Economic Calendar

Tuesday, March 20, 2012

Bales Faced Losing Houses as He Fought 6,700 Miles Away

By Peter Robison, James Nash and Alison Vekshin - Mar 20, 2012 5:59 AM GMT+0700

A world away from the isolated camp in the plains southwest of Kandahar, Afghanistan, where U.S. soldiers seized homemade bombs and weapons caches in nighttime raids, Robert Bales’s other life was crumbling.

The Army sniper’s home in Lake Tapps, Washington, where wife Karilyn once made Impossibly Easy taco pie and watched Mickey Mouse Clubhouse with his young daughter, was to be sold for $50,000 less than what they’d paid. They’d already defaulted on another home, scheduled for public auction in 2009 after the couple fell $15,644.19 behind in payments. Bales had failed to get the promotion that stood to ease their financial stress.

Staff Sgt. Robert Bales, 1st platoon sergeant, Blackhorse Company, 2nd Battalion, 3rd Infantry Regiment, 3rd Stryker Brigade Combat Team, 2nd Infantry Division, in 2011. Source: Spc. Ryan Hallock, 28th Public Affairs/U.S. Army via Bloomberg

March 14 (Bloomberg) -- Michael Courts, a retired U.S. army colonel who served at Joint Base Lewis-McChord in Washington state, talks about the base's Madigan Army Medical Center and mental health-care treatment for service members and veterans. Lewis-McChord was the home base of a U.S. Army staff sergeant who is accused of killing at least 16 civilians in Afghanistan villages. Courts, who is now a city council member in nearby DuPont, Washington, spoke with Bloomberg's Alison Vekshin and Britton Staniar yesterday. (Source: Bloomberg)

March 16 (Bloomberg) -- John Henry Browne, a lawyer representing the U.S. army sergeant held in connection with the killings of 16 civilians in Afghanistan, discusses his communication with the soldier and his family. Emma Scanlan and Richard Adler also spoke at the news conference yesterday in Seattle, about 50 miles (80 kilometers) north of Joint Base Lewis-McChord, the soldier's home station. (Source: Bloomberg)

Sometime before dawn on March 11, the Army alleges, the decorated veteran hiked to two villages and killed 16 Afghanistan civilians including women and children in their homes. A U.S. official has said family stress and alcohol may have combined to prompt the shootings. Friends, neighbors and experts in post-traumatic stress disorder contend that something else must have driven a man they know as unfailingly polite to such horrific acts.

“It is PTSD plus something,” said Harry Croft, a former Army doctor who has reviewed about 7,000 cases of post-traumatic stress disorders. “To kill innocent women and children indicates to me that something happened during these killings that was simply more than the product of PTSD,” said Croft, who’s the author of “I Always Sit with My Back to the Wall,” a book aimed at people who suffer from PTSD.

‘Not Thinking’

“He was not thinking of his family,” Croft said. “I do not think he was thinking about the children. I do not think he was thinking about the women. I do not think he was thinking about the reprisals.”

Karilyn Bales, in a statement today, extended her family’s condolences to the victims and said she can’t shed any light on how “such a terrible thing” happened. “What has been reported is completely out of character of the man I know and admire,” she wrote.

The polite neighbor who answered “yes, ma’am” also had a dark side, once completing court-ordered anger counseling to resolve an assault charge. A high school football player who grew up in a Cincinnati suburb, he was unfulfilled in early attempts to establish a direction in life. Bales left college without finishing and helped start an investment firm in Florida that closed after 16 months.

A Purpose

The military he entered less than two months after the Sept. 11, 2001 terrorist attacks gave him a purpose. It also burdened his young family, as four combat deployments lasting more than 1,000 days left Bales’s wife alone caring for their children, Quincy, now 5, and Bobby, 2, according to a blog she kept chronicling struggles with housework and appointments. Their stresses were compounded by $506,250 in mortgage debt they took on in 2006 at the height of the U.S. housing boom, records show.

The nation’s military families are taking the brunt of repeated deployments as Middle East engagements continue more than 10 years after the Sept. 11 attacks. More than 107,000 of 570,000 active-duty troops have been dispatched more than three times since Sept. 11, military figures show. About 21 percent of Iraq and Afghanistan veterans who sought medical treatment from 2004 to 2009 were diagnosed with PTSD, the Congressional Budget Office said in a February report.

Showing Strains

While none of that can excuse or explain the murder of women and children, former soldiers say it does show why an all- volunteer force prosecuting a decade of war may show strains.

A soldier at Joint Base Lewis-McChord, where Bales was based, threatened to blow up the barracks over the weekend in the latest incident at a station under scrutiny for suicides, killings and other crimes. Military police took the unnamed suspect into custody, according to Lieutenant Colonel Gary Dangerfield, a spokesman for the installation.

“We’re going on 11 years since this started,” Mike Courts, a retired army colonel who is now a council member in the nearby city of DuPont, said in an interview last week. “I think we’re seeing the results of repetitive deployments.”

John Henry Browne, Bales’s lawyer, called his client “in general very mild-mannered” with “a very strong marriage” at a news briefing last week, denying that alcohol or marital stress were factors. The possibility of post-traumatic stress disorder and the adequacy of his screening for a concussive head injury will be examined, according to the lawyer.

The U.S. Army will probably file “really bad” charges on March 22 against Bales, Browne said in an interview today.

‘Really Bad’

“We know what they are going to say -- it’s something really bad,” Browne said in Lansing, Kansas, near the Fort Leavenworth base where Bales is detained. The two men planned to meet today and tomorrow, said Browne, whose only previous contact with Bales was a brief phone call last week.

Navy Captain John Kirby, a Pentagon spokesman, declined today to comment on Browne’s remarks except to say “look to Kabul for release of the charges,” a reference to the U.S. Army’s operations there. Kirby said Bales also has been assigned military counsel.

Bales, 38, grew up in Norwood, Ohio, a Cincinnati suburb of 19,000, on a residential street near a United Dairy Farmers’ plant. He graduated from Norwood High School in 1991.

The youngest of five brothers, Bales was a guard and linebacker on the football team, said Michael Blevins, a neighbor who considered Bales his role model.

‘Little Guy’

“He was always the one to stand up for the little guy,” Blevins, 35, said, remembering that Bales spent time with a neighbor boy who had cerebral palsy.

Sitting on the porch of his mother’s house across from the former Bales family home, Blevins kept saying of the killings in Afghanistan: “That’s not Bobby.”

Bales starred on Norwood’s team before he lost his starting middle linebacker position as a junior to freshman Marc Edwards, according to “Odyssey: From Blue Collar, Ohio to Super Bowl Champion,” a 2010 biography of Edwards by Aaron M. Smith. Edwards would go on to play for the New England Patriots and other National Football League teams.

The NFL player would remain friendly with Bales, crediting his teammate as an early mentor who helped him learn the position. “That was huge motivation for me,” Edwards is quoted as saying in the book. “This guy was a junior and one of the stars of the team and he’s sucking up his pride to help me out.”

Stock Broker

After high school, Bales first studied physical therapy and then decided he wanted to get into finance, Blevins said.

He attended the College of Mount St. Joseph, a private, liberal arts school in suburban Cincinnati, for two semesters in 1991 to 1992, said Jill Eichhorn, the college’s communications manager. Bales went to Ohio State University in Columbus from 1993 to 1996 and studied economics, though he didn’t graduate, university spokesman Jim Lynch said in a telephone interview.

In 1997, Edwards and Bales, identified in the book as a Columbus, Ohio, stock broker, spent a weekend together at the PGA Memorial Tournament in Columbus watching golf, “drinking a couple beers,” and singing at a dueling piano bar, according to the book.

“People were watching us make complete idiots of ourselves, but we were having an absolute ball,” Edwards says in the book. “We were talking to girls, we were dancing. It was fun.”

Bales started Spartina Investments Inc., based in Doral, Florida, in 1999, with Edwards and Bales’ brother, Mark. It dissolved after 16 months, according to state records.

‘Business Relationship’

“Marc had a brief and very limited business relationship with Mr. Bales,” said Marina Ein, a spokeswoman for the former NFL player. It ended “as a result of marketplace forces at the time and other issues,” and “did not affect the friendship,” she said.

In a statement, Edwards called Bales “one of my oldest and best friends” and said the tragedy “has saddened my wife and me greatly and caused us great concern on Bob’s behalf.”

Before enlisting, Bales lived in Jensen Beach, Florida, according to the Army, and records there show he registered to vote as a Republican in St. Lucie County.

Bales’ enlistment in the Army, on Nov. 8, 2001, set him on a new course. He won medals for superior performance and spoke proudly of his combat experiences. He spent nine years at Lewis- McChord, the largest base in the western U.S., in the Second Battalion, Third Infantry Regiment of the Third Stryker Brigade.

