Goliath vs. Goliath

WASHINGTON-Google, exploiting a Microsoft weak spot, complains to
authorities about the tech titan's browser. But the Web giant may
have its own antitrust baggage. By Jim Puzzanghera.
http://email.latimes.com/cgi-bin1/DM/y/e2W...Io30G2B0HVzz0E6

Golf Pitches Found Takers

A firm claiming to be developing resorts and homes near golf
courses cheated investors of tens of millions, the SEC says. By E.
Scott Reckard.
http://email.latimes.com/cgi-bin1/DM/y/e2W...Io30G2B0HVz10Es

For Those Handicapping the Future, a Fed 'Pause' Won't Be End of Story

The markets' worries won't be over even if the central bank stops
raising interest rates. By Tom Petruno.
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Testimony in Enron Trial Winding Down Ask News
The lengthy fraud and conspiracy trial of Enron Corp. founder Kenneth Lay and former Chief Executive Jeffrey Skilling is reaching its end with a judge anxious for jurors to begin deliberations. The case will enter its 15th week Monday with the last five defense witnesses on deck, to be followed later in the week by up to 10 prosecution rebuttal witnesses. U.S. District Judge Sim Lake last week indicated none of this week's witnesses should be on the stand very long, insisting that a dozen hours of closing arguments are to begin May 15. The judge told the jury of eight women and four men he was "confident" that testimony would wrap up Thursday. The remaining defense lineup includes a pair of experts and the second of two pastors to testify as character witnesses for Lay. Also in the lineup is a woman affiliated with a now-defunct online photo-sharing company that both Skilling and Lay invested in that did nearly half a million dollars in business with Enron. The company, Photofete, was run by a former Skilling girlfriend. Prosecutors noted their investments while cross-examining the defendants - $180,000 from Skilling and a commitment of $120,000 from Lay. Both acknowledged that they "probably" violated Enron's code of ethics because they didn't inform their directors in writing, as required, that they had invested in a company that did business with the energy company. Prosecutors sought to challenge their credibility by demonstrating that they didn't follow their own company's ethics code. Last week Lake denied a request from Skilling's lead lawyer, Daniel Petrocelli, to advise jurors to ignore Photofete issues as irrelevant to the criminal charges facing the ex-CEO. So far, 27 witnesses have testified for the defense, including Lay and Skilling. The government presented 22 witnesses, including eight ex-Enron executives who have pleaded guilty to crimes, before prosecutors rested their case March 28. Experts had differing views on the importance of a government rebuttal case. Jacob Frenkel, a former federal prosecutor who has followed the trial, said the most important issue facing prosecutors is how much rebuttal to present - if any. "The most powerful rebuttal case the government could put on is, 'Your honor, we have no witnesses to put on, we're ready for closing arguments,'" he said. "That sends a powerful message in terms of the government's confidence in its case - the meaning is, 'We don't need to say anything else.'" But Michael Wynne, another former federal prosecutor in Houston who has observed much of the trial firsthand, said a few short rebuttal witnesses could help polish an already strong government case. "Rebuttal is an opportunity to sort of tie up loose ends. If you've got those witnesses and you can get them on and done quickly, I'd err on the side of doing it," he said. Lay and Skilling are accused of repeatedly lying to investors and employees about Enron's financial health when they allegedly knew their optimism masked fraudulent accounting that hid debt and inflated profits. The pair counter that no fraud occurred at Enron other than a few executives who skimmed millions from scams behind their backs. They both attributed the December 2001 descent into bankruptcy protection to bad publicity and lost market confidence. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors focusing on his actions from 1999 through his abrupt resignation in mid-August 2001 after serving as CEO for just six months. The six counts of fraud and conspiracy against Lay focus on his actions from Skilling's resignation through the company's failure.
By KRISTEN HAYS

Wachovia to Buy Golden West S&L

Golden West Financial Corp., one of the last major savings and
loans in California, agreed Sunday to be acquired by North
Carolina-based Wachovia Corp., the nation's fourth-largest bank,
for $25.5 billion in cash and stock. By E. Scott Reckard.
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Sony Has Much Riding on Console

Success of the PlayStation 3 would also boost the firm's
high-definition DVD standard, Blu-ray. By Dawn C. Chmielewski.
http://email.latimes.com/cgi-bin1/DM/y/e2W...Io30G2B0HV2Z0E3

Cozying Up to Power

POWAY, Calif. - Brent Wilkes' businesses grew along with his
political ties. He is "co-conspirator No. 1" in the Cunningham
case, his lawyer says. He has not been charged. By Peter Pae and
Dan Morain.
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Warner to Let TV Stations Offer Sitcom Reruns Online

Computer users will be able to watch, but not download, old
episodes of 'Two and a Half Men.' By Meg James.
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http://news.yahoo.com/s/nm/20060507/bs_nm/...HE0BHNlYwN0bWE-

Buffett deal sparks Israeli hopes for more
By Tova CohenSun May 7, 11:43 AM ET

Warren Buffett's acquisition of a majority stake in an Israeli engineering firm for $4 billion sparked hopes on Sunday that more foreign investors will follow suit.

Buffett, widely regarded as one of the world's savviest investors, announced on Friday that his company Berkshire Hathaway Inc. (NYSE:BRKA - news) (NYSE:BRKB - news) would use some of its nearly $43 billion in cash to boost its international presence, acquiring 80 percent of privately held Iscar Metalworking Cos.

The purchase is one of the largest deals involving an Israeli company and Buffett's biggest investment outside the United States.

The deal looked set to raise awareness among foreign investors about the potentials of the Israeli economy, which grew 5.2 percent in 2005 and is forecast to expand 4-4.5 percent this year on the heels of global growth and a shift to free-market policies.

"This is certainly a vote of confidence in Israel and reduces the risk factors that some investors might associate with investing in Israel. Some investors view Israel as a risky place but Buffett is not a risk taker by any means," said Richard Gussow, a senior analyst at the Excellence Nessuah brokerage in Tel Aviv.

However, Gussow said that future investments will also depend on economic and political developments in Israel.

Berkshire's deal follows an announcement by Intel Corp. (Nasdaq:INTC - news) in December that it will build a chip plant costing more than $3.5 billion in the southern Israeli town of Kiryat Gat, home to an existing Intel plant.

Foreigners invested nearly $10 billion in Israel last year, including almost $6 billion in direct investment as the tech-rich economy rebounded from a global downturn earlier in the decade and as violence between Israel and the Palestinians eased.

Vered Dar, chief economist at the Psagot Ofek brokerage, said Buffett's moves were widely watched.

"If he is investing in Israel such a substantial sum, he obviously knows something that we should learn from," she said. "This type of publicity is worth a lot to Israel's economy and capital market."

STOCKS, SHEKEL GAIN

Israeli shares surged on the news, with the main indices gaining over 2.5 percent on Sunday to record levels. Since the March 28 Israeli election, shares have risen about 8 percent.

The currency market is closed on Sunday but trading in shekel dollar options on the bourse indicated a rate of 4.44 shekels per dollar, compared with Friday's official rate of 4.4710. The shekel has strengthened from 4.70 on March 29.

"The huge increase in capital inflows as a result of the Iscar deal of $4 billion, even if not all of the amount is converted to shekels, is expected to contribute to the continued strengthening of the shekel," Tel Aviv brokerage Leader Capital Markets said in a report.

Iscar, based in Tefen in northern Israel, manufactures metalworking tools used by makers of heavy equipment such as cars and planes. It has facilities in Tefen, the United States, Brazil, China, Germany, India, Italy, Japan and South Korea.

Stef Wertheimer founded Iscar 50 years ago and his family will retain 20 percent of the company.

Iscar will continue to be managed by its current team, including Chairman Eitan Wertheimer, son of the founder.

Israeli newspapers quoted Buffett as saying over the weekend in Omaha, Nebraska, where Berkshire is based, that he plans further acquisitions of Israeli companies and will visit in September to inspect his investment and examine the local business scene.

Israeli Prime Minister Ehud Olmert hailed Buffett's acquisition as a boon to the Israeli economy.

"He is saying he supports and believes in the stability of the Israeli economy and says what we only say in our dreams," Olmert told reporters.

The deal will be a windfall for Olmert's new government, which is expected to reap about $1 billion in taxes from the deal, or more than 2.5 percent of annual tax revenues in Israel.

If the entire sum is received this year, the government could close the year without a budget deficit, Dar said, though she noted that budget surpluses often lead to political pressures to expand public spending.

The additional revenues will facilitate the government's plans to lower taxes and could also reduce the amount of funds the government will need to raise, which would support Israeli bond prices.

Verizon warns financial sector on Internet fight Yahoo! News
Verizon Communications warned the financial services industry may not get the secure networks it needs if Congress adopts laws governing high-speed Internet broadband networks, according to a company memo obtained by Reuters on Monday. The financial services industry is weighing whether to wade into a fight over legislation on broadband service, known as "Net neutrality." It fears that without safeguards on pricing for network access, the costs to financial institutions could rise. Verizon, the No. 2 U.S. telephone company, opposes legislation for Net neutrality and sent the memo to its consultants urging them to discuss with banking industry clients the arguments against possible legislation in the U.S. House of Representatives and Senate. "They are being fed a lot of cock-and-bull, Chicken Little stories about how the future of their industry is at stake because another network industry might have the freedom to price broadband services according to market demand," Verizon's chief congressional lobbyist Peter Davidson said in the memo. He warned that the financial services industry "better not start moaning in the future about a lack of sophisticated data links they need" if Net neutrality laws were passed because the communications industry may not invest in new networks. Verizon and AT&T Inc. have expressed interest in expanding from flat pricing for broadband to selling tiers of service based on the speed, reliability and security. They have pledged not to block access to the open Internet. "Why in the world should broadband network providers, who have invested billions to create those networks, be denied such pricing freedom?" Davidson said. That has raised fears among Internet content companies such as Amazon.com Inc. and Google Inc. that they will be shunted to a slower lane of the Internet if they do not pay more for dedicated access. Davidson argued that that broadband providers are not "going to do anything stupid to antagonize the people they rely on for their money!" A financial industry lawyer has been circulating a memo warning that the sector ignores the Net neutrality debate at its peril and urged companies to push for legislation that would preserve flat broadband pricing for online financial services. Financial services lobbyists have said they are concerned about the issue, and are monitoring it. The House could consider legislation this week that would preserve the ability to surf on the open Internet but does not specifically bar Internet providers from charging new fees to assure reliable service to business users. It is part of a broader communications bill. The Senate is considering its own legislation but only requires a study on Net neutrality. Differences between the bills could prevent any legislation from becoming law this year, analysts have said.

