Tag Archives: Coverage


Home building shifts to apartments


Conor Dougherty reported in the Wall Street Journal that construction of new homes is focusing on apartments. Some of this is in anticipation of an improving job market and more millennial workers finally being ready to move out of their parents’ homes.

Here’s the top of his story:

The share of new homes being built as rental apartments is at the highest level in at least four decades, as an improving jobs picture spurs younger Americans to form their own households but tighter lending standards make it more difficult to buy.

Residential construction—a pillar of the economy and employment—is starting to ramp up again overall, but in previous years the growth was driven by single-family homes. Last year, according to census data, construction was started on a little less than one million new residential units, and about one in three of those was a rental in a multifamily building, the highest share since data began in the mid-1970s. Single-family homes accounted for about two-thirds of housing starts last year, down from their peak of 87% in 1993 and about 80% in the years leading up to the recession, the census data showed.

The move toward apartment construction reflects the convergence of several trends. Mortgage credit is still tight. Also, Americans have seen muted wage gains, and others have high student-debt loads, forcing people who otherwise would have bought homes to rent instead.

At the same time, as the job market improves, larger numbers of young adults are leaving their parents’ homes and forming their own households—adding more to the demand for rentals. And the supply of new apartments hasn’t kept pace, especially in some key markets such as San Francisco.

“Builders are betting on more millennials leaving the nest this year,” said Jed Kolko, chief economist at Trulia, a real-estate site. “But young people don’t get a job one day and buy a home the next. The improving jobs picture for young adults will mean more renters this year, not a surge in first-time home buyers.”

Reuters reported on Friday in a story by Lucia Mutikani that job growth increased in February, indicating the economy is on better track than numbers previously indicated:

U.S. job growth accelerated sharply in February despite the icy weather that gripped much of the nation, easing fears of an abrupt economic slowdown and keeping the Federal Reserve on track to continue reducing its monetary stimulus.

Employers added 175,000 jobs to their payrolls last month after creating 129,000 new positions in January, the Labor Department said on Friday. The unemployment rate, however, rose to 6.7 percent from a five-year low of 6.6 percent as Americans flooded into the labor market to search for work.

“It reinforces the case for the economy being stronger than it’s looked for the last couple of months,” said Bill Cheney, chief economist at John Hancock Financial Services in Boston. “It makes life easier for the Fed and feeds into continuing the tapering process.”

The report also showed the largest increase in average hourly earnings in eight months and the payrolls count for December and January was revised up to show 25,000 more jobs created during those months than previously reported.

Writing for the New York Times, Nelson D. Schwartz pointed out that the uptick in the unemployment rate may be a sign that some are returning to the job search after a prolonged absence:

While analysts cautioned that the report on Friday from the Labor Department was hardly cause for celebration, it eased fears of another prolonged slowdown, which had been raised by weak figures for hiring in December and January and mixed signals from recent releases of other data. The improvement last month led some experts to conclude that a hard winter, not a fundamental downshift, was the prime mover behind the economy’s lackluster performance at the end of 2013 and the beginning of 2014.

With employers hiring 175,000 workers, the payroll gain in February was still well short of the pace needed to return the economy to full employment anytime soon or to quickly reduce the ranks of the long-term unemployed. But it was twice the number of jobs added in December, when the cold and snow arrived, and it came against a backdrop of more wintry weather last month.

“The report showed solid job growth in February despite clearly negative effects from the weather,” said Dean Maki, chief United States economist at Barclays. “It suggests the jobs numbers should improve as the weather gets better.”

And even though the unemployment rate rose 0.1 percentage point to 6.7 percent, some economists were actually encouraged, paradoxical as that might seem, because they interpreted the uptick as a sign that more Americans were seeing signs of improving job opportunities and returning to the labor force.

The new data for job creation also made it nearly certain that the Federal Reserve would stick with its plan to ease back its stimulus efforts when policy makers meet later this month. In December, the Fed announced the scaling-back after monthly job gains of more than 200,000 in the autumn, only to watch the pace of hiring quickly shrivel.

So it looks like for now that the economy is plowing ahead. It will be interesting to see if builders’ bets on multifamily construction will pay-off as more people look for places of their own. It will also be telling to see if the growth in jobs is sustainable and employers are really expanding. The short-term boom for construction will also help with employment and economic growth. It’s an interesting trend emerging from the current economy and hopefully business publications will continue to follow these going forward instead of simply reporting the numbers without context.

