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This Week's Business News

Company Layoffs

324,000 - 4-week avg. of initial claims for jobless benefits - August 16, 1997
318,000 - 4-week avg. of initial claims for jobless benefits - August 18, 2007

Yep, that's true -- fewer people today are being laid off from their jobs when compared to the same period 10 years ago. That's despite the fact the employed workforce today is much greater than it was back then -- to the tune of over 16 million additional net jobs at present.

Obviously if Lou Dobbs found out about all that he'd start acting out like an escaped inmate from a lunatic asylum. Yeah, even moreso than usual.

Bought & Sold

Shareholders of Tribune Co. -- which publishes the Los Angeles Times and the Chicago Tribune among others -- gave formal approval to that deal under which the company will be taken private and thereby owned by billionaire real estate mogul Sam Zell.

Yeah, that's true, folks, in reality those young liberal activists who keep marching off from journalism schools to join big-city newspapers -- to "change the world" -- are nothing more than fungible revenue units working in a decaying industry in which they're bought and sold -- like cattle.

Mr. Market

Another week of volatility on Wall Street. Zzzz.

With any luck the major market averages will roll over and fall down with such alacrity and zeal that Maria Bartiromo's and Ron Insana's heads literally will explode on live TV. That would be an obvious indicator stocks finally, mercifully, will have become cheap enough to purchase -- en masse.

Oracle of Omaha

Speaking of equities and buying low and selling high, reports are circulating that Warren Buffett might be in the process of putting serious money to work in the mortgage lending sector. That makes sense. Buffett buys undervalued assets from fickle and feckless panic sellers. The man is one of the greatest investors of all time. You don't get to that level by following the crowd.

Law & Order

There was no chance in hell the airheaded liberal financial media would have featured this news, but early this week the U.S. Court of Appeals for the Federal Circuit handed down one of the most important patent law rulings in decades.

The court made it much easier for companies to avoid being found liable for willful patent infringement. Which in turn will make it much harder for plaintiffs in those cases to recover treble damages. Which in turn will make patent infringement lawsuits much less valuable. Which in turn is a boon to scores of companies in the technology, biotech, pharmaceutical, medical device, and information sectors. The Federal Circuit's landmark decision follows on the heels of two pro-competition rulings in the patent law arena from our pro-business U.S. Supreme Court.

For those who are interested the case is In Re: Seagate Technologies; the full opinion is available on the Federal Circuit's Website.

Law & Order -- Part Deux

Courtesy of Reuters:

The Illinois Supreme Court on Wednesday denied requests from plaintiffs' lawyers to reopen a class action lawsuit by 'light' cigarette smokers against Phillip Morris USA.

The 4-2 ruling stamps out efforts to resurrect the failed case against the largest U.S. cigarette maker, a unit of Altria Group.

Slightly off topic, but Altria has to be one of the greatest value investing stories of all time. Back in late-1999 -- when the Lithium brigades on CNBC were cheerleading overblown tech stocks -- the mighty Altria, then known as Phillip Morris, was trading at a single-digit P/E ratio. The company's non-cigarette holdings were worth more than its stock price. Hell, the dividend yield alone was worth the price of admission. Sure enough, since late-1999 Altria's shares have risen from well under $30 to yesterday's close of $68 and change -- all the while its dividend payouts have increased too.

$25 - December 1999.
$68 - August 2007.
+ higher dividends each year in between.

Buy low.
Sell high.
Not vice-versa.

P.S. -- For those of you wondering how the Illinois Supreme Court became so conservative and pro-business, well, keep in mind that before "single-issue" voting became en vogue, and before other sorts of non-voting conservatives packed it in completely, Illinois was a bastion of Republican political strength, not weakness. GOP presidential candidates won the state in six consecutive elections, from 1968 through 1988. More germane to this issue, and not even taking into account George Ryan's scandal-plagued administration, Republican governors served as CEOs of that state for more than 20 consecutive years, from 1977 through 1999. Governors appoint state supreme court justices. Connect the dots....

Law & Order -- Part Tres

British Airways and Korean Air Co. got smacked around in court this week like illegitimate redheaded stepchildren. The companies both were fined $300 million for admitted price fixing on international flights.

How dumb of them, eh? It's not as if basic antitrust laws are closely-guarded state secrets.

