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Interview: Alcoa >> merrill lynch is giving more responsibility to five of its 11 regional sales directors and has offered less senior jobs to the other six, all according to an internal memo. merrill named the five to new roles as divisional directors, according it a memo sent to employees this week by senior vice president dan sontag. merrill did employ more than 14,000 brokers as of july 1 and robert mccann replaced james gorman as head of the business in june. gorman was hired by morgan stanley in august to revamp its brokerage business and the firm plans to expand its number of regions to 30 from 11. merrill, note, is a passive minority owner of bloomberg l.p., parent of bloomberg news. the securities and exchange commission investigating senator majority leader bill frist’s order to sell all of his shares of h.c.a. frist’s office confirmed the probe is underway. frist instructed trustees managing his assets to sell shares of h.c.a. in june and a month later, the company missed earnings estimates and the share price tumbled 15%. h.c.a. says the u.s. attorney’s office in manhattan has subpoenaed documents the company says are related to the frist stock sale. h.c.a. is the biggest u.s. hospital chain, founded in 1968 by thomas frist, the senator’s father, along with the senator’s brother. alcoa says third-quarter earnings will fall below analysts’ estimates because of lower prices and higher energy costs, joining other companies that in the past week or so have named the same reasons as they reduce profit forecasts. for more on the story, we bring in june grasso. >> ellen, alcoa has meanty of company—plenty of company, avon products, u.s. steel and estee lauder. the world’s biggest aluminum maker is one of the companies blaming higher energy costs and hurricane katrina for eroding earnings. alcoa says profit from continuing operations may fall as low as 27 cents a share, far below the 44-cent analysts’ estimates due to significantly higher energy prices. natural gas rose to a record this week as hurricane rita headed toward production rigs in the gulf of mexico. >> natural gas started up in june and you could see it coming. these companies use a lot of energy. we’ve had three steel companies preannounce, same reason. there’s going to be a few more. >> joining alcoa, u.s. steel said third-quarter profits will fall below analysts’ estimates because the cost of natural gas and scrap prices are both increasing. leggett and platt, maker of mattress springs and furniture parts blamed higher raw materials and energy costs. brunswick, world’s largest builder of recreational boats said falling confidence, high fuel prices and hurricanes may hurt sales. estee lauder cut its profit forecast. on tuesday, avon products, world’s largest director seller of cosmetics, said profits this year will miss its earlier forecasts because of hurricane katrina, higher fuel costs and weaker-than-expected sales outside the u.s. some analysts say higher prices at the gas pump and for winter heating fuel may further limit consumer spending. bartowf america cut earnings estimates on dozens of consumer companies because of the likelihood higher energy prices will hurt the amount of money for discretionary purchases. >> thanks so much. time for a world and national news update. three million people have been evacuated in texas and louisiana as hurricane rita approaches. mark crumpton joins us with details. >> with rita forecast to come ashore near beaumont and port arthur, texas, saturday, residents in the path heeded warnings from emergency management officials. in houston, many were stuck for hours in bumper-to-bumper traffic. some cars ran out of gas. houston mayor bill white had this advice for people stranded. >> if a person is on the side of the road, all of our emergency response capabilities and metro is mobilized to get people off the roads to a safe place. >> although the storm did lose strength on friday afternoon, officials in galveston are concerned that a storm surge could penetrate the city’s 17-foot high sea wall built in

Market briefing -- Ellen (slow) Rita --- Allan (slow) Bankers & traders --- Adrian (slow) “after the bell.” i’m ellen braitman, 30 after the hour. let’s recap the day on wall street where stocks ended little changed, erasing earlier declines as hurricane katrina was downgraded to category three and oil prices ended lower. the dow losing two ponents, s&p—two points, s&p essentially unchanged -- ank as we continue our coverage of rita moving toward the gulf coast, there are new estimates of the potential insured damages. insurance stocks rallied as the storm lost strength and veered from the direct hit earlier anticipated on galveston and houston. allan dodds frank joins us with this part of the story. >> even as normal tides from hurricane rita caused levee breaching in new orleans, insurance stocks gained on the notion that rita may not be as bad as katrina was. the s&p property and casualty index rose almost 3% on the day although falling 1% for the week. the initial estimate from eqecat for potential damage from hurricane rita is from $9 to $18 billion, representing totals for just potential wind damage from which the hurricane, some forecasters will say, will hit as a category three storm with waves surging 15 feet or more. by comparison, eqecat estimates hurricane katrina did $15 to $24 billion in wind damage when it came ashore august 29. >> if rita takes its worst track, it is likely to cause very high insured damages but probably not as high total economic losses as katrina because you’re not likely to see the amount of flooding, certainly, that we saw from katrina. >> still, the potential of a rita-katrina double whammy underscores the difficulties in understanding storm damage losses and understanding how the industry will handle them. >> as we look forward and look at the cash available to make the claim payments over the next 12 to 18 months, if you have a rise in interest rates, there’s a like load hood a number of these insurance companies would have to sell assets into a rising interest rate environment and the impact to assets could be greater from the losses from hurricane katrina and could be exacerbated by hurricane rita. >> insurance offices inc. estimates combined claims of as much as $78 billion from the storms will deplete 19% of the $402 billion in surplus or cushion that u.s. property and casualty insurers have for unexpectedly high claims. >> thanks so much. as we switch gears, record profits on wall street mean more jobs. merrill lynch, goldman sachs, bear stearns hiring the most bankers and traders in at least five years. let’s get more on the story right now, joined by bloomberg news reporter adrian cox. let’s start off with why are they looking to hire so many people? >> the reason is because they’ve been having very good profits this year and much better profits than they were expecting. one of the big reasons for this has been that the third quarter which tends to be a generally slow time during august actually turned out really rather well and a lot of bankers found they weren’t going on vacations as they expected but instead were in the office or troubling their families by tapping away on blackberries the whole time so as a result you saw third-quarter earnings at bear, the best third quarter it had ever had and lehman and goldman sachs had the best quarter they’d ever had which is upbelievable—unbelievable for a quarter that tends to be the slowest for the year so going forward it looks as though it will be a record year for all the brokers, as well. >> let’s talk about the areas of strength that the companies had that boosted sales and profits to records and where specifically recruiting is happening. >> recruiting is happening in the lower levels, in the associates, analysts, people straight out of business school so we’re expecting to see something like a 5% gain in hiring on those big brokers in those kind of areas but when you actually look at business areas that the hiring is occurring, principally it will be in those areas where the increase in the economic activity is helping out things like banking and then also because of the great rise of oil prices over the last couple of years and things like commodity trading, as well. >> so, reflecting essentially when you—what you see in profit and earnings reports? >> absolutely. it will be a time when people who can be in the areas where there are particularly quantitative areas like equity derivatives and credit default swaps and so on, people with ph.d.’s in path or—math or economics or engineering, those people are very much in demand and headhunters are seeing a 10% gain in the recruiting they’ve been doing this year and that has an impact on compensation. >> let’s talk about that compensation. i saw in the story that common coming—someone coming out of columbia with an mba making $95,000 as a starting salary. >> we were speaking with the head of recruiting at one of the business schools in paris who was saying that this has been within of the first times they’ve seen a lot of the wall street firms recruiting there because they are desperate to get new people in and as any business school graduate knows, if the demand is increasing and the supply is about the same, then the price will go up. >> thanks so much, adrian. adrian cox from bloomberg news who covers the financial sector for us here. rita, as we’ve been talking about, coming less than a month after hurricane katrina struck the gulf coast. when we return, we’ll look at how the world’s largest home improvement retailer is preparing. carl liebert joins us straight ahead.

