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Tuesday, January 31, 2012
Ryman Auditorium getting new stage after 61 years
[unable to retrieve full-text content]NASHVILLE, Tenn. (AP) ? It's time for a new stage at Ryman Auditorium, a significant moment in the history of a building known for its significant moments.
New Economic Perspectives: MMP #34 Functional Finance and ...
MMP #34 Functional Finance and Exchange Rate Regimes: The Twin Deficits Debate
By
L. Randall WrayIn the previous weeks, we examined the functional finance approach of Abba Lerner. It is clear that Lerner was analysing the case of a country with a sovereign currency (or what many call ?fiat? currency). Only the sovereign government can choose to spend more whenever unemployment exists; and only the sovereign government can increase bank reserves and lower (short term) interest rates to the target level. It is important to note that Lerner was writing as the Bretton Woods system was being created?a system of fixed exchange rates based on the dollar. Thus it would appear that he meant for his functional finance approach to apply to the case of a sovereign currency regardless of exchange rate regime chosen. Still it must be remembered that all countries in Lerner?s time adopted strict capital controls. In terms of the ?trilemma? they had a fixed exchange rate and domestic policy independence, but did not allow free capital flows. We have seen that domestic policy space is greatest in the case of a floating currency, but that adopting capital controls in combination with a managed or fixed exchange rate can still preserve substantial domestic policy space. That is probably what Lerner had in mind. Most countries with fixed exchange rates and free capital mobility would not be able to pursue Lerner?s two principles of functional finance because their foreign currency reserves would be threatened (only a handful of nations have amassed so many reserves that their position is unassailable). Managed or fixed exchange rates, with some degree of constraint on capital flows, can provide the required domestic policy space to pursue a full employment goal.We conclude: the two principles of functional finance apply most directly to a sovereign nation operating with a floating currency. If the currency is pegged, then the policy space is more constrained and the nation might have to adopt capital controls to protect its international reserves in order to maintain confidence in its peg.The US Twin Deficits Debate. Deficit hawks in the US frequently raise three objections to persistent national government budget deficits: a) they pose a solvency risk that could force to government default on its debt; b) they pose an inflation, or even a hyperinflation, risk; and c) they impose a burden on our grandkids, who will have to pay interest in perpetuity to the Chinese who are accumulating US Treasuries as well as power over the fate of the Dollar. This often leads to the claim that the US Dollar is in danger of losing its status as international reserve currency. We have seen that national budget deficits and debts do not matter so far as national solvency goes. The sovereign issuer of the currency cannot be forced into an involuntary default. We also have dealt with possible inflation effects of deficit spending (more on that later). To summarize that argument as briefly as possible, additional deficit spending beyond the point of full employment will almost certainly be inflationary, and inflation barriers can be reached even before full employment. However, the risk of hyperinflation for a sovereign country like the US is low. Later we will address the connection among budget deficits, trade deficits and foreign accumulation of treasuries, the interest burden supposedly imposed on our grandkids, and the possibility that foreign holders might decide to abandon the Dollar.Let us set out the framework thoroughly examined in previous blogs. At the aggregate level, the government?s deficit equals the nongovernment sector?s surplus. We can break the nongovernment sector into a domestic component and a foreign component. As the US macrosectoral balance identity shows, the government sector deficit equals the sum of the domestic private sector surplus plus the current account deficit (which is the foreign sector?s surplus). We will put to the side discussion about the behaviors that got the US to the current reality?which is a large federal budget deficit that is equal to a (large) private sector surplus (spending less than income) plus a rather large current account deficit (mostly resulting from a US trade balance in which imports exceed exports).There is a positive relation between budget deficits and the current account deficit that goes behind the identity. All else equal, a government budget deficit raises aggregate demand so that US imports exceed US exports (American consumers are able to buy more imports because the US fiscal stance generates household income used to buy foreign output that exceeds foreign purchases of US output.) There are other possible avenues that can generate a relation between a government deficit and a current account deficit (some point to effects on interest rates and exchange rates), but they are at best of secondary importance if not wrong. To sum up: a US government deficit can prop up demand for output, some of which is produced outside the US?so that US imports rise more than exports, especially when a budget deficit stimulates the American economy to grow faster than the economies of our trading partners.When foreign nations run trade surpluses (and the US runs a trade deficit), they are able to accumulate Dollar denominated assets. A foreign firm that receives Dollars usually exchanges them for domestic currency at its central bank. For this reason, a large proportion of the Dollar claims on the US end up at foreign central banks. Since international payments are made through banks, rather than by actually delivering US federal reserve paper notes, the Dollars accumulated in foreign central banks are in the form of reserves held at the Fed?nothing but electronic entries on the Fed?s balance sheet. These reserves held by foreigners (mostly, central banks) do not earn interest.?Since the central banks would prefer to earn interest, they convert them to US Treasuries?which are really just another electronic entry on the Fed?s balance sheet, albeit one that periodically gets credited with interest. This conversion from reserves to Treasuries is akin to shifting funds from your checking account to a certificate of deposit (CD) at your bank, with the interest paid through a simple keystroke that increases the size of your deposit. Likewise, Treasuries are CDs that get credited interest through Fed keystrokes. In sum, a US current account deficit will be reflected in foreign accumulation of US Treasuries, held mostly by foreign central banks. You can see the evidence here, in Figures 2 and 3: ?While this is usually presented as foreign ?lending? to ?finance? the US budget deficit, one could just as well see the US current account deficit as the source of foreign current account surpluses that can be accumulated as treasuries. In a sense, it is the proclivity of the US to simultaneously run trade and government budget deficits that provides the wherewithal to ?finance? foreign accumulation of US Treasuries. Obviously there must be a willingness on all sides for this to occur?we could say that it takes (at least) two to tango?and most public discussion ignores the fact that the Chinese desire to run a trade surplus with the US is linked to its desire to accumulate Dollar assets. At the same time, the US budget deficit helps to generate domestic income that allows our private sector to consume?some of which fuels imports, providing the income foreigners use to accumulate Dollar saving, even as it generates Treasuries accumulated by foreigners. In other words, the decisions cannot be independent. It makes no sense to talk of Chinese ?lending? to the US without also taking account of Chinese desires to net export. Indeed all of the following are linked (possibly in complex ways): the willingness of Chinese to produce for export, the willingness of China to accumulate US Dollar-denominated assets, the shortfall of Chinese domestic demand that allows China to run a trade surplus, the willingness of Americans to buy foreign products, the (relatively) high level of US aggregate demand that results in a trade deficit, and the factors that result in a