Don Blankenship, CEO of Massey Energy, has a lot of explaining to do this week. His company owns the Upper Big Branch Mine in Montcoal, W.Va., site of the most fatal mining disaster in decades. Even though the cause of Monday’s explosion, which claimed 25 lives, has yet to be determined, questions are already flying about the coal company’s safety standards.
By chance, I met with Blankenship just days before the accident as he was passing through Washington. Massey’s public relations firm suggested the meeting, and I was curious whether his personality would match his professional reputation.
Blankenship has long been unpopular with environmental groups who say the company’s mountaintop mining methods are destroying the Appalachia region. Blankenship in turn has not hidden his disdain — for them or for the climate legislation they stand for.
Yet, for a man who penned an op-ed last fall with the headline "No harm from cap-and-trade? You lie!" Blankenship is remarkably soft-spoken and delivers his critical bombs in a near-monotone.
Asked about the company’s long list of enemies and critics, Blankenship said that Massey (MEE) gets flack, because it’s "the largest and least politically correct." Its labor force is 97% non-unionized, which he says makes it a target of the labor left. (AFL-CIO has declaimed Massey’s safety violations this week.)
Even though he’s unpopular with labor and environmental constituencies among Democrats, Blankenship’s political views aren’t neatly aligned with either party. He’s against cap-and-trade, but he also resents free trade, arguing that not enough attention is being paid to protecting the interests of U.S. companies.
In our conversation, Blankenship displayed a streak of stubbornness. He had harsh words for the various trade associations that represent Massey to Washington, including the U.S. Chamber of Commerce and the National Mining Association. He accused them of being too focused on political maneuvering rather than defending their core principles. "Most of the time, they’re too compromising," he said.
Likewise he’s holding his ground on this mining accident, in spite of reports that the Mine Safety and Health Administration recently fined the company for violations related to ventilation that control methane. In today’s Wall Street Journal, Massey denied that Upper Big Branch Mine had any safety problems. "The safety record in the past three months had been really, really good," he told the Journal.
Before we finished talking, I asked Blankenship how often he comes to Washington. He said he used to come only a few times a year but expects to be visiting the capital at least a dozen times in 2010 because of all the issues affecting Massey. That schedule might be something Blankenship revises. After all, mining accidents like this one are just the sort of thing that lawmakers love holding hearings on.
Stocks ended lower Wednesday, but higher for the quarter after a strong showing in March, as downbeat jobs and manufacturing reports cooled a recent runup.
The Dow Jones industrial average (INDU) lost 50 points, or 0.5%, to end at 10,857.31. The S&P 500 index (SPX) slipped 4 points, or 0.3%. The Nasdaq composite (COMP) lost 7 points, or 0.3%.
Wall Street reached the end of a solid quarter, even with Wednesday’s losses. The Dow gained 4.1% over the first three months of the year, after a 5.2% advance in March, while the S&P added 4.9% for the quarter. The tech-heavy Nasdaq had the strongest quarterly showing, up 5.7%.
Wednesday’s declines were broad based, with 25 of the blue-chip Dow’s 30 components ending lower.
"The market has finished higher on 23 of 25 trading days, so now it’s taking a break and adopting a wait-and-see attitude," said Art Hogan, chief market strategist at Jefferies & Co., noting that the market is closed on Good Friday.
Stocks ended slightly higher Tuesday, pushing the Dow to a fresh 18-month high as investors digested mixed reports showing a rise in consumer confidence and continued weakness in the housing market.
Jobs: ADP released its monthly report on employment before the opening bell, showing that private-sector employers cut 23,000 jobs in March. This was in sharp contrast to expectations of a 40,000 job increase, according to economists surveyed by Briefing.com.
In February, the private sector cut a revised 24,000 jobs. ADP has not reported an increase in monthly payroll numbers since January 2008, when 34,000 private-sector jobs were added.
ADP was "a disappointment," said Hogan, especially because expectations are fairly high for Friday’s government report on the unemployment rate.
"Census jobs should boost Friday’s data, but it’s a tree that falls in the forest where no one stands," Hogan said. "I can’t remember the last time such an important report came out when the market is closed."
Economy: The Chicago PMI, a regional reading on manufacturing, was released shortly after the market opened and pushed equities further down. The index slipped to 58.8 in March from 62.6 the previous month. Economists predicted a smaller drop, to 61.
