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Hardy and Merced take an inside look at what happened at Autonomy Inc that resulted in the charge of $8.8 billion by H-P in Nov. 2012. The problems start with the hiring of Lee Apotheker, a former CEO of German software maker SAP, as H-P's new CEO in the beginning of 2011. This comes after CEO Mark Hurd is fired over relations with a female employee. Apotheker starts out within months of joining H-P with some precipitious moves that raise questions about his decisions- he dumps the new H-P tablet within weeks of joining, and follows this with a move to shift H-P out of its PC business and focus on software. To do this he pays ten times revenue for Autonomy Inc., a British software maker which has grown through acquisitions and not invested enough in advancements for its software, according to a piece by Al Lewis in the WSJ in August 2011. Autonomy's business is software that analyzes and finds patterns in voluminious data like e-mails, online data, web surfing. The tech community and analysts sees this as a risky investment from the start with Apotheker overpaying for Autonomy. Apotheker has failed to look at H-P's record in acquisitions with the failed Palm acquisition costing H-P over a billion dollars. H-P has a poor record of integrating companies. This proves to be especially true with Autonomy with founder Mike Lynch keeping a distance from Palo Alto headquarters by staying mostly in his London office. Apotheker is fired by the H-P Board within months of taking office and the Autonomy managers including Lynch leave H-P in the following months. Alarmed by a falloff in Autonomy sales, H-P's new CEO Meg Whitman sent a team in May 2012 to review the books of Autonomy. This results in finding "serious accounting improprieties." The problems are caught when a senior finance official at the London Autonomy offices points them out. What Autonomy did before selling out to H-P is to sell low end hardware servers at a loss, and disguise the loss by inflating marketing expense, resulting in marketing expenses going up just as it was trying to sell the company as a pure software company. Middle men who sold the Autonomy software reported sales that were made up and licensing revenue was taken before it was received. Analysts at Forrester Research say Autonomy had not invested in R&D, and did not make regular software releases, had poor customer relations, no regular customer feedback, and lacked transparency on future product plans. The question goes back to how did Apotheker make such decisions without giving enough time, with the due diligence reported to the head of strategy Robison and not the CFO as is normal, and how did he fail to catch the obvious failure to invest in the company R&D? Apotheker described his approach in a February 18, 2011 interview with the WSJ's Ben Worthen. He told Worthen a joke about the Swedish parliament where members discuss a proposal to move driving from the left to driving on the right, by doing this gradually. Apotheker's analogy turns out to be misplaced, his approach brash and dangerous, and the H-P's Board's confidence in their new hire misplaced. It turns out that H-P's previous CEO Mark Hurd came in for criticism for not investing enough in R&D. The money wasted in these acquisitions leaves H-P at a severe disadvantage for increasing investments in R&D when margins and sales are declining in the printer and PC business. On Nov. 20, 2012, H-P share price dropped 12% to under $12. H-P reported a $6.9 billion loss in third quarter 2012. Revenue for the full fiscal year declined 5% to $120.4 billon, and earnings declined 23% to $8 billion. ...

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The explosive issue of executive compensation where performance was a mirage. Here Louise Story of NYT says Merrill paid $5 billion to $6 billion in bonuses in 2006. A huge amount with bonuses sometimes running 100 times salary. Sow Kim with asalary of $350,000 had a bonus of $35 million.

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Analysts at Citigroup predict that Bank of America might record a$3.6 billion loss for fourth quarter 2008. It appears that Bank of America may have overreached in acquiring 2 troubled firms Countrywide and Merrill. WIth $25 billion in TARP funds already given to Bank of America, Bank of America has informed Treasury that without additional funding it may not be able to complete the acquisition of Merrill. Treasury and Bank of America are negotiating these additional funds. Meanwhile Goldman Sachs analysts estimate worsening losses from the credit and financial crisis. Losses says Goldman economists could reach $1.1 trillion from residential mortgages alone up from $780 billion earlier estimate. Adding in losses from commercial real estate, credit cards, auto and business debt could send this figure up to $ 2.1 trillion. And bad overseas loans of US institutions would be additional to this. Not surprisingly Fed Chairman Bernanker would like to see much of the second half tranche of $350 billion in TARP funds ging to stabilize the financial system....

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Efforts to get back on track where TARP started in the first place, with the goal now to rid banks of troubled assets by putting them in aseparate institution.

