News Analysis
BusinessWeek.com
December 26, 2006
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A Holiday Hangover for Stocks?

Wall Street may have enjoyed its "Santa Claus rally" early this year, according to analysts, and major indexes could struggle at the start of 2007

by Marc Hogan

 

Santa Claus may have already made his Wall Street visit for the year. Major stock indexes have risen solidly since a short-lived summer pullback, supported by expectations the Federal Reserve will be able to curb inflation without plunging the economy into recession. With only a week to go until 2007, however, some analysts say the market could enter the New Year limping.

Investors have certainly seen the generous side of old St. Nick this year. If market players typically look for a so-called Santa rally in the last two months of the year, then in 2006 the merriment began well ahead of schedule (see BusinessWeek.com, 11/10/06, "Stealing from Santa?"). As of afternoon trading on Dec. 22, the Standard & Poor's 500 index has advanced 15.5% since June 13, while the Nasdaq Composite has climbed 19.1% from its July 21 bottom.

Recently, though, stocks seem to have lost their holiday spirit. The S&P 500 is up a modest 0.9% so far in December, while the Nasdaq is down 1%. Generally, trading is light in the days between Christmas and New Year's. Still, a variety of technical and fundamental factors suggest stocks may continue to drift—or even pull back modestly—in the next couple of weeks, some analysts say.

No Comfort to Bulls

For one thing, sentiment indicators are at unusually optimistic levels, suggesting investors may be getting overly sanguine about the market. The weekly Investors Intelligence survey shows 59.6% bullish sentiment for the week ended Dec. 19. A week earlier, bullishness was at 59.8%, its highest reading of the year.

Meanwhile, the market has shifted its pattern. "Instead of the activity we've seen over the last couple of months, where you see pullbacks and then sharp rallies, we're now seeing a consolidation," says Chris Johnson, CEO and chief investment strategist of Johnson Research Group. "That tells us there are fewer buyers on the sidelines who are ready to jump in when things go on sale."

Nor have economic reports given any additional comfort to bulls, though they haven't bolstered the bears' case, either. Recent data on economic growth, manufacturing, inflation, and the housing sector have been mixed and consistent with forecasts of a "soft landing" for the U.S. economy, analysts say. With a so-called Goldilocks economy already priced in, these numbers haven't been enough to give the market a boost, Johnson observes.

Mutual Fund Window Dressing

Technical indicators may signal other challenges ahead (see BusinessWeek.com, 12/11/06, "Have Stocks Hit the Ceiling?"). The Dow Jones transportation average has fallen 10.4% since hitting an all-time high May 10, while the Dow Jones industrial average has gained 6.2% over the same period. Adherents of the Dow Theory believe a divergence in these two indexes means the market could be reaching a turning point.

In fact, the Nasdaq recently snapped its upward-trending ways. The tech-heavy index is down 1.3% so far in December, despite solid earnings Dec. 21 from Research In Motion (RIMM) (see BusinessWeek.com, 12/22/06, "Research In Motion's Record Year"). "If you're a trend follower, that's a pretty nasty warning sign," says Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics.

As the markets wander, mutual fund window dressing will likely be the order of the day to close out the year, other analysts say. "That means you will see portfolio managers try to play catch-up," says Quincy Krosby, chief investment strategist at the Hartford (HIG). "You will see the winners, so to speak, of the quarter gain some more, and the losers will lose some more," says Krosby.

Others say the market's strong year means window dressing could play less of a factor. "You're not going to sell something the last week of the year and pay taxes on it in two days," says Art Hogan, chief market strategist at Jefferies & Co. (JEF). "You're going to sell it in January if you have the inclination to sell something."

Early Results

Complicating matters further, oil prices have rebounded in recent months. Crude futures climbed to a three-month high Dec. 20 as OPEC output cuts began to have an effect on supplies. Nevertheless, oil prices retreated over the next two sessions to end the week hovering above $62 a barrel, still down significantly from an all-time high of $78.40 reached July 14.

At the same time, results have begun to trickle out for the fourth quarter. As of Dec. 19, S&P estimates the average S&P 500 company will report earnings growth of 9%, snapping a streak of 18 consecutive quarters with double-digit percentage increases. Goldman Sachs (GS primary=), Bear Stearns (BSC), Rite Aid (RAD), and General Mills (GIS) have been among companies posting upside surprises so far, whereas FedEx (FDX) and Bed Bath & Beyond (BBBY) were among companies missing analyst expectations.

In the intermediate term, some analysts expect the market to resume its winning ways after its end-of-year lull, while others warn of a slowing economy. "These pullbacks tend to bring in a lot of pessimism, which ultimately provides more fuel for a rally as that pessimism is unwound and expectations are lowered," says Todd Salamone, senior vice-president of research at Schaeffer's Investment Research. "The lower the expectations, the stronger the possibility of an upside surprise." In the meantime, though, investors might not want to count on a Christmas miracle.

News Analysis
BusinessWeek.com
December 21, 2006
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Retirement Income: Think Creatively

From intra-family mortgages to nontraditional fixed-income investments, here are a few strategies for generating extra golden-years cash flow

by Marc Hogan

 

This holiday season's massively hyped Sylvester Stallone movie, Rocky Balboa, finds the aging boxer—and the actor who plays him—beefing up their retirement accounts with one last return to the ring (wife Adrian, alas, isn't around to share the popular pugilist's golden years). Right now, many of the 77 million Americans nearing their golden years may be hoping for a similar yuletide miracle.

That's just Hollywood. Still, retirees and soon-to-be retirees may have some retirement options they haven't considered yet. In some cases, the boomers' grown-up kids might be able to lend a hand (see BusinessWeek.com, 10/16/06, "Getting Your Parents' Finances in Order").

"Anything a child can do to help the parent delay taking Social Security benefits can be helpful," says Bob Nusbaum, president of Pittsburgh-based financial-planning firm Middle America Planning. For example, Nusbaum observes, lending a car now and then might help the parents downsize from two cars to one.

Not ready to take up boxing? This week's Five for the Money looks at some other less obvious, but savvy, ideas for generating retirement cash flow.

1. Be house-smart
 
Brent Little, managing partner at Plano (Tex.)-based Odyssey Wealth Management, recalls a client who needed the level of income he might generate from corporate bonds. But instead of turning to the bond market, the client paid off his son's home mortgage and now has his son making mortgage payments to him instead of the bank. This way, the father earns 6%—the interest rate on the son's mortgage—compared with the 4% gain the Lehman Aggregate corporate bond index has posted this year.

Though not for everyone, this approach can be a way for baby boomers to get cash flow while still allowing their children to get the interest deduction for tax purposes. "Usually, we see parents helping children buy a house, but this time around the children can help the parents by giving them stable income in their retirement years while not costing the child anything," Little says.

Be warned: Little's strategy does carry risks, particularly if a child has an unstable employment history. Parents would be placing a large amount of their money in a single, illiquid holding, rather than in a broadly diversified investment portfolio. It's best to consider this option on a case-by-case basis.

2. Check up on insurance policies
 
Of course, retirees and those nearing retirement can also boost their cash flow by trimming their spending. Eliminating or reducing unneeded life-insurance coverage can cut down on the need for cash today, financial planners suggest. In some cases, baby boomers might even be able to turn the cash value of an unnecessary policy into an annuity.

"Many baby boomers still have whole life or some cash-value life insurance," says John Deyeso, principal of New York-based financial-planning firm Financial Filosophy. "Do they still need the life insurance? If so, do they still need the same level of coverage?" It's important to tailor your coverage to your current needs.

3. Look beyond traditional fixed income
 
The recent rising interest rate environment has led some investors to seek fixed-income investments other than bonds, which tend to underperform in those circumstances. James Holtzman, a financial planner at Pittsburgh-based Legend Financial Advisors, says "nontraditional" fixed-income offerings, such as bank loan funds, can be a smart income-generating alternative. "Nontraditional fixed income still isn't correlated to stocks but has done well when interest rates rise," Holtzman says. 

Preferred stocks, essentially a hybrid of stocks and bonds, offer another way to generate extra cash flow (see BusinessWeek.com, 10/18/06, "Hungry for High Yields"). High-yield mutual funds like Loomis Sayles Global Bond (LSGBX) can also make sense, says Georgia Bruggeman, chief investment adviser at Holliston (Mass.)-based financial-planning firm Meridian Financial.
But the yield-hungry should be careful. "Know what you're buying," Bruggeman cautions. "Stretching for yield often leads to higher risk unless you have done your homework."