Gold rises above $700 to hit 25-year high Reuters
Gold jumped to a 25-year peak above $702 an ounce on Wednesday as a weak U.S. dollar prompted fresh buying, while speculators pushed platinum to a record high. Gold has risen more than 35 percent this year as investors diversified into precious metals as a hedge against global tensions, including over Iran's nuclear ambitions, rising energy costs and uncertainty about the dollar's outlook. Spot gold <XAU=> rose as high as $702.10 an ounce, up from around $500 at the end of 2005 and compared with less than $300 at the start of the decade. A fresh roundof buying reversed earlier profit taking which had pushed the price down as low as $697.70 in Asia. Gold was last quoted at $699.90/700.90 late in New York on Tuesday. "People think the Europeans will buy more anyway because of a firm euro. Maybe that's the reason why people pushed it up," said a dealer in Singapore. "I saw both buying and selling here. When the market moves in a very strange way, there's nothing new about it," he said. As spot gold rose above $700, benchmark gold futures <0#JAU:> on the Tokyo Commodity Exchange rallied by a daily limit of 60 yen to 2,538 yen per gram. Some dealers now expect volatile trading with investors likely to book profits at higher levels. "I think there's a potential of volatility. It looks like until we are going to London, we may all struggle to get over about $703," said Darren Heathcote, head of trading at N M Rothschild in Sydney. He cited support for gold around $686. Traders said market talk that economists had urged China to quadruple its gold reserves to 2,500 tonnes from the current 600 tonnes had also spurred the rally, particularly in New York where the metal rose as high as $700.50. China has the biggest foreign exchange reserves in the world at more than $875 billion and is the world's third-largest gold consumer. But some dealers doubted China's central bank would buy gold at current high prices. "We've been talking about China increasing its reserves for half a year and I doubt it that it's going to happen. People made use of this to push up the price last night," said a dealer in Hong Kong. "The market is still in the upward trend but people are cautious," he said. A weaker dollar has made dollar-denominated gold cheaper in other currencies. The currency has dropped this year partly owing to concerns about the U.S.'s large trade and fiscal deficits. The dollar fell to an eight-month below 110.88 yen <JPY=> on Wednesday ahead of a Federal Reserve meeting that could signal an end to a two-year stretch of rising U.S. interest rates. The euro was trading at $1.2770 <EUR=>, just below a one-year high of $1.2788 struck earlier in the week. Platinum <XPT=> spiked to a record high of $1,258 an ounce as fund buying in Japan propelled the most-active contract <0#JPL:> on the Tokyo Commodity Exchange to an all-time high of 4,366 yen per gram. Spot platinum was quoted at $1,235/1,240 late in New York. Dealers said platinum's rise was driven by the view that Johnson Matthey (JMAT.L: Quote, Profile, Research), the world's top distributor of the metal, will produce a bullish report on the market later this month. The company is planning a report on the market to coincide with a platinum industry event in London that starts on May 15. Palladium <XPD=> rose to $391/396 an ounce from $389/394 an ounce. Silver <XAG=> was steady at $14.44/14.54.
Precious Metals Prices by 0532 GMT*
Last Net change Pct move
Gold 701.50 2.00 +0.29
Platinum 1254.00 16.00 +1.29
Palladium 391.00 3.00 +0.77
Silver 14.44 0.03 +0.21
Change so far in 2006
Metal Latest bid End prev year Pct Move
Gold 701.50 517.20 +35.63
Platinum 1254.00 968.00 +29.55
Palladium 391.00 254.00 +53.94
Silver 14.44 8.81 +63.90
* The closing prices used to calculate the net change may differ from New York's last quoted prices.
By Lewa Pardomuan
Price of Gold Surges to New Height New York Times
Gold hits 25-year high above $700 Reuters.uk
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Dollar falls to 1 yr-low vs euro after Fed meeting Reuters
The dollar tumbled to fresh one-year lows against the euro in choppy trading on Wednesday, as a Federal Reserve policy statement failed to alter the market's view that the central bank is nearing the end of its tightening cycle. In the statement accompanying the Fed's quarter-point rate hike, the Federal Open Market Committee said it may need to raise rates further to keep inflation down, although further tightening would increasingly depend on the economy's outlook. The dollar initially jumped after the Fed lifted rates to 5 percent, as markets initially viewed the Fed's statement as slightly more hawkish than expected. The dollar's rally, however, quickly faded as bearish sentiment on the currency persisted. "The initial rise in the dollar was a knee-jerk reaction, but it seems to me that the Fed is signaling a pause unless the U.S. data say otherwise," said Brian Dolan, director of FX research at Gain Capital in Bedminster, New Jersey. "Markets have reinterpreted the statement, and it wasn't enough to swing the tide of bearish dollar sentiment," he added. The euro wiped out its losses and surged to $1.2838 <EUR=>, up from a $1.2751 post-Fed low, its highest in a year and up from around $1.2800 just before the Fed's decision and statement. At midafternoon, the euro was up 0.4 percent on the day at $1.2810. Comments from European officials suggesting that euro zone interest rates will soon rise and that the euro's strength has not hindered the region's growth helped compound the overwhelmingly bearish dollar sentiment, analysts said. For details, see [nBAT001336]. [nL10111583] The dollar also slipped to one-year lows against the Swiss franc <CHF=> at 1.2221 francs and an eight-month low against the yen <JPY=> at 110.11. Meanwhile, chances of another U.S. interest rate increase in June <FFN6> initially jumped as high as 50 percent after the FOMC statement, from 34 percent shortly before the policy-making body's meeting -- before easing back to around 42 percent. "If anything, (the Fed statement) is slightly more hawkish than what people are expecting. But generally as advertised," said Firas Askari, managing director and head of foreign exchange trading at BMO Nesbitt in Toronto. "They're leaving the cards open. It seems to me that they're going to be a reactive Fed rather than a pro-active Fed," he added. With the Fed meeting out of the way, markets are now focusing on the U.S. Treasury report on foreign exchange due later on Wednesday, with analysts focused on whether China will be named a currency manipulator.
By Gertrude Chavez-Dreyfuss
US Fed Raises Short-Term Rates to 5 Percent CRI
Fed Raises Key Rate to Highest Level in 5 Years New York Times
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Iran President Unconcerned With Sanctions ABC News
Iranian President Says He's Unconcerned With Threat of Sanctions for Country's Nuclear Program. Iran's president on Thursday accused Western powers of double standards in their campaign against his country's nuclear program, and declared the threat of sanctions don't worry him. Iranian President Mahmoud Ahmadinejad made his comments after key U.N. Security Council members agreed to present Tehran with a choice of incentives or sanctions in deciding whether to suspend uranium enrichment. Iranian leader told Metro TV station in an interview that he was unconcerned about talk of sanctions and said he was ready to negotiate with any country to resolve the dispute.

Iranian President Mahmoud Ahmadinejad, left, meets with People's Consultative Assembly chairman Hidayat Nurwahid, right, Wednesday, May 10, 2006 at the national parliament in Jakarta, Indonesia. Ahmadinejad on Wednesday dismissed Western concerns over nuclear proliferation as "a big lie" and vowed to keep pursuing nuclear technology, as Indonesia's leader offered to mediate in the escalating international dispute. (AP Photo/Irwin Fedriansyiah)
"If someone points an arm (a weapon) at your face and says you must speak, will you do that?," he said. He said that Western nations with large stocks of nuclear weapons were practicing "double standards" in pressing Iran to stop its peaceful nuclear program, and dismissed the threat of sanctions.
By CHRIS BRUMMITT
Iran President Unconcerned With Sanctions Guardian Unlimited
Iran's President Says He's Ready for Nuclear Dialogue Voice of America
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Judge: Extradite 'super-hacker' to US Scotsman
A SCOTS-born computer hacker who has been accused of the "biggest military hack" ever detected should be extradited to the United States to face trial, where he could face up to 70 years in jail, a judge has ruled. Gary McKinnon, 40, who said he had hacked into NASA and US military systems to check for material on UFOs, has six weeks to submit evidence to John Reid, the Home Secretary, who will make the final decision.

Gary McKinnon arrives at Bow Street Magistrates' Court. He says he hacked into the systems 'to look for UFOs'.
Picture: Bruno Vincent/Getty Images
McKinnon was arrested last June following charges by US prosecutors that he illegally accessed 97 government computers, including Pentagon, US army, navy and NASA systems, causing £375,000 damage. He admitted hacking into the systems, but denied causing any damage. Appealing to Mr Reid not to extradite him, McKinnon said: "Do right by your subjects." McKinnon, who was born in Milton of Campsie, near Glasgow, before moving to London as a boy, fears he will be sent to Guantanamo Bay. A Home Office spokeswoman said the government always sought assurances that torture or the death penalty would not be applied before agreeing to extradition. Prosecutors accused McKinnon of crippling US defence systems in the wake of the 11 September, 2001, attacks. At the time of the indictment, Paul McNulty, the US attorney for the eastern district of Virginia, said: "Mr McKinnon is charged with the biggest military computer hack of all time." District Judge Nicholas Evans, sitting at Bow Street Magistrates' Court, yesterday ordered McKinnon's extradition, saying he had targeted US computers. "It is not my task to determine which state has the better right to prosecute but, for what it is worth, my view is, unquestionably, if the defendant is to face prosecution, it should be in the US," he added. However, McKinnon's supporters say he has done the US a favour by exposing the systems' vulnerabilities. Karen Todner, McKinnon's solicitor, said she would appeal against deportation. She argues that her client will not receive a fair trial in the US and could easily be tried in Britain. Colin Fox, a Socialist MSP and member of the justice 2 committee, said the verdict was timely, coming just days after the Scottish Parliament expressed its alarm at extradition treaties with the US. He said: "This treaty was signed by David Blunkett, then home secretary, in 2003 on the basis that it would help in the 'war on terror'. What role has Gary McKinnon, a computer hacker, played in this war?" MSPs are also concerned that, under the 2003 Extradition Act, the US simply has to make a statement and does not need to submit evidence to justify an extradition request. Related topic: Computer crime
by GERRI PEEV - POLITICAL CORRESPONDENT
UK Will Ship Accused Hacker to US PC World
Scot who hacked into Pentagon faces extradition to US The Herald
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Fed Raises Rates, Sends Mixed Signal

The central bank hints that it's uncertain about its next move
amid conflicting indicators. By Lisa Girion.
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Some More Modesty on the E3 Trade Show Floor

