The Wall Street Journal Education Program
Weekly Review & Quiz
Covering front-page articles from Oct 27- Nov 2, 2007
Professor Guide with Summaries Fall 2007
Developed by: Scott R. Homan Ph.D., Purdue University
Questions 1 – 12 from The First Section, Section A
If Lightning Strikes, Drop PlayStation And Pick Up a Book
By LIAM PLEVEN and DIONNE SEARCEY
October 27, 2007; Page A1
http://online.wsj.com/article/SB119344427585773546.html
Chris Bergin and his brother, Ben, were jamming along to "Message in a Bottle" on the
videogame Guitar Hero 2 during a storm in June when a bright light flashed and a
thunderclap shook their house in Wilton, Conn.
The lightning strike nearby triggered a power surge that snaked through the house's
electrical system to Mr. Bergin's PlayStation 2 then traveled through the wiring to the
plastic guitar controller pressed up against his stomach.
I just remember falling to the ground and looking at my brother 'cause he was on the
ground, too," says the 15-year-old Mr. Bergin. The two brothers weren't hurt, but their
PlayStation was fried, along with their laptop computer, television set, cable and phone
wiring and ceiling fan.
Lightning safety experts, endorsing common sense, have long advised that indoors is the
safest place to be during an electrical storm. The National Weather Service recently
adopted the slogan, "When thunder roars, go indoors."
But the spread of high-tech devices, including laptops and videogames, means there are
new ways in which people can suffer injuries or property losses, even in the relative
safety of their homes. A division of Sony Corp., Sony Computer Entertainment America,
the maker of PlayStation products, says it hadn't heard of incidents like this and says its
devices come with safety instructions about lightning. Activision Inc., which makes the
Guitar Hero game, advocates staying off electronics during storms.
Mark Earley, chief electrical engineer at the National Fire Protection Association, says
the new lightning safety slogan should be modified slightly: "When thunder roars, stay
indoors -- and read a book."
Among the recent incidents: A Mississippi teenager got zapped while holding a computer
mouse; a Washington, D.C., man received mild burns from a laptop resting on his legs;
and a Georgia police communications manager felt a stinging sensation when lightning
jolted the police department -- "like somebody took their middle finger and flicked me in
the cheek," she says.
"My hair was tingling. My teeth hurt," says Stacy Blackwell, of the Winder, Ga., police.
The strike in July "blew up quite a bit of equipment," says Alex Wages, the city's director
of information technology.
While Ms. Blackwell was unharmed, lightning-induced surges can cause serious injury.
The plastic casing covering laptops, game controls or computer keyboards sometimes
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 33
isn't thick enough to insulate users, so people holding plugged-in devices can get burns or
suffer other injuries.
Of course, physical injuries related to lightning are still far more likely to occur outdoors.
In the first nine months of this year, 41 people were killed by lightning strikes in the U.S.,
and all were outside doing things such as playing golf, fishing or standing under a tree,
according to the National Weather Service.
But property damage indoors is common, and getting more expensive when it happens.
The average cost of an insurance claim from a lightning strike has more than doubled
since 2000, rising to $3,446 in 2006, according to the Insurance Information Institute.
The increase in the cost per claim has a lot to do with all the wide-screen TV sets,
computer systems and other expensive gear.
The tab from damaged electronics can climb quickly in some cases. Chubb Corp., the big
insurer, says it paid out more than $300,000 in 2006 when lightning struck a house in
Hawaii and damaged the audio system, the internal Ethernet computer network, the
lighting system, and the wireless control panel that ran the house's electronics. Chubb
declined to identify the homeowner.
Every piece of electronic gear that is plugged into an electric outlet is vulnerable to a
lightning-induced surge, which can enter a house through wiring or plumbing. When
lightning strikes a power line, it can send a surge through a nearby home's wiring. The
electricity can snake through the home to anything that's plugged in.
Michael Utley, who has a Web site called struckbylightning.org1, says he has logged a
number of cases in which people claim to have suffered injuries or property damage as a
result of indoor surges to electronic games.
"When it hits something it goes pop whether it's a plasma TV or a heart," says Mr. Utley
who himself survived a lightning strike seven years ago when, while he was playing golf,
a bolt traveled through the top of his head and exited his putter.
Two summers ago, 19-year-old Travis Brooks was working at his computer with his hand
on the mouse when a lightning-induced surge traveled through the wiring in his Hurley,
Miss., home. The surge zapped his hand, knocking him to the floor, according to Jackson
County, Miss., sheriff's department records. When deputies arrived, Mr. Brooks was
complaining of chest pains and a numb arm. He was treated at a hospital and released.
Decades ago, lightning safety experts issued warnings about telephones and lightning
strikes. A surge could travel through wiring and shock anyone using the phone in a
thunderstorm. In rare instances, people on party lines would all get a shock. Today's
cordless phones and cell phones are safe to use indoors unless the handsets are being
charged at the time.
Ms. Blackwell had just answered the phone at the Georgia police station when "there was
a pop, and the phone went dead," she says.
Staying away from household electronics -- or anything that could carry the charge, such
as metal -- is the best way to protect oneself from surges. And one simple way to protect
electronic gear is to unplug it when a storm is due. But many people don't bother.
Instead, in an effort to protect their gear, many consumers buy surge protectors. But
lightning strikes generate so much force that they can overwhelm all but the most
sophisticated defenses. "Just putting a device on an incoming line may not solve all the
problems," says Mitchell Guthrie, a Blanch, N.C., electrical engineer and consultant.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 33
An article called "Pimp Your Plasma" on a Web site that reviews electronic gadgets for
consumers, advises people who buy expensive TVs to also purchase a $200 surge
protector that can suppress "punishing power strikes and surges resulting from lightning
strikes."
1. Ways to protect yourself and your electronics from lightning strikes include
a. buying expensive surge protectors
b. staying inside and reading a book
c. unplugging all electronic devices
d. all of the above Correct
2. In the first nine months of this year, ___people were killed by lightning strikes in the
US, and all were outside doing things such as playing golf, fishing or standing under a
tree, according to the National Weather Service.
a. 21
b. 31
c. 41 Correct
d. 51
O'Neal Out as Merrill Reels From Loss
By RANDALL SMITH
October 29, 2007; Page A1
http://online.wsj.com/article/SB119359304744274091.html
NEW YORK -- Whenever Goldman Sachs Group Inc. would report quarterly profits in
recent years, the pain would be felt nearby, at the downtown headquarters of Merrill
Lynch & Co.
There, Merrill Chief Executive Stan O'Neal would grill his executives about why, for
instance, Goldman was showing faster growth in bond-trading profits. Subordinates
would scurry to analyze the Goldman earnings to get answers to Mr. O'Neal. "It got to the
point where you didn't want to be in the office" on Goldman earnings days, one former
Merrill executive recalls.
Soon it will be Mr. O'Neal's turn to avoid the office. The 56-year-old CEO was
negotiating the terms of his forced departure yesterday afternoon in the wake of a
multibillion-dollar write-off he announced last week, according to a person briefed on the
negotiations. Merrill's board is expected to consider external candidates and current
Merrill executives in its search for a successor. Mr. O'Neal's resignation is expected to be
announced as early as today.
Calls to Mr. O'Neal's office and home weren't returned. A Merrill spokeswoman said he
wasn't available to comment.
With Mr. O'Neal's ouster, the global credit crunch -- triggered by a steep downturn in the
value of subprime mortgages to the least-credit-worthy borrowers -- reaches deep into the
executive suite. Damage across Wall Street has topped $27 billion, including $3.4 billion
at UBS AG, a Swiss bank whose head of investment banking resigned a month ago. It has
also cast further doubt on the future of Citigroup Inc. Chief Executive Charles Prince,
whose co-head of investment banking resigned after mortgage-related losses.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 33
According to people familiar with the firm, a top contender to succeed Mr. O'Neal is
Laurence Fink, CEO of BlackRock Inc., a money manager that is 49% owned by Merrill.
Mr. Fink is close to Greg Fleming, Merrill's co-president and himself a possible
candidate. One scenario is a power-sharing arrangement between the two. Other
contenders may include John Thain, the CEO of NYSE Euronext and himself a former
president of Goldman Sachs, and Bob McCann, head of Merrill's huge brokerage arm.
In some ways, Mr. O'Neal's downfall seems a straightforward consequence of last week's
announcement that Merrill would write down $8.4 billion in the third quarter -- $7.9
billion of that connected to its revaluation of mortgage-related assets -- the largest loss in
Wall Street memory. But many Wall Street executives were stunned by the speed with
which the board, most of it picked by Mr. O'Neal, was willing to throw its chief
overboard.
Mr. O'Neal, after all, is widely credited with boosting Merrill's profitability and
transforming it from a U.S.-focused retail broker to an international financial giant with
strong footholds in important segments such as commodities, private equity, asset
management and bonds.
Some former colleagues say Mr. O'Neal's talent and steely drive came with a tragic flaw:
He didn't much engage in debate, kept his own counsel and had little use for the kind of
strong-willed subordinates who might have helped him steer clear of the subprime
troubles that brought him down. In the early years of his tenure, which began in 2002,
Mr. O'Neal purged the firm of many of its longtime senior employees and later fired
some of those considered his allies.
"He was uncomfortable around independent people [with] views which might be different
than his, and whose loyalty was to the firm rather than to him personally," said Barry
Friedberg, Merrill's longtime head of investment banking in the 1980s and 1990s. Mr.
Friedberg retired in 2003, after he tried unsuccessfully to offer Mr. O'Neal advice.
Mr. O'Neal's lack of support became clear in recent days. Starting in late September, Mr.
O'Neal had briefed Merrill's board of directors on the firm's mortgage losses, a writedown he estimated would be $4.5 billion. In early October, days after the close of the
third quarter, Merrill fired two top bond executives.
Mr. O'Neal named a new bond chief, David Sobotka, to clean up the mess. On Oct. 24,
Mr. Sobotka's team came up with a more conservative valuation, which boosted the
mortgage-related write-down by 76%, to $7.9 billion.
The size of the loss startled the board. Particularly concerned was Armando Codina, a
Florida real-estate developer who is chairman of the board's nominating and corporategovernance committee. Mr. Codina is a former business partner of former Florida Gov.
Jeb Bush and served with Mr. O'Neal when both were directors of General Motors Corp.
Mr. Codina expressed his surprise to Mr. O'Neal at a recent board meeting, according to a
person familiar with the meeting.
