THE advertisement warns of speculative financial bubbles. It mocks a group of gullible Frenchmen seduced into a silly, 18th-century investment scheme, noting that the modern shareholder, armed with superior information, can avoid the pitfalls of the past. “How different the position of the investor today!” the ad enthuses.
It ran in The Saturday Evening Post on Sept. 14, 1929. A month later, the stock market crashed.
“Everyone wants to think they’re smarter than the poor souls in developing countries, and smarter than their predecessors,” says Carmen M. Reinhart, an economist at the University of Maryland. “They’re wrong. And we can prove it.”
Like a pair of financial sleuths, Ms. Reinhart and her collaborator from Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen.
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
The book, and Ms. Reinhart’s and Mr. Rogoff’s own professional journeys as economists, zero in on some of the broader shortcomings of their trade — thrown into harsh relief by economists’ widespread failure to anticipate or address the financial crisis that began in 2007.
“The mainstream of academic research in macroeconomics puts theoretical coherence and elegance first, and investigating the data second,” says Mr. Rogoff. For that reason, he says, much of the profession’s celebrated work “was not terribly useful in either predicting the financial crisis, or in assessing how it would it play out once it happened.”
“People almost pride themselves on not paying attention to current events,” he says.
In the past, other economists often took the same empirical approach as the Reinhart-Rogoff team. But this approach fell into disfavor over the last few decades as economists glorified financial papers that were theory-rich and data-poor.
Much of that theory-driven work, critics say, is built on the same disassembled and reassembled sets of data points — generally from just the last 25 years or so and from the same handful of rich countries — that quants have whisked into ever more dazzling and complicated mathematical formations.
But in the wake of the recent crisis, a few economists — like Professors Reinhart and Rogoff, and other like-minded colleagues like Barry Eichengreen and Alan Taylor — have been encouraging others in their field to look beyond hermetically sealed theoretical models and into the historical record.
“There is so much inbredness in this profession,” says Ms. Reinhart. “They all read the same sources. They all use the same data sets. They all talk to the same people. There is endless extrapolation on extrapolation on extrapolation, and for years that is what has been rewarded.”
ONE of Ken Rogoff’s favorite economics jokes — yes, there are economics jokes — is “the one about the lamppost”: A drunk on his way home from a bar one night realizes that he has dropped his keys. He gets down on his hands and knees and starts groping around beneath a lamppost. A policeman asks what he’s doing.
“I lost my keys in the park,” says the drunk.
“Then why are you looking for them under the lamppost?” asks the puzzled cop.
“Because,” says the drunk, “that’s where the light is.”
Mr. Rogoff, 57, has spent a lifetime exploring places and ideas off the beaten track. Tall, thin and bespectacled, he grew up in Rochester. There, he attended a “tough inner-city school,” where his “true liberal parents” — a radiologist and a librarian — sent him so he would be exposed to students from a variety of social and economic classes.
He received a chess set for his 13th birthday, and he quickly discovered that he was something of a prodigy, a fact he decided to hide so he wouldn’t get beaten up in the lunchroom.
“I think chess may be a relatively cool thing for kids to do now, on par with soccer or other sports,” he says. “It really wasn’t then.”
Saturday, July 3, 2010
Nasdaq-100 Index Posts Record Losing Streak as Microsoft Slumps
Technology companies are suffering some of the U.S. stock market’s biggest losses, sending the Nasdaq-100 Index to the longest losing streak in its 25-year history.
The measure, which gets 63 percent of its value from computer-related companies such as Microsoft Corp. and Apple Inc., has declined 9.7 percent after slumping 10 consecutive days. Microsoft has tumbled 26 percent since peaking on April 22, while Apple has fallen 9.9 percent in two weeks.
“There is an orderly liquidation of equity positions by traders who are taking risk units off the table,” said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, whose clients have about $90 billion in assets. “Nasdaq is typically the home of high beta risk units. Makes perfect sense.”
U.S. shares are experiencing the largest losses since the bull market began in March 2009, when the Standard & Poor’s 500 Index sank to a 12-year low. The benchmark measure of U.S. equities has fallen in 9 out of the past 10 days as reports on consumer confidence, manufacturing, home sales and employment were weaker than economists surveyed by Bloomberg predicted, fueling concern the recovery is in peril. The S&P 500 fell 5 percent since June 25, the biggest weekly loss since May.
“We’re in a psychological bear market,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts, which oversees $500 million. “The recent economic setback is significant,” and investors are bracing for companies to reduce forecasts in the next few weeks, he added.
GDP, Profits
Economists predict that U.S. gross domestic product will expand 3.2 percent this year and 2.9 percent in 2011, according to the median forecasts in a Bloomberg survey. Profit for companies in the S&P 500 are projected to rise 32 percent to a combined $81.72 a share in 2010, according to estimates from more than 2,000 analysts tracked by Bloomberg.
Barton Biggs, whose purchase of stocks in March 2009 gave Traxis Partners LLC a 38 percent gain last year, said concern the economy is about to contract prompted him to sell almost all his U.S. technology shares this week.
“I’m worried that we could have not just a soft patch but a double dip which lasts two or three quarters, and where nominal GDP is only up 2 or 3 percent, and that’ll have a big effect on profits,” Biggs said in a Bloomberg Television interview yesterday. “It’ll scare everybody, and I’m afraid the market goes down another 10 or 15 percent if that happens.”
When stocks rebound, technology shares may be the leaders, according to James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis.