Costumes face tougher regulations at the video game convention.
But some skirt the issue. By Dawn C. Chmielewski.
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Hartford to Settle Kickback Charges

NEW YORK-Hartford Financial Services Group agreed to pay $20
million to settle charges that it secretly paid insurance brokers
to improperly steer corporate customers to the company. By Walter
Hamilton.
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Google jazzes up search capabilities USA Today
Internet giant Google, which has lately been talking about new products that include finance pages, calendars and free urban Wi-Fi programs, returned Wednesday to its roots with a slew of products aimed at improving the search experience. At a meeting with reporters from around the globe, Google introduced several new search enhancements, including a way to subscribe to health research from experts and tools that let people save portions of websites in a pop-up box that can be shared via e-mails. The theme, says analyst Allen Weiner at research firm Gartner, was Google "moving the playing field back to its core strength — search — and all about fearing Microsoft as a threat." In the past two weeks, MSN and Yahoo overhauled their search advertising programs in a bid to more effectively compete with Google. And Microsoft says it will feature desktop search in the new edition of its Windows software, Vista, expected in early 2007. Google's share of online searches rose to 42.7% in March from 36.4% a year ago. Yahoo's and MSN's shares fell, says research firm ComScore Media Metrix. Google co-founder Larry Page dismissed the Microsoft rivalry, saying Google "tries really hard to not be focused on what they're doing, but what we're doing." Page says 98% of what will exist in 10 years "has yet to be done, and we won't get there by looking at what other companies are doing." Weiner doesn't buy it. "It's all about Google extending search into a desktop tool so you don't have to use an operating system," he says. The new tools:

• Google Co-op. Users can sign up at www.google.com/coop/directory to subscribe to free health information from several organizations, including the federal Centers for Disease Control, the Mayo Clinic and Kaiser Permanente. Their tips on the best health data will show up in search results. Google Co-op also offers city guide information for more than 300 cities, including London and New York. Co-op is designed to let organizations label Web pages relevant to their areas of expertise.
  QUOTE("Google Vice President Marissa Mayer said")
  "We're going to take the Tom Sawyer view and see how our users paint the fence"
• Desktop 4. An extension of Google's tool to search for items on your computer now comes with more than 100 "Gadgets" — little widgets that do things such as list friends' birthdays, show videos and play music.
• Google Trends. Lets users examine searches for market trends. For example, a search for "surfers" will show that most searches come from Hawaii and Australia and link to news stories about surfing. "For the first time ever, Google is making it possible to sift through billions of search queries from around the world to see what people are thinking about," said Mayer. Trends is targeted primarily toward marketers.
• Google Notebook. Available next week, it lets people save a portion of a website to a box that can be shared with others. Google showed an example of shopping for shoes, saving a certain pair and writing a note about it, then sending it to friends. The tool works in conjunction with Desktop 4.

By Jefferson Graham, USA TODAY
Google Debuts Four New Search Products and Promises Openness InformationWeek
Google dives deeper into vertical, social searches TMCnet
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Fed Raises Interest Rates to 5-Year High Yahoo! News
The Federal Reserve boosted Americans' borrowing costs for the 16th time in a row on Wednesday — this time to the highest level in five years — but suggested what happens next will be much less predictable. Chairman Ben Bernanke and his Fed colleagues left their options wide open to order yet another increase or to take a break in their two-year rate-raising campaign. Decisions on interest rates will hinge more heavily on what upcoming barometers say about economic activity and inflation, the Fed policymakers indicated. If surging energy prices should spark broader inflation, the Fed could opt to bump up rates again. If the economy should show signs of slowing more than anticipated, a pause in rate raising could be in store. To keep the economy and inflation on an even keel, the Fed unanimously decided on Wednesday to increase its federal funds rate by one-quarter percentage point to 5 percent. It marked the 16th increase of that size since the Fed began to tighten credit in June 2004. The funds rate, the interest that banks charge each other on overnight loans, affects a variety of other interest rates charged to consumers and businesses and thus is the Fed's primary tool for influencing economic activity. In response, commercial banks raised their prime lending rate — for certain credit cards, home equity lines of credit and other loans — by a corresponding amount, to 8 percent. The actions lifted both the funds rate and the prime rate to their highest points in just over five years. On Wall Street, the Dow Jones industrials gained 2.88 points, while other stock indicators lost ground. Fed policymakers offered a largely positive assessment of the economic climate, although they continued to express concern about the potential for inflation to flare up. Further moves "may yet be needed to address inflation risks," they said. Any such action, they added, "will depend importantly on the evolution of the economic outlook as implied by incoming information." Economists said this language — more detailed than a previous policy statement issued on March 28 — gave the Fed more flexibility in terms of future interest-rate decisions. If the economy doesn't slow to a more sustainable pace — as the Federal Reserve expects — and high energy prices start feeding into the prices of lots of other goods and service, then the Fed could opt to boost rates at its next meeting on June 28-29 or a some other point. However, if economic growth does slow — something that could reduce inflation pressures — then the Fed might pause in its rate raising at the June meeting or perhaps later this summer. Many economists believe the Fed will take a break in its rate-raising campaign this year — although they have mixed opinions on when that will happen. Some believe Wednesday's increase will be the last for a while. Others predict the funds rate will rise to 5.25 percent in June and then the Fed will move to the sidelines. A few believe the rate will rise to 5.50 percent before a pause. "We are now in much more uncertain territory. Monetary policy will become a lot less predictable and more focused on data," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. The economy in the first three months of this year grew at a brisk 4.8 percent pace, the fastest in 2 1/2 years. That is expected to slow to about 3 percent in the current April-to-June quarter, still a healthy pace. One challenge facing the Fed is figuring out whether high energy prices will feed inflation, slow overall economic activity or perhaps lead to both scenarios. Another challenge is gauging the extent to which the housing market, which racked up record high sales five years in a row, will slow this year. A slowdown in the housing market is likely to crimp consumer spending and thus overall economic activity. So far, the run-up in energy prices and other commodities has had only a modest effect on the prices of goods and services other than food and energy, the Fed said. Still, "elevated prices of energy and other commodities have the potential to add to inflation pressures," the Fed added. Oil prices hit a record high of $75.17 a barrel in late April; they are hovering above $72 a barrel currently. Gasoline prices have marched higher and have topped $3 a gallon in some areas. Bernanke took over as chairman on Feb. 1. Of the 16 rate increases, Bernanke's Fed ordered two and his predecessor, Alan Greenspan, 14. Before the increases, the funds rate had been sliced to a 46-year low of 1 percent to help the economy recover from the bursting of the stock market bubble, a recession and terror attacks.
On the Net: Federal Reserve: http://www.federalreserve.gov/
By JEANNINE AVERSA, AP Economics Writer

US Notes May Drop as Higher Oil Prices Fuel Inflation Risk Bloomberg
Treasuries may fall on speculation surging commodity and oil prices will stoke faster inflation, bolstering the case for the Federal Reserve to raise its key interest rates again. Ten-year notes are headed for a third weekly decline amid speculation the Fed will lift borrowing costs to keep inflation in check after 16th straight increases. Fed members this week boosted their target rate to 5 percent, the highest in more than five years, and said "further policy firming may yet be needed to address inflation risks.'' "A further rate hike can't be ruled out as inflation risks remain alive on the back of higher commodity and oil prices,'' said Yoshihiro Ishida, who helps oversee the equivalent of $2.72 billion at Meiji Dresdner Asset Management Co. in Tokyo. "Investors may find it difficult to buy Treasuries.'' The yield on the benchmark 10-year note rose 1 basis point, or 0.01 percentage point, to 5.14 percent at 11:57 a.m. in Tokyo, according to data compiled by Bloomberg. Yields move inversely to bond prices. The price of the 5 1/8 percent security due in May 2016 fell 1/32, or $0.31 per $1,000 face amount, to 99 29/32. Crude oil rose above $73 a barrel in New York yesterday, nearing last month's all-time high. Gold reached a 26-year high yesterday, and copper and aluminum futures rose to records today. "Possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures,'' the Fed said in a statement two days ago. The central bank raised its target rate for overnight loans between banks by a quarter percentage point that day. Interest-rate futures show traders are pricing in a 44 percent chance of another move at the June meeting, compared with no chance as recently as March. Treasuries yesterday had the biggest drop in more than a week after the government sold $13 billion of the securities, adding supply at a time when the Fed is signaling that it may raise rates further.
By Keiko Ujikane in Tokyo at kujikane@bloomberg.net
360 Degrees on the FOMC TheStreet.com
Fed Raises Interest Rates to 5-Year High Washington Post
BusinessWeek - Gulf News - MarketWatch - Wall Street Journal - all 1,108 related »

Google says search engines still its future despite new gadgets Telegraph.co.uk
Google has unveiled a new wave of software and desktop gadgetry in its ongoing quest to dominate users' experience of the internet. The world's most popular search engine, which faces mounting competition from rivals Microsoft and Yahoo, showcased innovations while pledging to focus renewed energies on its core business of online search technology. Executives denied the new products, especially an upgraded Google Desktop with a multi-media player, were a challenge to the dominance of Microsoft's Windows operating system. But the rivalry between the two companies was a recurrent theme at the launch, underlined by co-founder Sergey Brin's calling Bill Gates's corporation a "convicted monopolist". Eric Schmidt, Google chief executive, said he saw "no limit" to the company's growth, adding that Google would devote 70pc of its resources to search technologies "for the next 50 years". New products include a virtual notebook enabling users to collect web content and a feature to refine searches for health information. Google Trends - billed as "giving you the keys to the zeitgeist kingdom" - profiles how often and where specific searches are being conducted globally. The fourth version of Google Desktop crams a host of internet applications -'gadgets' - on to a user's sidebar, such as a multi-media player and weather report. Google is also personalising web searches by using information gleaned from a user's search history to give individualised responses to queries. The company also said it would become more focused on participation and feedback from users and partners and strove to explain its modus operandi - frequent, experimental launches of works in progress that die or thrive depending on user response. The hostility between Google and Microsoft remains keen, as Mr Brin revealed when asked about Google's objections to Vista, Microsoft's new operating system. "We just see the history of Microsoft behaving anti-competitively, not playing fair - a convicted monopolist," he said. The company acknowledged the recent criticism it faced for giving in to China's censorship demands, attempting to index the world's books and for revelations about storing users' personal data. Elliot Schrage, vice president of global communications, said Google's goal was "greater transparency" and "to be more open about what we are doing and what we are not". Asked if Google was sticking to its founding policy of making money without "doing evil", Mr Brin said: "I think we are doing a good job and staying true to our mission."
By Catherine Elsworth in Mountain View, California
Google Strengthens Focus on Search with Four New Tools CIO
Google goes after Microsoft San Francisco Chronicle
PC Magazine - Forbes - USA Today - iTWire - all 384 related »

