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    Published on: December 8, 2008

    …“The server is down.”

    Which is what happened on Friday, leaving MorningNewsBeat mostly inaccessible between 10:45 am and 4:30 pm EST.

    I guess I should take it as a compliment that so many of you emailed me or even called me to let me know that they couldn’t read MNB, but I feel like I let you down. I apologize for that, and am assured that it is not likely to happen again – that Friday’s issues have been resolved and better protections are in place.

    If you’re interested in reading Friday’s stories, commentaries and emails, you can access it through the MNB Archives button on the left hand side of the home page. Or just click here

    And thanks, as always, for your patience and understanding.

    KC's View:

    Published on: December 8, 2008

    There is a fascinating piece in the San Francisco Chronicle about the rise and fall of Pay By Touch, the biometric payment company, and John P. Rogers, who convinced investors – including Gordon Getty, Ron Burkle, a number of hedge funds and even five former NFL quarterbacks - to give him hundreds of millions of dollars to turn his dream into a reality.

    According to the story, “Investors were intrigued by the intense, charismatic Rogers' vision of a future in which shoppers would pay for their purchases with a thumbprint rather than a credit card or cash.

    “But today, Pay By Touch is bankrupt, and the millions are gone - squandered, investors contend in lawsuits, in an extraordinary spending spree that burned up venture capital at a rate of $8 million per month.

    “In a lawsuit filed in October in San Francisco Superior Court, an investors' group says the company's crash was hastened by Rogers' frequent partying and ‘constant abuse of drugs’ - behavior that allegedly impaired his business judgment and contributed to destructive behavior.

    “The CEO's suspected drug use became of such concern that a member of Pay By Touch's board said he arranged a hotel-room ‘intervention’ for Rogers, an investor says.

    “To some, the spectacular rise and equally spectacular collapse of Pay By Touch is a cautionary tale about the vagaries of venture capital, the importance of background checks - and, perhaps, the risks of taking your broker's tip at face value.”

    Among the points made in the story:

    “The company spent more than $150 million buying out rival firms that also were pursuing biometric bill-paying, court records show. Pay By Touch also went on a hiring spree: at one point, more than 750 people worked there. Rogers also leased 90,000 square feet of prime office space in a new Mission Street high-rise.

    “The company made some sales, signing contracts with the Albertson's and Piggly Wiggly supermarket chains to install payment terminals. But the company never came close to breaking even. In 2007, Pay By Touch lost $137 million on $600,000 in revenues, court records show.

    “Long before that, some investors had come to believe the problem with Pay By Touch was not its business idea, but Rogers.

    “The investors' suit filed in October claims that after a party in Florida in 2003, Rogers offered cocaine to an unnamed member of the Pay By Touch board. An employee later approached a company official and expressed concerns about Rogers and cocaine abuse, the suit also says. Rogers began missing work - or showing up looking disheveled, the suit claimed, while a prospective deal with American Express fell through after Rogers missed a scheduled meeting and did not show up for days. Meanwhile, a lawsuit filed by former company executive Jon Siegal accused Rogers of advising a female employee to submit a false expense account to pay for drugs.”

    KC's View:
    This is a fascinating piece of journalism, worth reading – and I haven't even gotten into the Rogers’ problems with sexual harassment and violence issues.

    It is a shame that biometrics may be getting a bad name because of Pay By Touch’s misadventures; in the long run, there is no reason to think that this won’t be completely viable as a payment technology.

    It’s also a shame that a lot of good people may be getting tarred unfairly because of Rogers’ misbehavior. I actually had a chance to attend a meeting at Pay By Touch’s offices (which were a lot fancier than MNB World Headquarters, let me tell you), and the people I met there seemed smart, committed and honest.

    But, buyer beware. The Chronicle piece notes that Rogers won’t talk about Pay By Touch, and that he is living in Southern California (probably not at the Betty Ford clinic) and working on a new start-up.

    It seems clear that anyone who invests with this guy gets what he or she deserves. (If they don't Google his name and go running for the hills, they’re nuts!)