4. Talk to your children
 
Mortgage payments aren't the only way the children of retirees or near-retirees can help their parents generate retirement income. Small-business owners may want to consider hiring their parents on a part-time basis as they make the transition into retirement. "If the children have their own business and are in a higher tax bracket than their parents, hiring their parents part-time can be a great way to provide some cash flow," says financial planner David Jacobs of Kailua (Hawaii)-based Pathfinder Financial Services.

If possible, children might want to buy their parents' home and rent it to them at a below-market rate, other financial advisers suggest. "Just be sure you don't go too below market or buy it for too little, or the IRS may think it's a gift," says Susan Fulton, principal at Bethesda (Md.)-based financial-planning firm WealthTrust FBB.

An outright gift, while potentially awkward and possibly not financially feasible, can also help solve retirement-income troubles. One person may give another a gift of up to $12,000 tax-free annually. Sid Blum, a financial planner at Green Light Fee-Only Advisors in Evanston, Ill., recommends giving money to pay parents' long-term insurance premiums, which also allows the parents to continue to take the premiums as a tax deduction.

5. Give your portfolio a tune-up
 
Well, this one might not seem particularly outside-the-box, but a careful portfolio assessment is crucial for investors in or nearing retirement. Baby boomers should review their income sources and their asset allocation to be sure it still makes sense given their changing needs.

With life expectancies growing, fixed-income investments might not be enough, financial planners say. "Depending on the amount of investable assets and income needs, some part of the portfolio allocated to growth assets, such as dividend-paying stocks, can help sustain the portfolio over time," says Penny Marlin, president of Delray (Fla.)-based Marlin Financial. "Cash flow should be viewed in terms of total return."

Most importantly, soon-to-be-retirees and their children should talk about their income needs and develop a plan for the years ahead. After all, not every 60-something can count on a blockbuster movie franchise for extra cash flow.

News Article
BusinessWeek.com
December 21, 2006
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Stocks Fall after Softer Economic Data

The Philly Fed index unexpectedly dropped in December. Third-quarter GDP growth was revised downward, while weekly jobless claims posted gains

by Marc Hogan

 

Stocks finished lower Thursday in slow pre-holiday trading, as investors digested a set of mostly softer reports on the economy and mixed corporate earnings. Investors were awaiting another batch of economic data to be released Friday, says Standard & Poor's Equity Research.

On Thursday, the Dow Jones industrial average fell 42.62 points, or 0.34%, to 12,421.25. The broader Standard & Poor's 500 index dropped 5.22 points, or 0.37%, to 1,418.31. The tech-heavy Nasdaq composite was down 11.76 points, or 0.48%, to 2,415.85.

NYSE breadth was negative, with 20 issues declining for every 14 advancing. Nasdaq breadth was 17-13 negative.

In economic news, the Philadelphia Federal Reserve's index of regional manufacturing activity fell to -4.3 in December, much weaker than expected, after rising to 5.1 in November. Still, expectations for other manufacturing gauges remain unchanged, says Action Economics.

Earlier, the final reading for third-quarter U.S. gross domestic product, or GDP, growth was revised down to 2% from 2.2%. The chain price index was revised up to a 1.9% pace from 1.8%. The mixed data contrast with expectations for no change and could add to wories about slowing growth in 2007, says Action Economics.

The softer growth figures don't significantly alter the third-quarter economic landscape, some analysts say. "This slight downward revision to GDP does not change the picture of modest economic growth in the third quarter, held back by sharply lower residential investment," says John Ryding, chief U.S. economist at Bear Stearns, in a note to clients. "The revision to third-quarter growth is a slight positive for fourth-quarter GDP as the revision was largely due to lower inventory investment."

The slowdown in GDP growth seems temporary, others note. "The economic backdrop looks good," says Lincoln Anderson, chief economist and chief investment officer of LPL Financial Services. "The Fed wanted to engineer a slowdown, and they got it."

Meanwhile, initial jobless claims rose 9,000 to 315,000 in the week ended Dec. 16, from an upwardly revised 306,000 a week earlier. The four-week moving average dipped to 325,750 from 327,750.

Separately, U.S. leading indicators nudged higher 0.1% in November to 138.2, beating expectations of a 0.2% decline.

Looking ahead, Friday brings another busy economic docket ahead of the Christmas holiday. The markets will be mulling over data on durable goods, personal income, consumer spending, inflation, and consumer sentiment.

Among Thursday's stocks in the news, Nike (NKE) was modestly higher after the shoemaker reported an 8% rise in second-quarter profit.

Drug retail was among the top-performing industries, as shares of Rite Aid (RAD) rose on strong third-quarter revenues.

Chipmakers fell following disappointing guidance from Jabil Circuit (JBL). Credit Suisse and Jefferies each downgraded the shares.

Retailer Bed Bath & Beyond (BBBY) was down despite a 3.8% increase in third-quarter earnings. Credit Suisse lowered its recommendation on the shares from outperform to neutral.

Accenture (ACN) was higher after the management and technology consulting company posted a 32% jump in first-quarter profit on a 12% sales surge.

Shares of General Mills (GIS) gained as the packaged-food maker's second-quarter results topped Wall Street expectations.

Rival ConAgra (CAG) was up on a 44% rise in second-quarter income.

In M&A news, defense contractor Raytheon (RTN) said it would sell its aircraft business for $3.3 billion to a new company started by a Goldman Sachs affiliate and a Canadian buyout firm.

Huntington Bancshares (HBAN) agreed to pay about $3.6 billion in stock and cash for fellow Ohio-based banking company Sky Financial (SKYF).

On the analyst front, Circuit City (CC) was higher after J.P. Morgan raised its rating on the stock from neutral to overweight, citing positive catalysts for fiscal 2008.

In the energy markets, January West Texas Intermediate crude oil futures fell 86 to $62.86 per barrel, with inventories still at the upper end of the seasonal range.

European markets finished slightly lower. In London, the FTSE-100 index fell 14.9 points, or 0.24%, to 6,183.7. Germany's DAX index shed 12.95 points, or 0.2%, to 6,573.96. In Paris, the CAC 40 index edged down 4.03 points, or 0.07%, to 5,510.39.

Asian markets ended mixed. In Japan, the Nikkei 225 index gained 36.79 points, or 0.22%, to 17,047.83. In Hong Kong, the Hang Seng index slipped 17.28 points, or 0.09%, to 19,222.84. Korea's Kospi index lost 5.81 points, or 0.4%, to 1,436.47.

Treasury Market
 
Treasury yields dipped on the soft Philly Fed data and rumors of a London security threat, after drifting earlier. The 10-year note rose in price to 100-19/32 for a yield of 4.56%, while the 30-year bond climbed to 96-31/32 for a yield of 4.7%. However, Richmond Federal Reserve President Jeffrey Lacker warned of inflation risks. The market will be watching the PCE deflator report Friday, says S&P.

News Article
BusinessWeek.com
December 19, 2006
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Stocks Finish Mixed Despite Inflation Data

The Dow hit a new all-time high as investors shrugged off a surprising surge in wholesale inflation. Housing starts also rebounded

by Marc Hogan

 

Major stock indexes finished mixed Tuesday, with the Dow touching a new all-time closing high, despite initial weakness following an unexpectedly firm inflation report. A 15% overnight plunge in Thai markets also rattled investors. Traders were awaiting Wednesday's mortgage applications data for clues about the housing market, says Standard & Poor's Equity Research.

On Tuesday, the Dow Jones industrial average rose 30.15 points, or 0.24%, to 12,471.32, a new record closing high. The broader Standard & Poor's 500 index added 3.07 points, or 0.22%, to 1,425.55. The tech-heavy Nasdaq composite slipped 6.02 points, or 0.25%, to 2,429.55.

NYSE breadth was positive, with 18 issues advancing for every 15 declining. Nasdaq breadth was 17-14 negative.

In economic news, the U.S. producer price index, or PPI, surged 2% in November, its biggest jump in more than 30 years, amid rising gas prices. The core rate, which excludes food and energy costs, rose 1.3%. The increases reversed October declines of 1.6% for the headline PPI and 0.9% for the core PPI.

Car prices rose 2.2% and light truck prices 13.7% in November, some analysts note. "The jump in vehicle prices suggests that the inflation picture in the goods sector is not quite as favorable as previously thought, though we would still place more weight on the positive surprises to the core CPI over the past two months," says Jan Hatzius, chief U.S. economist at Goldman Sachs, in a note to clients.

Others say the PPI is not a reliable measure of inflation. "Last month, we argued that 'We do not think that the PPI finished goods prices is a very representative index of current inflation pressures,'" says John Ryding, chief U.S. economist at Bear Stearn, in a note to clients. "Today's report underscores that assessment."