Technology is “one of the first groups to go if you go into a downward trend,” he said. “It’s going to be one that’s going to come back if we turn the corner again.”
The measure, which gets 63 percent of its value from computer-related companies such as Microsoft Corp. and Apple Inc., has declined 9.7 percent after slumping 10 consecutive days. Microsoft has tumbled 26 percent since peaking on April 22, while Apple has fallen 9.9 percent in two weeks.
“There is an orderly liquidation of equity positions by traders who are taking risk units off the table,” said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, whose clients have about $90 billion in assets. “Nasdaq is typically the home of high beta risk units. Makes perfect sense.”
U.S. shares are experiencing the largest losses since the bull market began in March 2009, when the Standard & Poor’s 500 Index sank to a 12-year low. The benchmark measure of U.S. equities has fallen in 9 out of the past 10 days as reports on consumer confidence, manufacturing, home sales and employment were weaker than economists surveyed by Bloomberg predicted, fueling concern the recovery is in peril. The S&P 500 fell 5 percent since June 25, the biggest weekly loss since May.
“We’re in a psychological bear market,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts, which oversees $500 million. “The recent economic setback is significant,” and investors are bracing for companies to reduce forecasts in the next few weeks, he added.
GDP, Profits
Economists predict that U.S. gross domestic product will expand 3.2 percent this year and 2.9 percent in 2011, according to the median forecasts in a Bloomberg survey. Profit for companies in the S&P 500 are projected to rise 32 percent to a combined $81.72 a share in 2010, according to estimates from more than 2,000 analysts tracked by Bloomberg.
Barton Biggs, whose purchase of stocks in March 2009 gave Traxis Partners LLC a 38 percent gain last year, said concern the economy is about to contract prompted him to sell almost all his U.S. technology shares this week.
“I’m worried that we could have not just a soft patch but a double dip which lasts two or three quarters, and where nominal GDP is only up 2 or 3 percent, and that’ll have a big effect on profits,” Biggs said in a Bloomberg Television interview yesterday. “It’ll scare everybody, and I’m afraid the market goes down another 10 or 15 percent if that happens.”
When stocks rebound, technology shares may be the leaders, according to James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis.
Technology is “one of the first groups to go if you go into a downward trend,” he said. “It’s going to be one that’s going to come back if we turn the corner again.”
Friday, July 2, 2010
Asian Stocks Post Weekly Drop on Signs Global Recovery Waning
July 3 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to its fourth weekly decline in five, as weaker manufacturing growth in the U.S., Europe and China added to signs global economic recovery is faltering.
Canon Inc., the world’s biggest camera maker that counts the U.S. as its second-biggest market, fell 7.7 percent. Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, tumbled 13.3 percent after predicting a wider first-half loss. Hyundai Motor Co. and Toyota Motor Corp. dropped at least 3.7 percent as car sales in the U.S. grew at a slower pace. BHP Billiton Ltd., the world’s largest mining company, fell 4.4 percent as commodity prices slipped.
“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”
The MSCI Asia Pacific Index fell 3.4 percent to 111.70. The gauge has slumped 7.3 percent this year amid concerns Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
China’s Shanghai Composite Index declined 6.7 percent, the biggest decline among benchmark indices in the Asia-Pacific after the New York-based Conference Board revised down an estimate for China’s growth and the country’s manufacturing expanded at a slower-than-expected pace. Hong Kong’s Hang Seng Index slipped 3.8 percent.
Faltering Growth
Japan’s Nikkei 225 Stock Average lost 5.5 percent, after the yen strengthened for a fourth week, dragging shares of Japanese exporters such as Canon Inc. and Sony Corp. lower. Australia’s S&P/ASX 200 Index dropped 4 percent, while South Korea’s Kospi Index sank 3.4 percent.
Gauges of raw material producers and electronics companies led this week’s decline as economic numbers released this week from China, Europe and the U.S. deteriorated.
Reports on U.S. manufacturing, employment and home sales pointed to slower growth in the second half of the year. The Institute for Supply Management’s manufacturing gauge released on July 1 fell more than forecast. Other data released on the same day showed contracts to buy existing homes tumbled in May, and claims for jobless benefits unexpectedly rose last week. A report by the New York-based Conference Board on June 29 also showed confidence among consumers declined more than forecast last month.
Slower Sales
Canon, which got about 28 percent of sales from the U.S. last year, fell 7.7 percent to 3,260 yen. Sony, the maker of Playstation gaming consoles and Bravia televisions, dropped 5.4 percent to 2,310 yen. Panasonic Corp., the world’s largest maker of plasma TVs, slipped 5.8 percent to 1,098 yen.
Shares of Asian automakers dropped as data released by Autodata Corp. on July 1 showed the growth in sales in the U.S. decelerated to 14 percent last month from a year earlier, after gains of 19 percent in May and 20 percent in April.
Toyota, the world’s biggest carmaker, slid 3.7 percent to 3,020 yen. Honda Motor Co., which counts North America as its biggest market, declined 6.8 percent to 2,495 yen. Hyundai Motor Co., South Korea’s biggest carmaker, dropped 7.7 percent to 132,500 won.
Japanese exporters also declined as a stronger yen threatened to reduce the value of overseas sales when repatriated. The dollar fell for a fourth week against the yen as signs the global recovery is faltering boosted demand for safer assets.