    Published on: December 8, 2008

    The Wall Street Journal reports that Rep. Bart Stupak (D-Michigan), who is on the House of Representatives Energy and Commerce Committee, which oversees the US Food and Drug Administration (FDA), is calling on President-elect Barack Obama to appoint entirely new leadership at FDA, saying that the existing “senior FDA employees are too close with the industries they regulate, creating a question of who they are working for."

    According to the Journal, “Congressional aides said Democratic officials have discussed naming Janet Woodcock, a longtime FDA official, as interim head after the expected departure of the current commissioner, Andrew von Eschenbach, a George W. Bush appointee. People close to the pharmaceutical industry also have been floating Dr. Woodcock's name as either interim or permanent FDA chief.”

    In his letter to Obama, Stupak wrote, “Rep. Stupak wrote, "I would encourage you not to appoint any current senior FDA employee as Commissioner or Interim Commissioner of the FDA."

    KC's View:
    Purely from a perception standpoint, FDA needs entirely new leadership. In many of the issues related to the food industry, it seems as if it has been far more interested in protecting industry than consumers…not realizing that such an attitude actually hurts business in the long run.

    Published on: December 8, 2008

    Bloomberg reports that comScore Inc. says that US e-commerce spending from December 1-5 was up nine percent compared to the same period a year ago. However, the research firm also said that it expects that e-commerce spending for the last two months of 2008 not to be significantly up compared to 2007.

    The big winners, at least in terms of site visits, in the first five days of the month, according to the report, were Amazon, Apple and Walmart.

    KC's View:

    Published on: December 8, 2008

    Nation’s Restaurant News reports that McDonald’s “is offering a money management program to its more than 500,000 unit-level employees in the United States … McDonald’s partnered with Visa Inc. to offer the ‘McDonald’s Practical Money Skills’ program, which includes a budgeting guide to track expenses and access to an instructional video and an online resource center.”
    KC's View:
    This is a smart move on all sorts of levels. There are an awful lot of people out there who do not know anything about budgeting and investing, and McDonald’s makes a clear commitment to its people through this effort.

    Seems to me that Tesco made a similar effort a couple of months ago. Kudos to both companies for doing so.

    BTW…this is something that America’s schools ought to be doing a better job at teaching. I haven't used any of the things I learned in chemistry, biology or even algebra since I got out of high school…but it seems to me that a personal finance course would have had a lot of lasting value. Needless to say, it wasn't taught…and still is not today in most of America’s schools.

    Published on: December 8, 2008

    • The Hartford Courant reports that “after denying for weeks that it was violating Connecticut laws by charging a second tax on exchanges, Wal-Mart has agreed to change its practice and pay a $2,500 fine. Wal-Mart also agreed to refund all customers who can show that when they returned an item for an even exchange they were charged a second tax.

    “The agreement between Wal-Mart and the state Department of Consumer Protection was made last week.”

    KC's View:

    Published on: December 8, 2008

    The New York Times reports that European Union health officials have ordered supermarkets to pull all Irish pork products – bacon, ham and sausages – off their shelves because of concerns about the items being tainted with cancer-causing dioxin.

    According to the story, “Health officials across the continent warned their consumers not to eat Irish pork after the discovery that dioxins had been in some of the pigs' feed for months. Irish government officials described the recall -- which affects all pig products produced since Sept. 1 -- as a precautionary move, but farmers called it a nightmare for Ireland's 450 million euro ($570 million) pig industry … Ireland's Food Safety Authority said the dioxin made its way into the food chain after pig feed from a producer was tainted with industrial oil. While only 10 percent of the country's pig meat was affected, that was processed and mixed in with other meat, resulting in widespread contamination.”

    KC's View:

    Published on: December 8, 2008

    • The Toronto Globe and Mail reports that there is widespread speculation in Canada that Loblaw Cos. is about to be taken private, with parent company George Weston preparing to buy out minority investors. There have been reports that Weston is looking to sell its US bakery operations to a Mexican food company, Grupo Bimbo, and will use the proceeds to at least partially fund the privatization.