Melissa Daly

How a PR person started her own agency that works with biz journalists


Melissa Daly is the founding partner of MFD Communications in New York.

In the summer of 2011, she started her strategic communications business and has worked to build a niche offering, bringing value to her clients. Prior to starting MFD, she worked in communications at Goldman Sachs and Brunswick Group.

She spoke with Talking Biz News about the challenges of starting her own agency in the competitive world of financial services. What follows is an edited transcript.

Talking Biz News: What was the biggest challenge in starting your own agency?

Melissa Daly: The biggest challenge was navigating all the different steps including setting up the limited liability company, ad placements, email systems and accounting systems. When you’re starting out, you don’t want to invest money in other people doing things for you, so if you can do it yourself, you do. I learned along the way what I could have done more efficiently.

It’s a very personal process to start your own company, and I wanted to make sure everything was done as best as it could be. Even if you farm something out, you want the best person to do that job. But you don’t always know the best web designer or accountant, so it can be nerve wracking.

That was the tactical part. There was also the emotional stress of not having a paycheck. I knew we had some savings to sustain the business for some time, but there was a time when I knew we needed to be profitable.

I’m constantly drumming up new business and networking. In the early days, I knew I had to set up a certain number of meetings and coffees. And I still do. I needed to accomplish certain things everyday because driving the business forward is what is going to get you paid. The fear and embarrassment of failure is a real motivator.

The best piece of advice I got when I started was from someone who has been in the business a lot longer than me and who also started his own firm. He told me it wouldn’t be the people who are your closest friends who will refer or give you business. It’s their connections. You need to broaden your first contact point and network. It will be those people who recommend you and the more people you talk to, the more people who will likely refer you.

TBN: What has been the most rewarding part?

MD: The best part is getting a new client and helping them or their business. It’s rewarding to get a client and each win is getting you closer to your goals and helping to  build the business.

We needed to set ourselves apart. We don’t do straight public relations. We do strategic communications. A lot of our business focuses on getting people to develop messages and content, then putting it out to their audience. We work to help define what clients are saying to their audience. A lot of that is media training and executive coaching.

For example, some of our clients are too close to the business or in a complicated field and can’t communicate their message in a simple way, which prevents them from being quoted. We spend a lot of time distilling their messages and helping people understand what they want to tell their audience and reporters. We help them speak intelligently and clearly about a product, initiative or company earnings. We help make sure they’re all telling the same story so clients and everyone else hears the same message.

TBN: How do you balance work with sourcing new business?

MD: You really have to set aside time to do the networking and sourcing your business when it won’t interfere with client work. You have to put in that time and effort, and know will take a lot of both. It won’t just come to you.

That said, you can’t do it at the expense of existing clients. You have to service your existing customer base. It’s easier to keep the client you have than to find a new one. You have to know your schedule and what each day looks like. If you’re out chasing business when a client needs you, then you need to source new business in a different way – maybe by finding evenings to network. Clients always come first.

TBN: Communications is competitive. How do you compete with the larger firms?

MD: A big part is that is having our two partners working closely with each of our clients. They get senior-level attention throughout the process. If you hired a larger agency, you wouldn’t get that all the time. We value and care more about our clients because each one so important. We can’t afford to lose them.

We also don’t track our hours like a bigger agency would do. If I were a senior person at large agency, I may have one to two hours per week for a client. We don’t put a junior person on the account like some larger firms may.  We’re navigating the strategic work and the actual execution of the plan. Each of us has more experience than a typical client may experience so ultimately we can add more value to each relationship.

We really target a specific niche that many people can’t do effectively as part of a larger organization. Often, we work with other agencies and help fill in their gaps.

TBN: What advice would you give to someone just getting started in the industry?

MD: The best thing anyone getting into communication can do for herself is to learn about business. If you’re going to talk about or write about business, it’s a good idea to take some classes to learn about business generally and perhaps a specific industry. I talk to a lot of people going into communications who have a writing background. But it’s hard to offer advice if don’t know how an organization typically operates, or how businesses or the economy work.

Having that business perspective will help you learn to speak with executives and offer strategic advice. This would be true for any industry – art, communications, manufacturing. There is a business side to every industry. You need to know how the business side functions so can you can effectively talk about it. Know how to read a balance sheet and an earnings statement, understand how a marketing plan should work.

I was a business major, and my first job was as a financial planner. I learned about financial services by doing that and it enabled me to be a better communicator about financial services specifically, and business broadly. It helped me speak intelligently about financial services products.

