Rick Newman
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15 Cars Fueling the Auto Recovery
Continue reading… 4 CommentsAs comebacks go, it's an awfully weak one. Annual car sales in 2009 are likely to end up at the lowest level in years, down more than 40 percent from their peak in 2005. The worst months came in the spring, punctuated by the bankruptcy filings of General Motors and Chrysler. The cash-for-clunkers program provided a nice summer boost, but that was followed by a steep dropoff once the giveaway ended and doubts that the subsidies would lead to any net gain at all.
[Slide Show: 15 Cars Fueling the Auto Recovery.]
But sales finally seem to have stabilized, with forecasting firms like CSM Worldwide predicting steady improvement through the end of the year into 2010. And a few models have already started to take off. Data from J.D. Power & Associates shows that cars offering strong value, with a good reputation for quality and a generous set of standard features, have performed well despite the dismal downturn. Buyers continue to shun big vehicles in favor of those getting good mileage. And excitement still sells, with some hot new sports cars sprinting out of the gate. Here are 15 cars that have been hot in a cold market:
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Restaurants on a Roll
Continue reading… 5 CommentsIt might not be good for America's waistline, but froufrou dining off petite plates is out. The recession has made us hungry for family-size piles of comfort food, skyscraping burgers, and all-you-can-eat fries.
Like other segments of the retail economy, the restaurant industry has struggled over the past two years as unemployment has soared and consumers have curtailed spending. The National Restaurant Association's performance index shows that the industry has been shrinking for 23 months in a row. High-end bistros have fared the worst, with sales at fancy restaurants like Ruth's Chris and Morton's Steakhouse off by 20 percent or more, as corporate customers pare expenses and other diners trade down. Casual- and family-dining places have suffered too, as people eat out less, order more takeout, or cook at home. Even fast-food chains like McDonald's and Burger King have lost business, despite dollar meals and other deals meant to keep the fryers sizzling.
[Slide Show: Restaurants On a Roll.]
Still, as in other whipsawed industries, a few survivors stand to benefit from the widespread pain. To figure out who they are, I analyzed data provided by financial research firm Capital IQ, a unit of Standard & Poor's, to see which publicly owned restaurant companies with at least $250 million in annual sales have gained revenue and market share since the recession began near the end of 2007. Then I researched earnings reports and other sources to separate firms with strong inherent growth from those benefiting from mergers, accounting anomalies, or one-time events.
Of 41 firms on Capital IQ's initial list, only eight made the final cut. All emphasize value, whether it's huge portions or quality for less. And all of these companies are financially healthy, with reasonable debt and the wherewithal to keep expanding despite a credit crunch. Here are the restaurants with the right recipe for lean times:
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How the Auto Bailout Is Punishing Ford
Continue reading… 6 CommentsFord Motor Co.’s latest earnings report doesn’t mention General Motors or Chrysler, its crosstown rivals. But those competitors have a lot to do with Ford’s surprising $1 billion profit in the third quarter.
Ford attributes its better-than-expected performance—its first quarterly profit since 2005—to aggressive cost-cutting, popular new products like the Taurus sedan and Fusion hybrid, a cash-for-clunkers bump, and improvements at its financing arm. But Ford also is a clear beneficiary of the woes at GM and Chrysler, both trying to recover after bankruptcy filings earlier this year. Ford cited a market share gain of 2.2 percentage points compared with 2008, which helped offset a shrinking market. For a mature industry like the car business, that’s a huge gain in a short period of time. And there’s little doubt that many of Ford’s new customers bailed on the other two domestic automakers as they shambled toward bankruptcy and wolfed down billions in taxpayers bailouts.
[See what GM’s recent progress report fails to mention.]
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The Private Sector Gets Another Chance
Continue reading… 0 CommentsA lot of economic indicators go hot and cold these days, but here's one that's been consistently getting better: The government has been steadily withdrawing its extraordinary support for the ravaged economy.