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China Establishing Economic Ties with Latin America Chinese President Hu Jintao paid a visit to Mexico recently, where he met with his Mexican counterpart, Vicente Fox, and members of Mexico's Senate. The two leaders presided over the signing of various agreements, including one that may eventually allow Chinese companies to mine iron and other minerals in Mexico.

It was Mr. Hu's second visit to Latin America in less than a year. His stops last year included Argentina and Brazil where he met with the presidents of those countries and signed commercial agreements to increase Chinese imports of agricultural products and other commodities. China's initiative toward Latin America appears to be part of a wider global strategy.

Michael Shifter is a Latin American expert at the Washington-based policy group, Inter-American Dialogue.

Michael Shifter "I think they are finding opportunities here and those opportunities are opportunities that the United States isn't taking advantage of. There is a sense that the United States has looked elsewhere and hasn't really put the energy and effort into taking advantage of the economic opportunities in this hemisphere. I think China has discovered that there may be some interesting ways they can take advantage of them so I think that's happening, but I think this is part of their global strategy as a major power."

China is looking at Latin America primarily as a source of raw materials like oil, timber and minerals. It also is importing agricultural products such as beef. These Latin American imports are supplying China's rapidly expanding manufacturing sector and helping to feed its huge population.

The Bush administration, which in August signed a free trade pact with Central America and the Dominican Republic, says it is not too concerned about China's initiatives in the hemisphere, noting that U.S. trade and investment in Latin America dwarfs China's.

Roger Noriega However, Roger Noriega, who until last week was the State Department's Assistant Secretary for Western Hemisphere Affairs, warns Washington does not want to see Beijing establish security ties with certain countries.

"If there's intelligence cooperation, or an effort to build security relationships, military-to-military relationships, in a way that would be detrimental to our security or the interests of our neighbors in the Americas, that would be a concern for us,” said Mr. Noriega. “We don't see that as a major problem but it's something that we have to pay close attention to."

Mr. Noriega points to the growing ties between Venezuela's Hugo Chavez and Cuba's Fidel Castro as the main source of concern should Beijing establish security relations with those nations.

China's expanding role in the region prompted the U.S. Senate Foreign Relations Committee to hold hearings on the issue Tuesday. Some lawmakers wondered if China posed a threat to U.S. influence in the Americas.

Roger Pardo-Maurer Administration witnesses played this down, but Roger Pardo-Maurer of the Defense Department highlighted the differences between the U.S. and Chinese approach toward Latin America.

"There is something very real out there, which we call the Inter-American system which is undergirded [supported] not only by binding institutions between governments, but by ethics and mores, and a common vision of the world. China is not part of that system at all. It's not a democracy, it's not a place where you can speak freely, it's a place whose interests in Latin America are economic."

For their part, Brazil and other Latin American countries view China as a promising new business partner -- a sign that Latin Americans are looking beyond their traditional economic and political relationship with the United States.

The Millionaire Next Door The majority of people do not have the ability to increase their incomes significantly. Yet income is a positive correlate of wealth. What, then, is our message? If you cannot increase your compensation significantly, become wealthy some other way. Do it defensively. This is how most of the used vehicle-prone shoppers did it. They successfully inoculated themselves from contracting the high-consumption lifestyle that many of their neighbors adopted. More than 70 percent of their neighbors earn as much or more than they earn. But fewer than 50 percent of their neighbors have a net worth of $1 million or more.

A PROFESSOR OF THRIFT HAS UAWs FOR NEIGHBORS

How did Dr. Bill, an engineering professor who never had a total household income of more than $80,000, become a millionaire? He inherited nothing. He never won the lottery or hired an investment advisor who turned a few thousand of his dollars into a fortune. His success in accumulating wealth is based on living well below his means. This professor is a classic example of a used vehicle-prone shopper. But like most of those in this buyer group, he never neglected his family. He provided funds for his children's college tuitions in full and more. He and his family live in a fine home in an upper-middle-class neighbor-hood. In fact, about 80 percent of his group live in homes valued at $300,000 to $500,000.

Jack Welch --- Straight From the Gut

We've had many great successes by breaking these projects out--and focusing on them as separate, smaller businesses in larger entities. We did this everywhere--Noryl in plastics, CT scanners and ultrasound in medical, and vendor financing and commercial finance in GE Capital. It didn't always work. But in every case one thing was clear: Breaking out businesses created people who were high-spirited, energized, and backed by the right resources.

The smaller ventures got high visibility and created heroes, celebrating both those who won and those who missed and driving home the value of taking risks.

We were aware of what size meant. The worst thing a company can do with size is to focus on "managing" it. Size either liberates or paralyzes. We tried every day to remember that the benefit of size was that it allowed us to take more swings.

Just some thoughts--things that worked for me, along with a lot of luck.

Execution--The Discipline of Getting Things Done LEADERS GET THE BEHAVIOR

THEY EXHIBIT AND TOLERATE

WHY THE RIGHT PEOPLE

AREN'T IN THE RIGHT JOBS

They Follow Through

Follow-through is the cornerstone of execution, and every leader who's good at executing follows through religiously. Following through ensures that people are doing the things they committed to do, according to the agreed timetable. It exposes any lack of discipline and connection between ideas and actions, and forces the specificity that is essential to synchronize the moving parts of an organization. If people can't execute the plan because of changed circumstances, follow-through ensures they deal swiftly and creatively with the new conditions. GE's senior leaders, for example, follow up every Session C after ninety days--before Session S begins--with a 45-minute tele- conference among the people involved with projects that take a long time to be completed.

The Buffettology 巴菲特原则 Seldom will you find a durable-competitive-advantage company with an organized labor force. These businesses have the economic might to make it through any strike that labor could throw at them. Also, since these businesses are typically more profitable, they can afford to pay their employees more to keep them happy. If you find a company that you think has a durable competitive advantage, but it has an organized labor force powerful enough to demand an ever-increasing piece of the pie, you should proceed with caution. The company may be strong enough to make it through any kind of bad-news event that kills its stock, but it may not be the type of company that you want tucked away in your portfolio for the next twenty years.