Australia Tax Agreement
Foxconn, controlled by Taiwan’s Hon Hai Precision Industry Co., slumped 13.3 percent to HK$4.88, the third-biggest decline on the MSCI Asia Pacific Index. The company said on June 29 its first-half loss will widen in part because of lower prices for its products and higher depreciation expenses, triggering a wave target price cuts from Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Shares of mining companies declined as weaker commodity prices weighed on the sector even as Australian Prime Minister Julia Gillard scaled back a proposed tax on mining companies.
BHP Billiton Ltd. declined 4.4 percent to A$37.09. Rio Tinto Ltd., the world’s third-biggest mining company, dropped 6.2 percent to A$65.30. Jiangxi Copper Co., China’s biggest supplier of the metal, lost 6 percent to HK$14.46.
The Reuters/Jefferies CRB Index, which tracks prices of commodities from copper to corn, dropped 4.2 percent amid heightened concern over the economic health of the China.
China Forecasts Cut
China’s manufacturing growth slowed more than economists forecast in June, data released on July 1 showed. The Conference Board on June 29 corrected down its April gauge for the nation’s economic outlook due to a calculation error.
Goldman Sachs Group Inc. yesterday cut its real gross domestic product growth forecast for China this year to 10.1 percent from 11.4 percent, joining BNP Paribas, Macquarie Securities Ltd. and China International Capital Corp. in doing so.
Companies with substantial business in Europe dropped after two surveys released on July 1 showed factory output in the 16- member euro region weakened for a second month.
Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest market, dropped 5.5 percent to HK$42. Li & Fung Ltd., the supplier of toys and home furnishings that got 27 percent of sales from Europe last year, dropped 10 percent to HK$34.85. Billabong International Ltd., the world’s biggest publicly traded surfwear maker, lost 2.7 percent to A$8.64.
Canon Inc., the world’s biggest camera maker that counts the U.S. as its second-biggest market, fell 7.7 percent. Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, tumbled 13.3 percent after predicting a wider first-half loss. Hyundai Motor Co. and Toyota Motor Corp. dropped at least 3.7 percent as car sales in the U.S. grew at a slower pace. BHP Billiton Ltd., the world’s largest mining company, fell 4.4 percent as commodity prices slipped.
“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”
The MSCI Asia Pacific Index fell 3.4 percent to 111.70. The gauge has slumped 7.3 percent this year amid concerns Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.
China’s Shanghai Composite Index declined 6.7 percent, the biggest decline among benchmark indices in the Asia-Pacific after the New York-based Conference Board revised down an estimate for China’s growth and the country’s manufacturing expanded at a slower-than-expected pace. Hong Kong’s Hang Seng Index slipped 3.8 percent.
Faltering Growth
Japan’s Nikkei 225 Stock Average lost 5.5 percent, after the yen strengthened for a fourth week, dragging shares of Japanese exporters such as Canon Inc. and Sony Corp. lower. Australia’s S&P/ASX 200 Index dropped 4 percent, while South Korea’s Kospi Index sank 3.4 percent.
Gauges of raw material producers and electronics companies led this week’s decline as economic numbers released this week from China, Europe and the U.S. deteriorated.
Reports on U.S. manufacturing, employment and home sales pointed to slower growth in the second half of the year. The Institute for Supply Management’s manufacturing gauge released on July 1 fell more than forecast. Other data released on the same day showed contracts to buy existing homes tumbled in May, and claims for jobless benefits unexpectedly rose last week. A report by the New York-based Conference Board on June 29 also showed confidence among consumers declined more than forecast last month.
Slower Sales
Canon, which got about 28 percent of sales from the U.S. last year, fell 7.7 percent to 3,260 yen. Sony, the maker of Playstation gaming consoles and Bravia televisions, dropped 5.4 percent to 2,310 yen. Panasonic Corp., the world’s largest maker of plasma TVs, slipped 5.8 percent to 1,098 yen.
Shares of Asian automakers dropped as data released by Autodata Corp. on July 1 showed the growth in sales in the U.S. decelerated to 14 percent last month from a year earlier, after gains of 19 percent in May and 20 percent in April.
Toyota, the world’s biggest carmaker, slid 3.7 percent to 3,020 yen. Honda Motor Co., which counts North America as its biggest market, declined 6.8 percent to 2,495 yen. Hyundai Motor Co., South Korea’s biggest carmaker, dropped 7.7 percent to 132,500 won.
Japanese exporters also declined as a stronger yen threatened to reduce the value of overseas sales when repatriated. The dollar fell for a fourth week against the yen as signs the global recovery is faltering boosted demand for safer assets.
Australia Tax Agreement
Foxconn, controlled by Taiwan’s Hon Hai Precision Industry Co., slumped 13.3 percent to HK$4.88, the third-biggest decline on the MSCI Asia Pacific Index. The company said on June 29 its first-half loss will widen in part because of lower prices for its products and higher depreciation expenses, triggering a wave target price cuts from Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Shares of mining companies declined as weaker commodity prices weighed on the sector even as Australian Prime Minister Julia Gillard scaled back a proposed tax on mining companies.
BHP Billiton Ltd. declined 4.4 percent to A$37.09. Rio Tinto Ltd., the world’s third-biggest mining company, dropped 6.2 percent to A$65.30. Jiangxi Copper Co., China’s biggest supplier of the metal, lost 6 percent to HK$14.46.
The Reuters/Jefferies CRB Index, which tracks prices of commodities from copper to corn, dropped 4.2 percent amid heightened concern over the economic health of the China.