Microsoft CEO: catching Yahoo, Google to take time Yahoo! Neww
Microsoft Corp. Chief Executive Steve Ballmer said on Thursday he has a five-year target to gain a bigger slice of the lucrative online advertising market dominated by Google Inc. and Yahoo Inc. Speaking at a business luncheon in Silicon Valley, Ballmer said he did not enjoy trailing the two Web advertising leaders but predicted that persistence and the software maker's ability to create new technology would help it catch up. "I don't think you will see some overnight transformation," Ballmer said. "It is going to have to be longer term. It makes sense for us to talk about five years." Microsoft is making a big push into Web services and has vowed to keep investing in a variety of technologies as it seeks to transform the way both businesses and consumers operate on the Internet. At the core of this plan is Windows Live, an advertising-funded, one-stop shop for services from e-mail, to instant messaging, to blogs that targets the fast-growing online ad market. Forrester Research projects online advertising will grow to $26 billion in 2009 from a current $15 billion. Goldman Sachs analyst Rick Sherlund estimates Microsoft plans to spend an additional $2 billion in the year starting in July, with much of that investment going toward building an ad-supported online business in the mold of Google and Yahoo. Ballmer acknowledged the world's biggest software maker is trailing Google and Yahoo but he said it was not too late for Microsoft to win over more advertisers and consumers. "We are a little bit late in the game," Ballmer said. "But at the end of the day it is going to be about the ability to create a mass marketplace for buyers and consumers." Microsoft has said it plans to spend about $6.2 billion in research and development in the current fiscal year ending June 30. At the same time investors have put pressure on Microsoft shares due to concerns about the lack of details on the company's plans to compete with its online rivals and the potential for more delays to its Windows upgrade, Vista. Ballmer said Microsoft would seek to create a marketplace where consumers want to spend their time and advertisers want to spend their money. It also plans to leverage the popularity of its MSN, Hotmail and Instant Messaging products, he said. "We are hard at work on our own core services where at the heart we want the users to be in control," Ballmer said. "There is a whole set of things we are doing to let the user be in control."
By Michael Kahn

Kodak unit settles US FTC spam charges Yahoo! News
A digital photo-sharing service run by Eastman Kodak Co. settled charges it sent e-mails to 2 million recipients and failed to give them a way to opt out of future messages, the U.S. Federal Trade Commission said on Thursday. Kodak Imaging Network, previously known as Ofoto Inc., agreed to pay a $26,331 penalty for violating a U.S. law aimed at curbing spam. The FTC said it imposed the penalty to recoup the total gross proceeds from the e-mail campaign and barred Kodak from future violations. U.S. law bars false or misleading headers on e-mails and requires commercial e-mailers to give recipients the option to not receive further solicitations. Solicitations must also be identified as advertisements and include a valid postal address under the CAN-SPAM Act. "This incident, which took place over a year and half ago, was a simple technical malfunction that caused the customary text to be removed from the e-mail," said Kodak spokeswoman Liz Scanlon. "We identified the problem, took steps to correct it and are confident it won't happen again." The Kodak Imaging Network lets consumers upload and share digital photographs and buy photo books, cards, coffee mugs and other products.

US dollar takes a pounding over deficit:


The US dollar suffered a severe sell-off on Friday, taking it to its weakest level against a trade-weighted basket of currencies since October 1997, as fears about the US current account deficit crossed world markets.
http://news.ft.com/cms/s/42c48634-e1e4-11d...00779e2340.html

Oil Tax Is Likely to Appear on Ballot

Supporters of a ballot initiative that would slap a
$400-million-a-year extraction tax on California oil producers
submitted almost 1.2 million signatures to state election
officials Friday, virtually assuring that the measure would go
before voters in November. By Marc Lifsher.
http://email.latimes.com/cgi-bin1/DM/y/e2l...Io30G2B0HXDJ0ES

Shanghai Media Group Blazes Trail in China's Fledgling Market

SHANGHAI - The state-owned firm and its president, Li Ruigang,
hold keys to the largest TV audience in the world. By Don Lee.
http://email.latimes.com/cgi-bin1/DM/y/e2l...Io30G2B0HXDK0ET

Used Car's Price Soars, Powered by Electricity

A battery-operated Toyota is sold for about twice its original
cost. By John O'Dell.
http://email.latimes.com/cgi-bin1/DM/y/e2l...Io30G2B0HXDL0EU

Dow's New High Is No Big Deal

It's nothing like those days when stock watching was a spectator
sport. By Kyle Pope.
http://email.latimes.com/cgi-bin1/DM/y/e2m...Io30G2B0HXEY0E6

Skype launches free call promotion in US, Canada Yahoo! News
Skype, the Web telephone company, on Monday announced a marketing promotion that will allow its users in the United States and Canada to make free calls to conventional wireline and mobile phones. Previously, users of Skype, a unit of online auctioneer eBay Inc., in both countries were required to pay for calls from their PCs to traditional telephones. Skype is seeking to accelerate usage in the North American market, where adoption of its voice-over-Internet technology has lagged other regions of the globe. The promotional offer, which extends through the end of 2006, covers calls within the United States and Canada. Calls from North America to conventional phones in other countries will incur charges. Skype already offers free calling to users worldwide who call from computer to computer. The company counts more than 100 million registered users worldwide. It has reported peak usage of its services by up to 6.5 million customers simultaneously. The offer is likely to put price pressure on rival voice-over-Internet phone service Vonage Holdings Corp., which is expected to go public later this month. Although Vonage and Skype currently serve somewhat different markets -- with Vonage acting as a full replacement service for traditional phones over Internet lines, and Skype considered by most as a complement to existing service -- the free offer could siphon customers away from Vonage. "In one stroke, Skype simplifies the choice to try Skype," said Phil Wolff, an editor at Skype Journal, a consulting group that publishes an online news site on Skype developments. "This promotion targets Skype's hardest market: North America." The move will also put pressure on rival Internet services such as Microsoft Corp., Yahoo Inc. (Nasdaq:YHOO - news), AOL, Earthlink and Google Inc., which charge small per-minute fees for computer-to-phone services, Wolff said. Henry Gomez, general manager of Skype North America, said he believes the move would rapidly accelerate adoption of the service. "Skype anticipates that completely free calling in the U.S. and Canada will expand Skype's increasing penetration in North America and solidify Skype's position as the Internet's voice communication tool of choice," Skype said in a statement. Skype said the offer to U.S. and Canadian consumers is made feasible by the low-cost structure of North American telecommunication markets relative to other countries, where phone tariffs are generally higher. "The structure and efficiency of the telecommunications industry in the U.S. and Canada makes it possible for Skype to offer free calls within the U.S. and Canada," Skype said in a question-and-answer section of its Web site. Last October, eBay CEO Meg Whitman signaled that Skype users could eventually expect to make telephone calls for free, with no per-minute charges, as part of a package of services through which carriers make money on advertising or transaction fees. "In the end, the price that anyone can provide for voice transmission on the Net will trend toward zero," Whitman said. The company is betting that by combining electronic markets, online payment systems and Web-based communications, eBay can emerge as a leader in all three businesses. Skype, which allows free Web-based calls between members, expects to generate more than $200 million in revenue during 2006, up from roughly $60 million last year. Shares of eBay were down 7 cents to $31.42 in afternoon trading on Nasdaq.
By Eric Auchard