Also after the market opened the Census Bureau reported factory orders for manufactured goods rose 0.6% in February, slightly higher than analysts’ expectations but significantly less than January’s 2.5% increase.
"We’ve gotten to that point in time when we need Goldilocks-type data, meaning it falls in just the right range," Hogan said. "If reports are too positive, people will be worried the [Federal Reserve] will raise interest rates; too negative, and concerns are raised that the recovery is weak or nonexistent."
Energy stocks and oil prices gained earlier in the session after President Obama announced plans to open large sections of the eastern Gulf of Mexico and an area off the Virginia coast for oil drilling.
Companies: Shares of Research in Motion (RIMM) plunged 5% in after-hours trading after the company reported a profit of $710.1 million, or $1.27 per share. That missed estimates from analysts polled by Thomson Reuters, who estimated earnings of $1.28 per share.
With the first quarter of the year ending with Wednesday’s session, Hogan said the market will be looking to see if company earnings estimates are hiked for 2010.
"The new focus is going to be on corporate America’s ability to start earning money," Hogan said. "We’ll see more mergers and stock buybacks — and investors will be watching to see how companies deploy their cash."
Outlook: The strong showing in the first quarter of the year means the market will likely see a pullback or about 5-7% in the next quarter, said Peter Cardillo, chief market economist at Avalon Partners.
"We could see a mild correction as early as mid-April, even when companies are in the middle of reporting strong first-quarter earnings," Cardillo said. "That sentiment is already priced into the market."
Throughout the rest of 2010, Cardillo expects continued focus on job market data and corporate earnings. Stocks could end the year 3-5% higher, he said.
World markets: Asian stocks finished lower. In Japan, the Nikkei index lost 0.1%, and the Hang Seng in Hong Kong slipped 0.6%.
In Europe, London’s FTSE 100, France’s CAC 40 and Germany’s DAX ended slightly higher after a choppy session.
The dollar and commodities: The dollar fell against the euro and British pound but rose on the yen.
U.S. light crude oil for May delivery rose $1.39 to settle at $83.76 a barrel, the highest closing price in almost 3 months.
COMEX gold for June delivery added $7.80 an ounce to $1,116.10.
Bonds: Treasury prices were higher, with the 10-year yield falling to 3.83% from 3.87% late Tuesday. Bond prices and yields move in opposite directions.
President Obama announced Tuesday over $8 billion in federal support for two new nuclear power plants in Georgia, setting the stage for what could be the first completed reactor in this country in over three decades.
The money, coming in the form of loan guarantees, is going to build two new reactors at Southern Company’s Vogtle plant facility, located some 170 miles east of Atlanta.
In announcing the grant at an electrical worker’s union hall in Maryland, Obama used to occasion to tout the benefits of nuclear power.
"Nuclear energy remains our largest source of fuel that produces no carbon emissions," said the president. "To meet our growing energy needs and prevent the worst the worst consequences of climate change, we’ll need to increase our supply of nuclear power. It’s that simple."
But Obama’s speech made clear the move is also deeply political.
The money is part of $18.5 billion in loan guarantees for nuclear power approved under the 2005 energy bill. This grant is the first slice of money to be awarded.
President Obama has increased the amount of money available for nuclear loan guarantees to over $54 billion in his 2011 budget.
The increased funding is part of an effort to win Republican support for the president’s overall energy plan, which includes building more nuclear plants as well as making fossil fuels more expensive in an effort to cut greenhouse gases and make renewable energy more competitive.
"Those who have long advocated for nuclear power, including many Republicans, have to recognize that we will not achieve a big boost in nuclear capacity unless we also create a system of incentives to make clean energy profitable," Obama said. "As long as producing carbon pollution carries no cost, traditional plants that use fossil fuels will be more cost-effective than plants that use nuclear fuel."
Passing legislation to make fossil fuels more expensive and clean energy more profitable is a centerpiece of the Obama administration’s domestic agenda.
A bill designed to do just that narrowly passed the House last summer, but faces stiff opposition in the Senate from lawmakers that are concerned about its cost to the economy, or don’t believe in global warming. The Senate is expected to take up the matter sometime this year.
The Georgia plant
Southern Company is one of a handful of power producers that has been vying for this federal funding over the last few years.
Preliminary construction work on new reactors has already begun at a few sites around the country, including the Georgia plant. But the U.S. Nuclear Regulatory Commission hasn’t issued a final permit at any of the facilities.
Winning the government loan backing is a major breakthrough for Southern, and underscores just how expensive and risky building a new nuclear facility is.