Take on the street (较量华尔街) The ECNs weren't the only force pushing Nasdaq and NYSE into a competitive corner. There were also wholesale market-makers, such as Knight Trading Group in Jersey City, N.J., and San Francisco's Schwab Capital Markets, owned by the same Charles Schwab who pioneered discount brokerage. Knight grew rapidly because it paid brokers for orders--called payment for order flow--while Schwab engaged in a practice called "internalization," in which buy and sell orders are matched internally. Both practices are problematic. Payment for order flow gave brokers an incentive to search out the highest bidder for their customer orders, rather than the market center that offered the best possible execution of investor orders.

Anatomy of greed (解剖贪婪--安然内幕) Just a few long days after laid-off employees learned their severance packages had been canceled--and after hearing that their$4,500 check (less tax) was "in the mail" we heard about the $55 million that was paid to five hundred people before bankruptcy. The news created an absolute uproar among laid-off employees. The so-called stay-on payments had been dished out by some uninhibited jackass who sat around one day and decided "who gets what." Was this the same person who sat around one day and decided "who stays and who goes"? No one expected these people to turn down the money; buy again, who's the genius who came up with these numbers? And for just 90 days! Lavorato, John $5,000,000 Kitchen, Louise $2,000,000

Professional Assertiveness (以下斜体字部分为测试题及答案) Beth said no to Dan’s request for staff. But she was able to provide alternatives by temporarily assigning a staff member to help out and by moving a deadline back to make time available for the new planning assignment. Before you can say no responsibly, it helps to understand the guidelines for doing so. From the list below, choose the guidelines for saying no responsibly as you provide constructive feedback to others. Select all that apply. Provide alternatives after saying no. Know how to say no to someone. Know when to avoid saying no. Know when to say no to someone. Say no to avoid controversy. (key: 1 2 4 ) You’ll undoubtedly feel that your constructive feedback sessions are more manageable when you learn how to say no in a responsible manner. In this course, you learned about becoming more assertive professionally by using proactive listening and constructive feedback strategies in the workplace. But you learned more than that. You learned that becoming an assertive business professional fosters your own growth as well as enables you to help co-workers and employees develop and grow.

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UN Summit Produces Hope and Speeches World leaders are set to wrap up a three-day summit at the United Nations with a declaration of goals for U.N. reform and global poverty alleviation. The gathering has produced hundreds of speeches, and a few hopeful developments.

The 60th anniversary observance ends Friday with a vote on a document that is the result of months of negotiations on how to update the world body for the 21st century. The outcome is far less than had been hoped, but could set in motion several reforms, among them a replacement of the discredited U.N. human rights commission.

Day two of the summit was filled with speeches from presidents and ministers representing 80 of the world body's 191 member states. Among them were the leaders of Russia, India, China, Japan, Iraq and Israel.

But the spotlight was outside the Assembly hall. In talks on the sidelines of the summit, European foreign ministers pleaded with Iran to reconsider their proposal for economic and other incentives in return for freezing its uranium enrichment program.

After a frank 25-minute meeting with Iranian President Mahmoud Ahmedinejad, German Foreign Minister Joschka Fischer said he was hopeful Iran would announce a halt to its enrichment activities Saturday during a General Assembly address. "We explained once again that the European position is unchanged, Iran knows our position, our proposal is on the table, and we are waiting for the announced new proposal by the Iranian president and he will do that on Saturday and we will examine these new proposals and see in which direction we can move," said Mr. Fischer.

The summit was the scene of diplomatic sparring on several other fronts Thursday. Indian Prime Minister Manmohan Singh, after meeting Pakistani President Pervez Musharraf, used his summit speech to reiterate New Delhi's charge that Pakistan is sponsoring terrorism in Kashmir, a charge Islamabad denies. "For several years, India has faced cross-border terrorism directed against its unity and territorial integrity," said Mr. Singh. "We shall never succumb to or compromise with terror, in Jammu and Kashmir or elsewhere."

At a news conference, President Musharraf declined to criticize his Indian counterpart's comments. He said the two sides disagree about who are terrorists and who are freedom fighters. "On one side the Indian position is there, of cross border terrorism, which we call freedom struggle," said Mr. Musharraf. "I don't want to get involved in definition, because this is too complicated, and unnecessarily creates misunderstandings. Any violence against civilians is terrorism."

Russian and Chinese leaders both used summit speeches Thursday to urge the United Nations to take the lead in the fight against terrorism. President Hu Jintao called for a new global security mechanism. "We must cultivate a new security concept featuring mutual trust, mutual benefit, equality and cooperation," said Mr. Hu. "The United Nations, as the core of the collective security mechanism, must play an enhanced rather than a weakened role in this regard."

In other summit developments, Israel's foreign minister met with his counterparts from Muslim nations Qatar and Indonesia. A day earlier, Israeli Prime Minister Ariel Sharon shook hands with Pakistan's President Musharraf. Also, a U.N. treaty empowering countries to prosecute officials accused of stealing public funds received enough signatures to go into force.

Venezuela's President Hugo Chavez received the biggest round of applause in the assembly hall Thursday when he scolded the United States. The populist South American leader called the U.N. reform plan set for approval Friday "illegal", and suggested that the United Nations should move out of New York to protest the war in Iraq. He said a better location for the world body might be Jerusalem.

The Millionaire Next Door Used vehicle-prone shoppers are unique even among their millionaire cohorts.

FRUGALITY TRANSLATES INTO WEALTH

Being frugal is a major reason members of the used vehicle-prone group are wealthy. Being frugal provides them with a dollar base to invest. In fact, they invest a significantly larger portion of their annual income than do any of the other types of vehicle buyers. This also applies to their contributions to pension/annuity programs. As you may have already predicted, the used vehicle-prone shopper group also contains the highest percentage of prodigious accumulators of wealth. This group is significantly more likely to agree with this statement:

Our household operates on a fairly well-thought-out annual budget.

To budget properly, one must keep records of disbursements. Here again, the used vehicle-prone shopper is more fastidious than any of the other types. More of them agree that:

I know how much our family spends each year for food, clothing, and shelter.

Jack Welch --- Straight From the Gut

Your Back Room Is Somebody Else's Front Room

Peter Drucker gets credit for this one. We practiced it.

Don't own a cafeteria: Let a food company do it. Don't run a print shop: Let a printing company do that. It's understanding where your real value added is and putting your best people and resources behind that.

Back rooms by definition will never be able to attract your best. We converted ours into someone else's front room and insisted on getting their best.