US government budget deficit. And of course it is even more complicated than this because we must bring in other nations as well as global demand taken as a whole. While it is often claimed that the Chinese might suddenly decide they do not want US treasuries any longer, at least one but more likely many of these other relationships would also need to change. For example it is feared that China might decide it would rather accumulate Euros. However, there is no equivalent to the US Treasury in Euroland. China could accumulate the Euro-denominated debt of individual governments?say, Greece!?but these have different risk ratings and the sheer volume issued by any individual nation is likely too small to satisfy China?s desire to accumulate foreign currency reserves. Further, Euroland taken as a whole (and this is especially true of its strongest member, Germany) attempts to constrain domestic demand to avoid trade deficits?meaning it is hard for the rest of the world to accumulate Euro claims because Euroland does not generally run trade deficits. If the US is a primary market for China?s excess output but Euro assets are preferred over Dollar assets, then exchange rate adjustment between the (relatively plentiful) Dollar and (relatively scarce) Euro could destroy China?s market for its exports. This should not be interpreted as an argument that the current situation will go on forever, although it could persist much longer than most commentators presume. But changes are complex and there are strong incentives against the sort of simple, abrupt, and dramatic shifts often posited as likely scenarios. The complexity as well as the linkages among balance sheets ensure that transitions will be moderate and slow?there will be no sudden dumping of US Treasuries?that would destroy the value of the financial wealth held by the Chinese, as well as the export market they currently rely upon.Before concluding, let us do a thought experiment to drive home a key point. The greatest fear that many have over foreign ownership of US Treasuries is the burden on America?s grandkids?who, it is believed, will have to pay interest to foreigners. Unlike domestically-held Treasuries, this is said to be a transfer from some American taxpayer to a foreign bondholder (when bonds are held by Americans, the transfer is from an American taxpayer to an American bondholder, believed to be less problematic). So, it is argued, government debt really does burden future generations because a portion is held by foreigners. Now, in reality, interest is paid by keystrokes?but our grandkids might decide to raise taxes on themselves to match interest paid to Chinese bondholders and thereby impose the burden feared by deficit hawks. So let us continue with our hypothetical case.What if the US managed to eliminate its trade deficit so that it ran a perpetually balanced current account? In that case, the US budget deficit would exactly equal the US private sector surplus. Since foreigners would not be accumulating Dollars in their trade with the US, they could not accumulate US Treasuries (yes, they could trade foreign currencies for the Dollar but this would cause the Dollar to appreciate in a manner that would make balanced trade difficult to maintain). In that case, no matter how large the budget deficit, the US would not ?need? to ?borrow? from the Chinese to finance it. This makes it clear that foreign ?finance? of our budget deficit is contingent on our current account balance?foreigners need to export to us so that they can ?lend? to our government. And if our current account is in balance then no matter how big our government budget deficit, we will not ?need? foreign savings to ?finance? it?because our domestic private sector surplus will be exactly equal to our government deficit. Indeed, one could quite reasonably say that it is the budget deficit that ?finances? domestic private sector saving.Yet, the deficit hawks believe the federal budget deficit would be more ?sustainable? if foreigners did not accumulate Treasuries that supposedly burden future generations of Americans. But how could the US eliminate the current account deficit that allows foreigners to accumulate Treasuries? The IMF-approved method of balancing trade is to impose austerity. If the US were to grow much slower than all our trading partners, US imports would fall and exports would rise. In fact, the ?great recession? that began in the US in 2007 did reduce the trade deficit?although only moderately and probably temporarily. In order to eliminate the trade deficit and to ensure that the US runs balanced trade, it might need a much deeper, and permanent, recession. By reducing American living standards relative to those enjoyed by the rest of the world, the nation might be able to eliminate its current account deficit and thereby ensure that foreigners do not accumulate Treasuries said to burden future generations of Americans. Now, can the deficit hawks please explain why Americans should desire permanently lower living standards on their promise that this will somehow reduce the burden on the nation?s grandkids? It seems rather obvious that grandkids would prefer a higher growth path both now and in the future, so that America can leave them with a stronger economy and higher living standards. If that means that thirty years from now the Fed will need to stroke a few keys to add interest to Chinese deposits, so be it. And if the Chinese some day decide to use dollars to buy imports, America?s grandkids will be better situated to produce the stuff the Chinese want to buy.In conclusion, while there are links between the ?twin deficits?, they are not the links usually imagined. US trade and budget deficits are linked, but they do not put the US in an unsustainable position vis a vis the Chinese. If the Chinese and other net exporters (such as Japan) decide they prefer fewer dollar assets, this will be linked to a desire to sell fewer products to America. This is a particularly likely scenario for the Chinese, who are rapidly developing their economy and creating a nation of consumers. But the transition will not be abrupt. The US current account deficit with China will shrink, just as its sales of US government bonds to Chinese (to offer an interest-paying substitute to reserves at the Fed) decline. This will not result in a crisis. The US government does not, indeed cannot, borrow Dollars from the Chinese to finance deficit spending. Rather, US current account deficits provide the Dollars used by the Chinese to buy the safest Dollar asset in the world?US Treasuries.To be clear: the US Dollar probably will not remain the world?s reserve currency. From the US perspective, that might be a disappointment. In the long view of history, it is inconsequential. There is little doubt that China will become the world?s biggest economy. Its currency is a likely candidate for international currency reserve, but that is not a foregone conclusion?nor something to be feared.Source: http://neweconomicperspectives.blogspot.com/2012/01/mmp-34-functional-finance-and-exchange.html
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Monday, January 30, 2012
UFC on Fox 2 picks, Vegas-style: Bisping really getting annoyed by Sonnen?s wrestling lines
CHICAGO -- It's all about staying off your back and top control in tonight's three big fights on the UFC on Fox 2 card.
If they control the pace in fights, top level wrestlers have the ability to steal rounds and money. A mix of underdogs and favorites (Chael Sonnen, Phil Davis and Chris Weidman) with excellent college wrestling backgrounds, will be an interesting follow on the betting scene.
Sonnen's controlled the pace so well in his recent fights, it's made him just about unbeatable and a huge favorite over Michael Bisping. We'll find out tonight if Bisping's takedown defense allows him to stay in the fight. Hopefully keeps his cool. Sonnen along with yesterday's weigh-in crowd at the Chicago Theater really got under the Brit's skin.
As an underdog, Phil Davis will be looking to do slow things down against Rashad Evans. Chris Weidman's in the most interesting position because the former Hofstra star could probably stay on top of Demian Maia the entire fight, but that's incredibly dangerous place to be against a top level jiu-jitsu fighter. In spite of that Weidman is a pretty solid favorite over the UFC veteran.
Former UFC bantamweight champ Miguel Torres joined Yahoo! Sports' Kevin Iole and myself on ESPN1100/98.9 FM to pick the fights using the Las Vegas' numbers.