"What bothered the board was that the size of the loss went up at an alarming rate," said
this person. If anything, Mr. O'Neal should have "overcommunicated" with his board
about Merrill's problems, this person said, but Mr. O'Neal didn't walk the board through
the reasons for the write-off's increase as much he should have.
'Final Straw'
The "final straw" was Mr. O'Neal's unilateral decision to ask Wachovia Corp. CEO G.
Kennedy Thompson, a longtime client of the firm, whether he would be interested in
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 33
buying Merrill. Mr. Thompson demurred, according to a person familiar with the
situation. But those familiar with the firm say the move's appearance of desperation -particularly since Wachovia just acquired a big St. Louis brokerage and now rivals
Merrill's brokerage in size -- offended some of Merrill's directors, brokers and some
executives who were unaware of the overture.
"If there are too many surprises, the board loses confidence in the senior management
team," says Michael P. Kelly, head of the board services practice for CTPartners, a New
York executive search firm. (The firm has done some search work for Merrill.) In the
aftermath of Sarbanes-Oxley, the 2002 corporate-reform law, directors "need to be in
sync with the CEO," he says.
No one on Wall Street embodied the Horatio Alger story better than Mr. O'Neal, who
became the highest-ranking African-American on Wall Street. Raised in poverty amid the
cotton fields of the Deep South, he worked as a young man at General Motors. During his
days in the auto business, an auto assembly-line foreman pointed out Mr. O'Neal's strong
Southern drawl. Mr. O'Neal took speech lessons that gave him perfect diction, an
associate recalls.
That same determination showed after Mr. O'Neal joined Merrill in 1986, in its junkbond division. He came to power amid growing investor impatience with the firm's cost
structure, particularly after money-losing expansion moves into Canada and Japan. He
made cost cuts in Merrill's brokerage division, was named president of the firm in July
2001 and reorganized the firm quickly after the terrorist attacks of Sept. 11. He made
even more draconian firmwide cuts during the 2002 stock-market slide, winning the top
job in July and taking office in December.
With his restructuring, Mr. O'Neal was seen as rejecting the longtime culture of a
company known internally as "Mother Merrill." For years, the brokerage giant was
willing to accept lower profit margins in order to keep longtime loyal employees on the
payroll, much like International Business Machines Corp. had a no-layoff policy during
its 1980s heyday.
Mr. O'Neal was criticized for purging a few dozen rivals and their allies after gaining
power, and later even his own former allies, such as executive vice chairman Thomas
Patrick.
Merrill's board gave him leeway because he more than doubled the firm's profit level to
an average topping $5 billion annually from 2003 to 2006. Those at the company said he
was proud of cutting through the cozy corporate culture.
Many former Merrill executives, who stayed in touch with each other, were critical of his
moves. Former executives say they were bothered by the firm's lack of support for a
group of its former bankers who were convicted and served jail time for allegedly helping
Enron Corp. deceive investors about its earnings. The bankers' convictions were later
reversed, but some face retrials.
Such episodes showed Mr. O'Neal "forgot what Mother Merrill stood for and just
disavowed the past," said Daniel Tully, a former broker and Merrill's chief executive in
the mid-1990s. "We had a great thing going for us, with the so-called backslapping type
of people that we are. We were tough taskmasters but not mean-spirited."
In recent days, former executives also discussed moves to launch a proxy fight if Mr.
O'Neal wasn't removed, according to a person familiar with those discussions.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 33
3. Possible replacements for Merrill Lynch & Co Chief Executive Stan O'Neal include
a. Laurence Fink
b. Kennedy Thompson
c. Greg Fleming
d. Both a and c Correct
4. “Mother Merrill” is a company culture known for
a. it’s draconian nature
b. being willing to accept lower profit margins in order to keep longtime loyal employees
on the payroll Correct
c. it’s constant re-structuring
d. both a and b
Congress Weighs Sweeping Overhaul Of Consumer Product Commission
By M.P. MCQUEEN and CHRISTOPHER CONKEY
October 30, 2007; Page A1
http://online.wsj.com/article/SB119370078391975611.html
Spurred by a spate of scares over the safety of imported goods, Congress is weighing the
most significant consumer-safety legislation in a generation -- even as states and
nonprofit groups step up their own watchdog efforts.
A bill that would substantially boost fines, add staffers and increase transparency at the
embattled Consumer Product Safety Commission is moving through the Senate. The
moves represent efforts to address what consumer groups and critics widely see as the
weakness and inefficiency of the commission, the tiny federal agency charged with
regulating at least 15,000 types of consumer products, from toys to all-terrain vehicles to
mattresses.
The Senate bill faces industry opposition and other hurdles on Capitol Hill, including
conflict with President Bush over the direction of the CPSC. The House has already
passed separate legislation. But consumer advocates predict the Democrat-controlled
Senate could pass a version by year end. Industry groups say Republicans aren't likely to
try to kill the bill, but hope to amend it to change provisions manufacturers find onerous.
Manufacturers and retailers say they will fight some of the bill's provisions, including the
increase of fines to a maximum of $100 million from $1.85 million. But their clout has
been diminished by a rash of highly publicized recent recalls involving everything from
Halloween pails with lead paint to hazardous cribs to toys with small parts that present
choking hazards.
Many of the goods are imported from countries like China, where safety standards are
often less stringent. Adding to the problem are a fixation among U.S. industry and
consumers on getting bargain prices -- sometimes, at a cost to quality -- and regulators'
failure to keep up with changes.
No Further Action
For much of this year, the CPSC has been unable to enact safety rules or levy fines for
safety violations, in part because it has lacked a third commissioner. Although Congress
passed a temporary law this summer authorizing the agency to act without a full panel,
until now, it hasn't taken any further action. An agency spokeswoman says it hopes to
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 33
move soon on some measures, including setting standards for children's jewelry and allterrain vehicles.
The commission's staff has been cut over the years to about 400 employees, less than half
the number it had when it started operating in 1973. Meanwhile, the number of products
it regulates is soaring, including imports. This has resulted in long delays that have
frustrated manufacturers and consumer groups.
For some, the federal bill is preferable to a patchwork of legislation shaping up as states
including California move to increase safety standards on their own. Responding to what
they see as a major regulatory void, some states are introducing tougher safety rules,
while watchdogs are testing products and unilaterally announcing results.
The new Senate bill, co-sponsored by Sen. Mark Pryor (D., Ark.) and Sen. Daniel Inouye
(D., Hawaii) with significant Democratic backing, would increase the commission's
authorized funding by 58% to $141.7 million over the next seven years, and allow it to
hire about 100 additional employees.
The bill proposes "a pretty big change from the system we have on the books now," Sen.
Pryor said. "This is an effort to really clean up the U.S. marketplace."
The CPSC declined to comment about pending legislation. Acting Chairman Nancy
Nord, a Bush appointee, has proposed raising the cap on civil penalties to $10 million but
opposes Sen. Pryor's goal of lifting it to $100 million, fearing the agency will become
inundated with needless information from nervous businesses. Along with industry
groups, Ms. Nord also objects to a provision that would give the agency more leeway to
publicly disclose details about potential hazards during ongoing investigations.
The CPSC regulates products mostly by setting and enforcing voluntary and mandatory
standards in cooperation with manufacturers and others. Manufacturers and retailers must
report any defects to the CPSC in a timely manner. The agency may issue a recall if the
product is found to violate a standard or pose a safety threat.
In such cases, the agency typically negotiates the recall terms and remedies with
manufacturers before goods are removed from shelves. It usually refrains from alerting
the public about potential hazards until an agreement is reached.
Most children's products aren't currently required to undergo premarket testing. CPSC
field investigators and customs officials check only a tiny sample of all goods the CPSC
regulates, at ports and elsewhere.
Fighting for Reform
Linda Ginzel, a psychology professor at the University of Chicago, has been fighting for
reform of product-safety laws since her 16-month-old son was strangled by a recalled
portable crib at his child-care provider's home in 1998.
He was the fifth child known to have died in the Playskool Travel-Lite portable crib,
manufactured between 1990 and 1993 and first recalled in 1993. A sixth child later died
because of the same model crib.
With the Senate bill, Ms. Ginzel said, "I think we finally have an opportunity for positive
change to protect children."
Some state regulators and watchdog groups are already taking their own steps. California
has enacted tougher fire-safety standards for mattresses ahead of the CPSC, and Illinois
has a ban on lead in children's products that goes beyond federal law.
Illinois Attorney General Lisa Madigan has disagreed with the CSPC over its handling of
a crib recall, noting that the commission alerted the public of the safety issues without
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 33
advising what to do. A CPSC spokesman said the agency took the "very unusual step"
because the cribs had caused three deaths and posed an immediate threat.
Last week, distributor Simplicity Inc. and the CPSC announced that the Reading, Pa.,
company will provide repair kits to immobilize the cribs' problematic drop-side. Ms.
Madigan's office has asked Simplicity to offer a complete refund or replacement. A
Simplicity spokesman yesterday said the company "worked very closely with the CPSC"
and believes "the repair kit is the safest" remedy.
Stepping Up
The "CPSC has not been robustly and aggressively working to protect consumers," said
Rachel Weintraub, director of product safety at the Consumer Federation of America, a
nonprofit. "Other entities have stepped up to the plate."
One of the more influential is the California-based Center for Environmental Health. This
month, it tested a Curious George toy on the market. Alleging that it contained 10 times
the legal amount of lead, CEH filed a notice to the company and regulators, saying that it
intended to take legal action. The same day, manufacturer Marvel Entertainment Group
Inc. said it would halt shipments of the Chinese-made toy and conduct its own tests to see
whether a recall was warranted.
Manufacturers said they oppose several key provisions in the Senate bill. These include a
proposal to end a prohibition on the CPSC disclosing details about potentially hazardous
products without first giving the manufacturer a chance to respond.
Supporters of the measure argue that agency investigations into such products can last
months or years, while injuries and deaths mount, and that other regulatory agencies
aren't bound by such rules.
Joseph M. McGuire, president of the Association of Home Appliance Manufacturers, a
trade group, said, "If the information is made public, it could serve as the basis for
litigation even though it may be found to be invalid."
Inconsistent Enforcement
Industry groups also oppose a measure that would enable state attorneys general to sue
companies for violating federal product-safety laws. They say it would expose companies
to potentially inconsistent enforcement and lawsuits.
Legislative hurdles also loom. There is a lack of consensus on key provisions of the Pryor
bill, and several amendments could slow its progress once it moves to the Senate floor.
So far, the House doesn't have a matching bill: Recently passed House legislation would
raise the cap on penalties -- but only by one-tenth as much as Mr. Pryor wants. The
House legislation didn't include the controversial measure on disclosure. But many House
Democrats hope to pass measures that more closely match the Senate bill's core
provisions.