Sense of Duty

“He wanted to be a soldier,” said Tim Burgess, 59, a retired warehouse worker who was a neighbor of Bales’s in Auburn, Washington, and remembered him talking about it with a sense of duty more than “rah-rah-rah.”

Court records show Bales was arrested at a hotel in Tacoma, Washington, in 2002 for investigation of assault in a case Browne said involved a woman he dated before he married his wife, according to the Associated Press. The lawyer didn’t return a call seeking comment on the case.

Bales, listed in his driver’s license at the time as five feet, 9 inches (1.75 meters) tall and 230 pounds (104 kilograms), pleaded not guilty. He underwent 20 hours of anger management counseling and the charge was dismissed, according to Tacoma Municipal Court records.

He left for combat in Iraq a year later, serving from Nov. 1, 2003, to Oct. 1, 2004, the Army says.

Wife Karilyn

The next year, he married Karilyn Primeau, according to the blog his wife later set up. She now works for Amaxra Inc., a Redmond, Washington, business communications company, according to the firm. Her LinkedIn profile lists her as an associate technical project manager and says she earlier worked for Washington Mutual, the Seattle lender that filed for bankruptcy in 2008 and was taken over by JPMorgan Chase & Co. (JPM)

“The Bales Family Adventures” blog and the companion “BabyBales” site were closed to public view after Robert Bales was identified as the shooting suspect. The sites were linked to others associated with Karilyn Bales and an e-mail that uses her maiden name. Karilyn Bales didn’t respond to an e-mailed request for comment.

The couple lived in Auburn at a house Karilyn owned for about a year. They moved when Karilyn became pregnant, according to neighbor Burgess. At the time, in 2005, Bales was nursing a war-related injury to his foot and walked with a pronounced limp, he said. Bales’s lawyer has said he lost part of his foot.

“He wanted to go back over there,” Burgess said. “His mission was to rehabilitate himself, to get back into another combat situation and get over there.”

Karilyn’s dad, who drove a brand-new Ford diesel pickup truck, took the couple out on his boat, Burgess said. Bales bought a new Ford Mustang, he said.

‘Total Military’

Edith Bouvette, 52, remembers when Bales once helped an elderly neighbor fix her roof. “He was always, ‘yes, ma’am, yes sir,’” Bouvette said. “Total military.”

The Baleses bought a four-bedroom home with 2.25 bathrooms in Lake Tapps, Washington, in 2005 for $280,000, county property records show. They rented the other home to neighbors, according to Burgess, vice president of the local homeowners association.

On June 19, 2006, Army records show, Bales returned to war, where his service coincided with the surge in Iraq ordered by George W. Bush.

With Karilyn’s baby on the way, the couple borrowed $506,250 on two residential properties in October 2006, public records show -- $178,500 on the Auburn house and $327,750 on the Lake Tapps home. Karilyn had a power of attorney to sign on her husband’s behalf, the records show.

While it’s unclear what his wife was earning, the debt was a stretch on the salary of a staff sergeant -- more than $60,000 a year, based on military pay scales.

‘$300,000 Houses’

“I’ve rarely seen staff sergeants who lived in $300,000 houses,” said John S. Odom Jr., a retired Air Force judge advocate and partner in Jones, Odom & Politz LLP law firm in Shreveport, Louisiana. “Other than the fact that his job was as an infantryman carrying a rifle and supervising a squad of infantrymen, he isn’t different than if he had been a lineman for the local power company.”

Daughter Quincy arrived Dec. 11, 2006, Karilyn Bales wrote in her blog. As Quincy, 7 pounds, eight ounces, was getting her first bath, Karilyn’s cell phone rang. “It was Bob calling from the airport in Kuwait!!” she wrote. “It was so good to hear his voice. I told him how the birth went and he got to hear Quincy squeaking in the background.”

Returning home with the baby a few days later, her phone rang again. It was Bales; he was in Dallas and would be home soon. “We would be a family,” she wrote.

Najaf Battle

The next month, in January 2007, Bales and his unit fought in the Battle of Najaf near the Euphrates River. They found villagers and family members of Iraqi fighters in the aftermath of the battle, also known as the Battle of Zarqa, which left 250 insurgents dead, according to a 2009 report by the Northwest Guardian, the military-authorized newspaper at his base.

They piled the injured on litters. Some had lost limbs or eyes, according to the report.

“We’d go in, find some people that we could help, because there were a bunch of dead people we couldn’t, throw them on a litter and bring them out to the casualty collection point,” Bales was quoted as saying.

His second deployment ended in September 2007. A year later, Bales was charged in the municipal court of a town near his home after a single-vehicle rollover that damaged property, AP reported. He told police he fell asleep at the wheel and paid a fine to get the charges dismissed, AP said.

Easter Eggs

Bales’s wife wrote of decorating Easter eggs, swimming at a local pool and trying to keep up with dishes and laundry. “Quincy is a much better egg hunter than last year, which was really fun to witness and enjoy with Bob,” she wrote.

In August 2009, Bales left for Iraq for a third time. “I had bad dreams and a pit in my tummy from missing Bob,” Karilyn wrote. “Thankfully I got a text message from Bob at 2pm, he was on the plane to Maine.”

Two months later, the couple’s Auburn house was scheduled to be auctioned at the entrance to the King County Administration Building.

The Baleses owed $15,644.19 on the house plus $1,333.46 in trustee’s fees, according to the auction notice. The auction subsequently was canceled without explanation. A Bank of America Corp. filing in King County in August 2011 said the couple was $16,978 in arrears on the rental property.

‘Do Not Occupy’

The home, visited yesterday, is a discolored light blue. Tire rims, an oil pan and part of a drivetrain rust outside in the driveway. A “Do Not Occupy” sign from the Auburn building department is displayed on the door, along with other signs in the window warning against unauthorized entry.

The homeowners association president, Bob Baggett, said the couple had lapsed on making $120 annual maintenance dues payments for at least two years.

“I suspect they fell on hard times financially,” Baggett said. “It could have been a matter of priorities.”

In March 2011, with their household further expanded by son Bobby, Bales failed to win promotion to sergeant first class, Karilyn wrote in her blog. The family was “disappointed after all of the work Bob has done and all the sacrifices he has made for his love of his country, family and friends.”

Bales, with 10 years of military service, would have received about $431 more a month for a total of $5,673 a month in salary if he had been promoted to sergeant first class, according to a pay calculator on the website of Army Times Publishing Co.

They hoped to make the best of the situation by going on an “adventure” instead -- with assignments in Germany, Italy or Hawaii their top options, Karilyn Bales wrote.

‘In Shock’

“Who knows where we will end up,” she said. “I just hope that we are able to rent out the house so we can keep it. I think we are both still in shock.”

Instead, in December, Bales left for Afghanistan, the Army says.

“He and the family were told that his tours in the Middle East were over, and then literally overnight that changed,” lawyer Browne told reporters last week.

The accused soldier’s job in Afghanistan was providing “force protection” for a Special Forces compound, according to a U.S. official familiar with the case.

The Panjwai plain where he was based is densely dotted with villages whose local mullahs helped found the Taliban movement in 1994. The district has remained a Taliban stronghold since NATO’s International Security Assistance Force, or ISAF, took control in heavy fighting in 2006.

Joint Patrols

U.S. forces there typically conduct joint patrols with the Afghan National Army in the villages surrounding their bases, seizing homemade bombs, weapons caches and hashish, according to ISAF news releases over the past seven months.

On March 12, villagers in southern Afghanistan buried 16 men, women and children shot dead in their homes after the killings by the accused soldier later identified as Bales.

Back at home, Karilyn had approached realtor Phillip Rodocker to list their house in Lake Tapps as a “short sale,” for less than the mortgage balance, according to Rodocker, who listed the house. Purchased for $280,000, it went on the market March 12 for $229,000. Karilyn called on March 13 and asked to cancel the sale because of a “family emergency,” Rodocker said.

Bales’s friends say they don’t want to believe the charges are true. Blevins said he exchanged Facebook messages with the soldier about three weeks ago in which Bales said he was looking forward to his son’s 3rd birthday.

“They always say you never know somebody, what’s in their heart, but that kid’s got the biggest heart anywhere there is,” said Blevins’ sister Michelle Caddell, who also lives on the street where he grew up. “I can’t see that kind of person living inside there, unless something completely destroyed his whole entire being.”

To contact the reporters on this story: Peter Robison in Seattle at robison@bloomberg.net; James Nash in Los Angeles at jnash24@bloomberg.net; Alison Vekshin in San Francisco at avekshin@bloomberg.net

To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net; Jeffrey Taylor at jtaylor48@bloomberg.net




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Apple to Pay Dividend, Buy Back Stock to Return Some of Cash

By Adam Satariano - Mar 20, 2012 5:32 AM GMT+0700

Apple Inc. (AAPL) will pay its first dividend in 17 years and buy back $10 billion in stock, heeding investors who urged it to return part of the $97.6 billion in cash amassed by robust demand for iPhones and iPads.