China Forecasts Cut
China’s manufacturing growth slowed more than economists forecast in June, data released on July 1 showed. The Conference Board on June 29 corrected down its April gauge for the nation’s economic outlook due to a calculation error.
Goldman Sachs Group Inc. yesterday cut its real gross domestic product growth forecast for China this year to 10.1 percent from 11.4 percent, joining BNP Paribas, Macquarie Securities Ltd. and China International Capital Corp. in doing so.
Companies with substantial business in Europe dropped after two surveys released on July 1 showed factory output in the 16- member euro region weakened for a second month.
Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest market, dropped 5.5 percent to HK$42. Li & Fung Ltd., the supplier of toys and home furnishings that got 27 percent of sales from Europe last year, dropped 10 percent to HK$34.85. Billabong International Ltd., the world’s biggest publicly traded surfwear maker, lost 2.7 percent to A$8.64.
Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole
CHICAGO — Even by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.
He picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.
Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.
States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
As the recession has swept over states and cities, it has laid bare economic weakness and shoddy fiscal practices. Only an infusion of federal stimulus money allowed many states to avert deep layoffs last year.
Cuts in Work Forces
The federal dollars are nearly spent. Last month, local governments nationwide shed more than 20,000 jobs. Should the largest struggling states — like California, New York or Illinois — lay off tens of thousands more in coming months, or default on payments, the reverberations could badly damage a weakened economy and push housing prices down still further.
“You’re not seeing these states bounce back, and that could be a big drag on the national economy,” said Susan K. Urahn of the Pew Center on the States. “It could be a very tough decade.”
In Illinois, the fiscal pain is radiating downward.
From suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs. Drug, family and mental health counseling centers have slashed their work forces and borrowed money to stave off insolvency.
In Beardstown, a small city deep in the western marshes, Ann Johnson plans to shut her century-old pharmacy. Because of late state payments, she could not afford to keep a 10-day supply of drugs. In Chicago, a funeral home owner wonders whether he can afford to bury the impoverished, as the state has fallen six months behind on its charity payments, $1,103 a funeral.
In Peoria — where the city faced a $14.5 million gap this year and could face an additional $10 million budget hole next year — Virginia Holwell, a trainer of child welfare caseworkers, lost her job when the state cut payments to her agency. She sits in her living room high above the Illinois River and calculates the months of savings left before the bank forecloses on her house.
“I’ve got enough to last until the end of August,” she says, matter-of-factly. “I’m 58 and I’m pretty good at what I do, and I got to tell you, I’m pretty devastated.”
He picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.
Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.
States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
As the recession has swept over states and cities, it has laid bare economic weakness and shoddy fiscal practices. Only an infusion of federal stimulus money allowed many states to avert deep layoffs last year.
Cuts in Work Forces
The federal dollars are nearly spent. Last month, local governments nationwide shed more than 20,000 jobs. Should the largest struggling states — like California, New York or Illinois — lay off tens of thousands more in coming months, or default on payments, the reverberations could badly damage a weakened economy and push housing prices down still further.
“You’re not seeing these states bounce back, and that could be a big drag on the national economy,” said Susan K. Urahn of the Pew Center on the States. “It could be a very tough decade.”
In Illinois, the fiscal pain is radiating downward.
From suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs. Drug, family and mental health counseling centers have slashed their work forces and borrowed money to stave off insolvency.
In Beardstown, a small city deep in the western marshes, Ann Johnson plans to shut her century-old pharmacy. Because of late state payments, she could not afford to keep a 10-day supply of drugs. In Chicago, a funeral home owner wonders whether he can afford to bury the impoverished, as the state has fallen six months behind on its charity payments, $1,103 a funeral.
In Peoria — where the city faced a $14.5 million gap this year and could face an additional $10 million budget hole next year — Virginia Holwell, a trainer of child welfare caseworkers, lost her job when the state cut payments to her agency. She sits in her living room high above the Illinois River and calculates the months of savings left before the bank forecloses on her house.
“I’ve got enough to last until the end of August,” she says, matter-of-factly. “I’m 58 and I’m pretty good at what I do, and I got to tell you, I’m pretty devastated.”
India’s Singh to Open Delhi Airport Terminal 3, Easing Travel
July 3 (Bloomberg) -- Indian Prime Minister Manmohan Singh will today open a terminal at New Delhi airport that will double the airport’s capacity and ease travel into the world’s second- most populous country.
The new terminal, spread over 5.4 million square feet, has 78 gates, 97 automated walkways, 95 immigration counters, 20,000 square meters of retail space and parking for 4,300 cars. The facility, which will begin handling international flights on July 14, will boost the airport’s total capacity to 60 million passengers a year.
The Delhi terminal and another planned in Mumbai are part of a government infrastructure push designed to lure overseas investment and support travel demand stoked by the nation’s surging economic growth. Nationwide, the number of domestic passengers will grow more than fourfold to 180 million by 2020, according to a ministry of civil aviation forecast.
“It is essential for India that T3 is seen as a success,” said Andreas Schimm, director of economics and program development at Airports Council International, a Geneva-based trade group. “If significant investments are not paying off, capacity will not keep pace with demand as investors will shy away from the airport industry.”
$2.7 Billion Terminal
Along with other renovations, construction of Terminal 3 cost about $2.7 billion, according to Kiran Kumar Grandhi, chairman, airports at GMR Group. The facility will be run by a group backed by Bangalore-based GMR, state-run Airports Authority of India Ltd., Frankfurt-based Fraport AG and Malaysia Airports Holdings Bhd.
