The exchange had already seen its predominant profit-source shift from cash trading to derivatives trading, Mecane said. Recent economic events have amped up pressure on the exchange to find more innovative ways to expand its business.

“People still think of NYSE as the trading floor. But the composition of our business has changed,” Mecane said. Now NYSE is seeking “other ways to diversify our business and survive in a changing world,” he added.
Mecane spoke at the Society of American Business Editors and Writers conference, held at the City University of New York Graduate School of Journalism.

He noted that the May 6 flash crash was a major catalyst in the shift away from equities. Since then, investors have been moving money out of the stock market and into investments that offer minimal, if any, growth potential, he said.

“That’s a pretty strong move and a pretty strong trend that we are trying to deal with. How do you rebuild that confidence?” Mecane said. “It’s difficult to look at some of the post May 6 events and say that didn’t have some effect on the investor psyche.”

Mecane took the popular stance on the cause of the flash crash, blaming it on a complex confluence of factors, including the increasing interconnectedness of markets. He made the statement just a few hours before a report, released by the Securities and Exchange Commission and the Commodity Futures Trading Commission, pointed to a single large trader as the source of the crash, according to The New York Times. The mutual fund’s use of rapid-trade computer algorithms set off the markets massive downward spiral, the report states.

Mecane explained that while the NYSE trading floor has increased its dependence on technology, the exchange still believes in the importance of human intervention as a circuit breaker in times of crisis.

“The role of the floor broker has changed and technology has become a much bigger piece of their function,” Mecane said. “But … trading at any speed, regardless of the impact on the investor, isn’t the right way to conduct markets. Allow human intervention at times when it makes sense.”

The combination of a relentlessly sagging economy, high unemployment and the May 6 flash crash has crippled demand for securities and forced the New York Stock Exchange to further diversify its business, NYSE Euronext Executive Vice President Joesph Mecane told a conference of business journalists on Friday.

The exchange had already seen its predominant profit-source shift from cash trading to derivatives trading, Mecane said. Recent economic events have amped up pressure on the exchange to find more innovative ways to expand its business.

“People still think of NYSE as the trading floor. But the composition of our business has changed,” Mecane said. Now NYSE is seeking “other ways to diversify our business and survive in a changing world,” he added.

Mecane spoke at the Society of American Business Editors and Writers conference, held at the City University of New York Graduate School of Journalism.

He noted that the May 6 flash crash was a major catalyst in the shift away from equities. Since then, investors have been moving money out of the stock market and into investments that offer minimal, if any, growth potential, he said.

“That’s a pretty strong move and a pretty strong trend that we are trying to deal with. How do you rebuild that confidence?” Mecane said. “It’s difficult to look at some of the post May 6 events and say that didn’t have some effect on the investor psyche.”

Mecane took the popular stance on the cause of the flash crash, blaming it on a complex confluence of factors, including the increasing interconnectedness of markets. He made the statement just a few hours before a report, released by the Securities and Exchange Commission and the Commodity Futures Trading Commission, pointed to a single large trader as the source of the crash, according to The New York Times. The mutual fund’s use of rapid-trade computer algorithms set off the markets massive downward spiral, the report states.

Mecane explained that while the NYSE trading floor has increased its dependence on technology, the exchange still believes in the importance of human intervention as a circuit breaker in times of crisis.

“The role of the floor broker has changed and technology has become a much bigger piece of their function,” Mecane said. “But … trading at any speed, regardless of the impact on the investor, isn’t the right way to conduct markets. Allow human intervention at times when it makes sense.”

The director of the United States Department of Commerce Bureau of Economic Analysis joined the growing debate shared by political leaders like President Barack Obama and French President Nicholas Sarkozy over just how adequate gross domestic product has been in measuring a country’s welfare. While there is no way to quantify happiness, said director Steve Landefeld, the BEA’s measures have been lacking. In fact, with better statistical analysis, they might have better predicted the housing bubble and financial crisis.

The “data really fell down on the job,” said Landefeld, as he showed charts that described a huge disparity between personal income and housing prices and data analysis that indicated little difference between Lehman Brothers or Bear Sterns and other, less-leveraged banks. A copy of Landefeld’s “GDP and Beyond” is available here and from the BEA.

The BEA should be comb over data more closely to better show bubbles and guide more sustainable practices, he said.