Shareholders will receive a quarterly dividend of $2.65 a share starting in the period beginning July 1, Cupertino, California-based Apple said today in a statement. The buybacks will begin in the fiscal year starting Sept. 30 and happen over three years, the company said.

Apple’s dividend may provide a short-lived economic boost to some pockets of the economy, said Richard Sichel, CIO of Philadelphia Trust Co., which manages $1.6 billion and holds Apple in some funds. Photographer: David Paul Morris/Bloomberg

March 19 (Bloomberg) -- Tim Cook, chief executive officer of Apple Inc., speaks on a teleconference about the company's plans to initiate a quarterly dividend of $2.65 a share and buy back $10 billion of stock and talks about the benefits of the moves. (This is an excerpt. Source: Bloomberg)

March 19 (Bloomberg) -- Apple Inc., the maker of the iPhone and iPad, plans to initiate a quarterly dividend of $2.65 a share and authorized a $10 billion share buyback, moves that return some of its $97.6 billion in cash and investments to shareholders. Dominic Chu reports on Bloomberg Television's "In the Loop." (Source: Bloomberg)

March 19 (Bloomberg) -- Paul Hickey, co-founder of Bespoke Investment Group, talks about Apple Inc.’s plans to pay a dividend and buy back $10 billion of its stock, returning some of its $97.6 billion in cash and investments to shareholders. He speaks with Betty Liu, Dominic Chu and Josh Lipton on Bloomberg Television's "In the Loop." (Source: Bloomberg)

March 19 (Bloomberg) -- Bloomberg's Cris Valerio reports that Apple Inc. plans to pay a dividend and buy back $10 billion of its stock, returning some of its $97.6 billion in cash and investments to shareholders as demand for iPhones and iPads boosts earnings. She speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

March 19 (Bloomberg) -- Mike Abramsky, an analyst with RBC Capital Markets, talks about Apple Inc.'s announcement today that it plans to initiate a quarterly dividend of $2.65 a share and authorized a $10 billion share buyback. Abramsky speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

March 19 (Bloomberg) -- Barton Biggs, managing partner and co-founder of Traxis Partners LP, talks about Apple Inc.’s announcement today that it plans to initiate a quarterly dividend of $2.65 a share and authorized a $10 billion share buyback. Biggs speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop.” (Source: Bloomberg)

March 19 (Bloomberg) -- Scott Kessler, head of technology equity research at Standard & Poor’s, talks about Apple Inc.'s plans to pay a dividend and buy back $10 billion of its stock, returning some of its $97.6 billion in cash and investments to shareholders as demand for iPhones and iPads boosts earnings. Kessler speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

March 19 (Bloomberg) -- Lawrence Haverty, a portfolio manager at Gamco Investors Inc., talks about Apple Inc.’s announcement today that it plans to initiate a quarterly dividend of $2.65 a share and authorized a $10 billion share buyback. Haverty speaks with Betty Liu on Bloomberg Television's "In the Loop.” (Source: Bloomberg)

Apple’s cash pile has swelled amid surging demand for its products, such as the iPhone and iPad. Photographer: David Paul Morris/Bloomberg

Chief Executive Officer Tim Cook is showing more willingness than co-founder Steve Jobs to channel part of cash and investments directly to investors. The move will cost $45 billion over three years, Cook said, and may broaden Apple’s shareholding base by attracting fund managers who only hold dividend-paying companies.

“It was high time to do this,” said David Rolfe, chief investment officer of Wedgewood Partners Inc., which holds Apple shares.

The dividend will cost Apple about $10 billion a year and represents a yield of 1.8 percent on the stock’s closing price today. The company generated $16 billion in cash in the first quarter of fiscal 2012, which ended in December. Shaw Wu, an analyst at Sterne Agee & Leach Inc., predicts that Apple will generate about $75 billion in cash this year.

Apple rose 2.7 percent to $601.10, closing above $600 a share for the first time.

Top 10 Yield

“This is something that large shareholders have been asking for,” Wu said before the announcement.

Including instances where a company has scrapped and re- established dividends, today’s was the largest initiation for a company in the Standard & Poor’s 500 Index, surpassing Cisco Systems Inc.’s announcement of a $1.3 billion dividend in March 2011. Apple’s move pushed the dividend yield of the benchmark gauge of American equities to 2.14 percent, from 2.06 percent, Howard Silverblatt, S&P’s senior index analyst, said in an interview.

Apple’s dividend may provide a short-lived boost to some pockets of the economy, said Richard Sichel, CIO of Philadelphia Trust Co., which manages $1.6 billion and holds Apple in some funds.

“More than anything, it’s a psychological boost,” Sichel said.

At 1.8 percent, the yield on Apple’s dividend would be the tenth-highest among U.S. technology companies with market values larger than $10 billion, data compiled by Bloomberg show.

Intel, Microsoft Higher

It’s lower than that offered by Intel Corp., which yields 3.03 percent, based on today’s closing price, and Microsoft Corp., which yields 2.48 percent on that basis. It tops Cisco’s dividend yield of 1.59 percent and International Business Machines Corp.’s 1.46 percent yield.

After today’s announcement, Google Inc., owner of the most popular search engine, is now the only technology company with a market value of more than $100 billion that doesn’t offer a dividend.

The growing amount of money on Apple’s balance sheet followed the introduction of the iPhone, the best-selling smartphone, and the iPad, the leading tablet computer. The company last week began selling a third-generation iPad, which comes with a high-definition screen and faster processor. Apple sold more than 3 million iPads on its debut weekend, a record, Apple said in a separate statement today.

“It’s literally become a cash machine,” said Charlie Wolf, an analyst at Needham & Co. in New York.

Contrast With Jobs

Gene Munster, an analyst at Piper Jaffray Cos., said Jobs, who died in October, resisted efforts to get Apple to return money to shareholders.

“It would have been unheard of under Jobs’s watch,” said Munster. “This is just finance 101, but it looks like rocket science next to what they’ve done in the past.”

Of Apple’s $97.6 billion in cash and investments at the end of December, about $64 billion was overseas. Oppenheimer said Apple will only use money held in the U.S. for the dividend and buyback to avoid tax consequences.

A dividend is a boon to shareholders, including Apple employees, who have already seen the company’s stock rise 48 percent this year.

Fidelity Management, Apple’s largest shareholder, will make $128.81 million each quarter from the dividend, based on its holdings as of Dec. 31. Vanguard Group Inc., the second-biggest shareholder, will receive $98.54 million and State Street Corp. will make $92.12 million.

‘War Chest’

“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” Cook said in the statement. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.”

On the conference call, Cook said adding a dividend will expand Apple’s investor pool. Some investors will only buy shares in companies that pay a dividend.

Apple last paid a dividend in 1995, before Jobs returned as CEO and led the introduction of top-selling products including the iPod, iPhone and iPad. The final dividend, of 12 cents a share, was suspended amid leadership upheaval and dwindling computer-market share. According to a company filing, Apple’s cash, equivalents and short-term investments dropped by about half, to $491 million, in the year through Sept. 29, 1995.

Highlighting its turnaround since that period, Apple has surpassed Exxon Mobil Corp. (XOM) as the world’s most valuable company. The iPhone maker’s market value is $560.4 billion, based on today’s closing price. That compares with $410 billion for Exxon Mobil.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net





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Wendy’s Tops Burger King as Second-Largest U.S. Burger Chain

By Leslie Patton - Mar 20, 2012 3:27 AM GMT+0700

Wendy’s Co. (WEN) surpassed Burger King Holdings Inc. (BKC) in sales last year, making it the second-largest U.S. hamburger chain, according to Chicago-based researcher Technomic Inc.

Sales at Dublin, Ohio-based Wendy’s U.S. locations were $8.5 billion last year, while Miami-based Burger King’s sales were $8.4 billion, according to Technomic. McDonald’s Corp. (MCD), based in Oak Brook, Illinois, is the largest chain with $34.2 billion in sales at all of its U.S. stores in 2011.

A Wendy's Restaurant in Dublin, Ohio. Photographer: Jay LaPrete/Bloomberg

Wendy’s Chief Executive Officer Emil Brolick has sought to boost sales recently by promoting more expensive, premium burgers and has started remodeling its U.S. stores to lure consumers. Sales at the 500 largest U.S. dining chains advanced 3.4 percent to about $242 billion last year, compared with an increase of 1.8 percent in 2010, the researcher said.

Technomic will release its chain restaurant report on April 13.

