Fixed annuities are a contract with an insurance company, wherein a customer gives the company a lump sum and receives a set interest rate for a period of time. Generally, participants have to keep their money in the annuity for seven to ten years, or have to pay a surrender fee when they withdraw it. Some annuities allow users to withdraw a certain amount for free each year.
Although most famous for its breakfast cereals, General Mills actually provides a wide array of home cooking products, ranging from the old-fashioned to the organic and from raw ingredients to fully-prepared meals. As such, it is positioned to experience massive growth as recession-plagued former restaurant customers start cooking at home and economizing home chefs move away from pricey prepared dishes.
The company is predicting that its 2010 adjusted net will increase by as much as 7%, a move that will yield a jump of up to 27 cents per share, from $3.98 to $4.25. For General Mills, at least, the recession looks like a fantastic growth opportunity.
The irony continues, as it appears that AIG's headquarters at 70 Pine Street may soon be the site of condominiums (presumably, they will not be purchased with subprime mortages). According to reports, the space was sold for approximately $100 million to an overseas company that plans to transform it into a mixed-use development including both retail and residential spaces.
On Sunday, the latest edition of Nintendo's (OTC: NTDOY) DS portable gaming system hit stores. In the aftermath of the release, questions are emerging about where the company is heading and what its platform will ultimately become.
There is little question that the DSi will be a big hit. One of the harsher reviewers, The LA Times' Pete Metzger, criticized the matte finish and stated that the machine's advances were "evolutionary," but not a must-have. Even so, he gave it a strong A-.
This attitude was echoed by another tough reviewer, The Globe and Mail's Chad Sapieha, who questioned whether the DSi was really worth the extra money, but seemed confident that the gaming system would be a resounding success.
Frankly, it's easy to overlook the Kindle. At more than $300, it is prohibitively expensive for many consumers in today's market; further, as Bloggingstocks columnist Joseph Lazzaro notes, there is nothing quite like curling up with a nice book, and the current Kindle doesn't quite make the grade. The little reader suffers from a too-small screen, a too-high price tag, and is an insufficient translator of the holistic "reading experience" that true bibliophiles adore.
While tales like Stephen Schwarzman's million dollar birthday and Dick Fuld's five homes tend to capture the public's attention, these outrageous expenditures are only the tip of the iceberg. From $175 hamburgers at the Wall Street Burger Shoppe to John Thain's $1.22 million office redecoration, it has become increasingly clear that New York's financial workers have spent the last few years living in a completely alien world. What's more, they are either unable or unwilling to adapt to the changing realities of America's economy.
Regardless of whether we're talking about the Ford Motor Company's (NYSE: F) decision to focus its attention on cars (to the detriment of its truck lines), Chrysler's decision to channel stuff its dealerships, or General Motors' (NYSE: GM) decision to sit on its fuel cell cars, Detroit seems determined to misjudge the economy and the customers.
At their best, the three have minimized innovation while milking their successes. At their worst, they have spent time and money on expensive acquisitions or dead-end technologies, to the detriment of their bottom line.
Now, I'm not a total rube. I never thought for a second that this connection was the result of random chance or pure romance. After all, there is nothing like a model to enhance the reputation and self-image of a hedge fund manager. Conversely, after Baywatch went off the air, financial-sector employees became the ultimate means for aging models to parley their looks into long-term financial security. Both groups have something to offer the other; while this may not be the basis for true love, it certainly serves as a stable foundation for a business arrangement.
I got my first clue that something was up back in September, when Lehman Brothers filed for bankruptcy. Amid scandals over bailouts and backroom deals, congressional testimony and AIG retreats, one figure quickly emerged from the mass of bloated plutocrats and greedy execs clamoring for bonuses. Everything about Dick Fuld, from his cartoonishly aggressive management style, to his whining over Congress' refusal to bail out Lehman, to his striking resemblance to Rocky and Bullwinkle's Fearless Leader, made him the perfect poster boy for corporate greed. As more details leaked out, including the story about Fuld being pummeled by one of his employees, much was made of his name. In the public mind and this writer's heart, Richard Fuld was permanently transformed into a complete Dick. All in all, I was hardly surprised to see Lehman fold.
Another clue came when the story leaked out that Merrill Lynch CEO John Thain tried to collect a $10 million bonus. The fact that this bonus was, supposedly, based on Thain's performance in a year when Merrill lost billions of dollars made Thain's chutzpah almost legendary. My wife, who has had dealings with Thain in the past, noted that this aristocratic sense of entitlement permeated every single one of their interactions. I, on the other hand, couldn't help but remember the words of the witches in Macbeth, who hail the Scotsman as Thane of Cawdor, Thane of Glamis, and King hereafter. There seemed to be something ironic about an ambitious, clawing Thain who so clearly felt himself deserving of the spoils of war.