Speed

At Crotonville, a frequent complaint even in my final days as CEO is that we weren't fast enough. I learned in a hundred ways that I rarely regretted acting but often regretted not acting fast enough. I could scarcely remember a time when I said, "I wish I'd taken six more months to study something before making a decision."

I think acting decisively on people, plants, and investments was one of the reasons I got out of the pile very early at GE. Yet 40 years later when I retired, one of my great regrets was that I didn't act fast enough on many occasions. When I asked myself, How many times should I have held off on a decision? versus How many times do I wish I'd made that move faster?, I inevitably found that the latter won almost every time.

Execution--The Discipline of Getting Things Done LEADERS GET THE BEHAVIOR

THEY EXHIBIT AND TOLERATE

WHY THE RIGHT PEOPLE

AREN'T IN THE RIGHT JOBS

They Get Things Done Through Others

LARRY: I think I've got a good record of hiring people, but I've made my mistakes. For example, we hired a man I'll call Jim as a vice president in a staff advisory role. We were all extremely impressed with him. He was smart, articulate, and extremely appealing in the way he worked with his superiors. After a year, we put him in charge of a major business unit. But a year later the unit was in trouble. He didn't get new products launched in time, he was losing market share, and productivity was dropping.

When we appraised his performance, we discovered that the people who worked for him couldn't stand him. He was abrasive--"almost a drill sergeant," in words of one executive who worked with him. He didn't include others in decision making. Over time a wide gap grew between him and his people, to the point where he could no longer lead them. We had to remove him, and it took his successor a year to get the unit back on track.

The Buffettology 巴菲特原则 If the company has the economics of a business with a durable competitive advantage but you don't understand the business itself, get on the Internet and see if you can find any information on the company or the industry that it is in. Often you can find a magazine article or a book on the company. These are excellent sources of information, which Warren constantly makes use of.

Thumb through a copy of Value Line and list all the companies that show consistently high returns on equity and on total capital, and that have strong earnings that show an upward trend. Then make a list of the products they sell and visit retailers where they are sold. Talk to a salesclerk who sells the product every day and find out whether it is number one or two in its field. You don't want to throw your money behind number three or four. What you are looking for is a brand-name product that has been on the market for years and hasn't changed at all. If you remember your parents using it, eating it, drinking it, smoking it, or doing some-thing else with it, it is usually a good sign. Brand-name product longevity equates to durability, and durability is the name of the game. If you don't understand the product, ask someone who does. Go ask a pharmacist about drugs and the companies that manufacture them--a car mechanic about automobile products, a computer salesman about computers, a salesclerk in a grocery store about food products. These are the people who can tell you the history of the product and whether it sold well in the past and continues to sell well today.

　

Take on the street (较量华尔街) Order-Handling Rules: The Big Bang

Separately, we dealt with the price quotation flaws and the two-tiered market with a new rulebook, issued in late 1996, called order-handling rules. We didn't realize it at the time, but these rules would trigger a big bang in the Nasdaq market, and eventually the NYSE.

The order-handling rules require that market-makers display—on Nasdaq or any other market center, such as an ECN--any limit order (an order that specifies a price) that improves their buy or sell quote. This stopped market-makers from hiding limit orders from the rest of the market to keep spreads wide. A second requirement forces ECNs, such as Instinet, also to publish their quotes. This eliminated two tiered markets--a superior one for institutions and an inferior one for retail customers

Anatomy of greed (解剖贪婪--安然内幕) was substantially linked to LJM2; the crushing earnings restatement in mid-November 2001 was tied to LJMI and Chew co (another partnership, run by Michael Copper). The half-dozen Enron employees who participated in the LJMS and Chew co made significant amounts of money from the deals, including Fastow making at least $30 million and Copper making at least $ 10 million. The accounting rules were stretched and broken, the broken, the details of the partnerships were misrepresented to the board, the hedges were not really hedges (the third party was just an Enron party), and the transactions were designed to improve the results shown on Enron's financial statements.

Professional Assertiveness (以下斜体字部分为测试题及答案) The second guideline is knowing how to say no to others as you provide constructive feedback. You can whisper no in a passive way and you’ll probably not be taken seriously by others. You can shout “No!” in an aggressive manner as you pound your desk, and you’ll undoubtedly get your point across. But the best approach is to just say no in an assertive manner that is responsible and firm, and you’ll be understood clearly without offending co-workers or employees. Click on the images below for more information. To close each pop-up box, just click on it again. Avoid being passive. Say no and expect others to believe you mean it. Be assertive by saying no in a calm but firm manner. People will respect you for taking a clear stand, especially if you justify or explain your negative response in a reasonable way. You can say the same word—no—and achieve widely different responses from people, depending on how you deliver the message. To get a positive, respectful response, just say no in an assertive manner. Don’t be overly aggressive and expect others to be enthusiastic about working with you. You’ll find that saying no in an assertive way will strike a much better chord than an aggressive style.

[此贴子已经被作者于2005-10-2 11:15:31编辑过]

