Lost in Space / NASA

Robert Cabana, director of the Kennedy Space Center, in front of the Shuttle Discovery as it awaits one final flight Stefan Ruiz

After 30 years, the Shuttle program will end. How do you outsource the astronaut business?

By Paul M. Barrett

It's 9 a.m., and 100 employees of the Kennedy Space Center are lining up for the chance to do some freelance work. Director Michael Bay will use the famed NASA facility—origin of the Apollo moon shots and home of the flare-winged Space Shuttle—as a backdrop for Transformers 3, the finale of his alien robot war trilogy, a Hollywood tip-of-the-hat to a place that once launched the future. Bay needs extras—and Kennedy has no shortage.

Preparing for a final journey: The Space Shuttle Atlantis, from beneath Stefan Ruiz

The facility's main mission, launching Space Shuttles, is about to end. Eight thousand engineers, technicians, and other employees are losing their jobs. Nearby towns that were built around NASA's programs—Cape Canaveral, Cocoa Beach, Titusville—are already in a defensive crouch, like wobbly boxers waiting for a knockout punch. 

A side view of the Space Shuttle Atlantis Stefan Ruiz

 NASA management is holding "morale events" to elevate spirits. A few days before the casting call, agency officials eased security rules to allow employees' families to witness what is expected to be the final "rollout" of the orbiter Discovery. In a majestic evening ceremony, the Shuttle was transported from the 52-story Vehicle Assembly Building to the launchpad. Bathed in xenon spotlights, the white spaceship, attached to its twin solid rocket boosters and orange external fuel tank, crept 3.4 miles on the back of an enormous tractor called the Crawler. An armed helicopter and a nearly full moon hovered overhead. Husbands and wives and children stood in a roped-off parking lot next to minivans, clapping and whistling. Some wept. 

A vintage Saturn in Kennedy's Rocket Garden Stefan Ruiz

In February, the Obama Administration abruptly canceled an over-budget program called Constellation that was supposed to take Americans back to the moon for the first time since 1972—and then on to Mars. For 30 years, NASA has flown the Shuttle, built and maintained the International Space Station, and overseen unmanned scientific probes. But no one seems certain where Americans should go next in space. Implicitly acknowledging NASA's lack of direction, the White House has instructed the agency to take a deep breath, marshal resources, and chart a new course. Routine trips to what is known as low earth orbit—the Space Shuttle's traditional responsibility—are supposed to be outsourced to private industry. Trying to protect jobs and existing contracts, Congress has slowed the Obama reform initiative without entirely stopping it. That leaves NASA trapped in what James E. Ball, an agency program manager in Florida, calls "a period of sustained ambiguity." This much is clear: The Shuttle will fly for the last time next year, and NASA has no new manned government rockets ready to go anytime soon. For five years, or maybe more, any American astronaut heading to the heavens will have to get there by renting a seat in a Russian Soyuz capsule or one of the several corporate-owned spacecraft now in development. 

Rather than use the end of the three-decade Shuttle program to streamline NASA and sharply articulate new goals for space exploration in a way that would command public attention, much of the political leadership in Washington appears to be ignoring the issue. Communities along Florida's Space Coast, built on the optimism and industry of the space program, are in economic peril. The area's 12 percent unemployment rate—2½ points higher than the national average—is expected to rise to 15 percent over the next year, mostly as a result of the space industry contraction. Meanwhile, as America dithers, Russia, China, India, and other countries are expanding their shares of the space market.

Travis T. Thompson sits in an air-conditioned conference room talking about the end of the Shuttle program. A compact man with a handlebar moustache, he heads the orbiter closeout crew; he's the guy who shakes hands with each astronaut just before they lift off. "You come back and see me now," he tells them. Thompson, 52, speaks of his work with quiet pride. "What I do," he says, "is put astronauts in spaceships and close the hatch."

After three final flights—one scheduled for Nov. 1, two in 2011—the trio of tile-skinned orbiters will be cleaned, stripped of classified gear, and sent to museums. Thompson's job will end. The customized 747s that piggyback Shuttles to Florida after California landings will be retrofitted for less exotic cargo. The mighty Crawler, which ferried Shuttles to the launchpad, will be reduced to hauling more terrestrial freight around the Space Center. 

Thompson, the last man to shake the hand of each astronaut before launch, expects to lose his job in the next year Stefan Ruiz

The weathered beach towns and small inland cities where space workers live and patronize local businesses were already hit hard by the recession, and now things will get worse. The Kennedy head count—civil servants and contractors—will fall from 15,000 in 2009 to 7,000 or lower. Nearly all the cuts will affect private sector workers; the 2,100 direct NASA employees currently are not targeted for layoffs. Overall, the Space Center workforce earns an average annual wage of $75,000, compared with $47,000 "outside of the gate." Nationally, the loss of space jobs in Florida, California, Louisiana, Texas, Utah, and other states could approach that of Kennedy.

In Cocoa Beach, south of the Space Center, the Durango Steakhouse and a large Chinese restaurant have shut their doors in recent weeks. Strip malls have been emptied of their manicure salons and home furnishing shops. Tourism remains, but the seasonal surf shacks and burger joints can't make up for the lost economic activity.

"I've seen this picture before," says Thompson, tugging on his NASA baseball cap. He works for United Space Alliance, the main Shuttle operator, which is jointly owned by Boeing (BA) and Lockheed Martin (LMT). As a young man, he lived through the local slump that accompanied the end of the Apollo program in 1975. In an earlier period of indecision and funding debates, NASA spent the late 1970s scrambling for sufficient political support to get the Shuttle built and aloft. Thompson's hometown, Titusville, "became a ghost town after Apollo," he says. "People were walking away from houses, leaving the keys under the mat." Shuttles didn't begin to fly until 1981, after which Kennedy and its environs enjoyed a period of relative economic stability. Now the highways are lined with billboards that say: "Changing Jobs?" They advertise financial advice for people who are unsure of what to do with their uprooted 401(k) accounts.

Thompson has worked at Kennedy for 31 years. He knows he should be looking for a new career. So far, he hasn't summoned the will. He distracts himself from the coming bad news by focusing on safely launching the final Shuttles. Even as résumé workshops and job fairs have proliferated, many in the area are struggling to imagine life after the Shuttle, says Lisa Rice, president of Brevard Workforce, a county agency. She has placed around 100 ex-Shuttle workers out of the 1,900 let go since last year.

Opportunities could still arise from the turmoil. Once Congress and the White House clarify short-term funding issues, Boeing, Lockheed, and smaller rivals such as Elon Musk's Space Exploration Technologies could jostle for pieces of an increasingly privatized market. Frank DiBello, 67, a space industry consultant and investor, has come out of retirement to lead a state-sponsored economic diversification initiative, with the goal of bringing tech-based businesses to Florida that could scoop up some of the laid-off NASA workforce.