Subprime Mortgages

BNC Mortgage shut down this week. Never heard of them? Well, don't feel remiss. Unless you work in the mortgage industry, or you happened to have borrowed money from them, or you happen to be a business news/investment junkie, there'd be no reason for you to know BNC from the BBC.

BNC was Lehman's subprime mortgage unit. Lehman was one of the companies that was waaaaay too aggressive during the real estate boom. They used massive leverage to try to squeeze maximum profits from subprime loans, where the collateral they were putting up and part of their income stream were tied to 100% financing given to people who, no offense, shouldn't have been allowed to get a car loan much less a home loan. Once the mortgage markets stopped guzzling the Kool-Aid and re-discovered the concept of risk Lehman came under heavy pressure. That pressure was magnified by the company itself attracting the interest of leveraged short-sellers. So, Lehman decided to exit the subprime business entirely. They treated their toothache by ripping out the tooth.

Ultimately the subprime mortgage industry will correct itself from being a diffuse marketplace with far too many feckless players into more of a true oligopoly. From this point forward the subprime industry also will factor -- duh -- risk into all its decisions. It'll be a long, long time before any lender gives 100% financing to people with lousy credit histories and minimal incomes. In the greater scheme of things that's good news, not bad news.


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Comments (19)

Junk bonds survived Giulian... (Below threshold)
kim:

Junk bonds survived Giuliani.
=============================

Uh, Jayson,from your top po... (Below threshold)
FreedomFries:

Uh, Jayson,from your top position on the American Econmic Pyramid, some more economic news you neglected to report:2005 Incomes, on Average, Still Below 2000 Peak

Freedom Fries, David Cay Jo... (Below threshold)
kim:

Freedom Fries, David Cay Johnston has been revealed two days ago on many blogs as a partisan hack or else a stupid reporter. Check out Bizzy Blog, and Talk Back. JustOneMinute ate him alive, too, and he even deigned to comment there.
=====================================

"It'll be a long, long time... (Below threshold)
BlacquesJacquesShellacques:

"It'll be a long, long time before any lender gives 100% financing to people with lousy credit histories and minimal incomes."

10 years, absolutely tops, then we'll do it again, perhaps in a slightly different way. The next generation of bankers will not believe their predecessors, or will believe they can do better because the predecessors were stupid or whatever. Hubris.

kim, if your comment has an... (Below threshold)
FreedomFries:

kim, if your comment has any merit, give the links. I have no desire to wade thru a pile of extreme right crap kook blogs that are trying to explain away what any average Middle Class American already knows; he is working harder for less. Either provide links are shove your reading assignments up the bold.

All the Bush base at the top of the economic pyramid and the rest of the Bushbots like you simply have no idea on which side of the bread the butter is.

Here's one for you FrenchFr... (Below threshold)
And another.....<b... (Below threshold) The BNC debacle was tragic ... (Below threshold)
LorenU:

The BNC debacle was tragic but remember Lehman is not going bankrupt. Just like Ford has had many product disasters but is still in business. Lehman is a diversified financial firm that just exited one aspect of its business. It is called creative destruction. Lehman will be around in August 2008. Don't panic, the financial stocks are getting killed here to the point that they may be buying opportunities. Buy low, sell high.

This is America, FF. If yo... (Below threshold)
P. Bunyan:

This is America, FF. If you don't like your place in the pyramid you have the opportunity to do something about it. It will take effort, hard work, perseverance, and personal responsibility (all things which are anathemas to the leftists).

Or you could just hope that the Democrats get total control of the government and instill their socialist policies so we can all be equal as there would be, as history has proven time and again, universal poverty.

kim:<br ... (Below threshold)
_Mike_:

kim:


Check out Bizzy Blog, and Talk Back. JustOneMinute

FF:


kim, if your comment has any merit, give the links. I have no desire to wade thru a pile of extreme right crap kook blogs

FF provides an interesting example of why he/she/it is a Democrat. Kim named the sites that had discussed the topic by name. If you Type THREE words into Google {JustOneMinute nytimes Johnston}, the FIRST link is one to which kim was referring. FF, stupid or lazy ?

_Mike_ wonders...... (Below threshold)
SCSIwuzzy:

_Mike_ wonders
...FF, stupid or lazy ?

Can't it be both?