US Levels a Final Blast at Enron Chiefs New York Times
A prosecutor accused two former Enron chief executives of "extraordinary arrogance" on Monday, and called them "masters of the cover story" who pushed the rules and crossed the line into illegality in their quest to portray Enron as a a success. As the government began closing arguments in the Enron fraud trial, a prosecutor, Kathryn H. Ruemmler, portrayed Jeffrey K. Skilling and Kenneth L. Lay as image-obsessed chief executives who time and again put their own interests first while defrauding the company's investors. "Every step of the way Mr. Skilling and Mr. Lay had choices," she told the 12 jurors and 3 alternates. "They had choices to tell the truth. Hold them accountable for the choices they made and the lies they told." Both men "loved Enron, they were Enron, Enron was their personal identity," Ms. Ruemmler said. The prosecutor said that Mr. Skilling and Mr. Lay "pushed the rules, they bent the rules and went right up to the line of legality and went over that line." She contended that the two men knew the company was hobbled from within by early 2001 but misled employees and investors about that information through "accounting tricks, fiction, hocus-pocus" and "outright lies." But Ms. Ruemmler, a 35-year-old prosecutor from the United States attorney's office in Washington, stopped short of blaming Mr. Lay and Mr. Skilling for the company's bankruptcy in December 2001. "This case is not about what caused the bankruptcy," she said. "You don't need to worry about that." Still, she mocked the defense's argument that The Wall Street Journal and short-sellers were in a conspiracy to take down Enron, saying it was "nonsensical, it's absurd, don't buy it." Judge Simeon T. Lake III, speaking slowly and clearly pronouncing every syllable of every word, read his instructions to the jury early Monday, going over the 28 counts of fraud, conspiracy and insider trading against Mr. Skilling and the 6 charges of fraud and conspiracy against Mr. Lay. The jury charge includes an "ostrich" instruction that says the jurors can find the defendants guilty for deliberately avoiding learning about wrongdoing at the company. If convicted on all charges, they face decades in jail. The courtroom was packed almost to capacity with family members, reporters and curious citizens who came to witness the conclusion of the emotionally charged corporate fraud trial. Mr. Lay showed little emotion, occasionally fidgeting in his chair. But Mr. Skilling clearly looked pained at times, tilting his head from side to side and sometimes turning to scan the audience's faces. He smiled dismissively during a discussion of accusations made in the trial made by the former chief financial officer, Andrew S. Fastow. Sitting in the first row, Mr. Lay's wife, Linda, struggled to contain her frustration; her daughter, Robin, put an arm around her to comfort her. Outside the courthouse a group of 10 protesters from LaRouchePac.com sang anti-Enron lyrics in barbershop style as the defendants went to lunch. Mr. Lay and his wife smiled as they passed them. For more than three hours on Wednesday, Ms. Ruemmler argued that the 54-day trial demonstrated that Mr. Skilling and Mr. Lay tried to shift responsibility to others for any mismanagement of the company, which descended rapidly from an energy-trading colossus into one of the biggest bankruptcies in American history. Their own appearances on the stand, Ms. Ruemmler said, ultimately mirrored the way in which they managed Enron, once the seventh-largest company in the country. While a parade of witnesses cooperating with the government took responsibility for fraud at Enron, Mr. Skilling and Mr. Lay "talked very little about what they did," she said. To them, "nobody else is smart enough. Ladies and gentlemen, that is extraordinary arrogance. That is exactly the same tactic they used at Enron — ridicule, condescend, call someone a profane name." Mr. Skilling and Mr. Lay, who on the stand were indignant and openly bitter about the government's Enron investigation, tried to deceive the jurors as they had tried to deceive Enron's investors, Ms. Ruemmler said. "All the righteous indignation in the world does not change the fact that in this courtroom their cover stories have been blown," she said. Ms. Ruemmler was indignant herself about Mr. Lay's actions in the five months after he took over as chief executive again in August 2001, when Mr. Skilling abruptly resigned. In the opening minutes of her presentation, she posted on the screen for jurors words Mr. Lay said during cross-examination: "Rules are important, but they should not — you should not be a slave to rules, either." Mr. Lay said the words in response to questions about why he had violated Enron's code of ethics through a personal investment in an outside photo-sharing company that had done business with Enron. She noted that Mr. Lay had withheld information about some $20 million in sales of Enron stock back to the company in late summer 2001, after Mr. Skilling's departure, even as he was telling employees that he was buying Enron stock, which he had portrayed as a "bargain" at its falling price. "He withheld information with half-truths, all the while taking care of himself," Ms. Ruemmler said of Mr. Lay. "Those were flat lies," she said, hitting her hand on a wooden table and raising her voice in anger for the first time all day. "He had no right to do that." Ms. Ruemmler walked jurors through evidence presented at trial that Mr. Skilling and Mr. Lay had lied to investors about the struggling broadband and Energy Services businesses, about the use of the LJM off-the-books partnership to manufacture earnings and about the Raptors financing vehicles Enron had used to hide losses, which Ms. Ruemmler called "fraudulent, from soup to nuts." She underscored the particular confidence the government had in one particular charge: the purported shift of some $200 million in losses from Energy Services to the wholesale unit. Testimony given by David W. Delainey, the former chief executive of Energy Services, that the former Enron chief executives conspired to hide the losses in the unit from investors "is absolutely devastating proof" of their guilt, Ms. Ruemmler said. A meeting on March 29, 2001, where Mr. Skilling signed off on the move and an accompanying cover story that the move was being done for "efficiency" reasons, according to Mr. Delainey, "is crystal-clear evidence of intent to defraud," she said. Mr. Lay continued the fiction in later public statements, she said. The prosecutor also highlighted the substantial evidence that Mr. Skilling had pushed underlings to "reverse engineer" the second quarter of 2000 to meet a higher earnings target. "The only ones that testified differently were Mr. Skilling and his $600,000 expert," Ms. Ruemmler said. Ms. Ruemmler also sought to head off the defense's expected argument on Tuesday that the government relied too heavily in the trial on seven cooperating witnesses who have pleaded guilty to Enron-related crimes — witnesses the defense has claimed lied to please the government in an attempt to reduce their ultimate prison sentences. The closing arguments, which are to conclude on Wednesday, come after weeks of testimony in which jurors heard 25 witnesses called by the government and 31 by the defense. Daniel Petrocelli, Mr. Skilling's lead lawyer, will handle a little over half the defense team's allotted six hours for closing arguments on Tuesday. All four lawyers for Mr. Lay will argue for him, with Michael Ramsey, the lead lawyer who has missed about half the trial due to heart problems, set to conclude. In an unusual situation, Judge Lake will oversee a separate case set to begin on Thursday on bank fraud charges against Mr. Lay related to his use of $75 million in loans from three banks. Mr. Lay could also be sentenced to more than a decade in prison from the charges in the second trial, in which Judge Lake, not a jury, will rule on his guilt or innocence.
Enron Prosecutors: Find them guilty CNN
Closing arguments underway in Enron trial BusinessWeek
Monsters and Critics.com - USA Today - MSNBC - Reuters - all 598 related »

http://www.kitco.com/ind/Laird/may162006.html

Huge Gold Action and Earth Shaking Change Imminent

By Chris Laird

May 16, 2006

www.prudentsquirrel.com

It’s been several weeks since my last public article, and man, what a few weeks for gold!

I just got finished with my latest subscriber edition, and said that the precious metals would probably correct as much as $100 this week, and lo and behold, Monday it drops $40 already.

Since January, gold rose over 200$, something that is really out of the box for gold’s price action in the last 30 or more years.

I was talking with a subscriber about the gold action and the probable sources of the huge price swings. I will outline some of that discussion here. My conclusion is that we are in for earth shaking changes politically and economically. Hold on to your hats.

First of all, I have to point out that these kinds of price swings in gold indicate that major change is on the horizon for the world. The changes are going to affect everyone’s life on this planet. If gold was not moving so strongly up and down, my prognostications for the future would be more sanguine.

Because gold is the historical money par excellence, it has a singularly unique tendency to telegraph any major change for better or worse. Gold reacts directly and immediately to world political developments, economic developments, social developments, war developments.

In my work, I have focused 100% of my gold study on macroeconomic trends and world political developments. I have found this method very fruitful in understanding precious metals. I have not used charting, mathematical modeling of price activity, Fibonacci ratios, or other methods. This, even though I am a mathematician myself.

Rather, being a student of history as well, I have found that macroeconomic news, and political developments are the primary drivers of the precious metals markets. The study of charts and other methods are very secondary ways to forecast where metal prices are going.

One of the most significant benefits of my approach is that I get a very good idea of what is happening in the world politically and economically as a direct benefit to my study of precious metals. And this leads me to make the following observations about gold’s price action this year:

The world is about to change radically... in every way, and you and your life are going to be directly affected, and soon too.

So, let me get down to brass tacks and explain myself, and, gold’s heavy price activity this year.

First of all, let me begin with a specific example. Typically, the US fiscal and trade deficits are given as reasons for the gold spike since 2000. And this year, the two hundred dollar gold price increase has come amidst the usual discussion of the US deficits.

However, these deficits have been out of control for over 5 years. Why is it that, all of a sudden in 2006, gold prices rise over $200, or about 30% in a few months?

Answer: this year we face the imminent demise of the USD system combined with a world energy war brewing in the Middle East. When I say the USD system, I mean the fact that it is the world’s reserve currency. The demise of the USD system will have apocalyptic economic consequence for YOU.

The typical answer for gold’s price rises in the financial press is the twin US deficits. Certainly, the twin deficits are a prime driver of the case for gold price increases. However, I have a particular problem making this correlate specifically to a recent $200 upswing in gold prices. There have to be other very serious factors out there, and there are.

The US fiscal deficits are serious, but we have had these for years. The very recent price swings of gold are being driven by fear of a US dollar collapse that will kill the USD SYSTEM. This, coming at the same time that there is a world energy war brewing in the Middle East. The fact is, since January, 2006, the two impeding events driving gold are a world energy war brewing and the impending collapse of the USD system, not just a US economic crisis. Things are much worse than that. Fear is driving gold prices.

Regarding Iran and the controversy over their nuclear program, the fact is that Iran sits all across one side of the Persian Gulf, where much of the Middle Eastern oil flows out to the world. The Middle East has about 2/3 of the world’s known oil reserves.
The tension in the Middle East in a major reason for gold’s price rises, and there are many reasons for this.

I am going to delineate how Middle East tensions are affecting gold, but first I will jump ahead and say that, we are looking at a major war brewing there, and probably China and Russia are going to be siding with Iran, against the US and its few allies. The war is going to be all about oil and natural resources.

This is one factor driving gold dramatically this year, and I would hazard a guess that this war fear is a $150 reason for gold’s price increases.

Another factor driving gold in 2006 is the imminent change from the US dollar system as a world reserve currency. The fact that the US has twin trade and fiscal deficits are really only part of the reason that gold is rising VSVS the USD. The real reason gold is rising so rapidly this year is because the world is looking at the probable demise of the whole USD SYSTEM. The fiscal deficits are a side show to this potential sea change for world economics.

As a matter of fact, the impending demise of the USD system is so serious that there is actual fear among world central banks as to the implications. There is not just concern, there is fear.

The last time the world saw a major change in a world reserve currency, it had no less than the great depression of the 1930’s. Right after that depression which enveloped the world, there was a world war that decimated Europe, much of Asia, the Pacific, Russia.
That war had well over 100 million casualties and changed the world forever.

We are now looking at a similar situation to the events just preceding the Great Depression of the 1930’s followed by World War Two. Gold is specifically reacting to fear in many parts of the world. Not just fear of a depression or recession or unemployment, or just a USD crisis. It is fear of two things.

The two fears

The fear that is evident in the gold market is about a coming war in the Middle East, combined with an imminent collapse of the USD system. The effects of a war in the Middle East will collapse oil shipments to 2/3 of the world. The effects of a collapse of the USD system will also collapse 2/3 of world economic activity for probably 5 to 10 years.

In other words we are looking at a world war coming and also a great depression due to the collapse of the USD system. Your life is about to change radically.

Now the impending demise of the USD system is nothing new particularly. Many writers have discussed this issue, to include the notable book about a coming USD crisis by Richard Duncan.



Since this issue has been so widely discussed, why is it that gold is somehow rocketing skyward just now?

Surely the price increases in gold since 2000 are due to the US fiscal problems and the well delineated US dollar crisis issue. But why the all of a sudden explosion in gold’s prices now?

Answer: a consensus has just formed in 2006.

The consensus is that the USD system is now going to collapse, and even though central bankers don’t know how to replace it, it will collapse anyway.

A very key idea here is what a consensus is, and how it forms. A consensus forms after events prepare themselves over time. Suddenly, what was discussed now becomes an imminent fact in many minds. Understanding this is key to showing why just now, the world now is acting to prepare for a USD system collapse.

IF it is true that the danger of a collapse of the USD has been known for some time, why just now are central bankers world wide publicly discussing this fact?
Because a consensus has now formed among them. No less than the BIS, the EU central Bank, the Bank of Japan, and the Chinese central bankers are all now simultaneously talking of a radical change from the USD system.

The consensus has formed and gold is telegraphing this. Then central bankers start making preliminary moves to react, and for example, Chinese central bankers start discussing buying 2000 tons of gold to add to their 500 tons of gold reserves.

European central bankers start talking openly about being in crisis mode, ie, what will they do if the USD devalues rapidly this year, because then world markets will collapse. If the USD collapsed rapidly there will be flight out of markets and selling of USD assets and bonds.