Much will have to happen before the Space Coast realizes DiBello's shiny aspirations. "We are going to go through a lot of hurt in regard to layoffs of a highly skilled workforce that Florida needs to ensure its future," he says.

Robert D. Cabana, the director of the Kennedy Space Center, visited his future workplace for the first time in 1970 as a member of the U.S. Naval Academy's Physics Honor Society. The brainy midshipman gaped at a Saturn V rocket, the kind that took Apollo astronauts to the moon. "That was our future and our pride at that time," Cabana recalls. 

After graduation, he flew A-6 Intruders in the U.S. Marine Corps, became a test pilot and colonel, and, on his second try, was accepted in 1985 into the elite astronaut program. He flew on four Shuttle missions, including the one in 1998 that inaugurated the assembly of the International Space Station. Today, Cabana, 61, is in charge of thinning the ranks of employees in the hangars and labs and control rooms scattered across 140,000 acres of alligator-infested swamp and scrub.

Wiry and intense, Cabana seems surprised, and maybe insulted, when asked to explain the Space Shuttle's value. "It's just a phenomenal vehicle," he answers. With it, NASA took the lead in creating the space station, where humans have learned how to survive for months in micro-gravity and do biomedical and astronomical research. The Shuttle launched and serviced the Hubble telescope, which revolutionized our understanding of the cosmos. The craft has also facilitated robotic probes of the earth's climate, Jupiter's atmosphere, and the sun's radiation. Its science contributes to the ongoing search for distant planets that support life. Closer to home, its spinoffs such as advanced home insulation and biodegradable lubricants have improved everyday life.

The frustrating truth is that relatively few Americans care about the scientific missions that came after Apollo's giant leaps for mankind. Since the last trip to the moon 38 years ago, NASA, for all the skill and bravery of its employees, has given the impression of an organization on a space walk to nowhere. A succession of agency leaders have grasped at grandiose proposals—go back to the moon, on to asteroids and Mars—that have fallen through for lack of support on Capitol Hill. To justify an annual budget now in the $19 billion range, the agency has kept the Shuttle flying, no small feat, given its aging late-'70s technology. Even a Shuttle enthusiast like Cabana has to admit—and does, reluctantly—that the venerable craft has proven with more than sufficient repetition that man can achieve low earth orbit.

In 2004, the space agency commissioned a consumer study by the Center for Cultural Studies & Analysis in Philadelphia. "Despite a strong emotional attachment to NASA," the think tank reported, "many of the agency's achievements since the end of the Apollo program have failed to resonate, or even register, with the public." Why? "In the mind of the public," the research showed, "human exploration of space is NASA's brand." The brand having badly eroded, the Bush Administration announced in 2004 that the Shuttle program would end this decade. Outside NASA and aerospace contracting circles, few people seemed to notice. "The space program," says the business veteran DiBello, "has become too much of a federal jobs program."

DiBello earned a math degree at Villanova University, advised the Defense Dept. on missile performance, and consulted with corporations that manufacture and service rockets while working for KPMG Peat Marwick for 25 years. In the 1990s he launched SpaceVest, a venture capital firm in northern Virginia. Throughout, he watched as politicians and bureaucrats spread NASA resources around the country: launches at Kennedy, mission control at the Johnson Space Center in Houston, propulsion engineering in Huntsville, Ala., rocket testing in southern Mississippi, management of astronomy missions at the Goddard Space Flight Center in Greenbelt, Md.

"Everyone gets a piece of the action," says DiBello, who has deep-set owlish eyes and a Philadelphia-accented baritone. "The program gets pulled in different directions based on which senator or congressman wants business for his or her district." As a result, he adds with a sigh, "We have been foundering from the moment we set foot on the moon."

To replace the Shuttle, the Bush Administration said the Constellation program would lead to a manned Mars landing. In a speech a year after the lethal explosion of the Space Shuttle Columbia, Bush promised a rededication to bold voyaging. "We choose to explore space," he said, "because doing so improves our lives and lifts our national spirit." The retirement of the Shuttle was supposed to free up money for a new family of long-distance, heavy-lift rockets.

The Bush Administration's proposed funding for the program was "grossly inadequate," according to DiBello. The Shuttle flies for about $3 billion a year. An optimistic bill to get to Mars would come to half a trillion dollars over time. The Bush Administration suggested that, somehow, Constellation could get off the ground within NASA's existing inflation-adjusted budget. By 2009, Constellation was already way over budget and far behind schedule. The Obama White House decided to cut the losses at about $10 billion. A 355-foot, $300 million steel tower that would have launched Constellation's rockets now stands without an immediate purpose at the Kennedy Space Center.

The latest White House plan has several components—and just as many risks. Private sector corporations, rather than the government, are supposed to provide transportation of cargo and crew to the Space Station. Contractors such Space Exploration Technologies, started in 2002 by Musk, the founder of PayPal (EBAY), are testing proprietary rockets for this purpose. In June, Musk's company staged a successful inaugural flight of its Falcon 9 launch vehicle from the Cape Canaveral Air Force Station adjacent to the Kennedy complex. 

In theory, the outsourcing of low earth orbit will make available resources for NASA to focus on farther-reaching manned exploration. How this strategy will be implemented—and at what cost over what period of time—remains unclear. The $58 billion, three-year NASA authorization legislation passed by the House on Sept. 30, and earlier by the Senate, endorses Obama's mandate to use taxpayer money to spur commercial rocket development. But it cuts back on the amount of money devoted to that goal. The legislation, which Obama signed in October, instructs NASA to move ahead with a new spacecraft that could land on an asteroid by 2025. But in a nod to Boeing, Lockheed Martin, and lawmakers representing states with existing Shuttle operations, Congress also exhorts the space agency to rely as much as possible on existing technology and personnel.

A new round of legislative jockeying will commence when congressional appropriations committees—the panels that cut federal checks—turn their attention to the space program after the election. "My fear is that Congress will continue to set ambitious but vague goals without giving NASA the resources needed to accomplish them," says DiBello.

One assumption built into the Obama plan is that private industry will get routine space work done much less expensively than the government. But given that corporations already do a lot of this sort of labor under contracts with NASA, the premise raises questions about how they will suddenly become more cost-effective, especially without sacrificing safety.

Patty Stratton, a senior manager with United Space Alliance, the contractor jointly owned by Boeing and Lockheed Martin that operates much of the Shuttle program at Kennedy, offers the metaphor of a lightbulb. "When you come into a room, you flip the light switch, and the light goes on. You replace the bulb from time to time," she says. "With the Shuttle, we put in a new bulb every single time. It gets expensive." Contractors claim they can operate faster and leaner once they're freed of NASA bureaucracy.

Following similar reasoning, the Pentagon and the State Dept. in recent years have outsourced large portions of logistical, infrastructure, and even security work in Iraq, Afghanistan, and other war zones. The results have been disappointing, with government auditors having identified billions of dollars in corporate waste, fraud, and other misconduct.