The new facility may boost travel by drawing more carriers, improving connectivity between flights and easing queues. About 25 million passengers passed through Delhi airport in the year ended March. Dubai handled 40.9 million travelers in 2009 and Singapore’s Changi airport moved 37.2 million, according to Airports Council International data.
“For the first time an Indian airport will rank alongside Changi, Hong Kong and Dubai,” said Binit Somaia, director for South Asia at the Sydney-based Centre for Asia Pacific Aviation. “That is a big step forward.”
The new facility was completed in 37 months compared with the 45 months China took to build the terminal that opened in Beijing ahead of the 2008 Olympics.
Travel Hub
Carriers including Jet Airways (India) Ltd., the nation’s largest, Kingfisher Airlines Ltd. and Air India will move domestic services to Terminal 3 around the end of the month. Low-cost carriers such as SpiceJet Ltd. will use a different facility.
Domestic carriers need to take advantage of the new terminal to develop New Delhi as a hub for both domestic and international travel, Civil Aviation Minister Praful Patel told reporters yesterday.
“Lufthansa, Singapore Airlines and British Airways, which are all reputed in the world, have only become big because they have encashed on the hub,” said Patel in New Delhi. “India did not have that.”
The ministry of civil aviation will pursue other government departments and state administrations to lower taxes on aviation turbine fuel and ease transit visa rules to facilitate development of Delhi as a hub, Patel said.
Airbus A380
Emirates Airline has applied to fly the Airbus SAS A380 superjumbo to Delhi with the opening of the new terminal, India’s Director General of Civil Aviation Nasim Zaidi said last month. AirAsia X, part-owned by Malaysia-based AirAsia Bhd., will add services to the city from Aug. 4. The group may also add flights from Bangkok, AirAsia Chief Executive Officer Tony Fernandes said last month.
“Improved infrastructure such as new terminals help boost air traffic and enhance the travel experience,” he said in an e-mailed response to questions. “This will mean a quicker turnaround time for our aircraft operations, helping keep costs low and enabling us to offer our lower fares.”
Indian air travel has risen alongside an economy growing at an average rate of 8.5 percent annually over the past five years and the rise of discount carriers. The number of airports with scheduled services has climbed to 82 from 50 over the past 10 years, according to the civil aviation ministry.
The new terminal in Mumbai, India’s financial capital, is due to open in 2012. The government has also approved plans for the construction of seven new airports.
The new terminal, spread over 5.4 million square feet, has 78 gates, 97 automated walkways, 95 immigration counters, 20,000 square meters of retail space and parking for 4,300 cars. The facility, which will begin handling international flights on July 14, will boost the airport’s total capacity to 60 million passengers a year.
The Delhi terminal and another planned in Mumbai are part of a government infrastructure push designed to lure overseas investment and support travel demand stoked by the nation’s surging economic growth. Nationwide, the number of domestic passengers will grow more than fourfold to 180 million by 2020, according to a ministry of civil aviation forecast.
“It is essential for India that T3 is seen as a success,” said Andreas Schimm, director of economics and program development at Airports Council International, a Geneva-based trade group. “If significant investments are not paying off, capacity will not keep pace with demand as investors will shy away from the airport industry.”
$2.7 Billion Terminal
Along with other renovations, construction of Terminal 3 cost about $2.7 billion, according to Kiran Kumar Grandhi, chairman, airports at GMR Group. The facility will be run by a group backed by Bangalore-based GMR, state-run Airports Authority of India Ltd., Frankfurt-based Fraport AG and Malaysia Airports Holdings Bhd.
The new facility may boost travel by drawing more carriers, improving connectivity between flights and easing queues. About 25 million passengers passed through Delhi airport in the year ended March. Dubai handled 40.9 million travelers in 2009 and Singapore’s Changi airport moved 37.2 million, according to Airports Council International data.
“For the first time an Indian airport will rank alongside Changi, Hong Kong and Dubai,” said Binit Somaia, director for South Asia at the Sydney-based Centre for Asia Pacific Aviation. “That is a big step forward.”
The new facility was completed in 37 months compared with the 45 months China took to build the terminal that opened in Beijing ahead of the 2008 Olympics.
Travel Hub
Carriers including Jet Airways (India) Ltd., the nation’s largest, Kingfisher Airlines Ltd. and Air India will move domestic services to Terminal 3 around the end of the month. Low-cost carriers such as SpiceJet Ltd. will use a different facility.
Domestic carriers need to take advantage of the new terminal to develop New Delhi as a hub for both domestic and international travel, Civil Aviation Minister Praful Patel told reporters yesterday.
“Lufthansa, Singapore Airlines and British Airways, which are all reputed in the world, have only become big because they have encashed on the hub,” said Patel in New Delhi. “India did not have that.”
The ministry of civil aviation will pursue other government departments and state administrations to lower taxes on aviation turbine fuel and ease transit visa rules to facilitate development of Delhi as a hub, Patel said.
Airbus A380
Emirates Airline has applied to fly the Airbus SAS A380 superjumbo to Delhi with the opening of the new terminal, India’s Director General of Civil Aviation Nasim Zaidi said last month. AirAsia X, part-owned by Malaysia-based AirAsia Bhd., will add services to the city from Aug. 4. The group may also add flights from Bangkok, AirAsia Chief Executive Officer Tony Fernandes said last month.