sunyuting1

Interview: PIMCO, world's largest bond fund manager >> fed policymakers raised interest rates for the 11th time, already traders talking about the next meeting that comes our way november 1. let’s get perspective from bill gross, chief investment officer at pimco, world’s largest bond fund manager. he’s joining us right now from his office in newport beach, california. good to see you. >> thank you. nice to be here. >> traders already boosting their bets for additional rate hikes. do you think that’s the right call? >> i think as additional evidence on the economy, it probably is. the fed kept the key words “measured” and “accommodative” within the text of their statement and to that extent, took us back to pre-katrina types of levels in which the market was assuming the fed marched upwards until something happened. i still think it’s important and i think the fed will continue to think it’s important that what happens over the next few weeks and months in terms of economic growth is critical to whether or not they continue to march upwards and it’s there, i guess, that i differ from many market participants and suggest that the fed stops at 4 as opposed to moving higher. >> you’ve been at that forecast, i believe, since july. what would it take for you to change that forecast that the fed will end the year at 4%? >> well, it would take—a pretty decent snap-back in terms of confidence, economic growth, slightly higher inflation numbers from the standpoint of the core and obviously recognition through statements and speeches on the part of fed governors and perhaps greenspan himself that this was the expectation into 2006. i think the fed is really searching for this neutral interest rate. they’re not searching for a rate that’s restrictive. they don’t want to shut the economy down. they recognize it’s highly levered and dependent to a considerable extent on the housing wealth so they’re searching for the magic bean like jack and the beanstalk and that’s why they’ve moved in 25-point steps the last 11 times. that’s the critical determinant, is 4% enough or do we have to go to 4.25 to slow things down magically? i think it’s 4%. >> tell us what you did today? >> not much today. as a matter of fact, anticipating the statement and the hike, you know, i myself portfolio sold five-year’s but it ended the day where i sold them. i would expect over the next few days and weeks, dependent, of course, upon where the economy shakes out and confidence numbers and how quickly consumers can adapt to this $3-a-gallon level, that the curve in terms of the short rate relative to longer dated treasuries, 5’s and 10’s, would continue to steepen slightly and so that’s where my bet continues to be on the front end as opposed to the back end of the curve. >> digging in a little bit more, you had been buying the two-year to five-year treasuries and today you said you sold that billion of the five-year so where specifically is the best place to be if the fed will raise to 4%? >> i think, strangely enough, that’s where it is. sometimes we—portfolio managers have this sense that we can do a quick trade. that’s typically not pimco’s style. but it was an important day and in a sense that this is probably what would transpire so there was a sale of some five-year’s but i expect to be back into those five-year’s and in a billion, five-year’s, short of a billion five-year’s, not to sound egotistical, it’s a drop in the bucket so it was a minor glitch in terms of our overall strategy which continues to recommend two’s, three’s and five’s. >> what’s the effect for your strategy of the katrina stimulus coming down the pike? >> we’ll have to wait and see. i’d be the first to admit that not everything falls neatly in line with “your strategy” or “my strategy” and to the extent that katrina promotes $200 billion in additional spending, that promotes inflation higher than it would have been otherwise so we’re mindful of that. we want to see some measured spending, admitting that that area needs lots of money but we don’t want the federal golf simply write a blank check. having said that, it’s important to monitor its progress and to i guess most of all monitor its impact in terms of inflation going forward. >> and very briefly, we just have 30 seconds here, you have said you want ben bernanke to be alan greenspan’s replacement. why is that? >> well, i think he’s a highly respected, in some ways politically savvy individual that has proved during the periods of time such as our deflationary scare of a few years ago, that he can respond both with intellect and with deed. if the response is required. it’s not that i don’t like any other candidates it’s just that this one provides some very visible evidence that he can do the job going forward. >> bill, thanks so much. bill gross of pimco. after the break, we’ll return.

Market briefing -- Ellen (slow) Fed --- Allan (slow) Goldman Sachs --- Bob (fast) NYSE -- Deb (fast) 3.75%, signaling they may continue to raise rates. the fed says the u.s. economy faces a near-term setback in employment, spending and production after hurricane katrina. allan dodds frank will join us in a moment for details. first, let’s check market reaction today. stocks down across the board -- there was concern among investors that higher rates and near record energy prices will restrain consumer spending. the 10-year treasury ending little changed, sending yields up. on the shorter end of the yield curve, that’s where the focus will be and yields moving up on the shorter end of the curve as the fed reiterated rates will likely continue to move up at a measured pace because of the threat of inflation. you had yields on futures contracts surging in a sign traders expect more increases than previously anticipated. as for currencies, not changed right now but in trading today, the dollar up against the yen and euro after that fed announcement. as for gold today -- we’ll get reaction to the fed rate decision from bill gross, chief investment officer at pimco. david seiders is chief economist with the national association of homebuilders of the. tom keene as “chart of the day” and bloomberg contributor gene sperling, speaking with them about what to expect from the fed in coming months. stocks and treasuries falling after the fed raised rates that quarter point. it was the first meeting since katrina. the fed’s action comes even though there is little hard data about that hurricane’s effect on the economy. let’s get more, now, from allan dodds frank. >> raising the fed funds rate a quarter point, the federal reserve said it can stay on the measured path to keep inflation in check. fed chairman alan greenspan and colleagues said that while hurricane katrina hurt the economy in the short term, the impact does not pose a long-term threat. >> i think what’s significant is that the fed felt the u.s. economy was in good enough shape that it could tolerate yet another increase in short-term interest rates and i would go beyond that. this is a federal reserve that has also been paying keen attention not just to the u.s. domestic economy but to the global economy and what we’ve seen over the last few months has been an improvement. >> cohen predicts the fed will continue to raise interest rates. the fed called the widespread devastation in the gulf region and boost in energy prices unfortunate developments which it says has increased uncertainty about near-term economic performance. the committee continued it is their view they do not pose a more persistent threat. the 9-1 vote to raise rates comforted some. >> treasury markets feared the fed would do nothing. inflation continues to be the demon that affects the bond market . as long as the fed is active fighting inflation, there is calm there. >> i think we’ve all been saying for the last week or two that this is probably the first meeting in a year where there’s been this much room for dissent and it would actually be surprising if that many highly opinionated and inform people did all agree and come out in the same place. >> the fed, acknowledging trouble spots, tried to add comfort to the longer range forecast. higher energy and other costs have the potential, the committee said, to add inflation pressures, however, core inflation has been relatively low in recent months and longer term expectations are contained. abby joseph cohen says as the fed continues to raise interest rates, stocks will do better than bonds since the outlook for corporate profits is so good. >> speaking of corporate profits, let’s talk about a record number reported today, that was goldman sachs. profit up 84% from the same period last year. again, it was a record. bob bowden joins us now with all the details. bob? >> thank you. goldman sachs managed to deliver blowout numbers, the headline figure powered the stock to a five-year high intraday before know finishing lower. the headline earnings were nearly double the $1.74 from last year’s fiscal third quarter and the $3.25 easily beat analysts’ estimates. for comparisons, goldman’s 84% increase in fiscal third-quarter profits larger than lehman’s 74% profit increase and bear stearns’s 34%. breaking down revenue by unit, financial advisory revenue up 24%, underwriting up 4% led by investment grade debt issuance, equity trading revenue up 75% because of “strong customer driven activity and generally higher equity prices.” fixed income currency and commodities trading up 41% and asset management revenue rose 23%. steve rukous of mate rick asset advisers says the fixed income market is heavy. >> the fixed income market continues to stay booming for everyone. the market has doubled within the last six years and that is one of the things people feared, as interest rates went up, they couldn’t make money but the size of the market has gone to $24 trillion. >> you see the intraday chart, goldman sachs shares hit the five-year intraday high. before falling lower, down 23% by the close of trading, down .2%. other investment bank stocks, mixed picture with merrill lynch up 1% and bear stearns down .8%. merrill lynch reports october 11. morgan stanley reports earnings tomorrow. and one other note, the 12-member amex broker/dealer index hit an all-time high, you see there, there’s the index there, up 34% in the last five years but intraday, 12-member index hitting an all-time high. >> and as bob mentioned, goldman sachs up much of the day, ending lower. really echoing what we saw in the broader market with indexes higher after the fed meetings, the index turned around and closed near the lows of the day. we’ll get details from deborah kostroun. >> stocks saw a major turnaround after the fed raising interest rates once again. some of the things the fed said that many traders are talking about, that, that higher energy and other costs have potential to add to inflation pressures and also the fact that the fed signaling that more interest rate increases are down the road. what we did see for the dow, biggest two-day slide since june 24. and consumer discretionary stocks hit the hardest. if you look at the bloomberg home building index over the past week, we have seen this index lower. what we saw even after that decision today, homebuilders, once again, sharply lower, erasing earlier gains that we did see. also, retail stocks. they actually saw some pretty big declines as a lot of concern about what near-record energy prices will do and could restrain consumer spending. federated, a different story there. they said they will sell their david’s bridal stores and convert 62 marshall field’s locations into macy’s and cut as many as 6,200 jobs after buying may department stores. oil-related stocks, exxon-mobil hit a record high and retreating. some of the energy stocks lower, some higher on the day even though crude oil actually lower. delphi falling to a record low amid concerns the company will not receive financial aid from former parent, general motors. that company may have to file for bankruptcy. delphi stock has been climbing in recent months as investors speculated g.m. would bailout the company in the same way ford agreed to help its former parts unit, visteon. steel stocks, they were sharply lower for the most part. that after u.s. steel saying their third-quarter profit will be less than average analyst estimates. maybe because of increasing natural gas costs which surged after hurricane katrina. i’m deborah kostroun at the new york stock exchange for bloomberg news. >> david radler, former chief operating officer of hollinger international pleaded guilty to a federal fraud charge today, agreeing to cooperate with a probe of conrad black. prosecutors will recommend radler serve 29 months in jail and pay a fine of $250,000 for his role in the $32 million fraud. he will be free on bond until all proceedings in the case are concluded. in the meantime, glaxosmithkline paid more than $150 million to settle u.s. allegations it overcharged government health programs. the company had been accused of inflating prices for two cancer drugs. the case was the first brought at the whistleblower suit by a florida pharmacy. when we return, we’ll focus on the meeting of the federal reserve, what it means for the bond market and speak with bill gross, chief investment officer at pimco. keep it here