Meanwhile, U.S. housing starts bounced 6.7% in November to a 1.588 million pace, from an upwardly revised 1.488 million in October.

The economic docket is relatively light Wednesday, highlighted by mortgage applications. The slate Thursday holds reports on economic growth, jobless claims, leading indicators, and regional manufacturing activity.

Among Tuesday's stocks in the news, Oracle (ORCL) was lower as analysts questioned the software maker's growth strategy despite an in-line report on second-quarter earnings.

Computer electronics retailers were among the worst performers. Circuit City (CC) was sharply lower after posting a third-quarter loss and lowering its full-year sales outlook.

On the upside, Morgan Stanley (MS) was higher as the investment house said it will spin off its Discover credit card business and reported fourth-quarter profit surpassing analyst expectations.
Drugmaker Pfizer (PFE) was higher after the company raised its dividend 21%, to 29 cents from 24 cents.

Microsoft (MSFT) was also up modestly after slipping earlier following a report a function in the software giant's new Internet Explorer 7 Web browser may make it harder for some small businesses to gain online credibility.

Elsewhere, Delta (DALRQ.PK) rebuffed a bid from U.S. Airways (LCC) and filed its plan to emerge from bankruptcy. U.S. Airways said it would continue its bid.

Homebuilders were taking a hit after Hovnanian (HOV) reported a fourth-quarter loss.

Oil prices climbed, boosting corresponding stock groups. In the energy markets, January West Texas Intermediate crude oil futures rose 94 cents to $63.15 per barrel, amid reports of increased violence in oil-rich Nigeria.

European markets finished lower. In London, the FTSE-100 index fell 43.5 points, or 0.7%, to 6,203.9. Germany's DAX index shed 43.74 points, or 0.66%, to 6,553.51. In Paris, the CAC 40 index was down 45.56 points, or 0.82%, to 5,484.76.

Asian markets ended lower. In Japan, the Nikkei 225 index slid 185.23 points, or 1.09%, to 16,776.88. In Hong Kong, the Hang Seng index lost 228.36 points, or 1.19%, to 18,964.55. Korea's Kospi index shed 5.47 points, or 0.38%, to 1,427.76.

Treasury Market
 
Treasury yields drifted higher, pulling back from an initial surge on the unexpectedly high wholesale inflation reading and firm housing data. The 10-year note edged down in price to 100-08/32 for a yield of 4.59%, while the 30-year bond slipped to 96-15/32 for a yield of 4.72%.

News Article
BusinessWeek.com
December 18, 2006
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The New Boss: Younger Than the Old Boss

Nearly 100 public-company CEOs in the U.S. are 40 or younger. Here they share war stories and tips on how to get to their position

by Marc Hogan

 

Michael Rubin started his business career at age 13, running a ski-tuning shop out of his parents' basement. He went on to open several retail ski shops in New York and Pennsylvania by the time he graduated from high school. Now 34, Rubin is chief executive of GSI Commerce (GSIC), a King of Prussia (Pa.)-based e-commerce company with $524.6 million in revenue in the 12 months ended Sept. 30.
Meet the new boss, younger than the old boss. Rubin is one of approximately 140 executives age 40 or younger who are chief executive officers of publicly traded companies around the world, according to data compiled by Capital IQ. Of these, nearly 100 are located within the U.S., while another 40 or so lead companies headquartered in other countries. The youngest, Harry Vafias, CEO of StealthGas (GASS) in Athens, Greece, is only 28.

For generations, the corner office has been the domain of experience, occupied in literature and film by crusty old-timers like Ebenezer Scrooge or It's a Wonderful Life's Mr. Potter. In more recent decades, investors grew accustomed to fresher faces, as such young visionaries as Microsoft's (MSFT) Bill Gates and Apple's (AAPL) Steve Jobs helped lead the 1980s personal-computing revolution. Now, a new generation of 40-and-under CEOs offers proof that today's young entrepreneurs can scale the corporate ladder, too.

Tech Ladder

The tech sector may still be the quickest road to the top. More public-company CEOs age 40 and under lead organizations involved in technology products or services than work in any other industry. These companies range from online travel publisher Travelzoo (TZOO) to semiconductor materials provider Cree (CREE) and software maker Borland (BORL).

A tech background can also help executives in related businesses, such as retail. Michael Soenen, 36-year-old chief of flower seller FTD (FTD), recalls becoming CEO of his company's Web division in 1999. "Internet CEOs were young by nature, and the success we were having made me a logical choice," Soenen explains. "Having run that business successfully, becoming CEO of FTD Inc. was a natural extension for me."

Many of the youngest CEOs achieved their position by launching their own companies from scratch. "If you really want to be a CEO at a young age, start a company and call yourself a CEO," says David Liu, who recently turned 41 but has been CEO of wedding information Web site The Knot (KNOT) since age 30.

Experience Can't Hurt

Sometimes the hardest part may just be getting started. "You can't wait until you know all the answers," says 36-year-old Taser International (TASR) CEO Rick Smith, who started his stun-gun operation in a garage at age 23. "You never will. When your gut tells you there's an opportunity there, you have to take it."


Others suggest seeking out a broad range of experiences en route to the corner office. Jonathan Huberman, now 41, became CEO of Zip-disk storage device maker Iomega (IOM) earlier this year at age 40, following stints in tech, management consulting, venture capital, and hedge funds. "Look for diversity of experiences, because to be a CEO you need to be able to understand and set strategy for every facet of the business," Huberman says.

While it's never easy to be a CEO, for those 40 and under it can be even more challenging. "It changes your life top to bottom," says Jordan Greenhall, 35-year-old chief of digital video compression software maker DivX (DIVX). "Not as much as having children, but in that same zone."

Ready for Risk

And like having children, CEOs typically say the job is worth any sleepless nights. "I have to say I really love it," says Michael Chasen, 35-year-old head of school software developer Blackboard (BBBB). "I thrive on the fast pace and excitement in running a fast-growth, successful company."


The people who become CEO at a young age are increasingly unafraid to take risks, notes Peter Cappelli, a management professor at the University of Pennsylvania's Wharton School. "They're willing to look for opportunities to stand out," Cappelli explains. Still, he cautions that bigger appetites for risk may have unwanted consequences, citing the Enron scandal.

Today's young CEOs are likely to have a better understanding of technology and globalization than did the bright up-and-comers of decades past, adds Michael Feiner, a management professor at Columbia University Graduate School of Business and author of The Feiner Points of Leadership. "The biggest challenge is the leading-people piece," Feiner says. "It takes a while for even really smart CEOs to understand it's people first, strategy second. That comes from experience and mistakes, and I don't think there's a shortcut."

Passion Projects

Meanwhile, new CEOs are taking on the mantle at a time of unprecedented turnover. Corner-office job changes this year are on pace to top last year's record 1,322 departures, according to Chicago consulting firm Challenger, Gray & Christmas (see BusinessWeek, 10/30/06, "The Great CEO Exodus"). Such big-name companies as Bristol-Myers Squibb (BMY), Ford (F) and Viacom (VIA, VIA.B) were among those making CEO switches in 2006.

Ultimately, a CEO of any age needs to have a passion for the job. "You can have all the products and packaging and scale that you need to perform, but really none of that takes you any place if you don't have the right attitude about the business," says Mariner Kemper, 34-year-old head of Kansas City (Mo.)-based financial services company UMB Financial (UMB).

The best CEOs grow into the position because they followed what excited them, not because they set out to become CEOs, adds Mark Vadon, 36-year-old chief of online jewelry retailer Blue Nile (NILE). "Do something that you really love doing," Vadon advises. "If you're not doing something that you really like, you're not going to be that successful at it."

Click here to see the list of 40-and-under CEOs of publicly traded U.S. companies.

News Article
BusinessWeek.com
December 18, 2006
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Hoku's Shindo Reaches for the Stars

Dustin Shindo is working hard to turn his company, Hoku Scientific, into an alternative-energy powerhouse

by Marc Hogan

 

Dustin Shindo expects to travel 350,000 miles this year. For the Chief Executive of Hoku Scientific (HOKU) in Kapolei, Hawaii, the shortest possible round-trip by air is the 5,000 miles to San Francisco. The alternative-energy company Shindo heads has moved in similar leaps and bounds since he helped launch it in March, 2001.

Hoku listed on the Nasdaq in August, 2005, selling 3.5 million shares at $6 a share. In fiscal 2006, the company reported a net income of $1.3 million, up from a net loss of $728,000 in fiscal 2005, on 90% higher revenue. However, the stock price has fallen more than 50% from its initial public offering, to $2.85 in afternoon trading Dec. 15.