There may be even more to our misunderstanding of GDP than that, said fellow panelist Mike Mandel, editor in chief of Visible Economy LLC and former chief economist of Bloomberg Businessweek. The notion that consumer spending is 70 percent of GDP-used ad nauseam by journalists around the country – is misleading and just plain wrong, said Mandel.

Personal consumption expenditures does indeed account for roughly 70 percent of GDP. But PCE includes $1 trillion government spending on Medicare, Medicaid and Children’s Health Insurance Program (CHIP), said Mandel.

It also includes spending on imports. In the second quarter of 2010, consumer spending on motor vehicles rose by more than 6 percent. But domestic motor vehicle output fell by 2.6 percent during that time.

It’s a lot more complicated that many journalists have indicated, said Mandel.

The statement that consumer spending drives the economy is misleading, he reiterated. “It leads you to the wrong story.”

A New World, a New Wall Street to Cover from NYCity News Service on Vimeo.

In the world after the recent financial crisis, the pressure on journalists who cover Wall Street has perhaps never been greater. Seasoned business reporters who three years ago would  not have known what a credit default swap most certainly do now. Similarly, the new crop of business journalists at the CUNY Graduate School of Journalism are learning how to cover Wall Street with the subprime mortgage debacle in mind.

Reported by David Montalvo and produced by Samantha Stark.

Jonathan Blum conducts a paenl on technology and journalism during the SABEW Conference

In the old days, all journalists needed were typewriters, notebooks and phone books.

But as technology changed and developed – as typewriters gave way to computers to laptops to iPads – the demand for instant information and more sources of information changed the way stories were filed, reported, and researched.

You could argue the courtship between journalism and technology got started with email; the relationship deepened with the advent of the BlackBerry and other smart phones.

But now, technology wants to take the relationship still further and marry journalism through collaborative software and real time editing in newsrooms. How? By moving journalism from the localized newsroom to Newsroom 2.0 through Google docs and social project management.

“Where we are now is at the debate of how collaboration tools work in the real world,” said Jonathan Blum founder and principal of Blumsday LLC during the SABEW fall conference at the City of New York Graduate School of Journalism. “It is much more than just Google docs, it is about real time, editing, collaborating.”

Blum was part of a panel discussion — which was liveblogged — on how cloud-based computing may help journalists in the newsroom. He was joined by Jonathan Rochelle, group product manager of Google Docs; Charles Seybold, CEO and CO-Founder of LiquidPlanner.com; and Pamela O’Hara, president of BatchBlue Software.

Software companies continue to create new programs that enable the speedy production and widespread distribution of content; is a computer program that can write articles as well next?

And the answer is no, no need to panic – at least according to the panel’s Google representative. Rochelle acknowledged that while innovations like Google Docs have made collaboration faster, Google is not in the business to eliminate journalism.

“Google values journalism and the role it plays in society,” Rochelle said. “Our goal is to just aggregate news, to make sure that those who are looking find good content.”

So then, what are the benefits and applications of Newsroom 2.0? For one, “the cloud” makes collaboration much easier, and easily accessible to a broader audience, according to Blum, whose company provides content for CNNMoney.com, TheStreet.com, Entrepreneur magazine and many others.

But the challenge will come in news organizations willing to pay for the new software and their willingness to train (and retrain) their staff.

“The fight is going to be in training the staff and fighting that battle,” Blum said. “Are you going to get rid of them if they don’t want to learn new software?”

An important question…

The issues around how Obama’s health care reform plan will affect small businesses are many and varied. At today’s SABEW seminar on the topic, the hour and fifteen minutes allotted barely allowed the panelists to scratch the surface.

Mark Wagar, CEO of Empire Blue Cross Blue Shield, ran over in his opening remarks and was cut off midstream. Rima Cohen, counselor to the secretary of the U.S. Department of Health and Human Services, promised to go for 3 to 5 minutes, but went 10.

“One of the biggest issues is that it’s hard to get answers,” said Rubin. “Everyone has websites, but it’s very hard to get deeper and say what it all means.”

Despite the time constraints, the seminar did provide a host of potential angles for covering the effect of the health care bill on small businesses, including:

* Are tax credits working? The bill provides a tax credit of up to 35 percent for small, low-wage companies, retroactive to Jan. 1, 2010, and increasing to 50 percent in 2014. “It’s helping companies keep existing coverage, but we don’t see it leading to a lot of new policies,” said Wagar.  Rosin worried that only companies with 25 or fewer employees are eligible for the credit. “It disincentives growth in small companies, where you might have the most potential,” she said.

