KeNo's Housing and Economic Portal: Saturday September 5 Housing and Economic stories

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Take that, Nevada: California answers ads wooing business - (www.latimes.com) The Golden State won't let its businesses go easily, especially not to Nevada, if one California lawmaker has his say. A week after the Nevada Development Authority ran a series of advertisements urging California companies to jump ship, Assemblyman Jose Solorio (D-Santa Ana) is retaliating. "I was pretty outraged by the nastiness of their tone," he said. "It's one thing to compare states in a factual way, but when you're doing nasty ads veiled in humor which dehumanize Californians, that's over the top." On Friday, Solorio launched his own offensive: a multimedia blitz of pro-California ads proclaiming that "What happens in Vegas stays in Vegas, but what happens in California makes the world go 'round." In the video, sweeping shots of state landmarks and a list of prominent California businesses including Gap Inc. and EBay Inc. are interspersed with arid images attributed to Nevada. The spots will show up on newspaper websites, Google ad sites, Facebook and e-mails, as well as on cable channels in Los Angeles, Orange County, Sacramento, Las Vegas and Reno, Solorio said. There's even a website -- CaliforniaIsGolden.com -- where he hopes staunch supporters will express their state pride. On the site, a gold medal stamped with "#1" is laid over a silver medal inscribed with "Not Even Close." The publicity strike was inspired by a Los Angeles Times article about Nevada's TV, radio and print ads, Solorio said. The spots compared California legislators to monkeys and the state budget to flying pigs. Solorio's response tries to put a positive spin on a "tough deal," said A. Somer Hollingsworth, chief executive of the Nevada Development Authority. "I understand what they're going through, and I expected something like this," he said. "I'm not offended -- it's a good response." Nevada's ads, which are scheduled to run for a year on a million-dollar budget, already have brought nearly 50 inquiries, Hollingsworth said. "It's overwhelming," he said. "We must have struck a nerve." Solorio wouldn't disclose the cost of his ads but said it would be significantly less than what Nevada paid for its "attack ads." The ads are being funded through Solorio's campaign committee.

Goldman's Trading Tips Reward Its Biggest Clients - (online.wsj.com) Goldman Sachs Group Inc. research analyst Marc Irizarry's published rating on mutual-fund manager Janus Capital Group Inc. was a lackluster "neutral" in early April 2008. But at an internal meeting that month, the analyst told dozens of Goldman's traders the stock was likely to head higher, company documents show. The next day, research-department employees at Goldman called about 50 favored clients of the big securities firm with the same tip, including hedge-fund companies Citadel Investment Group and SAC Capital Advisors, the documents indicate. Readers of Mr. Irizarry's research didn't find out he was bullish until his written report was issued six days later, after Janus shares had jumped 5.8%. Every week, Goldman analysts offer stock tips at a gathering the firm calls a "trading huddle." But few of the thousands of clients who receive Goldman's written research reports ever hear about the recommendations. At the meetings, Goldman analysts identify stocks they think are likely to rise or fall due to earnings announcements, the direction of the overall market or other short-term developments. Some of their recommendations differ from ratings printed in Goldman's widely circulated research reports. Some Goldman traders who make bets with the firm's own money attend the meetings. Critics complain that Goldman's distribution of the trading ideas only to its own traders and key clients hurts other customers who aren't given the opportunity to trade on the information. Securities laws require firms like Goldman to engage in "fair dealing with customers," and prohibit analysts from issuing opinions that are at odds with their true beliefs about a stock. Steven Strongin, Goldman's stock research chief, says no one gains an unfair advantage from its trading huddles, and that the short-term-trading ideas are not contrary to the longer-term stock forecasts in its written research. Former Goldman client George Klopfer of Park City, Utah, who was unaware of the trading tips until recently, says the practice is unfair. "When I joined Goldman as a client, I got all these fancy brochures saying they put the client first," he says. "I just don't want to have to worry about them or big clients trading on stuff like this. I was at the end of the food chain." He says he pulled out most of the $20 million in his account earlier this year after losing money on several Goldman funds. Goldman says individual clients like Mr. Klopfer typically have a long-term investing approach and are not focused on individual stocks.

Questions raised over Goldman research policy - (www.marketwatch.com) Goldman Sachs Group Inc. regularly provides its top clients with stock-trading tips that differ from the firm's published research reports, The Wall Street Journal reported on Monday. The report said that the firm's researchers hold weekly meetings, referred to as the "trading huddle," at which analysts discuss their latest views of individual stocks, and that those views are passed on to the firm's top clients and Goldman traders who run the firm's own money. The paper, citing company documents, said few of the firm's clients who receive written stock research from Goldman ever hear or know about the views that emerge from the meetings. The report cited research on asset manager Janus Capital Group Inc.as an example of the practice. It said Goldman issued a report on Janus on April 1, 2008, rating the stock neutral, and a day later at one of the weekly meetings told a group of Goldman traders that the stock was likely to go higher. Following that meeting, the paper reported that research department employees called about 50 favored clients, and passed on the information about Janus from the meeting. Goldman's clients who receive written research did not find out about the bullish update until six days after the call to top clients, according to the report. The report cited critics of the practice, who argue that the policy hurts customers who do not receive the updates. The report quoted a Goldman Sachs spokesman in its story saying, "Analysts are expected to discuss events that may have a near-term or short-term impact on a stock's price." He further told the paper that earnings estimates or stock-price targets "must be published and disseminated broadly to all clients." Goldman Sachs declined to comment to MarketWatch on the story on Monday morning.