Closely held Five Guys Burgers and Fries, with sales of $951 million last year, was listed as the fastest-growing chain with sales greater than $200 million. Five Guys is based in Lorton, Virginia.

Wendy’s fell 0.2 percent to $5.03, and McDonald’s rose 0.1 percent to $97.73 at the close in New York.

Burger King has attempted to gain market share and turn around declining same-restaurant sales in North America by revamping its menu with new French fries and soft-serve ice cream. 3G Capital Inc. bought Burger King in 2010 for about $3.93 billion.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net




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Facebook Is Said to Plan Paying 1.1 Percent Fee to Banks

By Douglas MacMillan and Serena Saitto - Mar 20, 2012 4:41 AM GMT+0700

Facebook Inc. (FB), the social- networking website seeking to raise $5 billion in an initial public offering, will pay underwriters a 1.1 percent fee, two people with knowledge of the company’s plans said.

The fee will be shared among Facebook’s underwriters, said the people, who asked not to be named because the details are private. Facebook has hired 31 banks to manage the IPO, including Morgan Stanley (MS) as lead underwriter. The lead bank typically earns a bigger cut of the total.

Mark Zuckerberg, chief executive officer and founder of Facebook Inc. Photographer: David Paul Morris/Bloomberg

A wall that has been written on by employees stands in the entry way at Facebook Inc.'s office in New York on Dec. 20, 2011. At 1.1 percent, the company will be paying its banks one-fifth the typical rate for IPOs. Photographer: Scott Eells/Bloomberg

At 1.1 percent, the company will be paying its banks one- fifth the typical rate for IPOs. Underwriters were paid an average of 5.48 percent in 127 offerings last year, Bloomberg data show. With larger IPOs, banks can often afford to take a smaller percentage fee, and high-profile offerings such as Facebook can lead to future business, making securities firms willing to accept less.

Jonathan Thaw, a spokesman for Menlo Park, California-based Facebook, declined to comment on banker fees.

Facebook said in a regulatory filing earlier this month that it received an $8 billion package of financing, including a $5 billion five-year revolving line of credit and a $3 billion 364-day bridge loan. The company also named 25 new underwriters.

Facebook had already named Morgan Stanley, JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Bank of America Corp. (BAC), Barclays Plc (BARC) and Allen & Co. to handle the deal.

The list of banks added to the offering this month includes Deutsche Bank AG (DBK), Credit Suisse Group AG and Citigroup Inc. (CLQ) Smaller banks were added as well, such as M.R. Beal & Co., Muriel Siebert & Co. and William Blair & Co.

Two people told Bloomberg in February that Facebook’s banks could collect a fee of 1 percent to 1.5 percent from the IPO.

To contact the reporters on this story: Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net




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Monday, March 19, 2012

Apple’s Cook to Discuss Plans for $97.6 Billion Cash Hoard

By Adam Satariano - Mar 19, 2012 6:27 AM GMT+0700

Apple Inc. (AAPL) will outline plans on a conference call tomorrow for its $97.6 billion in cash and investments, signaling that investors may get the dividend they’ve been seeking from the world’s most valuable company.

Chief Executive Officer Tim Cook and Chief Financial Officer Peter Oppenheimer will host the call, scheduled for 9 a.m. New York time, Cupertino, California-based Apple said in a statement today. The company didn’t elaborate on its plans, and said it won’t discuss topics besides cash.

March 16 (Bloomberg) -- Apple Inc. began selling its new iPad today, drawing the customary lines of cheering, die-hard fans to Apple stores around the world. Bloomberg's Jon Erlichman reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Apple’s cash pile has swelled amid surging demand for its products, such as the iPhone and iPad. Shareholders have urged Apple to return some of the balance to investors in the form a dividend, and have been awaiting an announcement after Cook said this year the company has “more than we need to run a company” and that the board is considering its options.

“This is something that large shareholders have been asking for,” said Shaw Wu, an analyst at Sterne Agee & Leach Inc. “When you look at the cash generation capability of Apple, it’s just tremendous.”

Apple may introduce a dividend of $2 a share, according to data compiled by Bloomberg. That estimate is based in part on the dividends paid by other large technology makers, including Microsoft Corp. and International Business Machines Corp. Apple and Google Inc. (GOOG), owner of the most-popular search engine, are the only technology companies with market values higher than $100 billion that don’t pay a dividend.

Dividend Predictions

A dividend would be an added boon to investors who have already seen the company’s stock rise 45 percent this year to $585.57 as of March 16. Apple co-founder Steve Jobs, who died in October, long resisted calls to return some of the money to investors.

Apple generated $16 billion in cash in the first quarter of fiscal 2012, which ended in December. Wu predicts that Apple will generate about $75 billion in cash this year. Besides Wu, analysts at Morgan Stanley, JPMorgan Chase & Co. (JPM) and Mizuho Securities USA Inc. also have predicted that Apple will institute a dividend.

The growing amount of money on Apple’s balance sheet has followed the introduction of the iPhone, the best-selling smartphone, and the iPad, the leading tablet computer. The company last week debuted a third-generation iPad, which comes with a high-definition screen and faster processor.

Apple this year surpassed Exxon Mobil Corp. (XOM) to be the world’s most valuable company. The iPhone maker’s market value is $545.97 billion, compared to $407.4 billion for Exxon Mobil.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net




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Oil Trades Near One-Week High in New York as Saudi Output Climbs

By Ben Sharples - Mar 19, 2012 6:01 AM GMT+0700

Oil traded near the highest price in a week in New York as investors bet that the second-highest Saudi Arabian crude output since at least 1980 signals fuel demand is increasing.

Futures were little changed after climbing the most in more than three weeks on March 16. Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, pumped 9.87 million barrels a day in January, according to data submitted by the government to the Joint Organization Data Initiative. Reports this week may show the economy strengthening in the U.S., the world’s biggest crude consumer.

Oil for April delivery was at $107.36 a barrel, up 30 cents, in electronic trading on the New York Mercantile Exchange at 9:54 a.m. Sydney time. The contract, which expires tomorrow, climbed 1.9 percent to $107.06 a barrel on March 16, the highest close since March 9. The more active May future rose 31 cents to $107.89 a barrel today. Prices have advanced 8.6 percent this year.

Brent oil for May settlement was at $125.95 a barrel, up 14 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $18.06 to New York futures for the same month.

Saudi Arabia’s output in January rose 0.6 percent from December and compares with 10.05 million barrels a day in November. The November figure was the largest in at least 31 years, according to the U.S. Energy Department.

Saudi exports climbed 2 percent in January to 7.5 million barrels a day, the JODI data show. Shipments by Iran, OPEC’s second biggest producer, increased to 2.3 million barrels a day, the highest since December 2008.

Home purchases in the U.S. probably rose in February to the highest level in almost two years in another sign of stabilization in the real-estate market, according to Bloomberg News surveys of economists before reports this week.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net




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Japan Stock Futures Little Changed on Yen; Australia Shares Rise

By Kana Nishizawa and Toshiro Hasegawa - Mar 19, 2012 6:35 AM GMT+0700

Japanese stock futures were little changed as the yen rebounded, damping the earnings outlook for exporters. Declines may be limited ahead of U.S. data that’s forecast to show the housing market is improving. Australian stocks rose after oil prices increased.

American depositary receipts of Honda Motor Co. (7267), Japan’s second-largest carmaker by market value, fell 0.4 percent from the closing share price in Tokyo. ADRs Komatsu Ltd., Japan’s biggest construction machinery maker, dropped 0.4 percent after China’s February home prices posted the worst performance in a year. BHP Billiton Ltd., the No. 1 Australian oil producer, gained 0.9 percent in Sydney.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in June closed at 10,035 in Chicago on March 16, compared with 10,060 in Osaka, Japan. They were bid in the pre-market at 10,060 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index rose 0.3 percent today. New Zealand’s NZX 50 Index slipped 0.1 percent in Wellington.

“Investors are likely to take profits today with a lack of news to move the yen,” said Hideyuki Ishiguro, assistant manager of investment strategy at Okasan Securities Co. in Tokyo. “But with a positive housing report expected from the U.S. and hopes for some easing from Japan’s central bank,” declined could be limited, he said.

Futures on the Standard & Poor’s 500 Index (SPXL1) were little changed today. The Dow Jones Industrial Average snapped a seven- day gain on March 16 after an increase in oil and consumer prices sparked inflation concerns as the U.S. economy improves.

U.S. Housing

Home purchases in the U.S. probably climbed in February to the highest level in almost two years, another sign of stabilization in the real-estate market, economists forecast reports this week will show.

Combined sales of new and previously owned properties rose to 4.93 million at an annual rate, the strongest since May 2010, from 4.89 million in January, according to the median forecasts in a Bloomberg News survey. Home construction also improved as warmer weather bolstered prospects for the industry, another report may show.