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On December 17 Kenneth Lewis CEO of Bank of America arranged a urgent meeting with Treasury's Paulson and the Fed's Bernanke to discuss unexpected losses in the billions at Merrill. Paulson and Bernanke persuaded Lewis not to scrap the deal and offered a $138 billion package not to scrap the deal. The deal then closed at $24 billion. Was it abad idea not to disclose the bad news immediately? It certainly proved to be the just that. In five trading days Bank of America's market capitalization dropped 45% wiping out a much bigger sum than the Merrill deal. Lewis says that the government was firm in its view that serious systemic harm would result if Bank of America did not close on the deal. Law suits from shareholders could result from this but says one legal expert a legal doctrine could emerge that in anational economic emergency companies are absolved from governance actions harmful to shareholders like nondisclosure of critical information. Which only shows how complicated situations can get once everythings spins out of control starting from the basic fact of bad opaque assets on the company's books, taking any form of rational action and behaviour with it with a million unpredictables....

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The impact on stock markets around the world of the protests in Egypt. The Nikkei fell 1.5%, the Kospi index fell 1.5%, on Jan 31, and the Dow Jones average fell 166 points on Friday Jan 28, 2011. Oil prices increased by 3.7% to $89.34 during the week of protests in Egypt. The Bipartisan Policy Center in Washington estimates a 5% increase in the price of oil takes away $5 billion dollars from the US economy. Sam Stovall, chief investment strategist at Standard & Poor's Equity Research, says that a boxer rarely gets knocked out by a punch he is expecting, and this could be what starts a decline after the market fought off fears from sovereign debt crises in Europe and interest rate increases in China. What makes Egypt significant? The Suez Canal is ony a 1000 feet wide at the narrowest point. Supertankers carrying oil do not pass through the canal but rely on smaller vessels and on the Sumed pipeline. About 2.9 million barrels of oil a day, 2.6% of global oil production passed though the Suez Canal and the pipeline according to the US Energy Department. Because prices are determined at the margin this is a lot of oil, especially considering the global spare production capacity is only 2.5 millon barrels a day. The immediate impact would be on Europe which gets much of the oil refined in the Middle East and shipped using the canal and pipeline. Egypt is also a major importer of wheat, importing more wheat than any other country. Any increase in imports to placate consumers would increase wheat prices. Already wheat prices are impacted by floods in Australia, a long drought in Argentina, and forest fires in Russia. Inflationary impact of rising food prices has been felt in China, India and other countries....

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The May 6 episode of the stock market plunge of 900 points in the U.S. and then recovering had the effect of rattling investors nerves especially retirees. The impact of this episode is recorded in the experience of one Charles Schwab broker office in Englewood, Colorado. By the end of that day this broker had 50 calls on his answering machine from a fifth of his clients, all seeking to know what happened. Charles Schwab, who helped launch a period of individual investing in the U.S. after 1982 by cutting fees and going after the average investor, (along with others like Jack Bogle of Vanguard Funds), is also on edge. He says he has not seen anything like this since his early days. Schwab confirms Yale Prof. Shiller who says (see link) that his index for markets shows a lot of nervousness. Saying that 98% of people are still very concerned, coming after the May 6 incident, and the Greece and eurozone crisis that impacted US stock markets. One other factor he points out is the constant flow of headlines that suggest certain business people engaged in fradulent practices, something that fuels a lack of trust. Charles Schwab ponders from his office across the San Francisco Bay Bridge, whether words like safety and soundness mean anything anymore. Another factor of concern, Bogle points out, is that institutional investors now own 70% of American corporations, up from 35% in 1975. And the advantage has veered sharply in their direction as institutions, hedge funds, and investment banks trade on their own account, with wealth moving in that direction. This leaves the individual investor and especially the retiree or those about to retire in a severe predicament....

