Ad revenues in the newspaper industry plunged 16.7% last year to $37.8 million r, according to the Newspaper Association of America (NAA). The 2009 take is estimated to fall another 17.3% to $31.6 billion according to Alan Mutter, a Silicon Valley executive who once lead the newsrooms of the Chicago Sun-Times and San Francisco Chronicle and now writes a blog titled “Reflections of a Newsosaur.”

Mutter’s estimate would put ad revenues at their lowest levels since 1965, when the industry took in $4.42 billion, or $30.22 billion when adjusted for inflation, the Columbia Journalism Review (CJR) reported.

While the worst economic downturn since World War II has eviscerated the fortunes of print media companies like The New York Times Co. (NYSE: NYT), The Washington Post Co. (NYSE: WPO) and Gannett Co. Inc. (NYSE: GCI), publishers will see secular decline in revenue even after the financial crisis subsides.

“Think, for instance, the classified ads business of newspapers, which has been walloped by eBay and craigslist (with a final indignity provided by the cyclical collapse of the housing bubble),” the CJR said. “Most of those revenues aren’t coming back. That’s a secular decline.”

The result of this decline means a “new reality” for publishers as they transition from the printed page to digital content. All the major publishers are online and have been for some time.

The New York Times’ Web site began in 1995, when the Internet was just starting to enter consumers’ homes. Ten years later in 2005, The Timestried its hand at a subscription-based model for its Web site, known as TimesSelect, a service that charged readers without subscriptions $50 a year for online access to editorial content.

According to The Times Co., TimesSelect had about 227,000 paying subscribers by August 2007. However, accessing the content for free were an additional 471,200 home delivery readers, as well as another 89,200 college students.

But the estimated 13 million readers who accessed the site that month, according to Nielsen/NetRatings reports, dwarfed those subscriber-users. The following month, the Times Co. gave up on TimesSelect and made the Web site free for all users in September 2007.

Since then, nytimes.com has soared to become the most visited newspaper site in the United States, with roughly 20 million unique visitors per month as of March. But The Times and other publishers are still trying to figure out how to generate revenue and turn a profit, especially now that the recession is cutting into advertisers’ budgets.

“As we continue our transition from a company focused primarily on print to one that is increasingly digital in focus and multiplatform delivery, online advertising revenues are a more important part of our mix,” said The Times Co. President and Chief Executive Officer Janet Robinson. “They made up 21% of our ad revenues in the quarter, up from 18% in the same period a year ago.”

Print and online ad revenue for U.S. newspaper publishers fell 29% in the second quarter from $9.6 billion to $6.82 billion, according to the NAA. Part of this stems from a cyclical decline in spending, while the rest comes from the “new reality” that people aren’t reading as many printed newspapers as they used to.

“This data represents a rearview mirror perspective on what we all know was a terrible stretch of bad road,” said NAA Chief Executive Officer John Sturm.

And the data comes even as online news audiences are growing: The latest data from the NAA shows online newspaper readership was 73.3 million users in the first quarter, a 10.5% increase from the 66.4 million the year before.

A Financial Fork in the Road

Publishers are hoping the decline in online ad spending is cyclical, but some aren’t waiting for the recovery to take advantage of the growing information-hungry audience and what they hope is an inevitable upswing in ad revenue.

News Corp. (Nasdaq: NWS) Chairman and CEO Rupert Murdoch has vowed to charge for all of the online content of his newspapers and television news channels, including The Wall Street Journal, the New York Post and Fox News.

Much of the content on The Journal’s Web site is available only through a paid subscription of $1.99 per week, and is one of the few newspapers to successfully charge for its content, in spite of a backdoor to view articles for free via Google Inc.’s (Nasdaq: GOOG) popular search engine.

“If successful, we’ll be followed by all media,” Murdoch told the Financial Times.

Murdock predicts “significant revenues” from charging for differentiated news online.

But differentiated news isn’t enough for people to pay for it, according to Google CEO Eric Schmidt.

“In general these models have not worked for general public consumption because there are enough free sources that the marginal value of paying is not justified based on the incremental value of quantity,” he said to a group of British broadcasting executives.

Murdoch is hoping The Journal’s online success will carry over to its mobile applications for devices like Research in Motion Ltd.’s (Nasdaq: RIMM) BlackBerry and Apple Inc.’s (Nasdaq: AAPL) iPhone. His company will start charging consumers to read stories via those apps “in one to two months,” he told Reuters last week.

Several news outlets already have either ad-supported mobile news sites or device-specific applications. The Times and The Journal have the No. 2 and No. 5-most downloaded apps in Apple’s App Store for iPhone, respectively. NPR News is the most popular app.

A “Digital Vampire” Becomes a Partner to Some Publishers

Google News, which aggregates stories from the all over the Internet, currently generates ad revenue from news searches and doesn’t share any of it with the news sites – a business model that clearly doesn’t sit well with publishers.

Earlier this summer, Les Hinton, chief executive officer of Dow Jones and publisher of The Journal described Google as a “digital vampire.”

Speaking at the annual PricewaterhouseCoopers LLP Entertainment and Media Outlook event, Hinton accused Google of “sucking the blood” out of the newspaper business, and vowed new developments would level the playing field.

“There is a charitable view of the history of Google,” Hinton said. “[It] didn’t actually begin life in a cave as a digital vampire per se.”

Instead, by offering content free on the Web, the newspaper industry “gave Google’s fangs a great place to bite,” he said. “We will never know what might have happened had newspapers taken a different approach.”

Now, Google is trying a new way to share its take and possibly change the way people read news on the Web with its “Fast Flip” experiment, unveiled last week.

The idea behind Fast Flip is to present newspaper and magazine Web sites like a print publication, and users can quickly “flip” top stories in a selected category or specific topic found via Google’s search.

Google will share revenue with publishers such as The Times. Co. and The Post Co., but specific percentages were not given.

“The publishing industry faces many challenges today, and there is no magic bullet,” said Google News researcher Krishna Bharat in a blog posting. “However, we believe that encouraging readers to read more news is a necessary part of the solution. We think Fast Flip could be one way to help, and we’re looking to find other ways to help as well in the near future.”

Source: ‘New Reality’ for Newspaper Publishers Forces Search for New Revenue Streams to Tap Into

Motorola’s stock is up nearly 12% since the announcement, as investors are hoping the new phone will be enough to win back some of the company’s lost market share.

