/economist/culture epicure Tyler Cowen is hard to please. But he is pleased by Nariman Behravesh's new book, Spin-Free Economics: A No-Nonsense, Nonpartisan Guide to Today's Global Economic Debates. Chief economist at Global Insight, Behravesh is often quoted in the Hancock column & elsewhere.

I was shocked by how much I liked this book. I think of it as a kind of contemporary Capitalism and Freedom, although it comes across as less partisan and the coverage is much more global. I agreed with almost everything the author said and I thought the framing was effective and spot on just about all the time.

Many MR readers already know too much to be the appropriate audience here, but if you wish to give someone an economics book as a gift, or as an introduction to thinking about economic policy, here you go. I'm still astonished at how remarkably good this book is and yes I did read it all the way through. Greg Mankiw wrote a very nice blurb for it.

Posted by Jay Hancock at 10:06 AM | Permalink | Comments (0)
        

Despite today's plunge, neither the Dow nor the S&P 500 have passed the lows reached last month. The Dow's October low: 8,176. It closed at 8,283 yestreday. The S&P's October low: 849. It closed at 852 yesterday. You're welcome.

Posted by Jay Hancock at 5:59 PM | Permalink | Comments (0)
        

A couple weeks ago I tried to interview the former Chrysler and Ford executive for this column on executive pay and how he worked for salary of $1 a year for a time when Chrysler was having troubles in the early 1980s. I never heard back until after the piece ran, and even then he replied through his assistant via email with one- and two-word answers to my questions.

Now she has sent a mass email to all the people who have been trying to talk to him, including the following: Bloomberg, two networks, Washington Post, Newsweek etc. Iacocca is still unavailable but refers people to his Web site.

'Josephs, Toby (NBC Universal)'; 'John Pomfret'; 'Naughton, Keith'; Hancock, Jay; 'RACHEL WEHRSPANN, BLOOMBERG/ NEWSROOM:'; 'ROBIN WOOD, BLOOMBERG/ NEWSROOM:'; 'Albano, Michael'; meghan.reeder1@nbcni.com; Eileen.A.Murphy@abc.com; 'Jimenez, Ryan'; JStAugustine@harpo.com; Autolab3@aol.com; leonkap1@aol.com; 'Rex Dale'

Posted by Jay Hancock at 4:39 PM | Permalink | Comments (0)
        

Piece in today's Washington Post by Paul Light, one of the sharpest observers of the gears of government. Some highlights.

But if the past is prologue, his [Obama's] agenda is likely to be one of the smallest since the 1960s.

Obama's problem in going big is not just a lack of money, though interest payments on the nation's $10.5 trillion debt will soon come to rival the Social Security program in annual costs. Nor is it pent-up demand on Capitol Hill, though House and Senate leaders are well ahead of Obama in setting next year's agenda.

Rather, there is simply less room in government for the kind of breakthrough ideas that Obama has promised. He is not just in charge of all things new; he is also the caretaker of all things old. As the grand legislative achievements of the past continue to rust, presidents have become more repairmen than reformers...

How ironic, perhaps, that Nixon had more room for his legislative agenda under divided party control of government in 1969 than Clinton had under unified government in 1993. Although Obama is likely to have more proposals than Clinton, there will not be a New Deal or Great Society this coming year...

Obama would be wise to recognize these limits on his first-year agenda. Instead of throwing a super-size agenda at Congress, he should start with a few tightly focused progressive initiatives that will whet the political appetite for more. His best opportunity for a grand agenda may not be 2009 but 2013.

Posted by Jay Hancock at 2:17 PM | Permalink | Comments (0)
        

The mighty morphin' Troubled Asset Relief Program isn't going to buy troubled assets after all. At least not the ones originally envisioned. The law was passed so Treasury could purchase toxic mortgage bonds, get them out of the system and let the economy resume business. Then people realized that this would do nothing to recapitalize the banks, at least if Treasury paid a fair price for the bad bonds. Then Washington decided to inject banks with capital directly by having Treasury buy preferred stock with a modest coupon.

Now Paulson is talking about lubricating the markets for credit-card and car loans to stave off a consumer strike. This was obviously motivated by last month's miserable car-sales results. He'll keep infusing banks directly, but he's scrapping Plan A. So the banks are stuck with the poison mortgage paper, which may end up being not quite as bad as feared if the economy doesn't tank too badly. One advantage of the original plan was that it would have established some kind of price discovery for iffy mortgage assets and perhaps gotten that market moving. That's on the back burner now.