* Checking the progress of long-term goals. “This is not a magic pill, it’s not going to cure health system over night,” said Cohen. In part, that’s because the bill phases in changes over five years to minimize disruption of the health care system.But the bill also includes long-range initiatives to drive down costs, including funding for wellness programs at small businesses, as well as $15 billion in public health grants to fight obesity and tobacco use. “So much of what we pay for chronic conditions are caused by preventable behavior,” Cohen said.

* How are health exchanges implemented? Cohen said that so-called health exchanges called for by the bill would allow small businesses and individuals to band together and negotiate premiums closer to those paid by large employers. Wagar agreed that exchanges could improve the market for small group health insurance. “I think it depends on how things are implemented,” he said. “If we have a rational discussion of what’s included in the things we’re supposed to control could have good market.”

Much food for thought – even if there remain more questions than answers.

Low trading volumes may cut into financial firms’ profits and lead to lean times at Wall Street’s proprietary trading desks, Hintz told an audience at the Society of American Business Editors and Writers conference at the CUNY Graduate School of Journalism on Friday.

According to Hintz, the core problem facing these companies is at the retail level: average Americans have decided to take a pass on equities.

Certainly the financial meltdown of 2008 and the flash crash of May 6 – in which the Dow plunged nearly a thousand points in less than a half-hour, before bouncing back – have played a role in creating uneasiness among retail investors.

But Hintz says market history suggests there may be a more fundamental reason why investors have cold feet:

The geeky argument is that we found a wonderful correlation that says the individual investor in North America won’t begin to invest, no matter what the stock market does, until unemployment begins to go down.

Hintz believes that until the jobs picture improves, mom and pop investors will be wary of the volatile equity markets:

If you’re worried about whether you’re going to keep your job, do you really want to make bets in the stock market?

Hintz also pointed out that with money markets offering basically zero returns, retail investors have been flocking to bond funds:

What we seen in terms of the retail investor, we’re seeing money flowing into bond funds, which means if you’re a trader at Citi, Goldman or Morgan Stanley you saw retail funds going into bond funds and bond funds going up in value.

He says it’s a mystery why the interest in bond funds hasn’t translated into big trading profits in fixed income. The thing that isn’t easily understood, according to Hintz, is the relative moderation of the fixed income traders:

In my experience…this would’ve been a time when fixed income would’ve just coined money. And the fixed income traders would have ramped up their balance sheet, increased leverage, taken more risk and made a fortune, but… they didn’t.  Not only that, they didn’t take risk up and this is so out of character… you know, I mean has Wall Street found religion? Have the traders suddenly become choirboys?

But there is a light at the end of the tunnel, and it’s the glow of potential deal-making, according to Hintz.

Hintz recently spent time with former colleagues from Morgan Stanley, on the occasion of the firm’s 75th anniversary celebration at the Metropolitan Museum’s Temple of Dendur.

Those former colleagues, who are now dispersed among Wall Street’s major investment firms, apparently hinted that conditions are increasingly ripe for a burst of corporate buying.

According to Hintz, there are three cash-rich players: American companies, private equity firms with investor funds sitting on the sidelines and Asian investors hungry for resource, distribution and technology companies. All are waiting for the right moment to move:

All of this is lined up, so think of this as a giant Domino, all we need is that first one to go over…and I’m guessing 2011 is going to be a pretty good M&A year. Really all we need is that first CEO to gain a little courage and push it over.

Wall Street firms may not see trading profits go up, but brokering mergers and acquisitions is a better business anyway, as Hintz argued:

M&A and equity underwriting are two very high margin businesses

Not all Wall Street firms are likely to share equally in the M&A boom that Hintz foresees for 2011. As for who might partake of the spoils, Hintz says Goldman Sachs, which has seen its reputation affected by a recent SEC lawsuit, is likely to be a good bet.

Vasant Prabhu says non US markets are leading the recovery. Photo: Hannah Rappleye

After the worst year for hotels since the Great Depression, tourism is climbing back. But the pace in the United States lags growing markets in Asia and the Middle East, according to Vasant Prabhu, vice chairman of Starwood Hotel and Resorts.

At the fall annual conference of the Society of American Business Editors and Writers, Prabhu and COO of JetBlue Rob Maruster spoke Friday to a crowd of financial journalists at the City University of New York Graduate School of Journalism in New York City.