5. The Consumer Product Safety Commission is a tiny federal agency charged with
regulating at least ______ types of consumer products, from toys to all-terrain vehicles to
mattresses.
a. 5,000
b. 15,000 Correct
c. 50,000
d. 150,000
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 33
6. A bill that would substantially boost fines, add staffers and increase transparency at
the embattled Consumer Product Safety Commission is moving through the Senate.
The bill's provisions, include the increase of fines to a maximum of ____ from $1.85
million.
a. $5 million
b. $10 million
c. $100 million Correct
d. $500 million
Bernanke, in First Crisis, Rewrites Fed Playbook
By GREG IP
October 31, 2007; Page A1
http://online.wsj.com/article/SB119374975769376194.html
WASHINGTON -- On the afternoon of Thursday, Aug. 9, with a panic driving up shortterm interest rates in Europe and the U.S., Federal Reserve Chairman Ben Bernanke's
office became a war room. His closest advisers took seats in the burgundy leather chairs
around a coffee table or telephoned in from their now-aborted vacations.
Mr. Bernanke, a former academic vaulted 18 months earlier to the world's most powerful
economic job, was seeking counsel from colleagues of all stripes, from a thirtysomething
former investment banker to a Federal Reserve veteran of nearly four decades who had
participated in almost every important Fed decision of the past 20 years. He pushed them
to spit out as much information as possible about the day's events. What, he asked, do we
know? What must we learn? And what are our options?
The roots of the crisis had been apparent for months. In rising numbers, homeowners
with subprime mortgages -- those made to the least credit-worthy home buyers -- were
delinquent on payments. Hedge funds and other institutions had bought opaque securities
backed by these mortgages, but they were difficult to value and potentially hard to trade.
That morning it became clear that European banks had more exposure than previously
thought, sparking a scramble for cash by some banks and a reluctance to lend that
instantly jumped the Atlantic.
The Aug. 9 meeting in Mr. Bernanke's office kicked off weeks of brainstorming over
ways to restore calm to credit markets. The wide-ranging tone of the subsequent
discussions was encapsulated in subject lines of some emails Mr. Bernanke and his aides
exchanged: "blue sky." One Fed governor spent hours on the phone grilling contacts on
Wall Street. Another official helped broker a deal to help mortgage lender Countrywide
Financial Corp. through a financing squeeze, aiming to avert a disruptive unwinding of
complex loan agreements.
In those next hours and days, the Fed insiders would determine the U.S. response to the
looming financial crisis. They would also help define the reign of Mr. Bernanke, who
faced his first major test since taking over as Fed chief from the larger-than-life Alan
Greenspan.
Mr. Bernanke's preparations and his handling of the scare were described by current and
former Fed insiders, private sector officials who deal with the Fed, and public documents.
The resulting portrait offers the clearest demonstration so far of how he differs from his
predecessor. Though an introvert like Mr. Greenspan, Mr. Bernanke has cultivated a
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 33
more open and collaborative process, striving to draw out all sides of a debate and forcing
participants to test their assumptions. Mr. Bernanke is also creative in seeking ways to
stabilize the financial system beyond the rate-cut weapon that Mr. Greenspan wielded
more readily.
There's more of the economic seminar room, of exchanging views and thinking out loud,"
says Vincent Reinhart, who was an adviser to both men before leaving the Fed in
September.
Whether Mr. Bernanke made the right calls in the most severe shock to U.S. financial
markets since Sept. 11, 2001, will be clear only in hindsight. Critics charge that he and
his colleagues, prior to August, underestimated the housing bust's magnitude and its
potential spillover to markets. They say the Fed team should have shifted its focus from
inflation to the slowing economy far sooner. Its efforts to restore order through the Fed's
little-used discount window have shown limited results.
Today, Mr. Bernanke faces another delicate decision on whether to cut interest rates for
the second time since credit markets began gyrating. Markets place high odds on a
quarter-point cut.
Nonetheless, he has dispelled some doubts about the ability of a former academic to run
the world's most powerful central bank in time of crisis. Should that hold, this could have
a calming effect on markets that could work to his advantage during future turmoil. "I
was concerned that his academic strength did not give him the market savvy he needed,"
says Stephen Roach, Asia chairman of Morgan Stanley. "His performance has allayed my
concerns."
T-Shirt and Shorts
As markets deteriorated in early August, Mr. Bernanke kept a low public profile. But he
canceled plans for a family vacation to Charlotte, N.C., and Myrtle Beach, S.C., and
began leaving his home near the U.S. Capitol to arrive at the Fed building by 7 a.m.,
staying 12 hours or more. There was no time to play basketball with the staff, as he did in
calmer times, but occasionally he would exchange his suit for a T-shirt and gym shorts to
shoot baskets or lift weights alone at the Fed gym.
Mr. Bernanke had been preparing for the crisis for much of his adult life. He grew up in a
small South Carolina town, the son of the local drugstore owner. He received his Ph.D. in
economics from the Massachusetts Institute of Technology in 1979 and spent the next 23
years in academia, most of it at Princeton University.
He has long taken exception to suggestions that he lacks Mr. Greenspan's feel for the
markets. Much of his career he has studied how the financial system and the economy
interact, in particular during the Great Depression. He told a Fed conference in 1999 that
one of the key mistakes the Fed made during the Depression was "to allow the financial
system to collapse."
When he took office, he had spent three years as a Fed governor under Mr. Greenspan
and seven months as chairman of President George W. Bush's Council of Economic
Advisers, and was comfortable with his grasp of the economy and monetary policy. But
he set out systematically to learn the nitty-gritty of the Fed's operations, such as its
oversight of the financial plumbing that the central bank maintains so banks can move
large sums to each other. With less time to peruse cutting-edge academic papers, he
tasked a staffer with sending him a selection that he spends a few hours each week
reading.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 33
Mr. Bernanke was no stranger to central bankers, but he was a neophyte to the
schmoozing of Washington and Wall Street. To help him make connections, Timothy
Geithner, president of the Federal Reserve Bank of New York and a veteran of the
Clinton Treasury, arranged breakfasts and lunches at the New York Fed between Mr.
Bernanke and financial "wise men." Guests included Citigroup executive and former
Treasury secretary Robert Rubin, and former J.P. Morgan & Co. chairman Dennis
Weatherstone.
The talk ranged from the gaping U.S. trade deficit to the "enormous amount of capital
sloshing around the world in perhaps-not-fully-understood instruments," one participant
recalled. Mr. Bernanke listened carefully but gave away nothing.
Mr. Bernanke asked an existing Fed staff task force to prepare twice-a-year "financial
stability reports," similar to those Mr. Geithner had ordered up from his own staff at the
New York Fed. He also asked for a "crisis manual," which runs several hundred pages
and includes details on the Fed's response to crises such as the 1970 Penn Central
Railroad collapse. An accompanying internal Fed Web site allows officials to view
contact information for counterparts around the world or see how credit derivatives of
major banks are behaving.
The reports and crisis manual contemplated numerous scenarios -- the failure of a major
bank, a surge in defaults of a major bank's mortgage portfolio. The standard
recommendation: Provide lots of cash to the financial system.
The Federal Open Market Committee is the Fed's key decision-making body, comprising
the Fed's five current governors in Washington and presidents of the 12 regional Fed
banks. The FOMC meets about every six weeks to decide on, and announce, interest-rate
adjustments. When its members gathered around the massive oval table in the boardroom
adjacent to Mr. Bernanke's office on Aug. 7, the staff detailed the growing tension in
financial markets: Subprime losses had sunk several hedge funds and forced the German
government to bail out a bank. Investors were shunning all but the safest mortgagebacked securities.
7. The _______ is the Fed's key decision-making body, comprising the Fed's five current
governors in Washington and presidents of the 12 regional Fed banks.
a. Federal Open Banking Committee
b. Federal Closed Banking Committee
c. Federal Open Market Committee Correct
d. Federal Closed Market Committee
8. In rising numbers homeowners with _____, those made to the least credit worthy home
buyers, have been delinquent on payments.
a. adjustable rate mortgages
b. 30 year balloon mortgages
c. subprime mortgages Correct
d. prime mortgages
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 33
Fed's Rate Cut Could Be Last For a While
By GREG IP
November 1, 2007; Page A1
http://online.wsj.com/article/SB119384915624677808.html
The Federal Reserve cut interest rates by a quarter point, but with an eye on surging
energy prices and other inflationary threats, it strongly discouraged expectations of
further cuts.
The decision, following a half-point cut six weeks ago, shows Fed Chairman Ben
Bernanke is grappling with risks on two fronts: Plunging home construction and eroding
real-estate values could hit the broader economy, while rising oil and commodity prices,
combined with a falling dollar, could spoil the Fed's hopes to contain inflation.
Developments yesterday underlined the tension. Though data showed the U.S. economy
growing at a faster-than-expected 3.9% annual rate in the third quarter, a purchasing
managers' survey showed weak manufacturing in the Midwest in October, the latest in a
series of such reports. At the same time, crude-oil futures prices jumped $4.15 to $94.53
a barrel, a nominal record, and gold futures settled at $792.00 an ounce, a 27-year high.
For now, though, investors appear to believe neither of those scenarios will materialize.
Stocks initially fell after the announcement dashed expectations of more rate cuts, but
then recovered, with the Dow Jones Industrial Average climbing 137.54 points, or 1%, to
13930.01, less than 235 points from its record.
The Fed cut its target for the federal-funds rate, charged on overnight loans between
banks, to 4.5% from 4.75%, after cutting it half a point in September. The combined cuts
were designed, it said in the accompanying statement, to "help forestall some of the
adverse effects on the broader economy" from the summer credit crunch that drove up
interest rates paid by many homeowners, corporations and banks.
Growth was solid in the third quarter but likely to slow with the "intensification of the
housing correction," the Fed said in its statement. Core inflation, which excludes food
and energy, has improved, it said, "but recent increases in energy and commodity prices,
among other factors, may put renewed upward pressure on inflation."
As a result, the Fed said, "after this [rate cut], the upside risks to inflation roughly balance
the downside risks to growth."
In the weeks leading up to the meeting, Fed officials saw their choice as no cut or a
quarter-point ease. But their room to maneuver was limited by the fact that markets had
become certain there would be a cut and, by last week, perhaps even a larger, half-point
cut. Many on Wall Street justified their predictions on the grounds that Fed officials
hadn't publicly countered them.