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[upload=zip]down5924.asp?ID=44236[/upload] Focus: Stocks couldn't rally off of the results at earnings season >> 2/3 of the 475 companies in the s&p out with results have beaten analysts’ estimates. we want to bring you to the bloomberg terminal to look at a 12-year chart of the actual quarterly earnings for the s&p 500, charted in white, compared to the actual s&p 500 seen in red. you can see the correlation between earnings and stock prices. here you see earnings falling from their previous peak in 2000. this is right here. this is the decline right here. dragging down stocks, the line in red. stronger earnings over the past three years have fueled the s&p. that’s that up trend you see right here. here you go, is the s&p 500. note how it’s basically leveled off. note, too, that earnings have climbed to a peak, that is the white line at the end of the chart. so a question for investors has become, why the s&p 500 has not rallied given the strong first-quarter results. let’s get the perspective right now of lincoln anderson, chief investment officer of l.p.l. financial services, joining us from our boston bureau in lincoln. pleasure to have you on. looking at earnings season, it seemed to confound investors that stocks couldn’t rally off of the results. why was that? >> i think there is irrational pessimism in equity and credit markets that people are looking away from the fundamentals which is low interest rates and strong earnings through the first quarter. >> does that mean the rally this week was not a surprise to you? >> not at all. i was one of the people who’s been scratching their heads wondering why stocks weren’t moving higher following these strong earnings announcements. >> so, then, why do you think that rally sputtered today? >> it comes in fits and starts. you know, some bad news comes into the market on a few companies’ earnings disappointments. bear in mind we had about 80% of companies met or exceeded earnings estimates in the first quarter but most people were focused on the 19% that missed. >> and in terms of that pessimism you talked about that perhaps is overextended, what do you think, then, it would take to erase that pessimism because another factor is oil prices, well off the record highs of april, but also not enough of a catalyst. >> i think it will take sustained continued progress until people decide that the positive news is a trend and the negative news are little fits and starts that just don’t ever turn into a sustained negative trend. i mean, it’s—we had that soft patch a month ago and then it went away and we returned to strong economic numbers and i think that will translate into a rising earnings estimates for the second quarter and we’ll just go along that way. >> one thing we heard a lot of talk of this week during the rally was the importance of technology shares, they really need to be there and perhaps leading the rally for the rally to stick. is that how you see it? >> i think some of the beat-down sectors need to participate here. healthcare already has been and that’s one that was certainly a catalyst, i think, to this advance. and i think technology should follow. we just have to get over the hurdle of lack of pricing power in technology. the spending numbers are there. there has been heavy spending in technology, but there’s still a lot of price competition. >> the companies in tact where we’ve heard negative news such as i.b.m., is that an anomaly? >> not an anomaly but that sector is finally getting sorted out so you’ll see winners and losers and misses as you get sorted out and then it will hit on all cylinders and we’ll see more steady upward progress and fewer anomalies. >> we have listed on the screen a moment ago that you like the industrial stocks. why is that and what specifically? >> in terms of industrials, what i like about industrials, again, it’s an area that got—had relative underperformance due to people worrying we were in to a cyclical slowdown, the soft patch piece. and also we have such strong capital spending numbers right now that i think we’ll be sustained through the year and can drive that sector higher. >> any specific stock that highlights this? >> i’m not a stock analyst. >> you do like junk bonds. what role do you think they’re playing in a portfolio right now? >> right now they’re playing a big negative role. the junk bond market is one of those areas where we have a lot of pessimism, as i mentioned. in credit markets , a serious spread widening over the last month or so. at first, initially due to the g.m. problems but it’s kept right on going so at this point i’m liking junk just because we have now moved from spreads being super tight to spreads being wide but, boy, it’s a hard way to get there. >> overall, what kind of gains are you looking for for the s&p this year? >> i think earnings will be up over the year about 15% and i don’t see any reason why p.e.’s should go down so the s&p should be up somewhere in the 10% to 15% range to keep the p.e. stable at around 16. >> lincoln earnings cious -- thanks for joining us. >> my pleasure. >> lincoln anderson out of boston from l.p.l. financial services. when we return, microsoft has just 10 days to make major changes. su keenan will join us with those details.