It might not seem that way. Lender GMAC is lined up for another bailout of $3 billion to $6 billion from the Treasury Department. Federal pay czar Ken Feinberg recently elbowed aside the boards of directors at seven big bailout recipients by dictating the pay of their top executives. Congress is devising new regulations to police Wall Street, rein in risky practices, protect consumers from corporate predators, and get the government more involved in the private sector than it has been in 70 years.
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Get Used To a Bipolar Economy
Continue reading… 4 CommentsJust a few months ago, we were gloomy all the time. It was easier that way.
Now we’re enduring frequent mood swings as the economy teases us with recovery, then smacks down our hopes. There was a bout of euphoria when we learned that the economy grew 3.5 percent in the third quarter, the first period in more than a year when GDP didn’t shrink. Growth was greater than expected, even on par with what you’d see in a normal, healthy economy. Yay! Life is good!
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Why More Competition Won’t Fix Healthcare
Continue reading… 8 CommentsVigorous competition. It's the go-to cure for free-market ailments. When the consumer's getting the shaft, just open up the market, bring in more providers, and watch prices fall.
A lot of the time, it works. Car buyers get terrific deals and great quality because a dozen automakers compete ruthlessly to offer the best value. Electronics consistently get cheaper, while features improve, thanks to the proliferation of low-cost Chinese manufacturers. And the Internet has allowed anybody with an eBay account to compete with the biggest retailers, lowering prices on thousands of products.
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Stuff We Spend More On In A Recession
Continue reading… 0 CommentsFox Business recently invited me onto its noontime Web show to discuss my recent story on 10 products that boomed during the recession. Here's the video:
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9 Signs of America in Decline
Continue reading… 262 CommentsThe sky isn't falling, exactly. America isn't on a fast track to irrelevance. Even in a state of total neglect, we could probably shamble along as a disheveled superpower for a few more decades.
But all empires end, and the warning signs of American decline seem to be blinking more consistently. In the latest annual "prosperity index" published by the Legatum Institute, a London-based research firm, the United States ranks as the ninth most prosperous country in the world. That's five notches lower than last year, when America ranked No. 4. The drop might seem inconsequential, especially in the midst of a grueling recession—except that most of the world has endured the same recession, and other countries are bouncing back faster.
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How Gary Vaynerchuk Crushes It
Continue reading… 4 CommentsI had a lively sit-down chat recently with Gary Vaynerchuk, founder of WineLibraryTV.com and author of the new bestseller Crush It: Why Now Is The Time To Cash In On Your Passion. Vaynerchuk is one of the most energetic folks I've ever met, and he has some compelling ideas about how to use the Web to indulge your avocations. Check out this video of the interview on Hulu:
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The Last of the Wall Street Pay Cuts
Continue reading… 8 CommentsThe Obama administration is finally getting tough—on corporate invalids.
The government's "pay czar," Kenneth Feinberg, is coming down hard on the seven firms under his jurisdiction, ordering steep pay cuts for about 175 top executives. The brass at AIG, Citigroup, Bank of America, GMAC, General Motors, Chrysler, and Chrysler Financial will have to live without the nine-digit paychecks Wall Street's titans have become accustomed to. Some won't even make eight figures. And the majority of their pay will come in the form of stock that can be cashed in only after the companies have met long-term performance targets. Until that happens, the impoverished execs might have to get by on meager salaries that might not even reach $1 million.
[See 10 gaffes by doomed CEOs.]
So hyperventilate about the government meddling in the private sector, and then consider that every one of these firms would have been vaporized if not for government intervention. American taxpayers effectively own AIG and General Motors, with major stakes in the other firms. Together, all seven firms have devoured nearly $300 billion worth of bailout funds. They've gobbled up the majority of the TARP money in the government's corporate rehab program. None of these firms have said when they will pay back those bailout funds, and some may never pay it back.
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The Healthcare-Reform Hypocrisy Sweepstakes
Continue reading… 20 CommentsMost people with a stake in the U.S. healthcare system agree there are deep problems that must be fixed. As long as somebody else pays for it.
Virtually all of the problems reformers are struggling to solve—relatively poor health outcomes, medical bankruptcies, nearly 50 million uninsured—derive from one überproblem: Healthcare in America costs too much. So as Congress finally gets close to producing actual reform legislation that could become law, just about every interest group with a Washington lobbyist is fighting intensely to make sure it doesn't get stuck with the bill.