Fed officials don't like to do something just because the markets expect it. But with
futures markets assigning a 92% probability yesterday morning to a cut, a failure to
deliver would have been the biggest surprise in the 14 years for which comparable data is
available, according to Bianco Research LLC, a Chicago financial-research firm. Many
predicted that would have led to a stock selloff and increased reluctance to lend.
Alan Blinder, a former Fed vice chairman who teaches at Princeton University, said,
"The Fed did not make their views very clear to the markets for about a three-week
period in October when they could have. As a result, they wound up being pushed by the
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 33
market. The Fed has a communications problem when the market's thinking diverges
from the Fed's and the Fed doesn't say anything to get back in line."
But Mr. Bernanke has been less inclined than his predecessor Alan Greenspan to try to
steer market expectations. And in any case, officials also saw good economic reasons to
ease borrowing conditions. Markets remain unsettled and the housing slump could yet
spill over more broadly to consumer spending, already weighed down by high energy
costs. By some estimates a 4.75% funds rate is high relative to inflation and growth,
implying the Fed was likely to ease eventually. Doing so now rather than later bought
insurance against worst-case scenarios.
9. The Federal Reserve cut interest rates by _______, but with an eye on surging energy
prices and other inflationary threats, it strongly discouraged expectations of further cuts.
a. a quarter point Correct
b. a half point
c. two points
d. a full point
10. Mr. Bernanke has been ____ his predecessor Alan Greenspan to try to steer market
expectations.
a. more inclined than
b. less inclined than Correct
c. equally inclined as
d. greatly more inclined than
Japanese Lesson: How Do You Say, 'Taken for a Ride'?
By YUKARI IWATANI KANE and YUKA HAYASHI
November 2, 2007; Page A1
http://online.wsj.com/article/SB119394083023779349.html
TOKYO -- Fresh out of college, Sam Gordon bought a one-way ticket to Tokyo for a
chance to explore Japan's exotic culture while teaching English at the nation's largest
language school. All it took to get the job was one simple interview.
The adventure, which began five years ago, has abruptly come to an end. His employer,
Nova Corp., hasn't paid him since September. The company closed its operations last
week and filed for court protection, following a government crackdown on its business
strategy. With $20 left in his bank account, the 28-year-old Mr. Gordon says he is living
on his credit card.
"At least I have a big fridge and still have some food in it," says Mr. Gordon. He doesn't
want to go home to Milford, Del., just yet, he says, because he'd have to borrow money
for the plane ticket.
Mr. Gordon is one of more than 4,000 foreign-language teachers working for Nova to be
slammed by the biggest scandal in Japan's foreign community in years. The company,
renowned in Japan for the hip-shaking pink bunny in its commercials, had been on a
hiring binge, setting up recruitment offices in the U.S. and the United Kingdom and
prowling college campuses offering jobs.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 33
Nozomu Sahashi, the company's quirky founder, was fired last week as president and has
dropped from sight. Now, worrisome details are trickling out: The 56-year-old executive
had quietly moved profits from publicly traded Nova to his private company, a courtappointed administrator alleged at a news conference. The administrators, who are
scrambling to find a sponsor to help turn around Nova, showed reporters his lavish office,
which has a Jacuzzi, a tea room and a secret bedroom.
Now, the Nova teachers are jobless and those who have lived from paycheck to paycheck
are stuck in Japan. Some have been threatened with eviction from their apartments
because Nova, which had provided housing and deducted the rent from teachers' salaries,
stopped paying rent months ago. In the past week, 300 Nova teachers have swarmed the
usually orderly employment agency office in western Tokyo, called Hello Work, seeking
jobs.
One labor union is planning to arrange for teachers in distress to give lessons in exchange
for a Japanese bento-box meal. Alarmed that so many of its citizens are affected, the
Australian government has struck a deal with Qantas Airways Ltd. to provide discounted
one-way air tickets to Sydney.
"I'm not really looking for a new job because the market is just flooded with teachers,"
says Matya Sheppard, a 23-year-old Canadian Nova teacher who is dipping into her
savings to pay for food and other expenses.
"I have no one to talk to. I'm in limbo," says Kristen Moon, a 23-year-old teacher from
Philadelphia who fears she will lose her Tokyo apartment. Ms. Moon, who came to Japan
in May for a "new experience" after graduating from college in New Zealand, is getting
along by giving private lessons to several Nova students.
English-conversation schools are a big business in Japan. Millions of Japanese dream of
speaking English. But the six years of language classes given in middle and high schools
focus on grammar, not conversation, so few children learn to speak English well. The
$3.5-billion-a-year foreign-language-education industry teems with more than 1,100
companies catering to about two million students, according to the Japan Association for
the Promotion of Foreign Language Education.
The Osaka-born Mr. Sahashi, who founded Nova in 1981, used a particularly inviting
pitch. He promised his clients native English teachers at half the price or less charged by
rival schools. He touted lessons as cheap as a movie ticket, so students could drop by as
casually as if they were going to a bar. There was one catch: To get the cheapest price -about $13.50 for a 40-minute class -- students had to pay in advance for 600 lessons.
Armed with a wildly popular marketing campaign featuring a cheeky pink bunny mascot,
Nova rapidly opened 900 schools, took on 400,000 students ranging from toddlers to
businesspeople and dominated the language-school industry. The bunny, which shook its
hips and, in TV commercials, came to the rescue of people who wanted to improve their
foreign-language skills, became a nationwide phenomenon. It soon even appeared as a
character in videogames. The school's convenient locations and policy of letting students
come in whenever they wanted to were also a hit. Sales reached $500 million in the year
ended March 31
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 33
11. One of the biggest scandals in Japan's foreign community in years affecting more
than 4,000 foreign language teachers involved which company:
a. Killion
b. Qantas
c. Pink Bunny
d. Nova Correct
12. The Japanese language company with a wildly popular marketing campaign featuring
a cheeky pink bunny mascot, required students to buy _____ lessons to get the cheapest
price.
a. 60
b. 100
c. 600 Correct
d. 1000
Questions 13 – 17 from Marketplace
To Find a CEO for Hilton, Blackstone Raids a Rival
By JENNIFER S. FORSYTH and TAMARA AUDI
October 29, 2007; Page B1
http://online.wsj.com/article/SB119362225071274464.html
Blackstone Group LP announced today that it has lured Christopher Nassetta, the chief
executive of a lodging-industry rival, to lead recently acquired Hilton Hotels Corp. as
it pursues an ambitious growth strategy and plans to boost the hotelier's standing in the
luxury market.
Mr. Nassetta, 45 years old, will leave his position as chief executive of Host Hotels &
Resorts Inc., the nation's largest publicly traded hotel owner, and become president and
chief executive of Hilton, after a four-to-six-week transition period.
In plucking Mr. Nassetta from Host, Hilton gets a manager with a strong track record
in real estate, hotel ownership, and finance as Hilton is rapidly expanding. Some
40,000 hotel rooms under construction in the U.S. alone will eventually carry a Hilton
flag and an additional 57,000 rooms are in the development phase.
The announcement, which comes less than a week after Blackstone finalized its $20
billion acquisition of Los Angeles-based Hilton, quells doubts about the private-equity
giant's vow to keep Hilton's assets in tact. That contrasts with some of Blackstone's
recent, large real-estate acquisitions -- particularly the $23 billion Equity Office
Properties Trust purchase in February -- in which most of the company's assets were
quickly carved up and sold.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 33
13. Blackstone Group LP announced today that it has lured ______, the chief executive
of a lodging industry rival, to lead recently acquired Hilton Hotels Corp as it pursues an
ambitious growth strategy and plans to boost the hotelier's standing in the luxury market.
a. John Schreiber
b. Christopher Nassetta Correct
c. Jonathan Gray
d. Will Marks
Talking Too Much On a Job Interview May Kill Your Chance
By JOANN LUBLIN
October 30, 2007; Page B1
http://online.wsj.com/article/SB119369428463475446.html
On the eve of Halloween, here's a scary thought: You can blow a promising opportunity
by talking too much during a job interview.
That's how one facilities administrator ruined her employment chances at Clark Nuber, a
small accounting firm in Bellevue, Wash. Asked to describe her strengths, the applicant
delivered a long-winded reply focused on her cleaning of every cabinet in her home. "She
probably went on for three to four minutes," recalls Tracy White, the firm's humanresources director. "I doubted she could get the job done in an eight-hour day."
Many nervous job seekers blabber endlessly about irrelevant information. They create a
poor impression and cut short the hiring manager's time for further questions. "That
official won't pay any attention to you unless you prove you're sharp during the first five
minutes," cautions Robin Ryan, a career counselor, author and speaker in Newcastle,
Wash.
"Oversharing in an interview is the most dangerous thing you can do," concurs Annie
Stevens, a managing partner at ClearRock, a Boston executive-coaching and
outplacement concern.
Don't despair. Here are four ways to steer clear of verbosity during a job hunt:
• Prepare short statements on how your background matches the job. Rehearse.
When a hiring manager says, "Tell me about yourself," you can offer a few war stories
that recount a work problem, your corrective action and the measurable result. "The
stories have to be powerful as well as engaging," lasting no longer than two minutes
apiece, says Rich Gee, an executive coach in Stamford, Conn.
He helped Ward Smith, a talkative golf pro and instructor, to win a marketing spot with
Black & Decker. During practice sessions with the coach, Mr. Smith supplied elaborate
detail about the golf irons that he recommended to students. A hiring manager "doesn't
need to know this," Mr. Gee interjected.
Mr. Smith soon realized he should translate "what I was doing into what Black & Decker
was looking for," and keep it succinct. During his job interview, he used marketing lingo
to describe briefly his teaching methods, explaining how he identified students'
objectives, forged a rapport and enabled them to reach solutions. He now is an Atlanta
field-marketing coordinator for a Black & Decker unit.
Embracing a similar approach, a jobless organizational-development consultant recently
landed follow-up interviews with three possible employers. Callbacks rarely occurred
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 33
when I "was running off at the mouth," he remembers. Defining yourself concisely also
"builds an enormous amount of confidence for the next interview," he notes.
• Make sure you understand a question. Stop every couple of sentences to check.
If the interviewer requests your career history, you might inquire, "Do you want me to
start with my present situation or at the beginning?" This type of response demonstrates a
candidate "is preparing mentally for what's he's going to give me," says Peter D. Crist,
head of recruiters Crist Associates in Hinsdale, Ill.
Pausing after you speak lets you collect your thoughts -- and seek permission to continue.
Before you resume, Ms. White suggests asking, "Did I answer your question enough? Do
you want more examples?"