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Barry Schwartz, a Psychology Professor at Swarthmore College, and author of Paradox of Choice: Why More is Less, points out that the 35 years of research shows that you get exactly what you pay for, but it turns out to be the opposite of what you want, and there are a lot of ways that incentive based compensation can go wrong. In theory choosing a parameter like share price and creating incentives to promote shareholder interests through higher share price as a measure of executive performance is reasonable, but it assumes that there is no manipulation of share price, or other external factors do not distort the measure of performance. In reality you get a situation like Merrill Lynch and other financial firms that gave out huge bonuses and executive pay even while bad decisions- that were later to sink the firms- were being incentivized. Schwartz points to research worldwide by Bruno Frey, Oberhozer-Gee, Uri Gneezy, James Heyman and Dan Ariely, that shows that incentives tend to remove the moral dimension from decisionmaking. Heyman's reaearch showed that when people offer passers by a token payment for help lifting a couch from a van, they are less likely to lend a hand when they are offered nothing. The question people ask themselves he says when money isn't part of the equation is very different he says: what are my responsibilities, what should I do that will fulfill these responsibilities to other people and to my country? In his view even though we put a lot of faith in incentives as a society to influence behaviour in a positive way, they actually do the reverse. Even if they work for some time, after a while some people who have fewer scruples learn ways to game the system and gradually distort the way it functions, leading to perverse results endangering all....

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The authors of this article say 2.4 million excess houses over and above nomal working inventories remain to be sold, and it is this surplus that is a mortal enemy of housing prices. US buyers are too debt ridden and have seen their 401 K's and pensions decline. So they suggest giving permanent resident status to immigrants who will invest in US housing, buy one or more than one house. They did not have to live in them, they also could not rent them, and would have to be above a certain price, so they would be taken off the housing market. They are aware of the effect on Vancouver of letting people from Hong Kong buy into that market, just before the handover to China. About a quarter of Vancouver's population became Chinese, and billions were invested in the housing market. They quote Merrill Lynch that there are 7.1 million households in the world with $1 million in financial assets, with a total of $29 trillion. They figure that 2.4 million excess houses could be sold at a median price of $184,000, and bring in billion sof dollars. If jobs are not impacted, and wealthy people in Asia and the rest of the developing world were to put money into buying houses of above $184,000 as an asset, with a temorary residency attached to it which could be permanent in 5 years, this could be part of the overall solution to the housing excess supply. The fact that values are attractive could make this an investment for affluent foreigners who may not stay in the houses at this time and keep it as a safe haven house, an additional property to use in the USA. It would ease the hosuing price situation in certain cities by bringing in a new buyer with resources into the market. ...

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GM plans to bring the Chevy Volt, a plug in type of car that will run more on the battery than the Toyota Prius- which uses gasoline support as soon as it picks up speed- to market in 3 years. But it doesn't yet know how it will do it. What created the opportunity is that Toyota is having a hard time of its own trying to figure out a battery that can provide more electric power, more punch, that would raise the Prius mpg from 46 to about 80 mpg. Its lithium ion technology batteries to achieve this haven't passed the safety tests so Toyota is pushing this back to 2011. This created a opportunity for GM to come up with its own for a plug in Chevy Volt. Its looking a small companies in the US that might supply these batteries. GM has come up with 2 consortiums of suppliers, one from MIT called A123 that is based on the work of MIT Prof.Yet-Ming Chinag who works with iron phosphate technology that is less prone to fires and safety issues. The other is led by S. Korean chemical maker LG Chem. Toshiba is working on research for a lithium ion battery for cars that will be safe on the Japanese side. It is not clear how this will turn out because batteries for laptops have had fires and safety issues, but the R&D is on in earnest for a new safe electric battery for cars. And automakers know its not just about an electric car. On it rests the image and innovation leader perception that is so important in marketing that no amount of advertising can fix, as the US automakers have learned to their extreme grief. ...

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Reliance Jio launches a high speed broadband service in India with annual plans for subscribers ranging from $10 to $118 a month for speeds from 100 Mbps to 1 Gbps. The prices are about one tenth of prices in Europe and the U.S. In 2016 mobile network prices dropped after Reliance introduced lower pricing. The new launch provides streaming services using high speed internet. Reliance Jio is taking on telecom companies, as well as streaming platforms. It is now the largest telecom company in India with revenue of $1.6 billion in the quarter ending June 30, 2019.  The free trial offer from Reliance Jio is 100 Mbps connection free, along with Jio apps. There is a 100 Gigabyte quota, with free 40 GB at a time 24 times- a total of 1000GB free. The only charge is a refundable deposit of 2,500 rupees ($35) for the router. Giveaways include high definition or LED television  and 4K setup box. 15 million people have registered for the service. Reliance Jio is aiming for 20 million residential users and 15 million businesses across 1600 towns in India. Reliance playbook is to launch aggressively with low prices and establish a dominance in the market. It did this in 2016 with free trial offer bringing in 100 million customers in the first 6 months. Today Reliance Jio service has 340 million customers who spend 30% more than other operator's such as Airtel and BSNL.   By cutting data prices in India sharply to one tenth of world prices Jio has created a completely different market and one in which there are only 3 or 4 smaller competitors in that space. Bringing down prices for users and enabling India to jump ahead in internet use in ways similar to that of South Korea, Finland, China.   ...