The comparison NASA and its contractors prefer is that of the postal service and commercial airlines. In the 1920s, when air travel was still new, the federal government allowed nascent airlines to bid on mail delivery contracts. Washington's backing allowed the airlines to expand into cargo and passenger service. Costs came down as they were spread across more profit-generating businesses. The idea is that as space travel becomes more common, it will foster new commercial research and adventure tourism. Corporations will be able to defray costs and reduce bills for taxpayers.

The potential flaw in this argument is that, for the foreseeable future, there just isn't that much that absolutely has to be done in space. Beyond launching and maintaining communications satellites, where is the profit-driven space market? How many tourists, apart from a few millionaires, really want to spend their vacations in stomach-turning micro-gravity? DiBello insists that the greatest potential is in fields such as medical research, and in technologies yet to be discovered. Space activity has produced valuable inventions such as global positioning devices that have had lucrative commercial applications.

Whether or not privatization saves money, it has already changed attitudes and reversed roles at the Kennedy Space Center. NASA officials for the first time are pitching the center's capabilities—and its potential improvement—to audiences of corporate executives who will decide where to locate new commercial space operations. In September, Boeing formally announced that it would get into the space tourism and astronaut transport business, with flights scheduled to start as early as 2015. What site will host those launches hasn't been determined, but the Kennedy complex is a leading contender.

Avera Motors, a 2009 spinoff from Mainstream Engineering, a Florida-based developer of energy conversion products, also hopes to capitalize on the ferment at Kennedy. The company occupies an 11,000-square-foot facility in Brevard County where its 20-person team has fabricated a prototype of a low-emission, high-mileage sports car it plans to sell in late 2012. In addition to privately raised seed money, Avera's chief executive officer, 27-year-old R.J. Scaringe, has received $2.5 million in state financing, some of it secured by DiBello. Scaringe, who has a PhD in mechanical engineering from Massachusetts Institute of Technology, plans to step up hiring early next year. If his car finds buyers, he foresees employing 1,100 people by 2015—a bold goal. "The skilled technical workers becoming available because of the Shuttle layoffs," he says, "are perfect for us."

Rob Schneider, 44, cannot wait around for Avera to start hiring. The heavy machinery mechanic employed by United Space Alliance has logged 10 years fixing Kennedy's forklifts and cranes. He expects to lose his position within a year and wants to sell his Brevard County house before the real estate market dips further. His wife, Sherry, has already moved to Columbia, S.C., where she found work as an elementary school principal. One of their two sons moved with her; the other is finishing high school in Brevard. Schneider talks over coffee and donuts in the local lodge of the International Association of Machinists and Aerospace Workers, where he is a member. Looking out from the wall, a yellowed poster of the space center's namesake, John F. Kennedy, states: "The work you are doing is vital to our national security."

Schneider tries to sound upbeat. "We got it good compared to a lot of people, because my wife already found a new job," he says. He is interviewing for railroad work in South Carolina. The best scenario he envisions would involve taking a 20 percent pay cut.

"The tradition around space is what I'm worried will go away," says Roberta Wyrick, 56. A United Space employee, she oversees orbiter testing and is integrally involved with launches. In her spare time, she takes Boy and Girl Scouts on tours. Wyrick has a math degree from the University of Central Florida and 31 years of experience at Kennedy. She has heard that there may be jobs at NASA's Wallops Flight Facility on the eastern shore of Virginia, where smaller research launches take place, but she has not formally inquired yet. "I've got a house here, and I thought I would retire from Kennedy," she says. "I launch Shuttles....When I see it on the pad, getting ready, my heart just starts beating faster."

Weeks after my visit to the Space Center, the director, Bob Cabana, calls out of the blue. "NASA," he wants to remind me, "is not going away by any means." But actually what prompted him to reach out, he explains, was a sense of loss. "I just said goodbye to 900 good people for the last time," he says of the latest stage of layoffs. "I can't put into words what that feels like." There is a long pause. Then the former Marine test pilot and astronaut reiterates his invitation to come back down for one of the last Shuttle launches: "It's just a phenomenal thing to see," he says. "Phenomenal."

 businessweek

US economic growth rate quickens

29 October 2010 Last updated at 13:16 GMT

 The US economy grew at an annualised rate of 2% in the July-to-September period, an acceleration on the previous quarter, official figures have shown.

US unemployment remains high

The expansion came despite continuing high unemployment and weakness in the housing market.

The 2% figure is an improvement on the upwardly revised 1.7% increase between April and June, but less than the 3.7% growth recorded from January to March.

The Federal Reserve suggested last week it would do more to boost the economy.

To do this, the Fed - the US central bank - is expected to announce next month that it will resume quantitative easing - injecting fresh money into the economy through the purchase of government bonds.

Compared with the preceding quarter, the US economy grew by 0.5% between July and September.

The economy is continuing to experience a slow recovery by historical standards, with the unemployment rate at 9.6% and Americans increasingly nervous about the future.

This is expected to manifest itself in big losses for President Barack Obama's Democratic Party in Tuesday's congressional elections, which are being seen as a vote on his economic performance.

'Disappointing'

The Commerce Department's figures showed that businesses building up their inventories - stocks of goods and materials - contributed most of the US economic expansion during the third quarter.

The growth in business inventories made up more than two-thirds of the 2% annualised expansion in the economy.

However, consumer spending also increased, despite continuing high US unemployment.

Consumer spending rose 2.6% during the third quarter, up from 2.2% in the second.

"[Economic] growth is still positive, but a bit disappointing," said Scott Brown, chief economist at Raymond James & Associates.

"It's not where we would like it to be at this point of the recovery."

 

 bbc.co

Reefer Sadness for Pot Farmers. In Northern California's ...

In Northern California's Humboldt County, small marijuana growers find the legalization of their business could be the worst thing that ever happened to them.

 By Sheelah Kolhatkar

To reach Jason's farm you drive south out of the small town of Arcata, in Humboldt County, Calif., and plunge into the forest that gave the region its "Emerald Triangle" nickname. After passing through hilly ranch country and a stretch on a dusty dirt road, a wooden house peeks out of the fruit trees on 150 acres of land, completely off the electrical grid. Jason is in the kitchen, stuffing cannabis leaves into a juicer.

"Everyone around here is involved in some way," says Jason, a professional marijuana grower. What he means is that a large percentage of people in town, and every other town for miles, is either directly or indirectly subsidized by dope, from the young parents cultivating a few seedlings in the backyard to the owner of the sushi restaurant where seemingly unemployed people eat dinner, always paying in cash.

