Marketplace: News Archives

Thursday, October 26, 2000
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It's Thursday, the 26th of October. I'm David Brancaccio.

It's crunch time in Congress as time runs out for passing vital spending and tax bills before the election. Early this morning, Republicans introduced a grab bag of tax breaks and worker benefits that total $250-billion. Marketplace's Washington editor John Dimsdale reports that while the bill has goodies for lots of people, it has attracted a veto threat from the President.

Dimsdale: "The tax bill gives each side some of what they want, raising the minimum wage, creating community empowerment zones and offering significant tax breaks for health care costs. It also gives workers much higher limits on tax deferred contributions to IRAs and employer pension plans. At a Republican rally for the tax bill today, Ohio's Rob Portman said the new pension benefits would keep the economy going by encouraging more savings."

Portman: "In the increasingly mobile workforce we have today, with people moving from job to job, it lets people move their retirement nest egg from job to job. Doesn't that make sense? Who could be against that?"

Dimsdale: "Republicans think their bill will be popular with voters but the White House issued a veto warning, pointing to the cost and the many benefits for the wealthy. The White House is also alarmed by a provision Senate Majority leader Trent Lott is considering that would give U.S. banana companies a veto over any government deal in the transatlantic trade war over bananas. The Cato Institute's Dan Griswold says that would be dangerous trade policy."

Griswold: "The president should be free to make a decision based on what's in the overall interests of the U.S. economy and not what's of particular interest to an industry or a specific company."

Dimsdale: "The Lott banana amendment has been met with lots of criticism, even from fellow Republicans. The majority leader's office says it is still under consideration. In Washington, I'm John Dimsdale for Marketplace."

A group of eminent scientists has revised its predictions about climate change. The United Nation's climate panel puts the blame squarely on humans for raising global temperature by one degree Fahrenheit during the 20th century, with temperatures getting much hotter during the century to come. Christy George of the Marketplace Business and Environment Desk went looking for some numbers.

George: "One degree in one century doesn't sound like much, does it? But scientists say that one degree temperature rise last century already partly melted polar icecaps and led to rising sea-levels, shorter winters and longer summers. So, what about two degrees? Stanford geologist Gary Ernst signed on early to the UN climate panel's conclusions. He says some places are in big trouble if the planet heats up another degree."

Ernst: "Venice, for instance, all of Bangladesh and island nations are going to have to grow gills."

George: "The UN climate panel's worst case scenario is an 11 degree temperature rise by 2100. But no one can say if or when global warming could trigger a doomsday destabilization where multiple earth systems fail."

Ernst: "No, there is no number where we say. 'Uh ,oh.' We go above four degrees and we're in deep trouble. It may be ten. It may be we've already exceeded it. We just don't know because we're running an experiment in real time."

George: "The fight is over whether global warming is natural or human caused. But many scientists link rising carbon dioxide emissions to the Industrial Revolution, which means changing how fast we burn fossil fuels could make a big difference… at a cost. From Oregon Public Broadcasting, I'm Christie George for Marketplace."

What does it mean when one of the most successful money managers of all time pulls the plug to spend more time with his family? It might mean he wants to spend more time with his family. Or it might be a vote against the stock market, when the money manager in question is the legendary Jeffrey Vinik, who once ran the gargantuan Magellan Fund for Fidelity. Vinik now says he is closing his hedge fund and returning more than four billion dollars to his investors after four very successful years. Last year, Vinik's fund went up 45 percent after fees, compared to the S&P 500 index, which went up less than 29 percent. Ken Kurson writes on matters financial at Esquire Magazine.

Kurson: "About half of his 15 biggest picks have more than doubled and none of them are companies that are household names. So, with him getting out of managing money at that level, it's like saying that there aren't many more values out there any more."

It usually takes at least a million dollars to get into a hedge fund, which are largely unregulated. It should be emphasized that Vinik says his decision doesn't have anything to do with the market.

Kurson: "He cited the often popular 'I want to spend more time with my family' excuse for getting out. That is such a transparently bogus excuse. You don't get into the hedge fund business because you're dying to spend a lot of time with your family. You get into the hedge fund business because you don't even know your family's names. This is a 24-hour a day sport running one of these things and if you're some one who, at an incredibly young age, was running the biggest mutual fund in the world, you're some one who needs that kind of action to keep going."

Ken Kurson is also founder of GreenMagazine.com.

In the wake of AT&T's plans to divide up into separate wireless, cable, consumer and business companies, the nations' second largest long distance phone, WorldCom, now says it also is considering restructuring to position against the slumping market for long distance phone service. The number three long distance company, Sprint, will meet with analysts soon to chart its future. Marketplace's Jessica Smith has the story from New York.

Smith: "The break up of AT&T isn't just a big change for one company. It marks a sea change in the thinking of industry executives."

Schoff: "Up until very recently, these guys were all about 'I must own the customer', 'I must own the network' and 'I must do everything'. And that's not what's playing out in the market this week!"

Smith: "Jeannie Schoff is a senior analyst at Forrester Research. She says a major impetus behind these changes is Wall Street. Investors are angry about the slumping stock prices of all three long distance phone giants… and want change."

Schoff: "I think the other thing is these companies are huge bureaucracies. With competition in the marketplace, what many of these big folks have done is glob all those businesses together. Which makes them more difficult to manage, and more difficult to pry apart the value and the investment required in each one of them."

Smith: "As divisions are pried apart, that could spark a new round of mergers, which only further worries consumer advocates who already criticize the AT&T split-up as proof that telecommunications deregulation doesn't work. But analysts are already speculating who might grab the smaller AT&Ts or who the smaller AT&Ts might buy themselves. Schoff says don't just match wireless with wireless firms. She can imagine Yahoo! buying AT&T's long distance division and selling that service through the Internet. In New York, I'm Jessica Smith for Marketplace."

AT& T shares fell 6.66 percent today. Worldcom fell nearly 14 percent. Sprint fell 3.6 percent on a day the Dow treaded water for much of the day, then rose 53 points or 0.5 percent toward the end of trading. The Nasdaq Composite fell 1.33 percent.