The Man Who Sells America’s I.O.U.’s - (www.nytimes.com) The brightly illuminated room looks like mission control for a space flight. Seven people, wearing headphones, stare intently at computer screens. Three minutes before the deadline, a disembodied voice exclaims, “We have coverage.” This is no shuttle launch. It is an auction of United States Treasurysecurities, and $32 billion has just been sold in a blink. It was another successful operation for Van Zeck, the commissioner of the public debt, who has the world’s biggest credit card. Mr. Zeck has worked for the federal government for 38 of his 60 years. He is a very busy man these days because the government is floating on a sea of red ink, as it borrows more and more money to stimulate the economy, bail out banks, shore up auto companies, aid struggling homeowners and fight foreign wars. In a city full of pompous politicians and bombastic bureaucrats, Mr. Zeck quietly runs one of the government’s truly indispensable operations. He is not a policy maker. He does not decide how much to borrow. He just makes sure the money is borrowed, in a regular and predictable way, at the lowest possible cost to the government over time. “We are the back office, the plumbing,” Mr. Zeck said. “We are borrowing a ton of money. It has to be done right.” Public attention will focus on the debt this week because the White House and the Congressional Budget Office plan to issue dueling estimates of federal spending and revenue for the next 10 years. In a preview, the White House said Friday that it saw the cumulative total of deficits over the next 10 years adding up to $9 trillion, or $2 trillion more than it anticipated in February. That means much more government borrowing. Last year alone, Mr. Zeck auctioned off $5.5 trillion of Treasury securities, to replace maturing debt and to meet new borrowing needs. Wall Street dealers expect the figure to exceed $8 trillion this year — an average of more than $253,000 every second. In the first eight months of the current fiscal year, the government issued more Treasury bills, notes and bonds than in all of last year. Mr. Zeck expects to conduct more than 280 auctions this year, up from 263 last year and about 220 a year from 2004 to 2007.

Millions face shrinking Social Security payments - (www.usatoday.com) Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975. By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly. "I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal." Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels. Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income. "For many elderly, they don't feel that inflation is low because their expenses are still going up," said David Certner, legislative policy director for AARP. "Anyone who has savings and investments has seen some serious losses." About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8% increase in January, the largest since 1982. More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration. Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients. There is no such hold-harmless provision for drug premiums.

Budget Pain Spreads to Energy-Rich States - (online.wsj.com) Energy-rich states, flooded with cash last year when oil and natural-gas prices soared to record highs, are now being drained as gas prices plunged to a seven-year low Friday. In Texas, revenue from gas-production taxes has fallen 43% from last year, costing the state more than $1 billion in lost revenue. In New Mexico, lawmakers are scrambling to close a $433 million budget gap even as they worry the gap could widen if gas prices stay low. In Oklahoma, the state government is furloughing employees and cutting school budgets. Natural gas "is the primary driver of our state's economy," Oklahoma Treasurer Scott Meacham said. "There's not a lot you can do as a government other than manage the downturn." In much of the U.S., falling natural-gas prices have been a rare piece of good economic news, driving down electricity costs for homeowners and businesses and promising lower heating bills this winter. But the decline in prices to less than $3 per million British thermal units from more than $13 per million BTUs last year has reversed the fortunes of energy-producing states such as Texas, Louisiana and Wyoming. Last year, high energy prices helped insulate those states from the national economic downturn. But as the recession worsened, demand for energy fell, dragging down prices and eroding that protection. "The mineral sector looks like it's going to be less and less able to hold us up," said Greg Albrecht, chief economist for Louisiana's state legislature. Across the country, states are struggling with sharply lower income from income, sales and property taxes because of the weak economy. A report by the nonpartisan Center on Budget and Policy Priorities this month found that 48 states -- all but Montana and North Dakota -- either face or have already addressed deficits for the 2010 fiscal year, just two months after it began.

Reader's Digest files Chapter 11 bankruptcy - (news.yahoo.com/s/ap) Reader's Digest Association Inc., publisher of the iconic general interest magazine that began gracing American homes in 1922, on Monday filed for Chapter 11 bankruptcy protection as it faces falling print circulation in the Internet age and looming debt payments. Known for its heartwarming stories about American life as other publications moved toward edgier fare, the company's flagship Reader's Digest magazine has seen its U.S. circulation drop from a peek of more than 17 million in the 1970s to just above 8 million last year. Magnifying the publishing world's woes is an advertising slump that already has led to the closing of several high-profile magazines, including Conde Nast's Portfolio, Domino and Blender. But Reader's Digest CEO Mary Berner has said that ad pages for the company's U.S. magazines are down less than 6 percent through the September editions. The publications' down-home feel instead of high reliance on luxury and high-income tastes have an added attraction to advertisers in a recession that has hurt much of print media. She noted that the company had several successful ventures, such as the magazine Everyday with Rachael Ray and cooking site AllRecipes.com. Berner, however, cited problems with two underperforming properties the company agreed to sell last year: Books Are Fun Ltd., a company that sells books at events and book fairs, and QSP, which assists with fundraising for schools and youth groups. Still, weakness in ads, lower circulation and a mountain of debt created a perfect storm that led to the prearranged bankruptcy filing of the privately held company. Reader's Digest said the prearranged bankruptcy, which only affects U.S. operations, would give lenders an ownership stake in exchange for lowering its indebtedness to $550 million from $2.2 billion. The filing has gotten the approval of more than 80 percent of the company's senior secured lenders, critical for a quicker exit from bankruptcy.