"I think we're in the middle of a boom time," says Jason, clomping over to a leather sofa with his juice. He's in his late 30s and wearing camouflage pants with a small knife clipped to his belt, heavy-duty work boots, and just enough chin scruff to keep him from looking groomed. Despite its rustic accommodations—personal business is conducted in an outhouse down the path—the house bears many signifiers of high household cash flow: gleaming new appliances, lots of products made by Steve Jobs, a Droid satellite phone. He got into the pot business almost by accident. After several years drifting hippie-style through California, Jason fell in love with the pastoral lifestyle and realized that he had to earn money to sustain it, so he became a businessman. He agreed to explain the economics of his trade, provided Bloomberg Businessweek withheld his full name.

Golden Age

The 1996 passage of Proposition 215, which legalized the possession and cultivation of marijuana for medical use in California, ushered in a green golden age. The legislation permits use of the drug by anyone with a 215 prescription, which can be dispensed by doctors for ailments ranging from cancer to a stiff neck; the Marijuana Policy Project estimates there are 355,000 patients in California who have been advised to use medical marijuana by a doctor. Selling marijuana for a profit is still illegal under state law, and there is no specific definition of how much a person can legally grow or what constitutes a profit, while all marijuana sales remain prohibited by federal law. The very vagueness of the rules created opportunity: Midlevel entrepreneurs such as Jason who were willing to live with the risks and ambiguities of a semi-legitimate market rushed in and thrived, though there are no reliable estimates of how many there are.

Now a new set of variables has thrown the business into even greater uncertainty. On Nov. 2, California will vote on Proposition 19, the "Regulate, Control and Tax Cannabis Act of 2010," a ballot initiative introduced by an Oakland pot enthusiast named Richard Lee that proposes to legalize marijuana for personal use. The new law would permit individuals to possess up to 1 ounce and cultivate 25 square feet worth of plants at private homes, with no medical requirement. Beyond that the initiative's language is murky. Regulation of commercial production and sale of cannabis would be done by counties and municipalities, leaving the mechanics of how it would all work undefined.

One thing seems clear, though, if the measure is adopted: A quasi-black market will be replaced by a much more legal one, and prices for pot are likely to go down. It's impossible to know by how much, but a 2010 Rand study called "Altered State? Assessing How Marijuana Legalization in California Could Influence Marijuana Consumption and Public Budgets" estimates that retail prices could eventually drop by 80 percent. First, suggests Jonathan Caulkins, a public policy professor at Carnegie Mellon University and a co-author of the Rand study, there would be a "honeymoon" period of several years when production would ramp up as California product began to push out inferior Mexican pot across the country. Once that happens, you could have "a real change in industry structure," according to Caulkins. Growers would have to professionalize their operations and become even more industrial-scale to squeeze out smaller margins of profit. In such an environment, people probably won't make the $150,000 or so Jason says he clears every year, and "mom and pop" farmers will be wiped out. Jason is planning ahead. "You wanna go up top and walk through them fields of glory?" he asks. "If you can grow twice as much, you'll make the same amount of money, even if the price is half." 

Aboveground-Underground Market

For decades, the Emerald Triangle was sustained by logging and fishing, but both eventually died off. In the 1960s and '70s, hippies and counterculture types fled San Francisco and other cities to get "back to the land," and were drawn to the area for its potential as an agricultural utopia. The ideal was to be dependent on no one: Build your own house, grow your own food, and slap solar panels on the roof. It turned out that big redwood country was almost as well suited to the cultivation of cannabis as southern France is to Côtes du Rhône grapes. The region's inaccessibility made it suitable for growing in greenhouses, while the climate and exposure were conducive to agriculture. It was easy for people to nestle a few pot plants back behind the tomatoes and bring in a little extra money to pay the property tax bill.

Proposition 215 elevated the trade to a new level, spawning businesses to uphold and profit from it: an aboveground-underground market. Growers hire manual laborers to cultivate, harvest, and trim the crops. Others are brought in to transport the bounty to dispensaries in Los Angeles, San Francisco, and across the state, or to out-of-state middlemen who inject the product into the black market. Doctors write prescriptions authorizing patients to purchase what they need from a dispensary; lawyers provide defense services; bail bondsmen help people get out of jail. In Arcata, a tidy college town with a population of around 17,000, there are many more shops selling fertilizer and greenhouse supplies than there are people growing orchids. And then there are the arteries the drug proceeds flow through: booming truck dealerships, organic food markets, and the electronics store.

Humboldt County has a small population base relative to its California neighbors—129,000—so it's easier for the pot industry to have a dominant effect on the local economy, Caulkins points out. At a moment when Americans don't seem to actually make anything anymore, domestic producers have quietly distinguished themselves in the cultivation of high-caliber weed, demand for which has proved to be almost recession-proof. Jobs cultivating, harvesting, and selling the plants can't be sent overseas, and the profits are usually reinvested in the community. Caulkins calculates that anywhere from $1.5 billion to $2 billion worth of marijuana might be sold in California each year. The wholesale price per pound is below $3,000, according to locals familiar with the market.

Advantages at Risk

The question that looms over the growers is whether the economic advantages they've built up can survive a more radical legalization policy, like that being put forth in Prop 19. "One thing that interests me is to what degree large-scale production can lower costs," says Erick Eschker, a professor of macroeconomics and U.S. economic history at Humboldt State University who directs the Humboldt Economic Index, a monthly indicator for the county. "If economies of scale do exist, small operations are going to be at a significant price disadvantage." Humboldt County could also lose the geographical advantage of its remoteness, which makes it ideal for producing an illegal product, as production moves closer to where most of the customers are, in Los Angeles and San Francisco. With taxation and regulation happening at a county or city level, there could also be a race to whichever area has the friendliest rules. 

The new proposition was initiated by Richard Lee, a marijuana entrepreneur who founded Oakland's Oaksterdam University, the first college for training students in cannabis commerce, and who helped push the city of Oakland to start taxing marijuana dispensaries. According to a recent poll by the Public Policy Institute of California, voters now oppose Prop 19 by 46% to 44%, after favoring it slightly in September. Last year, California Governor Arnold Schwarzenegger announced that it was "time for a debate" on legalizing marijuana (although he recently came out against Proposition 19, calling it a "flawed initiative"). Shifting public opinion has already led 14 states, plus Washington, to approve some form of legalization for medical purposes.

The cause has found interesting supporters in the business world: Two co-founders of Facebook, Sean Parker and Dustin Moskovitz, donated $100,000 and $70,000 respectively, to backers of Prop 19 this fall, according to campaign filings, and, in a Wall Street Journal opinion piece, investor George Soros announced that he was backing the initiative. The State Board of Equalization, which collects sales, property, and other taxes such as those on tobacco and alcohol, issued a report estimating that if marijuana were taxed at $50 per ounce it could lead to $1.4 billion in new revenue for California, which has been suffering from a $19 billion budget deficit. Jeffrey Miron, a Harvard economist, estimates that if the drug were taxed at rates similar to alcohol and tobacco it could create $8.7 billion in national tax revenue.