UFC on Fox 2 odds:
Best plays in bold
Rashad Evans (-205) vs. Phil Davis (+175) - Light heavyweight
Michael Bisping (+360) vs. Chael Sonnen (-450) - Middleweight
Demian Maia (+120) vs. Chris Weidman (-140) - Middleweight
Evan Dunham (-355) vs. Nik Lentz (+295) - Lightweight
Mike Russow (-150) VS. Jon-Olav Einemo (+130) - Heavyweight
George Roop (-115) vs. Cub Swanson (-105) - Featherweight
Charles Oliveira (-490) vs. Eric Wisely (+390) - Featherweight
Shane Roller (-225) vs. Michael Johnson (+185) - Lightweight
Joey Beltran (-205) vs. Lavar Johnson (+175) - Heavyweight
Chris Camozzi (-150) vs. Dustin Jacoby (+130) - Middleweight
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Who Looked Sexiest at the Directors Guild of America Awards? (omg!)
If Saturday's 64th Annual Directors Guild of America Awards are any indication, Hollywood's biggest stars will be pulling out all the stops at Sunday's Screen Actors Awards.
VIDEO: Best and worst awards season dresses ever
Jennifer Aniston, 42, showed up to Saturday's event wearing her go-to look: a strapless black mini-dress by Dolce & Gabbana. The Wanderlust star accessorized her look with Fred Leighton diamond fringe pendant earrings and a 13-carat rose-cut diamond and platinum ring.
PHOTOS: Jennifer Aniston's biggest PDA moments
The Descendants star Shailene Woodley, 20, opted for a very different look in a red lace Valentino dress, Jimmy Choo shoes and Herve Leger undergarments.
PHOTOS: 2012 winter movie preview
Amber Heard, 25, continued her impeccable red carpet run in a navy jersey dress by Roland Mouret. Helen Mirren, 66, looked classic in a pale gold, cleavage-baring dress by Badgley Mischka.
Tell Us: Which star looked sexiest at the Directors Guild of America Awards?
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Sunday, January 29, 2012
Good Reads: America's decline, China's rise, the way forward
There's a new genre of American journalism called 'Decline Watch,' tracking America's slow steady decline and China's rise. Here's your daily cup of sunshine.
Most adult Americans today grew up with their feet on the terra firma of American superiority.
Skip to next paragraphFaced with a cold war rival, the Soviet Union, Americans confidently paid taxes and sent their sons off to war in Korea, Vietnam, and oddly, Grenada, in order to keep communism at bay. From Washington, President Reagan proclaimed that it was ?morning in America,? which was great if you were a morning person, and Americans took the metaphor to heart. Intuitively, they knew that a free-market democracy would win against a soul-crushing authoritarian form of communism.
But now in the early part of the 21st century, that terra firma has begun to shift underfoot. Intellectuals from developing countries have argued that democracy is not always suited for all cultures, particularly those with poor education systems. Terrorist groups have attacked America?s symbols of prosperity and strength???the Pentagon, the World Trade Center ? and even America?s friends have begun to doubt that America has the mettle to carry on. The global economic crisis rounded out a very tough decade, and on the stage that America once dominated, a few new players emerged. They were familiar faces: America?s old rivals, Russia and China, who have devised hybrid models of capitalism very different from America?s that seem to function better, at least for now.
Now, it?s estimated that within the next 6 years, China may overtake America as the largest economic power in the world.
The changing global mood has created an entirely new genre of American journalism. Call it ?Decline Watch.? The writers tend to be economists ? the same profession that made us believe in the superiority of American capitalism, and in the logic of tearing down borders to create a unified European economy ? and their arguments are persuasive, if a little self-defeating.
Consider Charles Duhigg and Keith Bradsher?s piece in the New York Times this week, called ?How the US Lost Out on iPhone Work.? The reasons why Apple and every other American corporation with access to a travel agent have relocated their manufacturing to China go far beyond mere cheap wages, the authors write.
And they?re right. As the Atlantic magazine?s Jordan Weissmann notes in a blog, China has an education system that produces 600,000 engineers a year, compared with the US?s 70,000. China has an industrial policy that subsidizes the building of factories at home and the sale of products abroad.
Here?s a point in the New York Times piece that took my breath away.
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Saturday, January 28, 2012
Obama urges Congress to act in election year (AP)
CAMBRIDGE, Md. ? President Barack Obama rallied House Democrats for an election-year fight, urging them to work with Republicans if they show some willingness to put politics aside but telling the rank and file to call them out if they stand in the way.
Addressing Democrats on the final day of their three-day annual retreat, Obama outlined the political stakes over the next few months as congressional Democrats try to push his agenda in the face of Republican opposition, the GOP choses its nominee and signs of recovery in a fragile economy go a long way to determining his re-election chances and the party's fate.
Obama said Democrats should seize the opportunity "whenever there is a possibility that the other side is putting some politics aside for just a nanosecond in order to get something done for the American people, we've got to be right there ready to meet them," the president told the sometimes raucous crowd.
However, "where they obstruct, where they're unwilling to act, where they're more interested in party than they are in country, more interested in the next election than the next generation, then we've got to call them out on it," the president said. "We've got to push. We can't wait; we can't be held back."
Coming off a three-day tour to promote his State of the Union message, Obama promised a "robust debate about whose vision is more promising" when Republicans choose their nominee.
On a day when reports showed the economy picking up late in 2011 but still considered "fragile" by the White House, Obama told Democrats wondering about their re-election prospects: "It's going to be a tough election because a lot of people are still hurting out there and a lot of people have lost faith generally about the capacity of Washington to get anything done."
House Republicans, who held their retreat in Baltimore last week, have repeatedly said the election will be a referendum on Obama's policies, especially his handling of the economy.
The president acknowledged that Democrats have embraced parts of his agenda when it was politically difficult and in some cases costly. The party took a drubbing in the midterm elections, losing control of the House and seeing their ranks diminished in the Senate.
And despite some past clashes with House Democrats over his willingness to compromise with Republicans, Obama was warmly received and was introduced as "our champion" by Rep. John Larson of Connecticut.
The president returned the warmth with a vote of confidence that Democrats would win back the House in November, making a nod to their leader as "soon-to-be once-again Speaker of the House Nancy Pelosi."
"I believe in you guys. You guys have had my back through some very tough times," said the president, who received a small gift ? a DVD of House Democrats singing Rev. Al Green's "Let's Stay Together."
Last week, at a fundraiser at the Apollo Theater in New York, Obama stood on the stage and crooned a line from the Green classic.
Democrats were upbeat at their three-day session, energized by Obama's State of the Union address and its populist themes as well as recent polls showing more Americans say the country is on the right track and approve of Obama's handling of the economy. Divisions in the Republican ranks that were on full display last year in the fight over extending the payroll tax cut and the bitter battle between Mitt Romney and Newt Gingrich for the GOP presidential nomination also lifted Democratic spirits.
But the relationship with the White House hasn't always been cordial. Vice President Joe Biden, who addressed the Democrats prior to Obama's speech, described some of the rough patches.