• Watch the interviewer's body language for hints that your answers are getting boring.
He may stop taking notes, check his watch or glance at his computer. A loquacious
middle manager ignored such warning signals after spending 15 minutes telling a West
Coast recruiter about several extraneous issues, including her husband's problems with
his boss.
"I was rolling my eyes and tapping my pen on her résumé to indicate we should get back
to work here,'' the exasperated recruiter says. He finally cut her off because he had many
more questions to pose.
• Solicit feedback following an interview.
The West Coast recruiter decided against referring the middle manager to a client. "You
had a number of stories to tell but they weren't relevant," he told her. "Use each minute to
its best advantage to sell your background."
With practice, you'll be able to polish your pitch, adjusting the length of your responses
until someone says, "You're hired!"
14. During a job interview it is recommended that you
a. blabber endlessly about irrelevant information
b. supply elaborate details
c. define yourself concisely Correct
d. give only one word replies to any and all questions
How GM Handles a Hit: Build Fewer
By JOHN D. STOLL
October 31, 2007; Page B1
http://online.wsj.com/article/SB119378934909776934.html
This summer Mary Mooney and her husband were soaking up the sun in Florida when
they saw a Buick Enclave, a big, seven-passenger vehicle, and decided they just had to
have one. But when the couple called two dealers back in Michigan, where they live most
of the year, the model they wanted was sold out at both.
So instead of flying home, the Mooneys bought an Enclave in Florida and drove it 1,300
miles back to Michigan. Sitting in her opal-colored Enclave on Saturday, Mrs. Mooney
said, "We fell in love with it."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 33
The tight supply of Enclaves -- a so-called crossover utility vehicle that has become
General Motors Corp.'s breakout hit this model year -- is no accident. Buoyed by a new
labor contract that reduces its costs, GM is keeping a tight rein on production of the
Enclave in an effort to avoid past mistakes that forced it to offer discounts and cheapened
the image of the company's brands.
"We want to keep [the Enclave] hot," says GM Vice Chairman Robert Lutz. "Nothing
destroys the value of a new product faster than over producing."
In the past, when GM had hot models, it usually built as many as it could, and almost
always ended up with lots filled with unsold vehicles. For example, the Chevy HHR, a
retro-styled wagon launched in 2005, sold briskly at first, often at full sticker price. But
after cranking up production and offering discounts to boost sales, GM had a glut. Fifteen
months after the HHR was introduced, Chevy dealers had enough in stock to last almost
five months without ordering more. Since then, GM has had to continue discounting and
dump thousands of HHRs into rental fleets, which eroded the margin on the car, and
badly watered down its cachet.
Ford Motor Co. and Chrysler LLC often do the same with their fast-selling models and
are also trying to break away from the practice. But GM's handling of the boldly styled
Enclave and two other crossovers made from many of the same parts -- the GMC Acadia
and the Saturn Outlook -- is one of the first signs any of the Big Three is truly changing
its ways.
Both the Enclave and Acadia are selling almost as fast as dealers get them. At the end of
September, GM had a 21-day supply of Enclaves, and a 49-day supply of Acadias. The
Outlook hasn't sold as well and its stock is higher -- 73 days' supply. A supply of 65 days
or less is considered healthy.
But overall auto sales have slowed this year, hurt by the housing slump and high gas
prices. So GM is acting now to hold down its inventory of the three crossovers, which
look like SUVs but are lighter, drive more like cars and get better gas mileage. In
December, the Lansing, Mich., plant that makes the three models will cut back to two
shifts of production from three.
It's a risky move. The crossovers, which sell for $35,000 and up, make a lot of money for
GM at a time when sales of its highly profitable trucks and SUVs are falling. GM is also
struggling to produce steady profits in North American and needs every dollar it can
bring in.
15. Both the Enclave and Acadia are selling almost as fast as dealers get them. At the end
of September, GM had a 21-day supply of Enclaves, and a 49-day supply of Acadias. The
Outlook hasn't sold as well and its stock is higher -- 73 days' supply. A supply of ____
days or less is considered healthy.
a. 25
b. 45
c. 65 Correct
d. 85
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 33
An Ethanol Glut Hits Home In BioTown, USA
By DOUGLAS BELKIN and JOE BARRETT
November 1, 2007; Page B1
http://online.wsj.com/article/SB119387241216578303.html
Two years ago, Indiana Governor Mitch Daniels came to the small farm town of
Reynolds in northwestern Indiana corn country to christen it BioTown, USA. The goal: to
attract bioenergy companies and set an example by fueling the town's cars, homes and
businesses with cheap, environmentally friendly energy.
"This is America's first BioTown in the making," Gov. Daniels declared in front of about
300 people at Reynolds's fairgrounds. But like dozens of U.S. farm towns counting on
bioenergy to revitalize their economies, Reynolds is now learning a tough lesson about
the difficulties alternative fuels face. Last month, VeraSun Energy Corp. announced it
was stopping construction on an ethanol plant nearby.
"I think this has made everyone a little nervous," says Janice Farrell, manager of a BP gas
station in Reynolds that features ethanol fuel pumps. Her lunch-time food sales had
jumped since last spring when construction workers from the ethanol site started coming
in. Recently, her revenue has dropped by $1,000 a week.
A boom in corn-based ethanol has boosted prices for grain farmers and lifted farm
incomes as the industry nearly doubled capacity since January 2005. But now a glut of
ethanol supply -- and a sharp drop in price -- is reining in expansion.
Recently, proposed facilities in Minnesota, South Dakota and Iowa have put construction
plans on hold. An older plant in North Dakota has stopped making ethanol, laying off
most of its 34 workers. Seventy-three plants are under construction nationwide, according
to the Renewable Fuels Association in Washington. But dozens of other planned projects
are stalled -- leaving towns hoping for more jobs in limbo.
Seven of Nebraska's 19 ethanol plants opened this year and seven more are scheduled to
open by the second quarter of next year. But in the past few months, only one plant has
begun construction, says Steve Sorum, project manager for the Nebraska Ethanol Board.
Another 43 are stuck in planning stages. "The pace of building has slowed," he says.
Alchem Ethanol in Grafton, N.D., last month halted production at its nearly 25-year-old
plant housed in a former potato-storage facility. The plant couldn't make a profit amid
high corn prices and dropping ethanol prices, which have slid 55 cents since May to
$1.75 a gallon, according to Oil Price Information Service. Alchem's general manager
Kevin Rauser says he hopes the plant will reopen in the spring.
Reynolds, population 521, seems an ideal location for an experiment in biofuels. It is at
the intersection of two highways and two rail lines, near research facilities at Purdue
University and close to an abundance of corn, hogs and cattle.
The town is hungry for growth. The Midwest farm crisis of the 1980s decimated the town
center that older residents remember, and now downtown Reynolds is little more than a
two-block intersection anchored on one end by the BP station and a Frosty Freeze and the
USA Restaurant on the other.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 33
16. ______ , known as “Biotown, USA”, with a population of 521, seems an ideal
location for an experiment in biofuels. It is at the intersection of two highways and two
rail lines, near research facilities at Purdue University and close to an abundance of corn,
hogs and cattle.
a. Akron, Iowa
b. Reynolds, Indiana Correct
c. Grafton, North Dakota
d. Albion, Nebraska
Got $500,000? The U.S. Awaits
By MIRIAM JORDAN
November 2, 2007; Page B1
http://online.wsj.com/article/SB119396545319580007.html
An obscure immigration program is pumping millions of dollars from foreign investors
into dilapidated inner cities and employment-starved rural areas across the U.S. These
investors aren't focused on financial returns, however: They're in it to get green cards.
In recent years, a growing list of enterprises -- in agriculture, tourism, renewable energy,
education and transportation -- have benefited from a little-known federal program
known as EB-5, or the immigrant-investor visa. It offers a tantalizing trade-off for
foreigners who want to establish residency in the U.S.: For a $500,000 investment in a
distressed area, a foreigner and his immediate family become eligible for conditional
green cards. They become permanent a few years later upon evidence that the investment
has created at least 10 jobs for U.S. workers.
The program, administered by U.S. Immigration & Citizenship Services, essentially
encourages wealthy foreigners to buy their way into the U.S. Put in place in the early
1990s, it is widely regarded as a response to efforts by Canada and Australia in the late
1980s to attract investors keen to immigrate. But the U.S. program is considered the most
stringent because it requires proof that the investment has produced new jobs before
permanent residency is granted.
17. From a little-known federal program known as EB-5, or the immigrant-investor visa,
for a _______ investment in a distressed area, a foreigner and his immediate family
become eligible for conditional green cards. They become permanent a few years later
upon evidence that the investment has created at least 10 jobs for US workers.
a. $50,000
b. $500,000 Correct
c. $5,000,000
d. $50,000,000
Questions 18 – 23 from Money & Investing
New Tools Arrive to Rate Mutual Funds, ETFs
By ELEANOR LAISE
October 27, 2007; Page B1
http://online.wsj.com/article/SB119343108962673231.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 33
As mutual funds and ETFs multiply and pursue a fast-changing set of investment
strategies, it's a challenge for investors to separate winners from the flops. Several new
online tools can help.
While services like Morningstar Inc. and Lipper Inc. have long rated funds based on
factors like return and risk, the latest tools give investors some new ways to slice and dice
the fund universe. They can also help determine whether a mutual fund or an ETF is the
best fit for their portfolio.
Best of all, they're free.
Fundgrades.com2, launched late last month by investment-advisory firm Financeware
Inc., gives funds grades ranging from A-plus to F on factors like expenses, return and
risk. Funds are also awarded an overall grade.
That's nothing revolutionary, but there's a twist: Instead of grading a fund based on
comparisons against a single group of rival funds, Fundgrades offers grades for each fund
relative to any asset class users select. This can be useful, because many mutual funds
following a "go anywhere" investment approach can't easily fit in narrow categories.
Also, investors use funds in different ways. Say the iShares S&P 500 Index ETF, which
tracks the Standard & Poor's 500-stock index, is your only domestic stock holding.
Instead of comparing it only with the large-cap blend category (how Morningstar does it),
you can see how Fundgrades rates it against the broad universe of U.S. stocks. (The
Fundgrades verdict: It has almost no risk of substantially underperforming the largeblend asset class, but it has a significant risk of lagging behind the broader pool of U.S.
stocks.)