Formerly known as Pacific Energy Group, Hoku concentrates on making products for hydrogen-powered fuel cells. The company's name means "star" or "guiding light" in Hawaiian. More recently, Hoku has also started developing modules and materials for the solar-power market. In addition, the company has strategic relationships with the U.S. Navy, Nissan (NSANY), and Sanyo (SANYY).

Accomplished Innovator

When Shindo, 33, co-founded Hoku with Chief Technology Officer Karl Taft, it wasn't his first experience starting a company. Shindo, who earned an MBA at the University of Virginia's Darden School of Business Administration, founded travel-industry software provider Activitymax in 1999. Four years earlier, he had started Hawaiian microbrewery Mehana Brewing.

Shindo says his passion and the strength of his team are the reasons he was able to become a CEO at such an early age. "I have a lot of great people around me," he says. "That was a big difference. The second thing is I'm just incredibly passionate, and that ends up resulting in working incredibly long hours and caring a lot about the results of this company. Every CEO needs that."

How long are the hours? Shindo puts in 90 to 100 hours a week, which he says not only diminishes his free time but also affects his circadian rhythms due to all the travel involved. When possible, he sets aside Sundays to spend with his wife, Jamie. "I don't have any real hobbies other than trying to exercise as much as possible," he says.

The Three Ps

To young entrepreneurs who would someday like to be in his shoes, Shindo suggests "the three P's": passion, performance, and persistence. "You have to have more passion than anyone else, because as CEO, you're the cheerleader," he says. "You're the director. You have no one to complain to. The second 'P' is performance: Ultimately you have to be able to get the job done. The third 'P' is persistence, and that's what a lot of younger people lack. They're good at one thing, but rarely do people stick with it through the hard times."

When it comes to his future goals, Shindo speaks like a CEO of any age. "My biggest focus is always in building long-term shareholder value," he says, calling this "particularly important in energy technology, which is an extremely volatile industry." Either way, he'll have miles to go before he sleeps.

Click here to see the list of 40-and-under CEOs of publicly traded U.S. companies.

News Article
BusinessWeek.com
December 18, 2006
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Langer's CEO Puts His Best Foot Forward

At only 31, Gray Hudkins, CEO of orthopedic device maker Langer, is taking the path to success step by step

by Marc Hogan

 

Gray Hudkins may seem like an unlikely advocate for patience. At only 31, Hudkins is the chief executive officer of Langer (GAIT), a Deer Park (N.Y.) maker of orthopedic and skin-care products with $35.8 million in revenues in the year ended Sept. 30. Still, Hudkins put in time at a variety of different companies before landing in his current role. He says he didn't start out with his mind set on a corner office.

Hudkins came to Langer with a background in finance. After graduating from Princeton University in 1997, he held roles at a private merchant bank, a private equity bank, and a branded consumer-products company before becoming director of corporate development for Stamford (Conn.)-based e-commerce outfit Clarus in December, 2002. A year later, Hudkins went to work for Clarus Executive Chairman Warren Kanders as a principal in private investment firm Kanders & Co.

Kindred Styles

Soon, Hudkins found he enjoyed working with Kanders, who is the chairman and largest shareholder of Langer. "He has an incredible track record of building companies and he's just an amazingly intelligent investor," Hudkins says of Kanders. "My experience and my strengths dovetail nicely with how he likes to build his investments. It really just worked out this way."

In October, 2004, following the company's $15.5 million acquisition of skin-care company Silipsos in which Kanders said Hudkins played a "vital role," Hudkins came to Langer fulltime, stepping into the role of chief operating officer. He took over as CEO of the 35-year-old company effective Jan. 1, 2006, upon the departure of predecessor Andrew Meyers.

Notwithstanding his rapid rise, Hudkins says being CEO—and working with Kanders—have taught him not to be in a hurry. "You're exposed to everything from the 30,000-feet view of things down to the day-to-day minutiae," Hudkins explains. "Our approach to things is to be very patient, and we have this view that life is a very long time. Even though I'm doing this at the age of 31, I want to do well for everybody, for myself, and our shareholders. You have to be patient."

He needs to be. On Dec. 5, Chief Financial Officer Sara Cormack resigned for personal reasons. She had been on the job only three months.

Such challenges are part of the job, of course. As is contending with the fact that shares of Langer are down 23% this year as of afternoon trading Dec. 15.

A strategy of growing a company through acquisitions appeals to Hudkins. On Nov. 14 Langer announced an agreement to buy privately held specialty-soaps maker Twincraft for about $26.7 million in cash and stock.

"I like the approach, and I like doing it in this format," Hudkins says. "For me, being the CEO of the company is very exciting and really a lot of fun, because I get to do a lot of things that I really enjoy in connection with an approach that [Kanders] has used and has worked very well for him."

Lessons Learned

Indeed, being CEO has been "an incredible experience," Hudkins notes, one that has helped him to meet interesting people and learn to appreciate his strengths and weaknesses. "It does keep you pretty busy," he says. "The challenge for most any person in any company, whether it's a CEO or somebody else, is knowing where you can add value, and where you should leave things to people who are better at other functions."

Hudkins advises aspiring CEOs to seek out colleagues they'll enjoy working with. "If you have any interest in doing this kind of stuff, you're going to be working quite a bit," he explains. "It's important to enjoy the people you're around. I know it sounds trite, but it's the biggest thing I've learned."

Click here to see the list of 40-and-under CEOs of publicly traded U.S. companies.

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December 18, 2006
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From Russia, with Yogurt

After her father died in 2002, Julie Smolyansky took over her family company, Lifeway Foods, and the then-27-year-old had to grow up fast

by Marc Hogan

 

Lifeway Foods (LWAY) has been a fact of life for 31-year-old Chief Executive Officer Julie Smolyansky for more than two decades. Her father, Michael Smolyansky, founded the Morton Grove (Ill.) health-food maker in 1986. Since the younger Smolyansky took over in 2002, shares of the company have risen more than 650%, adjusted for splits, as of afternoon trading Dec. 15. Operating income was up 30% for the first nine months of 2006, compared to the same period last year, on 27% revenue growth.

Lifeway makes a creamy, yogurt-like drink called kefir, available in 12 flavors at supermarkets nationwide, including Whole Foods (WFMI) and Wild Oats (OATS). The company's products also include its Drinkable Yogurt and Farmer's Cheese brands, along with Basics Plus dietary supplements. Last year Lifeway launched ProBugs, an organic kefir line aimed at children.

Successful Immigrants

The company started much smaller, however. In 1976, the Smolyansky family emigrated from Russia to Chicago. Nearly 10 years later, Smolyansky's parents rediscovered kefir, a Russian staple, at a food show. Her deli-owner mother and engineer father hit upon the idea of producing kefir themselves for the U.S. market, and soon they were planning recipes in the basement after work.


The local media seized on this feel-good story at the height of the Cold War, and the business expanded quickly. Someone, Smolyansky recalls, told her father he should go public. "He didn't even know what that meant," she says. "He went to the local library, about seven blocks away from our offices right now, looked it up, researched what it meant, wrote his own business plan, and found his own investors. He did it all very nontraditionally."

In 1997, Smolyansky began working with her father part-time a year after graduating from the University of Illinois at Chicago. She had never paid much attention to the company or the products, she says, but became drawn to the business and the role she felt she could play there. Smolyansky left graduate school a year later to join Lifeway as director of sales and marketing.

Taking Charge

In June, 2002, Smolyansky's father died of a heart attack, and she stepped in to succeed him at the age of 27. Shares plunged as much as 29.3% the session after the news, leading the Nasdaq to halt trading. "Overnight my life changed just unbelievably," Smolyansky says. "Not only was I mourning the loss of my father, but I was also trying to keep the company together and leading our staff and suppliers to make sure they knew that everything was O.K. Even at my father's funeral, I'd heard people behind my back saying, 'There's no way a little girl's going to run a company like this.' "

Nothing could prepare Smolyansky for those challenges, but she was used to juggling the type of busy schedule that is the CEO's daily routine. In high school, she was always doing something, she recalls: figure-skating, playing tennis, organizing a silent auction for a local battered-women's shelter, or leading a community-service organization. "I was always leading people, and I was always overbooked in my calendar," she says. "It was almost a kind of training for me to do what I'm doing now."

Such a busy schedule does have its downside, Smolyansky concedes. "There's less freedom, less personal time, and certainly being a single female in this kind of business makes dating a little bit difficult," she explains. "Those are probably the most difficult parts."