He noted that several members in the room were mad at him in December 2010 after Obama negotiated an extension of President George W. Bush's tax cuts over the objections of some House Democrats. Last year, frustrated Democrats complained the Obama gave away too much in negotiating a spending bill and an agreement to raise the government's borrowing authority.
Biden said Pelosi told him at the last conference to "get tough. Enough is enough." He said the "message was heard. The message was heard. And I think we've delivered."
The vice president was more pointed in his political remarks than Obama and called out some Republicans by name. He said the American people will reject GOP unwillingness to compromise and its blatant determination to make Obama a one-term president.
Of the presidential candidates, Biden said Romney's criticism of the auto bailout and a host of positions stated by rival Newt Gingrich on government intervention will create a clear contrast for voters.
"These guys are helping us by saying what they believe," Biden said.
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Valve ventures into mobile with Steam on iOS and Android (Digital Trends)
Launched earlier this week and announced on the Steam site, Valve has started a closed beta for Steam Mobile on the iPhone and Android phones. The mobile application brings a vast amount of core functions found within the PC and Mac version of the Steam software, the most notable being the ability to make purchases through the application. This will allow any mobile Steam user to take advantage of the frequent sales?that cut popular games up to 90 percent off. Assuming the user agrees to notifications from the application, Steam will also be able to feed mobile alerts to the user when a game on a user?s wishlist goes on sale. The interface offers the familiar Steam categories of new, featured, popular and specials. In addition, there?s a search interface allowing the user to find games by price, title or genre.?
After a user logs into the mobile application, they have the ability to chat with Steam friends, peruse friend activity, read gaming news, check out profiles and groups in addition to looking at screenshots and other gaming media. Within the chat interface, friends are split up into?categories?such as?recent chats, in-game, online and offline. However, group chat is?unavailable?through this version of the mobile interface. There?s also no obvious link between the mobile device and a PC at home that would allow a user to queue up Steam downloads while away from the computer.?
While all of Steam?s features aren?t included within the application,?Valve president Gabe Newell?believes?that this application represents a good start.?Newell?stated ?Seeing which of your friends are online and playing a game, sending quick messages, looking at screenshots for an upcoming game, or catching a sale ? these are all features customers have requested. Mobile is changing way people interact, play games and consume media, and the Steam app is part of our commitment to meet customer demands and expand the service functionality of Steam to make it richer and more accessible for everyone.? Newell did not indicate if the Steam platform would start to sell mobile games.
While Steam is moving forward with mobile,?Electronic Arts still hasn?t rolled out a mobile counterpart to the Origin download service. Origin also lags behind Steam in terms of the amount of games offer for sale on the service. While Steam offers more than 1,800 titles for sale, Electronic Arts lists less than 10 percent of that figure. Electronic Arts did announce an additional 11 third-party publishers have been added to the Origin service recently, but did not indicate how many games would be added over the coming months. ?
As reported at CES 2012, Valve is still prepping Steam?s ?Big Picture? user interface designed to bring the Steam experience to the television screen. This will allow users to hook a computer to the television and play games on a much larger screen, similar to user experience of console owners.?Newell hasn?t indicated if Valve will release a set-top box to offer this feature to consumers that don?t have a computer hooked into their main television in the living room. Some analysts have also speculated that the??Big Picture? mode could utilize cloud streaming technology similar to OnLive and be delivered through an application on gaming consoles or through?Internet-connected televisions. However, Valve has said repeatedly that??Big Picture? mode will include controller support.?
While the mobile application is currently in a closed beta, Steam users can download the mobile application onto the iOS platform and log into the application to declare interest in joining the beta. Valve plans to roll out new invites slowly while the application is still being tested over the next few weeks.
This article was originally posted on Digital Trends
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Friday, January 27, 2012
In Facebook IPO, bankers seek prestige over fees (Reuters)
(Reuters) ? Facebook's initial public offering is likely to set a new standard for how low investment banks are willing to go on advisory fees to win big business.
The world's largest online social network is expected to tap public markets for $10 billion in the coming months in an offering that will value the company at up to $100 billion, according to sources familiar with the planned IPO. It will be one of the biggest U.S. market debuts ever, and a prized trophy for the investment bankers seeking to win lead advisory roles.
That has set up a fierce competition on Wall Street, particularly between the presumed front-runners Morgan Stanley and Goldman Sachs Group Inc, which may offer their underwriting services for as little as 1 percent of gross proceeds, bankers and industry observers said.
That would be far less than the 7 percent fee that smaller deals typically fetch, or the 2 or 3 percent that large deals tend to command.
"The Facebook IPO will be iconic," said James Montgomery, chief executive of San Francisco-based investment bank Montgomery & Co, which advises tech companies on mergers, acquisitions and private placements.
Facebook can easily negotiate a 1 percent fee for the entire group of investment banks that will peddle its shares, Montgomery said, "much to the chagrin of the underwriters."
Such a low fee is practically unheard of for investment banking deals, apart from the offerings of bailed-out companies General Motors Co, American International Group Inc and Ally Financial Inc, which sold shares held by the U.S. government in the aftermath of the financial crisis.
But Facebook has several advantages that will allow the company to haggle for a lower fee: it will be an easy sell as hoards of investors are keen to jump on the social media trend, and even a 1 percent fee would reap $100 million in revenue for investment banks, sending a lead advisor to the coveted No. 1 spot on IPO league tables.
"There's no other IPO like this," said Lee Simmons, a tech specialist at Dun & Bradstreet. "It's kind of the 800-pound gorilla for the tech sector."
The Wall Street Journal reported that Facebook plans to file IPO documents with U.S. securities regulators as early as Wednesday, and is close to picking Morgan Stanley as the lead underwriter.
The typical IPO that raises less than $500 million incurs a 7 percent fee -- what's known as "the 7 percent solution." But as IPOs grow in size, the fee percentage shrinks.
Investment banks usually earn fees of 4 percent to 5 percent on IPOs of more than $1 billion, but deals from Silicon Valley tend to carry a premium. U.S. tech IPOs of at least $1 billion carried an average fee of 5.8 percent from 2000 to 2012, on average, according to Thomson Reuters data.
In the case of Facebook -- whose T-shirt-wearing, 27-year-old chief executive, Mark Zuckerberg, is said to appreciate status updates more than stock brokers -- it's unlikely advisors will be able to command the standard rate.
"These Valley types think this whole process could be automated and they don't have to pay 7 percent to these flashy, French-cufflink-wearing Wall Street types," said Eric Jackson, founder and managing member of Ironfire Capital, a technology-focused hedge fund, who has interacted professionally with executives at Facebook and other social-media companies.
PRICING DILEMMA
Facebook's offering will be the largest ever IPO from Silicon Valley, as well as the largest global high-tech IPO since the dot-com bubble burst. The most recent U.S. social-media IPO, Zynga Inc, raised just one-tenth of the proceeds Facebook is hoping for.