18. As ______ multiply and pursue a fast-changing set of investment strategies, it's a
challenge for investors to separate winners from the flops. Several new online tools can
help.
a. bonds and stocks
b. mutual funds and bonds
c. mutual funds and ETFs Correct
d. stocks and ETFs
Fed's Impact on World Less US-Centric
By JUSTIN LAHART
October 29, 2007; Page C1
http://online.wsj.com/article/SB119361509319874338.html
Square this circle:
Oil rose $1.40 Friday in New York to $91.86 a barrel, an exchange record. It is up 50%
this year. Gold rose $16.60 an ounce to $783.90. It is up 23% this year. The broad Dow
Jones-AIG Commodity Index is up 8.5% this year.
Economists and Wall Streeters alike expect Federal Reserve policy makers to cut the
Fed's overnight target rate by at least a quarter point this Wednesday.
Rising commodity prices and the Fed cutting rates seem incongruous. When commodities
prices are rising, it typically signals strong demand -- and therefore a strong economy -often with a whiff of inflation. When the Fed cuts rates, it usually is an attempt to
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 33
strengthen a slowing economy. The confluence of a slowing U.S. economy and rising
commodity costs is something new.
Indeed, in an earnings conference call Thursday, Whirlpool Chief Executive Jeff Fettig
said 2007 "is the first year ever where we have seen a significant decline in demand in the
U.S. and significant raw material inflation."
The reason that raw-material prices are high is, of course, that the rest of the world, in
general, and the commodity-intensive and rapidly developing economies of India and
China, in particular, appear robust despite slowing growth in the U.S. The sharp
weakening of the dollar -- itself symptomatic of slower growth and falling interest rates
in the U.S. -- also has contributed to the rise in raw-materials prices. In euro terms, for
example, the rise in oil prices hasn't been nearly as extreme.
Past slowdowns didn't work this way. Through the 1980s and 1990s, other countries
around the world became increasingly reliant, through rising exports, to U.S. consumers.
As a result, when the U.S. economy ran into trouble, so did they. Or, as it was often put,
when the U.S. sneezed, the rest of the world caught a cold. With global demand
diminished, raw-material costs slipped. The dollar, too, was better able to weather such
declines, because with growth slowing around the world and central banks acting in
response, markets and interest rates outside of the U.S. usually were moving in the same
direction.
In that world, the Fed's job was easier. "We had more of an ability to set our interest rates
independently of what was going on elsewhere," says James Hamilton, an economist at
the University of California, San Diego.
With the rest of the world now playing a bigger role in global growth, the Fed now must
be more mindful of what is happening beyond its borders. For instance, it has to consider
whether taking U.S. rates lower will push the dollar down, fanning inflation through
higher import and commodity costs. It also has less influence on long-term interest rates,
which are set globally. The Fed, U.S. companies and investors are short on real
experience in this kind of setting.
Of course, it is important to remember that we still don't know if the rest of the world can
weather a U.S. slowdown. The U.S. is, after all, still responsible for nearly $14 trillion in
economic output annually. There is a chance the investors driving commodity prices and
emerging market stocks higher are running away with a theory that they live in a less
U.S. centric world, before it has actually been proved.
Chances are, we are about to find out.
19. The confluence of a slowing US economy and rising ____ is something new.
a. labor costs
b. oil costs
c. energy costs
d. commodity costs Correct
Investors Pay Little Mind To Weak Dollar, Record Crude
By PETER A. MCKAY
October 30, 2007; Page C1
http://online.wsj.com/article/SB119370646870775799.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 22 of 33
Investors again shrugged off record oil prices and a weak dollar to send stocks higher for
a second consecutive day.
The Dow Jones Industrial Average rose 63.56 points, or 0.5%, to 13870.26, up 11.3% in
2007. Among its strongest components was energy giant Exxon Mobil, up 1.5%, which
benefited from higher oil prices and from a decision by the Supreme Court to hear the
company's appeal of $2.5 billion in punitive damages stemming from the massive oil spill
from the Exxon Valdez tanker off Alaska in 1989.
Oil prices rallied after Mexico's state-run oil company, Pemex, said it would shutter some
of its production facilities because of storms. Crude futures for December delivery rose
$1.67, or 1.8%, to $93.53 a barrel. It was the seventh record close this month, leaving oil
up 53% so far this year at the New York Mercantile Exchange.
The dollar hit a new low against the euro, and gold rose $5.20 a troy ounce to $789.10 on
the Comex, its highest level since January 1980.
This week's main event for the markets will be the two-day meeting of Federal Reserve
policy makers beginning this morning, which is expected to end with an interest-rate cut
that will encourage more spending throughout the U.S. economy.
"The Fed has to stay ahead of slackening economic growth," said William D. Rutherford,
president of Rutherford Investment Management in Portland, Ore. "They probably don't
want to cut rates, but they'll have to."
Rising crude prices tend to hurt nonenergy companies, since high fuel costs can
discourage consumer spending on other goods and services. That held major stock
yardsticks' gains in check.
The broad Standard & Poor's 500-stock index rose 0.4%, or 5.70 points, to 1540.98, up
8.6% so far this year. The Nasdaq Composite Index gained 0.5%, or 13.25 points, to
2817.44, up 16.7% in 2007.
The financial sector, which has suffered recently in the fallout from bad mortgage bets,
eked out a slight gain.
In major U.S. market action:
Stocks and bonds rose. The 10-year Treasury note gained 2/32, or 62.5 cents for each
$1,000 invested, pushing the yield down to 4.383%. The 30-year bond rose 11/32 to yield
4.663%.
The dollar was mixed. Against the Japanese currency, the dollar rose to 114.63 yen, from
114.23 yen Friday. The euro rose to $1.4430 from $1.4392.
20. Crude futures for December delivery rose $1.67, or 1.8%, to _____ a barrel. It was
the seventh record close this month, leaving oil up 53% so far this year at the New York
Mercantile Exchange.
a. $63.53
b. $73.53
c. $83.53
d. $93.53 Correct
More Cuts From the Fed Seem Inevitable
By JUSTIN LAHART
October 31, 2007; Page C1
http://online.wsj.com/article/SB119379130291376972.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 23 of 33
When Federal Reserve policy makers wrap up their meeting today, most of Wall Street is
convinced that they will cut interest rates by at least a quarter of a point.
Before that happens, the Commerce Department will release its initial take on how the
economy did in the third quarter. Economists polled by Dow Jones Newswires estimate
gross domestic product grew at an annual rate of 3.2%, down from the second quarter's
3.8%. The last time the economy grew at a better-than-3% rate for two quarters in a row
was in 2004, when the Fed started raising rates. So why is the Fed, which cut its
overnight target rate to 4.75% from 5.25% in September, lowering rates now?
The short answer is that while the third quarter was solid, credit-market distress and fresh
declines in the housing market are expected to sap growth in the future. Consumer
spending, which was bolstered by declines in gasoline prices over the summer, looks soft.
Retailers reported a tepid September, and weekly sales measures suggest no improvement
in October. Yesterday, the Conference Board reported its confidence index fell more than
expected in October, to 95.6 from 99.5 in September.
But another factor pushing GDP higher in the third quarter was strong export growth.
With the dollar weak, and overseas growth remaining strong, that doesn't look like it is
about to reverse, says AllianceBernstein economist Joe Carson. He looks for a bigger
housing hit to GDP in the third quarter than most economists -- his estimate is for 2.5%
growth -- and a weaker 1.7% in the fourth quarter. But even though he thinks housing
will suffer next year, he expects that to be overwhelmed by the strength in exports, and
the economy will grow at a respectable 2.5%.
That isn't the sort of growth that would normally prompt the Fed to keep cutting rates.
Although in the face of a continuing housing downturn, holding rates steady could be a
difficult thing to do.
21. Economists polled by Dow Jones Newswires estimate gross domestic product grew at
an annual rate of 3.2%, down from the second quarter's 3.8%. The last time the economy
grew at a better-than-3% rate for two quarters in a row was in ______, when the Fed
started raising rates.
a. 1999
b. 2000
c. 2002
d. 2004 Correct
Flood of Money Strains Hong Kong's Dollar Peg
By JONATHAN CHENG
November 1, 2007; Page C1
http://online.wsj.com/article/SB119386847339078176.html
HONG KONG -- With more currency flooding into Asia in recent days, monetary
officials have been working overtime.
While currency traders say authorities in South Korea, the Philippines and India bought
U.S. dollars yesterday, the center of such buying is this gateway to China.
Twice last week and five times again yesterday, the Hong Kong Monetary Authority -charged with keeping the local currency pegged to the U.S. dollar in a trading band of
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 24 of 33
7.75 Hong Kong dollars to HK$7.85 -- went to the currency market to buy up a total of at
least US$1 billion.
The HKMA had to weaken the Hong Kong dollar as the currency strengthened against its
slumping American counterpart, pushing the upper limit as it has over the past two
weeks.
The upward pressure on the Hong Kong dollar forced the first interventions that the
authority has had to stage since a week after the current trading band was established in
May 2005. They probably won't be the last.
The authority is responding to persistent rushes of capital into Hong Kong, led now by
large-scale fund investments, according to Bear Stearns economist Michael Kurtz.
As this river of money puts the 24-year-old peg to the test, Hong Kong, a separately
governed region of China, finds itself at the crossroads of the slowing American economy
and a breakneck Chinese one.
The tension is evident in the trading band. Because of the peg, the Hong Kong dollar has
been tracking the U.S. dollar's long-term decline, down nearly 20% against the euro in
the past two years. Yet in recent weeks, Hong Kong's currency has been straining upward
on the strength of China's booming markets to break free of those limits -- a result that
the monetary authority is bound to prevent.
The moves by the authority are "an indication of how much money is coming in," says
Ken Lu, managing director of APAC Capital Advisors, a China-focused equity fund. Mr.
Lu's own analysis has most of the recent influx coming from the U.S., Europe and Japan
into China through Hong Kong. "People think it's going to go even higher," he says.
Analysts say interventions could persist for weeks, with the declining U.S. dollar making
Hong Kong dollar-denominated equities -- already attractive -- even more tempting.
Enoch Fung, an economist for Goldman Sachs, says Hong Kong is "still in an asset
inflation cycle that is sustainable and very healthy." Mr. Fung is reluctant to say the Hong
Kong economy is "decoupling" from that of the U.S., but he calls the authority's moves a
sign of Hong Kong's "increasing synchronization" with the Chinese growth cycle.
Because of the U.S. dollar's weakness, other regional currencies also have been feeling
strong upward pressure. While Hong Kong is the only Asian economy with an explicit
peg to the U.S. dollar, traders say officials in several countries in the region have been
snapping up U.S. dollars to keep their local currencies from rising too quickly.