To Smolyansky, the opportunity is worth all the challenges. "I'm just an ordinary immigrant girl," she says. "I grew up just a couple of blocks from where our offices are. I rang the Nasdaq bell in early January to celebrate 20 years of providing healthy New Year's resolution options for people. That was amazing. We got to see the Lifeway logo, and our bottles, and my signature in Times Square in lights. If I pinched myself a million times, I still wouldn't believe that this was all really happening."

Click here to see the list of 40-and-under CEOs of publicly traded U.S. companies.

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December 16, 2006
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Jeff Stibel: Web Head

Web-hoster Web.com's CEO Jeff Stibel is only 33 and it's already his second chief executive job

by Marc Hogan

 

Experience counts. Jeff Stibel may be just 33, but he had packed in enough leadership roles for a much more senior businessperson before becoming chief executive of Atlanta-based Web.com (WWWW), which provides Web-hosting services to small businesses and consumers. Stibel credits this background with helping him become one of the youngest CEOs of a publicly traded company.

At 26, Stibel was already chairman and CEO of a privately traded search and marketing technology company, Simpli.com, now owned by ValueClick (VCLK). From 2000 to 2005, he held executive positions at United Online (UNTD), which owns ISPs such as NetZero along with such online services as Classmates.com and Freeservers.com. Before that, he went to business school at MIT's Sloan School of Management, pursued a doctorate in brain science at Brown University, and also held roles at Verizon (VZ), a law firm, and a consulting group.

Living to Grow

In other words, he's used to being busy. "I knew that I wanted to build a company," Stibel says. "I wanted to get that technology experience, as well as that business experience, as well as be around people who were exciting and innovative and work toward being the motivating force to drive things forward."

Stibel joined Web.com, then called Interland, in August, 2005. Shares of the stock have more than doubled since then. On Nov. 7, the company reported third-quarter revenue of $12.3 million, its first-ever organic revenue increase, on 11% year-to-date subscriber growth. During the third quarter, Web.com also started to diversify into patent licensing.

Looking ahead, Stibel's goal is for more growth. "I'm incredibly passionate about growth, whether it's individual growth and learning or whether it's company growth," he says. "I always want to be doing something new, exciting, and rewarding, and that speaks both for myself personally and for the company."

Still, Stibel's accelerated experience hasn't come without sacrifices. "I ended up waiting to marry my wife for seven years because I was focused on building my company," he says. The two have also moved back and forth across the country numerous times as Stibel moved from Simpli.com in the East Coast to United Online in California, and back to Atlanta for Web.com. Nevertheless, Stibel says the sacrifices have been worth it, calling his position "a tremendous opportunity."

Keep Learning

For aspiring young CEOs, Stibel recommends listening and learning as much as possible. "Soak up as much information as you can," he says. "Don't be afraid to make mistakes, and be proud of your mistakes. At the end of the day learning and getting experience and getting advice from others shouldn't be seen as a weakness, it should be seen as a positive. The more that you surround yourself with great people, the better off you'll be for the long term."

Giving back is also important to the Web.com chief. Stibel serves on the board of Brown University's Entrepreneurship Program and Tufts University's Gordon Center for Leadership. He also sits on the boards of about a half-dozen small startups. "I hope to be working for them someday," he quips.

Click here to see the list of 40-and-under CEOs of publicly traded U.S. companies.

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December 18, 2006
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Josh James: Building a Business that Counts

Omniture's founder and CEO has not only created one of the Web's top analytic software and services companies—he's taken it public

by Marc Hogan

 

Josh James's entrepreneurial career has grown with the Internet. In 1996, as Brigham Young University undergraduates, James and friend John Pestana started a business making Web pages. Before long, customers started clamoring for a way to measure their Web sites' performance. Now 33, James is CEO and co-founder of Orem (Utah) Web-analytics company Omniture (OMTR), the descendent of that first Web venture.

One factor pushing James to eventually run his own company was an all-American desire to take ownership of his own success or failure. "I like making decisions," he explains. "I'm really comfortable with whatever the outcome is, bad or good, as long as I was able to have a part in making the decision."

Going Public

So far, the decision to take Omniture public this summer has been a pretty good one for shareholders. The stock's price was up 117.8% to $14.16 in afternoon trading Dec. 15, after opening at $6.50 on June 28. On Oct. 26, the company reported record quarterly revenue of $21 million, up 83% over the same period a year earlier.

True to those customers at James's collegiate Web-design business, Omniture hosts and delivers on-demand software that lets its customers dig into the data their Web sites generate and attempt to gauge performance. Customers include eBay (EBAY), AOL (TWX), Wal-Mart (WMT), Microsoft (MSFT), Oracle (ORCL), and Hewlett-Packard (HPQ), according to a recent press release. (BusinessWeek.com, a unit of The McGraw-Hill Companies (MHP), also has a business relationship with Omniture.)

Another client, General Motors (GM), helped the company establish itself after changing its name to Omniture in 2002. GM provided a Hummer for Omniture to give away at an e-tailing trade show. "We wanted every single person in that place to know who we were," James recalls.

Surrounded by Talent

Omniture sponsored a lunch, asked everyone to stand up—and its competitors to sit down—then led a game of "rock, paper, scissors" with the vehicle as a prize. As part of the contest, all of the 1,000 or so participants in the room except Omniture's competitors were chanting the company's new moniker: "Om-ni-ture. Om-ni-ture. Om-ni-ture."

Such confidence is essential for a CEO, James says. But he stresses that an effective CEO should never be too confident to ask for help. In fact, he says it's important for chief executives to surround themselves with people who may be more talented than they are in many areas.

"You absolutely have to hire people that are not just smarter than you, but more aggressive than you, more driven than you," he explains. "And you have to find a couple of people who are more realistic than you to balance it out. You end up creating a company that reflects your personality, all aspects of it."

Take Action

James doesn't pretend that being a CEO is all Hummers and rock-paper-scissors games. On top of the usual day-to-day stress, a head of a company can't shirk his responsibilities or "disappear," James says. And other employees, some of whom make life changes to work at a company, are all counting on the CEO, too.

Ultimately, the most important thing when it comes to starting a business, in James's view, basically boils down to the Nike (NKE) slogan: "Just do it," he says. "People sit and talk about things forever. If you've got the risk profile, just do it."

Click here to see the list of 40-and-under CEOs of publicly traded U.S. companies.

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December 18, 2006
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Stocks Fall Despite M&A News

The Dow touched an all-time intraday high amid deal activity in the health care and casino sectors, but the early rally fizzled in afternoon trading

by Marc Hogan

 

Stocks finished modestly lower Monday, fading from initial peaks after another flurry of merger news lifted the Dow to a new all-time intraday high. Traders were unwinding positions from Friday's quadruple witching, when monthly stock and index option expirations coincide with the quarterly expiration of stock and index futures contracts. Trading was active early but likely to be slow later in the week ahead of Christmas, says Standard & Poor's Equity Research.

On Monday, the Dow Jones industrial average edged down 4.25 points, or 0.03%, to 12,441.27, after touching an all-time trading record of 12,490.70. The broader Standard & Poor's 500 index fell 4.61 points, or 0.32%, to 1,422.48. The tech-heavy Nasdaq composite dropped 21.63 points, or 0.88%, to 2,435.57.

NYSE breadth was negative, with 221 issues declning for every 11 advancing. Nasdaq breadth was 21-10 negative.

In economic news, the U.S. current account deficit widened to $225.6 billion in the third quarter from $217.1 billion in the second quarter, revised from $218.4 billion.

The U.S. National Association of Homebuilders index dipped to 32 in December, weaker than expected, from 33 in November. "Despite the headline decline, the builders group suspect the worst is behind us," says Action Economics.

Looking ahead, Tuesday's economic calendar holds November readings on housing starts and wholesale inflation.

Merger activity was in focus Monday. Health care services was among the top-performing industries as pharmacy benefits manager Express Scripts (ESRX) launched a $26 billion hostile bid for competitor Caremark (CMX).

Medical products maker Biomet (BMET) was lower after the company agreed to be acquired for about $10.9 billion in cash by a private equity consortium.

Casino and gambling stocks were also strong amid reports casino operator Harrah's Entertainment (HET) agreed to a $16.7 billion buyout offer private-equity groups Apollo Management Group and Texas Pacific Group.

Meanwhile, Realogy (H) was sharply higher on news the parent of the Century 21 and Coldwell Banker real estate brokerages is being acquired by an affiliate of Apollo in a deal valued at about $9 billion, including debt assumption, or $30 a share in cash.

Positive analyst notes helped support the Dow. Shares of Citigroup (C) hit an all-time high after Merrill Lynch raised its rating on the financial giant from neutral to buy.

