Case Blog

With August drawing to a close as we enter the dog days of summer, we start to get ready for fall. The XXIX Olympic Games in Beijing are living up to their advance promise and NBC, in spite of this being the first Olympic Games with extensive live online coverage, is getting very good ratings. Michael Phelps’ outstanding performance, 8 gold medals, has certainly contributed to the global focus on Beijing.

As the world watched President Bush and Prime Minister Putin chat during the opening ceremonies, no one knew that Putin would quietly leave Beijing to personally direct the incursion into Georgia. President Sarkozy of France, who is also head of the European Union (this position rotates), quickly tried to broker a truce. He at first appeared to be successful, but as the days have dragged on, it is clear that Russia will pull back on its own terms.  What are Russia’s true ambitions? Will they turn their attention to Poland and the Ukraine, which have also aligned themselves with the west?  Both presumptive presidential nominees, Senator McCain and Senator Obama, have quickly turned their attention to foreign affairs. And the Bush administration is slowly realizing that the world balance has changed in a way they had not anticipated.

Back in the media market, we have seen the very successful introduction of Apple’s 3G iPhone. Its arrival was tied to the introduction of the App Store, which was promised by Steve Jobs at MacWorld in January. (See my blog, Mobile, January 27, 2008.)  By opening up the iPhone as a development platform, Apple has once again shown us the future.  I have downloaded two applications, Voice Dialer, which allow me to voice activate my contact database for calls, and the New York Times. The first one went very smoothly and I have added several updates since the first download. The New York Times application, which is excellent, unfortunately led to my iPhone freezing.  My advice is to download the iPhone’s very good user manual to your computer prior to downloading any apps. This will save you a trip to the local Apple Store to unfreeze your phone. I trust that Apple in an upcoming release will correct this problem, which has been widely reported in the press.

The mobile market as a whole is looking very promising. Google’s CEO Eric Schmidt weighed in this week, saying that the advertising opportunity for mobile will eventually eclipse Google’s current online advertising business. And Microsoft’s licensees for their mobile operating system will soon engage in this market with platforms that allow for custom applications for the user.

The end of summer has also brought with it the first of the NFL’s preseason games and the usual speculation about how the season will unfold. Brett Favre had Jets fans attention last evening in a preseason game against the Redskins. Can he, along with the other talent that Jets owner Woody Johnson has assembled in the offseason, allow the team to challenge the Patriots in their division? In his brief playing time, Favre did not appear to have lost any of the skills that made him a legend in Green Bay and he certainly was not ready, on a personal level, for retirement.  Will there be two playoff teams in New York in January? Which team will be most improved, the Miami Dolphins or the Oakland Raiders?

It will soon be time to return to work and the media deal market should become more active as well. And shortly after the upcoming Democratic and Republican conventions, all eyes will turn to the presidential election. Any forecasts on the candidates vice presidential running mates?

It was one year ago that I wrote in posting title “August Credit Turmoil”: “For those of us in the media business who focus on M&A and disappeared several weeks ago, our world was changed while we were enjoying our favorite recreational pursuits… Many of us are expecting a federal funds rate cut in mid-September now that the Federal Reserve seeks to stave off a recession. There is also a sense that the Fed Chairman passed his first real test.” At the time that was written, we had no idea how many more tests Ben Bernanke and Hank Paulson would face. These may have been the most challenging 12 months for the global financial system since World War II. Who would have forecast that the subprime meltdown in the United States would lead to a global credit crunch or that The Bear would be brought to its knees and that the only alternative was a fire sale to JPMorgan Chase (JPM)?

During this time we have seen an activist Federal Reserve working hand in hand with the Treasury Department under the leadership of Hank Paulson. Neither Bernanke nor Paulson have been doctrinaire regarding free markets. In mid-July we saw the latest example of this when shares of 19 financial institutions were protected from naked short selling by an emergency order from the SEC. SEC Chairman Christopher Cox went on record that he was not opposed to legitimate short selling — only “unlawful manipulation through ‘naked’ short selling that threatens the stability of financial institutions.” (WSJ 7/19-7/20, 2008)  Over the past month we have seen many of these same financial institutions show a significant increase in price from their lows of early July.

I am, as a rule, opposed to government intervention in free markets because of the dislocation that can result. One can look back, for example, to the Nixon price controls and the inflationary results that followed their removal. However, challenging times often demand extraordinary actions. Restoring confidence in the U.S. and global financial markets  has been critical, and I believe that the leadership demonstrated by The Fed & other agencies has been correct. Both presumptive presidential nominees, Senator McCain and Senator Obama, and their advisers would be well advised to study the turbulence of the past year and the herculean efforts that have been necessary to stave off disaster.

This past weekend we also saw almost all of the world’s best golfers go for the last major, the PGA Championship. With Tiger out of the mix for the balance of the season, Sergio Garcia looked well positioned going into the back 9 to finally have a very good shot at winning his first major.  He was denied by Padraig Harrington, the back-to-back British Open champion, who put on an exceptional putting display on the 16th, 17th & 18th holes. He displayed the skill, concentration and focus necessary to excel at a very precise game.  During Tiger’s absence, Phil Mickelson, who has been ranked #2 in the world, has not been able to step into the void.

Let’s hope that while we are all on holiday next August it will be a quieter time, and we will be in the midst of a strong recovery.

In the fall of last year I wrote about doing business in China and the many trips I made to China during my time at Reed Business (B2B in China). As I watched the XXIX Olympics’ masterful and beautifully choreographed opening-night ceremony on Friday evening, I thought back to many of my visits. My last one, in the fall of ‘06, when Mary Claire accompanied me, was one of my most memorable and as always my dear friend Hugo Shong was an impeccable host.

The historian Arnold Toynbee’s prophecy that the 21st century would belong to China is becoming more and more of a reality to the global community. This is China’s time on the world stage. As host to these 2008 Summer Olympic Games, the world will watch with awe and fascination this rich and complex culture.  I trust that it is time for me to plan another trip to China in the not too distant future. History is clearly a “long march” and there remain many opportunities for media investments for those who have patience.  I believe that the B2B sectors, in particular, will provide excellent returns over the long term. I also sense that the events and exposition business will prove very profitable.

For those of you now in Beijing, my favorite high-end restaurant is Tian Di Yi Jia, which translates into Heaven & Earth Restaurant. It is located at 140 Nan Chi Zi Dajie, Dongcheng, in Beijing. The phone number is 8511-5557. It is only a 5-minute cab ride from the Grand Hyatt Hotel. The cuisine is superb and it has a world-class wine list, with many first-growth Bordeaux wines, as well as outstanding wines from other parts of the world.

In late June, I wrote in a posting titled “Summer”: “As we move into summer, the financial markets continue to be unsettled, with the surge in oil prices continuing to depress the stock markets. Is this surge truly driven by demand from growth economies like China and India? I have a hard time reconciling this with the slowdown in growth the last several quarters around the globe, including both China and India. How much of this is driven by commodity speculation, which is fed by a weak U.S. dollar?” This past week we continued to see the price of a barrel of oil spiral downward to $116 and it now looks like a $100 per barrel price may be closer to becoming a reality than a $200 per barrel price. This fall has taken place concurrently with the strengthening of the U.S. dollar versus the Euro and other world currencies.