    • The Pittsburgh Business Times reports that Giant Eagle has debuted a new store concept, Valu King, positioned as a discount food store featuring Giant Eagle’s Valu Time private label. The story notes that “it isn’t tied in to the main Giant Eagle brand, and it has no gas pumps and no advantage card incentive program.”
    KC's View:

    Published on: December 8, 2008

    • PriceSmart Inc., which operates membership club stores in Central America and the Caribbean, announced that its November sales were up 21.5 percent to $105.6 million, from $86.9 million during the same period a year ago, on same-store sales that were up 12.4 percent.

    For the quarter ending November 30, net sales increased 21.7% to $298.5 million from $245.2 million in the same period last year, with same-store sales up 14.3 percent.

    KC's View:

    Published on: December 8, 2008

    • Bob Ling, executive vice president of Unified Grocers, Inc., has been elected 2008 2009 Chairman of the California Grocers Association.

    • CHEP, the pallet and container pooling services company, has named Brian Malloy as its new Chief Customer Officer of CHEP USA. Malloy remains in his current position as Senior Vice President of Sales & Marketing for the US operation.

    KC's View:

    Published on: December 8, 2008

    Got the following email from an MNB user responding to my suggestion last week that Walmart, often prescient about such things, probably has plans to put electric car chargers in many of its parking lots:

    Walmart built a new store in Richmond, CA (20 min outside of San Francisco and Oakland, in the mall in an old Macy’s wing) about a year and a half ago.

    They put charging stations at priority parking stalls at all entrances to their store. It looks like they “donated” some to the mall because now there are 2-3 charging stations at every entrance through out the mall.

    Testing at new store sites, perhaps?


    Like I said last week, while the rest of us debate it, Walmart will do it.

    MNB user Richard Lowe has problems with the whole idea of electric cars:

    It seems to me this is the wrong direction. It requires batteries and more electric generation, plus more consumer inconvenience. Algae biofuels made locally using sewage and carbon gas from industry would still work in our existing vehicles and service stations, yet be a locally produced renewable energy. We need to hear more about this and consider this as the best alternative to growing our economies and saving the planet. Purdue is building a 2500 gallon/day jet fuel plant in Delphi, IN due to come on stream in 2009. We could be doing the same for gasoline and diesel fuel. These fuels will also burn cleaner.

    What are we going to do with all those dead polluting batteries?

    What about the cost of replacement and maintenance of them?

    What about their lack of performance?

    I still don't like the idea.





    On the subject of coupons and their role in 2008 and beyond, MNB user Jill M. Le Brasseur wrote:

    I just can’t keep quiet on this coupon issue anymore. I have tried to redeem manufacturers coupons sent to me via e-mail or obtained from the companies’ own websites several times at several different grocery stores and other retail outlets only to be told time and time again that “We don’t take online coupons!” This has happened while shopping in three different states, OH, WV and DE. I have completely stopped printing them out and even trying to use them. I have heard that many stores refuse them because they are easy to counterfeit.

    Call me a dinosaur, but if the coupon doesn’t come from a newspaper or magazine I don’t use it. Basically because I’m not permitted to!

    Since you are a fan of the digital coupon, please tell me and the rest of your readers just where you are allowed to actually use them.


    I didn’t say that digital couponing systems work in every case or is foolproof. Just that in a digital society, they ought to. You make excellent points.




    And, we continue to get lots of email about the proposed bailout of the bailout of General Motors, Ford and Chrysler.

    One MNB user wrote:

    I know, there are not easy answers....I was not in favor of bailing out any banks or financial institutions either....and based on the polls before it was done, 79% of the population felt the same way. I know it would have caused a meltdown, but we'd have survived it. Yes, it would have been tough. Now, I fear we have simply postponed it, and it's going to take place anyway, at some point......I think we should allow the free market system to simply - work. Painful as it might have been, and still appears to be.

    The auto industry - well, we've priced ourselves out of the market, with the union costs, our high standard of living. Or, we simply didn't make cars the market wanted. The market speaks.

    So, we can offer other goods and services to the market - nationally and internationally. What did all the horse and buggy makers do when cars became mainstream? They found other jobs...or created new ones. No one in 1950 could have predicted a Bill Gates/ Microsoft, or a Steve Jobs/Apple/iPod - yet that happened because of what I'd call practical visionaries had the opportunity - and more importantly, took that opportunity - and we all benefit from the results of their risk taking. I believe this country facilitates opportunity, due to the basic inherent foundation of protecting our "inalienable rights", life liberty and the pursuit of happiness.