Many people go into a major thinking they only need to learn what’s in that discipline, but you need other parts that will round out your career and make you better overall. That is how you can set yourself apart. If you’re going to get into business communications, you should really learn about certain parts of the business and the economy. It can only give you more credibility and confidence.

Fargo Forum

North Dakota paper expanding biz coverage


Matthew Von Pinnon, the editor of the Fargo Forum in North Dakota, writes about how the paper is expanding its business news coverage.

Von Pinnon writes, “We’ve noticed it, and you have, too. We’re in a go-go business environment here, one that seems poised to grow exponentially in coming years. More businesses are opening every day, offering more goods and services to the growing number of people who flock to this region for new opportunities and an improved way of life. And that’s compounding the need for more goods and services.

“We’re on the cusp of big things. Not a day goes by that this newspaper is not writing about some new place or new idea seemingly springing up out of nowhere. It’s exciting. There’s a real entrepreneurial spirit taking hold, and we aim to tell that story in bigger and better ways.

“We’re doubling our weekday space devoted to Business. We’re also adding to its reporting power, dedicating three full-time reporters to the beat, as well as any other resources we can throw at it.

“Veteran reporter Sherri Richards is our new Business editor. She’s joined by two other veterans of the area and newspaper: Dave Olson and Angie Wieck.

“Our team aims to cover Business and work more thoroughly than it’s ever been covered here. Oh, and about that popular Saturday Business section, with all those names and faces: It’s not going anywhere.”

Read more here.


Fed chair testifies for Senate committee


After a snowstorm pushed back her appearance before the Senate Banking Committee, Federal Reserve Board Chair Janet Yellen answered a variety of questions Thursday about topics ranging from asset purchases to Bitcoin.

Bloomberg’s Craig Torres led with the tapering of asset purchases:

Federal Reserve Chair Janet Yellen said the central bank is likely to keep trimming asset purchases, even as policy makers monitor data to determine if recent weakness in the economy is temporary.

“Unseasonably cold weather has played some role,” she said in response to a question today from the Senate Banking Committee. “What we need to do, and will be doing in the weeks ahead, is to try to get a firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook.”

Yellen repeated the Fed’s statements that the central bank intends to reduce asset purchases at a measured pace, and she said in response to a separate question that the bond-buying program was likely to end in the fall.

At the same time, “if there’s a significant change in the outlook, certainly we would be open to reconsidering, but I wouldn’t want to jump to conclusions here.”

Yellen’s testimony to the Senate panel, originally scheduled for Feb. 13, was postponed because of a snowstorm, creating an unusual two-week gap between her appearances before the two committees that oversee the central bank. Since her House testimony, weaker-than-forecast data on retailing, manufacturing and home construction have suggested the economy is slowing, in part because of harsh winter weather.

The New York Times story by Binyamin Appelbaum added some details about the data Yellen was reviewing to make her decision:

Ms. Yellen cited the slow pace of job growth in December and January, weakness in the housing market and disappointing retail sales and industrial production.

The remarks were a shift from Ms. Yellen’s testimony two weeks ago before the House Financial Services Committee. But Ms. Yellen did not change her description of the Fed’s plans, saying that the central bank was still quite likely to keep cutting back on its monthly purchases of Treasuries and mortgage-backed securities.

Senator Charles E. Schumer, Democrat of New York, asked Ms. Yellen whether the Fed would reconsider if it concluded that the cold was not the whole problem.

“Certainly we would be open to reconsidering it,” Ms. Yellen responded, “but I wouldn’t want to jump to conclusions.”

The Associated Press story (via the San Jose Mercury News) by Martin Crutsinger pointed out that Yellen is following in Bernanke’s footsteps:

In both her House and Senate appearances, Yellen sought to emphasize policy continuity with her predecessor, Ben Bernanke, who stepped down last month after eight years leading the central bank.

Yellen said that she, like Bernanke, believed the economy is strengthening enough that the Fed can gradually pull back its monthly bond purchases.

The Fed has cut the pace of bond purchases at both its most recent meetings. It reduced the original $85 billion monthly pace in December and again in January in $10 billion steps to a current level of $65 billion.

Many economists think that as long as the economy keeps improving, the Fed will keep cutting the bond purchases by $10 billion at each meeting this year until ending the program in December.

The Fed has stressed that it’s standing by a plan to keep a key short-term rate at a record low near zero for an extended period. At the past two meetings, it has said short-term rates will remain low “well past” the time unemployment drops below 6.5 percent. The unemployment rate is now 6.6 percent.

