Bear Stearns' Downfall
Nearly a year after two big hedge funds at Bear Stearns (BSC) blew up, it has suffered a near-death experience. JPMorgan Chase's (JPM) hurriedly arranged bid for Bear on Mar. 16 for a bargain basement price is an ignominious outcome for the 85-year-old firm. Bear's management suggests it was done in by short-sellers who whispered that Bear was facing a cash crunch. Meanwhile, Bear shareholders—including most of the firm's 14,000 employees—are crying foul. Bear's stock was trading around $70 as recently as Mar. 10. Many were worried about a contagion, including the Federal Reserve, which arranged the takeover. But while their earnings fell, Lehman Brothers, (LEH) Goldman Sachs, (GS) and Morgan Stanley (MS) didn't report any bombshells.
The Fed Steps It Up
Busy. Busy. Busy. The Federal Reserve didn't stop with engineering JPMorganChase's takeover of Bear Stearns. Fighting to ease the credit crunch, the central bank broke precedent on Mar. 16 by offering loans directly to investment banks such as Lehman, Merrill Lynch (MER), and Goldman Sachs that are among its 20 primary dealers. And on Mar. 18, the Fed cut the federal funds rate by three-quarters of a point, to 2.25%, down from 5.25% last summer.
Visa Starts Strong
What a time to go public. The stock market is topsy-turvy, yet Visa (V) raised a record $17.9 billion with an initial public offering on Mar. 18—and then trumped it the next day. The world's largest credit-card network opened at 44 a share and jumped 22%, to 56.50, in its first day of trading, even as major indexes collapsed. The previous IPO record-holder was AT&T Wireless (T).
Wilbur Ross has found gold in steel and coal, so why not subprime mortgages? His WL Ross & Co. is paying $1.1 billion for the Option One mortgage-service business of H&R Block (HRB), said the hard-pressed tax-prep firm on Mar. 17. With the takeover, Ross' mortgage- service portfolio will total some $95 billion worth of loans, including those he acquired from bankrupt American Home Mortgage Investment last fall.
The North American Free Trade Agreement has re-emerged as a culprit for America's economic woes. Democratic Senators Hillary Clinton and Barack Obama both are bashing Nafta as they fight for their party's Presidential nomination. But the global economy has changed in so many ways since 1994 that pinning job losses and gains on Nafta is problematic. And it's not clear what the U.S. could achieve by renegotiating the treaty.
Nymex Cashes Out
Despite rumblings over its already hefty market power, CME Group (CME) on Mar. 17 inked a deal to buy Nymex Holdings (NYM), parent of the New York Mercantile Exchange, for about $9 billion. The takeover, should it be blessed by the Justice Dept., would move CME beyond financial futures and ag contracts into energy and metals trading. CME, parent of the Chicago Mercantile Exchange, took over the Chicago Board of Trade for $11.9 billion last July.
No Go on Airline Deal
So much for synergy. The much anticipated merger between Delta Air Lines (DAL) and Northwest Airlines (NWA) now looks as if it'll never leave the gate. On Mar. 17 the pilots union at Delta said it couldn't reach an agreement with their counterparts at Northwest on merging their ranks, a precondition for the overall combine. The next day, Delta Chief Financial Officer Ed Bastian said the airline would cut 2,000 jobs and ground dozens of planes to offset soaring fuel costs.
See "Delta-Northwest Deal Grounded"
Techdom's Big Chill
The heat is on the world's growing number of data centers to cool it. All those blazing circuits in server farms cost a lot to keep from overheating, which is why some of the biggest names in technology—outfits like Google (GOOG), Microsoft, (MSFT) and Yahoo! (YHOO)—are checking out Iceland as a site for data centers. Iceland's edge: cheap geothermal power and brisk climes.
HBO Needs a Hit
Ever since The Sopranos ended its seven-season run last June, cable network HBO has struggled to reclaim its reputation for edgy TV. Subscriber growth has slowed to just 2% a year. On Mar. 16, HBO announced that Carolyn Strauss, the entertainment president who had worked at the network for 22 years, was stepping down. In a break with tradition, the company plans to go outside for her successor.