Middle Eastern bankers, seeing an impending war with Iran, and the collapse of their bubble markets start buying tons of gold for flight to safety.

The US government publicly calls for a lower USD to deal with the trade deficit and the world realizes that the USD will very possibly have a disorderly decline in value because there are trillions of dollars of foreign reserves overhanging the world markets.

A consensus has now formed. The consensus is: the fears we have all had about economic Armageddon are now at hand in 2006.

Now, Japan is having an economic resurgence. The US is having some decent economic growth too. So, how is gold to portend that all is definitely not well, and so energetically in 2006? Because the fact is, if the USD system collapses, the economic growth in Japan and the US will disappear in about one month.

China cannot tolerate this. China is very concerned that there are two China’s emerging after their economic reformation since 1990. There are now about 200 million wealthier Chinese and about 1 billion poor Chinese who are angry that their lands in the country are being expropriated by the wealthy and corrupt officials.

Last year, China had over 50,000 public demonstrations about these inequities, and China is very afraid of the chaos that can happen there. China cannot tolerate an economic collapse of the West.

Japan has just emerged from ten years of mild deflation that left their government with the highest indebetedness of the developed world. Japan’s government bonds are classified in the Junk category… did you know that?

Japan cannot tolerate a USD systemic economic collapse either.

Europe is hopelessly stagnating economically. France tried to create employment reform for their industry, and got a million student rioters for their trouble and had to relent. France last summer had a month of out of control rioting by Muslims all over the country, and Europe almost got dragged into their own Muslim riots. Much of the reason for these riots are economic inequality.

France and Europe cannot tolerate any major economic disruption, and, if the USD system collapses it will be curtains for the political and economic security of Europe.

The problem is, no one can now stop a collapse of the irreplaceable USD system.

Now let us look at gold in this 2006 picture;

• Every time there is bad news about the Iran situation gold rises from 20 to 50$ in price.

• Every time China mentions that they are considering a change in their 1 trillion US dollar foreign reserves gold rises $20.

• Every time there is social chaos in Europe gold rises $20.

• Every time Japan mentions that they will raise interest rates gold jumps $20 because of the chaos that an unwinding of the Yen carry trade will inflict on world markets. Trillions of dollars value of Yen have been borrowed and invested in every world market for the last ten years.

• Every time the US mentions that they are considering a pause in interest rate increases gold rises $30, because the US positive interest rate differential of about 3% over the rest of the world is the only thing keeping the USD system from collapsing.

In 2006, a consensus has now formed that all of the above events are about to happen, and gold has risen $200 as a result.

The correction in gold this week is merely speculators taking money off the table and is not going to continue. Rather, gold will continue to rise in 2006, and worse, we are going to have a world energy war and very probably a collapse of the USD SYSTEM and all the economic collapses that would follow that.

If I were to say one thing it is this: being in any market today is hugely risky. Be in precious metals. I would not necessarily be in USD positions either, or in USD cash.

The last time there was an economic depression, there was flight INTO the USD in the 1930’s. This time, there is probably going to be flight OUT of the USD. But I think that our economic woes are going to be the smaller worry…rather war and huge energy disruptions are the biggest problem we face in 2006.

The PrudentSquirrel Newsletter is a gold and economic commentary. It tracks macro trends and is not stock specific. My readers have written that they find it a unique source of economic big picture analysis that drives precious metals prices. Stop by and have a look.


Christopher Laird
Editor-in-Chief
www.PrudentSquirrel.com

Warren Buffett ukulele auction starts slowly Yahoo! News
The online auction for a ukulele autographed by Warren Buffett has begun, with early signs that the instrument may fetch somewhat less than a lunch that the world's second-richest person auctions each year. Buffett, who runs Omaha, Nebraska-based Berkshire Hathaway Inc., is offering the white ukulele on eBay Inc.'s Web site. Proceeds will go toward the Omaha Children's Hospital. The auction began Monday night, with an initial $1,000 bid by "timharrod." By 3 p.m. EDT (1900 GMT) Tuesday, the top bid was $3,050 by "warren_buffett_partner" from Hong Kong. The auction ends on May 25 at 9 p.m. EDT (0100 GMT May 26). Buffett appeals to people in part because he is "like the ordinary man on the street and in appearance, and yet he's so widely accomplished," said Mohnish Pabrai, managing partner at Pabrai Investment Funds in Irvine, California, which owns Berkshire shares. "He's almost like a Horatio Alger figure, and people like that." International Dairy Queen, a unit of Berkshire, helped create the ukulele for the auction. A second ukulele was given to the 75-year-old Buffett, who plays the instrument. According to Forbes magazine, Buffett was recently worth $42 billion, trailing Microsoft Corp. founder and Berkshire director Bill Gates, who was worth $50 billion. Christie's New York said it auctioned on Tuesday a 1707 Stradivari violin for $3,544,000, which it called a record at auction for any musical instrument. Buffett first teamed up with eBay in 2003, when he began to auction lunches for as many as eight people to benefit the Glide Foundation, a San Francisco nonprofit that offers programs for the poor, hungry and homeless. Last year, the winning bidder agreed to pay $351,100, far above the initial $25,000 bid, and equal to the cost of nearly four of the pricey Class "A" shares of Berkshire, an insurance and investment company. Previous auctions were conducted live, and raised less. Pabrai, who bid $250,100 for the lunch, said he would bid for another lunch, but had no plans to bid for the ukulele. "I'm not a musician," he said.
By Jonathan Stempel

Ecuador Seizes Oxy Operations

Ecuadorean officials seized oil projects run by Occidental
Petroleum Corp., sending the company's stock tumbling and dimming
hopes of a trade deal between the South American nation and the
United States. By Elizabeth Douglass.
http://email.latimes.com/cgi-bin1/DM/y/e2t...Io30G2B0HXfV0Ek

Passionate Pitch by Enron Defense

HOUSTON - Lawyers for Kenneth L. Lay and Jeffrey K. Skilling, in
an emotional last pitch to jurors who could sentence their clients
to prison for decades, accused the government of building a sham
case against the former Enron Corp. leaders because it needed
scapegoats for a corporate scandal. By Thomas S. Mulligan.
http://email.latimes.com/cgi-bin1/DM/y/e2t...Io30G2B0HXfW0El

http://www.atimes.com/atimes/China_Business/HE17Cb05.html
Greater China IPOs surpass EU, US

BEIJING - With global investors eager to take advantage of the Greater China growth story, the average take of new initial public offerings in the region now exceeds that of IPOs in the United States and Europe, according to the accounting firm PricewaterhouseCoopers.

Historically most IPOs in the region have been in Hong Kong, which has benefited from the lull in mainland IPOs the past year while Beijing took measures to resolve the "split share structure" of mainland companies.

With that lull coming to an end, however, there has been concern that the imminent resumption of mainland IPOs would dilute Hong Kong listings; however, analysts say these concerns are unjustified, partly because of attractive upcoming IPOs such as that of the Bank of China, whose Hong Kong IPO, expected this year, is anticipated to be the largest in Hong Kong history.

China IPO takes now world's highest
The average amount of money raised for every IPO in Greater China - mainland China, Hong Kong and Taiwan - surpassed European and US markets last year, according to research by PricewaterhouseCoopers. Hong Kong remained the largest fundraising hub in the region.

The average money raised per IPO surged in Greater China to US$260 million in 2005, up 214% from $83 million in the previous year. The figure exceeded the combined average amount per IPO raised on the Nasdaq and the New York Stock Exchange (NYSE) in the United States, which dropped to $170 million last year from $220 million in 2004.

"China's sound and steady economic growth continues to attract international funds into the capital markets in the region," said Frank Lyn, China market leader at PricewaterhouseCoopers. "Besides, the decision of some mega-sized mainland enterprises to list in Hong Kong, instead of considering a dual listing in other overseas exchanges, also contributed to the increase."

In terms of the total sum of money raised through IPOs, however, the US and European markets, including exchanges in the European Union plus Switzerland and Norway, were ahead of the Greater Chinese markets in 2005. IPO funds raised in mainland China, Hong Kong and Taiwan last year totaled $25.57 billion, which was 43% of the $60 billion raised on European markets, and 79% of the $32.08 billion raised on US markets.

Mainland IPO resumption won't impact Hong Kong
According to Edmond Chan, a partner at PricewaterhouseCoopers Capital Market Services Group, mainland China's resumption of IPOs in the second half of this year will have a very limited impact on the listing frenzy in Hong Kong.

"Companies choosing Hong Kong to launch their IPOs aim to attract more international investors and improve their publicity in the international arena," Chang said, adding, "Due to its well-established financial and legal systems, geographical proximity to the mainland and good corporate governance standards, the Hong Kong stock market continues to be seen as the major international fundraising platform by mainland enterprises."

Among the total amount of money raised through IPOs in Greater China, about 97% of the money was raised in Hong Kong, which separately was the world's fourth-largest fundraiser in 2005.

The number of new listings in Shanghai and Shenzhen decreased, mainly as a result of share segregation reform in the Chinese mainland. Only three IPOs in Shanghai and 12 in Shenzhen were seen in the first half of 2005, and there were none in the second half of the year.

Looking ahead to the next 12 months, Lyn estimated that money raised through new IPOs in Hong Kong would likely reach a record high of HK$200 billion (US$25.6 billion) raised this year with the projected average price-per-earnings ratio hovering around 10 to 15.

"We expect to see sizable and quality listings in 2006," said Lyn. "There is a strong pipeline of companies with powerful financials, with the major force coming from mainland-based financial services and logistics companies."

Other analysts agreed that mainland China's resumption of new share issuances on May 8 will not affect Chinese companies' listing frenzy in Hong Kong in the short term, defusing worries of a possible decrease in the number of listing candidates there. They cite Hong Kong's position as a regional financial hub and a raft of incentives that have been driving the local market to new highs as their reasons.

"Hong Kong still has a monopoly position in the region" as a fundraiser, said Andes Cheng, associate director of South China Research Ltd.

The special administrative region's mature financial system, abundant international capital and accelerated economic integration with mainland China have helped it to become the first-choice destination for Chinese firms that seek alternatives to the yuan-denominated A-share markets in Shanghai and Shenzhen. That advantage will not wither for at least two years, Cheng said.

Hong Kong was the world's eighth-largest bourse in terms of capitalization by the end of 2005 and Asia's second-largest.

The recent lasting bullishness of the Hong Kong market is another factor that might be luring companies seeking listings. By comparison, mainland markets are still lagging behind and will probably take some time to become more active.