Lawsuits by smokers against... (Below threshold)

Lawsuits by smokers against the cigarette death merchants are more difficult for success in the courts. I've been actively seeking lawyers to sue the tobacco companies out of business on behalf of nonsmokers injured by secondhand smoke from their products by cancer, asthma, emphysema, inner ear damage or hearing loss and other physical injuries, SIDS and wrongful death. It should be far easier for nonsmokers to sue this industry from the legal standpoint of being victims and nonusers of the toxic product. Tobacco companies will find that a very difficult standard to defend their product from.

Nonusers don't smoke because it causes them pain, injury, health problems, or even death, yet have cigarette smoke forced on them in many public places such as simply walking down a crowded public street. This puts nonsmokers in a pure victims class and should enhance their chances in the court system considerably and could help to force the removal of any tobacco product that creates toxic air pollution or fumes that impact nonusers from the American marketplace.

_Mike_ or is it BPlug? I ... (Below threshold)
FreedomFries:

_Mike_ or is it BPlug? I did use google for kim's silly exercise. If she wants to link for an easy read, fine, I'll read it. But to go to those sorts of bilge blogs and wade thru all crap isn't worth my time.

Besides, all kim is doing is killing the messenger. You whacko kooks deride anything that flies in the face of your delusionary world. If you have facts, fine. If you have Real World Derangement Syndrome from distorted or invented points like those from Foz Noise or your other instruments of propaganda, I'll pass.

Hooson,Or you coul... (Below threshold)
P. Bunyan:

Hooson,

Or you could do America and the human race a big favor and stop breathing when you're in public places.

Would you like a Berger wit... (Below threshold)
kim:

Would you like a Berger with that, French Fries? Johnston crooked the interpretation of the data by picking the span, and ignoring the last two years. Go read Back Talk. There are lots of other problems with his article.

It's pitiful propaganda and you're a useful idiot.
===============================================

Kim. He's not even a... (Below threshold)

Kim.
He's not even a useful idiot. The Delta pledge class may be insulted.
_______________________________________________

Dean Vernon Wormer:
Mr. Kroger: two C's, two D's and an F. That's a 1.2 grade average. Congratulations, Kroger. You're at the top of the Delta pledge class.

Thanks for the links, Hugh.... (Below threshold)
kim:

Thanks for the links, Hugh. David Cay Johnston made a real ass of himself. It's kind of a shame, because I think he actually is a decent reporter, and has done some good stuff in the past. I'd like to think he just got seduced by some research somebody left in his inbox.

The editors of the New York Times were pleased. His article fit the narrative that all the useful idiots, like John Edwards, are pushing.
===============================

KimThe edito... (Below threshold)

Kim

The editors of the New York Times were pleased

Therein is the devil.

Not to sucker punch/pinch, but here is their approval rating....using Johnston's selective timing metrics complete with graph, but fully disclosed with dates and prices.

http://moneycentral.msn.com/investor/charts/chartdl.aspx?C6=2007&D3=0&CE=0&ShowChtBt=Refresh+Chart&DateRangeForm=1&Symbol=NYT&C8=2007&C5=8&C7=8&ComparisonsForm=1&D5=0&D4=1&ViewType=0&C9=1&DisplayForm=1&CP=0&PT=10

The way most of you jump do... (Below threshold)
John S:

The way most of you jump down the throat of anyone who questions Ms. Rosie Scenario makes this board sound like a bunch DU'ers. Any economic numbers released this week were compiled before the global liquidity panic and are meaningless. (Things could look VERY different when next month's numbers come out.) We are going from a abnormal market with excess liquidity to a normal market with tight liquidity. Unfortunately there's no way to do that without suffering a period of frozen liquidity. (Read up on Japan's 15 year deflationary recession.) That won't happen here, of course, because the Fed will hyperinflate the currency to get money flowing again. Your paycheck will become worthless.

And those of you cheerleading the economy, I hope you don't have a mortgage less than 5 years old (Guess what? You're under water! That $50K downpayment? Gone! For at least 10 years!) Or any credit card debt (bummer, the rate rose last month to 28%. Go read the fine print, they can do that legally and without notice.)

Personally I hope the economy muddles on until the middle of Hillary's first term. It'll take a global recession to clean this mess up and I'd prefer the Democrats get full blame.




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