Posted by Jay Hancock at 11:50 AM | Permalink | Comments (6)
        

Addictive products that latch onto customers no matter how much prices go up usually don't suffer in a recession. But Altria (formerly known as Philip Morris) is downsizing.

NEW YORK (AP) -- Altria Group, owner of the nation's biggest cigarette maker, confirmed on Tuesday that it has started to cut jobs to alleviate the risk from the widespread economic turmoil.

A spokesman declined to say how many cuts would be made

Richmond, Va.-based Altria Group Inc. owns Marlboro-maker Philip Morris USA as well as cigar maker John Middleton. It is also buying smokeless tobacco company UST Inc. to pursue growth outside of cigarettes, which are facing less demand from American consumers.

Spokesman David Sylvia confirmed the cuts and said the company is deciding how many cuts to make between now and February. He said departments that would lose employees have been told that there would be layoffs.

Posted by Jay Hancock at 10:19 AM | Permalink | Comments (2)
        

GGP owns big malls in Towson, Columbia, White Marsh, Owings Mills and Baltimore, not to mention huge commercial & residential assets in Columbia. Here is a recent column on General Growth's problems through a Baltimore lens. From the WSJ:

Ailing mall owner General Growth Properties Inc. warned Monday in a government filing that its failure to refinance or extend $1 billion in debt due this month could trigger default on billions of dollars in debt and its ability to continue operations would be in "substantial doubt."

One of the nation's largest shopping mall owners, General Growth made the warning in a quarterly filing with the U.S. Securities and Exchange Commission. The company, based in Chicago, faces an additional $3.07 billion in debt coming due next year.

If General Growth cannot raise additional capital to pay off that debt or extend its payment deadlines, it would need to take additional steps to acquire needed funds, "including seeking legal protection from our creditors," according to the SEC filing.

Posted by Jay Hancock at 9:54 AM | Permalink | Comments (0)
        

Here's the NY Post on Secret Millionaire, the reality TV show to air in December.

CAREFUL. The homeless man you may have ignored on the way to work today might be a millionaire.

Here's an intriguing thought - take a millionaire out of his or her plush lifestyles and plunk them down - undercover - in the crappiest part of town for a week with no money.

When the week is over, let the millionaire reveal himself to the people and groups who have helped him - and then write out a big fat check for them.

Reality TV meets the "Prince and the Pauper."

That's the premise of "Secret Millionaire," a new reality series set to debut early next month on Fox.

Each of the millionaires on the show had to agree to give away at least $100,000 of his or her own money to qualify. In at least one case, a guy gives $500,000 at the end of his harrowing week.

They got something wrong in this part:

The show is based on a British series that has become one of the most-watched on British TV.

(In Britain, more than one business tycoon has used the show to repair a tarnished public image, like the sub-prime mortgage lender in the UK last year. The US version includes the wife of an energy exec who took an $18-million severance package after the company lost 75 percent of its value.)

Molly Shattuck, wife of Constellation Energy CEO Mayo Shattuck, is one of the secret millionaires. But Shattuck said he would give up $18 million in severance if the deal to sell Constellation to Warren Buffett's MidAmerican Energy goes through. He will, however, get plenty of other dough.

Posted by Jay Hancock at 5:32 PM | Permalink | Comments (13)
        

Store-for-store sales at Starbucks' U.S. shops dropped 8 percent for the third quarter compared with the same period last year. Amazing how good a $1.49, 24-ounce, 7-Eleven coffee tastes in a recession.

Posted by Jay Hancock at 5:22 PM | Permalink | Comments (0)
        

Best Buy should be up more than a quarter this morning. All its competitors are going into bankruptcy proceedings.

RICHMOND, Va. (AP) _ Circuit City Stores Inc., the nation's second-biggest electronics retailer, filed for bankruptcy protection on Monday but plans to stay open for business as the busy holiday season approaches.

It said it decided to file for bankruptcy protection because it was facing pressure from vendors who threatened to withhold products during the holiday shopping period. The company also said it cut 700 more jobs at its headquarters, after announcing a week ago that it would close 20 percent of its stores and lay off thousands of workers.

Circuit City filed under Chapter 11 of the bankruptcy code, which will allow it to hold off creditors and continue operations while it develops a reorganization plan. Its Canadian operations also filed for similar protection.