Many economists think the first rate hike won’t occur until late 2015. But minutes of the Fed’s last meeting showed that “a few” policymakers felt it might be appropriate to make the first move to raise short-term rates “relatively soon.”

The Fed has held its benchmark for short-term rates near zero since December 2008.

Reuters had a short piece citing Yellen’s remarks that Congress should look into regulating bitcoin:

The U.S. Congress should look into legal options for regulating virtual currencies such as bitcoin, Federal Reserve Chair Janet Yellen said on Thursday.

Japan-based bitcoin exchange Mt. Gox went dark on Tuesday, leaving customers unable to access their accounts. Experts have warned they might not have much recourse to recover their money.

Yellen said the Fed had no jurisdiction over bitcoins, which are created using a network of computers that solve complex mathematical problems and are not traded or held by banks.

Bitcoin aside, the Federal Reserve is holding its policy the same for now, something the market expected. It will be interesting to watch the next round of numbers. If economic data continues to weaken, Yellen may be forced to revisit her current policy. But for now, no change is good.


New York regulator looks at mortgage servicer


Benjamin Lawsky, head of New York’s Department of Financial Services, is looking into the nation’s fourth-largest mortgage servicing company for conflicts of interest. It’s another blow to the image of the industry.

Michael Corkery had this story in the New York Times:

New York State’s top banking regulator said he had new concerns about Ocwen Financial, one of the nation’s largest mortgage servicing companies, creating another regulatory headache for the company.

In a letter to Ocwen released on Wednesday, Benjamin M. Lawsky, supervisor of the state’s Department of Financial Services, said his office had found a “number of potential conflicts of interest” between Ocwen and other public companies with which it has relationships.

Ocwen, which is based in Atlanta, is the brainchild of William C. Erbey and has grown in recent years into a major player in the mortgage industry. Inside Mortgage Finance said Ocwen services 2.3 million home loans.

Mr. Lawsky said he was concerned that potential conflicts between Ocwen and four other publicly traded companies of which Mr. Erbey is chairman could “harm borrowers and push homeowners unduly in foreclosure.” For example, Mr. Lawsky said Ocwen’s chief risk officer also was the chief risk officer of another of the companies, called Altisource Portfolio Solutions, “and reported directly to Mr. Erbey in both capacities.”

Mr. Lawsky said the chief risk officer, who has since been removed from his duties at Altisource Portfolio, “seemed not to appreciate the potential conflicts of interest posed by this dual role, which is particularly alarming given his role.”

The Financial Times reported that Ocwen disclosed the relationships in regulatory filings, which it feels is sufficient:

DFS said his interest in such businesses “raises the possibility that management has the opportunity and incentive to make decisions concerning Ocwen that are intended to benefit the share price of affiliated companies, resulting in harm to borrowers, mortgage investors, or Ocwen shareholders as a result”.

Ocwen said, “These agreements are fully disclosed in our public filings, and we believe them to be on an arms-length basis. We look forward to addressing the matters raised by NY DFS and will fully co-operate.”

Ocwen has expanded rapidly in recent years as it snapped up billions of dollars worth of assets that give the company the right to collect payments on thousands of American home loans. In 2009, it spun off Altisource, which in addition to providing mortgage servicing, also stands to profit by selling and renting homes that have been foreclosed on.

The servicing firm’s practices have been under growing regulatory scrutiny. This month, DFS halted indefinitely Ocwen’s purchase of servicing rights from Wells Fargo, citing concerns about its ability to handle the increased servicing.

In December, Ocwen agreed to provide $2bn in loan modifications to homeowners to settle with the Consumer Financial Protection Bureau, which said it found years of “significant and systemic misconduct that occurred at every stage of the mortgage servicing process” including foreclosures.

Housing Wire’s Trey Garrison added the background that Lawsky (whose name he spells wrong below) is concerned about the company’s ability to service mortgages, which prompted Lawsky to halt a $2.7 billion servicing deal with Wells Fargo:

In addition to information on Ocwen’s officers, directors and employees, Lawskey’s office wants all documents sufficient to show the nature and extent of services provided to Ocwen by each of the affiliated companies, including all agreements for such services, and copies of all agreements between Ocwen and the affiliated companies concerning procurement of third party services. Ocwen is also being probed about its agreements concerning the outsourcing of information management to the affiliated companies.

Regarding the Ocwen/Wells Fargo deal, the DFS says it is concerned about Ocwen’s ability to handle Wells Fargo’s portfolio of mortgage servicing rights, a deal that was announced last month and which would have given Ocwen the right to service some $39 billion in mortgages.