Winning a lead advisory role on Facebook has become a make-or-break contest for tech bankers such as Goldman's George Lee, Morgan Stanley's Michael Grimes and Credit Suisse's Bill Brady.
Morgan Stanley and Goldman Sachs have been in communication with Facebook for months and already offered pitches to its executives in hopes of becoming lead adviser, according to sources briefed on the meetings.
Wall Street is now waiting to hear who will win the coveted "lead left" title, referring to where the top underwriter's name will appear on the IPO prospectus.
"Facebook is one of the most well-known brands around the globe," said George Papaioannou, a business professor at Hofstra University who has studied underwriting competition among investment banks. "The underwriters will have to do very little convincing to investors, and that gives Facebook a huge negotiating advantage."
Investment banking fees are not usually the primary concern for IPO candidates, who must nail down the right offering price and sell shares to the right mix of investors, Papaioannou said.
If the offering price is too high, the company and its underwriters risk burning IPO investors. If the bar is set too low, the stock issuer risks leaving money on the table. And if the mix is not right -- with more short-term traders than long-term investors -- a stock can become highly volatile in the days and weeks following its debut on an exchange.
Zynga, which makes some of the most popular online games that are played on Facebook, is a prime example. Co-managed by Goldman and Morgan Stanley, the IPO was priced at $10 a share in mid-December. IPO investors watched the stock fall 5 percent on the first day of trading. Zynga was quoted at $9.72 on Friday.
Similarly, online coupon-deals site Groupon Inc priced its IPO at $20 a share on November 4, but its shares fell as much as 26 percent in the first two weeks of trading. The stock was trading at $19.78 on Friday. Goldman, Morgan Stanley and Credit Suisse were co-managers of the IPO.
HANDLE WITH CARE
The other edge of the IPO sword can cut just as sharply for hot tech stocks.
LinkedIn Corp, which raised $353 million last May in an IPO priced at $45 a share, watched the stock soar as high as $122.70 on the first day of trading. LinkedIn shares have drifted down to the low $70 range, but the price range to date indicates that the company could have raised another $440 million to $1 billion in extra money if the IPO were priced more aggressively. Morgan Stanley was in the lead left position.
A sharp fluctuation in price soon after Facebook's IPO "would really embarrass Facebook and the underwriters," given the recent history of social-media IPOs, said Papaioannou
The Zynga, Groupon and LinkedIn deals garnered fees of 3 to 5 percent.
To be sure, the banks that are vying for a lead position on Facebook's IPO will have to do more than lowball on price. They will also have to convince the Palo Alto, California-based company that the deal will go off without a hitch.
As Facebook's size and influence have grown in recent years, its actions -- whether changes to privacy policies on its popular networking site, or its interactions with Wall Street bankers -- have come under intense public scrutiny.
Goldman's handling of a private sale of $1.5 billion worth of Facebook shares to wealthy clients last year stirred enough controversy that the bank was forced to limit the offering to non-U.S. investors.
That misstep may have cost Goldman some goodwill with Facebook, industry observers said. And, as a company that makes money from a broad base of users, it also forces Facebook to consider whether its IPO will give unfair advantages to well-heeled investors.
"Two reasons I think Morgan Stanley will get the lead: one, they have a great retail distribution platform with the Smith Barney franchise and, two, I don't think Facebook is overly happy with Goldman Sachs," said Jeff Sica, president and CEO of SICA Wealth Management, who has bought shares of Facebook in private, pre-IPO markets for clients.
Morgan Stanley was the top bookrunner for global high-tech IPOs last year, with $2.2 billion in global proceeds and 10.9 percent market share. It also led the pack in U.S. high-tech IPOs, according to Thomson Reuters data. Goldman Sachs was the runner up with $1.9 billion in global fees and 9.2 percent market share, and ranked No. 3 in U.S. high-tech IPOs behind JPMorgan Chase & Co.
A less measurable but equally important factor in obtaining the lead IPO position is whether bankers can connect with decision-makers at Facebook on a personal level.
"It's really going to be the banker that understands and is sensitive to Zuckerberg and the executive team's needs," said Dun & Bradstreet's Simmons. "Whoever does that successfully will get the bragging rights, the proverbial brass ring of tech IPOs."
(Reporting By Lauren Tara LaCapra, editing by Tiffany Wu)
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Are you a happy shopper? Research website helps you find out
ScienceDaily (Jan. 26, 2012) ? Psychologists have found that buying life experiences makes people happier than buying possessions, but who spends more of their spare cash on experiences? New findings published this week in the Journal of Positive Psychology reveal extraverts and people who are open to new experiences tend to spend more of their disposable income on experiences, such as concert tickets or a weekend away, rather than hitting the mall for material items.
These habitual "experiential shoppers" reaped long-term benefits from their spending: They reported greater life satisfaction, according to the study led by San Francisco State University Assistant Professor of Psychology Ryan Howell.
To further investigate how purchasing decisions impact well-being, Howell and colleagues have launched a website where members of the public can take free surveys to find out what kind of shopper they are and how their spending choices affect them. Data collected through the "Beyond the Purchase" website will be used by Howell and other social psychologists.
Graduate students in Howell's Personality and Well-being Lab will use the site to study the link between spending motivations and well-being, and how money management influences our financial and purchasing choices.
For his latest study, Howell and colleagues surveyed nearly10,000 participants, who completed online questionnaires about their shopping habits, personality traits, values and life satisfaction.
"We know that being an 'experience shopper' is linked to greater wellbeing," said Howell, whose 2009 paper on purchasing experiences, published in the Journal of Positive Psychology, challenged the adage that money can't buy happiness. "But we wanted to find out why some people gravitate toward buying experiences."
Participants' personality was measured using the "Big Five" personality traits model, a scale psychologists use to describe how extraverted, neurotic, open, conscientious and agreeable a person is. People who spent most of their disposable income on experiences scored highly on the "extravert" and "openness to new experience" scales.
"This personality profile makes sense since life experiences are inherently more social, and they also contain an element of risk," Howell said. "If you try a new experience that you don't like, you can't return it to the store for a refund."
The authors suggest that it could be easier to change your spending habits than your personality traits. "Even for people who naturally find themselves drawn to material purchases, our results suggest that getting more of a balance between traditional purchases and those that provide you with an experience could lead to greater life satisfaction and wellbeing."
Visit the Beyond the Purchase website at http://www.beyondthepurchase.org
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The above story is reprinted from materials provided by San Francisco State University.
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Journal Reference:
- Ryan T. Howell, Paulina Pchelin, Ravi Iyer. The preference for experiences over possessions: Measurement and construct validation of the Experiential Buying Tendency Scale. The Journal of Positive Psychology, 2012; 7 (1): 57 DOI: 10.1080/17439760.2011.626791
Note: If no author is given, the source is cited instead.