And:

Consumer-electronics chain Tweeter Opco LLC filed for bankruptcy protection for the second time in 17 months and said it has begun liquidation sales at its 94 stores. Canton, Mass.-based Tweeter listed assets and debt of less than $100 million each in Chapter 11 documents filed this week in U.S. Bankruptcy Court in Wilmington, Del. Tweeter operates stores in 17 states, including seven in Maryland, under the Tweeter, Sound Advice, HiFi Buys and Showcase Home Entertainment names. Tweeter said it faced "a severe liquidity crisis brought on by slow sales caused by declines in discretionary consumer spending." -- Bloomberg News

Posted by Jay Hancock at 11:53 AM | Permalink | Comments (0)
        

A simple, sensible solution to the housing crisis from financial strategist Ed Yardeni:

... Yet, ironically, the economy urgently requires a radical approach to revive growth. New infrastructure spending programs would most likely be too little, too late to help an economy that is in a deep recession now. I still believe that a more targeted stimulus aimed at not just stabilizing, but reviving housing activity would be the best way to turn the corner. If you know any of the following members of TEAB tell them we should nationalize Fannie and Freddie and have these two Government Owned Enterprises provide $2 trillion of 30-year fixed mortgages at 4%, on a first-come-first-served basis for all qualified buyers of new or existing homes. That would get rid of the housing inventory overhang in 3-6 months! They can call me 24/7 to discuss the idea.

Posted by Jay Hancock at 9:33 AM | Permalink | Comments (1)
        

Bill Gates is bullish on inflation.

He’s putting tens of millions of dollars into the Western Asset-Claymore Inflation-Linked Securities & Income Fund, which rises with consumer prices over the long term. The fund is managed by Legg Mason’s Western Asset unit in Pasadena, Calif.

Through his Cascade Investment vehicle, Gates has been buying the inflation fund (ticker WIA) at least since June, when he first declared ownership of more than 10 percent of its shares. In mid-June he owned 2.9 million shares worth about $36 million.

Since then he kept plowing in money. On Oct. 16 he owned 4.2 million shares worth $41 million.

The shares have fallen from $12.50 in July to $10.30 lately, as the Treasury’s inflation-protection bonds, which make up most of the fund, have lost value. So-called TIPS were a hot product when oil was $140 a barrel.

But analysts expect the economic slowdown to reduce inflation in the near future or maybe even introduce a period of falling consumer prices. That’s not to say, however, that inflation isn’t a threat. With governments around the world fighting the crisis by printing money, rising prices are the probable long-term outcome.

The Western Asset-Claymore fund is closed-end, which means the internal value of its assets can diverge sharply from its market price. Last week the portfolio was worth about 10 percent more than the share price. So Gates is hedging against inflation and buying $1 worth of assets for 90 cents. Smart, but he's unlikely to make much money for a long time.

Posted by Jay Hancock at 12:46 PM | Permalink | Comments (0)
        

Details from Constellation Energy's earnings report in Hanah Cho's story in today's Baltimore Sun:

Constellation Energy Group said yesterday that it wants to sell another part of its volatile commodities trading operations and is taking more steps to shore up its balance sheet ahead of its pending $4.7billion sale to Warren Buffett's MidAmerican Energy Holdings Co.

The Baltimore company said it will receive up to $350 million in additional liquidity from MidAmerican, which had already provided an immediate $1 billion cash infusion as part of the deal.

Constellation also plans to sell its Houston-based natural gas trading business, on top of previously announced sales of another portion of its natural gas assets and international coal and freight business. Constellation expects to increase its liquidity by up to $1.5 billion through the return of collateral, which is required in its trading operations, once the sales are completed.

Posted by Jay Hancock at 10:42 AM | Permalink | Comments (1)
        

Constellation Energy Group third-quarter earnings out today. Didn't get to them earlier. The headline: Unwinding trading positions and selling businesses could raise enough cash for CEG to avoid bankruptcy if shareholders reject the planned merger of one of Maryland's biggest companies with Warren Buffett's MidAmerican Energy Holdings. The multibillion-dollar poker game between Baltimore and Omaha is still on. Background can be found in this column, "Omaha sage could get a Baltimore 'never mind'" Pequot Capital's Catapult Capital's David Frank put Constellation CEO Mayo Shattuck on the spot at the very end of the conference call. Emphasis is mine:

FRANK: “But it would be a safe bet that if you are able to complete some portion if not all of these transactions, your coverage to collateral requirement in a downgrade would be maybe two or three times [what's necessary]. So I guess my question to Mayo would be: this sounds great. Wouldn’t this then obviate the purpose and the need for the merger with Mid-American?"

