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"The longer it lasts, the worse it will be when it ends." — Carlyle Group co-founder William Conway in an internal memo warning colleagues that an era of cheap debt has caused private equity firms—including his own—to make "risky credit decisions" that could come back to haunt then when the market shifts

Now there may be one more thing to consider before investing in a stock: Does the CEO own a trophy house? Finance professors David Yermack of New York University and Crocker Liu of Arizona State University looked at the relationship between stock performance and the size of a CEO's home. The bigger or pricier the house, they found, the greater the risk of lackluster shares. "If [the CEO] buys a big mansion, sell the stock," Yermack says. "Many of these guys have been super performers, but at some point that stops, and they reap the benefits."

Armed with the addresses of 432 CEOs of S&P 500 companies at the end of 2004, Yermack and Liu found that 12% of them lived in homes of at least 10,000 square feet, or on a minimum of 10 acres. And their companies' stocks? In 2005 they lagged behind those of S&P 500 CEOs living in smaller houses by 7%, on average. Energy infrastructure supplier Power-One (PWER), whose then-CEO Steven Goldman bought a 12,000-sq.-ft. beachfront property in Malibu, Calif., in 2000, was the worst performer, with shares down more than 30%. And Robert Nardelli, who bought a 19,000-sq.-ft. Atlanta mansion and spent lavishly to expand it after taking over as CEO of Home Depot (HD) in 2001, saw his company's stock drop 5% in 2005. The S&P 500 index rose 3% that year. A Power-One spokesperson declined comment. Nardelli did not respond to a request for comment.

Yermack and Liu also looked at 164 CEOs in the sample who bought houses after taking the corner office, and found 23 had gone for big homes. There was the 13,000-sq.-ft. L.A. house bought by Hilton Hotels' (HLT) Stephen Bollenbach in 1997 and the 24-acre estate in Bedford, N.Y., purchased by Howard Solomon of Forest Laboratories (FRX) in 2002. In the 36 months after their purchases, Hilton trailed the S&P by 74% and Forest Labs by almost 25%. Hilton declined to comment, as did Forest. And together, all 23 companies lagged the S&P by roughly 25% in the three years after their CEOs' purchases, while smaller-home buyers' companies beat it by 22%.

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Everything counts in the age of gotcha politics. And that includes the family ride and a campaign's vehicles. Looking for a sign that Al Gore may be a Presidential candidate after all? Check out his wheels:

A Google (GOOG) search can reveal a lot about whom Presidential candidates consider to be their most serious rivals. The key: the list of paid-for links on the right-hand side of each hopeful's search-term results page.

Governor Mitt Romney's campaign paid enough to be the second-highest sponsored link on former New York City Mayor Rudy Giuliani's search results page in the week of Mar. 11.

Did Rudy return the compliment? No. Joinrudy2008.com, Giuliani's exploratory committee site, bid only enough to be the eighth link on the "Mitt Romney" results page.

And while the search term "Hillary Clinton" brought up Senator Barack Obama's campaign Web site as the second sponsored ad link, a Clinton campaign adviser said the New York Senator isn't likely to buy "Barack Obama," because it would indicate "that she was chasing or worried about Obama."

Meanwhile, that week no candidates bought links for the search terms "Joe Biden," "Bill Richardson," "Al Gore," "Sam Brownback" "Mike Huckabee," "Fred Thompson," or "Dennis Kucinich."

Conservative commentators are having a field day over a Feb. 14 securities filing by Soros Fund Management, run by billionaire philanthropist and antiwar activist George Soros, who financed a $25 million media campaign to unseat President George W. Bush in 2004. The filing reports that in late 2006 the fund bought 2 million shares of Halliburton, whose KBR unit is the military's biggest Iraq war contractor. Soros Fund now has a 0.2% stake in Vice-President Dick Cheney's former employer. Halliburton is in the midst of spinning off KBR to focus on core oil services, but that didn't stop critics from denouncing what one called "the hypocrisy of the liberal elite." Soros spokesman Michael Vachon declined to comment, citing company policy. But Rush Limbaugh had plenty to say: "Halliburton has become a buzzword for corruption and lying and deceit as far as the left is concerned, and here's their guru now buying 2 million shares of Halliburton," he blogged. "It just doesn't get any better than this."

For about a decade, companies have tried to goose their stocks—or manage the market's expectations—by putting out quarterly earnings projections. Now the practice has come under fire as business leaders fret that the focus on short-term targets undermines long-term growth.