Different parts of the cannabis plant contain varying levels of tetrahydrocannabinol, or THC, the main psychoactive ingredient. The highest concentrations are found in unfertilized buds of the female plant, which yield the most expensive strains. Much of what is grown in Humboldt County is of this type, and the price (followed by all the grades below) has been dropping for the last several years. As the price slid, more people rushed into growing, farms became larger, and the market became glutted. It also attracted what some locals describe as outsiders and criminal elements, including members of drug cartels. Home invasions are more common than they used to be, and there are reports of shootings—six so far this year in Humboldt County, up from one two years ago, according to Mike Downey, the incoming sheriff. Many houses in Arcata have been taken over by indoor marijuana-growing outfits. "I've been involved in the drug wars for 25 years," says Downey. "My personal view? It's not worth it. We've spent a lot of money and it hasn't made a difference. It's been a frustrating issue. A lot of people have been killed. We've got bodies in these hills we've never found."

Land Rush

"I'm probably selling more land than anyone else in the country," Charlie Tripodi says as he bumps along the highway in his mud-crusted Dodge Ram. Tripodi says he's sold $21 million worth since January, to be precise. "We missed a bit of the bullet of the real estate market. No real estate agents are out peddling hot dogs." And why might that be? "The marijuana industry," Tripodi says without hesitating. "That's obvious. It definitely kept us afloat."

Tripodi, a Realtor with Coldwell Banker who calls himself "The Land Man," specializes in selling remote parcels of former timberland to buyers who want to farm or live the so-called rural-residential lifestyle. A former white-water rafting guide, he has chin-length brown hair and a boyish cowlick. He spends his days cruising around in his truck with laminated aerial maps on the front seat and a fortified laptop on the console. Tripodi says that land prices in Humboldt have gone nowhere but up. "In the last eight years, the price for 40 acres has gone from $59,000 to $150,000," he says.

A good portion of the demand comes from people trying to diversify their assets. Over clam chowder at the Waterfront Cafe Oyster Bar in Eureka, Calif., the sister city to Arcata, which has a brand new waterfront and the lively air of a rich little boomtown, Tripodi slips into his sales pitch: "We're facing a devaluation of the currency," he says. "If there's another terrorist attack, people are going to be fleeing here. It's a safe haven.…Where are you going to put your money? Land has much more of an intrinsic value." 

Of course, the demand has as much to do with high times as end times. "I hate to emphasize that," he says, but "hopefully most of them grow under the guidelines of 215; some of them do, some of them don't. I don't ask questions, it's none of my business." During the last few years, he's seen much more of this second type of buyer passing through town. "It's the end of the gold rush. People will be clamoring to be a part of it until the last nugget is taken out of the river."

Uncertainty for Small Business

On a quiet side street, just beyond Arcata's main square, sits a tidy white building that could pass for an insurance office. The Humboldt Patient Resource Center is a dispensary where people with 215 cards can sidle up to the counter and order one of the pot strains—Redwood Kush, and so on—that are on view in little clear plastic jars. If the clients don't feel like smoking, as many patients don't, according to Mariellen Jurkovich, the proprietress, they can buy one of the goodies in the display case: ganja pecan pie, "special" peanut butter truffle cups, and rainbow Rice Krispie treats—"Consume slowly!" the package warns. Chelsea, the perky blonde nutritionist, sits at a table by the door, offering paper cups of sunflower seeds and tamari roasted almonds.

Jurkovich has been here 11 years and is just the sort of small business owner who could see her world changed by the passage of the new bill, but she doesn't know if it would be for better or worse. "When you run a business, you need to know the rules. Here the rules are constantly changing," she says, sounding like a beleaguered member of the Chamber of Commerce.

Jason isn't sure how the shifting legal landscape will affect his own small enterprise, but he tries to be optimistic. As he finishes his carrot-and-cannabis cocktail and moves on to beer, he breaks down his business: He spends around $50,000 a year on labor, he estimates, and thousands more on "bourgie" organic nutrients that he orders from Chile and other far-flung locales to make his plants more high-end. "I just put an 18-wheeler's worth of soil in the ground," he adds, which amounted to about $12,000. There's a lot of spray and fertilizer. "The plants are pretty water-hungry," he explains.

Harvest Party

At harvest time, which starts in October, he hires trimmers to cut the buds off plants for $200 a pound. "Somehow I tapped into this endless lesbian crew. They come out from North Carolina or Idaho, jumping trains the whole way," he says. "One year I had a CPA from Paris." He hires a cook to feed them and provides music, wine, and, of course, plenty to smoke. "It's a party," he says, bouncing up and down and making Edward Scissorhands motions with his fingers. His plots are scattered around the forest along with a collection of greenhouses that are visible from overhead but, he hopes, aren't numerous enough to invite a raid.

Jason says he clears $150,000 to $200,000 a year in profit from the land surrounding his house, depending on how good the crop is. He earns more from other plots he owns nearby. He doesn't pay taxes on the income because he doesn't file a return ("I don't lie about it. That's when you get in trouble"). Spending all that cash in the middle of nowhere can be a challenge. He and his wife eat all-organic, and he's got a few trucks to play with as well as a $28,000 Kubota backhoe. Some of the money is "seasoned" slowly into a bank account, so as not to draw attention.

Inside one of Jason's greenhouses, eight 10-foot-tall plants salute the sky, like big, smelly Christmas trees. Each is encased by a metal hoop of the sort used to grow tomatoes, and hoses snake along the floor to provide water and nutrients. He says the big strains this year are called "Chemdog" and "Green Crack." Jason is also working on his own concoction, called "Triple X." "Here, squeeze this," he says, indicating one of the spongy buds, about the size of a golf ball. It leaves a sticky, pungent residue. "Ha! You can't go back to New York with that!" he smirks.

The conditions surrounding Jason's industry may be about to change dramatically, but he's determined not to worry about it until it actually happens. For now, life is almost too easy. Occasionally he even feels nostalgic for the bad old days, when the feds were focused on crushing the domestic pot trade, before they decided to spend most of their energy on crystal meth instead. Back then, the choppers were always roaring overhead. Sometimes he had to dive into the mud with a rifle. "It used to be sexy," Jason says, half joking. "Now it's just boring."

 businessweek

US new home sales pick up speed

Sales of new homes in the US rose 6.6% in September to a seasonally-adjusted annualised rate of 307,000.

Sales of new homes remain subdued thanks to a glut of repossessed houses on the market

The figure beat market expectations of a rise to just 300,000.

However, the rate is still 21.5% below the level of a year ago and near historic lows.

Meanwhile, the US Treasury's head of housing said that an investigation into faulty foreclosure documentation may hold up the sale of thousands of repossessed houses for months.