However, saving Motorola’s mobile division – which the company plans to spin off – is a daunting task. The company – which invented the cell phone, as well as a plethora of other communication devices used by police and military – has seen its global market share of wireless phones fall to 2% in its second quarter this year from 31% in 1995. Mobile phone sales accounted for 33% of Motorola’s second-quarter revenue, down from 41% a year ago.

Motorola had enjoyed some success in 2004 when it released its popular Razr clamshell-style phone, which was viewed as a fashionable and useful high-tech gadget. During its four-year run, more than 110 million Razrs were sold.

However, Motorola failed to respond to innovation in the mobile phone market that was pioneered by its fiercest competitors. Apple and RIMM have whittled away at Motorola’s market share over the past five years.

With the Cliq, Motorola is trying to separate from the competition by angling its device toward a younger, less professional base. The Cliq’s biggest draw will be its quick access to social networking content from Facebook Inc., Twitter Inc. and News Corp.’s (NYSE: NWS) MySpace.

“Our initial take is favorable, and it seems that Motorola is carving out a niche in the crowded smartphone market by focusing on socially minded demographics as opposed to enterprise users or pro-sumers,” RBC Capital Markets Corp. analyst Mark Sue told Reuters. Sue upped his share target for Motorola from $8 to $10 a share.

Aside from that distinction, the Cliq includes features typically found in most any smartphone: A touch screen, slide-out keyboard, and access to an application store. It runs on Google Inc.’s (Nasdaq: GOOG) Android mobile operating system, already found on two other T-Mobile Phones.

However, if Motorola’s Android-based phones are going to take off, they’ll need bigger wireless carriers. The phones currently function on Deutsche Telecom AG’s (NYSE ADR: DT) T-Mobile USA Inc. network. But with just 34 million users, T-Mobile is the fourth-largest carrier in the United States.

For that reason, a second Android phone will be offered for Verizon Communications Inc.’s (NYSE: VZ) mobile network, which is nearly three times as large. Verizon Wireless has about 88 million subscribers and is the largest carrier in the United States.

Wall Street may be underestimating the boost in profit Motorola will get from its smartphone line in 2010, UBS AG (NYSE: UBS) analyst Maynard Um said in a note to investors. Um has upgraded the communications firm’s stock to “buy” from “neutral.” Um attributed the upgrade to the expected holiday release of the Cliq, as well as additional deals with mobile carriers in the fourth quarter.

Pricing for the Cliq was not announced, but Um anticipates recession-friendly pricing.

“We do not expect new competitor handset announcements to have a materially negative sentiment impact on Motorola, as the company is not defending share, likely only has share upside, and is likely to be an aggressor on price,” he wrote.

A sizeable boost in profit could come from the Android phones’ access to the Android Market, Google’s application store. Apple’s App Store for its iPhone and iPod Touch devices have proven to be a boon for the company, with more than 1.8 billion paid and free apps downloaded since its debut in July 2008. While many of the apps, such as those from The New York Times are free, they present consumers a strong value proposition when buying a smartphone.

However, Apple’s App Store has more than 75,000 applications available, while Google’s Android Market offers just 10,000 apps.

Motorola will add more Android-based phones next year, Chief Executive Officer Sanjay Jha said at a conference last week in San Francisco, and Avian Securities LLC analyst Matt Thornton expects Android phones to represent 30% of the total handsets it sells in 2010, Bloomberg News reported.

“It’s the first step in a long journey,” said Jha, who insists the Cliq will not make or break his company.

In March 2008, Motorola to split its core business from its mobile division after pressure from billionaire investor Carl Ichan mounted. At the time, analysts said the split would put the company in a better position to sell assets or negotiate a joint venture.

A week later, Videocon Industries Ltd., the largest electronics maker in India, said it was interested in buying Motorola’s mobile business. However, neither a sale nor split of Motorola has happened.

Motorola shares closed at $8.79 in trading yesterday (Monday), up 11 cents or 1.27%.

Source: Hot Stocks: Motorola Throws Hat Into Smartphone Ring

Before we get into the ins and outs of this sale, we need to clarify what it means to actually buy one-fourth of the Internet. Of course, you can’t just own something as large and independent as the Internet. But you can buy a portion of its traffic.

We’ve been recently writing about international telecoms. If you bought up enough of these Internet Service Providers you could potentially own enough Internet traffic to constitute a quarter. But there will soon be another way you can invest in the traffic with just a single click.

About 50% of all Internet traffic is from file sharing– people sharing music, videos, games, and every other type of file you can think of. Regardless of how you feel about Internet piracy, 50% of all bandwidth on the net is made up of this type of activity.

Here’s where the story really starts heating up…

The Pirate Bay: 2009 Has Already Been One Hectic Year

Half of all file-sharing traffic is hosted on a single website. That’s a fourth of all Internet traffic in one place. That site is called The Pirate Bay.

TPB was launched in 2003, less than one and a half years after Napster—the pioneer in music file sharing— was forced to shut down because of court rulings.

TPB operates in Sweden, free from initial U.S. laws. But over the past several years, the European Union and many individual member-countries have cracked down on e-piracy.

In 2006, Swedish police raided TPB’s headquarters, temporarily shutting down its server. April of this year was an even worse time for the organization. Founders Peter Sunde, Fredrik Neij, Gottfrid Svartholm and Carl Lundstrom were sent to prison for one year and slapped with a $3.6 million fine.

TPB’s Next Giant Step Forward

With the founders in jail and facing serious fines, another Sweden-based company, Global Gaming Factory, announced plans to purchase TPB for $7.8 million. GGF intends to turn TPB into a legal, fee-based website. Users would have to pay a monthly fee to share files. This money would then be used to pay copyright fees for each file transfer.

This, again, might conjure up images of Napster, which was bought by Roxio Inc at bankruptcy auction. Roxio rebranded it as Napster 2.0, which began to offer legal, paid transfers. Best Buy acquired Napster last year for $121 million, but is struggling to see profits.

GGF’s plans for TPB, however, aren’t as small as Best Buy’s were for Napster. GGF, almost immediately after announcing its plans to buy TPB, declared its intent to take the website public… on Nasdaq.

If all the legal and technical aspects of this deal work out as expected, TPB’s intial public offering will take place sometime in 2010. This gives us less than 16 months to plan.

But before we start setting aside cash for this IPO, we need to take a serious look at what this deal will look like.