SHATTUCK: "Well David, you get to the fundamental point, obviously. We intend to merge with Mid-American. We’re proceeding down that path. We also have the obligation as an independent company right now to operate ourselves prudently. So yes, we’re going down both paths so to speak. But we also think there's alignment between the two and we think it’s important that we manage the company that way." Moves to raise liquidity and survive a bond downgrade "are really consistent with what we'd be doing independently anyway," Shattuck said

FRANK: "Right. And I understand, your comments with regard to the merger you basically have to say. But I also know you wouldn't want to willingly sell this company at less than two times trough EBITDA. So I guess as as shareholder of the company, if you’re successful in executing on all of these plans, I would certainly vote against this deal and I hope we get a resounding 'no' because your company is certainly worth far more standalone than it is under this price."

As Shattuck said: This is the fundamental point. If CEG shareholders reject Buffett's $26.50, bargain basement price, will CEG have enough cash to survive the bond downgrade that would almost certainly follow? Buffett's betting that the answer is no, or at least that shareholders won't have the guts to find out. But Constellation is upgrading its cash and credit position, a third-quarter trading loss of $210 million (everybody wondered what was going on in the trading book) and shrinkage of a UBS/RBS borrowing facility from $2 billion to $1.2 billion notwithstanding.

According to Constellation's projections, selling various businesses, getting collateral returned and setting up credit lines could give it access to more than $3.5 billion by the end of the year. But at that point if its bonds were downgraded to junk status, its collateral requirements would be only $1.1 billion. Sure, there's no promise it can sell the stuff soon enough. Shareholder vote is expected for December or January. Financial markets are still crazy. But this is going to be very interesting.

Posted by Jay Hancock at 5:50 PM | Permalink | Comments (2)
        

Yesterday I blogged the bad timing of a new reality show, "Secret Millionaire," co-starring Molly Shattuck, and the recent troubles of Constellation Energy Group, run by Ms. Shattuck's husband, Mayo Shattuck. The show features well-to-do folks living in downscale places and giving away money. From the press release, via Zurawik's blog:

The secret millionaires will leave their opulent lifestyles and go undercover to experience life in some of the most impoverished areas of the country including a community devastated by Hurricane Katrina, an old coal-mining town in Schuylkill County, Pa., and areas outside of Los Angeles, San Francisco and Las Vegas, where people in need live just minutes from those in upscale, gated communities.

The millionaires include an internet mogul worth $300 million, a husband-and-wife team who own a multi-million dollar magazine-publishing business, a successful Southern California lawyer, an owner of a restaurant empire, a Baltimore socialite and former NFL cheerleader, as well as a software inventor worth $50 million.

Shattuck is the Baltimore socialite and former Ravens cheerleader. More than one email correspondent has suggested to me that the show's timing -- just as Constellation stock has lost three-fourths of its value from its January high -- is unfortunate and insensitive.

In fact the show was filmed in April, according to Shattuck. That's when Constellation was still riding high.

"This is a project I got involved in almost a year ago," she says on the phone. "I did it before all this has happened."

“I was literally in Pennsylvania for less than a week" for the shooting, she said. “I had no idea it was going to be picked up as a major national show," adding that she didn't know it would be named "Secret Millionaire," either.

“I despise the name, but I love the concept of it."

She added: “I chose to do the show because I believe it’s going to show people how easy it is to help other people. It doesn't matter how much money you have or how little money you have. We're all just people... I did this because I thought it was the right thing to do."

Posted by Jay Hancock at 12:52 PM | Permalink | Comments (3)
        

BGE has set the November commodity gas price: 96.34 cents per therm. This is slightly lower than the $1.599 that BGE Home, the less-regulated company owned by BGE parent Constellaton Energy, is charging people who lock in for the whole winter.

At my house we use about 100 therms per month in the winter. That's a difference of $64 a month between the BGE Home product and the standard, floating BGE price. Even if you're locked into the BGE Home deal, it's worth paying the $50 cancellation fee to get back to BGE's standard price.

Posted by Jay Hancock at 11:30 AM | Permalink | Comments (2)
Categories: BGE/electricity
        

It turns out that running for president as a Republican just as the current unpopular Republican president is presiding over an economic disaster isn't the worst bad timing you can have. This is worse: Having your pretty, limelight-loving wife star in a reality show about wealth and poverty just as you, the very wealthy CEO, preside over the near collapse of your energy company and destroy billions in shareholder value.

Posted by Jay Hancock at 12:35 PM | Permalink | Comments (2)
        

Today's column. Obama's second (or maybe fourth or fifth) challenge.