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10 Products That Boomed During the Recession
Continue reading… 20 CommentsBehold the damage the recession has wrought on the consumer economy: Retailers and automakers have gone bankrupt, restaurants have closed, and malls have become ghost towns. Most businesses dependent on consumer spending, from clothing to computers to appliances, have felt the pinch.
[Slide Show: 10 Products That Boomed During the Recession.]
But some consumer-product companies have benefited from the recession, usually because they sell the kind of stuff that helps people save money. Other companies have capitalized on timely technology or latched on to powerful trends that defy the recession. To identify some of these recession winners, I analyzed data provided by financial research firm Capital IQ, a unit of Standard & Poor's, to see which consumer-products firms have gained revenue and market share since the recession began near the end of 2007. Then I researched earnings reports and other sources to see which products have fueled each company's growth.
For many of these companies, any increase in revenue over the past two years is a nifty accomplishment, since overall sales of household goods have fallen by more than 30 percent, according to Capital IQ. And sales of supposedly recessionproof "staple" items like food, beverages, and personal products have barely risen. So firms that have significantly outpaced the rest of their industry deserve special attention.
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Why Stocks Are Surging as Jobs Disappear
Continue reading… 31 CommentsStocks are up. Jobs are down. So if you're an investor you're enjoying a vibrant recovery and if you're a worker it still feels like a grinding recession.
Since bottoming out in March, the stock market has soared by about 60 percent, one of the most awesome rallies in market history. The Dow Jones Industrial Average cracking 10,000 may not be strategically significant, but it's a psychological breakthrough that's worth cheering after the demoralizing crash that preceded it.
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7 Ways to Survive the Jobless Recovery
Continue reading… 40 CommentsMaybe the pessimists are wrong. Maybe the so-called economic recovery will gather steam and turn out to be robust. Maybe prosperity is about to leap from its hiding place and shout, "Hey! I'm back!"
But planning your future around maybes leaves little margin for error, and it looks as if the Great Recession is morphing into the Great Hangover. Even though economists believe the recession is technically over, the unemployment rate is likely to hover near 10 percent or higher well into 2010. Businesses have slashed costs, but with sales still weak, they're in no mood to start hiring. The Congressional Budget Office predicts that the unemployment rate will stay above average until 2014 at least. Allen Sinai, an economist at Decision Economics, foresees a "difficult, probably crisis situation in the U.S. labor market that goes beyond the recession and any fledgling recovery."
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How to Profit From Your Passion
Continue reading… 4 CommentsWrite a blog. Cultivate Facebook friends. Tweet. You know you have to do all this. But why?
The new tools of social media are mystifying to many—and enriching to a few. One of the new social-media impresarios is Gary Vaynerchuk, founder of WineLibraryTV. Vaynerchuk used the Web to turn a sleepy New Jersey liquor store into a $60 million business, and his consulting firm, Vayner Media, advises companies on how to harness the power of social media without the hard selling that turns off customers. Vaynerchuk's new book, Crush It: Why Now Is the Time to Cash In on Your Passion, explains how individuals can build a personal "brand" and build a following while doing what they love. I've spoken with Vaynerchuk a few times recently, including this interview on Hulu. Some excerpts from those conversations:
What's the brief history of how you got started selling wine? I was a child entrepreneur. I started by selling baseball cards. My dad had a liquor store, Shoppers Discount Liquors, in New Jersey. I came home from college every weekend to work at the store. I wanted to pump it up. I was selling baseball cards and other memorabilia, making so much money from that, I figured I could do the same with my dad's store.
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The Man Who Could Salvage Wall Street
Continue reading… 14 CommentsAre all bankers evil? Maybe not. Over the past year, it's become fashionable to trash Wall Street for unbridled greed and the rapacious use of billions in taxpayer bailout funds. Much of the outrage is justified, since Wall Street firms like Bear Stearns, Lehman Brothers, Merrill Lynch, and Citigroup stoked the flames that nearly torched the entire economy. But there's been rough justice for a few of those firms, now either defunct or de facto wards of the state.