Wells Fargo’s portfolio of residential mortgage servicing rights holds roughly 184,000 loans linked to the transaction. The portfolio represents approximately 2% of the banks total residential servicing portfolio.

While this story might seem small, it’s yet another black mark on the mortgage industry, which has suffered since the crisis. Investors have turned to servicers in the anticipation that housing will post gains and this is an area that will help show some type of returns. But it seems that they may have to look for those, especially if litigation becomes a bigger risk or regulators are putting a stop to deals.

Reuters climate coverage

Reuters climate coverage continues to decline


Reuters’ coverage of climate change issues has continued to decline, according to a report from Denise Robbins of Media Matters for America.

Robbins writes, “Former Reporter: “Skeptic” Editor Ingrassia Created A ‘Climate Of Fear’ In The Newsroom. In July 2013, former Reuters Asia climate change correspondent David Fogarty revealed that when Paul Ingrassia —  a self-identified ‘climate change sceptic’ — took over as deputy editor-in-chief, a”climate of fear” surrounding climate change coverage followed….

Since Ingrassia’s Promotion To Managing Editor, Reuters’ Climate Coverage Has Decreased Further. Media Matters analysis released on July 23, 2013, supported Fogarty’s suspicions, finding that Reuters reported on climate change almost twice as much before Ingrassia became deputy editor-in-chief. Since Ingrassia became managing editor in February 2013, Reuters’ climate coverage has only worsened according to an analysis of the six-month period following our initial study. From July 24, 2013, to January 24, 2014, Reuters published 221 articles and 103 mentions about climate change, for a total of 324 stories. This is an 8 percent drop from 353 stories during an equivalent time period under the ‘skeptic’ editor’s regime (which saw 353 total stories), and a more than 50 percent decrease from an equivalent time period before Ingrassia took over (675 total stories).

“Just under half of Reuters’ coverage (44 percent) was focused on policy — a decrease from our previous study (63 percent) — and coverage focused on science increased slightly from 12 percent to 14 percent. The articles quoted primarily politicians and government officials (45 percent of the time) — similar to the previous study (41 percent) — but their usage of scientists increased slightly to 19 percent of the time from 12 percent. [Media Matters7/23/13] [University of Wisconsin-Madison, 2/4/13]”

Read more here.

Home Depot

Home Depot sees Christmas in the Spring


The world’s largest home improvement chain is doing some work on its own bottom line. After reporting sales less than analysts expected, Home Depot is banking on higher demand after winter storms and premium products to increase the bottom line.

Dhanya Skariachan wrote for Reuters that the retailer is predicting higher demand as people make repairs after a tough winter:

Winter storms and record cold in much of the United States hurt Home Depot’s (HD.N) fourth quarter sales of everything from lumber to building materials.

But the world’s largest home improvement chain expects to benefit this spring when Americans begin to repair snow damaged homes and gardens.

“We know firsthand that many homeowners have some major repairs ahead of them which suggest we should have a great spring selling season,” Chief Financial Officer Carol Tome said on Tuesday, adding that sales at stores open at least a year were up so far in February despite harsh winter weather.

The comments came after Home Depot missed sales estimates and relied on tight cost controls to beat profit estimates in the fourth quarter, which ended February 2.

Some Wall Street analysts said the retailer held up pretty well in the quarter plagued by inclement weather in its key U.S. market and weakness in the Canadian currency.

The Wall Street Journal’s story by Shelly Banjo and Michael Calia led with the addition of high-end products as a way to make more money:

Home Depot Inc. is adding more upscale items to its lineup, as its customers show a willingness to splurge on their homes.

The giant home-improvement retailer said sales of premium products have posted four straight quarters of growth. The results highlight the growing divergence between chains that can cash in on wealthier shoppers who benefit from rising home and stock prices, and retailers like Wal-Mart Stores Inc. that cater to lower-end customers and are suffering because of reductions in federal food stamp outlays and unemployment benefits.

Home Depot’s customers are spending more. The number of shopping trips where customers spent more than $900 increased by 5.5% in the three months ended Feb. 2, compared with a 2.5% increase for tickets under $50. Those bigger tickets helped sales excluding newly opened or closed stores rise 4.9% in the U.S.

“We want to make sure we have products across the entire price spectrum, but we are adding on the higher end and also adding products with innovation that would come with a premium price,” Chief Financial Officer Carol Tomé said in an interview.