Nuclear plants have been subject to massive cost overruns in the past, and without government support even those in the industry recognize a new plant would not be built.
The Georgia expansion is estimated to cost $14 billion, and is scheduled to be completed in 2017.
When originally built late 1980s, the plant was expected to have four reactors and cost $975 million, according to the Atlanta Journal Constitution. The final price tag for two reactors was $9 billion.
The new construction in Georgia is expected to create 3,500 jobs building the plant and 800 permanent jobs once the facility is complete, according to a Southern Company press release.
Each new reactor is expected to produce 1,100 megawatts of electricity, enough to power over 800,000 homes.
Too expensive?
Opponents of nuclear power claim the plants are too expensive to build, and fear government support will distort the power market in this country for years to come.
They also fear the plants will be the target of a terrorist attack, and say there is still no plan for what to do with the waste.
Supports contend the plants will get far cheaper after the first few are built, and will be a good source for clean, domestic power.
The Energy Department has stopped building a permanent waste disposal site at Nevada’s Yucca mountain, but says the waste can be safety stored on-site in pools or concrete bunkers for many decades until another site is found.
NBC fired back at Conan O’Brien Wednesday as negotiations between the outgoing host of "The Tonight Show" and the network stalled over how much O’Brien’s staff would be paid under a potential severance deal.
"It was Conan’s decision to leave NBC that resulted in nearly 200 of his staffers being out of work," a network representative said in an e-mailed statement. "We have already agreed to pay millions of dollars to compensate every one of them."
O’Brien is reportedly close to signing a $40 million deal to walk away from "The Tonight Show," which he has hosted since June. The network tried to push the show to a later time slot.
But talks have been held up by disagreements over, among other things, how much the show’s staff is entitled to as well.
Gavin Polone, O’Brien’s manager, told the New York Times that some wrangling over staff compensation was to be expected given the dismal job market. But, he added, "We’re fighting to do better for them fast cash online."
The weeks-long dispute has roiled the entertainment industry and galvanized fans of the show, who held rallies in cities across the nation Tuesday in support of O’Brien.
According to NBC, O’Brien raised compensation issues a few days ago, and it is only one of many points still being negotiated.
"This latest posturing is nothing more than a PR ploy," the NBC representative said.
The rebuke comes one day after O’Brien took the network to task during his nightly monologue, saying "NBC is headed downhill faster than a fat guy chasing a runaway cheese-wheel."
O’Brien is widely expected to cede the show later this week. "I’m just three days away from the biggest drinking binge in history," he said Tuesday night.
Bucks County drug-discovery company BioLeap raised $5 million in a venture capital financing Tuesday.
The financing was led by Quaker BioVentures of Philadelphia and Adams Capital Management of Sewickley, Pa.
BioLeap, of New Hope, Pa., plans to use the funding for business development, to support continued development of its computational fragment-based drug design and to pursue alternative models of early drug discovery.
The fragment-based drug design process involves using the company’s in-house computer cluster and proprietary algorithms to rapidly calculate the potential for small molecular fragments of biological compounds to bind to, and inhibit, targeted proteins.
David Pompliano, CEO of BioLeap, said, “We are using our computational method to design novel drugs for specific diseases, and to build the foundation for the next generation of drug discovery.”
Brenda Gavin, founding partner of Quaker BioVentures, said BioLeap, since its creation in 2004,
has demonstrated its ability to save drug discovery costs for pharmaceutical and agricultural chemical companies. “By minimizing nonproductive guesswork during the drug discovery process, BioLeap assists in bringing better drug candidates to market in a shorter period of time,” she said.
Gavin and William A. Frezza of Adams Capital Management will join BioLeap’s board of directors.
MIAMI — The nation’s roughly 1 million paid tax preparers will soon be regulated by the Internal Revenue Service, which plans to require competency tests and registration with the government.
The new regulations don’t kick in this year, in part because of the size of the undertaking, IRS Commissioner Doug Shulman said Monday. But the agency will soon send letters to 10,000 preparers with a record of errors on returns.
About 80 percent of taxpayers use a tax preparer or tax software to complete their annual returns. Most are unregulated, unless they are attorneys, certified public accountants or agents who represent taxpayers before the IRS.
More people are turning to preparers or software for help with their taxes as the tax code becomes more complex, he said.
"If we can have preparers fill out taxes right, the American people are well-served," Shulman said. "We’re going to get accurate returns and collect the right amount of money."