'Questions of legality'

"This would hurt homeowners and home buyers alike at a time when foreclosed homes make up 25% of home sales," Phyllis Caldwell, chief of the Treasury's Homeownership Preservation Office, told the Congressional Oversight Panel in prepared testimony.

"Together, these two factors may exert downward pressure on overall housing prices both in the short and long-run."
She said that the investigation would delay the sale of thousands of vacant homes, and may also raise question markets over the legal ownership status of other foreclosed properties, making their sale more difficult.

End Quote Robert Tipp Chief investment strategist at Prudential, New Jersey

"The issues that have been alleged raise significant questions about the accuracy, fairness and even legality of several mortgage processes," she said. 

Earlier this month, attorneys general in all 50 of the country's states announced a joint investigation into the process of repossessing homes from defaulted mortgage borrowers.
The investigation was launched after it emerged that the mortgage service companies employed by the banks may have provided fraudulent documentation to the courts.
The affected lenders include JP Morgan Chase and Bank of America.

Prices fall Sales of new homes in the US reported by the Census Bureau have remained particularly subdued during the economic recovery thanks to a glut of repossessed houses on the market.
Moreover, sales of both new and existing homes fell sharply again in the summer, following the expiry in April of a tax credit for homebuyers.
The actual number of homes sold in September - at about 24,000 - is a record low for the month, beating the previous record set in 1981.
"While the number, on the face of it, is slightly better than expectations, the general level is still so moribund that the basic message coming through is the extremely depressed state of the housing market is continuing," said Robert Tipp, chief investment strategist at Prudential in New Jersey.
Earlier in the week, data from rating agency Standard and Poor's showed that US house prices also began falling again in August, mainly in response to the expired tax credit.
Prices are likely to continue to fall as the number of unsold houses remains high.
Current unsold new homes represent about eight months of supply, according to economist Bill McBride, well above their historic norm of about five months.


bbc.co

Employers in U.S. Start Bracing for Higher Tax Withholding

October 27, 2010, 12:22 AM EDT

 Employers are starting to warn their workers to prepare for slimmer paychecks if Congress fails to vote on an extension of Bush-era tax cuts

By Timothy R. Homan
 

(To see examples of changes in withholding taxes for different income levels, click here.)

Oct. 27 (Bloomberg) -- Employers in the U.S. are starting to warn their workers to prepare for slimmer paychecks if Congress fails to vote on an extension of Bush-era tax cuts.

“I’ve been doing payroll for probably close to 30 years now, and never have we seen something like this where it gets that down to the wire,” said Dennis Danilewicz, who manages payroll services for about 14,000 employees at New York University’s Langone Medical Center. “That’s what’s got a lot of people nervous. All we can do is start preparing communications with a couple of different scenarios.”

Lawmakers won’t start debating whether to extend the cuts, which expire Dec. 31, until after the Nov. 2 elections. Because it takes weeks to prepare withholding schedules, the Internal Revenue Service will probably have to assume the cuts will expire and direct employers to increase payroll deductions starting Jan. 1, experts say.

“We’re kind of stuck between a rock and a hard place,” said Ron Moser, head of human resources for the school district of Kenmore-Town of Tonawanda, New York, which pays about 1,900 teachers, custodians and aides each month. In upstate New York, where winter heating costs are among the highest in the country, many school employees earn between $20,000 and $40,000 a year, he said, and losing $50 in a paycheck is “a significant dollar amount.”

Employees Calls

“We’re starting to get the calls” from employees asking what they need to do for the next tax year, Moser said.

President Barack Obama and most Democrats want tax cuts extended for middle-income earners and to end for the wealthiest Americans, the top 2 or 3 percent of earners. Republicans want tax cuts extended for everyone, arguing that an increase makes little sense as the economy recovers from the worst recession since the 1930s. Tax cuts went into effect in 2001 and 2003.

For Moser, the challenge of the moment is keeping people in the Buffalo suburb, home to about 78,000 residents, calm about what will happen in January. The area has several manufacturing employers -- including 3M Co., General Motors Co. and Praxair Inc. -- and unemployment is 7.6 percent, lower than the national rate of 9.6 percent. Still, many people are worried, he said.

“The bulk of our employees don’t understand” the coming tax debate in Congress, Moser said. “When they see this type of thing happening they go into panic mode. They don’t follow what’s going on.”

June 2001 Rates

If Congress fails to act, income tax rates will revert to higher levels dating from June 2001.

For a married couple with an income of $80,000, that would drain an extra $221.48 in withholding from a semi-monthly paycheck, according to calculations by the Tax Institute at H&R Block. Married individuals earning $240,000 a year would lose an additional $557.78 to withholding in a single semi-monthly paycheck. The Tax Institute at H&R Block calculated federal tax rates for single-income earners and married taxpayers without children.

Paychecks could shrink in January and into February, depending on how long it takes Congress to act.

January could well be a time of “sticker shock” for salaried employees and their employers, said Kathy Pickering, executive director of the Tax Institute, an independent research division at Kansas City, Missouri-based H&R Block Inc.

“If the laws get passed late in December, it’s just necessarily going to take one to three weeks to get those payroll tables updated and implemented into the system,” Pickering said.

Blow to Spending

Allowing the tax cuts to expire, even temporarily, would deal a blow to disposable income and could curtail the consumer spending that accounts for about 70 percent of the economy, said Alec Phillips, a Washington-based economist at Goldman Sachs Group Inc.

“The longer the expiration lasts, the more significant the impact will be,” he said.

Economists raised estimates for consumer spending in the third quarter to 2 percent from 1.9 percent, according to the median forecast on a Bloomberg News survey this month. Spending rose at a 2.2 percent pace in the second quarter. The Commerce Department will release third-quarter data on Oct. 29.

Making a withholding-rate change could take longer for small businesses that don’t outsource payroll services, experts said. If a business can’t react fast enough, employees could recoup any over-withholding by filing a new W-4 tax form to temporarily lower their federal withholding rate.

Another option is to wait until 2012 when workers file their tax returns for the previous year.

Taxpayer Strategy

Taxpayers could use the same strategies if Congress reinstates the tax cuts next year and they need to recoup the extra withholding.

Jodi Parsons, manager of payroll and accounts payable at IFMC, a health care management company based in West Des Moines, Iowa, said if the IRS issues two sets of withholding tables, her two-person office could be overwhelmed with processing changes to W-4 forms.

“We’d have to basically go back and hand calculate checks for all 800-900 employees to determine whether or not we need to deduct additional taxes from them or refund taxes,” Parsons said. “We’d like to see changes in mid-November just to make sure we have time.”

There are now six federal tax brackets, ranging from 10 percent to 35 percent. If Congress doesn’t act, there will be five rates with the top bracket reaching 39.6 percent.