IBM (IBM) was higher after Prudential initiated coverage of the stock with a neutral rating.

Fellow Dow component Home Depot (HD) was modestly higher after the home-improvement retailer reportedly said its board of directors will oppose a shareholder group's request for an independent review of the company's strategic direction. The board will meet with the shareholder group in early 2007, the company said.

Elsewhere, Weight Watchers (WTW) was sharply higher after the company began a modified Dutch auction self-tender offer for up to 8.3 million shares.

In technology, Google (GOOG) was lower following a report the Internet search company's earnings growth may hit a speed bump.

Software maker Oracle (ORCL) was set to report quarterly earnings after the close.

Oil prices fell, weighing on corresponding shares. In the energy markets, January West Texas Intermediate crude oil futures fell $1.22 to $62.21 per barrel.

European markets finished mixed. In London, the FTSE-100 index fell 12.6 points, or 0.2%, to 6,247.4. Germany's DAX index added 8.42 points, or 0.13%, to 6,597.25. In Paris, the CAC 40 index was down 11.3 points, or 0.2%, to 5,530.32.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 47.8 points, or 0.28%, to 16,962.11. In Hong Kong, the Hang Seng index advanced 11.36 points, or 0.43%, to 19,192.91. Korea's Kospi index was up 11.36 points, or 0.8%, to 1,433.23.

Treasury Market
 
Treasury prices drifted. The 10-year note was little changed in price at 100-07/32 for a yield of 4.6%, while the 30-year bond edged down to 96-17/32 for a yield of 4.72%. "Incoming data had little lasting impact as the bond market settled in to a pre-holiday torpor," says Action Economics.

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December 15, 2006
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Stocks Rise on Tame Inflation Data

The Dow touched a new intraday high after the November consumer price index came in flat. Also in focus: industrial production

by Marc Hogan

 

Major stock indexes finished modestly higher Friday, though off their best levels, as the Dow hit new all-time closing and intraday highs following a mild inflation report. Trading was heavy due to quadruple witching, when monthly stock and index option expirations coincide with the quarterly expiration of stock and index futures contracts, says Standard & Poor's Equity Research.

On Friday, the Dow Jones industrial average rose 28.76 points, or 0.23%, to 12,445.52, a new closing record. The blue-chip benchmark also touched a new intraday best of 12,445.52. The broader Standard & Poor's 500 index added 1.59 points, or 0.11%, to 1,427.08, a six year-high, and within 100 points of its record close of 1527 in March, 2000. The tech-heavy Nasdaq composite was up 3.35 points, or 0.14%, to 2,457.2.

NYSE breadth was negative, with 18 issues declining for every 16 advancing. Nasdaq breadth was 16-15 negative.

In economic news, a key inflation gauge showed a tamer reading than Wall Street expected. The U.S. consumer price index, or CPI, was unchanged in November, after a 0.5% headline decline in October. Economists were expecting a 0.2% core and headline increase.

The benign CPI reading suggests inflation may have peaked, some analysts say. "For the Fed, the recent relief on the core inflation front provides expanding room to respond to below-trend economic growth, if necessary," says Peter Kretzmer, a senior economist at Bank of America, in a note to clients.
Meanwhile, U.S. industrial production rose 0.2% in November from a downwardly revised flat reading in October. The report was in line with expectations, says Action Economics.

Next week's economic calendar holds reports on November personal income, housing starts, durable goods orders, and producer price figures. Investors will also be digesting December consumer sentiment data.

Among Friday's stocks in the news, strength in General Electric (GE) and Honeywell (HON) helped lead the Dow higher.

Fellow Dow component Home Depot (HD) edged down after the home-improvement retailer said its board of directors has authorized the immediate repurchase of $3 billion of outstanding stock.

Bear Stearns (BSC), which reported strong earnings Thursday, was higher after the investment house increased its stock buyback plan to $2 billion from $1.5 billion.

Tech bellwether Apple (AAPL) was lower after the computer maker said it has delayed filing its annual report as a result of its probe into stock options grants.

In earnings news, Adobe (ADBE) was higher after the software maker said it expects revenue of as much as $670 million in the fiscal first quarter, topping analyst estimates of $651.2 million.

E-Trade Financial (ET) was higher after the online brokerage said it expects sales of $2.75 billion to $3 billion in 2007, more than the $2.68 billion analysts forecast.

Black & Decker (BDK) was sharply lower after the power-tool maker cut its fourth-quarter earnings forecast.

On the M&A front, software maker Intuit (INTU) agreed to buy payment processor Electronic Clearing House (ECHO) for $142 million, or $18.75 a share.

XM Satellite Radio (XMSR) and rival Sirius Satellite Radio (SIRI) were higher after Lehman Brothers reportedly said in a research report that a merger between the two companies would save $1.3 billion a year.

In the energy markets, January West Texas Intermediate crude oil futures rose 92 cents to $63.43 following OPEC's agreement to cut output starting Feb. 1 and amid news of attacks on facilities in Nigeria.

European markets finished higher. In London, the FTSE-100 index rose 32 points, or 0.51%, to 6,260. Germany's DAX index added 36.25 points, or 0.55%, to 6,588.83. In Paris, the CAC 40 index was up 32.04 points, or 0.58%, to 5,541.62.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 85.11 points, or 0.51%, to 16,914.31. In Hong Kong, the Hang Seng index advanced 191.25 points, or 1.01%, to 19,110.65. Korea's Kospi index was up 3.49 points, or 0.25%, to 1,421.87.

Treasury Market
 
Treasury yields ticked slightly lower on the benign CPI reading but finished well above their initial lows. The 10-year note edged up in price to 100-07/32 for a yield of 4.59%, while the 30-year bond was little changed at 96-19/32 for a yield of 4.71%. The late-session decline in bond prices likely reflected pre-holiday positioning and possible technical selling, says S&P.

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December 14, 2006
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Dow Hits New High amid Data, Earnings

Weekly jobless claims fell, while November import prices rose. Bear Stearns and Lehman Brothers posted stronger fourth-quarter earnings

by Marc Hogan

 

Wall Street returned to this year's record-setting ways Thursday. Stocks finished broadly higher, with the Dow at a new all-time closing high, as investors looked past a jump in oil prices to embrace solid reports on the economy and corporate earnings.

Trading was active amid the end of December futures rollovers and the beginning of quadruple witching, when monthly stock and index option expirations coincide with the quarterly expiration of stock and index futures contracts.

On Thursday, the Dow Jones industrial average rose 99.26 points, or 0.81%, to 12,416.76, its highest-ever close, after touching a new intraday record of 12,431.26. The broader Standard & Poor's 500 index added 12.28 points, or 0.87%, to 1,425.49, a six-year high. The tech-heavy Nasdaq composite climbed 21.44 points, or 0.88%, to 2,453.85.

NYSE breadth was decidedly positive, with 22 issues advancing for every 12 declining. Nasdaq breadth was 18-12 positive.

Positive momentum and technical factors helped drive the market forward, some analysts say. "The Santa Claus rally continues to be in place," says Art Hogan, chief market analyst at Jefferies & Co. "Today's just another day when there's no negative catalysts to slow it down."

Looking ahead, key economic reports out Friday may determine whether stocks can extend their rally. Economists expect the consumer price index (CPI), a closely watched inflation gauge, to edge higher 0.2%. Industrial production is also seen up by 0.2%.

The looming inflation reading makes this session's rally even more surprising, other analysts say. "CPI is critical because that's really the last lingering question mark facing the Fed," says Jack Ablin, chief investment officer at Harris Private Bank. "A nice, well-behaved number will give the Fed a lot more room to maneuver."

In economic news Thursday, U.S. jobless claims dropped 20,000 to 304,000 in the week ended Dec. 9, better than expected, from 324,000 the previous week.

Meanwhile, U.S. import prices increased 0.2% in November, following October's revised 2.3% drop. November export prices rose 0.4% after a revised 0.3% decline in October.

The Empire State index was released a day ahead of schedule due to a technical error by the New York Federal Reserve. This gauge of regional manufacturing activity fell slightly to 23.1 in December, above market expectations, from November's 26.7 reading.

Oil prices surged, supporting corresponding shares. In the energy markets, January West Texas Intermediate crude oil futures rose $1.14 cents to $62.51 a barrel, after OPEC reportedly agreed on an oil output cut of 500,000 barrels per day beginning Feb. 1.

Among Thursday's stocks in the news, Bear Stearns (BSC) was higher after the investment house reported a 38% increase in fourth-quarter profit, topping analyst forecasts. The gains followed Tuesday's record earnings report from Goldman Sachs (GS).