Why You Should Not Buy Pirate Bay… At Least With What We Know Now

It’s safe to assume TPB’s 25-plus million users aren’t all going to start paying the monthly fees. Instead, we can expect more than 75% of these users to stop sharing files. Possibly as little as 10% of TPB’s current user base will be left when GGF starts requiring fees.

This transition is expected to come very soon. On August 27, GGF is holding a press conference to go over the details of this reorganization, as well as its plans for the IPO.

GGF is also working on deals to turn TPB’s enormous share of Internet traffic into a second revenue stream. By setting up deals with ISPs, GGF will trade promised bandwidth usage for cash.

ISPs are starting to sell bandwidth to customers instead of offering unlimited packages. This means that users that transfer a large amount of data packets will have to pay considerably more than those that just us the Internet to check their email.

With this transition from monthly subscriber to pay-as-you-go, ISPs will have an opportunity to make more money off bandwidth use. GGF promises that TPB will provide this.

However, we’re not sold on this business model. Napster 2.0 has not been able to mount a significant attack on powerful rivals such as (NASDAQ:AAPL) Apple’s iTunes store. Even web giant Google (NASDAQ:GOOG) has not been able to effectively monetize its $1.65 billion purchase of the world’s most popular video sharing site, YouTube.

GGF’s plan might seem enticing to some—don’t buy into the hype. Music and movie pirates will go somewhere else for their illegal downloads. Avoid this IPO at all costs.

Sincerely,
Jim Nelson

Source: How You Can Own a Quarter of the Internet… And Why You Don’t Want to

Even though the Internet as we know it is only a couple of decades old, this is still a difficult scenario to comprehend. Entire businesses – literally thousands upon thousands of jobs – exist because of the web.

Now we’re entering an age of Web convergence. Every single element of our old media – radio, television and print – is migrating to the Internet at breakneck speeds.

Within the next five years, the depth of offerings on the Internet and the global population connected to them will grow exponentially. In fact, the worldwide Internet economy is now growing at such a rate it will be next to impossible for content providers to keep up…

Bandwidth is being eaten up left and right by more data-intensive offerings, such as streaming video. Young people are also gobbling up Internet media. Young adults today are getting more and more of their news, sports and video directly on their computers. A recent study claims that those born between 1981-1992 get 34% of their news from the Internet, compared with only 11% from print newspapers.

Then there are the masses in emerging economies like China. China became the world’s top Internet user last year, passing the United States. The number of Chinese hooking up to the Internet for the first time is staggering, growing 42% last year alone, to nearly 300 million users, according to the China Internet Network Information Center. Now the government is setting its online ambitions toward the countryside, vowing to hook up every village with broadband lines by 2010.

In all of Asia, only 17% of the population has Internet access, according to Internet World Stats. Compare that with 75% penetration here in North America. This shows that there is plenty of room for tremendous growth…

Partnering With the Biggest Names in Media…

We’ve written to you before on the topic of bandwidth scarcity. And Penny Stock Fortunes readers already had the opportunity to score quick double-digit gains playing this trend with Internet data handler Soapstone Networks Inc. (OTC:SOAP).

Now we’re looking to play a different side of the bandwidth scarcity coin. This time, content delivery and media integration are our targets…specifically, video delivery outsourcing. As we’ve told you before, it’s a highly competitive field, but that’s where the real money is…

That’s why we’re moving one content delivery company off the Penny Stock Fortunes watch list and marking it a strong buy. This company is a content delivery network (CDN) provider for some of the largest media companies in the world. Its customer list includes big media mainstays such as MSNBC, Disney (NYSE:DIS), Netflix (NASDAQ:NFLX) and Fox. The company also boasts the biggest fish of them all. Its No. 1 customer is Microsoft (NASDAQ:MSFT) – a company that is now locked into an all-out war against rival Google (NASDAQ:GOOG) for web supremacy.

And lucrative contracts with these heavy hitters has helped the company grow its revenue more than 500% over the past three years.

Its most recent quarter proved how recession-resistant this content-delivery provider really is. While it still isn’t cash flow positive yet, its Q2 net loss was cut by two-thirds. The company grew its top line 7%, while the rest of the economy is still contracting.

And for a growing company in the tech sector, this company’s balance sheet is incredibly clean. The company is sitting on more than $145 million in cash and zero long-term debt.

The stock’s recent acquisition of another leading firm has even allowed the company to expand its offerings to mobile devices.

This is a massive market. According to networking giant Cisco (NASDAQ:CSCO), mobile video and other bandwidth-heavy features will drive worldwide mobile traffic to more than 1 exabyte per month by 2012. An exabyte is equal to 1 billion gigabytes…that’s a heck of a lot of data.

We just revealed this latest pick and more to our Penny Stock Fortunes readers – if you want to take a look, just click here for more details…

Best,
Greg Guenthner

Source: Taking Advantage of the ‘New Media’ Boom

If you need a place to live and want to own a house, why not? Prices in some areas are fairly reasonable. But if you’re speculating, our guess is that you’ll get a better deal if you wait.

Why? For the many reasons we have given you in these Daily Reckonings. House prices may be firming in some areas – that’s what the Case-Shiller numbers seem to show. But nationwide, they are probably headed down for quite a while longer.

Herewith, four reasons why:

First, as you know, this is a depression. It will probably be long. And deep. You wouldn’t know it from looking at the stock market or reading the news. The Dow went up another 114 points yesterday. Oil rose to $71. And the dollar – anticipating inflation – fell to $1.44 per euro.

But that’s what bounces are supposed to look like. They look good enough so that people mistake them for the real thing… and get suckered into more losses.

Depressions drag down asset prices. Typically, prices become much more reasonable. And then they reach UNREASONABLE levels. House prices have become reasonable. Now they will become unreasonably cheap…

Second, waves of resets and foreclosures are still washing over the housing market. As Barry Ritholz told us in Vancouver, we’re only half way through the foreclosure process. There are more than 18 million empty houses in America. A news report yesterday told of a 32-storey apartment building in Florida with only one lonely tenant.

And still coming up are more refinancings… more drowning homeowners … and more people giving up on homeownership altogether. The bubble era created new households at the rate of 1.2 million per year. Practically every one of them wanted to get in on the housing boom. Now, there are only 500,000 new households per year. And few of them still believe that housing is the route to wealth. At the current rate, it will take many years to fill up all America’s empty houses.

Third, incomes are falling. Property crashed because people with average incomes could no longer afford to buy the average house. Now, they can afford even less. Ken Rogoff estimates that the consumer needs 6-8 years to pay his debts down to a more reasonable level. Part of that deleveraging process will mean getting rid of heavy mortgage debt – one way or another.

Fourth, there are too many houses that are too big… and in the wrong places.. Big houses were a status symbol in the bubble years. Now they’re a symbol of extravagance and error. Plus, they’re expensive to own. People will want to dump them – even if they can afford them. There was far too much building in the outlying suburbs of the sand states too – Arizona, Nevada, California and Florida. Those houses may have to be abandoned as people are forced to move closer to where the work is.

There are also a couple of more technical reasons why the Case-Shiller numbers may be erring on the bright side: seasonal adjustments and a changing mix of houses sold. But our guess is that real house prices – adjusted for inflation – will continue going down for many more years.

You want to see deflation? Go to Tokyo City in London. The restaurant chain says it is going to give its food away for free. Customers will pay for drinks plus 2 pounds 50 pence for service.

Meanwhile, in Tokyo itself prices are falling – again. The Japanese have had on-again, off-again deflation for the last 20 years… ever since their stock market crashed in 1989.

Hey, what’s the matter with those Japanese? Don’t they know about stimulus?

Hold on there, pilgrim. What the Japanese don’t know about stimulus ain’t worth knowing. They’ve stimulated their economy so much that their government debt now measures 200% of GDP. And what did they get for all that stimulus? Did it get their economy moving?

Are you kidding? Now, the latest news tells us that they also have the highest jobless rate in 6 years. And the latest figures show the inflation rate NEGATIVE. In fact, never has the inflation rate been lower.

*** Nissan announced an electric car. Shares soared.

*** Jobless benefits are running out for 1.5 million unemployed Americans, says a New York Times report.

*** And here a commentary by David Pauly on what Wall Street is doing about low earnings – lying!

“Stock analysts continue to promote corporate earnings lies, insisting that net income isn’t really what investors need to know… .

“In analyst speak, Intel Corp. (NASDAQ:INTC) wasn’t hit with a $1.45 billion fine from the European Union in the second quarter for anticompetitive practices.

“After setting aside funds to cover the fine, which Intel is appealing, the semiconductor-maker had a quarterly loss of $398 million, or 7 cents a share. Disregarding the fine altogether, analysts maintain the company earned 18 cents a share, beating their average estimate of 8 cents.

“As Wall Street tells it, the employee stock options Google Inc. granted in the second quarter didn’t cost its shareholders $293 million.
“Google (NASDAQ:GOOG), according to generally accepted accounting principles, earned $1.48 billion, or $4.66 a share, in the period. Not enough for Wall Street, which prefers to say the company earned $5.36 a share, leaving out the cost of stock options.

“Viacom Inc. (NYSE:VIA.B), an entertainment company, this week reported second-quarter net income of $277 million, or 46 cents a share. Analysts had estimated profit as if money Viacom paid out in severance in the period wasn’t the real thing. On that basis, Viacom earned 49 cents a share, beating the average estimate by 1 cent.

“Time Warner Inc. (NYSE:TWX), a rival of Viacom for entertainment dollars, said it earned $519 million, or 43 cents a share, in the quarter. Analysts insist Time Warner earned 45 cents, excluding, according to Bloomberg data, costs related to litigation and asset sales. Lawyers must work for nothing.

“By similar Wall Street reckoning, the expense of cutting jobs and selling an asset that reduced McGraw-Hill Cos. (NYSE:MHP) second quarter earnings per share by 10 percent was immaterial.

“Analysts also say investors should ignore $129 million that Textron Inc. (NYSE:TXT), maker of small airplanes, helicopters and golf carts, charged against net income in the latest quarter. Included was the cost of shutting a plant for an eight-seat jet Textron decided not to build.

“General Electric Co. (NYSE:GE), which makes jet engines and electric power equipment and has a financial services arm, had a second- quarter profit of 24 cents a share. GE and the analysts emphasized earnings from continuing operations, which at 26 cents a share, exceeded their estimate by 2 cents. A $194 million loss from discarded businesses was discarded.”

And so on… and so on…

*** “As You Like It” was as we liked it – lively, bawdy, and raucous. It is not Shakespeare’s finest play – or so the critics say. But it has some marvelous dialogue. “All the world is a stage… ” is the most memorable.

Our hostess had set up a stage on the lawn and put out a hundred or so chairs for guests. But by the time we sat down it had begun to rain. The chairs were wet. A Frenchman gallantly wiped off Elizabeth’s chair. Your editor sat down in a puddle… and the play began…

The rain continued throughout the performance. Some spectators – perhaps those who listened to the weather forecast – came equipped with parkas and anoraks. We had an umbrella, which we held over our heads throughout the performance.

Despite the drippy conditions in the bleachers, a good time was had by all. The English actors who performed the play were real pros. They enlivened the set with music and acrobatics, moving the story forward 4 centuries to the days of Peace & Love and strawberry fields forever. We never quite got the connection… but it seemed to work, somehow.

After the play was over, we retired to a stone barn for soup and dessert. There, we met neighbors whom we only see once a year – in August. Among them was a dear Daily Reckoning reader.

“I’m glad I bought gold when I did,” he said. “It was $600 or so at the time. So I made a gain on the gold. But the important thing was that I wasn’t caught in that sell-off in stocks last year.

“What do you think gold is going to do now?”

“Probably, it will go down,” we replied.

“So, you’re selling your gold?”

“No… we’re holding on… It’s too risky to sell it.”

*** “Of course, that’s the big question,” Elizabeth began on the drive home.

“What’s the big question?”

“About whether the world is just a stage. It’s really a question of free will. About whether we do things because we think them through ourselves, or whether we just play our roles.

“I suppose it’s related to the ‘Great Man’ theory of history… the idea that people actually determine history, rather than play their parts in it… ”

“It’s probably like all the great questions… that is, both true and untrue at the same time. I mean, Louis 14th couldn’t have been Louis 14th if there hadn’t been a Louis 13th… and if France hadn’t been the leading country of Europe… and if it hadn’t been the peak of the monarchic age.

“And Rommel couldn’t have led a Blitzkrieg in WWII if the tank hadn’t been invented in WWI… .

“In both cases, it appears that Shakespeare was right… that the roles were already there, just waiting for someone to play them… ”

“Yes, but I wonder if that is true… or as completely true as it looks. The fellow who took over from Lenin didn’t have to be a monster, did he?”

“I don’t know. If he hadn’t been so ruthless some other guy probably would have purged him out… sent him to the gulag. Once a revolution gets started, the most violent and ruthless groups seem to take over. So, I guess you could say that even there… the role must be played… ”

“Does that apply to our personal lives, too? Are we just playing roles? You are pretending to be my husband. I am pretending to be your wife. We are pretending to love each other. Is that all there is to it?”

“No… no… that’s very different… ”

“How so?”

“I don’t know… but when I say I love you, it comes out of my soul like smoke from a sacred volcano… ”

“What does that mean?”

“I don’t know… I just like the sound of it… ”

Source: More Empty Houses in America

When the U.S. Commerce Department on Friday said the U.S. economy contracted at a 1% annual pace in the second quarter, the report was actually seen as good news: It was a slower decline than in each of the two prior quarters, and economists had expected a contraction of 1.5%.

“This is good news,” Nariman Behravesh, an economist with IHS Global Insight Inc. (NYSE: IHS), told The San Francisco Chronicle.

But here’s the wild card: Although government spending did increase during the April-to-June quarter, only about 7.7% – $60.4 billion – of U.S. President Barack Obama’s stimulus package had actually made its way into the U.S. economy by June 30, the quarter’s official conclusion. Of that total, the largest component went to U.S. states to help defray the jump in Medicaid costs, CNNMoney.com reported.

Much of the $43 billion in stimulus tax relief – including the “Making Work Pay” tax credit for individual workers – also took effect during the second quarter, CNNMoney said.

At this point, it’s really difficult to “see how the effect of stimulus has been very large,” Edward Lazear, an economics professor at Stanford’s Graduate School of Business – who served as an advisor to former U.S. President George W. Bush – told CNN. “Very little has gone out.”
And that’s the problem.

In short, it looks like we’re already experiencing an economic rebound – without the Obama stimulus having really even kicked in … yet. In fact, the impatience over the continued U.S. malaise, the slowness of the economic turnaround and the fact that when growth does return we’re almost assured of a “jobless recovery” actually has some Washington legislators already pushing for a second stimulus.

That means the economy will be in rebound mode when nearly three-quarters of a trillion dollars in stimulus money starts to flow in. Dumping all that money into an already-growing economy won’t just serve as a simple tailwind that gives the economy a gentle push; it will be more like the head-snapping start followed by the thunderous charge down the quarter mile that we see from one of the supercharged Top Fuel Funny Cars driven by National Hot Rod Association (NHRA) star John Force. (From a standing start, Top Fuel Funny Cars cover a quarter mile in less than five seconds at speeds well in excess of 325 miles per hour).

And there’s only one outcome from that scenario – rampant inflation. In fact, U.S. consumers are probably headed for the worst bout of inflationsince the 1980s. And that makes the so-called “exit strategy” of U.S. Federal Reserve Chairman Ben S. Bernanke all the more important.
To be sure, the Obama stimulus has given the economy a bit of a boost. So far:

• The states have deployed what stimulus money they have received, which helped fuel the biggest surge in state and local spending since 2007.
• Some early pieces of the stimulus – such as the $25 increase in unemployment benefits – have allowed consumers to spend more.
• And one economist – Economic Policy Institute’s Josh Bivens – said Obama stimulus money may have boosted growth by as much as three percentage points during the second quarter.

But other economists say that – given the environment – the second-quarter GDP numbers were much too strong. After all, business spending dropped 8.9% and hours worked fell 7%. Somehow that doesn’t translate into a mere 1% drop in GDP. That latter figure will most certainly be revised downward in the future.

Unless or until that happens, look for the third quarter GDP statistics to give us a better picture of the U.S. economy’s health. Complaints that the promised stimulus money isn’t getting where it needs to be have Obama’s economic team working overtime to iron out the problems that keep cropping up.

Mark Thoma, an economics professor at the University of Oregon, toldCNNMoney that “the third quarter will be a critical time period for assessing the stimulus package.”

And for assessing the inflation threat – which Money Morning has repeatedly warned is a very real threat. Gold, commodities, and other hard assets will be key holdings. The same is true for dividend-paying stocks. And make sure to go global – the best growth prospects will continue to be overseas.

Market Matters

A report by the New York Attorney General’s Office claims the initial nine institutions that received Troubled Asset Relief Program (TARP) money paid out $33 billion in bonuses in 2008.  Of particular note, Citigroup Inc. (NYSE: C) and Bank of America (NYSE: BAC) rewarded a combined 900 employees (combined) with bonuses of at least $1 million, despite having received $45 billion each in government aid (and that doesn’t count the $3.6 billion Merrill Lynch & Co. Inc. employees received).  Imagine how much they would have made if the companies were actually doing well?

While President Obama continued his road trip across America to promote health care reform, a group of conservative Democrats (Blue Dogs) came up with their version of a bill, but offered no timetable for completion.

Meanwhile, regulators pushed forward with proposed rules aimed at reducing speculation in the marketplace and focused on so-called “naked” short selling and on lpacing strict limits on commodities contracts.

In corporate news, deals were the theme of the week.  Microsoft Corp. (Nasdaq: MSFT) made amends with Yahoo! Inc. (Nasdaq: YHOO) and forged a 10-year partnership to cut into Google Inc.’s (Nasdaq:GOOG) share of the Internet search business. And International Business Machines Inc. (NYSE: IBM) is expanding its software empire with the purchase of SPSS Inc. (Nasdaq: SPSS) for $1.2 billion.

On the earnings front, energy companies highlighted the week’s reports and the results were not pretty (though were expected).  On a positive note, Motorola Inc. (NYSE: MOT) surprised analysts by reporting an unexpected profit, while offering a promising outlook, and Deutsche Bank AG (NYSE: DB) continued the favorable trend among (previously depressed) financials by posting strong earnings on solid investment banking operations.

Investors digested the mixed earnings news and chose to focus more on the positives.  Despite a temporary setback in China (5% index decline before encouraging comments by its central bank), the Dow Jones Industrial Average moved higher late in the week after General Electric Co. (NYSE: GE) was upgraded to a “Buy” by a major analyst, a sign of an improving climate.  The Nasdaq Composite Index even flirted with 2,000 for the first time since October 2008, and theStandard & Poor’s 500 Index edged closer to 1,000, a level not seen since last November.

The Dow ended July with its best monthly performance since October 2002.  Japanese stocks moved to their highest levels in about 10 months and European equities soared to nine-month highs.  Bond investors breathed sighs of relief as a record $115 billion Treasury auctions came to a close and foreign bankers emerged as buyers on the final day.