Companies eager to sell shares on mainland bourses will be those that have already traded their shares in Hong Kong, said Tang Sing-hing, associate director with Tung Tai Securities. But that won't weaken Hong Kong's attraction. He said those Chinese firms with Hong Kong-listed H shares will jump at the chance to float shares at home, where they may get a higher price-to-earnings ratio.

Hong Kong has witnessed a listing boom from Chinese companies since the mainland suspended new share issuances a year ago prior to its reforms to float the non-tradable shares. China is in the process of altering its stock market from one where the majority of equity ownership of listed companies is in the hands of the state or state-owned institutions.

In 2005, Hong Kong saw 70 companies listed, involving a record HK$192 billion in IPOs. Mainland companies realized 80% of this total. The listing fever has shown no sign of abating this year. Already 12 mainland companies have gone public in Hong Kong in 2006, and media reports suggest more than 20 others are preparing to do so.

BOC 'road show' attracts attention
The Bank of China (BOC), the second-largest of China's Big Four state-owned commercial banks - the other three are the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and the Agricultural Bank of China - is attracting a lot of buzz as it kicked off a marketing road show last week in Hong Kong for its HK$78.4 billion (US$9.8 billion) share sales.

The IPO, which analysts say would hit the Hong Kong stock market with a bang, is expected to be the largest offering ever launched by a mainland company, surpassing China Construction Bank's US$9.2 billion.

BOC is selling 25.57 billion H shares, or 10.5% of its enlarged share capital, at a price between HK$2.50 and HK$3.00, according to a preliminary prospectus. The price values the lender at 1.9-2.2 times its book value, which is at least 15% cheaper than rivals CCB and Bank of Communications. The two made their IPOs in Hong Kong last year.

"The pricing is pretty reasonable and will attract investors," said Kingston Lin, Prudential Brokerage's associate director. The money used to subscribe BOC shares will amount to more than US$25 billion, he estimated. The Bank of China's shares will be covered "more times than that of China Construction Bank", Lin said.

Another factor that will make BOC popular is its high dividend payout ratio, which stands at 35-45%, said Lai Wai-shing, Hantec Investment's associate director. "[The] BOC will certainly drive the market sentiment high," he said.

The ICBC, the largest of the Big Four, also plans to launch its IPO in Hong Kong this year.

(Asia Pulse/XIC)

Going After Google Forbes
Can anybody overtake Google? Yes, insist its two closest rivals, who say they'll eventually have a search engine that offers better results and draws more traffic than Google. But in the meantime, both Microsoft and Yahoo! plan to claw back more ground by improving the ad-selling platform that surrounds their search engine. The idea: Offer advertisers a better way to target their ad campaigns, and watch the money flow in, even if Google continues to draw more traffic. Microsoft has already rolled out its new offering, dubbed AdCenter. And Yahoo! Chief Executive Terry Semel, who doesn't plan to unveil his product until later this year, is expected Wednesday to offer more details at an analyst meeting. While the race to top Google in searches may seem daunting--Google fielded 43% of all searches in March, according to ComScore, while Yahoo! handled 28% and Microsoft only managed 13.2% --building a smarter advertising system could be doable. At stake: A bigger slice of the search-related advertising pie Forrester Research says will grow to $11.6 billion by 2010 from $7 billion this year. Yahoo!'s current advertising system allows the highest-bidding online marketer to place ads near search results. But the new offering, dubbed Project Panama, is expected to match Google's system by taking into account not just price, but subject matter and effectiveness of prior placements when distributing advertising space. Analysts say Yahoo! plans to offer extra flexibility to advertisers in the form of ad testing, forecasting and performance feedback. The new system should increase revenue for Yahoo! because it will allow advertisers to spend their money more efficiently, says Forrester analyst Shar Von Boskirk. “They'll be able to spend more because they won't waste as much of their budgets.” Search portals would be wise to take a cue from Google's ad platform--there's no denying that the company's method works. Google's vast head start in market share of searches has translated into plenty of cash. Almost 60% of the company's first-quarter earnings, or $1.3 billion, came from advertising on Google-owned sites, and most of those ads appear in searches. Microsoft is also making loud noises about its search advertising plans. In early May, Microsoft rolled out AdCenter, its first proprietary auction-based advertising platform for U.S. advertisers. Until now, Microsoft had been relying on Yahoo!'s older Overture advertising system. AdCenter offers advertisers feedback about the demographics of people who click on their ads. Microsoft Chief Executive Steve Ballmer boasted earlier this month that his company could overtake competitors in search in about five years. In fiscal 2007, Microsoft plans to spend $1.1 billion in research and development on the company's MSN group, of which search is a major part. Advertisers have begun experimenting with Microsoft's AdCenter-- and some like what they've seen. “Microsoft currently has lower rates than other search engines, so our clients are getting eager to test it out,” says Scott Linzer, director of media at online marketing agency iCrossing. “Microsoft has also been indexing our clients' sites faster, and putting their sites higher up in search results.” Those low advertising prices won't last forever, says David Jakubowski, general manager of search strategy and go-to-market for Microsoft, but higher “conversion rates”--or percentage of searchers who click on an ad and proceed to make a purchase--could make advertisers stick around. But regardless of its attractiveness to advertisers, Microsoft's AdCenter can only reap so much profit for the company with its current amount of search traffic. Jakubowski says Microsoft's recent rollouts of “live” services, new Web-based mapping and e-mail, will eventually convince consumers to stick around Microsoft sites and enter their search queries through MSN Search rather than competitors' offerings. But iCrossing's Linzer hasn't seen evidence that these products have attracted new searchers to Microsoft. Technological advances are also unlikely to budge consumer search shares up. Microsoft, Yahoo! and even IAC/InterActiveCorp's newly upgraded Ask.com bested Google in a study of search-result relevancy in May, according to market research firm Intralink, yet they all trail Google in market share. Google's brand image is something all search competitors must contend with, though Microsoft's Jakubowski minimizes its impact. “You'll find our focus over the next three to five years on the utility of our products rather than on branding and awareness.” Still, Microsoft spent $34 million advertising MSN, which includes search as well as other consumer products, in 2005, according to TNS Media Intelligence. Jakubowski insists that search share isn't the only important way to monetize site traffic. “Of course having big chunks of all searches is important, but that's only part of it. The real story is who has the user engagement in suites of products beyond search--and current metrics are limited to Web searches.”
By Chris Kraeuter and Rachel Rosmarin

http://www.nytimes.com/aponline/business/AP-Economy.html

Consumer Prices Jumped 0.6% in April
By THE ASSOCIATED PRESS
Published: May 17, 2006
Filed at 3:55 p.m. ET

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WASHINGTON (AP) -- Consumer prices vaulted higher in April, fueling concerns the Federal Reserve might keep pushing interest rates up to fend off inflation. Discouraged Wall Street investors sent stocks tumbling.

Soaring prices for gasoline and other energy products have played a major role in the spikes seen over the past two months. But the price tags of lots of other goods and services also are climbing.

The closely watched Consumer Price Index rose 0.6 percent, the biggest jump in three months, the Labor Department said Wednesday. That followed an already strong 0.4 percent advance in March.

''The whiff of inflation is feeling more like a gust,'' observed Richard Yamarone, economist at Argus Research. ''The inflation picture is worsening.''

On Wall Street, stocks plunged. The Dow Jones industrials plummeted 200 points in afternoon trading.

Excluding energy and food prices, ''core'' prices went up 0.3 percent in April for the second month in a row. The sizable back-to-back increases suggested that rising energy costs may be starting to breed wider inflation throughout the economy.

Stuart Hoffman, chief economist at PNC Financial Services Group, described the inflation performance as ''rotten to the core.'' He and other economists said it indicates that more companies are passing along some of their higher costs for energy and other materials to consumers.

The latest inflation readings were higher than economists anticipated. They were forecasting a 0.5 percent increase in overall consumer prices and a 0.2 percent rise in core prices.

So far this year, consumer prices are rising at an annual rate of 5.1 percent, much faster than the 3.4 percent increase registered for all of 2005. Core prices are advancing at a brisk 3 percent pace, compared with a more moderate 2.2 percent rise for last year.

To thwart inflation, the Federal Reserve bumped up interest rates last week to a five-year high of 5 percent. It was the 16th increase in a row since the Fed began to tighten credit in June 2004.

Fed policymakers left options for future decisions wide open. They suggested another increase might be possible, or they could take a pause in their rate-raising campaign depending on how inflation and economic activity unfold.

A growing number of economists said Wednesday's inflation report raises the odds for another rate increase at the Fed's next meeting, June 28-29. ''I conclude that higher interest rates are in our future,'' said Brandeis University economics professor Stephen Cecchetti.

Some, however, still believe the Fed will leave rates alone at the June meeting on the grounds that slower economic growth will eventually ease inflation pressures.

The economy in the first quarter of this year grew at a brisk 4.8 percent pace, the fastest in 2 1/2 years. Growth is expected to slow to around a 3 percent pace in the April-to-June period, which would still be healthy.

One of the things the Fed will be keeping close tabs on is how energy prices affect inflation and economic activity.

Energy prices can make inflation worse. They also can crimp overall economic activity by forcing consumers to pare their spending and investment. Or, high energy prices can result in both scenarios -- which would be a tricky problem for the Fed to deal with. To counter inflation, the Fed would be inclined to boost interest rates. To treat economic weakness, the Fed would want to leave rates alone or, in more serious cases, lower them.

Oil prices hit a record high of $75.17 a barrel in late April; they are now hovering below $69 a barrel. Those high crude oil prices have pushed up prices at the gasoline pumps to $3 a gallon in some areas.

Wednesday's report said energy prices shot up 3.9 percent in April, the most since January. Gasoline prices jumped 8.8 percent. Fuel oil prices went up 5.2 percent.

Other prices also bounded ahead last month.

Airline fares rose 1.6 percent, the most in nine months. Hospital and other related services climbed 0.8 percent, the most in two months. Clothing prices increased 0.6 percent. Education costs, including tuition and books, rose 0.5 percent. Prices for shelter, a broad category including rent, went up 0.3 percent.

There were a few bright spots for shoppers. Food prices were flat in April. Computer prices dropped 2.6 percent. Prices for tobacco and smoking products dipped 0.2 percent.

Against the backdrop of mostly rising prices, workers are seeing only small gains in their paychecks.

A separate report issued by the department showed workers' average weekly earnings, after adjusting for inflation, edged up 0.2 percent in April. That was an improvement from a 0.1 percent dip in March.

''Workers are making some headway -- but it is not very much,'' said Ken Mayland of ClearView Economics.