Nov. 20 notice

Last year, the IRS alerted payroll departments on Nov. 20 about the 2010 tax tables, said Scott Mezistrano, senior manager of government relations at the American Payroll Association in Washington. He said a delay in guidance from the IRS could increase costs for some small businesses.

The Treasury Department last week issued a statement that it was “maintaining flexibility” with regards to the release of the withholding tables for 2011.

If the IRS issues tables in mid-November and then again later, businesses will double their programming costs, Mezistrano said. A related concern, he said, is if Congress makes a last-minute decision to extend the cuts and companies aren’t able to implement the change before January.

Business owners may face “tons of angry employees pounding at my office door saying, ‘What have you done to my paycheck?’” Mezistrano said.

UK recovery faster than expected

26 October 2010 Last updated at 11:25 GMT

 UK economy grows a faster-than-expected 0.8%

Growth was boosted by a 4% rise in construction

 The UK's economy grew at 0.8% between July and September, official figures show, suggesting the economy is recovering faster than expected.

It follows 1.2% growth in the second quarter of the year, and is double the 0.4% expected by analysts.

Meanwhile rating agency Standard and Poor's upgraded its outlook for the UK's triple-A credit rating.

Chancellor George Osborne called both reports "a vote of confidence in the new government's economic policies".

The gross domestic product (GDP) figure released by the Office for National Statistics (ONS) is only a first estimate, and may be revised.

Analysts had expected a slowdown after weak retail sales and housing data.

Government relief

"This is the second major GDP growth surprise in a row and suggests that the UK economy is more resilient than many had feared," said James Knightley, economist at ING.

"The government will no doubt take this as a sign that the private sector can fill the gap created by public sector cuts, but with consumer confidence, hiring intentions surveys and housing activity data all softening we remain cautious."

But Chancellor George Osborne said that, along with the government's Spending Review announced last week, the ONS data should help underpin confidence in the UK economy.

"The ONS believe that the underlying growth in the third quarter was 'broadly similar' to the strong second quarter," he said.

"This gives me confidence that although global economic conditions remain choppy, a steady recovery is underway."

However, shadow chancellor Alan Johnson claimed the data showed no such thing.

"There's no sign yet of the kind of momentum in the private sector that we need to actually create the 2.5 million jobs that the [Office of Budget Responsibility] is suggesting are necessary, to actually come out of this with increases in employment," he said.

But the government's planned cuts in its Spending Review got a stamp of approval from ratings agency Standard & Poor's, which raised its outlook for the UK's triple-A rating back to "stable" from "negative".

"In our opinion, the decisions reached by the United Kingdom coalition government in its 2010 Spending Review reduce risks to the government's implementation of its June 2010 fiscal consolidation programme," the company said in a statement.

Building momentum?

The construction sector continued to grow strongly at 4%, the data release from the ONS showed, although this was slower than the 9.5% recorded in the previous three months.

The building industry has been dealing with a backlog of work that had been postponed from the beginning of the year due to bad weather.

"It's basically all down to construction again and I think the implication is that that's not sustainable," said James Nixon, economist at Societe Generale.

"The underlying rate is obviously significantly less than these headline numbers would suggest."

The recovering construction industry contributed almost a third of the total GDP growth for the quarter.

However, the latest data suggests that the recovery may be becoming slightly broader-based.

Manufacturing slowed to 0.6% from 1.0% the previous quarter, but was still ahead of predictions.

Service industries also held steady at 0.6% growth, with the transport, storage and communications sub-sector returning to growth.

The pound jumped following the news, which lowered expectations that the Bank of England will engage in further quantitative easing in the near future.

The pound rose one cent against the dollar, to $1.585, immediately following the data release.

"Today's data ought to dispel any notion that the Bank of England will implement more quantitative easing in the near term," said Hetal Mehta, analyst at Daiwa Capital Markets.

Slowdown fears

Some economists had feared the UK economy was stalling on the back of spending cut threats.

"The timing of the VAT rise in the new year will help to bolster spending over the fourth quarter, but this is also likely to slow growth more noticeably through the winter and early next year," predicted Ian McCafferty, chief economic adviser to the CBI business group.

Recent surveys have suggested that confidence in the manufacturing and services sectors has dropped due to concerns surrounding the impact of the spending cuts.

Weaker-than-expected retail sales in September added to the concerns, with sales slipping 0.2%.

Meanwhile, the housing market has also started to suffer. Figures released by the British Bankers' Association on Monday showed that the downward trend in the number of mortgage approvals for house purchases had continued in September.

bbc.co

How Much Is Too Much? - Emerging-Market Stocks...

Pros are debating what level of exposure U.S. investors should have to equities of developing economies, such as China and Brazil

By Ben Steverman 

As U.S. investors put more and more money into developing economies such as China and Brazil, they are getting widely differing advice on what kind of role emerging-market stocks should play in their portfolios.
The flow of individual investor dollars to these fast-growing countries has sped up in 2010, as emerging-market stocks have outperformed those in the U.S. and other developed nations. Since its 2010 low on May 25, the MSCI Emerging Markets index is up 29.3 percent. In that same period, the MSCI World index, which includes only developed markets, has risen 16.8 percent and the U.S.-only Standard & Poor's 500 index is up 9.9 percent.
An Oct. 19 report from JPMorgan states that retail investors have put $60 billion in emerging-market equity funds so far this year while pulling $74 billion from developed-market stock funds.
According to TrimTabs Investment Research, $20.9 billion has flowed into diversified emerging-market exchange-traded funds so far this year, compared with $14.4 billion in all of 2009.
A Bank of America Merrill Lynch survey of fund managers, released Oct. 20, found that 49 percent have a higher-than-usual, or "overweight," exposure to emerging markets, up 17 points from last month. A Russell Investments survey of 350 financial advisers in September found 59 percent plan to boost their emerging-market exposure in the next year, up 11 points from a June survey.

Contrarian View

Yet on Oct. 18, brokerage Morgan Stanley contradicted much of the rest of Wall Street with a recommendation to "scale back" emerging-market stocks. Morgan Stanley's chief Asia and emerging-market strategist, Jonathan Garner, told investors to reduce their holdings "gradually, rather than precipitately" from an overweight exposure of 6 percent more than usual to 4 percent.
The rapid rebound in the benchmark MSCI index since the May 2010 low was one reason cited for Morgan Stanley's downgrade of emerging-market stocks.
By contrast, from the third to fourth quarter of 2010, Barclays Wealth raised its recommended emerging-market stock portion from 8 percent to 9.5 percent. In its fourth quarter Global Asset Allocation report issued Oct. 1, Bank of America Merrill Lynch gives developing-market stocks a favorable "overweight" rating, at a recommended 11 percent portfolio weighting.