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Under the $3.5 trillion workers and families plan, $1.3 trillion are already being used to finance investment projects across the US. The city of RIchmond, Virginia, is shown here in this NYT report and the projects underway in Richmond which get $155 million. One of the projects is for $20 million to build a dream complex which can provide child care and community college classes. Decaying neighborhoods will get the investment needed for renewal, which will change how America looks. Earlier reports in WSJ showed the new ways in which underfunded infrastructure is finally getting the funding needed in communities across the US under the Biden Plan, and how each city has a list of projects that were ready to launch.  Yet this report in NYT says most Americans are unaware that this is happening.

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The BBC's Soutik Biswas takes a look at prime minister Modi as he seeks a second term in India's general election in May 2019.  Modi's first term is marked by exceptional development schemes, efforts to provide health insurance to 500 million people who cannot afford health insurance, bringing cooking gas cylinders to hundreds of millions of Indian women especially in rural areas, efforts to jumpstart building of infrastructure projects such as airports and metro subways. A new law for GST brings together the country with one tax instead of a hodge podge of state taxes for interstate commerce, something India needed for a long time but different governments failed to implement. A failed effort to fight corruption by removing from circulation large denomination currency notes reduced economic growth briefly during the first term, though it may have accelerated the shift to formal economy needed in the long run to improve tax revenues for development needs. One of the problems for the Modi government is how do you put a value on something like Swach Bharat Mission, the achievement of the goal of defecation free India in 2019 by 100% on the 150th anniversary of the birth of Mahatma Gandhi, getting rural toilets up from 38% to 100%. Development had to start from the bottom up. Similarly in a country where middle men took up a lot of the transfer to poor families of government assistance- the delivery to hundreds of millions their own bank accounts.- how do you put a value on something like this, but it is essential for development from the ground up. More than missiles or other talk this has got to be the spirit of any development oriented administration in India. Ground up, big goals and rapid delivery and an apology for the difficulties that the people suffered earlier for lack of this infrastructure. For both China and India it is the same - moving quickly to make up for 100 years of colonial rule and stagnation. The Modi government has responded to rural farmer distress with support for guaranteed crop prices. As more young voters vote for the first time an important factor is how the new voters see the years ahead under either a government led by the BJP or by a patchwork of parties as the previous ruling Congress party depends on alliances with other parties with conflicting agendas or lack of rapid development agendas. The Modi government sees itself as setting the stage for the next phase of development that would change the economy through new infrastructure development and create jobs in construction and engineering, and other areas. The criticism is that not enough jobs were created in the first term. Yet bold infrastructure development targets such as transformed the Chinese economy could be the answer for job creation. The question then is who is better qualified to launch that effort based on its track record. The Congress party's main criticism is that it has to make alliances with parties that could stall development with conflicting agendas. The other is that in the the 2 years leading to the election of Mr. Modi the Congress led government of Manmohan Singh was stalled due to corruption charges, leading to a lack of decisionmaking at the highest levels, and stalled efforts for the rapid development that could deliver the kind of jobs India needs.  Young Indians would like to see growth first and foremost, only something rivalling China's transformation over 2 decades can do this. It should be kept in mind that China poured more concrete in the 21st century so far than all the concrete the United States poured in the 20th century, according to The Guardian report. The question then is who is best qualified and in a position to deliver this needed economic miracle.    ...

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Nokia slips into seventh place in the smartphone market in Nov. 2012, as Apple and Samsung take the lead with combined 46.5% market share, and HTC, RIM overtake Nokia. Nokia has only 4.3% of the smartphone sales worldwide. Smartphones now account for about 40% of all mobile phone sales worldwide according to Gartner Inc., and sales are growing fast with a 47% increase in global smartphone sales in the third quarter according to Gartner Inc. Worldwide 169.2 million smartphones were sold in the third quarter of 2012. Microsoft operating system and Nokia's Symbian system account for only 5% of the operating systems on smartphones in the third quarter 2012, says Gartner. By comparison Google's open end Android platform accounts for 72.4% of smartphones, increasing from 52.5% the prior year.