Market briefing --- Ellen (slow) NYSE --- Deb (fast) Nasdaq --- Robert (slow) AIG -- Allan (slow)

deborah kostroun is at the big board with more on what held stocks back today. >> the dow jones industrial average and the s&p 500 might have been lower in friday’s session but they had a really tremendous week. the s&p 500 up 3.1%. the dow up 3.3%. take a look at the gainers in the s&p 500 for the week. we saw the auto industry, it was the best performer throughout the week. retail, second best performer throughout the week and also consumer durables, many of the homebuilders putting in a strong performance. if you look at the auto industry and some of the stocks related to that, visteon, the money-losing auto parts supplier spun off from ford in 2000, they rallied for a second day on friday. the second largest gain in the s&p 500 -- laggards for the week, even though these were laggards, they were still up for the week. all 24 industry groups in the s&p 500 were higher. if you look at energy, crude oil down 3.8% this week. crude oil falling and closing on friday at a three-month low of $46.80 after opec’s president said that the group will keep production levels near their record levels to meet global demand regardless of whether it causes crude prices to decline further. now, in friday’s session, even though retailers, one of the best performers throughout the week, one of the worst performers in friday’s session because gap said sales fell for the first quarter in three years. comparable sore sales—store sales fell in all of the company’s divisions. we also had prudential downgrading federated and abercrombie & fitch so those stocks on the lower side. i’m deborah kostroun at the new york stock exchange. >> over at the nasdaq, the nasdaq had its biggest weekly gain since august. robert gray has details. >> the nasdaq composite finishing higher on friday, the only of the three major averages to do so, finishing higher for the sixth straight day, the longest streak since november and best weekly gain on the nasdaq composite index since last august. the nasdaq has rallied more than 7% in the past three weeks since closing at its 2005 lows on april 28. head of trading at p.n.c. capital markets telling me that given the action in the last week, people didn’t want to go into the weekend short. the shorts are at risk, he says, the tone changing more bullish this week. he says as far as next week’s trading goes, the fed minutes will move the market , and he’s most focused on the consumer sentiment reading from the university of michigan due out next friday and there’s a strong possibility of a summer rally and the consumer sentiment index an important gauge of that for him. the rally over the past week, transports leading the gains as crude oil falling to a three-month low on the nymex. 6.5%-plus gains for the transports. also financials and computer-related shares gaining, as well. the semiconductors, one of the best performing groups over the past week continuing their gains that they’ve had basically over the past month. the s.o.x. rising for an eighth straight day. intel shares rising for an an eighth straight day on friday. google rising to a record as they lost a customized home page. there was weakness in retail. looking at sharper image, j.p. morgan cutting it to underweight from neutral as they forecast a wider loss than the average estimate.%  also, weakness in teen retailers, prudential downgrading the group from underweight to neutral. american eagle outfitters and pacific sunwear falling in friday’s session. at the nasdaq, i’m robert gray. a new york state grand jury investigating possible criminal conduct at the insurance giant a.i.g., according to people familiar with the situation. allan dodds frank joins us with details. >> the grand jury is taking testimony from insurance industry witnesses as they listen to—as they are questioned by prosecutors from the new york attorney general eliot spitzer’s office about possible misconduct at a.i.g. the attorney general declined to comment on the grand jury, which, by law, is conducted in secret. spitzer has said his investigation is focused on offshore reinsurance transactions that a.i.g. executives may have used to boost the company’s net worth. people familiar with the investigation say a.i.g. senior vice president testified in exchange for immunit from possible criminal charges that could arise from the grand jury. former prosecutor john moskow says he has no information from inside the a.i.g. grand jury although he says, if it is sitting, its existence is significant. >> part of an investigation. then you are seeking to obtain an indictment. or checking to see whether you should obtain an indictment but in any event, the question is, should you bring criminal charges? if not, should you bring civil charges or should you bring criminal charges. that’s what you learn in a grand jury investigation.%  >> on may 1, a.i.g. said some reinsurance deals may have to be reclassified as loans and could cause the company to restate earnings by $2.7 billion over the last five years. so far, former a.i.g. chairman and c.e.o. maurice hank greenberg has been forced out of the company and three other top executives have been fired for refusing to cooperate with investigators. the new york attorney general does not expect to prosecute the company which is cooperating with investigators from his office and the u.s. securities and exchange commission. spitzer also said he could pursue possible criminal charges against individuals from a.i.g. and other insurance companies caught up in the investigation. a.i.g. disclosed on valentine’s day it received subpoenas from spitzer and the a.i.g., since then the stock has declined more than 25%. a.i.g. may file its delayed annual report for last year by the end of the month. >> thanks so much. turning our attention right now to the currency market . the dollar traded higher today, sending it to a seven-month high against the euro. the gains came on concerns that economic growth in europe, also on speculation the three-year bear market for the dollar may be over. as for treasuries, prices were little changed today. the yield on the 10-year at $4.12%. for the five-year, that yield at 3.87% and two-year, note that it recorded its fourth weekly price decline in the past five weeks coming on speculation the federal reserve will continue to raise interest rates. and speaking of the fed, fed chairman alan greenspan said some regions of the u.s. housing market are showing signs of unsustainable speculation and trough based on fast turnover of existing homes. >> the big price surge will soon simmer down and because of the heterogeneity of the market and inability to get a major reduction in price in this country, we don’t perceive it as a serious macro economic issue. >> greenspan also offered a warning that energy choices americans make will have a major effect on the economy. he was speaking to the new york economic club today. he said energy prices should fall some, noting the rise in oil as well as gas inventories. long-term, however, the choices the u.s. makes now, he says, will affect the economy for a language time to come. >> of critical importance will be the extent of the light vehicles on u.s. highways which consume 11% of total world production become more fuel efficient as vehicle buyers choose the lower fuel costs of lighter or hybrid vehicles. >> one problem the chairman anticipates is that much of the untapped oil and gas in the world is in countries hostile to the u.s. or that prohibit foreign investment. >> unless those policies and political institutions and attitudes change, a greater proportion of the cash flow of producing countries will be needed for oil reinvestment to ensure that capacity keeps up with projected world demand. >> he says fear that won’t happen is a major reason oil future prices are so high today. taking a break, then stocks failed to get a lift from first-quarter earnings results. will that affect investors in coming weeks? keep it here.

sunyuting1

China Studies Possible Readjustment of Currency

Chinese officials have brushed off pressure from the United States and Europe to change its currency regime and to slow the rapid expansion of its textile exports.

Chinese Commerce Minister Bo Xilai, speaking at a gathering of business people in Beijing Wednesday, called the U.S. and European Union positions unfair.

He said they were taking protectionist actions against China instead of resolving problems in their own economies.

Chinese banking officials on Wednesday also lashed out at news that the U.S. Treasury Department warned that China could be labeled a manipulative trading partner unless it took steps toward scrapping its currency peg. The officials repeated that China plans to reform the currency at a slow pace that does not damage the country's fragile banking system.

The United States and the European Union for the past few years have pushed China to remove or relax its currency peg of about 8.2 yuan to the dollar. U.S. politicians say the peg makes Chinese products artificially cheap, hurting American manufacturers and costing thousands of U.S. jobs.

However, Paul Coughlin, managing director for Asia at the Standard and Poors financial ratings agency, says an artificially cheap yuan can also hurt China in part because it threatens trade relations with the United States.

"The Chinese acknowledge they need to change," he said. "I think where there isn't a consensus, either within China or between China and America, is really what exactly should happen (or) what the extent of the change should be."