The MSCI Asia Pacific Index (MXAP) rose 12 percent this year through March 16, compared with a 12 percent gain by the S&P 500 and an 11 percent advance by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 15 times estimated earnings on average, compared with 13.5 times for the S&P 500 and 11.4 times for the Stoxx 600.

The yen strengthened to 83.31 per dollar today, compared with 83.94 reached on March 16. A stronger yen decreases the value of Japanese exporters’ profits overseas when repatriated.

Oil traded near the highest price in a week in New York as investors bet that the second-highest Saudi Arabian crude output since at least 1980 signals fuel demand is increasing.

Crude for April delivery was at $107.36 a barrel, up 30 cents, in electronic trading on the New York Mercantile Exchange at 9:54 a.m. Sydney time. The contract, which expires tomorrow, climbed 1.9 percent to $107.06 a barrel on March 16, the highest close since March 9.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net




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James Murdoch Board Seats Dwindle as BSkyB Role Under Scr

By Amy Thomson and Edmund Lee - Mar 19, 2012 7:01 AM GMT+0700

A year ago, James Murdoch was promoted to News Corp. (NWSA)’s deputy chief operating officer, moving ever closer to succeeding his father as head of the media company. Now he’s struggling to keep his career alive.

Auction house Sotheby’s said March 16 that Murdoch will leave its board, following demands he resign over his role in a U.K. phone-hacking scandal. It was the third influential position he gave up in as many months, resigning from the board of GlaxoSmithKline Plc (GSK) in January and as executive chairman of News Corp.’s U.K. publishing unit News International last month.

James Murdoch, son of News Corp. Chief Executive Officer Rupert Murdoch, is the chairman of BSkyB and previously oversaw News Corp.’s U.K. publishing unit. Photographer: Peter Foley/Bloomberg

Feb. 17 (Bloomberg) -- Michael Wolff, author of the Rupert Murdoch biography "The Man Who Owns the News," talks about News Corp. Deputy Operating Officer James Murdoch's move to step down from the position of executive chairman of the company's News International unit.¶ He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." Adam Johnson also speaks. (Source: Bloomberg)

News Corp., based in New York, said the moves will allow Murdoch, 39, to focus on his main job. Tim Bale, a professor of politics at the University of Sussex, said Murdoch’s role in the scandal may force him to step down as chairman of pay-TV company British Sky Broadcasting Group Plc (BSY), a position that is crucial to his position overseeing the international television operations of News Corp.

“It will be very difficult for him to stick around,” Bale said in an interview. “His personal brand has been trashed so comprehensively and continues to be trashed with each new revelation.”

Murdoch’s future at BSkyB hinges on a report that U.K. lawmakers are preparing on the phone-hacking scandal following testimony he gave that has been contradicted by former subordinates. The committee began its inquiry in July after Murdoch said lawmakers had been misled about the extent of phone hacking during a previous probe in 2009. It has questioned him twice for the new report, once alongside his father Rupert, News Corp.’s 81-year-old chief executive officer.

Tarnished Reputation

U.K. media regulator Ofcom will take parliament’s report into consideration when evaluating whether James is “fit and proper” to hold a broadcast license on behalf of BSkyB.

Murdoch’s prospects for remaining chairman of BSkyB, in which News Corp. owns 39 percent, are also diminished because the scandal tarnished his reputation as a manager, saidJeffrey Sonnenfeld, senior associate dean of the Yale University School of Management.

“He’s certainly not bringing better management competence or insight or a reputation where his character is beyond question,” Sonnenfeld said in an interview. “A lot of things under his watch at best are a failure of management oversight, even if he’s not directly complicit in any of the scandal.”

A News Corp. spokeswoman, Julie Henderson, declined to comment on the Sotheby’s departure, which takes effect May 8. Robert Fraser, a spokesman for London-based BSkyB, in which News Corp. owns a 39 percent stake, also declined to comment.

‘More Questions’

On March 14, Murdoch told U.K. lawmakers he should have dug deeper to uncover the phone hacking at the company’s U.K. unit, which saw News Corp. journalists hack into the phones of celebrities and a murdered schoolgirl.

“I could have asked more questions, requested more documents and taken a more challenging and skeptical view of what I was told,” Murdoch said.

Murdoch told lawmakers in November that News of the World editor Colin Myler failed to tell him in 2008 that phone hacking at the now-defunct tabloid was common. Myler and the newspaper’s lawyer Tom Crone have repeatedly insisted that they discussed evidence with Murdoch.

The phone-hacking scandal prompted News Corp. to close the News of the World in July and drop its 7.8 billion-pound ($12.4 billion) bid for full control of BSkyB, the U.K.’s biggest pay- TV company.

‘Little Advantage’

James’s decision to leave the boards of Sotheby’s (BID) and Glaxo may already signal a diminishment of his perceived management value, Edward Wasserman, Knight Professor of Journalism Ethics at Washington and Lee University, said in an interview.

“It’s tempting to say that in both cases, the boards saw little advantage to whatever wisdom or adornment James brought to being on the boards of these companies,” he said.

Murdoch was a Sotheby’s director for two years. Sotheby’s, based in New York, said it benefited from Murdoch’s “broad- based marketing and brand management experience, his guidance regarding the company’s strategic initiatives in Asia and his insight into digital media.”

Murdoch is leaving to “focus on his core responsibilities at News Corp.,” Sotheby’s said. Glaxo Chairman Christopher Gent said in January that “James has taken this decision to focus on his current duties as non-executive chairman of BSkyB, and following his decision to re-locate to the U.S.”

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

James was appointed CEO of BSkyB in 2003 amid accusations of nepotism. He was promoted in 2007 to run News Corp.’s television, newspaper and digital operations in Europe, Asia and the Middle East, while becoming non-executive chairman of BSkyB.

Report Delayed

The U.K. lawmakers are behind schedule with their report, as they debate how critical they can be ofMurdoch, two people with knowledge of the panel’s discussions said in February. There is no question of Murdoch escaping criticism completely, the people said at the time. They said panel members are unimpressed by his statements that he was ignorant about what was going on at the News International unit.

News Corp. shareholders in October lodged a protest vote against Rupert Murdoch and his sons, following an annual meeting at which investors called for governance changes and an end to voting practices that cement the family’s control. James received the highest percentage of votes against his election to the board, at 35 percent.

In November, one third of BSkyB’s independent shareholders voted against James Murdoch’s re-election as chairman.

Professor Bale says the public criticism of Murdoch’s role in the scandal is increasingly becoming a problem for BSkyB itself.

“For the board as a whole and the company as a whole it’s very difficult when someone is under such pressure,” Bale said. “It’s a story he can’t control and there’s more to come. What’s out there already is really bad.”

To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net





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UPS Is Said to Agree to Purchase TNT Express for $6.8 Billion

By Aaron Kirchfeld, Jacqueline Simmons and Alex Webb - Mar 19, 2012 6:38 AM GMT+0700

United Parcel Service Inc. (UPS) reached an agreement to buy TNT Express NV (TNTE), Europe’s second-largest express delivery company, after sweetening its bid to about 5.16 billion euros ($6.8 billion), two people with knowledge of the talks said.

The price will be about 9.50 euros a share and an announcement will come as soon as today, said one of the people, who declined to comment because they weren’t authorized to speak publicly.

United Parcel Service Inc. reached an agreement to buy TNT Express NV after raising its bid for Europe’s second-largest express delivery service, according to two people with knowledge of the talks. Photographer: Tim Boyle/Bloomberg

TNT Express NV employees process incoming and outgoing freight at Liege Airport in Grace-Hollogne, Belgium. Photographer: Jock Fistick/Bloomberg

For Atlanta-based UPS, acquiring TNT will mean achieving roughly equal footing in Europe with Deutsche Post AG (DPW)’s DHL, the region’s biggest delivery operator. For TNT, the deal secures a higher value on the money-losing Dutch company than the 9 euros a share that directors turned down last month.

“They can declare a victory and sign on the dotted line and go home,” said Kevin Sterling, a BB&T Capital Markets analyst in Richmond, Virginia. “If they didn’t do this deal, everyone else would take market share from them in Europe and they would continue to weaken over time.”

TNT closed at 9.35 euros in Amsterdam on March 16, giving the Hoofddorp, Netherlands-based company a market value of 5.08 billion euros, according to data compiled by Bloomberg. UPS, already No. 1 in the world in package deliveries, traded at $78.41 in New York for a $75.2 billion market value.

Company spokesmen declined to comment yesterday.

Deal Valuation

At 9.50 euros a share, the deal would value TNT at 13 times its last four quarters’ earnings before interest, taxes, depreciation and amortization, compared with a median of 10 times trailing Ebitda in nine other similar deals, according to data compiled by Bloomberg.