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Feldstein says GDP growth was smaller than the 1.8% that was reported for the 1st quarter of 2011, because two thirds of that 1.8% went into business inventories and not for sales to consumers or final customers. This means final sales growth at an annual rate of 0.6% and actual quarterly increase of 0.15%. With mostly inventory investment and not much response from the consumer he says business cannot be persuaded to hire and invest. A closer look at the numbers shows the growth was in February and March, with declines in April for real wages, durable goods orders and manufacturing production, existing home sales, and in real per capita disposable incomes. Feldstein sees the Obama administration's failure in several areas. The stimulus could not make up in size and structure for the loss of annual consumer spending of $500 billion and loss in housing construction of $200 billion. At $300 billion in 2009 and $400 billion in 2010 it was not enough to fill the huge gap presented by the financial crisis. President Obama allowed the Democratic leadership in Congress to put together a package that while adding to the deficit added less than a dollar to GDP for every dollar of stimulus. The stimulus lacked punch for economic growth as it consisted more of transfers to state and local governments, transfers to individuals, temporary tax cuts for low income people etc. The lack of a plan to reduce the deficit by creating higher uncertainty about future tax rates and interest rates has hurt the economy. The President's health legislation with the cost of $1 trillion over 10 years diverted much needed time, attention and bipartisan goodwill from the core issues of unemployment and the deficit. The Obama administration also did not tackle the housing issue as suggested by Feldstein with specific proposals in the first year of the Obama administration, with very little done to reduce the millions of foreclosures that have kept housing in a prolonged slump. ...

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Its going to be very difficult to adopt the bad bank option in current circumstances, where the banks find their situation continually and rapidly deteriorating with renewed loss of public confidence and collapsing share prices. The efforts with the first TARP under Treasury Secretary Paulson to isolate the toxic assets of banks did not take off and had to be diverted to capital injections for precisely this reason. Banks in November and December 2008 went through a continually escalating problem situation, with losses, collapsing share prices and so on, and the government had no breathing room to develop the bad bank solution. In some cases decisions had to be made in a few days to prevent the collapse of some banking institution like Merrill Lynch, Morgan Stanley or Citicorp. At the same time its very clear that there can be no restoration of confidence in lending, and no recovery, without lending by banks, without a bad bank to separate these toxic assets from the banking system in the USA. The Swedish and American example in the 1990's of a bad bank, was possible because the banks were either gone bust, or under government ownership. With the banks in private hands, it is somewhere between difficult to impossible to value these toxic assets without serious problems. So nationalizing these banks becomes the only serious option, which would become more acceptable as the crisis unfolds in 2010, and it becomes clear that one way or another the government is guaranteeing these assets. Banks are in reality entirely dependent on the US government for capital and support, and it would not be wise to pretend otherwise. The safest and most direct option would be to mitigate the risks of nationalization, with prudent safeguards, and develop the bad bank option with the government in ownership of banks, in which case the bad bank option can proceed quickly. ...

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As German chancellor Merkel pointed out at the EU summit, all central European states and Eastern European staes are not doing the same. Czech Republic and Poland are doing relatively better, Hungary, Romania and the Baltic Countries are in serious crisis. And smaller Slovenia and Slovakia are part of the core countries in the EU which use the euro. The Baltic countries are looking to Sweden to help and the Swedish Finance Minister has said it is the political responsibility of Sweden to help the Baltic countries, which Sweden should consider as part of the home region. Romania is looking to a reluctant Germany for help. And voices in Europe are asking if it isn't the political responsiility of Western European countries like Germany to help, and if not what does it mean to be part of the European Union? The Eastern European countries caught up in this crisis with their currencies losing value and large loan repayments to western European banks, feel they embraced the liberal capitalist model without any knowledge or experience with its fluctuations and crisis prone nature, as part of the integration into a united Europe. Now they are left they feel, to drift on their own. The recent emergency European summit meeting in Brussels saw the Czech prime minister Topolanek, who holds the rotating presidency of the EU, say that no member would be left in the lurch, and the need to avoid a dividing line in Europe that North-South or East-West. The Hungarian prime minister insisted on a special European Union fund of upto $241 billion to protect the weakest members, and circulated a paper saying that Central Europe's refinancing needs for 2009 were $380 billion. So far the governments of the EU have already spent $380 billion in bank recapitalizations and put up $3.17 trillion to guarantee bank's loans and to get credit moving again. And the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank have promised $31.1 billion to Eastern European countries....