Mr. Coughlin and other analysts say China may choose an option that would only modestly adjust the exchange rate, such as pegging the yuan to a basket of currencies.

Prime Minister Wen Jiabao on Monday said currency reform is a matter of sovereignty and he said China would not bow to foreign pressure to change the decade-old peg.

China is also fighting pressure from the United States and the European Union over its textile exports, which have surged since the lifting of worldwide quotas on January 1.

The Bush administration has announced limits on some items entering the United States. EU officials this week have complained that Chinese textile imports have hurt EU manufacturers, and suggested containment measures might be considered.

Jack Welch --- Straight From the Gut Mixing NBC with

Light Bulbs

Grant was tired of commuting between New York and California and told me the day of the acquisition that he was not going to stay. Grant thought he had a leadership team in place that would keep NBC on top. He assured me everyone, including Brandon, was on board.

Fortunately, I had an old friend in Don Ohlmeyer, an independent TV producer, whom I had known from his association with Ross Johnson of Nabisco. We had played golf in the Nabisco/Dinah Shore Open. As a favor, Don called to tell me that Brandon was getting itchy.

At the age of 30, Brandon had been the youngest president of entertainment at a major network. He played a big role in NBC's hits, including L.A. Law, Miami Vice, Cheers, The Cosby Show, Family Ties, and Seinfeld.

I didn't want to lose him.

I called and asked Brandon to meet me for dinner at Primavera in New York on May 12. We really hit it off. He was a base-ball nut like I am. I assured him things would be better than anything he had seen in the past. A month later, he signed a new four-year contract. Having Brandon heading up our entertainment team gave me confidence that GE could succeed in the net- work business.

Execution--The Discipline of Getting Things Done LARRY: For the plan that the product's business unit manager prepared, the assumptions we agreed on showed revenue growth in the high teens for the South American and Asian markets. The plan then projected revenue and operating margins for each region, and the key initiatives that would support such growth. For example, in the Asian market we planned to support customers in dealing with that region's growing environmental concern. We also had a program to develop new customers in China and to promote sales of high tech globally, using China as a low-cost supply base.

Another program involved the independent after-market--manufacturers who supply replacement equipment--which we analyzed as a profitable segment with significant growth opportunity. The initiative centered on the following key issues:

Fixing delivery and improving product availability.

Implementing weekly performance reviews to drive tactical action planning.

Implementing lead times with customers' and distributors' stocking strategies.

Common Sense on Mutual Funds

ON INVESTMENT

RELATIVISM

HAPPINESS OR MISERY?

Too many mutual fund portfolio managers and shareholders now seem to operate in a system representing a new form of Micawber's formula: Market return, 17.8 percent, my return, 18.3; result happiness. Market return, 17.8 percent, my return, 13.2; result misery.

That last set of returns, in fact, describes the shortfall of the average domestic equity mutual fund compared to the stock market (as measured by the S& 500 Index) over the past 15 years: 17.8 percent versus 13.2 percent. The 4.6 percentage point gap suggests why most equity fund managers are likely to be feeling considerable professional misery--albeit, perversely, along with stunning personal financial gain--as the 1990s end. While, given the great bull market, most fund investors have hardly felt much financial misery, it seems only a matter of time until they recognize not what was, but what might have been.

Rich dad, poor dad This was a simple example of how money is invented, created and protected using financial intelligence.

Ask yourself how long it would take to save $190,000. Would the bank pay you 10 percent interest on your money? And the note is good for 30 years. I hope they never pay me the $190,000. I have to pay a tax if they pay me the principle, and besides, $19,000 paid over 30 years is a little over $500,000 in income.

The math is simple. You do not need algebra or calculus. I don't write much because the escrow company handles the legal transaction and the servicing of the payments. I have no roofs to fix or toilets to unplug because the owners do that. It's their house. Occasionally someone does not pay. And that is wonderful because there are late fees, or they move out and the property is sold again. The court system handles that.

The Buffettology With a price-competitive business the cost of production may increase with inflation while the price it can charge for its product decreases--a miserable situation to be in.

THE DURABLE COMPETITIVE ADVANTAGE AND INFLATION

For Warren, a business with a durable competitive advantage is free to increase the prices of its products right along with inflation, without experiencing a decline in demand. That way its profits remain fat, no matter how inflated the economy gets. H&R Block, Nike, Coca-Cola, Hershey's, Mattel, and Allstate all have increased the prices of their products with inflation without experiencing a decline in demand. Yet the most interesting aspect of the durable competitive advantage and inflation is that this increase in product price has also caused an increase in earnings, which has led to an increase in the underlying value of the business. Let me explain.

Take on the street

Keep this onslaught of new information in perspective. Just because you can trade like the pros on the basis of what you hear in a Webcast or conference call, it doesn't mean you should. Impulsive trading on the basis of a single quarter's results is the mark of a day trader, and not a long-term investor.

As the fight over Reg FD drew to a close in the summer of 2000, the battle lines were already being drawn for the next showdown: restoring the credibility of company financial statements. As tough as it was, the battle over Reg FD would be a mere skirmish compared to the war of the numbers game, the manipulation of financial statements.

Anatomy of greed And other makeshift signs were posted on high-story windows to warn people: "This is not an exit.” Again, the elevators and ETV were delivering the usual pro-Enron propaganda, but the attitude of the people inside the elevators was drastically different, where on day somebody flipped Ken Lay a middle finger. Late in November, Liz Perry and I decided to take a morning breakfast break. It was around 9:00 A.M. As we were walking off the trading floor, Liz asked, “So… where do you want to go? Energizer?” “NO ENERGIZER. I’ve got to get out of this building. Someplace far away from here.” I needed some air.

Communicate for Results People have been talking about setting up a company carpool for as long as Carol can remember. But in three years, nothing as been done, and the situation is getting worse. Carol is determined to rectify this, and believes that the best method would be to motivate senior executives into direct action. She asks to speak at the next management meeting. Click on the five steps, starting with step one, to see what she has to say. Click again to close each text box. ”Let’s be proactive. By the end of this meeting, let’s make some decisions about how this can be organized.” ”imagine how happy and relaxed our staff will be, taking it in turns to drive, and then pulling into the parking lot and straight into a designated space—all in under five minutes.” ”A coherent carpool plan would reduce this monumental waste of time and effort.” ”Staff are starting the working day already irritable and tired. This situation needs to end.” ”Every working day, at least 100 hours of our employees’ time is wasted by staff sitting in traffic. Then they have to circle our building to look for parking, wasting more time.” Carol used motivated sequence to precipitate action and change. First, she got the listeners’ attention by giving some pretty surprising statistics, and then she proceeded to explain what was needed to rectify this negative situation. She then asked them to imagine the same scene, once the required change had been implemented, and then urged them to take immediate action

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sunyuting1

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