Disclaimer: This article is not intended to provide medical advice, diagnosis or treatment. Views expressed here do not necessarily reflect those of ScienceDaily or its staff.
Source: http://feeds.sciencedaily.com/~r/sciencedaily/~3/vHgkG-uSprQ/120126143656.htm
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Thursday, January 26, 2012
Summary Box: Ireland returns to debt markets (AP)
IRISH RETURN: Ireland tapped the bond markets Wednesday for the first time since September 2010, when bond yields surged above 6 percent.
WHAT HAPPENED: Bondholders swapped $4.6 billion in bonds due in January 2014 for new bonds due in February 2015, delaying some of the country's debt obligations.
CONTEXT: The European Union and International Monetary Fund had to rescue Ireland out with cheap loans in November 2010 because of massive budget deficits stemming from the huge costs of bailing out the country's indebted banks.
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Wednesday, January 25, 2012
British-based all-star concert to debut in NYC (AP)
NEW YORK ? The Secret Policeman's Ball is letting America in on the party: The British-based music and comedy festival is coming to New York in March.
Coldplay, Jon Stewart, Stephen Colbert, Mumford & Sons and Russell Brand are among the acts who have signed on for the event at Radio City Music Hall on March 4. The concert will benefit Amnesty International, as it has since it started back in 1976 with celebrities like John Cleese. Over the years, Bono, Sting and others have participated. This will mark the first time it's being held in New York City.
"For us, it's iconic and a very special thing, and has provided the opportunity to really celebrate the presence of freedom of expression and free speech, and how we can move people and how we can bring people together, and just how powerful that is," said Amnesty International spokesman Andy Hackman in an interview Tuesday.
The last Secret Policeman's Ball was in 2008 in London. Hackman said the organization wanted to do something different and on a grander scale this year since it's the 50th anniversary of the human rights group.
"That phrase `human rights' has lost meaning in some ways," he said. "That's why we want to demonstrate the power and the joy that free speech can bring to us all. ... It's really just using these amazing talented people to demonstrate the power, what a force of good free speech is."
David "DJ" Javerbaum, the former head writer and executive producer for "The Daily Show with Jon Stewart," said the show will feature sketches, music and more. He said the legacy of the Secret Policeman's Ball, which has lived on in videos, has helped it attract top talent, some of which are still to be announced.
"These are very seminal movies for anybody young in that age who wanted to get into comedy," he said.
Tickets go on sale on Monday.
___
Online:
http://www.facebook.com/secretpoliceman
___
Nekesa Mumbi Moody is the AP's music editor. Follow her at http://www.twitter.com/nekesamumbi
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Tuesday, January 24, 2012
Seal "Shocked" By Heidi Klum Divorce
Mere hours after Heidi Klum and Seal confirmed their divorce, interviews between Seal and Ellen DeGeneres (airing today) and PBS' Tavis Smiley (Friday) hit the web.
The topic of his separation was not off the table. Not even close.
About to embark on a new album tour, Seal is more than willing to openly speak about what shocked us - and himself, apparently. "I think we were shocked," he said.
"You go into these things with the greatest intentions when you say 'I do' and you say ''Till death do us part.' Those vows hold value," the singer told Ellen.
"They are not just words. These things happen. We pretty much said how we feel and made it clear in the release statement."
"But, for intents and purposes of this show, you just grow apart after awhile. You try and you work through it and the thing that you quickly realize when you are married and you become a parent is you do the best that you can."
"It makes you actually appreciate your parents a lot more."
"The thing that I'm most proud about this great woman who married - and I really do mean that from the bottom of my heart - is that together she has given me four incredible gifts, four beautiful children.
"She still, in my opinion, the most wonderful woman in the world."
"I think our priority was to remain civil and do this thing with dignity. We still very much love each other. It's not a question of we were never to follow suit of some breakup or separations that you hear about, especially in our industry."
"It's a shame. To say that neither of us were grieving would be an out and out lie, and I don't mind telling you that. We both have a tremendous amount of respect and love and we try and do this with as much dignity as we possibly can."
"And of course, when you have four children, you hope and pray that the rest of the world will respect that we have four children and that their little hearts are at stake, too."
Here's Seal on Tavis Smiley's show as well:
Source: http://www.thehollywoodgossip.com/2012/01/seal-shocked-by-heidi-klum-divorce/
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Bid for Iran nuclear talks confronts old snags (AP)
DUBAI, United Arab Emirates ? The last time Iran's nuclear envoys held talks with the U.S. and other world powers, the negotiations limped along until a parting shot by the Islamic Republic: Its labs boosted the enrichment levels of uranium in reply to demands for a full-scale freeze.
Since then, the standoff has only become tenser. The European Union on Monday joined the U.S. with new sanctions targeting Iran's critical oil exports. Authorities in Tehran fired back with another threat to block tankers in the Persian Gulf ? even while offering to restart international talks after a one-year gap.
Yet one thing hasn't changed since the last round of meetings in January 2011. The chances of Iran agreeing to stop enriching uranium ? the core dispute between Tehran and its foes ? still appear slim.
Iran portrays its ability to make nuclear fuel as akin to a patriotic cause: showcasing the country's technological advances, elevating its international stature and proudly defying Western nuclear controls like other nations in the past ? including North Korea since the 1990s and China in the 1960s.
Iran strongly denies that it seeks nuclear weapons and says it only wants to enrich uranium to fuel reactors for energy and research. But Iran's Supreme Leader Ayatollah Ali Khamenei has linked control of the entire nuclear cycle to part of Iran's "national identity."
"Iran's right for uranium enrichment is non-negotiable," said conservative Iranian lawmaker Ali Aghazadeh. "There is no reason for Iran to compromise over its rights. But Iran is open to discussions over concerns about its nuclear program."
The bloc on the other side of the negotiating table ? the five permanent Security Council members plus Germany ? has not publicly spelled out any clear strategies if talks resume in Turkey as a proposed venue. It's highly unlikely, however, that they would back off the insistence that Iran suspend uranium enrichment, which Washington and others fear could lead to weapons-grade nuclear material.
The potential dead ends are clearly marked even before any agreement to reopen dialogue.
Iranian officials hammer the point that halting uranium enrichment is off the agenda. Some in the West, meanwhile, question whether Iran's outreach is simply another tactic to buy time for its nuclear program under pressure from cyberattacks and targeted killings that Tehran has blamed on Israel and its allies.
In Paris last week, French Foreign Minister Alain Juppe said the European Union has made specific proposals for dialogue with Iran, but "unfortunately the country has not committed in a transparent and cooperative way in this process of talks."
On Monday in Brussels, the EU's foreign policy chief Catherine Ashton urged Tehran to offer "some concrete issues to talk about."