“Improved infrastructure such as new terminals help boost air traffic and enhance the travel experience,” he said in an e-mailed response to questions. “This will mean a quicker turnaround time for our aircraft operations, helping keep costs low and enabling us to offer our lower fares.”
Indian air travel has risen alongside an economy growing at an average rate of 8.5 percent annually over the past five years and the rise of discount carriers. The number of airports with scheduled services has climbed to 82 from 50 over the past 10 years, according to the civil aviation ministry.
The new terminal in Mumbai, India’s financial capital, is due to open in 2012. The government has also approved plans for the construction of seven new airports.
India opens $1.3bn air terminal in capital
Until now, international travellers arriving in New Delhi transited through a dingy socialist-era terminal that seemed out of kilter with India’s status as one Asia’s fastest-growing economies. As the airport had few aerobridges, most passengers rode rickety buses to reach the gloomy arrivals hall.
But India’s capital is finally getting an international gateway befitting its aspirations as an emerging global superpower, with today’s inauguration of a gleaming new ultra-modern air terminal.
Built at an estimated cost of $1.3bn (€1bn, £860m) by a consortium led by Bangalore-based GMR, the nine-storey glass-and-steel terminal – with 78 aerobridges, upscale boutiques and eateries – can accommodate 34m international and domestic passengers a year and will raise the airport’s total capacity to 60m.
Its inauguration comes as India’s air travel revolution is regaining momentum after last year’s slowdown, with passenger traffic from January to May up 22 per cent over last year.
“We want to show the world what a world-class airport we have,” G.M. Rao, founding chairman of GMR – one of India’s pioneering new breed of infrastructure companies – said in a recent television interview. “It’s a brand for the country.”
New Delhi’s swish new terminal – part of a $2.6bn modernisation of the whole airport – is the jewel in the crown of a once controversial limited airport privatisation programme that has seen India’s four biggest airports put under private investor control, and transformed the flying experience for many Indians.
Bangalore and Hyderabad, the country’s main IT hubs, both opened swanky new airports two years ago, and their overcrowded state-run facilities were shut down. Both airports were “greenfield” facilities – built from scratch on undeveloped sites. GVK, the Hyderabad-based infrastructure company, is building a $2bn new international terminal at Mumbai, though the airport’s small size means air traffic congestion – and long delays – will remain a problem. Plans to build a greenfield airport in Mumbai, however, are still bogged down, awaiting environmental clearance.
International and domestic airlines will start operating from New Delhi’s new terminal in two phases over the next month, four years after GMR was given control of the airport – which handled 25m passengers last year.
Amber Dubey, an analyst with KPMG, calls the rapid completion of the terminal a “remarkable feat,” demonstrating India’s ability to build world-class infrastructure if given a chance. “The message is, ‘we can, and we will,’ ” he said.
But even as India’s political and business elite gear up to celebrate the country’s newest status symbol, dozens of other Indian airports – at business hubs like Chennai, major cities like Calcutta, and tourist sites like Varanasi, Goa and Jaipur – are still firmly under state control, and remain dismal utilitarian relics of the socialist past.
The Airports Authority of India – which holds minority equity stakes in all four privatised airports – has a $3bn plan to upgrade and expand the basic infrastructure of 35 of the busiest of these facilities. But raising funds may prove difficult, as most of the airports AAI operates are loss-making.
Even if cash can be raised, many analysts doubt that the airports authority – with lack of talent at the higher levels and excessive staffing at the lower levels – has the vision and entreprenuerial drive to satisfy India’s increasingly demanding consumers.
“The quality of Indian airports is almost like a national shame,” said one industry analyst, who asked not to be identified. “They are almost worse than the railway stations in Europe.”
But India’s capital is finally getting an international gateway befitting its aspirations as an emerging global superpower, with today’s inauguration of a gleaming new ultra-modern air terminal.
Built at an estimated cost of $1.3bn (€1bn, £860m) by a consortium led by Bangalore-based GMR, the nine-storey glass-and-steel terminal – with 78 aerobridges, upscale boutiques and eateries – can accommodate 34m international and domestic passengers a year and will raise the airport’s total capacity to 60m.
Its inauguration comes as India’s air travel revolution is regaining momentum after last year’s slowdown, with passenger traffic from January to May up 22 per cent over last year.
“We want to show the world what a world-class airport we have,” G.M. Rao, founding chairman of GMR – one of India’s pioneering new breed of infrastructure companies – said in a recent television interview. “It’s a brand for the country.”
New Delhi’s swish new terminal – part of a $2.6bn modernisation of the whole airport – is the jewel in the crown of a once controversial limited airport privatisation programme that has seen India’s four biggest airports put under private investor control, and transformed the flying experience for many Indians.
Bangalore and Hyderabad, the country’s main IT hubs, both opened swanky new airports two years ago, and their overcrowded state-run facilities were shut down. Both airports were “greenfield” facilities – built from scratch on undeveloped sites. GVK, the Hyderabad-based infrastructure company, is building a $2bn new international terminal at Mumbai, though the airport’s small size means air traffic congestion – and long delays – will remain a problem. Plans to build a greenfield airport in Mumbai, however, are still bogged down, awaiting environmental clearance.
International and domestic airlines will start operating from New Delhi’s new terminal in two phases over the next month, four years after GMR was given control of the airport – which handled 25m passengers last year.