Economically Speaking

Has Fed Chairman Bernanke suddenly become Mr. Optimist these days? Early in the week, he proclaimed that the financial debacle ultimately would produce favorable results as “not only will we will be back on track, but the economy will be stronger than it had been before this started.”  He also urged Congress to move forward with a regulatory reform package to ensure that such dire times will not be repeated.

The Fed’s Beige Book showed that the economy remained weak, though signs of stabilization and improvements in manufacturing, housing, and even labor are occurring across several regions of the country.  Some districts reported enhanced corporate hiring, particularly within the healthcare and technology sectors.

The afore-mentioned second-quarter GDP report was better than expected, giving yet another indication that the recession is drawing closer to an end.

Still, it’s a much deeper recession than most realized: For the first time since records have been kept (1947), economic activity has declined for four consecutive quarters.  New homes sales skyrocketed in June by 11%, the fourth increase in the last six months, and home prices even climbed on a month-over-month basis for the first time since July 2006 according to the S&P Case-Shiller index.

Durable good orders fell in June, though once the volatile transportation category was removed from the statistic, orders actually increased.  Consumer confidence fell in June, as ongoing pressures on the labor markets brought continued concerns and many Americans are refraining from major purchases (now and for the foreseeable future).

On the other hand, jobless claims rose in the most recent week, though analysts pointed to discrepancies from the auto industry.   Looking at the four-week moving average as a better gauge, claims for unemployment benefits actually fell to the lowest level since January and continuous claims unexpectedly declined, as well.

Weekly Economic Calendar

Source: Why the Obama Stimulus Has Us on a Collision Course with Inflation

• The special inspector general for the Treasury’s Troubled Asset Relief Program (TARP) said U.S. taxpayers could be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, Bloomberg News reported.  In testimony prepared for a hearing before the House Committee on Oversight and Government Reform, Neil Barofsky said the Treasury’s $700 billion bank-investment program represents only a fraction of all federal bailouts to resuscitate the U.S. financial system. “TARP has evolved into a program of unprecedented scope, scale and complexity,” he said. Costs include $6.8 trillion in Federal Reserve guarantees, $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae (NYSE:FNM), Freddie Mac (NYSE: FRE), and other federal programs, he said.

• A survey of economists released yesterday (Monday) said the U.S. recession’s hold on the economy appears to be easing but likely has not yet ended, Reuters reported. The National Association for Business Economics’ (NABE) quarterly industry survey found that demand is stabilizing, but a small majority of the 102 respondents said their firms had not yet seen the bottom. The survey “provides new evidence that the U.S. recession is abating, but few signs of an immediate recovery,” said Sara Johnson, managing director of global macroeconomics for IHS Global Insight, who helped analyze the report for the NABE.  “Industry demand was still declining in the second quarter of 2009, but the breadth of decline had narrowed considerably since late 2008, raising prospects for stabilization in the second half” of the year, she said.

• General Motors Corp. (NYSE: MTLQQ) garnered three final offers for its Opel unit in Europe, with Germany’s preferred bidder,Magna International Inc. (NYSE: MGA), planning to take a bigger stake from its Russian partner, Bloomberg News reported. RHJ International SA (EBR: RHJI) and Beijing Automotive Industry Holding Co. also submitted offers. Magna, the largest Canadian car-parts manufacturer, would buy 27.5% of Opel compared with 20% in an earlier proposal, said a GM spokesman.  Germany selected Magna as preferred bidder on May 30. Detroit-based GM, seeking to salvage its European operations afteremerging from bankruptcy, set today as the deadline for taking final offers for Opel, which includes the Vauxhall brand in the U.K.  “The final bids will now be analyzed and compared by GM,” GM Europe said in a statement.

• Mortgages on commercial property held by U.S. banks have been failing at the fastest rate in nearly 20 years, the Wall Street Journal said.  Losses on loans used to finance commercial spaces would possibly reach about $30 billion by the end of 2009 at the current rate.  The $30 billion estimate is based on financial reports filed by more than 8,000 banks for the first quarter, The Journalsaid. The commercial real-estate market, valued at about $6.7 trillion, represents 13% of the United States’ gross domestic product.

• Shares of Human Genome Sciences Inc. (Nasdaq: HGSI) skyrocketed 276.81% after the Rockville, Md.-based company’s Benlysta drug reduced symptoms in patients inflicted with lupus, a disease that is notoriously difficult to treat. The company tested 865 patients in a one-year study with the drug, which is co-produced with GlaxoSmithKline PLC. Leerink Swann LLC analyst Joseph Schwartz expects the drug to launch next year andgenerate $1.2 billion in sales for HGSI in 2013 and $2.4 billion in 2015, according to a report by Dow Jones Newswires. HGSI closed at $12.51 yesterday (Monday), up $9.19.

• A potential tax liability as well as growing tensions betweenVolkswagen AG (OTC ADR: VLKAY) and Porsche Automobil Holding put a speed bump in the way of a potential Volkswagen acquisition of Porsche’s sportscar division, The Wall Street Journal reported, citing people familiar with the matter. Both companies unsuccessfully attempted last weekend to find a way around a tax payment that could be triggered by the sale Porsche’s division. Volkswagen contested the significance of the issue, with a spokesperson telling The Journal “a transparent maneuver to torpedo a sensible business idea.” Porsche is also in negotiations with Qatar to give the emirate a substantial stake in the German automaker.

• The Conference Board’s Leading Economic Index (LEI) rose slightly in June, up 0.7% following a 1.3% gain in May and a 1% rise the month before. “The recession has been losing steam since the spring, although very large job losses continue. Nevertheless, confidence is slowly rebuilding. Financial markets are less volatile. Even the housing market is stabilizing. If these trends continue, expect a slow recovery this autumn,” said Conference Board economist Ken Goldstein.  The LEI has improved 4.1% in the past six months.

• New AOL LLC Chief Executive Officer Tim Armstrong revealed his plans to overhaul the troubled Time Warner Inc. (NYSE: TWX) division’s advertising and develop more localized websites in an effort to resuscitate falling revenues. The former Google Inc.(Nasdaq: GOOG) executive says sites with city guides can help fill a void of community information on the Internet, which in turn will bring in visitors and advertisers. “AOL still has a really large opportunity in front of it,” Armstrong said in a July 16 interview with Bloomberg News. “It comes with a very difficult path, but if we can navigate the path and navigate what needs to be done here and do it transparently, quickly and deliberately, I think AOL can be a successful company, and that’s why I came.” Time Warner will spin off AOL later this year.