Concern about unscrupulous and untrained tax preparers has been longstanding, said Karen Reinagel, president of the Florida Society of Enrolled Agents, a group of tax professionals authorized by the federal government to represent taxpayers in dealings with the IRS. "The taxpayer has no idea if they’ve got the proper education, if they’ve kept up with continuing education," Reinagel said.
People expect hair dressers and auto mechanics to have passed certain tests and acquired certain licenses, and they may assume as much about their tax preparers.
"But if they’re not registered or licensed they don’t have to have an education," Reinagel said. "They wouldn’t think they would have to ask."
The system will be paid for through user fees by tax preparers who register with the government and take the IRS competency tests business card templates.
Eventually, the IRS said, it will have a searchable database for taxpayers to consult before working with a preparer.
Shulman said his agency was already studying potential regulations for tax preparers before recent criticism about abuse of large tax credits offered through federal stimulus laws.
In a report last month by the inspector general for tax administration, as of July 25, about 74,000 taxpayers had wrongly claimed $504 million through the first-time home buyers tax credit that was expanded in last year’s federal stimulus law. The credit pays $8,000 to first time buyers and $6,500 to current owners if they buy a new home.
"Any time there’s a large, refundable tax credit, you’re going to see fraud _ people trying to claim the credit where it’s not earned," Shulman said.
The EITC _ Earned Income Tax Credit _ for low-income individuals and families is also a source of fraud. The credit offers up to $5,600 to those who qualify. Shulman praised that program as having lifted more people out of poverty than any program in the country.
In addition to the new regulations for preparers, IRS agents will visit thousands of tax preparers, sometimes without advance notice. Some agents will pose as taxpayers to gauge what kind of advice a preparer offers. These visits will begin this year.
And the IRS has set up a task force to review tax preparation software and review businesses that offer refund advances.
The rules won’t apply to volunteers who help low-income families and individuals prepare their taxes. But those who work at Volunteer Income Tax Assistance Program already must pass a test before working on others’ returns.
The Toronto stock market closed lower, led by losses in the telecom sector as a new company joins the wireless wars.
The S&P/TSX composite index fell 40.64 points to 11,423.93.
Industry Minister Tony Clement overruled an earlier decision by the Canadian Radio-television and Telecommunications Commission and gave the green light to Globalive Wireless Management Corp. The company will join BCE Inc. (TSX: BCE), Rogers Communications (TSX: RCI.B) and Telus Corp. (TSX: T) in providing cellphone service no fax payday loans.
The Canadian dollar was down 0.85 of a cent to 94.35 cents US. Crude closed 67 cents lower at US$69.87 a barrel.
Solid retail data sent the Dow Jones industrial average up 65.67 points to 10,471.5.
The Nasdaq composite index dipped 0.55 of a point to 2,190.31 while the S&P 500 index climbed 4.07 points to 1,106.42.
Hiring by U.S. discount, grocery, restaurant and specialty chains in November rose to the highest level in 2009, signaling that retailers may be anticipating a gradual recovery in consumer spending, a monthly survey found.
In November, 3.87 percent of applications resulted in hires, the most this year according to seasonally adjusted figures compiled by software maker Kronos Inc. Job applications last month fell to 1.27 million, the lowest since March, after 10 straight months of increases, the closely held Chelmsford, Massachusetts-based company said today in a statement.
While these are classic signs of a gradual, post-recession recovery, last month’s hiring increase might be a “spill over” from October, as retailers delayed the peak season for taking on employees, Robert Yerex, Kronos’s chief economist, said by telephone Dec. 4 from Beaverton, Oregon.
The U.S. jobless rate decreased to 10 percent in November after reaching a 26-year high of 10.2 percent in October, according to a Dec. 4 report from the Bureau of Labor Statistics.
Retailers “weren’t sure how good or bad this year would be,” Yerex said. “There’s still a little bit of shell shock from 2007 and 2008, when retailers were caught with a lot of people on staff, a lot of product inventory, but a difficult time selling it.”
Kronos’s analysis covers 68 companies with 27,034 U.S. stores. The company makes software that businesses use to process hiring, payroll and scheduling, and manage employees. Chains that use Kronos products account for about 15 percent of U.S. retail jobs, according to the company.
Controversy has accompanied Verizon Wireless' latest Droid phone ad that mocks Apple Inc.'s iPhone, but never actually mentions its rival.