"It is very important that it is not just about words; a meeting is not an excuse, a meeting is an opportunity and I hope that they will seize it," she said as the EU adopted its toughest measures yet on Iran with an oil embargo and freeze of the country's central bank assets.
Iranian lawmaker Aghazadeh snapped back: "The West is not seeking a genuine dialogue."
"It's unlikely that any new round of talks will bring any understanding," he added. "There is lack of trust on both sides. Iran won't retreat from its position."
The situation carries strong echoes the last talks in January 2011. When the main talks foundered, Brazil and Turkey tried their hand by reviving proposals to provide Iran with reactor fuel rods from 20 percent enriched uranium in exchange for suspending the enrichment work.
It fell apart when Iran pushed ahead with a pilot program to make its own 20 percent enriched uranium. That's still far below the level needed for a warhead, but it boosts Iran's stockpile of higher-grade nuclear material and was seen as a powerful snub to Western demands.
In a news conference on Saturday, Iran's Foreign Ministry spokesman, Ramin Mehmanparast, used the word "justice" to describe what Tehran hopes to achieve from any possible talks.
It covers a lot of ground in explaining Iran's views.
Tehran considers its nuclear program as fully within U.N. rules ? which permit enrichment with oversight ? although U.N. watchdogs and other question how much of Iran's work is secret. Tehran also seeks to shift the nuclear spotlight onto Israel, which is believed to have an atomic arsenal despite its policy of neither confirming nor denying its military capabilities.
But, above all, the Islamic Republic sees its nuclear advancement as an integral part of its self-declared goal of becoming the Muslim world's answer to Western military and technological dominance.
Iran has announced sweeping plans for upgrades to its armed forces, including new warships and surveillance drones similar to the unmanned CIA spy craft captured last month. Iran's state media has claimed aerospace engineers have launched objects into orbit and are working on sending an astronaut into space.
"The nuclear program is a huge part of what's shaping Iran's world view," said Mehrzad Boroujerdi, an Iranian affairs expert at Syracuse University. "Khamenei sees it as part of his legacy. In a way, it's like the nationalization of the Suez Canal for Egypt. It's a defining issue and one of major national importance."
It also is one of the few patches of common ground in a country deeply divided since the clashes and crackdowns after President Mahmoud Ahmadinejad's disputed re-election in 2009. Even opposition groups that rail against the ruling theocracy often support the nuclear program as a point of pride.
"The issue is protecting national interests," said Iranian political analyst Davoud Hermidas Bavand.
Yet he believes that talks ? even if they at first appear ill-fated ? are the only option to avoid deeper tensions that could lead to a military conflict in the Gulf.
"Talks offer a window to get out of the current impasse," he said.
The question still circles back to whether it could bring some concessions from Iran on uranium enrichment.
Meir Javedanfar, an Iranian-born analyst based in Israel, described Khamenei as stuck between "Obama and a hard place."
Khamenei cannot easily roll back the Iranian nuclear program, but is hit with increasing blows from sanctions that have isolated and eroded Iran's economy.
"Should he ignore it, the Iranian economy, the health of which is crucial to the survival of the regime, could collapse," he wrote in a Sunday commentary.
Keeping the ruling system in place, however, could also drive Iran's nuclear advances closer toward weapons, others contend.
"They perceive the whole nuclear issue as an insurance policy of sorts," said the analyst Boroujerdi. "There are those who say, 'If we are a nuclear power then the West wouldn't dare touch us.' And this, in their mind, helps ensure the survival of the system."
___
Associated Press writer Ali Akbar Dareini in Tehran, Iran, contributed to this report.
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Amid scandal, revered PSU coach Joe Paterno dies (AP)
STATE COLLEGE, Pa. ? Happy Valley was perfect for Joe Paterno, a place where "JoePa" knew best, where he not only won more football games than any other major college coach, but won them the right way: with integrity and sportsmanship. A place where character came first, championships second.
Behind it all, however, was an ugly secret that ran counter to everything the revered coach stood for.
Paterno, a sainted figure at Penn State for almost half a century but scarred forever by the child sex abuse scandal that led to his stunning dismissal, died Sunday at age 85.
His death came just 65 days after his son Scott said his father had been diagnosed with a treatable form of lung cancer. The cancer was found during a follow-up visit for a bronchial illness. A few weeks later, Paterno broke his pelvis after a fall but did not need surgery.
Mount Nittany Medical Center said in a statement that Paterno died at 9:25 a.m. of "metastatic small cell carcinoma of the lung." Metastatic indicates an illness that has spread from one part of the body to an unrelated area.
The hospital says Paterno was surrounded by family members, who have requested privacy.
Paterno had been in the hospital since Jan. 13 for observation after what his family called minor complications from his cancer treatments. Not long before that, he conducted his only interview since losing his job, with The Washington Post. Paterno was described as frail then, speaking mostly in a whisper and wearing a wig. The second half of the two-day interview was conducted at his bedside.
His family released a statement Sunday morning to announce his death: "His loss leaves a void in our lives that will never be filled."
"He died as he lived," the statement said. "He fought hard until the end, stayed positive, thought only of others and constantly reminded everyone of how blessed his life had been. His ambitions were far reaching, but he never believed he had to leave this Happy Valley to achieve them. He was a man devoted to his family, his university, his players and his community."
Two police officers were stationed to block traffic on the street where Paterno's modest ranch home stands next to a local park. The officers said the family had asked there be no public gathering outside the house, still decorated with a Christmas wreath, so Paterno's relatives could grieve privately. And, indeed, the street was quiet on a cold winter day.
Paterno's sons, Scott and Jay, arrived separately at the house late Sunday morning. Jay Paterno, who served as his father's quarterbacks coach, was crying.
Paterno built a program based on the credo of "Success with Honor," and he found both. The man known as "JoePa" won 409 games and took the Nittany Lions to 37 bowl games and two national championships. More than 250 of the players he coached went on to the NFL.
"He will go down as the greatest football coach in the history of the game," Ohio State coach Urban Meyer said after his former team, the Florida Gators, beat Penn State 37-24 in the 2011 Outback Bowl.
Paterno roamed the sidelines for 46 seasons, his thick-rimmed glasses, windbreaker and jet-black sneakers as familiar as the Nittany Lions' blue and white uniforms. He won 409 games and two national championships.
The reputation he built looked even more impressive because he insisted that on-field success not come at the expense of high graduation rates.
But in the middle of his 46th season, the legend was shattered. Paterno was engulfed in a child sex abuse scandal when a former trusted assistant, Jerry Sandusky, was accused of molesting 10 boys over a 15-year span, sometimes in the football building.
Outrage built quickly when the state's top cop said the coach hadn't fulfilled a moral obligation to go to the authorities when a graduate assistant, Mike McQueary, told Paterno he saw Sandusky with a young boy in the showers of the football complex in 2002.