On Mar. 14 the Commission on the Regulation of U.S. Capital Markets in the 21st Century, a project of the U.S. Chamber of Commerce, urged executives to stop issuing their short-term goals. The practice is a "self-inflicted wound by American CEOs," says commission member Robert Pozen, chairman of MFS Investment Management, a Boston fund manager.

Debate over this issue has simmered for years. Indeed, dozens of companies, including Coca-Cola (KO) and McDonald's (MCD), have quit publicizing quarterly earnings targets. Now the issue has become urgent, the Chamber argues, as U.S. companies face growing long-term competition from overseas, where such projections are not widely made. In coming months, the Chamber hopes to create a groundswell by persuading more high-profile companies to drop these short-term estimates. But abandoning such projections comes with a caveat. "It's a great idea in theory, but there could be enormous volatility," says Glenn Curtis, director of strategic research at Thomson Financial. "When there's surprise, panic is not that far behind."

Rather than trying to outshoot the hordes of amateur photographers who take cell-phone snaps of fires, celebrities, and plane crashes, Getty Images (GYI) is enlisting them. On Mar. 12 the $807 million Seattle stock-photo agency bought Scoopt, one of the best-known new-style photo agents that have popped up to act as brokers between the media and so-called citizen photographers.

Former Scottish journalist Kyle MacRae founded Scoopt in July, 2005, after watching the outpouring on CNN and BBC of amateur video clips of the Indian Ocean tsunami in 2004. Since then, Glasgow-based Scoopt, which gives 40% of a picture or video's sale price to the photographer, has provided British and other outlets with bystander photos and videos of events like last summer's Manhattan plane crash that killed New York Yankees pitcher Cory Lidle.

Getty says the acquisition will help it compete with rivals like Reuters Group (RTRS), which set up a partnership with Yahoo! (YHOO) in December to solicit user-submitted photos and videos. "A lot of capturing the moment is based on luck," says Hugh Pinney, Getty's editorial director. "Citizen journalism and cameras with phones shorten the odds."

The latest time bomb ticking in the home lending industry: the "silent second," a second mortgage or line of credit taken out for fast cash by a new homeowner—usually without the knowledge of the first mortgage grantor.

On top of a declining housing market and a spike in defaults among homeowners, silent seconds pose an acute problem for original lenders, says Max Doubek, director of analytics marketing at First American LoanPerformance (FAF), a Santa Ana (Calif.) data and risk firm for the mortgage industry. This is especially true for banks in the subprime market, he says, where borrowers have checkered credit histories.

Just how bad is the problem? One troubled top subprime lender, Doubek told BusinessWeek, recently asked LoanPerformance to conduct a stress test on a sampling of loans the bank had originated as recently as last year's fourth quarter. LoanPerformance found that within months of getting their original mortgages, some 50,000 of 169,000 borrowers they screened had already gone to either the same lender or another bank to tap into the dwindling equity that remained in their houses—without the lender's knowledge.

The result, Doubek says, is that the properties of these borrowers have an average loan-to-value ratio of 95%, with some of the loans at more than 100% of the value of the house. Big financial institutions are in the dark about borrowers who have come back to them for another loan, he notes, because home equity lines of credit and first mortgages are often granted by separate departments that don't communicate with each other. "They might as well be different companies," he says.

Silent seconds are also bad news for investors in mortgage-backed securities. A 2006 study by Standard & Poor's (MHP), which, like BusinessWeek, is owned by The McGraw-Hill Companies (MHP), analyzed the performance of nearly 640,000 mortgages with second liens in mortgage-securities portfolios and found that they are 43% more likely to go into default than first mortgages of comparable size where borrowers didn't go back to the bank. For subprime borrowers, that default rate rises to 50%. For mortgage-securities investors, says Joseph Mason of Drexel University's LeBow College of Business, "it's a game of hot potato in the dark."

TV's upfront season—the time of year when networks make their annual pitches to big advertisers—is almost upon us. What trends do you see?

"The upfronts are not going to go away. But marketers are not putting as much money towards them simply because there are more options. Why restrict your flexibility?" — Joe Tripodi, chief marketing officer, Allstate

"A hotly debated issue will be Nielsen ratings for commercials. We and the networks have yet to determine how to value that data. We're actively working on that." — Chris Boothe, president, media buyer Starcom USA

"This upfront will become an infront' because the complexity surrounding the proposed Nielsen commercial ratings, among other things, will drag out negotiations." — John Miles, director of investment, media communications agency MediaCom


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