“That price is a bit ahead of what the shares are trading at currently, so they seem to be getting a bit of a premium,” said Dieter Furniere, a Brussels-based KBC Securities analyst who has a hold rating on TNT.

A mix of cash and debt will be UPS’s likeliest choice for financing, Sterling said yesterday in a telephone interview.

UPS “could practically write a check” because it had about $4.2 billion in cash and short-term investments as of Dec. 31, said Sterling, who recommends buying the stock. “The rating agencies might put them on watch, depending on how much leverage they use, but this is a deal that UPS can easily afford.”

Overlapping operations, particularly in Europe, may produce savings and benefits for UPS worth more than 400 million euros, according to Andre Mulder, an analyst at Kepler Capital Markets in Amsterdam, who recommends buying TNT shares.

European Market Share

UPS controlled 7.7 percent of the European express-parcels market in 2010, compared with TNT’s 9.6 percent, according to Transport Intelligence. Combined, they would be about as large as DHL, which had a 17.6 percent share.

Buying TNT will be the UPS’s biggest purchase since the company was founded in 1907 as a bicycle-messenger service. The deal tops the 2005 acquisition of Overnite Corp. (OVNT) for about $1.25 billion in cash, which gave UPS the ability to make U.S. land shipments of parcels too large to be lifted by a driver.

International packages generate the most revenue for UPS, at $19.30 each in 2011, compared with $9.30 per domestic parcel. The $12.2 billion in sales for that business last year was 23 percent of UPS’s $53.1 billion total, which the company doesn’t disclose on a regional or country-by-country basis.

The final stages of talks played out as investors and unions looked on after TNT said Feb. 17 it rejected a “highly conditional” UPS offer while saying the sides were still meeting. UPS said March 16 that negotiations had been extended.

Unhappy Directors

TNT directors were unhappy with terms attached to the initial offer that may have required divestitures to win regulatory approval, possibly leading to job cuts, a person familiar with the matter said last month.

The company’s four main unions wrote Chief Executive Officer Marie-Christine Lombard and Supervisory Board Chairman Antony Burgmans on March 6 to express opposition to “forced” job reductions. TNT employed about 77,500 people as of Dec. 31.

TNT was spun off in May from the Dutch postal operator, which is now named PostNL and retains a 29.9 percent stake, according to data compiled by Bloomberg. TNT, whose name derives from the postwar Australian company Thomas Nationwide Transport, sold its Indian domestic road business in December and has been hurt by costs from revamping unprofitable Brazilian operations.

Focus on Europe

After posting a 2011 operating loss of 105 million euros on Feb. 21, TNT said it would refocus operations on Europe, where its operating profit was 356 million euros last year. Operating losses were 360 million euros in the Americas and 76 million euros in the Asia-Pacific region.

A bid by UPS or FedEx Corp. (FDX) had been fodder for industry speculation for years as the U.S. companies studied expansion in Europe.

That talk gained momentum following the spinoff of TNT as an express operator, and some analysts and investors had predicted a possible late bid by FedEx after UPS’s interest was announced, a scenario that never came to pass.

In an industry in which UPS, FedEx and DHL already operate on a global scale, TNT was a “once-in-a-lifetime chance” for one of the biggest competitors to grow by gobbling up a substantial rival, Katrina Dudley, a portfolio manager at Mutual Series, a Franklin Templeton Investments unit, said last month. Mutual Series owns TNT shares.

UPS has completed the acquisition of Brussels-based Kiala to bolster operations in Belgium, France, the Netherlands, Spain and Luxembourg, after several smaller purchases in recent years, said David Campbell, a Thompson Davis & Co. analyst in Richmond, Virginia, who recommends buying UPS and FedEx.

To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jacqueline Simmons in Paris at jackiem@bloomberg.net; Alex Webb in Frankfurt at awebb25@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net





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Monti to Meet Labor Unions Amid Warning of Continued Euro Crisis

By Patrick Donahue - Mar 19, 2012 6:01 AM GMT+0700

Italy’s Prime Minister Mario Monti will press ahead with efforts to revise labor laws this week, amid fresh warnings that the three-year-old European debt crisis is far from over.

Monti will lead talks with unions and employers in a final round of negotiations beginning tomorrow. Decision makers meanwhile warned against complacency after delivery of the final element of Greece’s 130 billion-euro ($171 billion) bailout package and the completion of the world’s largest sovereign-debt restructuring last week.

Mario Monti, Italy's prime minister. Photographer: Alessia Pierdomenico/Bloomberg

March 16 (Bloomberg) -- David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, talks about the global labor market, wages and central bank policy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

“Optimism should not give us a sense of comfort or lull us into a false sense of security,” International Monetary Fund Managing Director Christine Lagarde said in a speech at the China Development Forum in Beijing yesterday. “We cannot go back to business as usual,” she said, urging vigilance on oil prices, debt levels, and the risk of slowing growth in emerging markets.


An easing of the crisis offered breathing room for Monti to seek an Italian labor-market overhaul and for euro-area ministers aiming to bolster euro bailout funding before a meeting at the end of the month. Still, urgency was underscored by an IMF warning that the Greek bailout held “exceptional risks” that could prompt a “disorderly” exit from the monetary union unless additional help is prepared.

‘Sovereign Default’

“The materialization of these risks would most likely require additional debt relief by the official sector and, short of that, lead to a sovereign default,” IMF staff wrote in a report released March 16. “In the absence of continued official support and access to” refinancing by the European Central Bank, “a disorderly euro exit would be unavoidable,” it said.

With billions of euros committed to hold Greece afloat and investors looking to see whether contagion could spread to Spain or Italy, the fragility of rescue efforts were reflected in bond yields last week. Spain’s 10-year yield climbed 20 basis points to 5.20 percent, the second weekly gain, while the yield on similar maturity Italian debt rose three basis points to 4.86 percent.

Investors have been encouraged by the Italian prime minister’s efforts to rein in the country’s debt since his government of non-politicians replaced Silvio Berlusconi’s administration last year.

Monti’s labor overhaul will include a revision of firing rules and an expansion of jobless benefits. The rules, which will distinguish between workers removed without just cause and those fired for disciplinary or economic reasons, are among the most contentious. Under article 18 of the Italian labor code, employers have to compensate and rehire and worker ruled to have been fired without just cause by a labor court.

Month’s End

Monti met with Confindustria head Emma Marcegaglia, Labor Minister Elsa Fornero, CGIL union leader Susanna Camusso, CISL union chief Raffaele Bonanni and UIL union head Luigi Angeletti on March 17, a spokesman for Confindustria said. The Italian leader has said he wants to pass labor legislation by the end of the month.

“We’ll get an agreement within about a week, although there may be some small changes to the present proposal before it’s all done,” Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London, wrote in a note to clients.

Even as focus shifted beyond Greece to other parts of the euro area, the IMF’s continuing concern about the Greek package illustrated the difficulty of implementing changes that officials in Brussels and Athens had been negotiating for months. Greece remains “accident prone,” the Washington-based institution’s staff said in the report.

Greek Election

The IMF reduced its contribution to the second Greek bailout because the operation poses what staff called “unprecedented financial risks” to its finances. One of the risks identified was the Greek election, to be held in April or May.

Lagarde has pushed European governments to boost their bailout fund in an effort to protect Spain and Italy from contagion. Euro finance ministers may decide to increase the region’s crisis fund to a total capacity of 692 billion euros when they meet on March 30, a euro-area official said March 16.

The ministers, who will meet in Copenhagen, are weighing what to do with the temporary European Financial Stability Facility and its permanent successor, the European Stability Mechanism. The 692 billion-euro figure represents the most attainable compromise between 500 billion euros, if policy makers change nothing, to a maximum of 940 billion euros, the official said.

On March 16, Chancellor Angela Merkel left the door open to boosting the euro-area backstop, saying a decision on reinforcing the firewall will be made before IMF meetings next month. Ministers have discussed “combination possibilities” for the EFSF and the ESM ahead of their meeting.

“What’s clear is that we need to settle on a position with a view to the IMF’s spring meeting because the topic will surely come up and because there have been offers by the international community,” Merkel said. “You can count on us setting the course by the end of March.”

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net




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Merkel Free to Focus on Elections After Germans Choose President

By Tony Czuczka and Patrick Donahue - Mar 19, 2012 6:01 AM GMT+0700

German Chancellor Angela Merkel has been freed to focus on issues likely to shape her chances of a third term after changing sides to ensure the election of Joachim Gauck as the country’s 11th postwar president.

Merkel can concentrate on three forthcoming state elections and euro area crisis-fighting. With her Free Democrat coalition allies backing Gauck, a candidate she initially opposed, it also enables her to dodge a conflict within government which might have dented her record-high approval ratings.