At a preliminary hearing for the school officials, McQueary testified that he had seen Sandusky attacking the child with his hands around the boy's waist but said he wasn't 100 percent sure it was intercourse. McQueary described Paterno as shocked and saddened and said the coach told him he had "done the right thing" by reporting the encounter.
Paterno waited a day before alerting school officials and never went to the police.
"I didn't know which way to go ... and rather than get in there and make a mistake," Paterno said in the Post interview.
"You know, (McQueary) didn't want to get specific," Paterno said. "And to be frank with you I don't know that it would have done any good, because I never heard of, of, rape and a man. So I just did what I thought was best. I talked to people that I thought would be, if there was a problem, that would be following up on it."
When the scandal erupted in November, Paterno said he would retire following the 2011 season. He also said he was "absolutely devastated" by the abuse case.
"This is a tragedy," he said. "It is one of the great sorrows of my life. With the benefit of hindsight, I wish I had done more."
But the university trustees fired Paterno, effective immediately. Graham Spanier, one of the longest-serving university presidents in the nation, also was fired.
Paterno was notified by phone, not in person, a decision that board vice chairman John Surma later regretted, according to Lanny Davis, an attorney retained by the trustees as an adviser.
The university handed the football team to one of Paterno's assistants, Tom Bradley, who said Paterno "will go down in history as one of the greatest men, who maybe most of you know as a great football coach."
"As the last 61 years have shown, Joe made an incredible impact," said the statement from the family. "That impact has been felt and appreciated by our family in the form of thousands of letters and well wishes along with countless acts of kindness from people whose lives he touched. It is evident also in the thousands of successful student athletes who have gone on to multiply that impact as they spread out across the country."
New Penn State football coach Bill O'Brien, hired earlier this month, offered his condolences.
"The Penn State Football program is one of college football's iconic programs because it was led by an icon in the coaching profession in Joe Paterno," O'Brien said in a statement. "There are no words to express my respect for him as a man and as a coach. To be following in his footsteps at Penn State is an honor. Our families, our football program, our university and all of college football have suffered a great loss, and we will be eternally grateful for Coach Paterno's immeasurable contributions."
Paterno believed success was not measured entirely on the field. From his idealistic early days, he had implemented what he called a "grand experiment" ? to graduate more players while maintaining success on the field.
He was a frequent speaker on ethics in sports, a conscience for a world often infiltrated by scandal.
The team consistently ranked among the best in the Big Ten for graduating players. As of 2011, it had 49 academic All-Americans, the third-highest among schools in the Football Bowl Subdivision. All but two played under Paterno.
"He teaches us about really just growing up and being a man," former linebacker Paul Posluszny, now with the NFL's Jacksonville Jaguars, once said. "Besides the football, he's preparing us to be good men in life."
Paterno certainly had detractors. One former Penn State professor called his high-minded words on academics a farce, and a former administrator said players often got special treatment. His coaching style often was considered too conservative. Some thought he held on to his job too long, and a move to push him out in 2004 failed.
But the critics were in the minority, and his program was never cited for major NCAA violations. The child sex abuse scandal, however, did prompt separate investigations by the U.S. Department of Education and the NCAA into the school's handling.
Paterno played quarterback and defensive back for Brown University and set a defensive record with 14 career interceptions, a distinction he still boasted about to his teams in his 80s. He graduated in 1950 with plans to go to law school. He said his father hoped he would someday be president.
But when Paterno was 23, a former coach at Brown was moving to Penn State to become the head coach and persuaded Paterno to come with him as an assistant.
"I had no intention to coach when I got out of Brown," Paterno said in 2007 in an interview at Penn State's Beaver Stadium before being inducted into college football's Hall of Fame. "Come to this hick town? From Brooklyn?"
In 1963, he was offered a job by the late Al Davis ? $18,000, triple his salary at Penn State, plus a car to become general manager and coach of the AFL's Oakland Raiders. He said no. Rip Engle retired as Penn State head coach three years later, and Paterno took over.
At the time, the Lions were considered "Eastern football" ? inferior ? and Paterno courted newspaper coverage to raise the team's profile. In 1967, PSU began a 30-0-1 streak.
But Penn State couldn't get to the top of the polls. The Lions finished second in 1968 and 1969 despite perfect seasons. They were undefeated and untied again in 1973 at 12-0 again but finished fifth. Texas edged them in 1969 after President Richard Nixon, impressed with the Longhorns' bowl performance, declared them No. 1.
"I'd like to know," Paterno said later, "how could the president know so little about Watergate in 1973, and so much about college football in 1969?"
A national title finally came in 1982, after a 27-23 win over Georgia at the Sugar Bowl. Another followed in 1986 after the Lions intercepted Vinny Testaverde five times and beat Miami 14-10 in the Fiesta Bowl.
They made several title runs after that, including a 2005 run to the Orange Bowl and an 11-1 season in 2008 that ended in a 37-23 loss to Southern California in the Rose Bowl.
In his later years, physical ailments wore the old coach down.
Paterno was run over on the sideline during a game at Wisconsin in November 2006 and underwent knee surgery. He hurt his hip in 2008 demonstrating an onside kick. An intestinal illness and a bad reaction to antibiotics prescribed for dental work slowed him for most of the 2010 season. He began scaling back his speaking engagements that year, ending his summer caravan of speeches to alumni across the state.
Then a receiver bowled over Paterno at practice in August, sending him to the hospital with shoulder and pelvis injuries and consigning him to coach much of what would be his last season from the press box.
"The fact that we've won a lot of games is that the good Lord kept me healthy, not because I'm better than anybody else," Paterno said two days before he won his 409th game and passed Eddie Robinson of Grambling State for the most in Division I. "It's because I've been around a lot longer than anybody else."
Paterno could be conservative on the field, especially in big games, relying on the tried-and-true formula of defense, the running game and field position.
Paterno and his wife, Sue, raised five children in State College. Anybody could telephone him at his home ? the same one he appeared in front of on the night he was fired ? by looking up "Paterno, Joseph V." in the phone book.
He walked to home games and was greeted and wished good luck by fans on the street. Former players paraded through his living room for the chance to say hello. But for the most part, he stayed out of the spotlight.
Paterno did have a knack for jokes. He referred to Twitter, the social media site, as "Twittle-do, Twittle-dee."
He also could be abrasive and stubborn, and he had his share of run-ins with his bosses or administrators. And as his legend grew, so did the attention to his on-field decisions, and the questions about when he would hang it up.
Calls for his retirement reached a crescendo in 2004. The next year, Penn State went 11-1 and won the Big Ten. In the Orange Bowl, PSU beat Florida State, whose coach, Bobby Bowden, was eased out after the 2009 season after 34 years and 389 wins.
Like many others, he was outlasted by "JoePa."
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