Amber Dubey, an analyst with KPMG, calls the rapid completion of the terminal a “remarkable feat,” demonstrating India’s ability to build world-class infrastructure if given a chance. “The message is, ‘we can, and we will,’ ” he said.
But even as India’s political and business elite gear up to celebrate the country’s newest status symbol, dozens of other Indian airports – at business hubs like Chennai, major cities like Calcutta, and tourist sites like Varanasi, Goa and Jaipur – are still firmly under state control, and remain dismal utilitarian relics of the socialist past.
The Airports Authority of India – which holds minority equity stakes in all four privatised airports – has a $3bn plan to upgrade and expand the basic infrastructure of 35 of the busiest of these facilities. But raising funds may prove difficult, as most of the airports AAI operates are loss-making.
Even if cash can be raised, many analysts doubt that the airports authority – with lack of talent at the higher levels and excessive staffing at the lower levels – has the vision and entreprenuerial drive to satisfy India’s increasingly demanding consumers.
“The quality of Indian airports is almost like a national shame,” said one industry analyst, who asked not to be identified. “They are almost worse than the railway stations in Europe.”
Thursday, July 1, 2010
Lobbyist Says It’s About Information, Not Influence
WASHINGTON — On the eve of a critical Congressional vote last week on a sweeping measure to regulate Wall Street, the prominent lobbyist Tony Podesta met with one of the lawmakers to go over some final language and discuss the effect it could have on his many corporate clients.
“He exaggerates our power, but he increases demand for our services,” Tony Podesta said of President Obama.
Related
*
Congressman Seeks Inquiry on Trailers (July 2, 2010)
Once that was over, Mr. Podesta pivoted back to another client, BP, to help the company navigate Congressional waters and, in short, try to prevent an ugly situation from getting even uglier.
For weeks now, the two biggest issues in Congress have been cleaning up Wall Street and cleaning up the Gulf Coast. To the surprise of no one in the capital’s K Street corridor, Mr. Podesta — Democratic fund-raiser, avid art collector and member of a family brand in Washington — has had a big hand in both. And medical companies have also been drawn to his firm, particularly in the wake of the health care legislation.
In a remarkable season of lobbying, business is booming for the Podesta Group, already one of Washington’s biggest players. It has become particularly lucrative for firms like Mr. Podesta’s that are skilled at wielding influence in Congress, the center of epic debates on health care, bailouts and financial regulations.
“We’ve been dealing with some very big issues,” he said with a bit of understatement.
For lobbyists, the Obama legislative agenda has been a veritable full-employment program, with 2,500 working just on financial regulation alone.
The results are often buried deep in the fine print.
On Wall Street regulation, for instance, Mr. Podesta lobbied on 25 different issues for major players like Bank of America as well as smaller companies.
He recently represented a “person to person” lender, Prosper Marketplace, which makes loans over the Internet. The company worried about the prospect of coming under the jurisdiction of the Securities and Exchange Commission, which insisted that Prosper should be treated as an investment firm.
Mr. Podesta and lobbyists at his firm, including Israel Klein, a former top aide to Senator Charles E. Schumer, Democrat of New York, worked through a number of senior Democratic allies in both the House and the Senate.
Among those they lobbied to resist the S.E.C.’s purview included Representative Barney Frank, the Financial Services Committee chairman; Senator Christopher J. Dodd, the banking committee chairman; Senator Barbara Boxer of California; and Mr. Schumer. Once the Podesta team realized it could not defeat the idea, it resorted to an old Washington standby — delay by study.
In the end, House and Senate negotiators agreed last week to a government study, delaying federal jurisdiction and possible S.E.C. oversight.
“It wasn’t a total loss,” Mr. Podesta said. “We ended up in the middle.”
On BP, Mr. Podesta has acted mainly as a liaison between Congressional investigators and the embattled company. For instance, the firm helped to work out a schedule to give BP more time to turn over corporate documents in the face of a dozen Congressional hearings.
Mr. Podesta, a garrulous, gravelly voiced man known for his bold neckwear, is part of the elite group of lobbyists atop the industry who move easily between black-tie fund-raisers on Embassy Row and closed meetings on Capitol Hill. Despite the recession, lobbying scandals and frequent denunciation from President Obama about their outsize influence, lobbyists are more in demand than ever.
“The irony of it is that every time the president says we lobbyists have all this influence, people who don’t have a lobbyist want one,” Mr. Podesta said in an interview. “He exaggerates our power, but he increases demand for our services.”
Revenue for the more than 11,000 federal lobbyists rose 5 percent last year, to more than $3.5 billion, and fees at the Podesta Group have more than doubled since 2006, to $25.7 million last year, according to data from the Center for Responsive Politics.
General Dynamics, the big military contractor, and Genzyme, the biotech company, pay half a million dollars or more a year for the firm’s services. In four years, the Podesta Group has tripled its staff of lobbyists.
Mr. Podesta waves his hand dismissively and chortles when discussing the criticism and new restrictions that lobbyists face from the White House.
“Whatever they’re gonna do, they’ll do,” he said. “They can ban lobbyists from having drivers licenses. We’ll all get cars and drivers.”
The obvious friction between Mr. Podesta and the White House has an added dimension; his brother and former partner, John Podesta, headed up Mr. Obama’s presidential transition and is a crucial presidential ally.
Some prospective clients, in fact, will contact Mr. Podesta because of his brother’s ties to Mr. Obama. “People approach us and say, ‘Can you call your brother and get him to call the president,’ and we’ll say, ‘No.’ It’s not what we do. We don’t do access lobbying.”