Fellow investment bank Lehman Brothers (LEH) was modestly lower after posting a 22% rise in fourth-quarter profit, but not a record like its competitors.

Gains for the Dow were capped by United Technologies (UTX), which was down on a disappointing 2007 earnings outlook.

The retail sector was among top performers. Shares of Costco (COST) advanced as the wholesale club operator's 10% first-quarter profit growth surpassed analyst expectations.

On the downside, home-decorations retailer Pier 1 (PIR) was lower on a wider third-quarter loss.
In the tech sector, Ciena (CIEN) was sharply higher after the maker of fiber-optic networking equipment said it swung to a fourth-quarter profit on a 35% rise in revenue.

Advanced Micro Devices (AMD) also surged after the chipmaker forecast microprocessor unit growth at twice the industry rate in 2007.

In analyst calls, Massey Energy (MEE) was lower after J.P. Morgan cut its recommendation on the coal producer from neutral to underweight.

Shares of Netflix (NFLX) dropped after Bank of America initiated coverage of the DVD-rental company with a sell recommendation.

On the M&A front, Australian airline Qantas Airways agreed to accept an $8.64 billion takeover offer from a private equity group including Macquarie Bank and the Texas Pacific Group.

European markets finished higher. In London, the FTSE-100 index rose 35.5 points, or 0.57%, to 6,228. Germany's DAX index added 31.81 points, or 0.49%, to 6,552.58. In Paris, the CAC 40 index was up 33.73 points, or 0.62%, to 5,509.58.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 136.27 points, or 0.82%, to 16,829.2. In Hong Kong, the Hang Seng index advanced 201.21 points, or 1.07%, to 18,919.4. Korea's Kospi index rallied 35.1 points, or 2.54%, to 1,418.38.

Treasury Market
 
Treasury yields ticked higher following the drop in jobless claims and gain in import prices. The 10-year note slipped in price to 100-08/32 for a yield of 4.59%, while the 30-year bond fell to 96-21/32 for a yield of 4.71%.

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December 13, 2006
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Still Time for '06 Tax Savings

Here are some yearend strategies investors can use to help trim their bill from Uncle Sam

by Marc Hogan

With December almost half over, it's probably too late to make good on those old New Year's resolutions you haven't quite gotten around to. Those trips to the gym may just have to wait until next year, just like your unwritten novel. But here's some good news: Investors may find there's still plenty of time to help trim their 2006 tax bill.

A few smart moves now can save money when the tax collector calls in April (see BusinessWeek.com, 12/9/06, "Yearend Tax Tips"). "The biggest mistake that clients make with yearend planning is not doing any," says Allentown (Pa.) financial planner Kevin Brosious. "Often they wait too long and try to cram everything in the final weeks of December, and there just isn't enough time."

Still, investors shouldn't fret so much about avoiding the tax man that they end up making costly miscues. "I see this more often than people not making proper tax moves at yearend," cautions Andrew Tignanelli, president of Lutherville (Md.) financial planning firm the Financial Consulate.

This Five for the Money looks at some sensible late-year strategies for easing the Apr. 15 burden. It may be the season for caroling, but it's not too early for investors to start humming the Beatles' Taxman.

1. Sock Away for Retirement

Contributing to a 401(k) or individual retirement account isn't just a wise decision for your golden years. A savvy retirement savings program can also help reduce investors' tax bills in the current year. If you have the cash, putting as much as you can into your retirement plan will lower your taxable income.

The 401(k) contribution limit for 2006 is $15,000, and workers 50 and older can stow away another $5,000. For IRAs, the maximum is $4,000, or $5,000 for the over-50 crowd. The deadline for 401(k) contributions is Dec. 31, but investors can keep funding their IRAs until April.

Naperville (Ill.) financial planner Robert Gerstemeier says he suggests his clients defer as much as they can into their 401(k)s before the yearend deadline. "Some people may take a cash-flow hit in the short term, but in a few months when they complete their 2006 taxes they will be glad they did this," Gerstemeier explains.

Small-business owners who haven't yet set up a workplace retirement plan may wish to do so (see BusinessWeek.com, 11/27/06, "Saving on 2006 Taxes"). Steven Podnos, principal at Merritt Island (Fla.) financial-planning firm Principal Wealth Care, says solo 401(k)s for sole proprietors and their spouses have helped his clients shelter big chunks of their income.

2. Give to a Good Cause

Investors caught up in the spirit of holiday giving might want to direct some of their largesse to charity. Of course, philanthropy doesn't have to be purely altruistic. Donations of several kinds can ease the tax bite come April.

Investors can donate highly appreciated stocks to a church or favorite charity. "This results in the [charity] receiving the full value of the shares, as they don't pay taxes on any gains," says Timothy Brown, a financial adviser with Woodbury (Minn.)-based Brown Wealth Management. Plus, the investor can deduct the gift while getting around the capital gains tax.

A donor-advised fund can be another tax-smart way to give. These vehicles allow people to parcel out a gift of cash or an appreciated investment, like stocks or mutual funds, to their favorite charities over time—and take an immediate tax deduction. "People enjoy the systematized approach to charity," notes Luke Hail, a financial planner with Cincinnati wealth-management firm Foster & Motley. "Usually they actually end up making higher contributions to charity than if they would have made ad hoc contributions throughout the year."


IRA rollovers are a new type of donation allowed in 2006. Investors who are due to take a required minimum distribution from their IRA can reap tax benefits by transferring the money to charity. "If you do this directly, you avoid the income tax owed on the distribution," says Tom Orecchio, principal at Old Tappan (N.J.) wealth-management firm Greenbaum & Orecchio.

3. Sell Your Losers

A yearend portfolio tune-up can also help stymie the tax man. As stocks finish a strong year, investors can soften the tax hit from any capital gains they might have booked by taking losses to offset them.
Investors with more losses than gains use up to $3,000 in losses on stocks sold by Dec. 31 to offset ordinary income. It's important to remember that the losses must be in taxable accounts for investors to enjoy the tax benefits.

Exchange-traded funds, or ETFs, can be a simple way of harvesting tax losses. An investor might want to sell Intel (INTC), which is down 15% year-to-date, and buy the Technology Select Sector SPDR (XLK), a basket of similar companies, suggests Russell Wild, an Allentown (Pa.) financial adviser and author of Exchange-Traded Funds for Dummies.

"If you wish, after 30 days you can sell your ETF and repurchase your beloved Intel," Wild says. "Voilà, you've just earned yourself a sweet tax deduction."

Mutual fund shareholders, too, should beware of capital gains payouts (see BusinessWeek, 12/4/06, "Taking Stock of Taxes"). Find out when a fund is making its distribution, and don't buy the fund before that date. "Many international and growth funds have had sizable distributions this fall," says James Daniel, founder of Alpharetta, (Ga.)-based financial-planning group the Advisory Firm. "The tax bill is going to be large."

4. Use Your Time Wisely

The holiday season is a hectic part of the year already. For taxpayers hoping to reduce their bills to Uncle Sam, it only gets busier. Pushing up deductible expenses into the current year could be a good way to lessen the tax pain.

In some cases, paying expenses early may allow taxpayers to itemize their deductions, rather than just take the standard one, financial advisers say. This strategy can also benefit investors who expect to be in a lower tax bracket in 2007. Jim King, a financial advisor at Itasca (Ill.) wealth-management firm Balasa Dinverno & Foltz, recommends accelerating mortgage payments, tax payments, and medical costs if you are sure they can be deducted.

5. Watch out for the AMT

Different guidelines apply if an investor is subject to the alternative minimum tax, or AMT (see BusinessWeek.com, 1/12/06, "Coping with the Alternative Minimum Tax"). Investors getting slapped with the AMT might want to postpone making their state income tax and property tax payments until next year, suggests Burt Hutchinson, president of Lewes (Del.) financial-planning firm BLH Financial Services. Those payments aren't deductible if the taxpayer owes the AMT.

Trouble is, figuring out whether you'll qualify for the AMT might not be easy. Risk factors include gross income over $100,000 combined with the exercise of stock options, large capital gains, high property tax or mortgage interest deductions, and many dependents. "If AMT hit last year or may hit this year, time with the tax preparer before Dec. 31 could be a good investment," says Scott Anderson, a Newport Beach (Calif.) financial planner.

But there's no need to wait until the last minute to consider tax issues. Investors may want to map out some tax savings strategies early next year to avoid the yearend crunch—consider it your next New Year's resolution. The savings might even pay for that gym membership.