Some key takeaways:

With sales growth down 20 percent last year, Starwood hotels didn’t expect such a turnaround in the industry. But for the company that is known for its five-star hotels, markets in Asia are up as much as 20 percent and are leading the overall recovery for the global chain of hotels.

“There are massive amounts of wealth being accumulated outside the US,” said Prabhu. For example, 10 years ago, 70 percent of hotel occupants were from aboard, today 70 percent of occupants are domestic, he said.

In the U.S. “global cities” are faring better than the country as whole. Prabhu has dubbed these top 100 cities —  like  London and New York — “global cities” because business activities drive growth there. These cities are growing twice as fast as smaller ones, he said.

Maruster said JetBlue, which just celebrated its 10 year anniversary, has fared better than its competitors. JetBlue only started flying out of Boston 6 years ago, but is already the already the largest carrier out of Logan Airport, he noted.

The recent purchase of AirTran by Southwest should help JetBlue’s business, said Maruster. By having too many planes in the air, airlines are not as efficient because they are slowed down by air traffic. The consolidation “takes out irrational capacity in the airline” industry, he said.

JetBlue continues to grow and roll out new features – like the ability to watch football games live at 30,000 feet, scheduled to debut this fall. Echoing the growth in hotels overseas, JetBlue is expanding its international offerings as well. In 2005, JetBlue didn’t offer any international flights; five years later, 25 percent of its flights are now international.

“There’s enormous [growth] potential in South America,” Maruster said.

To revive the US market, transportation to the airport needs to be improved. Faster trains, from places like New York City to Washington, DC, would reduce the need for constant airfare between cities, Maruster said.

By Carl Gaines

“While we may be far along in the adjustment process, it is difficult to judge just how much further we have to go,” said Dudley.  “Further action is likely to be warranted.”

With interest rates already so low, Dudley’s recommendation is for the Fed to increase the amount of stimulus they provide by growing their balance sheet.  He said they could accomplish this through the purchase of medium and long-term Treasuries or mortgage-backed securities.

Long-duration assets acquired by the Fed could pull down the level of long-term interest rates, Dudley said.  He suggested that $50bn of purchases could provide about as much stimulus as a reduction in the federal funds rate of between half a point and three quarters of a point.

He said that lower long-term rates would make housing more affordable and support consumption when households refinanced mortgages to lower rates.

Dudley said such action must be coupled with a push to communicate with the public uncharacteristic to the Fed.  “The more confident market participants are in the Fed’s ability to exit when the time is right, the more effective its purchases will be in stimulating the economy,” he said.

Dudley also told the audience that balance sheet-expansion would not be a policy of monetizing the federal debt.  “The FOMC would only engage in large-scale asset purchases in order to push the economy more rapidly toward the dual mandate goals of full employment and price stability.”

Even if the Fed ended up losing money on expanded asset purchases, Dudley would not be deterred.  “Profits are much less important than getting the U.S. economy back to the highest level of employment consistent with price stability,” he said.

“The current levels of unemployment and inflation and the timeframe over which they are likely to return to levels consistent with our mandate are unacceptable,” he said.  “We have the tools that can provide additional stimulus at costs that do not appear to be prohibitive.”

“Today’s low and falling rate of inflation – at a time when interest rates are near zero – is a problem,” Dudley said.

“In this environment, a decline in inflation expectation drives up real interest rate and thereby increases the real cost of credit,” and it “cannot be offset simply by lowering the federal funds rate.”

Dudley, who has a PhD in Economics,  began with a speech about the cause and effects of the economic crisis – complete with (rather complicated) charts and graphs projected behind him.

But during the last ten minutes of the presentation, he switched gears and seemed to relax somewhat as he sat down with CUNY professor Greg David. During the discussion, Dudley reiterated the FOMC’s recent statement that inflation levels were running too low, and that must be communicated clearly to the public. “That’s why I’m here,” he said. “To reassure people and reduce dispersion of uncertainty.”

The Fed has tools, he said, to bring inflation back to target levels consistent with its dual mandate – the pursuit of the highest level of employment consistent with price stability . Such tools included expanding the Fed balance sheet.

“Simple calculations based on recent experience suggests that $500 billion of purchases would provide about as much stimulus as a reduction in the federal funds rate of between half a point and three quarters of a point,” he said.

Still, as Dudley reminded the workshop, the public must wait for the FOMC’s November announcement for any official views.