To that end, Home Depot this spring will introduce a higher-end patio furniture line, a new gourmet barbecue system and a toilet seat that comes with an integrated LED light. It is also adding new products at lower price points

Kyle Stock pointed out in a Bloomberg Businessweek story that the retailer also held sales in various markets in the spring, much like the after Thanksgiving sales of other retailers:

The marketing masochists at Home Depot (HD) are again trying to make Black Friday happen in the spring. As if one day a year of bleary-eyed shopping rugby isn’t enough. Nothing cultivates commerce like a ginned-up shopping holiday—so the thinking goes—and this one is even more random than the post-Thanksgiving scrum. Americans don’t give gifts en masse every spring, and other retailers don’t respond with similar blanket deals.

Home Depot doesn’t even hold its spring sales event on the same day, choosing to play it out over several weeks “on a market-to-market basis based on climate by geography.” Sounds festive, right? That’s like Santa canvassing the southern hemisphere in July. Still, never underestimate the American consumers’ demand for a killer patio and a lush lawn. Home Depot’s mantra: “Spring is our Christmas.” May through July is always the company’s busiest period.

There’s plenty of evidence that Home Depot’s Black Friday push will pay off handsomely this year. For one, rising home prices have spurred consumer confidence and emboldened do-it-yourselfers to tackle bigger, more expensive projects. Home Depot said purchases greater than $900 were up 5.5 percent in the recent quarter as shoppers splurged on appliances and flooring. “The housing market is in the early innings of a recovery,” Robin Diedrich, an analyst with Edward Jones, told Bloomberg. Indeed, Home Depot estimates home sales and price appreciation will add 2 percentage points to its sales growth this year.

The New York Times pointed out in a story by Elizabeth A. Harris that earnings for the retailer were mixed, beating expectations but not by much:

Home Depot’s profits were higher than expected, at 73 cents a share, while analysts surveyed by Thomson Reuters were expecting earnings of 71 cents a share. Sales at stores open at least a year rose 4.4 percent over the same period last year.

Overall sales, however, dropped 3 percent over last year, from $18.2 billion to $17.7 billion. (This year’s fourth quarter contained one week less than the same quarter last year.) This year-over-year comparison was an especially difficult measure for the company because last year included a significant bump in sales because of Hurricane Sandy. Carol B. Tomé, Home Depot’s chief financial officer, said the company had $255 million in fourth-quarter sales last year that came with the rebuilding efforts.

Home Depot estimated that the company lost $100 million in sales during January because of the weather, because although its stores sell more snow-clearing equipment and heaters during storms, traffic falls considerably.

The weather was a good and bad point for the retailer since it kept people from getting to stores in the quarter, but will likely prompt them to spend more in the spring. Investors seemed to like what they heard in the earnings report, sending the stock up 4 percent on the news.

Best Business Writing 2013

Columbia Journalism review seeks entries for Best Business Writing 2014


The editors at Columbia Journalism Review are in the process of putting together the third book in its Best Business Writing series with Columbia University Press, and while they read a lot of business journalism (and I do mean a lot of business journalism), they can’t read everything.

Ryan Chittum writes, “What are the most memorable and vivid pieces you’ve seen in the last year or so? What stories made you wish you’d written them or made you see something in a whole new light?

“We define business writing pretty broadly. Best Business Writing 2013, for instance, included a Rolling Stone piece on the hidden-in-plain-sight woes of the middle class, a wonky blog post by Steve Randy Waldman on inequality, productivity, and employment, a takedown of the TED phenomenon by Evgeny Morozov, and a Wired piece on how Corning engineered and produced glass for the iPhone.

“And, of course, we had your more traditional Fortune, Wall Street Journal, and Businessweek fare.

“We have a soft spot for muckraking stories, but we also love a good corporate focus, profile, or column.

“Drop me an email if anything comes to mind, and don’t hesitate to nominate your own work.”


HSBC earnings disappoint


Europe’s largest bank fell short of expectations as revenue declined and they didn’t cut enough costs. The economy is begining to recovery but not fast enough for the bank to  meet its targets.

Bloomberg’s Howard Mustoe and Gavin Finch had this story:

HSBC Holdings Plc (HSBA), Europe’s largest bank, posted full-year profit that missed analyst estimates as a cost-cutting drive fell short of targets and revenue shrank. The stock slumped in Hong Kong and London.