Source: Investment News Briefs Tuesday, July 21, 2009

With options running out over the weekend, CIT advisors began preparations for a bankruptcy filing. As of Sunday, JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (MS) were talking with other banks about a debtor-in-possession loan, used to fund a company’s operations after it seeks court protection from creditors, Bloomberg News reported.

Bondholders held calls last week to discuss whether to swap some claims for equity to reduce indebtedness. Thomas Lauria, a lawyer at White & Case LLP, told Bloomberg that a group of CIT creditors he represents offered to provide $3 billion in new loans to bridge CIT to an out-of-court restructuring or an orderly bankruptcy, but had yet to hear back from CIT management.

“It seems CIT was ill-prepared for this moment, so they’re scrambling,” Scott Peltz, a managing director at consulting firm RSM McGladrey Inc. told Bloomberg. “Unless you have all these bondholders holding hands and singing Kumbaya, I think they’re too far behind the eight ball to avoid filing.”

While CIT is not nearly the household name of Citigroup Inc. (NYSE: C)or Bank of America Corp. (NYSE: BAC), the lender finances over 1 million businesses – including Dunkin Donuts and Eddie Bauer.

Three prominent retail trade groups sent letters to financial regulators this week warning that the failure of CIT would undermine the industry supply chain.
“[Retailers] are unbelievably concerned right now,” New York bankruptcy lawyer Jerry Reisman told the Buffalo News. “What we may have here is a total disruption in small business.”

Reisman said he received more than two dozen calls from panicked stores and apparel manufacturers, some of which said they may not have the money to pay their employees.

An otherwise light week on the economic calendar gives way to the next round of earnings as Apple Inc (Nasdaq: AAPL) and Texas Instruments Inc. (NYSE: TXN) highlight the corporate releases this week, while consumer companies The Coca Cola Co. (NYSE: KO),McDonalds Corp. (NYSE: MCD), and Amazon.com Inc. (Nasdaq:AMZN) join the mix.

U.S. Federal Reserve Chairman Ben S. Bernanke will head to Congress where several critics await.  As for the healthcare debate, the August deadline seems less likely, though the Senate has its two cents to add in the coming days.  Expect plenty of politicized talk about the ballooning deficit and the impact on small businesses.

Market Matters

The financial sector appears to be on the mend as earnings season brought several positive signs that the worst is over and soon “business as usual” will return to Wall Street.  Goldman Sachs Group Inc. (NYSE: GS) easily surpassed analysts’ earnings estimates on solid trading revenues, while JP Morgan got a boost from its investment banking division to shatter the forecasts.

Even Citigroup and Bank of America posted solid results (thanks to one-time gains), though both entities have many ongoing challenges to overcome before the Feds let them fend for themselves.

Of course, the possibility that CIT will file for bankruptcy protection has left panicked customers without a significant source of funding for their daily operations.  After late hour negotiations failed, the government chose to pass on another sizable bailout and allow true capitalism to play itself out.  CIT turned to private firm and bondholders to help devise a financing plan and avoid the fate of Lehman Bros. and others.  But now, nervous retailers and manufacturers are lining up alternative funding sources with the hope of dodging significant business interruptions.

Bed Bath & Beyond (Nasdaq: BBBY) and Wal-Mart Stores Inc. (NYSE: WMT) are among CIT’s largest customers, though many are small independent operations.  A CIT failure could prove devastating for those firms considered the lifeblood of American business.

In other earnings news, techs enjoyed another decent quarter as Intel Corp. (INTC) easily bested expectations (that is, before that $1.45 billion antitrust fine) and International Business Machines Corp. (NYSE: IBM) earnings grew by double-digits, while management raised its outlook for the next few quarters.  Though both offered encouraging signs for the sector (and economy as a whole), Dell Inc. (Nasdaq:DELL) warned that lower margins are impacting its operations andGoogle Inc. (Nasdaq: GOOG) experienced its lowest rate of revenue growth since going public five years ago.

The travel industry continued to struggle as consumers and business professionals delayed trips and Marriott International Inc. (NYSE:MAR) and American Airlines parent AMR (NYSE: AMR) posted disappointing results.

Market/ Index	Year Close (2008)	Qtr Close (06/30/09)	Previous Week (07/10/09)	Current Week (07/17/09)	YTD Change
Dow Jones Industrial	8,776.39	8,447.00	8,146.52	8,743.94	-0.37%
NASDAQ	1,577.03	1,835.04	1,756.03	1,886.61	+19.63%
S&P 500	903.25	919.32	879.13	940.38	+4.11%
Russell 2000	499.45	508.28	480.98	519.22	+3.96%
Global Dow	1526.21	1,629.31	1,561.11	1,664.23	+9.04%
Fed Funds	0.25%	0.25%	0.25%	0.25%	0 bps
10 yr Treasury (Yield)	2.24%	3.52%	3.30%	3.65%	+141 bps

Economically Speaking

The White House also experienced a “good news/bad news” week as House Democrats began to push forward a major healthcare overhaul.  Before the real lobbying could begin in earnest, the Congressional Budget Office (CBO) Director proclaimed the proposal would have no positive results on reducing costs or expanding coverage and would actually increase government spending.

Investors shrugged off the CIT developments and focused on positive earnings and economic data.  Stocks surged early on the Goldman news and soared right through the technology reports.  Technicians joined the fun as the Standard & Poor’s 500 Index broke beyond resistance at 930, a strong sign for traders who monitor charts.  Major indexes snapped a month-long losing streak and the tech-heavy Nasdaq Composite climbed to levels not seen since last October, while fixed income suffered reverse “flight-to-quality” trades.  Oil rebounded on the favorable market and economic signs.

While the debate over a healthcare overhaul rages on, the Treasury Department reported that the budget deficit ballooned beyond a record $1 trillion and seemed prime to move even higher if Congress cannot reign in spending.   Analysts fear that interest rates ultimately will move higher should the alarming trend continue and foreign investors shy away from U.S. securities.

But for now, inflation seems very much under control, despite sizable jumps in both the retail and wholesale gauges.  Though gasoline prices surged by 17% in June, prices have already begun dropping at the pumps and most economists do not expect a repeat performance in the months to come.

Though retail sales increased in June for the second consecutive month, much of the gain was related to the rising gas prices and consumers remain reluctant to part with their hard-earned income in light of the weakening labor picture.