The Currency Angle

"We don't actually think emerging markets look cheap," says Barclays Wealth investment strategist Brian Nick. There are other reasons, however, to invest outside the developed world—especially to gain exposure to currencies that have a good chance of rising, he says. "It's important, we think, to have that emerging-market currency exposure, especially because the U.S. seems to be doing everything it can to weaken the dollar."
India's currency, the rupee, has risen 5 percent so far this year against the U.S. dollar, while the Brazilian real has increased 2.25 percent and the Chinese renminbi has gained 2.5 percent.
Standard & Poor's equity market strategist Alec Young says flows of investor assets into emerging markets accelerated when, on Oct. 15, Federal Reserve Chairman Ben S. Bernanke said additional monetary stimulus via the central bank's purchase of U.S. Treasury issues—known as quantitative easing—may be needed to revive the U.S. economy. Quantitative easing in developed countries is "pushing this flood of liquidity into emerging markets," says Young, who recommends that 7 percent of a total portfolio go into emerging-market equities.

Americans Still Leery

Data indicate that most U.S. investors still send a relatively small portion of their portfolios to emerging markets. According to the International Monetary Fund, emerging-market stocks have grown as a portion of total U.S. holdings from 1.63 percent in 2004 to 2.41 percent in 2009. That increase, however, lagged the growth during that time in emerging-market stocks' proportion of total world market capitalization, from 8.7 percent to 15.9 percent.
"Americans tend to be underweight emerging [market stocks] relative to where they should be," Young says.
Charles Schwab senior market analyst Michelle Gibley says many Americans should be conservative about putting their nest eggs into emerging markets. She suggests 5 percent or less of portfolios should be in emerging-market stocks, a recommendation that hasn't changed despite others' growing enthusiasm for the category.
"Going through the crisis, we saw people pull back their risk tolerance," Gibley says. So "it's somewhat surprising" to see U.S. investors embracing an investment that is often quite volatile, she says.

Diminishing Risk?

Financial advisers say the past year has made it clear that emerging-market stocks are actually much less risky than once feared. Keith Amburgey, chief investment officer at Rutherford Asset Planning in Cresskill, N.J., says he has doubled his typical portfolio's emerging-market exposure in the past year, from 5 percent to 10 percent.
"A lot of the emerging markets have emerged," he says. Amburgey notes that many emerging economies have better economic fundamentals—especially lower debt levels and faster economic growth—than developed economies.
Emerging markets "are much more stable" than they used to be, says Terry J. Siman, president of Vantage Point Advisors in Lower Gwynedd, Pa. He finds it reassuring that large, established companies, such as South Korea's Samsung Electronics, dominate many emerging-market stock indexes.
The right mix of emerging-market stocks in a portfolio depends on the particular circumstances and risk tolerance of an investor, says George Iwanicki Jr., global macrostrategist for J.P. Morgan Asset Management's emerging-market equity team. That percentage, however, has been an "upwardly moving target" for the past five years.

Rising Corporate Profits

The reason is that corporate profits from emerging-market companies continue to take a larger and larger share of the world's total. For emerging-market corporations, "there has been an improvement in corporate focus on profitability," Iwanicki says. Also, "there are more investable names," he says. By various measures, he calculates that the number of public companies with substantial trading volume has roughly tripled since 2005.
S&P's Young says emerging-market stocks still look reasonably priced, judged by price-earnings, or p-e, ratios, which are a common valuation measure. According to Bloomberg data, the p-e for the MSCI Emerging Markets index based on earnings for the past 12 months is 14.8, compared with 15.2 for the S&P 500. With corporate profits in developing nations expected to increase, the emerging markets index's p-e based on estimated earnings is 12.9 for 2010 and 11.1 for 2011.
For now, the biggest risk for emerging markets may not be local worries but the flood of liquidity and investor enthusiasm from the developed world. "If the quantitative easing persists too long in the developed world," Young says, "that could create bubbles and problems in emerging markets."
With developed-world economies chugging along at subpar growth rates, investors searching for higher returns are willing to take that chance.

businessweek

Dollar at new 15-year low against yen on G20 comments

25 October 2010 Last updated at 09:55 GMT

The US dollar has hit a 15-year low against the yen after the G20 nations agreed to avoid a currency war. 

The weekend talks, in South Korea, saw the group of 20 major advanced and developing nations, agree to avoid competing to lower their currencies.
The meeting sparked another fall in the US dollar, which fell 1% against the yen to 80.52 yen.
The lower dollar also boosted the price of metals. In London trading, base metals rose by an average of 2.5%.
Copper was at its strongest since peaking at a record in July 2008, hitting $8,549 a tonne, while lead and zinc hit their highest in nine months.
The dollar is being undermined in part by the view that the US will start a new round of Quantitative Easing (QE).

That has the effect of pumping money into the economy.

A lower currency can help to boost a country's exports by making the goods relatively cheaper to foreign buyers.
China and the US are at the centre of the story, with the US most concerned about the level of China's yuan, which does not trade freely on the currency markets.
The US wants China to allow the yuan to rise to make its own goods cheaper within the country, and China's goods more expensive for US citizens.
At the weekend, US Treasury Secretary Timothy Geithner said he believed China was now "committed" to allow the yuan to rise in value.
Earlier this year, China promised greater "flexibility" in its currency approach, but since then the yuan has only increased slightly in value.
Many in the US say the yuan remains undervalued by as much as 20%.

bbc.co

25 October 2010 Last updated at 06:21 GMT

Singapore stock exchange bids $8.3bn for Australian ASX

Singapore wants to strengthen its position as a financial centre

 The Singapore stock exchange (SGX) has unveiled a multi-billion dollar bid for the company that owns the Australian Stock Exchange (ASX) in Sydney. 

If approved, the $8.3bn takeover would mark the first stock exchange merger in the Asia Pacific region.
The deal would enhance Singapore as a major financial hub in the region and benefit Australian investors by giving them greater access to Asian markets.
A merged exchange would hope to compete more effectively with Hong Kong.
ASX shares soared more than 20% to A$43.49 ($43.17) after the announcement, while SGX shares fell back 4.35% to S$9.13 ($7.05).  

SGX's Magnus Bocker (left) and ASX's Robert Elstone have agreed the deal

A merger would create the second-largest exchange in the region by number of companies listed with 2,700 quoted firms.
However, in terms of market value of the companies listed, the new exchange would still lag behind Hong Kong, Tokyo and Shanghai.
SGX chief executive Magnus Bocker, said: "The capital flow we see today is really changing from West to East. This will be the gateway to Asian capital markets."
The Singapore bid values ASX at A$48 ($47.50) per share, nearly 40% higher its latest traded price before the announcement.
The offer is made up of A$22 plus 3.473 SGX shares for each ASX share.
Any merger deal would require approval by the regulatory authorities in both countries.
Graeme Samuel, the chairman of the Australian Competition and Consumer Commission, said he did not see any potential problems with the proposed deal.
"I think it's a matter between the Singapore Exchange and the Australian exchange, and I can't see that raising competition issues for us."



bbc.co