Pretax profit for 2013 rose 9 percent to $22.6 billion from $20.7 billion in the year-earlier period, the London-based bank said in a statement yesterday. That was lower than the $24.6 billion median estimate of 30 analysts surveyed by Bloomberg. HSBC’s Hang Seng Bank Ltd. (11) unit in Hong Kong posted record earnings for the year, boosted by an accounting gain.

HSBC, which gets most of its profit from Asia, is focusing on the most lucrative markets amid increased regulation and compliance costs. While Chief Executive Officer Stuart Gulliver has closed or sold 63 businesses since 2011, costs are running above his target of about 50 percent of revenue, while return on equity, a measure of profitability, is still short of his goal.

“The miss is driven by revenue softness and costs not falling as much as expected,” said Ian Gordon, an analyst at Investec Plc in London with a buy recommendation on the shares. “The dividend is also below expectations.”

The Reuters story by Steve Slater and Matt Scuffham pointed out that HSBC makes most of its money in Asia and is looking to find a way to offset that as the economy slows:

Gulliver is under pressure to show how HSBC can replace income lost from the sale of U.S. businesses and a stake in a Chinese insurer, and worries that Asia’s economic growth is slowing.

He remained optimistic about longer-term prospects for emerging markets, which have been hit hard by a U.S. decision to wind down stimulus measures, but warned of “greater volatility in 2014 and choppy markets”.

He predicted China’s economy would grow by 7.4 percent this year, Britain’s should expand by 2.6 percent, the United States by 2.5 percent and western Europe 1.2 percent.

HSBC reported 2013 pretax profit of $22.6 billion, up from $20.6 billion in 2012 but below the average forecast of $24.3 billion in a Thomson Reuters poll.

Shutting businesses hit the bank’s revenues, which fell 5 percent. Stripping out the impact of disposals, underlying revenue was $63.3 billion, up from $61.6 billion.

Margot Patrick and Max Colchester wrote for the Wall Street Journal that HSBC could also be hurt by rules requiring it to hold more capital:

Chief Executive Stuart Gulliver warned that rising capital requirements could hinder the bank’s ability to ever hit the upper end of its 12% to 15% return-on-equity target, a measure of how much profit a company generates from shareholder funds. He also dashed hopes of a share buyback in the near term by saying he didn’t think it would happen in 2014.

HSBC, with $2.7 trillion in assets, is regarded as one of the world’s most stable banks because of its strong capital ratios and exposure to rapidly growing emerging economies. Mr. Gulliver said on Monday the bank has succeed in becoming “leaner and simpler” since starting a restructuring in 2011 that included exiting 63 businesses and shedding tens of thousands of jobs.

But analysts have been concerned about the bank’s ability to hit its return targets and jump-start revenue growth in an uncertain global economy. Return on equity in the year was 9.2%, up from 8.4% in 2012. The bank missed its cost-efficiency target, too, and said both figures had been affected by repayments to U.K. customers who were wrongfully sold insurance on loans and credit cards.

Profit before tax fell in many of the regions where HSBC operates. In Asia Pacific excluding Hong Kong, pretax profit slipped to $7.76 billion from $10.45 billion. Latin America pretax profit fell to $1.97 billion from $2.38 billion. The decline was offset, though, by a better performance from Europe, where last year’s $3.41 billion pretax loss swung to a $1.83 billion gain.

Andrew Peaple wrote in the Heard on the Street column that HSBC is working hard to get, well, nowhere:

Moreover, HSBC’s balance sheet is in decent shape, with core tier one equity up to 10.9% of its risk-weighted assets. The rising dividend could eventually be accompanied by share buybacks: HSBC will seek shareholder approval for that this spring.

Still, the problem for HSBC is that since 2011 it has effectively been running hard to stand still. It has promoted itself as a key beneficiary of global growth thanks to its expertise in trade finance. But with emerging-market growth increasingly checkered, it’s getting harder to judge HSBC’s revenue outlook. On the expense side, the low-hanging fruit of lower loan provisions, cost savings and decreasing regulatory fines can only be plucked so often.

And that’s really the point investors should think about – that cost cutting and capital management isn’t the talk of a growing company. Those are measures that stagnant companies take to continue to show growth on paper. While it’s no surprise that banks are having trouble making money as the global economy slows, it is hard to see where they’ll turn after all the costs have been cut and capital managed.

Comcast Netflix

Comcast and Netflix reach streaming agreement


Netflix is striking deals now to make sure its content will stream without interruption. It reached an agreement with Comcast for an undisclosed amount to directly connect to its network.