On a positive note, weekly jobless claims fell to its lowest level since January. However, naysayers claimed that much of the decline was due to calculation problems stemming from auto closures and layoffs are still very much on the rise.

Finally, the hectic economic calendar ended on a positive note as the housing sector showed renewed signs of a rebound as both new construction and permits for future activity experienced unexpected strength.  Even Dr. Doom himself, NYU professor Nouriel Roubini, the man best known for predicting the current crisis, reversed course and claimed the global economy would move out of recession by late 2009.

The minutes from the June Fed meeting showed that policymakers revised (positively) their forecasts for economic activity in 2009 and 2010, though they expect the unemployment situation to remain weak through next year.  Most Fed watchers do not see any change in the funds rate for the foreseeable future.

On another note, numerous renown economists (about 200), including a few Nobel prize winners, called on Congress to cease the grandstanding and stop criticizing the Fed’s handling of the financial crisis and economic downturn (particularly Bernanke’s “tactics” surrounding the Bank of America/Merrill Lynch deal).  The strongly worded letter by some of the nation’s sharpest minds stated that such politicizing could prove detrimental to the recovery.

Weekly Economic Calendar

Source: Market Recoils as CIT Edges Toward Bankruptcy

GE’s profit fell by almost half as the slump that has gripped its finance and media businesses took hold of its heavy industrial units, and shares of the conglomerate tumbled 6 percent to $11.66.

Shares of Google fell nearly 3 percent to $430 after news that the weak economy and a slump in advertising spending took a toll on revenue growth at the Internet giant. Its results, posted late on Thursday, beat Wall Street expectations, however.

With companies such as Intel Corp and Goldman Sachs Group posting strong quarterly results earlier in the week, investors had been eager to see some consistency from other bellwether names.

Bank of America posted lower earnings and Citibank relied on a gain off its Smith Barney deal with Morgan Stanley to turn a profit.

“So far earnings season is good, but if you were to call it revenue season it’d be more of a mixed bag,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

“What this shows is that companies are able to deal with cost structure, but light revenue shows that we’re still in a difficult economic environment.”

The Dow Jones industrial average <.DJI> gained 9.97 points, or 0.11 percent, to 8,721.79. The Standard & Poor’s 500 Index <.SPX> shed 1.49 points, or 0.16 percent, to 939.25. The Nasdaq Composite Index <.IXIC> dropped 4.13 points, or 0.22 percent, to 1,880.90.

A spike in shares of International Business Machines Corp helped buoy the Dow industrials, after the company raised its full-year earnings forecast late on Thursday.  IBM shares gained 3.5 percent to $114.53.

On the economic front, data showed U.S. housing starts and building permits jumped more than expected in June, propelled by a rise in single-family homes.

Shares of DR Horton , up 4 percent to $10.05, helped boost the Dow Jones home construction index <.DJUSHB> 3.1 percent.

NEW YORK, July 17 (Reuters)

• Google Inc. (Nasdaq: GOOG) saw its revenue grow 3% in its second quarter, which ended on June 30. The Internet search giant reported a net income of $1.4 billion, or $4.66 per diluted share on revenue of $5.5 billion. That compares to a net income of $1.2 billion, or $3.92 per diluted share on revenue of $5.3 billion in the same quarter last year. “These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs,” said Eric Schmidt, Google’s chief executive officer. Ad revenues accounted for 97% of Google’s revenue. The company was able to maintain its 65% market share for searches amid increasing competition fromMicrosoft Corp.’s (Nasdaq: MSFT) Bing search engine, which launched in early June.

• International Business Machines Corp.’s (NYSE: IBM) second quarter profit grew 12%, but revenues fell 13%, the company said yesterday (Thursday). IBM’s net income was $3.1 billion, or $2.32 per diluted share on revenue of $23.2 billion for the quarter ended June 30. That compares to a net income of $2.8 billion, or $1.97 per diluted share on revenues of $26.8 billion in the same quarter last year. Shares of IBM were up 1.46% in after hours trading on the news.

• Foreclosure filings in the United States jumped to a record 1.9 million on more than 1.5 million properties in the first half of 2009, according to RealtyTrac. “Despite everybody’s best efforts to datewe’re not really making any headway against the problem,” Rick Sharga, senior vice president at RealtyTrac said in an interview with Reuters. “I don’t think this suggests the economy is any worse than anyone expected but I certainly don’t think it shows by itself any signs of improvement.” In related real estate news, builder confidence for newly built single-family homes grew by two points to 17 this month, its highest level since September according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. Still, the index was well below 50, the threshold for which builders view the market conditions as good. “Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices, but many remain quite concerned about the road that lies ahead,” said NAHB Chairman Joe Robson, who is himself a builder from Tulsa, Okla.

• Initial unemployment benefit claims in the United States fell by 47,000 to 522,000 for the week ended July 11, to their lowest level since January, according to the Department of Labor. The less volatile four-week moving average also shrank, falling by 22,500 to 584,500. “The annual auto retooling shutdowns almost certainly explain the sudden dive in claims,” Ian Sheperdson, chief economist at High Frequency Economics told the Financial Times. “The shutdowns happen every year but GM and Chrysler started early this year.”

• Lawmakers in Washington yesterday (Thursday) accused former Treasury Secretary Henry Paulson of misleading Congress and looking the other way as major mistakes were made at Bank of America (NYSE: BAC) as it was about to merge with Merrill Lynch, Dow Jones Newswires reported. Paulson defended the U.S. government’s response to the financial crisis and his role in ensuring Bank of America closed its acquisition of Merrill Lynch, but took a verbal drubbing on Capitol Hill, mostly from those who voted against the Troubled Asset Relief Program (TARP). “I don’t think anyone’s buying what you’re saying,” said Rep. Dan Burton, R-Ind. “The biggest, most powerful bankers have essentially received a free ride at taxpayers’ expense,” Rep. Dennis Kucinich, D-Ohio, added.

• Sun Microsystems Inc. (Nasdaq: JAVA) shareholders approved the sale of the company to Oracle Corporation (Nasdaq: ORCL) for $9.50 per share in cash Sun said yesterday (Thursday) in a statement. Roughly 62% of the outstanding shares of Sun’s stock voted in favor of the merger. The deal represents a total of $7.4 billion, or $5.6 billion of Sun’s cash and debt.

Source: Investment News Briefs Friday, July 17, 2009