Fleeing the Dollar
It was a record-setting week in world markets. Commodities are sizzling as investors rush away from the declining dollar and rocky equities markets, while emerging markets continue to stoke demand. Gold closed above $1,000 an ounce for the first time on Mar. 17, while crude oil spiked to $111 per barrel on Mar. 13. And against the euro, the dollar fell to an all-time low of $1.59.
A $6 Billion Paper Deal
After spending the past few years raising billions through asset sales, International Paper (IP) broke into its piggybank on Mar. 17. The Memphis papermaker said it would pay $6 billion in cash for Weyerhaeuser's (WY) packaging and containerboard units. IP crowed that it won because it had halved its own long-term debt, to $6.3 billion, since the start of 2005.
China's Tibet Problem
China has put down the biggest protests in Tibet in almost 20 years, casting a shadow over the Olympic Games in Beijing, just four months away. Unrest that began in Lhasa, Tibet's capital, culminated in street riots and a violent crackdown by Chinese troops on Mar. 14 that left as many as 80 dead. Scattered protests have also erupted in nearby Chinese provinces. Beijing says the Olympic torch will be relayed past Mt. Everest and through Tibet as planned.
See "China: It's Not Just Tibet"
Air France-KLM (AKH), already the world's largest airline in terms of total sales, soon may get bigger. On Mar. 17, Italy's outgoing government said it had approved the sale of its 49.9% stake in Alitalia to the Paris airline for $218 million. The takeover can't be sealed until mid-April, after a new Italian government is formed. Alitalia is so strapped for cash that it will suspend service to China and India on Apr. 1.
Better Than GDP?
When it comes to measuring economies, the preferred yardstick is growth in gross domestic product. But a better gauge of living standards is GDP per capita. Size up nations that way, and booming Brazil looks less impressive: GDP per person has been growing by just 2.3% a year since 2003, barely better than sluggish Japan. The reason is simple: Brazil's population is growing, while Japan's is shrinking. (The Economist)
All NCAA, All the Time
If you like your college basketball fast, furious, and wall-to-wall, this is your year. CBS, which is airing the March Madness championship series, is offering video streams of all 63 games—up from 56 last year—on more than 200 sites, from YouTube to Joost. CBS figures to generate north of $23 million in online ads, on top of some $500 million from its television broadcasts—more than double last year's online total of $10 million.
Nacchhio: Try, Try Again
Joseph Nacchio will get his day in court—again. On Mar. 17 a federal appeals court ordered a new trial for the former Qwest Communications (Q) CEO, saying the judge erred by not allowing testimony from an expert witness. Nacchio was convicted on 19 counts of insider trading last April and sentenced to six years in prison.
Japan's Headless Bank
As if a collapsing stock market and a weakening economy weren't enough, Japan is facing another financial problem: finding a new central bank chief. Although Toshihiko Fukui's five-year term as Bank of Japan governor ended on Mar. 19, the ruling Liberal Democratic Party can't seem to find a candidate who will pass muster with Parliament. The upper house, controlled by the opposition Democrats, rejected two candidates for BOJ chief. In the interim, the bank's deputy-governor will step in as needed.
See "Bank of Japan: Who's at the Wheel?"
Chávez Wins a Round
ExxonMobil lost a skirmish with Venezuelan President Hugo Chávez. On Mar. 18 a British judge released $12 billion in Venezuelan assets that ExxonMobil (XOM) had wanted frozen in case it wins compensation from Venezuela over nationalization of an oil project. But the court ruled Venezuela was unlikely to hide assets.
American companies are hot on Turkey. In a recent survey of U.S. companies, 76% of those polled said the country has great potential as a market, reports the Feb. 24 edition of BusinessWeek Turkey. Not bad, since just six years ago the Turkish economy all but collapsed. GDP grew 5% in the first nine months of 2007. And the balance-of-payments position has improved, setting the stage for a possible upgrade by international credit-rating agencies. American companies would now like to see the government turn its attention to micro-level reforms. In particular, they bristle at the country's high labor taxes, deficient legal code, and onerous customs procedures, according to a study carried out by the American Business Forum in Turkey.