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October 9, 2001

Rebuilding Nation's Infrastructure will Boost Economy

The U.S. has the lowest debt-to-gross-domestic-product ratio of any developed country. That's one of the reasons why we can look for heavy spending on a landmark national legislation effort (a large-scale public investment program with a long-term economic impact), in addition to being a needed economic stimulus package.

According to a report by the American Society of Civil Engineers, America's infrastructure needs $1.3 trillion over the next five years to reach acceptable standards. So look for much more aggressive spending on highways, airports and energy transmission, not to mention the Department of Education's suggestion that over $300 billion is needed for rising enrollment and installing modern technological infrastructure.


September 11 Attack Shows
World's Interdependence And Vulnerability

Some 1.2 billion people in the world now subsist on less than $1 a day...the global benchmark for poverty, and that number will be increased by another 10 million, according to the World Bank.

The effects will be especially felt in countries dependent on tourism, foreign investment, remittances from citizens living abroad, and exports of agricultural commodities--notability countries in the Middle East, South Asia and Northern Africa.


Business 2.0 Says The Internet
No Longer Appealing To Financiers

In the November issue of Business 2.0, a 7-page article titled, "The 7 Habits of Highly Persistent Dot-coms" contends that now that the get-rich-quick prospects have evaporated, the Internet no longer holds much appeal for financiers.

The seven examples of what is needed to succeed today were all the opposite of the hubris of just 18 months ago...with a much greater awareness of the need for tightfistedness and a greatly reduced sense of grandiosity.

Geoffrey Moore, author of the best-selling book, Crossing The Chasm, explains today's web as "a huge flea market that is open for people to set up tables. This is not the time to put up a Wal-Mart on the Web," he admits.

Editor's Note: Backing up Moore's contention of a huge flea market is news from Amazon.com that their used-goods initiative, dubbed Marketplace, has been far more successful than its auctions. Last quarter Amazon said one out of ten customer orders in the U.S. were for used goods.

And eBay's online marketplace, once dominated by collectibles' traders, has veered decidedly toward the trading of items such as computers and electronics, including many new goods sold by liquidators and manufacturers.


Here And There. . .

  • David Peeler, chief executive of CMR, a New York research firm reports that TV networks gave up nearly $320 million in ad revenues in the days immediately following the terrorist attacks. James Marsh of Robertson Stephens estimates a larger number will be the final tally--upwards of $1 billion of lost advertising revenue as around-the-clock coverage focused on the attacks.

    (Networks took in $20 billion in national advertising in the 12 months through June 30, 2001. Local stations take in roughly $16.4 billion annually in advertising by national and local marketers that purchase "spot" time.)

  • The last time the world's three largest economies--Germany, Japan, U.S.--tanked together was in 1973, according to the Economic Cycle Research Institute in New York. The recession lasted 16 months in the U.S. and a month shy of two years for German and Japan.

  • Here's some interesting news from the friendly banking industry... Between 1994 and 1999 overdraft fees across the banking industry rose 17% to an average of $17.45, according to a survey by the Federal Reserve System's Board of Governors.

    While overdraft incidents cut across all economic backgrounds, it's really the poor, those least likely to afford such fees, that are really hurt by such exorbitant fees.

    With that in mind, one bank has decided to focus on long-term service relationships as opposed to transactional ones. Charter One is presently testing a program that tracks customers who regularly overdraw checking accounts, offering to slash their overdraft penalties by more than half.

  • Mobile-phone distributor CellStar Corp. is offering half of its common stock and $20 million in cash in exchange for $150 million of debt outstanding.

  • Southwest Airlines reports that the break-even point for their airline is a ridership of 55% to 60%, very similar to what occupancy rates are required for hoteliers to make their nut. (Percentages would be higher if an airline or hotelier has a high debt loan.)

  • MGM Worldwide Television Distribution is expanding its operations to capitalize on its enormous film and TV properties which include 4,100 feature films and 10,100 television episodes.

    Jeff Brooks will be responsible for licensing MGM's film and TV library to North American cable outlets. And Kim Sterton will manage the western region for all syndication, including barter and cash distribution and negotiating on television series and movie packages.

  • BXI Inland Valley Holiday Barter Fair is scheduled for November 18, for info call 909-592-7727. In Atlanta the "Holiday Spirit" trade fair is taking place October 21, phone 770-929-8500.

  • Here's another story on how fortunes change... American Greetings Corp. is buying rival Bluemountain.com for $35 million in cash just two years after At Home Corp. paid $780 million in cash and stock for the e-mail greeting card publisher.

 

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