[See 10 gaffes by doomed CEOs.]
Other firms have filled the void, becoming even more prominent. One of them is JPMorgan Chase, whose chief executive, Jamie Dimon, has largely escaped the pitchforks aimed at his fellow Wall Street CEOs. Over the course of the financial crisis, JPMorgan Chase remained profitable, a pillar of relative stability in the midst of an earthquake. The bank absorbed the failed Bear Stearns and Washington Mutual, while accepting $25 billion in bailout money that it paid back with interest once the government allowed it to. Through it all, Dimon consulted frequently with officials in Washington, and news reports have even depicted him as President Barack Obama's favorite banker. A new biography of Dimon, Last Man Standing by Duff McDonald, describes Dimon as a diligent and trustworthy executive who has risen above the swill of Wall Street. I spoke recently with McDonald about the man some think will be the next treasury secretary. Excerpts:
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What GM’s Progress Report Doesn't Say
Continue reading… 19 CommentsGeneral Motors has some genuine good news. The automaker's June 1 bankruptcy filing hasn't been nearly as ruinous as GM executives once feared. New vehicles like the Chevrolet Camaro, Cadillac SRX, and Buick LaCrosse are wowing reviewers and drawing buyers. The Chevy Volt, an electric plug-in that could help move the car industry away from gas-powered engines, remains on track for launch late in 2010. Fewer dealers and a streamlined workforce are finally bringing GM's size in line with its customer base.
[See what GM can learn from Toyota's humility.]
But unlike its rival Toyota, GM has a long history of exaggerating its virtues and denying its liabilities. Since GM is now a privately owned company, CEO Fritz Henderson's recent briefing on GM's progress offered useful insight into the company now 60 percent-owned by American taxpayers. But there's more to the story. Here are a few important things Henderson didn't mention:
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Corporate America’s Identity Crisis
Continue reading… 4 CommentsThe Man is confused. So I guess it's OK if the rest of us are too.
We tend to think of corporate America as a monolithic bloc of mostly middle-aged men with a prescribed set of views. Politically, they're moderate to conservative (though not necessarily represented these days by the angry mob the Republican Party has become). They believe in low taxes, law and order, and whatever else is good for business. The less government the better.
[See 10 gaffes by doomed CEOs.]
But suddenly, it's not easy being corporate. The most prominent rupture in big business's united front is the exodus of firms from the U.S. Chamber of Commerce, a stalwart old-establishment trade group and one of the most powerful business lobbies in Washington. The chamber opposes legislation to reduce greenhouse-gas emissions and has even suggested that global warming, now regarded as a significant problem by most scientists who have studied it, doesn't exist. The chamber probably feels it is fulfilling its historic mission to keep government out of business's way, using whatever hardball tactics are necessary.
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10 Retailers Gaining Strength From the Recession
Continue reading… 8 CommentsA trip through the mall tells the story: The recession of the past two years has devastated the retail industry, as overspent consumers have put away their credit cards, started paying off years of debt, and put the kibosh on shopping.
[Slide Show: 10 Retailers Gaining Strength From the Recession.]
So far, the victims include bankrupt chains like Dial-a-Mattress, Filene's Basement, KB Toys, Circuit City, Mervyn's, Steve & Barry's, and Linens 'n Things, plus hundreds of smaller retail outlets. Vacancy rates at shopping malls have been shooting up, and 10 percent of malls might even close, by some estimates. The pain could continue for another year or longer, as unemployment keeps rising and shoppers scrimp.
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What GM Can Learn From Toyota's Humility
Continue reading… 16 CommentsAndy Grove, one of the founders of Intel, is famous for saying that "only the paranoid survive." The long-term success of his company suggests he's right.
These days, Toyota is looking like one of the most paranoid companies on the planet. It's the world's biggest carmaker but certainly isn't coasting. The global recession has hammered sales and profitability, with Toyota losing $8.4 billion in the fiscal year that ended in March. Sales are likely to be down 18 percent more this year, with a turnaround next year looking modest at best.