Germany's Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

German President Joachim Gauck, who had been a pro-democracy activist in East Germany. Photographer: Johannes Eisele/AFP/Getty Images

“She’s like Teflon,” Carsten Brzeski, an economist at ING Groep in Brussels, said in an interview. “Everything that could have been blamed on her hasn’t affected her at all.” Merkel “has shown that she can sit things out.”

Yesterday’s decision means that Europe’s biggest economy is headed for the first time by both a chancellor and president who grew up behind the Iron Curtain. A special federal assembly of national and state politicians convened in Berlin elected Gauck with 991 of the 1,232 ballots cast.

The election of Gauck, 72, a former pastor and East German anti-communist activist, was the second vote for the mainly ceremonial post in less than two years. Gauck was the main opposition candidate in 2010, when he lost to Christian Wulff, Merkel’s pick. Wulff quit on Feb. 17 to face a criminal probe that may lead to corruption charges. He denies any wrongdoing.

Nazi Hunter

His main opponent this time was Beate Klarsfeld, 73. The German-born, Paris-based Nazi hunter was nominated by the anti- capitalist Left party. With Merkel’s coalition and two opposition parties backing Gauck, his election was assured.

Gauck, the son of a sailor who was sent to a Soviet Gulag for more than three years in the 1950s, grew up in the Baltic Sea port city of Rostock and became a leading figure in East Germany’s anti-communist opposition in 1989. He later gained a reputation as Germany’s leading “Stasi hunter” for his work in overseeing the opening of millions of files kept by informants of the communist-era Ministry of State Security.

“Out of the joy of liberation came the joy and obligation to take on duties,” Gauck said after the vote.

After expressing reservations about the opposition’s support for Gauck, Merkel backed down last month when the Free Democrats, her junior coalition ally, supported him. By retreating and moving on, she tamped down a domestic distraction as European leaders were struggling to craft a second bailout for Greece.

Euro Bailouts

An Emnid poll on March 11 showed national support for her bloc at 36 percent, the best level since 2008. Her FDP ally, which has seen voter support collapse amid leadership changes and a split over its stance on euro bailouts, had 3 percent backing, against almost 15 percent in 2009. The main opposition Social Democrats had 28 percent support and the Greens 14 percent.

“She checked it off the list in a hurry,” Manfred Guellner, head of the Berlin-based Forsa polling firm, said of the Gauck spat. “It didn’t harm the high approval she enjoys. When Merkel is alone on the stage saving the euro, that’s when she scores points.”

Next stop for Merkel is Saarland, where voters cast ballots on March 25 in the first of three German state elections this yea, followed by the northern state of Schleswig-Holstein on May 6. North Rhine-Westphalia, Germany’s most populous region with almost a quarter of the country’s 82 million people, will also vote the same day. It’s a bellwether for the respective parties’ national fortunes ahead of a federal election due next year. While not yet scheduled, that vote will probably also take place in May.

Dead Heat

Merkel’s position is a turnaround from last year, when her national coalition was defeated or lost votes in all seven state elections as Germany’s involvement in the crisis stemming from Greece made it the biggest contributor to euro-region bailouts.

Polls now show the CDU and Social Democrats in a dead heat in Saarland, suggesting the CDU and SPD will govern the region bordering France and Luxembourg in a “grand coalition,” mirroring Merkel’s first-term government.

That’s a constellation Germans like because they favor cooperation among the two biggest parties rather than conflict, making another grand coalition a possible outcome of the next national election in 18 months, Forsa’s Guellner said.

With the Free Democrats decimated, Merkel sought agreement with the opposition to find a presidential candidate, who is elected by the assembly meeting at the Reichstag building in Berlin.

The chancellor’s majority in the assembly narrowed to as little as two seats from 21 seats in 2010, when Wulff defeated Gauck, according to election website wahlrecht.de.

To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net; Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net





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Sunday, March 18, 2012

Britain Will Keep Austerity With Unemployment at 16-Year

By Nick Taborek - Mar 18, 2012 11:00 AM GMT+0700

Britain won’t ease austerity in its budget to be presented this week, U.K. Chancellor of the Exchequer George Osborne said in an interview to be aired today on CNN’s “Fareed Zakaria GPS” program.

“We are going to stick with the deficit reduction plan that I set out almost two years ago,” Osborne said, according to a transcript of the interview.

British Finance Minister George Osborne at 11 Downing Street in London on Feb. 14, 2012. Photographer: Justin Tallis/AFP/Getty Images

U.K. jobless claims rose more than economists forecast in February, and a broader measure of unemployment remained at the highest level in 16 years, according to data released March 14 by the Office for National Statistics in London.

Keeping austerity measures in place is important “to provide the stability that the British economy needs and the low interest rates the British economy needs to allow the recovery to take hold,” Osborne said.

“The plan we put in place is bringing that deficit down and borrowing is coming down,” he said. “But even with that, we still have one of the highest budget deficits in the world.”

The U.K. has the third highest deficit in the Group of Seven countries, behind Japan and the U.S. Osborne is trying to rid Britain of a budget deficit equal to 9 percent of gross domestic product by 2017. His austerity program will cost more than 700,000 government jobs. Critics including the opposition Labour Party say the scale of the squeeze is worsening Britain’s economic woes.

Fitch Rating

Britain risks losing its top investment grade because of its limited ability to deal with shocks, Fitch Ratings said in a March 14 statement.

Fitch changed the outlook on Britain to “negative” from “stable,” indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years, the company said, citing the weak economic recovery, high debt levels and threats from Europe’s debt crisis.

Osborne is meeting with coalition partners to agree on a budget he will present on March 21.

Osborne said the U.S. and the U.K are “not that dissimilar” in their need for deficit reduction.

“All Western countries know that they’ve got to deal with that question the rest of the world and the markets have, which is, OK, well, how are you going to pay your way?”

To contact the reporter on this story: Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Ann Hughey at ahughey@bloomberg.net





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Merkel Unhurt by Spat as Germany Elects President From the East

By Tony Czuczka and Patrick Donahue - Mar 18, 2012 6:01 AM GMT+0700

Chancellor Angela Merkel is set to vote for a German president she rejected once already, shrugging off the setback to focus on state elections and crisis-fighting steps that are more likely to shape her chances of a third term.

The probable election today of Joachim Gauck, 72, a former pastor and East German anti-communist activist, would mean Europe’s biggest economy is headed for the first time by both a chancellor and president who grew up behind the Iron Curtain.

Germany's Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

German President Joachim Gauck, who had been a pro-democracy activist in East Germany. Photographer: Johannes Eisele/AFP/Getty Images

The vote also enables Merkel to dodge a conflict in her coalition that failed to dent her record-high approval ratings. Three state elections and a decision due by the end of the month on whether to back an expanded financial firewall against the crisis are her immediate challenges.

“She’s like Teflon,” Carsten Brzeski, an economist at ING Groep in Brussels, said in an interview. “Everything that could have been blamed on her hasn’t affected her at all.” Merkel “has shown that she can sit things out.”

A special federal assembly is due to convene in Berlin at noon today for the presidential election, the second vote for the mainly ceremonial post in less than two years. Gauck was the main opposition candidate in 2010, when he lost to Christian Wulff, Merkel’s pick. Wulff quit on Feb. 17 to face a criminal probe that may lead to corruption charges. He denies any wrongdoing.

The only other candidate this time is Beate Klarsfeld, 73. The German-born Nazi hunter living in Paris was nominated by the anti-capitalist Left party. With Merkel’s coalition and two opposition parties backing Gauck, his election is assured.

Stasi Hunter

Gauck, the son of a sailor who was sent to a Soviet Gulag for more than three years in the 1950s, grew up in the Baltic Sea port city of Rostock and became a leading figure of East Germany’s anti-communist opposition in 1989. He later gained a reputation as Germany’s leading “Stasi hunter” for his work in overseeing the opening of millions of files kept by informants of the communist-era Ministry of State Security.

“The central issue in the public life of Joachim Gauck has been that of freedom and responsibility,” Merkel said Feb. 20 when she announced his candidacy. “That’s what connects me to him personally, despite our differences.”

After expressing reservations about the opposition’s pick of Gauck, Merkel backed down last month when the Free Democrats, her junior coalition ally, supported him. By retreating and moving on, she tamped down a domestic distraction as European leaders were struggling to craft a second bailout for Greece.

Latest Poll Scores

An Emnid poll on March 11 showed national support for her bloc at 36 percent, a level last exceeded in 2008. Her FDP ally, which has seen voter support collapse amid leadership changes and a split over its stance on euro bailouts, had 3 percent backing after almost 15 percent in 2009. The main opposition Social Democrats had 28 percent and the Greens 14 percent.

“She checked it off the list in a hurry,” Manfred Guellner, head of the Berlin-based Forsa polling firm, said of the Gauck spat. “It didn’t harm the high approval she enjoys. When Merkel is alone on the stage saving the euro, that’s when she scores points.”