The ad starts with a group of mesmerized people looking at a phone that is behind a glass case and asks, "Should a phone be pretty? Should it be a tiara-wearing, digitally clueless beauty pageant queen?”
Then it says the Motorola Droid, which uses Google Inc.'s (NASDAQ:GOOG) Android operating system, is "racehorse-duct-taped-to-a-Scud-missile fast."
It also shows what some critics are portraying as an anti-gay image of a group of fashionably dressed (and partially undressed) male statues getting hit with tomatoes.
The ad can be viewed on YouTube by clicking here.
A post by Kara Swisher on the Wall Street Journal's All Things Digital blog slams the ad and is headlined, "Is the new droid ad anti-women and anti-gay or just plain idiotic? Actually all three!
VentureBeat rated the ad "just plain clueless," especially for "likening the Droid phone’s speed to that of the Scud missile, a not-very-fast Russian rocket used by Saddam Hussein’s regime no faxing 1 hour payday loans. A Scud killed 28 Americans at an airbase in Saudi Arabia in 1991. Other Scuds have killed lots more civilians in the Middle East."
Not all of the reviews have been negative, with many focusing on the cool look and humor of the spot.
But while saying he liked the ad, Stuart Turton of PC Pro wrote, that "when stripped to its barebones (the ad) actually says that the Droid is uglier than an iPhone, and… erm… well, that’s it. Funnily enough, it appears that by criticising the iPhone for placing style before substance, Verizon’s done exactly that."
Verizon's other Droid ads resulted in legal challenges by the iPhone's exclusive U.S. service provider, AT&T Inc., which were recently dropped. In those, Verizon took aim at AT&T's service and likened the iPhone to a misfit toy in a holiday-themed video.
India must loosen foreign investment rules in insurance, banking and retail to create more jobs and accelerate economic growth, the Organization for Economic Cooperation and Development said.
The South Asian nation’s policies to attract overseas investors remain “restrictive in comparison with a majority of OECD countries,” the Paris-based organization said in a report titled “OECD Investment Policy Reviews: India.”
India limits New York Life Insurance Co. and other foreign insurers to a 26 percent stake in local companies and bars retailers including Wal-Mart Stores Inc. from opening outlets in the world’s second-most populous country. The OECD called for an improvement in the “investment environment” in India, which the World Bank places 133rd among 183 countries in a ranking based on the ease of doing business.
Indian Prime Minister Manmohan Singh told investors in New Delhi last month that the country had received foreign direct investment of $121 billion since 2001 and that it isn’t a “large number given the scale of our economy.” The flows were less than a quarter of the $566 billion that China attracted during the period.
“India may be able to better achieve its objectives through non-discriminatory policies rather than sectoral restrictions on foreign investment,” OECD Secretary-General Angel Gurria said in the report.
A plan to raise the foreign-direct-investment ceiling in insurance to 49 percent has been stuck in parliament for more than three years and is currently being debated by a group of all political parties.
Bank Access
In retail, local laws are aimed at protecting small shops in Asia’s third-largest economy. India permits overseas chains such as Wal-Mart to operate as wholesalers and sell groceries and other goods to businesses such as supermarkets, department stores and restaurants payday loans. They are barred them from opening stores or buying stakes in supermarket chains.
In banking, India’s central bank postponed in April a plan to review granting greater access for foreign lenders into the economy. The Reserve Bank of India regulates the entry of foreign banks and even limits expansion of their branches to 12 a year, the OECD said.
“Growth could be accelerated by the enhanced productivity from increased foreign investment,” the report said. “In banking, insurance and especially retail distribution, the influx of FDI could help raise incomes in the agriculture sector while increasing the choice and lowering living costs.”
Economic Growth
The OECD said that while growth and investment in India has been “impressive” since 1991, when Prime Minister Singh as finance minister opened the nation’s economy to foreign investors, income inequalities among states have increased.
India’s economic growth has averaged 8.5 percent each year since 2004 after expanding at a 6 percent pace during the 1990s. India’s investment rate has more than doubled to 35 percent of gross domestic product since 1991.
The OECD called upon poorer states in India to cut bureaucracy to attract more investment and spur growth.
“While the central government has reduced the number of approvals needed for new investment, there remains a need to streamline administrative procedures at the state level,” according to the report.
The OECD also called on India to improve the judiciary, whose capacity to handle cases such as those related to intellectual property rights “in a timely manner remains insufficient.”
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