News Article
BusinessWeek.com
December 6, 2006
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Stocks Inch Higher on Jobs Report

Nonfarm payrolls rose 132,000 in November, beating analyst expectations. December consumer sentiment came in below Street forecasts

by Marc Hogan

 

Major stock indexes finished slightly higher in volatile trading Friday, recovering from initial choppiness, after a report showed November payrolls rising more than expected but still below the 138,000 six-month average. A key consumer sentiment gauge turned in an unexpectedly weak reading. Oil prices fell, giving back early gains.

On Friday, the Dow Jones industrial average rose 29.08 points, or 0.24%, to 12,307.49. The broader Standard & Poor's 500 index added 2.55 points, or 0.18%, to 1,409.84. The tech-heavy Nasdaq composite was up 9.67 points, or 0.4%, to 2,437.36.

Breadth was flat on the NYSE, with as many issues declining as advancing. Nasdaq breadth was also flat.

In economic news Friday, U.S. nonfarm payrolls rose 132,000 in November, from a downwardly revised 79,000 in October and an upwardly revised 203,000 in September. The unemployment rate edged up to 4.5% from 4.4% in October. Hourly earnings rose 0.2%, less than expected, after gaining 0.4% in October.

The employment report sent federal funds futures lower, with the market remaining priced for no change in interest rates at next Tuesday's Federal Reserve policy meeting or again on Jan. 31. The upside surprise in payrolls removes much of the concern about a possible hard landing and erases the rationale for a Fed rate cut in the first quarter, says Action Economics.

However, employment is growing more slowly than in the third quarter, others note. "At the November pace of jobs creation, unemployment will likely rise in the months ahead, and the probability that the economy will slip into recession has grown significantly," says Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.

Also on the economic docket, the preliminary December reading for University of Michigan consumer sentiment fell to 90.2, weaker than expected, from November's reading of 92.1.

Looking ahead, markets face another busy week for economic events. A quiet schedule Monday will be followed Tuesday by the Fed's interest-rate meeting and the release of October trade data.
The slate next week also holds reports on retail sales, trade prices, consumer inflation, industrial production, and regional manufacturing activity.

Oil prices slipped in a see-saw session Friday. In the energy markets, January West Texas Intermediate crude oil futures fell 46 cents to $62.03 as forecasts for warmer weather offset speculation of an output cut at OPEC's meeting next week in Nigeria.

Among stocks in the news, Hewlett-Packard (HPQ) was modestly lower after the computer maker agreed to pay $14.5 million to settle a lawsuit brought by California Attorney General Bill Lockyer over the company's investigation into boardroom news leaks.

Citigroup (C) led the Dow higher amid speculation the banking giant may be broken up.

In other deal news, Bank of America (BAC) was lower and Barclays (BCS) was higher following a Merrill Lynch research note indicating that Bank of America may be interested in buying Barclays.
Music giant EMI Group was also reportedly nearing a deal to be acquired by a European private equity group for about 2 billion pounds ($3.9 billion).

The Dow's gains were capped by an analyst downgrade. 3M (MMM) was lower after Prudential cut its rating on the stock from overweight to neutral.

Fellow Dow component McDonald's (MCD) hit a seven-year high after the fast-food chain operator reported a 6.2% rise in November same-store sales.

In tech, Xilinx (XLNX) was lower after J.P. Morgan lowered its rating on the chipmaker from overweight to neutral.
Shares of National Semiconductor (NSM) gained modestly after the chipmaker posted a 20% decline in second-quarter profit, in line with projections.
Expedia (EXPE) was sharply higher after the travel website operator announced a stock buyback of up to $30 million.

European markets finished slightly higher. In London, the FTSE-100 index rose 20.9 points, or 0.34%, to 6,152.4. Germany's DAX index added 14.38 points, or 0.22%, to 6,427.41. In Paris, the CAC 40 index was up 4.95 points, or 0.09%, to 5,384.16.

Asian markets ended lower. In Japan, the Nikkei 225 index shed 55.54 points, or 0.34%, to 16,417.82. In Hong Kong, the Hang Seng index lost 103 points, or 0.55%, to 18,739.99. Korea's Kospi index dropped 19.87 points, or 1.41%, to 1,390.43.

Treasury Market
 
Treasury yields pushed higher after the jobs data showed firm growth, while inflation pressures were contained. The 10-year note fell in price to 100-17/32 for a yield of 4.55%, while the 30-year bond dropped to 97-14/32 for a yield of 4.66%. Comments from Treasury Secretary Henry Paulson that wage gains were welcome contributed to bond price weakness, says S&P.

News Article
BusinessWeek.com
December 5, 2006
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Stocks Rise After Economic Data

The S&P 500 hit a six-year high amid a downward revision to third-quarter labor costs and a report showing unexpected service-sector strength

by Marc Hogan

 

Stocks finished modestly higher Tuesday, with major indexes near historic highs, after data releases indicated moderating inflation and a strong service economy. Year-end portfolio adjustments also influenced trading, says Standard & Poor's Equity Research.

On Tuesday, the Dow Jones industrial average rose 47.75 points, or 0.39%, to 12,331.6, within 15 points of the 12,342.56 all-time closing high hit last month. The broader Standard & Poor's 500 index added 5.64 points, or 0.4%, to 1,414.76, its highest level since Nov. 7, 2000. The tech-heavy Nasdaq composite was up 3.99 points, or 0.16%, to 2,452.38.

NYSE breadth was positive, with 21 issues advancing for every 12 declining. Nasdaq breadth was 16-15 positive.

A flurry of economic data was in focus Tuesday. The Labor Department revised third-quarter productivity growth up less than expected, to 2.3% growth from unchanged in the advanced report. Unit labor costs were revised down to a 2.3% vs. 3.8% initially, better than expected, says Action Economics.

While the report was fairly positive overall, inflation worries remain, some analysts say. "The revisions paint a better picture of inflation but the trend is still troubling relative to the pre-Fed pause," says Lehman Brothers senior economist Drew Matus. "Friday's employment report is likely to post a bounce in average hourly earnings that should keep concerns about rising wage pressures on the minds of policymakers."

The Institute for Supply Management's non-manufacturing index unexpectedly rose to 58.9 in November, from October's stronger-than-expected 57.1 reading. Meanwhile, factory goods orders slumped 4.7%, slightly more than projected.

The ISM non-manufacturing index includes not just services, but construction, analysts note. "At present, it appears that the overall economy is nowhere near as weak as the manufacturing sector," says John Ryding, chief U.S. economist at Bear Stearns. "Meanwhile, the factory orders decline in October is further evidence of the weakening of factory conditions in October."

The economic docket Wednesday holds the release of weekly jobless claims, ahead of Friday's key payrolls report.

Homebuilders were among the top performers Tuesday, after Toll Brothers (TOL) was higher after the luxury homebuilder after reporting a 44% drop in fourth-quarter profit, better than expected, and suggested the housing market may be nearing a bottom.

Ford (F) was lower after the automaker said late Monday it plans to offer $3 billion in convertible senior notes.

Shares of Sirius Satellite Radio (SIRI) sank after the company reduced its outlook for new subscriber additions, citing soft retail sales since Thanksgiving. Bear Stearns downgraded the stock from outperform to underperform.

In other analyst calls, Starbucks (SBUX) was higher after UBS raised its recommendation on the shares from neutral to buy.

M&A activity continued to percolate. A panel of European regulators recommended approval of NYSE Group's (NYX) planned $13.7 billion acquisition of Euronext.

In the energy markets, January West Texas Intermediate crude oil futures fell 1 cent to $62.43 a barrel, in see-saw trading amid mild weather forecasts, an inventory report Wednesday, and anticipated OPEC output cuts next week.

Elsewhere, fast-food chain operator Yum! Brands (YUM) was higher following reports a recent E. coli scare in New York and New Jersey linked to the company's Taco Bell restaurants has apparently passed. Separately, Yum said it will double its quarterly cash dividend to 30 cents.

European markets finished higher. In London, the FTSE-100 index rose 36 points, or 0.6%, to 6,086.4. Germany's DAX index added 77.57 points, or 1.23%, to 6,372.8. In Paris, the CAC 40 index was up 63.61 points, or 1.2%, to 5,359.69.

Asian markets ended mixed. In Japan, the Nikkei 225 index slipped 37.83 points, or 0.23%, to 16,265.76. In Hong Kong, the Hang Seng index climbed 241.46 points, or 1.29%, to 18,844.19. Korea's Kospi index dropped 5.87 points, or 0.41%, to 1,420.59.

Treasury Market
 
Treasury yields pushed higher following the strong ISM non-manufacturing reading. The 10-year note fell in price to 101-14/32 for a yield of 4.44%, while the 30-year bond dropped to 98-28/32 for a yield of 4.57%.