Despite recent resilience on Wall Street, a host of worries loom over the U.S. economy,
including credit-market jitters, a housing downturn and high crude-oil prices. Meanwhile,
China's economy is steaming ahead at double-digit rates, pumping up Hong Kong's
fortunes.
Hong Kong's benchmark Hang Seng Index recorded its first close above the 30000 mark
Friday. It continued to soar this week before falling 285.64 points, or 0.9%, to 31352.58
yesterday.
The optimism is driven in part by a wave of initial public offerings, including property
developer Soho China Ltd. and e-commerce giant Alibaba.com.
In addition, a Chinese government plan to let mainland investors trade directly in Hong
Kong-listed stocks has boosted the markets here, further driving up the Hong Kong
dollar. Last week, Taiwan's cabinet approved a regulatory amendment that will allow
local Taiwanese mutual funds to invest as much as a tenth of their assets in shares of
Hong Kong-listed Chinese companies.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 25 of 33
On top of those factors is the grail of arbitrage. Class H shares, which are Hong Konglisted shares in mainland Chinese companies, are trading at an average discount of 40%
to their mainland-listed Class A share counterparts. As the yuan, China's currency,
gradually rises against the U.S. dollar, companies with yuan-denominated assets become
still more attractive.
At the same time, Hong Kong-listed stock in these mainland Chinese companies,
undervalued because the U.S. dollar is dragging it down, look better still. The diverging
directions of the U.S. and Hong Kong dollars mean that Hong Kong's government will
come under increasing pressure to modify, or even abandon, the U.S. dollar peg.
Any major change to the peg -- not thought to be imminent -- may pave the way for a
linking of the Hong Kong dollar with China's appreciating yuan. That would even more
closely align Hong Kong's economy with China's.
22. The Hong Kong Monetary Authority is charged with keeping the local currency
pegged to the _____ in a trading band of HK$ 7.75 to 7.85 Hong Kong dollars.
a. Yuan
b. Euro dollar
c. US dollar Correct
d. Mexican Peso
Job Outlook: Perhaps Weaker Than It Looks
By JON E. HILSENRATH
November 2, 2007; Page C1
http://online.wsj.com/article/SB119396534983980011.html
Last month's jobs report reassured many investors that the economy wasn't falling off a
cliff. Not only did businesses increase their payrolls by a relatively healthy 110,000 in
September, but the Labor Department also revised away a previously reported decline.
Take a look at some underlying trends, however, and it becomes clear there's still reason
to believe the job market isn't on a great trajectory.
Some parts of the job market -- manufacturing, construction, temporary help -- tend to be
more cyclical than others. Their moves tend to precede broader changes in employment.
All three of these areas have softened in the past few months.
Consider manufacturing employment, which posted sharp declines during the 1990 and
2001 recessions. In both cases, manufacturing started softening well before the overall
job market. It's softening now, too. Year-over-year declines in manufacturing payrolls
exceeded 200,000 in August and September, the biggest drops since early 2004.
Temp jobs are down roughly 70,000 from a year ago, the biggest decline in roughly five
years. Construction employment held up in the 2001 recession, but was an important
leading indicator before the 1990 recession. It is down more than 100,000 from a year
ago, and it's hard to imagine that turning higher anytime soon.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 26 of 33
23. Year over year declines in manufacturing payrolls exceeded ____ in August and
September, the biggest drops since early 2004.
a. 10,000
b. 20,000
c. 100,000
d. 200,000 Correct
Questions 24 – 26 from Personal Journal, Section D
The Virgin Effect: Lower Cross-Country Fares
By SCOTT MCCARTNEY
October 30, 2007; Page D1
http://online.wsj.com/article/SB119369814616075510.html
Virgin America, the start-up launched by British entrepreneur Richard Branson, is
shaking up what is arguably the most glamorous air-travel route in the U.S.: New York to
Los Angeles.
Fares came down sharply when Virgin began service in August, and despite some price
increases lately, ticket prices remain lower than before the new competition took off. For
the past couple of years, the cheapest round-trip fares between Los Angeles and New
York have been $350-$400, says Rick Seaney, president of FareCompare.com1. Today,
prices are under $300. "Virgin America has definitely driven the price-point down," he
said.
Travelers are enjoying the price cut, and the service Virgin offers. The airline has a seatback entertainment system with movies, television, games and 3,000 songs. Each Virgin
plane has eight white-leather massage-chair first-class seats -- a first for discount airlines.
Highest price: $699 one-way, compared with about $2,500 one-way on AMR Corp.'s
American Airlines and UAL Corp.'s United Airlines.
Airlines have long lavished attention and effort on the New York-to-Los Angeles route.
It's the commuter line of movie stars and money moguls -- one of the most heavily
traveled airline routes, and often one of the most profitable, too.
Small wonder that airlines give Los Angeles-New York flights prestigious flight numbers
like Flight 1. And small wonder, too, that so many airlines have tried to compete over the
years flying between the nation's two largest cities. Trans World Airlines began nonstop
flights between Los Angeles and New York in 1953, and since then, many airlines -People Express, MGM Grand Air, Tower Air, JetBlue and America West just to name a
few -- have tried to wedge their way in among the big carriers. Most, however, have
failed.
But Virgin America has deep pockets and long-term dreams. It is already attacking crosscountry markets from a California base. From San Francisco and Los Angeles, Virgin
now flies to New York and Washington. (The airline also flies from San Francisco to
both Los Angeles and Las Vegas.)
Roxanne Kimmel, who works for a Los Angeles ad agency and flies to New York about
once a month, was won over by Virgin's entertainment system on a flight in early
October. "I watched a movie, I ordered food and listened to radio," she said. "I'm going to
use this airline a lot."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 27 of 33
Other travelers have had more of a mixed experience. David Seidler, a Hollywood writer,
paid only $139 to get to New York, and while he loved the price, he was less thrilled with
the cheese-and-crackers snack he bought for $7, and the $10 fee on Virgin to check his
second bag. "If they keep their prices down and the quality of their service up, they will
make inroads," said Mr. Seidler.
While competitors have matched prices offered by Virgin, they haven't dumped a bunch
of flights in Virgin markets trying to vacuum away customers. American and JetBlue
Airways Corp. have each added a few daily trips between New York and California since
Virgin launched. Southwest Airlines Co., which decided recently to return to San
Francisco International Airport after pulling out a few years ago, decided to add seven
trips a day between San Francisco and Los Angeles starting next month. United has built
up a bit, too, at its San Francisco hub.
Carriers say markets are strong, and so the added service, they profess, isn't a direct
response to Virgin. "If we're adding, it's because markets are performing well," said John
Tague, United's chief revenue officer.
Southwest says it is ready for battle, too. The airline has 700 daily flights in California,
and "we're in it for the long haul," said Brad Newcomb, senior director of marketing at
Southwest. The big move back into the Los Angeles-San Francisco route -- Southwest
already has dozens of flights up and down the California coast from Oakland, Burbank
and other airports -- is simply to "provide customers as much choice as possible," he said.
JetBlue may actually have the most to lose since it is the airline most like Virgin America
-- a well-financed start-up with discount prices, a high-quality product focused around inflight entertainment and heavy reliance on transcontinental traffic.
A JetBlue spokesman said the airline is "continually reviewing our product and
investigating options for enhancing our onboard experience." One area JetBlue believes it
still has the upper hand is legroom -- vital on long flights. JetBlue's all-coach cabin has
half of its seats at 34 inches of "seat pitch" -- the space from a point on the seat to the
same point on the seat in the next row -- and half at 36 inches. Virgin's coach seat pitch is
32 inches.
That's something Fredda Weiss noticed when the person in front of her reclined her seat
on a Virgin flight. The seat back was almost in her lap, she said, making the
entertainment-system screen hard to see and the trip uncomfortable. "All the high-tech
may be impressive, on first glance, but it pales in comparison to a more-comfortable
space," she said.
Competitors fought Virgin's launch probably harder than any other start-up in U.S.
history. The U.S. Department of Transportation forced Virgin to reorganize its structure
to comply with U.S. airline-ownership laws that prohibit foreigners from having more
than 25% of the voting control of a U.S. airline.
Despite the battles and current high fuel prices, Fred Reid, Virgin's chief executive, said
the company's launch has gone "very, very well." Virgin says it filled more than 80% of
its seats in August, and while passenger loads have fallen once summer ended, they have
been better than the company expected.
"We want to have a national presence and we want to be in all major markets eventually,"
Mr. Reid said.
The airline has had some glitches with its Web site and in-flight entertainment system,
but new antennas on planes should help improve reception over the Rocky Mountains, for
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 28 of 33
example. Virgin plans to add more food and beverage choices later this week, and plans
to experiment next year with some high-end food offerings for sale.
Despite skepticism about the new airline, Mr. Reid said Virgin's U.S. controlling
investors are sophisticated, patient and tenacious and are in the airline business for the
long-haul. Big legacy airlines will be around a long time, he said, but new entrants will
continue to grow and continue to shake up the marketplace and give travelers more
choice. "This juggernaut is not going to be stopped," he said.
24. The new Virgin airlines has lowered the price to under $300 for this market
a. Los Angeles to Las Vegas
b. Los Angeles to Honolulu
c. Los Angeles to New York Correct
d. Los Angeles to San Francisco
Talking Points: Making the Most Of Doctor Visits
By LAURA LANDRO
October 31, 2007; Page D1
http://online.wsj.com/article/SB119378733197676876.html
When her sister Kelly Rooney was battling breast cancer, Erin Dugery went along to
doctors' appointments to help make sense of the treatment options. But the medical
jargon was often hard to understand, and she often felt she had forgotten important
questions her sister needed answered. "On the drive to the appointment, you think of a
million things you want to ask, but when you finally have the attention of the doctor it's
almost like getting stage fright," says the Philadelphia mother of four.
Ms. Rooney died 15 months ago at age 43, but Ms. Dugery says she learned valuable
lessons during her sister's illness -- such as writing down important questions beforehand
and not being afraid to ask the doctor to explain things. Much of this advice came from
an unusual source: "Doctor, Doctor, Lend Me Your Ear," a one-woman skit the sisters
saw performed in Florida by Ms. Rooney's radiation oncologist, Marisa Weiss. Dr.
Weiss, who strips off her white coat and clothes on stage to reveal a hospital gown, uses
humorous examples from her own experience to convey lessons on how to talk to -- and
listen to -- your doctor.
Dr. Weiss, who has turned the lessons from the skit into a new book, is one of a growing
number of medical professionals and health-care groups offering advice through books,
Web sites, DVDs and even personal consultations to help patients navigate the modern
doctor's appointment.