^------

On the Net:

CPI report: http://www.bls.gov/

Enron jury deliberates on verdict BBC News
After hearing 56 days of testimony, the jury in the Enron fraud trial has begun deliberating verdicts for former bosses Jeffrey Skilling and Kenneth Lay. The pair are accused of trying to hide $32bn (£18bn) of debts at the firm, but deny any wrongdoing. The energy giant collapsed in 2001, with thousands of people losing their jobs and investments. Mr Lay and Mr Skilling have both claimed that other staff were to blame and that they were kept in the dark.

List of charges
Earlier on Wednesday, the courtroom in Houston, Texas heard government prosecutors rebut some of the closing arguments made by the defence team."They lied to their investors," said prosecutor Sean Berkowitz. "They omitted critical facts, and at key times they put their own interests above those of their shareholders. And they lied, ladies and gentlemen, from the stand." A day earlier, the defence team had accused prosecutors of rewriting Enron history and bullying witnesses. Mr Skilling, 52, Enron's one-time chief executive, faces 28 counts of fraud and conspiracy. Mr Lay, 64, the firm's founder and former chairman, is charged with six such offences. Both could be sentenced to more than 30 years in jail if convicted. They suffered a blow last week when the judge ruled that jurors could find the men guilty of deliberately avoiding knowledge of massive fraud. Known as the "ostrich instruction", because it refers to a person sticking their head in the sand, the ruling means prosecutors can present a lower burden of proof to be successful.

Honda to Build Midwest Plant, Add Small Hybrid

Honda Motor Co., straining at the seams to meet demand for its
cars and trucks, said that it would build another assembly plant
in the Midwest and introduce a small hybrid gasoline-electric car
as part of a $1.46-billion global expansion. By John O'Dell.
http://email.latimes.com/cgi-bin1/DM/y/e2x...Io30G2B0HXps0E1

Tenet Settles Kickback Charges

The company will pay $21 million and sell or close its Alvarado
hospital in San Diego. By Daniel Yi.
http://email.latimes.com/cgi-bin1/DM/y/e2x...Io30G2B0HXpt0E2

Rents a Key Driver of Inflation

Housing increases account for nearly half the rise in the core
consumer price index. By Lisa Girion and Annette Haddad.
http://email.latimes.com/cgi-bin1/DM/y/e2x...Io30G2B0HXpu0E3

Yahoo sees no boost from ad system before '07 Yahoo! News
Internet media giant Yahoo Inc. plans to introduce its revamped Web search advertising system in the third quarter, but expects no financial contribution in 2006, executives said on Wednesday. "We don't expect a financial contribution this year," Chief Financial Officer Sue Decker said at the company's annual analyst meeting here. "We are looking more toward 2007." "It would be premature to try and put numbers around that," Decker said in response to a question on the potential financial contributions of the advertising system to Yahoo results. Executives originally said they would release details of how and when the much-anticipated ad service would make money at the meeting. Decker said she was making no change to the company's prior outlook for 24 percent to 31 percent growth this year. Longer term, she expects Yahoo to grow faster than the Internet industry as a whole, mentioning a target of 25 percent to 26 percent rate. "It would be an aspirational growth rate to double that to 25 percent to 26 percent," Decker said in response to one analyst's question, but shied away from his more aggressive 30 percent long-term revenue growth calculation. "I wouldn't take that so literally -- but faster than the industry growth rate," Decker said. Industry growth is expected to slow from around 30 percent presently to annual growth rates around 22 to 24 percent over time, analysts predict. In April, the company said its 2006 year revenues would range between $4.6 billion and $4.85 billion. Tim Cadogan, vice president of Yahoo's search business, said a redesigned software console used by ad buyers, along with the back-end technology will be put in the hands of advertisers by the third quarter in the United States. International advertisers will gain access to it during the first-quarter of 2007, he said. However, the system's revised advertising ranking and pricing mechanisms will only become available in the fourth-quarter of this year in the United States and some time in the first-quarter of 2007 for international clients, Cadogan said. Yahoo began, earlier this month, to test the paid search ad system that aims to compete with market leader Google Inc. by offering advertisers an easier way to manage placing ads alongside consumers' keyword Web search results. Microsoft Corp., previously a major customer of Yahoo's search advertising system, recently unveiled its own Web search advertising system, setting up a three-way battle in the online advertising market. Decker said Yahoo's margins have stabilized in recent years at around 40 percent, as the company balances advertising growth against the need to invest to fuel further growth, to fend off competition from other major Internet companies. At least half of future revenue growth will come from existing users spending greater amounts of time on its network of Internet media and e-commerce sites, rather than relying on new users, Decker said. "More than 50 percent of our revenue growth will come from (increased) revenue per user," she said. Drivers of this growth reflect the increasing availability of broadband Internet connections, mobile phone access to the Internet, Web search improvements and new products. Some analysts expressed disappointment that the company did not set any aggressive new targets for its revamped search business. But Morgan Stanley analyst Mary Meeker said the mood of Yahoo executives appeared upbeat, despite the lack of news at the meeting. "Their outlook appears positive for the short-term and the long-term," said Meeker, who rates Yahoo "overweight." Yahoo closed down 86 cents, or 2.78 percent, to end the day at $30.11 on Nasdaq.
By Eric Auchard

http://usinfo.state.gov/xarchives/display..../wf-latest.html

12 May 2006

U.S. Finds No Conclusive Evidence of China Currency Manipulation
But Treasury "extremely dissatisfied" with pace of Chinese exchange rate reform

By Susan Krause
Washington File Staff Writer

Washington -- The United States is deeply concerned about China's international economic and exchange rate policies, but has not found conclusive evidence to show that China is intentionally manipulating its currency regime, according to a report released May 10 by the Department of the Treasury.

In its semi-annual Report on International Economic and Exchange Rate Policies, submitted to Congress as required by the Omnibus Trade and Competitiveness Act of 1988, the Treasury found that "far too little progress has been made in introducing exchange rate flexibility for the renminbi (RMB)," China's currency.

"Let us be clear: we are extremely dissatisfied with the slow and disappointing pace of reform for the Chinese exchange rate regime," Treasury Secretary John Snow said in a statement released with the report, which covers the second half of 2005.

After reviewing several different factors, however, the Treasury determined that China did not meet "technical requirements" necessary to be designated a currency manipulator under the terms of the trade act, according to the report.

"In the final analysis," Snow said, "the Treasury Department is unable to conclude that China's intent has been to manage its exchange rate regime for the purposes of preventing effective balance of payments adjustment or gaining an unfair advantage in international trade."

COMMITMENT TO REFORM HAS BEEN BACKED BY ACTION

China's leadership has made a public commitment to implement reforms as the country is undergoing profound economic transformation, Snow said. He cited statements from China's President Hu Jintao and Premier Wen Jiabao as evidence that "China does not want a large current account surplus and will act to reduce it."

"Of course, words must be backed by action, and China is taking some action," Snow said.

A first step, according to the Treasury report, was China's July 2005 decision to end an eight-year policy that pegged the value of the RMB to the dollar, replacing it with a managed floating exchange rate. That change resulted in a slight appreciation -- 2.6 percent -- of the RMB against the dollar.

China has also moved to develop a foreign exchange market infrastructure and modernize its financial sector, the report says. The country's most recent five-year plan emphasizes consumption and rural development to stimulate domestic demand as an engine of growth.

The Treasury Department has pushed for such reforms over three years of intensive engagement with China, Snow said.

GREATER EFFORT NEEDED

Nonetheless, the report cautions, "While these developments suggest that progress is being made, China's advances are too slow and hesitant given China's own needs, and its responsibilities to the international financial community."

Because of its relatively rigid exchange rate, Snow said, "China lacks effective monetary policy tools to avoid the boom-bust cycles it has experienced in the past."

China's economy is now strong enough and far enough along in its transition to begin to move more rapidly toward exchange rate flexibility, the report says.

The United States is not alone in its concern about China's exchange rate policies, according to Snow. The Group of Seven (G7) industrialized nations, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) have all encouraged China to increase the flexibility of its exchange rate, he said.

"It is important for China to understand that its exchange rate regime is not simply a bilateral U.S.-China issue, but a multilateral issue," the secretary said. "Chinese exchange rate practices affect the entire world."

Snow said the United States will continue to monitor China's progress on exchange rate flexibility "every step of the way."

"The entire international community must work together cooperatively to address global imbalances," he said. "But it is a matter of extreme urgency that China act immediately to increase the flexibility of its exchange rate regime before real harm is done to its own economy, to its Asian neighbors, and to the global financial system."

US shoppers 'cut back for fuel' BBC News
More than three out of four US consumers are curbing their spending because of the steep rising cost of petrol, a survey has found. The National Retail Federation said that even wealthier consumers were conceding that the price at the pump was taking its toll. A gallon of regular petrol currently costs an average of $2.98 in the US. A year ago it was $2.16. The survey said 76% of respondents were cutting back on spending over fuel. In its 2005 poll, only 67% were making the sacrifice.

Value for money
Almost half the 7,388 people surveyed in this year's study said they planned to drive less while 37% planned to cut back on holidays and travel. But less than a quarter said that high fuel prices would delay a major purchase such as a car or television. Customers were looking for more value for money and conditions favoured discount stores and online retailers, said Tracey Mullin, the federation's president and CEO.. "Higher prices at the pump act as a tax on disposable income. As prices continue to rise, it is inevitable that consumer spending will be affected," she said.

'Tipping point'
Earlier this week Wal-Mart said that higher fuel and utility prices could hit its second quarter results. Until recently Americans have been used to cheap petrol prices. But it has been unable to avoid the impact of higher oil prices, driven up by rising tension between the US and Iran over its nuclear programme, concerns over supplies from Nigeria and events in Venezuela and Bolivia. Editor of Stores magazine, Susan Reda said: "If prices continue to soar to.. a threshold often cited as a potential tipping point, it could very well reduce discretionary spending to a trickle." This could "cause the economy to lose much of the steam it has built up over the last two years," she added.

Mittal Steel launches Arcelor bid BBC News
Mittal Steel, owned by Indian tycoon Lakshmi Mittal, has launched its bid for French rival Arcelor, after the go-ahead from European regulators. France, Belgium and the Luxembourg have given the approval for Mittal's 19.2bn euro ($24.6bn; £13.02bn) hostile takeover bid for steel firm Arcelor. Luxembourg-based Arcelor has repeatedly voiced its opposition to the bid. Earlier in the week, Mr Mittal said shareholders would be able to decide on "the value and merits of our proposal". This comes four months after the surprise takeover offer for Arcelor was originally made. Arcelor's management has rejected the planned deal ever since it was first mooted on 26 January.