There have since been others. For example, when I first heard of Bernie Madoff, I thought nothing of his last name. However, when I learned that the proper pronunciation isn't "MAD-off" but rather "MADE-off," I couldn't help but laugh. For somebody who "made off" with billions of dollars, Bernie has a name that would put Dickens to shame. Following him, of course, there's been Joseph Forte, the Ponzi schemer who put on a "strong" front, but couldn't hide the fact that making money wasn't his forte. Frankly, punning off these guys is so easy that it's almost embarrassing.
While these three narratives all contain a certain measure of truth, most people tend to choose one and stick with it. Personally, having been given the hard sell from a predatory lender, I tend to allot them a fair bit of the blame. Moreover, having watched the bailout farce unspool over the past few months, I feel a certain amount of disgust at the behavior of financial institutions that treated the housing bubble like a license to print money, but are now begging for taxpayer money to save their ailing companies. Needless to say, this feeling is only compounded by the fact that some of the bailout money has been used to pay for bloated executive compensation packages. Added to this, the lack of transparency in the bailout is somewhat terrifying; given the recent behavior of these financial institutions, I can't completely discount the possibility that they're blowing the dough on booze and hookers.
The latest stage in this saga occurred a few days ago when commercial real estate developers began lobbying for a bailout. Citing slowly rising delinquency rates and the pending due dates of various mortgage-backed securities, they are in the beginning stages of painting what is sure to be a dire, apocalyptic vision of the horrifying disasters that will befall the world if they should go under.
As the SEC attempts to assign blame in finest Three Stooges form, it's worth noting that this is hardly the first time that a lack of serious governmental regulation has reared its ugly head this year. At the moment, mobs are currently clamoring for Dick Fuld's head, with a healthy side order of Hank Greenberg, John Thain, John Mack, Lloyd Blankfein, Jimmy Cain, and pretty much everyone who works in New York's financial district. The general perspective seems to be that these men engaged in business practices that ran the gamut from risky to actionable and now should be forced to pay for the economy that they have ruined.
Any intelligent person recognizes that a Ponzi scheme is, essentially, suicidal. Even in a consistently strong market, there will come a day when people will withdraw from the fund, investigators will shut it down, or the financial house of cards will fall apart. The best that a Ponzi schemer can hope for is that he will die before he is caught or will somehow be able to pull out all funds and make a run for it. In the case of Bernard Madoff, it's pretty clear that he was counting on the former. While this didn't work out, one could make a strong argument that Madoff's life currently isn't worth a plugged nickel: even if he somehow survives the next few months without suffering a massive coronary, chances are that a former investor or fellow inmate (or both!) will soon introduce him to the business end of a shank.
That was in 2004.
Thinking about it, my wife and I soon realized that those were a lot of ifs; while we wanted the house, we knew that we couldn't base our financial future on a deck of cards. After turning down the offer, I thought more and more about it and began to get worried. If a lot of people were buying into the kind of mortgage that my wife and I had declined, and if they had similar expectations about refinancing when their rates went variable, then it seemed likely that the mortgage industry was sitting on a major time bomb.
We are unfortunately not privy to the backroom deals and promises that are passing between Treasury Secretary Henry Paulson and the honchos who are benefiting from the government's massive bailout. However, two things are becoming increasingly clear: first, the financial industry has not gotten the memo about changing their business practices, and, second, the $700 billion in tax money that is keeping these companies afloat is not finding its way down to the average citizen. The big bailout was originally sold as a desperate maneuver to keep Wall Street afloat. Paulson has indicated that these funds would enable lending companies to service their toxic debt and, in turn, continue lending. In this way, America would be able to count on the credit that kept it running; businesses would be able to meet their payrolls, people would be able to buy houses, and the world would continue to turn.
Instead, some banks seem to be going on a buying spree, snatching up smaller, less successful institutions while prices are low and the getting is good. Citigroup (NYSE: C), for example, used the Wall Street fire sale to make a bid for Wachovia and pick up Forum Financial, shortly before asking for a second huge bailout. Similarly, Bank of America (NYSE: BAC) has decided to take over Merrill Lynch. A clever MBA could, undoubtedly, filter these purchases through a secret capitalism decoder ring and come up with a logical reason for them, but one wonders how gobbling up companies (and their toxic debt) is likely to help Bank of America and Citigroup to stay afloat, much less enable them to extend money to consumers. It is becoming clearer and clearer that the huge influx of taxpayer money is less about saving consumers than it is about enabling big companies to get even bigger.