Though medical information has never been more accessible to consumers, many patients
still don't have the skills to talk to their doctors and cram all the questions they have
about their health into a brief visit. They often ignore what they don't understand, or leave
delicate but important issues to the end and then run out of time. So to help patients get
answers, health-care officials are offering new discussion aids, providing sample
questions patients can ask, and offering advice ranging from making a list of your drugs,
to starting with the biggest questions first, to checking that a doctor has your lab results
before going to an appointment.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 29 of 33
Given the growing concern about patient safety and malpractice liability, doctors, too, are
under pressure to help patients ask the right questions in the limited time they have. The
Joint Commission, a nonprofit group that accredits health-care organizations, recently
began requiring hospitals to show that they are encouraging patients to participate in care.
For example, health-care providers should be encouraging patients to ask questions, and
using educational materials to help them make decisions. A growing number of healthliteracy programs urge physicians to speak more slowly, use plain language, and, when
possible, show models or actual devices or even draw pictures.
A survey by the Boston-based nonprofit Foundation for Informed Medical Decision
Making found that the majority of adults have big concerns about doctors not spending
enough time to explain all treatment options. The foundation, whose work stems from
research originally conducted at Dartmouth Medical School about unwarranted variations
in health-care practice, is working with physician-practice groups around the country to
test videos, books and pamphlets called Shared Decision-Making programs. Used at the
Dartmouth-Hitchcock Medical Center in Lebanon, N.H., and provided through health
plans with about 20 million members, the aim is to see how they work when provided
directly to patients by primary-care offices.
"The doctors don't have time to explain everything you ought to know, and they may not
even be the best people to provide basic information and frame it for the patients," says
Floyd J. Fowler Jr., the foundation's president.
The Shared Decision-Making materials, which are organized by illness, procedure and
condition, present background information to help patients make medical decisions,
including pros and cons of various treatment options, risks and long-term survival
statistics. Patients can review the information in the doctor's office before an appointment
and take materials home to review with family members. Unlike a broad Internet search,
Dr. Fowler notes, the decision aids synthesize the most important information for the
specific decision a patient has to make, such as whether to get a colorectal cancer
screening or go forward with back surgery, and how different treatment choices might
affect their lifestyle or personal preferences.
Yvonne West, a 41-year-old nurse and mother of two teenage girls who was diagnosed
with breast cancer, learned of the Shared Decision-Making aids because Pittsfield, Mass.based Berkshire Health Systems, the hospital where she worked, is participating in a test
of the programs. Shortly before her own diagnosis, her husband died of cancer after being
treated with radiation, and she was concerned about undergoing such treatment herself.
Using the decision aids, she reviewed the evidence for different options and the risks of
recurrence before consulting with her doctor, ultimately choosing a unilateral
mastectomy and reconstruction. The videos include real patients talking about their
choices and why they made them.
"The videos got me thinking about the different options, and really helped me with the
decision process," says Ms. West.
Consumers without access to such decision aids can still find help in preparing for doctor
visits on Web sites sponsored by disease advocacy groups, hospitals and the federal
government. The American Heart Association (americanheart.org), for example, offers a
list of questions that patients with high blood pressure and high cholesterol should ask,
while the Boston-based Joslin Diabetes Center Web site (joslin.org) offers a list of
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 30 of 33
questions that diabetics should ask doctors who are managing their disease, and
explanations of why each question is important.
Researchers at the University of California, Los Angeles, say that as many as 40% of
patients bring more than one concern to a doctor's visit -- and possibly as many as three
or more. In a study published this month in the Journal of General Internal Medicine,
they suggest that a slight change in bedside manner can make a difference in whether all
of these issues get addressed: Patients who were asked at the end of a doctor's visit
whether there was "something else" that needed attention were much less likely to leave
with unmet concerns than those who were asked whether there was "anything else" that
needed attention.
According to the study, "any" tends to be used in a negative context, predisposing
patients to respond negatively. With many doctor visits averaging 11 minutes, doctors
clearly have to make every question count, lead study author John Heritage notes.
Delia Chiaramonte, a Baltimore-area physician, started a business called Insight Medical
Consultants that helps patients find medical experts, make treatment decisions and
communicate effectively with doctors. She notes that patients often save their most
important or embarrassing question for last, then find the appointment is over with no
time to address their most important concern. "There is often a tremendous
miscommunication between doctors and patients on what the visit is really about," says
Dr. Chiaramonte. "If your No. 1 priority is talking about your erectile dysfunction, it's
best to start with that."
It's also critical when making doctor's appointments to be clear on whether it is simply a
check-up or you have a specific urgent complaint or problems with a chronic health issue.
Doctors schedule their time differently for all three and should be prepared ahead of time.
Dr. Chiaramonte suggests asking office staff what the best time is to schedule an
appointment if you need more time to talk, such as whether later in the day or the first
appointment is best.
Dr. Weiss -- whose book is titled "Seven Minutes: How to Get the Most from Your
Doctor Visit," available for $10 through her nonprofit Web site, breastcancer.org -advises that patients prepare a full report of any symptoms or concerns prior to the
doctor's visit, as well as a complete list of current medications. If you are awaiting
interpretation of test results from a lab, make sure before you arrive that the results have
been sent and that the office staff have given them to the doctor.
She also advises bringing family members or a trusted friend, not only for moral support,
but to act as another set of eyes and ears to listen to what the doctor is saying and to help
organize questions. Since grasping the doctor's words can be the hardest part of the visit,
she also advises using a tape recorder, but first asking the doctor's permission to do so.
Ms. Dugery, who started a Web site, Save2ndbase.com, to help raise money for a
foundation in her sister's name, says she now uses Dr. Weiss's advice to advocate for
herself and others in her extended family. "Even though your doctor may be the captain
of the ship, you are the first mate," says Ms. Dugery. "It's really empowering to be able to
find your own voice in your own care and in the care of your loved ones."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 31 of 33
25. Some helpful advice for modern doctor appointments include
a. checking that a doctor has your lab results before going to an appointment.
b. bringing family members or a trusted friend, not only for moral support, but to act as
another set of eyes and ears to listen to what the doctor is saying and to help organize
questions
c. patients should prepare a full report of any symptoms or concerns prior to the doctor's
visit
d. all of the above Correct
Some Date: How Homecoming Is Losing Out to Hanging Out
By JEFF ZASLOW
November 1, 2007; Page D1
http://online.wsj.com/article/SB119387563623178398.html
Last month, a boy asked my 16-year-old daughter to his school's homecoming dance. She
agreed to go, bought a new dress and made a hairdresser appointment.
The boy never bought tickets to the dance. Neither did his friends. They decided that
attending homecoming wouldn't be cool, and instead planned to just dress up that night,
go out for dinner and then hang out with their dates at someone's house.
My daughter was disappointed, as were her girlfriends. They would have loved to have
been taken to the dance, to show off their dresses, to see and be seen.
At 6 p.m. on the night of the boycotted dance, about a dozen of these girls and their dates
gathered in one boy's backyard so a mob of parents could photograph them. I found it
dispiriting. My heart went out to those girls -- all dressed up with no place to go. Couldn't
we, as parents, have demanded that the boys take our daughters to the dance? Why did
we stand there, clicking our digital cameras, saying nothing?
I live in suburban Detroit, but this phenomenon is playing out elsewhere in the country,
too -- a telling example of the indifference with which young people today view dating,
chivalry and romance.
Studies, of course, show more young people skipping romantic relationships in favor of
"hooking up." As teens socialize in packs, forgo one-on-one dating and trade sex
nonchalantly, it is no stretch to find that boys are asking girls to homecoming and not
bothering to take them there. But with so many young people ignoring once-sacrosanct
dating rites, how can we respond?
At some schools, students are boycotting dances to protest bans on sexually suggestive
"freak dancing." At others, dances are just falling out of favor. Southeast High School in
Wichita, Kan., canceled its homecoming dance last February after just 27 tickets were
sold, half to members of the homecoming court. At Cardinal O'Hara High School in
Springfield, Pa., class of '06 homecoming queen Cathy Caramanico never got her big
moment at the dance. It was called off due to lack of interest.
Many teens today prefer to gather in someone's basement because it's easier to pair off in
dark corners. "There aren't as many chaperones in basements as at dances," says Ms.
Caramanico.
Meanwhile, 60% of 125 college students in a new study by Michigan State University
have had a sexual "friends with benefits" relationship. Nine out of 10 "hookups" didn't
lead to dating relationships, the study found. More ominously, after casual sex, females
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WSJ Professor Guide: Page 32 of 33
are more likely than males to show symptoms of depression, according to a study
reported last year in the Journal of Sex Research.
"Young women are longing for romance," says Laura Sessions Stepp, author of
"Unhooked: How Young Women Pursue Sex, Delay Love and Lose at Both." She
interviewed girls who considered it empowering to be dismissive of romance and casual
about sex. Later, many were beset with regrets.
Obviously, boys no longer have to call girls on Wednesday for a Saturday date. Now,
college boys seeking weekend hookups send girls "U busy?" text messages at 2 or 3 a.m.,
and girls routinely rouse themselves and go, according to Ms. Stepp's research. Many
girls spend the next day clutching their cellphones, waiting in vain for the boy to call.
While visiting a high school students in McLean, Va., Ms. Stepp was approached by four
girls seeking advice. They wanted to start a "dating club." "These were gorgeous girls,"
she says. "I told them to print up T-shirts: 'Ask me for a date.' "
Family advocates say we should ask our daughters, point blank, about hooking up. "Does
it make you happy?" And we should explain that it can be helpful for teens to start
practicing relationships -- learning to listen, to trust, to consider someone's needs.
My wife and I debated insisting that our daughter's date take her to homecoming. Our
daughter asked us not to do that. The boy, a nice kid, wanted to go to homecoming, she
said, but was following his peers. Because there was parental supervision at that night's
gathering, we bit our lips and let it be.
As the father of three daughters, I wish that more parents of sons would talk to their boys
about being respectful, and about the thrill that can come from holding hands. Those of
us with daughters need to tell them that empowerment is less about sexual freedom and
more about recognizing their true feelings.
It is too bad that my daughter and her friends didn't demand that the boys take them to
homecoming. Yes, they risked being dumped for easier girls. But maybe the boys would
have gotten the message and, as promised, graciously escorted their dates to the dance.
26. The current trend in dating for high school and college students includes
a. an increase in casual “hook-up” relationships
b. lack of interest in formal events like dances
c. boys have to call girls on Wednesday for a Saturday date
d. both a and b Correct
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