Mr. Podesta does some work with the White House despite the tension, but his lobbying is directed mainly on Congress, where debate has focused on huge and historic measures.
In a capital fragmented by politics, the best lobbyists “are able to work across fields and across branches of government — and even across political parties,” said Rogan Kersh, a New York University professor who studies lobbying.
“A Tony Podesta isn’t going to wave a magic wand and make all of BP’s problems go away,” he said, “but his clients are going to get a blueprint for how to succeed in official Washington.”
Mr. Podesta’s status has made him a target, too; advocates for campaign finance reform dressed as “Founding Fathers” picketed in the lobby of his building this week.
“He exaggerates our power, but he increases demand for our services,” Tony Podesta said of President Obama.
Related
*
Congressman Seeks Inquiry on Trailers (July 2, 2010)
Once that was over, Mr. Podesta pivoted back to another client, BP, to help the company navigate Congressional waters and, in short, try to prevent an ugly situation from getting even uglier.
For weeks now, the two biggest issues in Congress have been cleaning up Wall Street and cleaning up the Gulf Coast. To the surprise of no one in the capital’s K Street corridor, Mr. Podesta — Democratic fund-raiser, avid art collector and member of a family brand in Washington — has had a big hand in both. And medical companies have also been drawn to his firm, particularly in the wake of the health care legislation.
In a remarkable season of lobbying, business is booming for the Podesta Group, already one of Washington’s biggest players. It has become particularly lucrative for firms like Mr. Podesta’s that are skilled at wielding influence in Congress, the center of epic debates on health care, bailouts and financial regulations.
“We’ve been dealing with some very big issues,” he said with a bit of understatement.
For lobbyists, the Obama legislative agenda has been a veritable full-employment program, with 2,500 working just on financial regulation alone.
The results are often buried deep in the fine print.
On Wall Street regulation, for instance, Mr. Podesta lobbied on 25 different issues for major players like Bank of America as well as smaller companies.
He recently represented a “person to person” lender, Prosper Marketplace, which makes loans over the Internet. The company worried about the prospect of coming under the jurisdiction of the Securities and Exchange Commission, which insisted that Prosper should be treated as an investment firm.
Mr. Podesta and lobbyists at his firm, including Israel Klein, a former top aide to Senator Charles E. Schumer, Democrat of New York, worked through a number of senior Democratic allies in both the House and the Senate.
Among those they lobbied to resist the S.E.C.’s purview included Representative Barney Frank, the Financial Services Committee chairman; Senator Christopher J. Dodd, the banking committee chairman; Senator Barbara Boxer of California; and Mr. Schumer. Once the Podesta team realized it could not defeat the idea, it resorted to an old Washington standby — delay by study.
In the end, House and Senate negotiators agreed last week to a government study, delaying federal jurisdiction and possible S.E.C. oversight.
“It wasn’t a total loss,” Mr. Podesta said. “We ended up in the middle.”
On BP, Mr. Podesta has acted mainly as a liaison between Congressional investigators and the embattled company. For instance, the firm helped to work out a schedule to give BP more time to turn over corporate documents in the face of a dozen Congressional hearings.
Mr. Podesta, a garrulous, gravelly voiced man known for his bold neckwear, is part of the elite group of lobbyists atop the industry who move easily between black-tie fund-raisers on Embassy Row and closed meetings on Capitol Hill. Despite the recession, lobbying scandals and frequent denunciation from President Obama about their outsize influence, lobbyists are more in demand than ever.
“The irony of it is that every time the president says we lobbyists have all this influence, people who don’t have a lobbyist want one,” Mr. Podesta said in an interview. “He exaggerates our power, but he increases demand for our services.”
Revenue for the more than 11,000 federal lobbyists rose 5 percent last year, to more than $3.5 billion, and fees at the Podesta Group have more than doubled since 2006, to $25.7 million last year, according to data from the Center for Responsive Politics.
General Dynamics, the big military contractor, and Genzyme, the biotech company, pay half a million dollars or more a year for the firm’s services. In four years, the Podesta Group has tripled its staff of lobbyists.
Mr. Podesta waves his hand dismissively and chortles when discussing the criticism and new restrictions that lobbyists face from the White House.
“Whatever they’re gonna do, they’ll do,” he said. “They can ban lobbyists from having drivers licenses. We’ll all get cars and drivers.”
The obvious friction between Mr. Podesta and the White House has an added dimension; his brother and former partner, John Podesta, headed up Mr. Obama’s presidential transition and is a crucial presidential ally.
Some prospective clients, in fact, will contact Mr. Podesta because of his brother’s ties to Mr. Obama. “People approach us and say, ‘Can you call your brother and get him to call the president,’ and we’ll say, ‘No.’ It’s not what we do. We don’t do access lobbying.”
Mr. Podesta does some work with the White House despite the tension, but his lobbying is directed mainly on Congress, where debate has focused on huge and historic measures.
In a capital fragmented by politics, the best lobbyists “are able to work across fields and across branches of government — and even across political parties,” said Rogan Kersh, a New York University professor who studies lobbying.
“A Tony Podesta isn’t going to wave a magic wand and make all of BP’s problems go away,” he said, “but his clients are going to get a blueprint for how to succeed in official Washington.”
Mr. Podesta’s status has made him a target, too; advocates for campaign finance reform dressed as “Founding Fathers” picketed in the lobby of his building this week.
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