The New York Times had these details in the story by Noam Cohen:

Comcast, the country’s largest cable and broadband provider, has reached an “interconnection agreement” with Netflix to ensure that its videos would be streamed directly — and thus faster and more reliably — to Comcast’s customers, both companies announced Sunday.

The terms of the multiyear agreement, including whether Netflix was paying for its direct connection, were not disclosed, other than to say that the company “receives no preferential network treatment.”

The announcement confirmed reports that had trickled out late last week, already detecting a more direct Internet path of Netflix videos to Comcast customers. The agreement is expected to be fully put in effect in a matter of weeks.

That the technical details of how streaming videos arrive on a customer’s screen is the subject of corporate announcements and news media coverage speaks to the outsize importance of Netflix and Comcast in how movies and television are watched.

The Wall Street Journal story by Shalini Ramachandran pointed out that the agreement comes less than two weeks after Comcast agreed to buy Time Warner Cable creating the largest TV provider:

The deal comes just 10 days after Comcast agreed to buy Time Warner Cable Inc. The acquisition, if approved, would establish Comcast as by far the dominant provider of broadband in the U.S., serving 32 million households before any divestitures it might make. It also comes amid growing signs that congestion deep in the Internet is causing interruptions for customers trying to stream Netflix movies and TV shows.

People familiar with the situation said Netflix Chief Executive Reed Hastings didn’t want streaming speeds to deteriorate further and become a bigger problem for customers.

In a statement confirming the broad outlines of the deal, the companies on Sunday said the agreement would provide “Comcast’s U.S. broadband customers with a high-quality Netflix video experience for years to come.”

The debate has been heating up over who should bear the cost of upgrading the Internet’s pipes to carry the nation’s growing volume of online video: broadband providers like cable and phone companies, or content companies like Netflix, which make money by sending news or entertainment through those pipes.

While several big Web companies in recent years have started paying major U.S. broadband providers for direct connections to get faster and smoother access to their networks, Netflix has held out—until now.

Steven Musli wrote for CNet that many are concerned that the deal will damage net neutrality, which would prevent Internet providers from discriminating against traffic on their networks:

Under the so-called “paid peering” deal, Netflix will be allowed to connect directly to Comcast’s network instead of going through intermediaries, as it formerly did.

The companies have for years been locked in a dispute over the cost of delivering Netflix streams to its customers over Comcast’s broadband network. While Netflix wanted to connect to Comcast’s network for free, the cable giant sought compensation for the heavy traffic that Netflix users generate, arguing that it costs the company a lot to deliver Internet video.

In recent months, the dispute appeared to be heating up, with suggestions that Comcast customers were seeing their connections to Netflix degraded. Netflix released data last month that showed the average Netflix streaming speed decline 27 percent since October.

The deal is likely to presage similar agreements with other broadband carriers such as AT&T, Verizon, and Time Warner Cable, which have also refused Netflix’s request to connect to their servers without compensation.

Although the two companies say Netflix is not receiving preferential treatment, observers worry that the deal may deal a setback to Net neutrality, which aims to prevent broadband providers from blocking access or discriminating against Internet traffic traveling over their connections.

Timothy B. Lee wrote in The Washington Post that the deal signals the end of net neutrality:

In recent months, the nation’s largest residential Internet service providers have been demanding payment to deliver Netflix traffic to their own customers. On Sunday, the Wall Street Journal reported that Netflix has agreed to the demands of the nation’s largest broadband provider, Comcast. The change represents a fundamental shift in power in the Internet economy that threatens to undermine the competitive market structure that have served Internet users so well for the past two decades.

The deal will also transform the debate over network neutrality regulation. Officially, Comcast’s deal with Netflix is about interconnection, not traffic discrimination. But it’s hard to see a practical difference between this deal and the kind of tiered access that network neutrality advocates have long feared. Network neutrality advocates are going to have to go back to the drawing board.

One clear lesson, though, is that further industry consolidation can only make the situation worse. The more concentrated the broadband market becomes, the more leverage broadband providers like Comcast and Verizon will have over backbone providers like Cogent. That gives the FCC a good reason to be skeptical of Comcast’s proposed acquisition of its largest rival, Time Warner Cable. Blocking that transaction could save the agency larger headaches in the future.

While blocking the transaction is the best move in one man’s opinion, access to the Internet for companies of all sizes is an important issue. If companies with deep pockets are able to buy better access then it will be harder for competition to start-up and earn customers. And when competition suffers, it’s been proven, so do consumers.