Next stop for Merkel is Saarland, where voters cast ballots on March 25 in the first of three German state elections this year. It’s followed by votes in the northern state of Schleswig- Holstein on May 6 and North Rhine-Westphalia, Germany’s most populous region, which with almost a quarter of the country’s 82 million people is a bellwether for the respective parties’ national fortunes before the federal election in 2013. While not yet scheduled, that vote will probably also take place in May.

Grand Coalition Redux

Merkel’s position is a turnaround from last year, when her national coalition was defeated or lost votes in all seven state elections as Germany’s involvement in the crisis stemming from Greece made it the biggest contributor to euro-region bailouts.

Polls now show the CDU and Social Democrats in a dead heat in Saarland, suggesting the CDU and SPD will ally to govern the region bordering France and Luxembourg in a “grand coalition,” mirroring Merkel’s first-term government.

That’s a constellation Germans like because they favor cooperation among the two biggest parties rather than conflict, making another grand coalition a possible outcome of the next national election in 18 months, Forsa’s Guellner said.

With the Free Democrats decimated, Merkel reached out to the opposition to agree on the presidential candidate, who is elected by a 1,240-member assembly of national lawmakers and state delegates that meets at the Reichstag building in Berlin.

The chancellor’s majority in the assembly has narrowed to as little as two seats from 21 seats in 2010, when Wulff defeated Gauck, according to election website wahlrecht.de.

To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net; Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net





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Lagarde Says World Can’t Be Lulled Into Sense of Security

By Bloomberg News - Mar 18, 2012 9:22 AM GMT+0700

International Monetary Fund Managing Director Christine Lagarde urged policy makers to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability.

“Optimism should not give us a sense of comfort or lull us into a false sense of security,” Lagarde said today at a speech in Beijing at the China Development Forum. “We cannot go back to business as usual.”

Christine Lagarde, managing director of the International Monetary Fund, speaks during a news conference in Beijing, China, on Thursday, Nov. 10, 2011. Photographer: Adam Dean/Bloomberg *** Local Caption *** Christine Lagarde

The IMF last week approved a 28 billion-euro ($36.6 billion) loan for Greece as part of a 130 billion euro second bailout by the European Union that requires more austerity and an overhaul of its economy. Greece completed the world’s largest sovereign-debt overhaul and agreed to deeper spending cuts to obtain new funds as it faces a fifth year of recession.

“The measures that were proposed are ambitious and it will be important to focus on steady rigorous implementation of the situation on the ground,” Lagarde said about Greece. “We have made important steps forward.”

Brent crude oil futures have rising 18 percent this year on concern Iran’s standoff with the West over its nuclear program will escalate into military action in a region that holds 54 percent of global petroleum reserves. Increased gasoline prices threaten to slow consumer spending in the U.S., tempering the recovery in the world’s largest economy.

Oil prices are “becoming a threat to global growth,” Lagarde said. “I think it’s a major threat.”

Praising China

Lagarde praised China’s rising leadership role in the world economy, while saying the world’s second-biggest economy must “continue shifting the drivers” of growth toward domestic consumption and away from investment and exports. China’s leadership should work to improve standards of living, she said.

The IMF chief said March 8 that the fund may raise its growth forecast for the U.S. on signs the recovery is picking up in new forecasts to be released in about a month.

“I wouldn’t be surprised if it was upward compared with our previous forecast of 1.8” percent for 2012, she said in an interview on the “Charlie Rose” show broadcast on PBS and Bloomberg Television.

The Washington-based IMF in January cut its global growth forecasts for this year and next and warned that the European debt turmoil could tip the world into another recession if it were to worsen. The fund has been seeking $600 billion from its members to be able to allow an increase in lending resource of $500 billion, to protect the world from consequences of the European debt crisis.

While euro nations have pledged about $200 billion, Group of 20 officials meeting in Mexico last month sided with the U.S. and said any decision on more funding hinges on the euro area delivering more of its own financial firepower first.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net





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U.S. Citizen Freed After Nine-Month Iraq Detention, UN Sa

By Nick Taborek and Flavia Krause-Jackson - Mar 18, 2012 4:24 AM GMT+0700

A U.S. citizen was handed over to the United Nations mission in Iraq by two Iraqi legislators, the UN said in an e-mailed statement.

The man had been held in detention for about nine months by an Iraqi group, the UN said in the statement, without identifying the group. The U.S. State Department said in an e- mailed statement an American was transferred to the U.S. Embassy in Baghdad from the UN mission in Iraq.

The UN and the State Department declined to identify the American. He was handed over today by Deputy Speaker of the Council of Representatives, Quasay Al-Suhail, and Maha al-Douri, a member of the Iraqi Parliament, according to the UN.

The Iraqi news agency Al Sumaria reported that the man was handed over by followers of the anti-U.S. Iraqi Shiite cleric Moqtada al-Sadr.

Without identifying himself, the man spoke at a press conference outside the Green Zone in Baghdad today, the Associated Press reported.

Iraqi lawmakers displayed U.S.-issued military and contractor ID cards that identified him as Randy Michael Hultz, the Associated Press reported. The Al Sumaria report said the man’s name is Randy Michael Hill, 59, a retired member of the U.S. military.

At the press conference the man gave few details of what he described as a “kidnapping,” or how he was treated while captured, according to AP. The man was taken into the Green Zone and turned over to the UN mission immediately after the press conference, AP said.

The kidnappers, the man said during the press conference, were from the Promised Day Brigade, a branch of the Mahdi Army, a militia that is controlled by al-Sadr, according to the AP.

The Al Sumaria report, citing al-Douri, said the man was freed after the withdrawal of U.S. troops from Iraq “to give a message about Iraq’s good intentions and to say that Iraq restored its sovereignty.”

To contact the reporter on this story: Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Ann Hughey at ahughey@bloomberg.net





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Goldman Sachs Board Must Act on Smith Op-Ed, Ex-Partner Writes

By Christine Harper - Mar 18, 2012 6:00 AM GMT+0700

Goldman Sachs Group Inc. (GS)’s directors must investigate a former employee’s allegations about a change in the firm’s culture, Jacki Zehner, who was a partner when she left the firm in 2002, wrote on her blog.

Zehner said she doesn’t know Greg Smith, the derivatives salesman whose New York Times op-ed piece blamed Chief Executive Officer Lloyd C. Blankfein and President Gary D. Cohn for fostering a “toxic and destructive” environment, causing Smith to quit last week. Zehner, who worked at Goldman Sachs for 14 years, wrote that she’s heard from “many people” in the past few years that the firm is emphasizing profits over character.

“These are very serious accusations from a credible person in my view and I hope it does indeed provide a ‘wake-up’ call to the board of directors,” wrote Zehner, who was the first female trader promoted to partner and is married to a former partner. She is now CEO and president of Women Moving Millions, a non- profit supporting the advancement of women and girls worldwide.

“It is the board that is accountable to shareholders and before they take another paycheck I hope they ask a heck of a lot of questions and get honest answers,” Zehner, 47, wrote in her March 16 commentary.

Blankfein, 57, and Cohn, 51, who have held their current roles since 2006, responded to Smith’s op-ed with a memo expressing disappointment with his assertions and cited a survey of employees that found most disagree. Still, “if an individual expresses issues, we examine them carefully and we will be doing so in this case.”

‘Verbal Hand Grenade’

David Wells, a spokesman at Goldman Sachs, declined to comment beyond the contents of the memo.

Janet Tiebout Hanson, who left Goldman Sachs after almost 14 years in 1993 and in 1997 founded the women’s networking firm 85 Broads, wrote her own blog response to Smith’s op-ed piece, calling it a “cowardly act.”

“By tossing a verbal hand grenade on his way out the door, he sullied the reputations of the vast majority of the people at the firm who work and live by the highest possible professional standards every single day,” wrote Hanson, who was the first woman at Goldman Sachs to be promoted into sales management. “He is just a quitter who never gave management an opportunity to respond before he verbally strafed the entire firm in print.”

Seek Some Answers

Hanson, 59, said she was “delighted” to become a Goldman Sachs client when she started an asset-management firm, Milestone Capital, in 1995. Milestone Capital had an “awesome relationship” with the fixed-income trading desks at Goldman Sachs, which she said was partly responsible for its growth the next five years.

“Greg Smith got his 15 minutes of lame fame, which is all it is,” she added.

In Zehner’s blog post, she said the board should decide how to respond to Smith’s accusations after they get some answers.

“If those answers are that the kind of behavior reported by Mr. Smith is not the norm, then they would have done their job, this story will fade and Goldman will go about its business for another 143 years,” she wrote. “If the answers are the opposite, heads should roll.”

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.




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