So far, American taxpayers have put up $1 trillion to rescue banks and consumers who borrowed too much. Congress will almost certainly approve a stimulus package of $300 billion or so more.

Total debt owed by the U.S. government just surpassed $10 trillion. The deficit for the fiscal year that began Oct. 1 should break a record.

All this money appears to have tempered financial turmoil and plunging confidence, at least temporarily.

But who will bail out the bailer?

Read the whole thing here.

Posted by Jay Hancock at 8:13 AM | Permalink | Comments (0)
        

That's my headline, not his. It looks like the Legg Mason strategist's lawyers made him tone down the official headline, which is, "Where from here?" (Yawn.) But "buy stocks" is the upshot. The piece is very much worth reading, especially for the cool graph on page 7 showing the rolling 10-year returns from U.S. stocks along with when Warren Buffett said "Buy" or "Sell."

To summarize, we believe this will prove to be a good time—and maybe even a great time—to invest for people with time horizons beyond a year or two. While there’s no way to know where the market will be in the short term, many conditions are in place for better performance. More directly, we believe the market at these levels represents substantial value for long-term investors...

To put this all in perspective, the decline in asset values in the past year or so has been huge. According to the Federal Reserve, following 2008’s second quarter the U.S. consumer’s net worth declined the most in real terms in any year since World War II. Specifically, year-over-year consumer net worth declined by $2 trillion—a combination of lower equity and housing values. The third-quarter numbers are likely to set another record, and may show a decline in excess of $7 trillion with the swoon in equity prices. While consumer net worth is still $53 trillion, the arrow is pointing in the wrong direction, and that will likely have a material negative wealth effect...

Finally, you can make a decent case for the market based on dividends alone. The current dividend yield on the S&P 500 is only about 25 basis points below the yield on the 10-year Treasury note (see Exhibit 3). You have to go back to the early 1960s to find a similar relationship. 6 If you add in share buybacks, the yield is about 400 basis points above the 10-year note yield, and that’s with buybacks down sharply this year.

Posted by Jay Hancock at 11:44 AM | Permalink | Comments (0)
        

Goldman Sachs, which just got $10 billion in taxpayer cash, has set aside "£7billion for salaries and 2008 year-end bonuses" for its London bankers, reports the Daily Mail. This will prompt outrage, but it also points up the complications that ensue when taxpayer money starts mixing with private capital.

As preferred shareholders, taxpayers should expect no more than the return of their money plus the interest Goldman has agreed to pay. This they will almost certainly receive, so it's hard to complain about this from a purely financial standpoint. Minority shareholders generally don't tell companies what to do with their money. Goldman is doing what investment banks always do -- enrich their partners and employees in good times and in bad. And yet it's hard to avoid the perception that government money is financing mortgage payments on townhouses on Manhattan's upper East Side.

The Goldman stakeholders who should really be hacked off are the ones at the bottom of the capital structure -- the common shareholders. Like common shareholders everywhere, they hold a residual interest in Goldman's income stream -- whatever's left over after all the other bills are paid. So the London bonuses come directly out of their pockets, not the government's. Goldman's bondholders will be made whole. So will the preferred shareholders. Where is the outrage among common shareholders?

Posted by Jay Hancock at 12:10 PM | Permalink | Comments (1)
        

Steve Hanke is professor of applied economics at Johns Hopkins. This is from his latest column for Forbes.

IN MY APR. 16, 2007 COLUMN I WARNED THAT THE U.S. was trapped in a dangerous boom-bust cycle that began with cheap credit and would end with collapsing home and stock prices. When the bust came it was worse than I had imagined. Now what? To find a safe harbor in this storm, we must ignore panicked media headlines and understand how we got into such turbulent waters.

Expect more irresponsible political behavior and market
panic. We’ll see deleveraging-driven deflation in the near term
and more inflation in the long term. Maintain the gold hedges I
have recommended before (most recently in my Aug. 11
column) and keep a full stockpile of U.S. Treasury inflation protected
securities.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (0)
        

Constellation Energy Group is down 90 cents today after the company disclosed late Friday that an expected line of credit from UBS and RBS got reduced and delayed. CEG needs liquidity after nearly melting down in September. Warren Buffett's MidAmerican Energy Holdings threw it a lifeline, but at the price of being able to buy the company cheaply. At $23.30, the stock is far below Buffett's price of $26.50 per share. We'll learn much more about what has been going on at CEG on Thursday, when third-quarter earnings are announced.

Posted by Jay Hancock at 10:10 AM | Permalink | Comments (0)