    And if we bailout the auto industry (A friend of mine works at Pebble Beach and just wrote one of the companies hosted an elaborate bash there last week, with complementary "Journey" concert for the employees who attended, is THIS where our tax dollars will go? I believe they will! I work hard for what I earn and I want to keep as much of it as possible, knowing some taxes are inevitable - but I want Congress to keep their paws out of our pockets!


    Another MNB user wrote:

    I think the best way to address this to what amounts to Chapter 11, but call it the Omnibus Auto Industry Resolution Act. The Congress agrees to loan money for 120 days, they hire the guy that handled the 9/11 Victims Fund or someone of impeccable character with no dog in the fight. And, certainly no congressional flunkies that try to slip in a few dollars for the “folks back home” by way of new bike path.

    This Special Master would have all the powers of Bankruptcy Judge. If companies, suppliers, bondholders, dealers and labor can all agree to “take one for the team”, then Congress hands out the rest of the loan and things move forward. If there is a holdout for not taking one for the team, then Chapter 11 or 7 begins on the 121st day. The interim loans by the taxpayers take first position.

    No one really going to buy a car, when there may not be a dealer for service in the area, or that any warranty is dull and void.

    And finally, trying to blame the Automakers for building big SUVs… gee could that be because that what the consumers want? Even with our poor educational system, anyone recognizes that if you sell a product people want you are going to be successful. All goes back to lack of a coherent energy policy… an articulate explanation of the problem, viable options, a debate, and a vote and then leadership and consistency in moving it ahead. We need to get away from politicians posturing on TV and get to something like the BRAC Commission. Politicians just can’t make the tough choices.


    And still another MNB user wrote:

    The best line about the bailouts: Those who shower before work got the money, no questions asked, $700 Billion, those who shower after work, get grilled by hypocrite congressmen who can’t balance a budget. What a joke.




    Regarding my rant on Friday about new genetic testing that allow people to test their kids to see if they are potential athletes, which permits them to fast-track them for possible athletic scholarships – something I am appalled by – one MNB user wrote:

    Couldn’t agree with your comments more in this week’s offbeat about genetic testing for children to determine athletic prowess. The whole thing reminds me of sad story of Todd Marinovich, whose father “bred” him to be a quarterback from birth and strictly controlled his diet and upbringing focused on making him a college and professional QB. The young man who went to college never having tried a Big Mac or a beer ended up trying a lot more than that once he was on his own. His drug problems ended his career early and have plagued him throughout his life.

    I was discussing a related topic recently with my wife after we visited some friends whose daughter takes daily shots of human growth hormone to help her grow up properly. This girl was in the lowest 5 percentile in height and weight and was estimated by doctors to reach just 4’9” tall at her current growth rate, this despite a father at over 6 feet and a mother around 5’5”. The child has been receiving daily injections of HGH for over a year and is now estimated to reach be about 5’7” by doctors. Certainly a great story about the marvels of modern medicine, however, one only has to wonder how many parents would hear this story and think that their child, on a growth path to say 6’, would benefit by HGH to get to 6’8” giving them a better chance of a college scholarship and a professional sports career. Unfortunately, the use of performance enhancing drugs by professional athletes has proven that there are many doctors out there that would be willing to assist in this little “project”, given the right “incentive”.


    KC's View:

    Published on: December 8, 2008

    In Week Fourteen of the National Football League…

    Jacksonville 10
    Chicago 23

    Houston 24
    Green Bay 21

    Atlanta 25
    New Orleans 29

    Minnesota 20
    Detroit 16

    Cincinnati 3
    Indianapolis 35

    Philadelphia 20
    NY Giants 14

    Cleveland 9
    Tennessee 28

    New England 24
    Seattle 21

    NY Jets 14
    San Francisco 24

    Dallas 13
    Pittsburgh 20

    Miami 16
    Buffalo 3

    Kansas City 17
    Denver 24

    St. Louis 10
    Arizona 34

    Washington 10
    Baltimore 24

    Oakland 7
    San Diego 34

    KC's View: