The Wall Street Journal Education Program
Weekly Review & Quiz
Covering front-page articles from Oct 20-26, 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
Inside the Greed Zone
By GLENN R. SIMPSON
October 20, 2007; Page A1
http://online.wsj.com/article/SB119282544852865144.html
Marshall Gutierrez was classic military material, a working-class kid whose father and
both grandfathers served in the armed forces.
He joined the Army and marched steadily up the hierarchy, ultimately becoming a
lieutenant colonel and chief logistics officer at this sprawling base in Kuwait. His Army
record was spotless, and he developed a reputation as a bit of a straight arrow.
So it isn't surprising how Lt. Col. Gutierrez reacted in 2005 when he discovered signs of
rampant overcharging by the Army's main food supplier for the Iraq war. Bags of CocaCola syrup available in the U.S. for about $10, for example, were going for $90. He blew
the whistle. That triggered a massive criminal probe of Kuwait-based Public
Warehousing Co. that is now raising questions for such major American food companies
as Perdue Farms Inc. and Sara Lee Corp., and is shaping up as one of the biggest fraud
probes of the Iraq War.
Then the tables turned. The Kuwaiti contractor accused Col. Gutierrez of seeking bribes,
setting in motion a bizarre chain of events that left his military career and his 22-year
marriage in ruins. On Sept. 4, 2006, he was found dead in his quarters at the age of 41.
Next to his body were an empty container of prescription sleeping pills and a plastic
bottle of antifreeze.
The story of Col. Gutierrez, who Army investigators allege wound up tainted by the very
corruption he complained about, is one thread in the expansive fraud and corruption
investigation into firms supplying food to troops in Iraq. The Justice and Defense
Departments are investigating overcharging and possible favoritism in awarding of
contracts. Col. Gutierrez's role in the inquiry emerges from interviews with military
officials, contractors and others involved, as well as emails, letters, court filings and other
written material.
Marshall Gutierrez grew up in the little town of Las Vegas in the foothills of New
Mexico's Sangre de Cristo Mountains, a descendant of the original farmers who received
Spanish land grants to settle the area. He was a driven and intensely proud man, both of
his achievements as a soldier and his Hispanic heritage, says his widow Brenda, also a
Las Vegas native.
The two met a quarter-century ago at a church event. He was 15, she was 13. At the age
of 16, Brenda discovered she was pregnant -- a harsh predicament for two teenagers in a
small, conservative Catholic community. "His mother offered to send him away to
another school elsewhere in the state, and he didn't. He married me," Ms. Gutierrez
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 26
recalled. "This was not a guy that ran away from trouble or from any type of a difficult
situation."
They married two years later, and he started serving in the Army National Guard the very
next weekend. After high school, he worked his way through college on a scholarship
from the Army Reserve Officers' Training Corps and became a commissioned officer in
1987. The couple commenced the itinerant life of a military family, bouncing from
Newport News, Va., to Colorado Springs, Colo., to Saudi Arabia after the 1991 Persian
Gulf War. In Panama, Capt. Gutierrez led the 1097th Transportation (Medium Boat)
Company, which moved thousands of tons of materiel and in 1994 won a prestigious
Army award.
"He was a hard charger. He did not accept any sort of failure. His way or the highway
was how he was," recalls Sgt. Sean Kelly, who served under him in Panama. "But he also
was able to motivate the people who worked under him to literally accomplish the
impossible."
Eventually Mr. Gutierrez rose to the rank of lieutenant colonel, and in 2005, he shipped
out to Camp Arifjan in Kuwait, a large logistics and staging facility with fast-food
restaurants and Internet cafés.
CAMP ARIFJAN is now at the center of the U.S. inquiries into contracting corruption.
One Saudi catering company, Tamimi Global, allegedly had a "party house" frequented
by contractors and at least five military contract officers, according to a sworn statement
in July 2006 by a former Army officer, contained in U.S. court records. The officer
admitted taking $8,000 in bribes and gifts from a Tamimi executive and another $50,000
from another catering firm. He claimed he had witnessed at least five other Army officers
taking bribes in the course of roughly a dozen parties at the Tamimi house.
Camp Arifjan sends numerous truck convoys to Iraq every day. Most of the freight is
handled by Public Warehousing, which began as a modest Kuwaiti government spinoff.
Now publicly traded, it is one of the largest transport companies in the world. Under a
series of contracts worth more than $6 billion, Public Warehousing is designated a
"Prime Vendor" for virtually all food served to U.S. forces in Iraq and Kuwait -- some
150,000 stomachs.
Within months of arriving in Kuwait, Col. Gutierrez clashed with Public Warehousing
over its prices for various items, according to emails he sent that are now part of the
Army record of the case. He questioned why Public Warehousing was charging the Army
about $90 for five-gallon bags of Coca-Cola syrup when they could be found for around
$40 from Kuwait City merchants, the emails indicate.
Col. Gutierrez began supplying information via email to Gary Shifton, a top official at the
Pentagon's Defense Supply Center in Philadelphia. In November 2005, Pentagon officials
launched an investigation. The inquiry focused on Public Warehousing's pricing
agreements with its own suppliers.
Investigators suspect the military wound up paying inflated prices for everything from
preserved milk to lobster tails, according people involved in the investigation and courts
records from U.S. civil litigation between Public Warehousing and the Defense
Department. The investigators are looking into whether Public Warehousing passed along
high prices from its suppliers to the military, then was improperly compensated by those
suppliers through large rebates and discounts, the court records and the people involved
say. One focus is Sultan Center, a supplier with close ownership and managerial ties to
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 26
Public Warehousing, which refunded to Public Warehousing some 10% of the military
sales it received.
1. In 2005 Lt Col Gutierrez blew the whistle on _____.
a. mistreatment of prisoners at Abu Ghraib
b. overpricing of food by Public Warehousing Correct
c. Enron
d. the Wedding Party massacre
2. Camp _____ is now at the center of the US inquiries into contracting corruption.
a. Sultan
b. Tamimi
c. Global
d. Arifjan Correct
Ship Shortage Pushes Up Prices Of Raw Materials
By ROBERT GUY MATTHEWS
October 22, 2007; Page A1
http://online.wsj.com/article/SB119301028152866449.html
The cost of shipping raw materials across the world's oceans has reached an all-time high,
pushing up prices of grain, iron ore, coal and other commodities.
The average price of renting a ship to carry raw materials from Brazil to China has nearly
tripled to $180,000 a day from $65,000 a year ago. In some cases, ocean shipping can be
more expensive than the cargo itself. Iron ore, for example, costs about $60 a ton, but
ship owners typically are charging about $88 a ton to transport it from Brazil to Asia.
The trend may force manufacturers to pay more for the basic ingredients they need to
make their products. And those higher costs could be passed on to consumers, affecting
the price of everything from automobiles and washing machines to bread.
The main reason commodity shipping rates are escalating: not enough bulk ships. The
shortage stems from the surging volume of global trade as growth explodes in China,
India and other developing nations. China's voracious manufacturing sector is compelling
it to look increasingly far afield for resources, such as to Brazil for iron ore. (See related
article1.)
The Baltic Exchange Dry Index, the most important and widely used indicator of worldwide ocean freight rates for bulk commodities, hit a record Friday after rising 169% over
the past year. And shippers, brokers and commodity merchants are braced for higher rates
next year and possibly through 2009. By then enough new bulk freighters are expected to
come on line to ease the shortage.
"All of the ship owners are making a lot of money because these are numbers that the
market has never seen," said John P. Dragnis, commercial director of Athens-based
Goldenport Inc., one of the largest providers of ships to commodity sellers.
Even when ships are available to carry the cargo, inadequate port facilities can cause
delays, driving up the cost of shipments. At Brazilian ports, ships often wait offshore for
as long as two weeks for their turn to load or unload, like airplanes sitting on a runway
waiting for a gate.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 26
Brazil isn't the only source of bottlenecks. As of last week, 131 vessels were waiting to
pick up or unload coal and iron ore at Australia's main ports, according to the Global
Ports Congestion Index, which tracks wait times world-wide.
As a result, some Australian coal producers are being forced to cut back on exports,
which is expected to add to the upward pressure on global coal prices. Likewise,
commodity merchants are building higher costs for transportation into the price of steel,
grain and aluminum. The steep run-up in bulk shipping rates has largely bypassed other
types of vessels, like oil tankers or the container ships that transport finished goods like
television sets, because those ships aren't in such short supply.
Though bulk shipping costs have been rising for a couple of years, the run-up has
intensified over the past year. The full impact of those spot-market rate increases has yet
to filter through to the 70% of bulk commodity shipments that are covered by long-term
contracts.
3. The main reason commodity shipping rates are escalating:
a. too many bulk ships
b. not enough bulk ships Correct
c. high fuel costs
d. increased exports
4. As of last week, ______ vessels were waiting to pick up or unload coal and iron ore at
Australia's main ports, according to the Global Ports Congestion Index, which tracks wait
times world-wide.
a. 31
b. 131 Correct
c. 231
d. 331
More Debtors Use Bankruptcy To Keep Homes
By AMY MERRICK
October 23, 2007; Page A1
http://online.wsj.com/article/SB119309633953367729.html
With loan defaults rising along with many mortgage payments, fast-growing numbers of
homeowners are gambling on bankruptcy filings to try to stay in their homes.
Last month, as the nation's housing slump continued, consumer bankruptcy filings
increased almost 23% from a year earlier -- representing nearly 69,000 people -according to the American Bankruptcy Institute, a nonprofit research group whose
members include bankruptcy attorneys, judges and lenders. Overall, consumer
bankruptcy filings were up 44.76% during the first nine months of this year.
In some areas where the real-estate boom was especially heated, the increase in filings
has been even sharper -- especially for a type of bankruptcy that allows homeowners to
halt foreclosures on their homes.
The surge in filings hasn't caught up with the flood of bankruptcy cases consumers
launched in 2005, as they raced to beat a change in federal law that made it harder for
individuals to declare bankruptcy. Even so, it shows the rising sense of insecurity many
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 26
Americans feel as housing values fall, lending standards get tighter and hundreds of
thousands of mortgages with low introductory interest rates "reset" to higher rates,
boosting the homeowner's monthly payments.
Most consumers filing for bankruptcy continue to do so under Chapter 7 of the federal
Bankruptcy Code. Under that provision, a person must forfeit certain assets -- including,
in some cases, a portion of home equity. Those assets are sold to pay off debts.
While Chapter 7 filings stop foreclosure proceedings, the break is usually only
temporary. As a practical matter, many homeowners who file under Chapter 7 lose their
homes.
In recent months, however, an increasing number of homeowners have filed for
bankruptcy under Chapter 13, which staves off foreclosure proceedings while the
homeowner works out a plan to pay off mortgage debt and other obligations over time -usually three to five years. To qualify, debtors must have a regular income and must stay
current on their new bills. About four in 10 filers today are filing under Chapter 13 -- up
from three in 10 two years ago. The 2005 change in bankruptcy laws was designed in part
to shift more filers to Chapter 13, which forgives less debt than Chapter 7.
In California, one of the nation's hottest markets during the recent real-estate boom, the
number of nonbusiness Chapter 13 petitions in the second quarter of the year more than
doubled from a year earlier, according to records compiled by the Administrative Office
of the U.S. Courts in Washington. Over the same period, such filings increased nearly
40% in the northern district of Illinois, which includes Chicago, and 70% in
Massachusetts.
"It's a mess," says William McLeod, a Boston bankruptcy attorney who says he is
receiving twice as many calls from debtors as he did a year ago. "This is fed right now by
real estate, and what's been this mortgage frenzy in the last several years."
Some bankruptcy attorneys are promoting Chapter 13 bankruptcy in press releases and
commercials, and are contacting borrowers whose homes are already in the foreclosure
process. But it isn't a strategy that works for everyone. Consumer advocates say the
homeowners who are most likely to benefit from Chapter 13 are those facing foreclosure
because of a temporary financial setback, but who expect to be able to cover their
mortgage payments in the future.
Early this year, 47-year-old Briant Titus saw sales start to lag at his family's vacuumcleaner sales business. He missed several payments on the two-story Cape Cod home in
Potterville, Mich., that he purchased 15 years ago for $139,000. When he called his
lender to find out why two recent checks hadn't been cashed, a manager told him that
foreclosure proceedings had begun.
"I was freaking out," says Mr. Titus. "All I was thinking about were my two little kids,"
who are 9 and 6 years old.
Mr. Titus saw a TV commercial for a local bankruptcy attorney, Gene Turnwald.
Encouraged by the suggestion that he could save his home, Mr. Titus hired Mr. Turnwald
and filed a Chapter 13 petition about six months ago. Since then, he has paid his regular
monthly mortgage bill of $950 as well as $2,000 under his debt-repayment plan, half of
which is applied to his past-due mortgage payments and the other half to business
creditors. Vacuum sales are still sluggish, but he says he can make his payments by
budgeting carefully.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 26
"I think if people knew they had the Chapter 13 option, a lot of people would save their
house," Mr. Titus says. He says he can't recall what he paid in legal fees but says he
thinks he spent a total of about $1,200 to file his case.
Of course, there are pitfalls. A Chapter 13 filing stays on a person's credit file for a
decade, wreaking havoc on his or her ability to get financing. And the repayment plans
leave borrowers with little room for maneuver. Indeed, many Chapter 13 plans fail
because of unforeseen problems such as an illness, job loss or expenses for an emergency
home repair.
5. An increasing number of homeowners have filed for bankruptcy under ______, which
staves off foreclosure proceedings while the homeowner works out a plan to pay off
mortgage debt and other obligations over time -- usually three to five years.
a. Chapter 7
b. Chapter 13 Correct
c. Chapter 11
d. Chapter 5
6. Overall, consumer bankruptcy filings were up 44.76% during the first nine months of
this year.
a. down 24.76%
b. up 24.76%
c. down 44.76%
d. up 44.76% Correct
To Sharpen Nike's Edge, CEO Taps 'Influencers'
By NICHOLAS CASEY and BRUCE ORWALL
October 24, 2007; Page A1
http://online.wsj.com/article/SB119317864699068959.html
BEAVERTON, Ore. -- Nike's iconic co-founder Philip H. Knight built the company by
sealing endorsement deals with sports heroes such as Michael Jordan and Tiger Woods.
But under current Chief Executive Mark Parker, Nike is also depending on lesser-known
figures -- like a Los Angeles tattoo artist known as Mister Cartoon.
Though far from mainstream, Mr. Cartoon rivals Nike's high-profile jocks for influence
among a certain crowd that is young, Latino and hip-hop. His ink-on-flesh flourishes are
popular with rappers like Eminem and 50 Cent. Born Mark Machado, Mr. Cartoon has
also written comic-book style graphic novels and created a brand called Joker to sell Tshirts and baseball caps with his designs. Nike's Mr. Parker, who met Mr. Cartoon several
years ago, calls him an "aesthetic influence and a friend."
So far, the artist has designed six lines of limited- edition shoes for Nike, ranging in price
from $70 to $130. They include a version of the company's classic Air Force One
basketball shoe that nods to what Mr. Cartoon calls the "old icons of the gangsters":
skulls and roses, dark tenements and "sexy, female clowns." The heel of one model is
adorned with the initials "L.A." rendered in Gothic letters.
Athletes still rule at Nike. But the game is changing. Nike's traditional endorsement
strategy has taken a few hits recently. It dumped NFL star Michael Vick from its lineup
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 26
in the wake of his August guilty plea in a criminal dog-fighting case. More recently, one
of its most prominent former pitchwomen -- track star Marion Jones -- admitted to using
performance-enhancing steroids after years of staunch denials.
Meanwhile, delivering the sales growth Mr. Parker has promised Wall Street -- a 50%
increase in revenue, to $23 billion by 2011 -- means expanding Nike's hold on fickle,
style-conscious consumers.
The company hasn't lost its traditional focus on pure sports, utilitarian design and
performance. Just yesterday, Nike penned a $582 million deal to acquire Umbro PLC, the
British soccer brand. But now, Nike's vast expansion has created pressure to broaden and
deepen its appeal -- even among non-athletic types. Mr. Knight recently told Mr. Parker:
"Your job is way more difficult than my job was."
Mr. Parker sees the challenge thusly: "The question is, how do you not let your size
become a disadvantage? How do you keep an edge, a crispness, a relevance?"
One answer, for many marketers over the years, has been to divine the future -- to find
the most cutting-edge, trend-sniffing individuals and set them loose to formulate new
ideas, new products. Such "coolhunters," as some types are known, scour the globe's
streets, stores, clubs and hidden haunts picking up clues as to what's hot, what's next.
They then interpret their findings to help companies better resonate with their core
audience.
At Nike, the drive to recruit under-the-radar influencers like Mr. Cartoon is on the rise
and a key part of the company's strategy. While other sneaker-makers have also called on
cultural soothsayers to shape their aesthetic agenda, Mr. Parker has taken the practice all
the way to the executive suite -- acting as the company's ambassador of cool.
"I have a personal interest in popular culture and the influence of culture on the consumer
landscape," says Mr. Parker, rattling off the worlds he turns to for inspiration: interior
design, cuisine, art and music among them.
Following his own instincts, Mr. Parker has moved to aggressively link Nike with those
who can help maintain the company's standing among what he calls the "influencers of
influencers."
The 52-year-old Mr. Parker plumbs a global network of friends -- including artists, DJs,
designers and other early adopters -- for tips on who might be able to confer credibility
on the company. The result, Mr. Parker says, is a bit like social networking on the
Internet. It's about "looking peripherally, not just straight ahead."
In addition to Mr. Cartoon, Mr. Parker has fostered Nike collaborations with a New York
graffiti artist named Lenny Futura, the industrial designer Marc Newson and a pair of
twin Brazilian muralists known as Os Gêmeos.
7. Nike Chief Executive Mark Parker has promised Wall Street a ____ increase in
revenue, to $23 billion by 2011.
a. 10 %
b. 30 %
c. 50 % Correct
d. 70 %
8. Mr. Parker has moved to aggressively link Nike with those who can help maintain the
company's standing among what he calls the ______.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 26
a. "writers of writers"
b. "leaders of leaders"
c. "influencers of influencers" Correct
d. "runners of runners"
Economic Reckoning Looms In Argentina's Election
By MATT MOFFETT
October 25, 2007; Page A1
http://online.wsj.com/article/SB119327033336170614.html
BUENOS AIRES -- Argentina has had plenty of anti-inflation plans over the years. The
current one may be the first that rests heavily on a public servant whom some executives
and politicians have nicknamed "El Loco," or the Crazy Man.
The official, Guillermo Moreno, is Argentina's Secretary of Internal Commerce, the
government's price policeman. His mission is limiting price markups in the red-hot
economy -- at least until the leftist Cristina Kirchner, the wife of the current president,
Néstor Kirchner, can win her own bid for president. Elections are scheduled for this
Sunday, and she's heavily favored to win.
With the Kirchners' blessing, Mr. Moreno has hammered out price-control agreements
with industry, doled out subsidies and imposed export restrictions to keep the domestic
market awash in goods. He has also threatened uncooperative businesses with
prosecution under a recently resurrected 33-year law against hoarding goods. When none
of that worked to restrain prices, a prosecutor has alleged, Mr. Moreno ousted the
government statisticians who prepared the consumer price index and installed his own
people to massage the numbers. Mr. Moreno denies that; a judge is reviewing the case.
Argentina has often been a standard-bearer for economic trends in Latin America. In the
1990s, it was a leader in the wave of free-market capitalism that swept the region. That
ended in a harrowing collapse in 2001. This decade, the Kirchner government has moved
toward greater state control over the economy alongside several Latin American
countries, including Venezuela, Bolivia and Ecuador. With Latin America divided
between those populist governments and countries pursuing free-market economics, the
fate of Ms. Kirchner and Argentina could affect policy choices around the region.
As Argentina's governing faction tries to prolong the country's roaring economic recovery
-- and maintain its grip on power -- it is waging an increasingly desperate battle to
contain inflation. The government's tainted figures put the annual figure at 8%, while
most independent economists peg it around twice that high. Rather than cooling off the
economy and fixing bottlenecks to future prosperity, Mr. Kirchner's government has been
intervening in markets and prices with a heavy hand.
The moves are often proving ineffective and sometimes sow distortions in the economy
that could make lasting solutions even more difficult. When Mr. Moreno tried to set
potato prices following a bad crop, with a hotline for reporting profiteers, consumers
rejected the officially priced spuds as low-quality. ("They were not fit to feed pigs," said
a consumer advocate.) Most ominously, artificially low power prices -- one-third the
region's average for residential electricity -- have spurred demand while discouraging
new investment in electricity and natural gas. That led to power rationing during the last
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 26
Southern Hemisphere winter in June and July and raised fears about the coming summer
months.
Ms. Kirchner, a senator and top adviser to her husband, has been running as the guarantor
of his legacy -- a 50% expansion in Argentina's annual economic output in the past five
years. Polls show her winning election without the need for a runoff, largely because the
boom is the most vigorous in Argentina in the past century. Since Mr. Kirchner took
office amid a withering crisis, Argentina has reduced unemployment to about 8% from
18% and taken a big bite out of the poverty rate. His backers note that mainstream
economists have frequently scoffed at his policies despite the country's recovery.
Mercedes Marcó del Pont, an economist and congresswoman of the Kirchners' party,
contends some government intervention in prices is justified to confront inflationary
pressures coming from abroad.
The opposition seems too divided to overcome Ms. Kirchner, especially since her
husband's government has used the power of incumbency to direct benefits such as
pension and wage increases toward key voter blocs. One leading opposition candidate is
Roberto Lavagna, Mr. Kirchner's former economy minister who broke with him in 2005
amid disagreements over inflation policy, and wants to restrain government spending to
control inflation -- not a popular position. Mr. Lavagna, who also wants to aggressively
court investment, derides the Kirchners' policy as "the ostrich plan: You put your head in
a hole."
9. Guillermo Moreno, is Argentina's Secretary of Internal Commerce and is responsible
for Argentina’s _____ plans.
a. banking
b. beef stocking
c. security
d. anti-inflation Correct
10. Independent economists peg Argentina’s inflation rate at ______.
a. 5 percent
b. 8 percent
c. 14 percent
d. 16 percent Correct
Marketers Use Trickery To Evade No-Call Lists
By JENNIFER LEVITZ and KELLY GREENE
October 26, 2007; Page A1
http://online.wsj.com/article/SB119335472901272206.html
Older Americans around the country are getting duped by a seemingly innocuous tactic
that can expose them to hard-sell pitches from the insurance industry.
The technique is centered on a marketing tool called the lead card, and it became popular
after the federal government created its Do Not Call Registry in 2003 to shield consumers
from unwanted solicitors. Sent through the mail, the lead card invites the recipient to mail
off an enclosed reply for free information about, say, estate planning.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 26
But the cards fail to warn that by sending off replies, recipients are giving up their right to
avoid telephone solicitations from the sender -- even if their phone numbers are on the
Do Not Call list.
"It's a huge loophole," says Pam Dixon, executive director of the World Privacy Forum, a
San Diego nonprofit researcher of privacy issues including commercial use of personal
information.
The technique is prompting legal action from states across the country. Because the
loophole itself violates no law in most states, prosecutors are focusing their cases on
other lead-card deceptions. The cards often falsely imply an affiliation with the federal
government or with advocacy groups such as AARP, for instance. Many of the cards also
fail to mention that replies will be turned over to insurance salespeople.
When Naomi and Horace Williams got a postcard warning that estates of older
Americans could be wiped out by taxes unless they moved quickly, they believed it came
from AARP, the Washington-based lobbying group for older Americans, since it said that
"AARP found" probate taxes were hurting seniors.
So the Williamses filled out a reply card that promised more information and mailed it to
a post-office box in Washington, D.C. Soon after came a phone call from a man saying
he wanted to drop by their North Carolina home to deliver the information they'd
requested. It never occurred to the Williamses -- who had registered on the Federal Trade
Commission's Do Not Call Registry -- that the caller was a marketer. They assumed he
was affiliated with AARP, they say.
11. Sent through the mail, the ______ invites the recipient to mail off an enclosed reply
for free information.
a. call card
b. heads up card
c. lead card Correct
d. toll free card
12. When Naomi and Horace Williams got a postcard warning that estates of older
Americans could be wiped out by taxes unless they moved quickly, they believed it came
from ______, the Washington-based lobbying group for older Americans.
a. AARP Correct
b. CARP
c. BPOE
d. AAA
Questions 13 – 17 from Marketplace
For Boards, Firing Or Keeping a CEO Can Be Tough Call
By JOANN S. LUBLIN
October 22, 2007; Page B1
http://online.wsj.com/article/SB119301090157566455.html
Citigroup Inc.'s directors stood by Chief Executive Charles Prince last week as the
nation's largest bank reported a 57% drop in third-quarter earnings. But the expression of
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 26
support did little to allay speculation abut Mr. Prince's future. The reason: Boards of
directors of struggling companies typically trumpet their faith in the chief until the day
they force him or her out.
Deciding whether to unseat a leader poses a dicey dilemma for directors. Wait too long,
and they risk letting a bad situation get worse. Act too quickly, and they may short-circuit
a potential recovery and create a demoralizing power vacuum.
"Nobody has mapped this process so well that they could give you a cheat sheet," says
Paul Danos, dean of the business school at Dartmouth College in New Hampshire and a
director of General Mills Inc. and BJ's Wholesale Club Inc. Frequently, Mr. Danos
suggests, the decision comes down to "whether you have someone to replace him with."
More directors are struggling with the issue at a time of growing board authority,
increasing investor impatience and shrinking CEO tenure. As at Citigroup, directors of
Alcatel-Lucent and Motorola Inc. also recently backed CEOs Patricia Russo and Ed
Zander, respectively, amid shareholder complaints. Earlier this month, Sprint Nextel
Corp. CEO Gary Forsee resigned after his fellow board members launched a search for
his successor.
13. According to the article, For Boards, Firing Or Keeping a CEO Can Be Tough Call,
boards of directors of struggling companies typically trumpet their faith in the chief until
____.
a. profit sags 10 percent
b. profit sags 25 percent
c. corruption is proven
d. the day they force him or her out Correct
Do You Hear What I Hear? Telling Off a Colleague -- Silently
By JARED SANDBERG
October 23, 2007; Page B1
http://online.wsj.com/article/SB119309292987667651.html
Bill Seybolt, a system administrator, was recently helping one of his colleagues with a
technical problem when another colleague issued a drive-by insult, putting down the
planned upgrade to a new program.
"It really pierced me," Mr. Seybolt says. Before responding, he decided he'd give himself
the night to sleep on it. But later he couldn't sleep, coming back to the conversation. "It's
like taking a shot of espresso," he says.
The conversation kept playing through his mind when he was walking his Beagle mix,
Millie. "If you were here right now you know what I would tell you?" he told his foe in
his head. Ultimately, his boss "talked me off the ledge," he says, and he dropped the
issue.
At work there are countless things you should and could and would have said. But the
tormenting fact is, you didn't. So, hemmed in by forces such as the fragility of
reputations, your dependence on a paycheck, or even just slow-footedness, you re-enact
one of the countless little workplace defeats in the confines of your head. Maybe if you
think about all that conversation's permutations, you can right all the little workplace
wrongs -- and then bend spoons with your mental powers.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 26
The process of chewing over old conversations is referred in psychology circles as
rumination. It's prevalent enough in the office that various leadership-training programs
administer personality tests asking how often you "replay an incident over and over" in
your mind.
The idea is to probe whether someone is predisposed to festering in a cycle of anger that
produces more bad thoughts that then create more anger, says Craig Runde, director of
new program development at Eckerd College Leadership Development Institute, St.
Petersburg, Fla. Ruminating too much, he says, "keeps you stuck."
14. The process of chewing over old conversations is referred in psychology circles as
________.
a. re-scripting
b. regurgitation
c. re-dramatization
d. rumination Correct
Editing on Big Films Is Now Being Done On Small Computers
By LEE GOMES
October 24, 2007; Page B1
http://online.wsj.com/article/SB119318119331269063.html
Like any modern professional, Naomi Geraghty took her laptop with her when she went
on a business trip in January. The machine got a lot of use -- but not just for email.
Ms. Geraghty is a film editor and was spending 10 days at the Irish coastal home of Terry
George, director of "Reservation Road," starring Joaquin Phoenix, which opened across
the U.S. last week. Mr. George couldn't travel for the editing, so Ms. Geraghty loaded a
copy of Avid editing software on her Apple MacBook and went to him.
Most people have a mental image of film editors hunched in the dark over editing
consoles with lengths of film pinned to the wall behind them. These days, they sit at
computers, moving scenes around as easily as paragraphs in a word processor.
Video files are so demanding, editing computers used to cost tens of thousands, even
hundreds of thousands, of dollars. But as Ms. Geraghty's tale suggests, even relatively
low-end personal computers, laptops included, are now so powerful that Hollywood pros
have joined student filmmakers and indies in taking advantage of them.
It's one more example -- along with music recording and graphic design -- of the way
cheap computers are blurring the distinction between professional and amateur tools. Not
that just having software makes you good at something, as a quick trip around the Web
makes clear.
Ms. Geraghty says that while she enjoys the comfort of her regular editing studio, a
notebook is not without its charms. "I could look out over a fishing harbor," she says. "It
was the best view I've ever had from a cutting room."
Like "Reservation Road," the typical Hollywood feature film these days is an analogdigital hybrid. Reels of film might be developed at a lab such as Technicolor, but then
$1.5 million scanners digitize them and put them on a $100 generic USB hard drive.
From there, it's on to the editors.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 26
Editing on computers is so much easier than editing physical film that it's how nearly all
movies are now cut. USC's film school once had 50 editing consoles; now it has only
two. Indeed, editing may have become too easy. "You can easily recut your movie 10
times a day," says Matt Furie, who teaches editing at USC. "Some students go off the
deep end and cut, cut, cut. We tell them they need to discipline themselves to push away
from the desk, drop the mouse and just think."
Like others, Mr. Furie suggests that one of the reasons there are so many rapid-fire cuts in
today's movies is that editing software has made them so simple to do.
Editors are lucky in that theirs is one of the few industries with intense software
competition. Anyone paying attention to computers the past 20 years will understand its
dynamics.
Avid, of Tewksbury, Mass., is the long-established leader. Your average Academy
Award winner typically is cut on an Avid. The company was one of the first in the field,
and designed its software to work the way editors were used to working. For example,
Avid's programs, like most software, use folders. But they're called "bins," after the
canvas bags into which editors used to toss small lengths of film.
Avid software does just about anything you could ask -- for a price. The company's
flagship Media Composer package runs $5,000. Philip Hodgetts, who follows the
industry for Creative Planet, says Avid has an epic fight on its hands from newer, lowercost alternatives. Apple sells Final Cut Studio for $1,300, while Adobe's Premiere Pro is
just $800.
While film still is central in big Hollywood features, it's unclear how long it will be
before even the biggest feature movies go all-digital. The buzz in technical moviemaking circles these days involves the two-month-old, ultra-high-resolution digital Red
camera. Boosters say it looks nearly as good as 35mm film -- and costs around $30,000,
or about the same as renting a 35mm camera for 10 days.
Thanks to cheap computers, a similar sort of creative destruction is happening
everywhere in the industry. Color adjustment used to require expensive oscilloscope-like
monitors. It first moved to specialized -- and expensive -- software, but lately it's done
with relatively low-cost (say, $200) "plug-ins" by companies like Red Giant Software.
Angus Wall, editor of "Zodiac," a film released earlier this year, says the real impact of
all of this digitization is to bring simplicity and artistic control back to the process. He
says postproduction work on the typical Hollywood movie is a vast assembly line of
runners, technicians, assistants and others. With Murphy's Law in force at every step, it
isn't always easy for filmmakers to get the results they want.
The "Zodiac" crew, by contrast, sought to rethink and streamline the process. Right on
the set, the digitized film went into a computer; after that, just a handful of people were
involved. While the skills were different, coordinating the work of these editors and
others wasn't much more difficult than what happens in an average office with a typical
PowerPoint presentation. "It's revolutionary and empowering, because you don't have to
worry anymore about some nameless person somewhere not doing their job right," Mr.
Wall says. "You start to see the joy come back into the movie-making process."
15. ________ was one of the first in the field and is the long established leader in film
editing software.
a. USC
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 26
b. Red Giant
c. Avid Correct
d. Creative Planet
New Shipping Law Makes Big Waves In Foreign Ports
By JOHN W. MILLER
October 25, 2007; Page B1
http://online.wsj.com/article/SB119324934731170078.html
ROTTERDAM, the Netherlands -- A U.S. law that will require foreign ports to scan
every container they ship stateside looks set to create big winners and losers and force
consolidation at ports around the world.
Designed to ensure freight containers aren't used by terrorists to smuggle weapons or
bomb materials into the U.S., the Law on Maritime Cargo Scanning Requirements is
shaping up to have a dramatic impact on the global shipping industry, port officials and
operators in Europe and Asia say.
Companies that make the giant $5 million X-ray or gamma-ray machines needed to scan
shipping containers are anticipating a boom in orders as roughly 700 ports around the
world gear up for the U.S. rules, which were signed into law in August but take effect in
2012. Industry analysts say each will have to buy one to 10 of the scanners or stop
exporting to the world's richest market.
Large modern ports, mostly in Asia, also expect to win new business as smaller and older
ports struggle to meet the U.S. requirements. The European Union estimates the average
start-up cost for a port to buy and support the scanners will be around $100 million, too
much to make business sense for some minor ports to go on shipping to the U.S.
Big, older river ports like Antwerp in Belgium are also at a disadvantage. Antwerp would
need to build new roads and bridges to get all containers to scanners from its scattered
docks and may not be ready in time. "We're looking at billions [of euros] in extra
spending," says Lieven Muylaert, a Belgian customs official.
The EU has led opposition from around the world to the new U.S. requirements,
worrying the relative lack of flexibility at many European ports will add to cost
advantages Asian exporters already hold over European companies. Asia's newer ports
tend to be bigger, but more compact, than their European counterparts. They will have
less trouble meeting the requirements, port operators and analysts say. The EU has
threatened to impose reciprocal constraints on all containers landing in the EU from the
U.S.
Since the attacks of Sept. 11, 2001, the U.S. has toughened rules that aim to stop
terrorists from smuggling weapons into the country in containers, the 20- or 40-foot steel
boxes that carry everything from bananas to toys to lawn mowers around the globe. The
U.S. imported 12 million containers of goods last year, and that number is expected to
rise, according to the U.S.
Security experts say the container-scanning law may reduce, but won't eliminate, the risk
of terrorists smuggling weapons aboard ships. That is partly due to the poor resolution of
X-rays able to scan something as big as a container, according to Jim Cowling, managing
director for Maritime Security Solutions Ltd., a London-based consultancy. It is also
because ships remain vulnerable to tampering after leaving port. "It could be possible to
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 26
hijack or bribe a ship and put a container on it in the middle of the ocean," says Mr.
Cowling.
The new U.S. scheme will replace the current risk-based system, under which only
selected containers get scanned. Under the new system, giant X-ray devices would scan
every container for suspicious shapes at a rate of about three containers per minute. It
now takes several minutes to scan a container.
The three main international suppliers of container scanners are Nuctech Co., a Chinese
state-owned company that dominates in Asia; U.S. defense contractor Science
Applications International Corp., which sells mainly in the U.S.; and Smiths Heinmann
GmbH, part of Smiths Group PLC, a pan-European firm. All three compete in Europe
and Latin America. A fourth company, Rapiscan Systems, a division of OSI Systems
Inc., also makes scanners but is behind the others in orders, say analysts.
Michel Lequy, who sells Nuctech scanners in Europe, says orders already grew to dozens
per year from low single digits before U.S. lawmakers started talking about the scanning
law in 2003. He expects a further increase after governments and ports start budgeting for
the actual law next year. "We can cash in on a boom," he said.
Though Europe's governments are likely to pick up much of the extra cost for major ports
like Antwerp to meet the rules, construction can take years in the face of tough EU
environmental laws, putting them at a significant disadvantage.
Antwerp's troubles, could mean more business for the nearby Dutch port of Rotterdam,
which is more compact than Antwerp and expects to be able to install the scanning
equipment quickly and at comparatively low cost. "Security is a good business
opportunity," says Peter Struijs, chief operating officer at Rotterdam.
Without significant change to the rules, smaller ports such as Seville in Spain, Dunkirk in
France and Naples, Italy, could have to stop shipping to the U.S. altogether. "The law
will force us to stop shipping to the U.S., unless we can attract a lot more customers,
which would justify investment in the equipment," says Philippe Revel, manager for the
shipping terminal at Dunkirk.
The Bush administration has said it wants to cut the number of ports that ship containers
to the U.S. to around 100 world-wide, from 700 today because that would make it easier
to monitor security. Consolidation would also force more trucks onto Europe's already
congested roads, however, as they move U.S.-bound goods to bigger, but more distant,
ports for shipping.
16. The Bush administration has said it wants to cut the number of ports that ship
containers to the US to around ____ world-wide, from 700 today because that would
make it easier to monitor security.
a. 100 Correct
b. 150
c. 300
d. 400
From Balls of Concrete To Habitats for Sea Life
By GAUTAM NAIK
October 26, 2007; Page B1
http://online.wsj.com/article/SB119334933043772085.html
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 26
ISLA MUJERES, Mexico -- During a recent dive here, Todd Barber hovered above such
familiar tropical sights as red sea sponges, iridescent fish and a half-hidden moray eel.
But the coral reefs -- hollow, spherical and made entirely from concrete -- were anything
but typical.
Mr. Barber wasn't surprised, though. A decade earlier, he created the artificial reefs using
300 concrete "reef balls." Now, those once-bare and ugly spheres have been transformed
into minireefs, rich with life.
"They're in pretty good shape," said Mr. Barber after he climbed onto a boat and stripped
off his scuba gear. He was particularly pleased by the presence of a Pederson shrimp, a
translucent creature with blue flecks making a reef ball its home.
Mr. Barber is leading a charge to build "designer reefs" that will replace or support
natural ones as the effects of overfishing, pollutants and disease take a growing toll on
these vital ecosystems. His nonprofit Reef Ball Foundation has so far cultivated about
4,000 reefs in 55 countries. Projects range from a mile-long reef in Malaysia to a halfmile one at a millionaire's island in the Caribbean.
Artificial reefs aren't a new idea. For years, fisheries have made faux reefs by dumping
junk -- old boats, airplanes, washing machines -- into the sea. But such unscientific
efforts can go haywire. In 1972, about two million tires were dumped in the waters near
Ft. Lauderdale, Fla., in an attempt to provide a habitat for fish. The tires failed to attract
marine life and instead littered the ocean floor. They are now being removed.
The new "designer reefs" are much more sophisticated. EcoReefs Inc., of Jackson, Wyo.,
sells ceramic structures shaped like branching corals, essentially a prefabricated kit for
making a customized reef. A Philippine company molds artificial coral whose shape,
texture, color and even chemical signature are much like the real thing. One quixotic
scientist tries to spur coral growth by piping low-voltage electricity through large metal
mesh placed underwater.
17. In 1972, ____ were dumped in the waters near Ft Lauderdale, Florida, in an attempt
to provide a habitat for fish. The project failed to attract marine life and instead littered
the ocean floor. They are now being removed.
a. scuba gear
b. sponges
c. concrete balls
d. tires Correct
Questions 18 – 23 from Money & Investing
Municipal Bonds Are Awkward Fit In ETF World
By SHEFALI ANAND
October 20, 2007; Page B1
http://online.wsj.com/article/SB119283727030365518.html
In just the past few weeks, investors have gotten a new tool to invest in tax-exempt
municipal bonds: exchange-traded funds.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 26
At least nine ETFs -- mutual funds that trade like regular stocks -- have been launched in
recent months designed to track indexes of munis. They are being marketed aggressively,
but they may not be the best choice for everyone.
18. In just the past few weeks, investors have gotten a new tool to invest in tax exempt
municipal bonds:
a. exchange-traded coupons
b. exchange-traded funds Correct
c. exchange-traded blocks
d. exchange-traded stocks
Avon Makeover Isn't Cosmetic
By ELLEN BYRON and KAREN RICHARDSON
October 22, 2007; Page C1
http://online.wsj.com/article/SB119300954290366425.html
Waiting for a restructuring to deliver results can give any investor worry lines, but Avon
Products Inc. is showing signs that its big, multiyear makeover -- projected to cost $500
million -- is working.
The maker of cosmetics and toiletries this month announced a $2 billion share-buyback
plan over the next five years, which it will fund from cash flow. Although last quarter's
net income was 25% lower than a year earlier amid restructuring charges, the longer-term
outlook for Avon's shares appears to be getting prettier.
The buyback plan, which amounts to about $400 million a year, "is pretty aggressive and
bold" in the midst of a cash-consuming turnaround, says Anant Sundaram, a finance
professor at Tuck School of Business. "Management could be signaling confidence in its
ability to generate substantial free-cash-flow growth in the future," he says.
Avon's latest progress report -- its third-quarter results -- comes next week. Chief
Executive Andrea Jung "needs to do well this quarter. There are a lot of investors even
more frustrated than they have been historically," says Ali Dibadj, an analyst at Sanford
C. Bernstein who has a "hold" recommendation on the stock and doesn't own Avon
shares.
At 4 p.m. in broadly lower New York Stock Exchange trading Friday, Avon shares were
down $1.31, or 3.5%, to $36.19. The share price of the $15.6 billion company is up about
9.5% this year, but still lower than in 2005, before the restructuring kicked off, adding to
the stock's allure.
In the past two years, the 49-year-old Ms. Jung has trimmed management almost 30%,
and nearly tripled ad spending, including its first sales-representative recruitment
campaign in the U.S. Avon invested $100 million in its research facilities and has been
introducing more-sophisticated skin-care products, including a new $54 face cream, its
most expensive one yet. And rapid expansion in developing markets continues. In China,
for instance, where Avon was first to win a direct-selling license, its sales force now
surpasses 700,000.
"It's a textbook study of how to turn around a company," says Robert Sellar, senior
investment manager of Aberdeen Asset Management, which manages about $10 billion
in assets in North America. As a value investor, he says he will consider buying Avon at
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 26
a forward price-to-earnings ratio of 16 to 17 times. The shares now trade around 18
times, in line with its peers.
19. In China, Avon was first to win a direct selling license, its sales force now surpasses
_____.
a. 7000
b. 70,000
c. 700,000 Correct
d. 7,000,000
Focus Shifts From Credit To Economy
By JUSTIN LAHART
October 23, 2007; Page C1
http://online.wsj.com/article/SB119309548521867698.html
The word on Wall Street is that while the stock market's summer slide stemmed from a
narrowly defined credit crisis, the latest trouble is about much broader problems in the
economy.
Disappointing results from Caterpillar and 3M, rather than trouble in some obscure, yet
incredibly important, credit instrument, helped to knock the Dow industrials lower last
week. In fact, the credit markets behaved well -- a sharp contrast to August, when
commercial paper and other short-term debt showed signs of distress.
Of course, the problems in the economy that now worry Wall Street so much are directly
connected to the credit crisis. This summer's credit turmoil wouldn't have happened if the
housing downturn hadn't brought the mortgage boom to a halt. And troubles in the credit
market now shows signs of reverberating back onto the economy and potentially into
corporate profits.
20. The problems in the economy that now worry Wall Street so much are directly
connected to ______.
a. the price of oil
b. the price of natural gas
c. the credit crisis Correct
d. the weather crisis
The Dish on AT&T's Satellite Plans
By DIONNE SEARCEY and DANA CIMILLUCA
October 24, 2007; Page C1
http://online.wsj.com/article/SB119314123850168314.html
AT&T Inc. has been circling the satellite-television sector for several years,
contemplating a bid for one of the two major players. Now, with consolidation in the
telephone industry mostly done, AT&T appears to be getting ready to swoop in.
Investors should be wary.
AT&T has been consulting lawyers in Washington about how long it would take to get
government approval to purchase either EchoStar Communications Corp. or DirecTV
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 26
Group Inc., people familiar with the matter said. If it does make a bid for one of the
satellite providers, AT&T could unveil the offer before year's end in hopes of getting
federal antitrust officials to approve the combination before a new administration takes
over, these people say.
21. AT&T Inc is expected to try to buy controlling interests in the _____ sector.
a. cell phone hardware
b. satellite-television Correct
c. online-television
d. Chinese-television
Brazil Exchange Strikes While It's Hot
By ANTONIO REGALADO and AARON LUCCHETTI
October 25, 2007; Page C1
http://online.wsj.com/article/SB119327360387370734.html
Until now, the race to cash in on stock exchanges -- through initial public offerings and
mergers -- has been concentrated in the northern half of the globe. Now, it is Latin
America's turn.
Tomorrow's planned $3.2 billion IPO by São Paulo's stock exchange, Bovespa Holding
SA, is drawing attention to Brazil's red-hot IPO market and offering a peek into what
could be the next region for deal making among exchanges.
In recent years, public offerings by exchanges in Asia, Europe and the U.S. have set off a
wave of modernization as broker associations have morphed into for-profit groups with
an eye on expansion. Just this year, the New York Stock Exchange's takeover of
European exchange operator Euronext NV formed a company, NYSE Euronext, that
owns exchanges in six countries and is valued at more than $20 billion.
Latin America has lagged behind the trend, but several IPOs are awakening strategic
interest in the region. In addition to Bovespa, Brazil's main futures and commodities
exchange, the Bolsa de Mercadorias & Futuros, and Mexican exchange operator Bolsa
Mexicana de Valores, also are planning IPOs.
And in the first foray by a major U.S. exchange into Latin America, Chicago Mercantile
Exchange owner CME Group Inc. announced plans late Tuesday to acquire about 10% of
Brazil's BM&F, which trades things including cotton and currencies, in return for a 2%
stake in the Chicago market operator. The swap is valued at about $700 million.
22. Until now, the race to cash in on stock exchanges, through initial public offerings and
mergers, has been concentrated in the northern half of the globe. Now, it is ____ turn.
a. Cuba’s
b. Africa’s
c. Asia’s
d. Latin America's Correct
China Makes Splash, Again
By RICK CAREW and JASON LEOW in Beijing, and JAMES T. AREDDY in Shanghai
October 26, 2007; Page C1
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 26
http://online.wsj.com/article/SB119329362261771138.html
A $5.5 billion investment by China's biggest bank in South Africa is the latest sign of
China's growing power as an exporter not just of toys, sweaters and MP3 players, but of
capital.
Yesterday, the state-owned Industrial & Commercial Bank of China Ltd., based in
Beijing, announced it was purchasing a 20% stake in Standard Bank, South Africa's
largest bank by assets, for 36.67 billion rand ($5.5 billion). The deal will be the largest
overseas investment by a Chinese entity and follows a string of billion-dollar-plus
investments by China's rapidly growing finance sector.
23. A $5.5 billion investment by China's biggest bank in South Africa is the latest sign of
China's growing power as an exporter of:
a. toys
b. sweaters
c. MP3 players
d. capital Correct
Questions 24 – 26 from Personal Journal, Section D
Cheap Holiday Fares? They Aren't in the Cards This Year
By SCOTT MCCARTNEY
October 23, 2007; Page D1
http://online.wsj.com/article/SB119309827708367795.html
There are 62 shopping days until Christmas, but most of the airfare bargains are already
sold out.
Ticket sellers say smart consumers bought early for Thanksgiving and Christmas holiday
trips this year. Now, prices are up, and the number of open seats is down. Spurred by
higher fuel prices, many airlines have boosted fares in recent weeks. And with some big
airlines still cutting domestic capacity and demand for tickets running high, especially to
beach destinations, the availability of cheap holiday seats has dwindled, experts says. But
savvy travelers can still sleuth out holiday deals -- if they are willing to be flexible with
their travel dates.
Seats are particularly scarce in some leisure hot spots, as more families choose to spend
their holidays in more exotic locales, rather than going home to grandma's. One of the
most popular Thanksgiving destinations this year at Travelocity.com: Las Vegas.
Beach destinations have seen some of the biggest jumps. A San Francisco-Honolulu
ticket for Thanksgiving on UAL Corp.'s United Airlines was priced last week at $1,670
round trip. The cheapest price on that route for a Nov. 21-25 trip was $1,582 round trip
on Northwest Airlines, according to Orbitz.com. Peak travel days at Christmas have
already run up to more than $1,300, too. Non-holiday tickets in December and January
can be had for under $400 round trip.
"If you haven't bought by now, you need to buy now. Things are only going to get more
expensive," says Rick Seaney, chief executive of FareCompare.com, which tracks ticketprice changes.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 26
Mr. Seaney says fares for holiday travel were actually lower than last year through early
September, but then airlines raised prices as consumers gobbled up seats. Those who
bought very early got good deals. At Travelocity.com, prices on tickets sold for
Thanksgiving-week travel are up 4.5% over last year and 9.5% over 2005, the company
said. The average price of Thanksgiving tickets already sold was $387, compared with
$371 last year and $354 two years ago, according to Travelocity, a unit of Sabre Holdings
Corp.
Delays, like fares, will be higher this year, too. Last winter, airlines had difficulty coping
with storms. With flights packed, some people were left stranded for days in Denver. Just
before New Year's, AMR Corp.'s American Airlines ended up with passengers stuck on
flights for eight hours or more after storms in Dallas. And JetBlue Airways Corp. had
planes stuck in terrible conditions for hours during a Valentine's Day ice storm. Summer
was difficult, too, with airlines short on staff and airports and airways clogged with
flights.
There are ways you can beat the high prices this season. For the past two years,
Christmas and New Year's Day have fallen on weekends, bunching up the peak days
when people want to travel. This year, Christmas and New Year's Day fall on Tuesdays,
giving travelers more flexibility. If you haven't already bought tickets and are looking for
a break on higher prices, you'll have to travel on off-peak days.
At American, the cheapest price on a Thanksgiving trip from New York to Las Vegas and
back was a hefty $1,095 for travel on Nov. 21, the day before Thanksgiving, and
returning on Sunday, Nov. 25. Those are the peak days for those holidays (other airlines
still had cheaper seats, such as $569 on Continental Airlines Inc.). But change your
itinerary to leave Thanksgiving Day and return the following Tuesday, and the Las Vegas
getaway costs only $335 on American.
At Christmas, United's cheapest price for a Chicago-Orlando trip on peak days of Dec. 22
returning Dec. 30 is $633. Leave a few days earlier and a Dec. 19-26 Chicago-Orlando
trip costs only $327 on United. Houston-Cancun on those same peak Christmas days has
already run up to $885 on Continental, but for Dec. 19-26, the same trip costs $525.
"If you want to refinance your home, go ahead and go at peak times," says Tom Parsons,
president of BestFares.com. "But you can still get cheap deals if you are flexible."
It doesn't work everywhere. Take Pittsburgh, for example, a city where US Airways
Group Inc. has reduced flights dramatically over the past several years, and announced
another big cut to take effect in January. A Washington-Pittsburgh ticket on United for
peak travel days at Christmas priced at $345 on Orbitz.com last week; off-peak days
priced at $345 as well.
Nationwide airline inventory has been tight all year, particularly in the summer months.
U.S. airlines filled an elbow-jabbing 86% of their seats in July, according to the Bureau
of Transportation Statistics. Several big airlines have grounded flights because of high
fuel prices and discount-airline competition and shifted more planes to more-profitable
international routes. Low-cost carriers have filled in with solid expansion. But on the
whole, capacity is up only slightly, and not growing as fast as demand. For the first seven
months of the year, airline capacity, measured in available seat-miles, was up 2.8%, but
passenger traffic was up 3.3% as more seats were filled, the BTS said.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 26
That's allowed airlines to boost fares and stay profitable amid rising oil prices. Several
carriers last week reported higher profits for the summer travel season because they have
been able to raise prices and still sell more tickets than last year.
With seats selling out this summer and ticket prices rising steadily, many consumers
bought early this year for Thanksgiving and Christmas, travel companies say. At
Travelocity.com, tickets for Thanksgiving week were sold an average of 85 days before
departure, up from an 81-day average last year. That's a sizable shift given the millions of
tickets sold. "This is the first time we've ever seen people booking so early," says Amy
Ziff, Travelocity's travel analyst. "People are definitely onto the fact that travel costs
more and you have to buy early to get a seat."
And it's not just the winter holiday period. Steve Cosgrove, president of Dynamic Travel
& Cruises Inc., says he's now seeing double the volume at his Southlake, Texas, travel
agency for trips for spring and summer of 2008, compared with the same period last year.
Another trend that has emerged, according to travel sellers: More people are using the
holiday period for vacation trips to Europe and other international destinations.
In terms of the portion of Travelocity tickets sold, the Caribbean's share is up 20% this
year for Thanksgiving, Mexico is up 17% and Western Europe is up 10%, Ms. Ziff said.
"Looking at the past seven years, this is the first time we've seen so much international
focus at Thanksgiving," she said.
24. Cheap airfares for the holiday season
a. are mostly sold out at this time
b. can still be found if you are flexible about dates
c. were booked a lot earlier this year
d. all of the above Correct
More People Are Freezing Credit Reports
By JANE J. KIM
October 24, 2007; Page D1
http://online.wsj.com/article/SB119318394702669159.html
Spooked by the possibility of identity theft, increasing numbers of people are taking a
radical approach to thwart criminals: They are putting their credit reports on permanent
freeze.
A frozen credit report prevents almost anyone from using your name to take out a loan or
sign up for credit, such as a credit card, a bank account or cellphone service. That is
because, with a freeze in place, potential new creditors can't get access to your credit
record kept on file by the three main credit-reporting bureaus without your explicit
permission.
Michael Dana, a Dallas police detective, chose to freeze his credit reports after a Texas
law took effect last month that made freezes available to all residents. Mr. Dana says he
received several notices from financial institutions and the government saying that some
of his personal information may have been compromised. "You can try to shred all your
documents," says the 42-year-old. But "I'd rather shut my credit down and have the best
security in place and not be a victim at all."
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WSJ Professor Guide: Page 22 of 26
An estimated 50,000 to 70,000 people have so far signed up for credit freezes, according
to the Consumer Data Industry Association, a trade group that includes the three credit
bureaus. Consumer groups expect that number will grow after the bureaus -- Experian
Group Ltd., TransUnion LLC and Equifax Inc. -- recently announced plans to offer credit
freezes nationwide by next month. The bureaus' action comes after 39 states and the
District of Columbia enacted laws in recent years allowing consumers to freeze their
credit, though some states limit the option only to identity-theft victims.
Florida enacted a credit-freeze law last year, and Jimmy Glass and his wife signed up the
same day. "Just the thought of someone else being able to assume your identity and rack
up thousands of dollars in your name -- that's just unthinkable," says Mr. Glass, of
Orlando. "I have all the credit cards I need, no mortgage and no need for any car loans, so
I just decided to shut it down."
Sometimes a brush with identity theft prompts people to take action. Dave Schreima of
Long Beach, Calif., says someone recently got a hold of his bank-account number and
started making unauthorized withdrawals. "I had already decided to freeze my records.
That just kind of prompted me that this is the time to do it," says the 49-year-old retired
computer programmer.
"New account fraud is more serious than people hijacking your current accounts because
you can go for a very long time and not realize that there's an account in your name at a
store you never shop in," says Claudia Bourne-Farrell, a spokeswoman at the Federal
Trade Commission.
Freezing your credit can be cumbersome. You generally have to write a letter to each of
the credit bureaus and pay a fee of about $10 to each. Although you can temporarily
suspend the freeze, doing so could take several days and, in many cases, means paying
more fees.
When your file is frozen, the bureaus assign you a personal identification number, which
you will need to remove the freeze from the file. To lift the freeze, you must notify the
bureaus and specify the amount of time you want the lift in effect. With a fee of $10 per
bureau in many states, it can cost a married couple as much as $60 to initiate a freeze
across all three bureaus and another $60 to lift the freeze. Freezes are typically free for
people who provide a police report confirming they were victims of identity theft.
The credit bureaus are generally promising to lift a credit freeze within three business
days of receiving the request. But some states are forcing them to go further. Beginning
next year, Utah and the District of Columbia, for instance, will require the bureaus to lift
the freezes for state residents within 15 minutes. Keep in mind that even if you don't plan
to borrow money, you may need to suspend a credit freeze to get an insurance policy,
cellphone or utility service, an apartment or even a job.
Some states also are requiring the credit bureaus to charge lower fees in their states. As of
last month, Indiana residents can request, lift or a remove a freeze for free, while
consumers in other places, such as Nebraska and Delaware, pay only a one-time fee to
place the freeze with no additional costs to remove the freeze. Some states, including
New York, New Jersey and Montana, require that bureaus charge fees of $5 or less.
Consumers can get more information on states' credit-freeze laws, along with general
guidelines on how to place a freeze, at www.financialprivacynow.org, a site run by
Consumers Union.
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WSJ Professor Guide: Page 23 of 26
The strategy isn't a total answer to identity theft: for example, a freeze won't stop
someone from stealing your existing credit-card numbers and using them fraudulently. A
freeze also doesn't prevent existing creditors and certain government or state and local
agencies from accessing your credit files.
Identity-theft experts say that freezes are often best-suited for people who have little need
to apply for new credit, such as children or for elderly parents, or for those who have
already paid off their mortgages, car loans and credit cards. Even with a freeze in place,
consumers can still order their own credit report. A freeze also doesn't lower an
individual's credit scores.
Credit bureaus say there are less-cumbersome ways to prevent financial-identity theft.
"File freezing is really the extreme measure," says Rod Griffin, Experian's manager of
public education. "It can be the right thing for a person who has an extreme issue with
identity theft, but if you freeze your credit file, you're removing yourself from the credit
marketplace."
Other tools are available for people concerned about identity theft but not inclined to
freeze their credit reports. For people who are still active in applying for new credit,
credit-monitoring services, offered by the credit bureaus for a fee of between $4.95 and
$14.95 a month, typically send email alerts to customers if there is unusual activity or
changes in their credit files.
Consumers can also place free 90-day fraud alerts against their credit files, which require
lenders and merchants to verify an applicant's identity before opening a new account.
(Victims of identity theft qualify for alerts lasting longer than 90 days.) But consumer
advocates say that some lenders may not take the alerts seriously, especially if they are
eager to sign you up for a new loan.
Scott Marberblatt of Swampscott, Mass., says he uses several credit-monitoring services
to alert him to potential identity theft. But the 46-year-old small-business owner says he
plans to drop some of these services, thereby saving "a decent amount of money," and
instead freeze his credit after the option becomes available at all three bureaus next
month.
"The whole purpose of the credit freeze is to keep yourself from being victimized in the
first place," says Kirk Torgensen, chief deputy in Utah's attorney general's office. Once
Utah's credit-freeze law goes into effect in September -- which will, among other things,
require the credit bureaus to lift a freeze within 15 minutes of a consumer's request -- the
attorney general's office plans to support the law with public-service campaigns in print
and TV.
Jaimee Napp of Omaha, Neb., says she recently froze her credit reports after her state's
credit-freeze law took effect last month. Ms. Napp, a vocal supporter of the legislation as
it was being considered, was herself a victim of identity theft two years ago when a
former co-worker opened new credit cards in her name. "I would rather go through and
plan my credit purchases with a little more caution than have to deal with cleaning up the
credit reports after it's been damaged," says the 36-year-old, who now runs a nonprofit
group that helps identity-theft victims.
25. A frozen credit report prevents:
a. consumers from ordering their own credit report.
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WSJ Professor Guide: Page 24 of 26
b. almost anyone from using your name to take out a loan or sign up for credit, such as a
credit card, a bank account or cell phone service. Correct
c. existing creditors and certain government or state and local agencies from accessing
your credit files.
d. children and elderly person from applying for credit.
With Buyers Sidelined, Home Prices Slide
By JAMES R. HAGERTY
October 25, 2007; Page D1
http://online.wsj.com/article/SB119326355265670448.html
Home builders are slashing prices, often by more than 10%. Some people who list their
homes on Craigslist.org admit they are "desperate" to sell. Inventories of unsold homes
are at the highest level in nearly two decades, providing plenty of choices.
Yet a severe tightening of credit by mortgage lenders is keeping many buyers out of the
market, while the huge supplies of homes for sale have persuaded others that they can
wait for further price cuts.
The National Association of Realtors reported yesterday that sales of previously occupied
homes in September dropped 19% from the same month a year ago to a seasonally
adjusted annual rate of 5.04 million units. The trade group blamed disruptions in the
mortgage market.
Meanwhile, The Wall Street Journal's quarterly survey of housing-market conditions in
28 major U.S. metropolitan areas shows that inventories of unsold homes are still rising
in most of them, prices are generally falling and overdue loan payments are piling up.
(See chart3)
Some forecasters now warn that home prices are unlikely to start rising in most of the
country before 2009 or 2010. A year ago, many home builders and lenders still thought
that the housing boom -- which more than doubled prices in some areas during the first
half of this decade -- would end with a gentle landing. Now those hopes are dead.
"Everybody's kind of at a stalemate now, waiting to see what happens next," says Donna
Butera, who has a business in Phoenix "staging" homes for sale, adding furniture and
other decorative touches to make them more appealing. Ms. Butera and her husband,
Mark, are trying to sell six homes in Phoenix and Scottsdale. They bought the properties
as investments over the past few years, but now find that the rents they collect don't cover
mortgage payments that are resetting to higher levels after initial low-cost periods of a
year or two.
Home lenders have been growing more cautious for more than a year. But they suddenly
tightened the screws much more in August, when investors grew so alarmed about rising
defaults that most wouldn't buy loans other than those guaranteed by Fannie Mae or
Freddie Mac or insured by the Federal Housing Administration. That led to a brutal drop
in both lending and home sales.
In one of the most extreme examples, home sales in the Orlando, Fla., area declined 55%
in September from a year earlier to 924 units, the Orlando Regional Realtor Association
reported. Sales in six Southern California counties -- Los Angeles, Riverside, San Diego,
Ventura, San Bernardino and Orange -- in September totaled 12,455, down 49% from a
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 25 of 26
year ago and the lowest for at least 20 years, according to DataQuick Information
Systems, a real-estate data firm in La Jolla, Calif.
The National Association of Realtors said that the disruption in the mortgage market is
temporary and that the availability of jumbo mortgages -- those that exceed the $417,000
limit for loans that can be sold to Fannie Mae and Freddie Mac -- has improved in recent
weeks.
Even so, home sales are likely to remain weak for months because lenders are still very
cautious and huge supplies of homes are weighing on prices. On a national basis, the
number of previously owned homes listed for sale is enough to last about 10.5 months at
the current sales rate, the NAR said. The supply of detached single-family homes, at 10.2
months, is the highest since February 1988. Supplies hovered around four to five months
for the first half of this decade. When the figure is longer than six months, it is considered
a buyer's market.
Inventory figures reported by Realtors probably understate supply because not all
foreclosed homes are sold through real-estate agents, says Doug Duncan, chief economist
at the Mortgage Bankers Association.
In Miami-Dade County, the supply of condos is enough to last about 57 months at the
current sales rate, while the supply of single-family homes is 38 months, according to
Esslinger-Wooten-Maxwell Inc., a large local real-estate brokerage firm.
In Orlando, the supply of single-family homes and condos is enough to last 28 months.
That compares with about 24 months in the Detroit metro area; 20 months in Tampa,
Fla.; 15 in Sacramento, Calif.; 13 in the Northern Virginia suburbs of Washington, D.C.;
and 11 in the Atlanta area, according to Realtors and consultants. Even in some of the
nation's strongest markets, such as Seattle and Portland, Ore., supply is rising fast. In the
Portland area, for instance, the supply is enough to last 8.6 months, up from 4.5 months a
year ago.
The better news for sellers is that the number of homes on the market is no longer rising
as fast. Supplies are up only slightly from a year earlier in some markets, such as the
metro areas of New York, San Diego and Washington, D.C., including suburbs in
Maryland and Virginia. The number of homes listed has declined in the Boston and
Denver markets. But inventories have continued to rise rapidly in the Miami-Fort
Lauderdale; Nashville; Raleigh-Durham, N.C.; and Orlando areas.
26. The National Association of Realtors reported yesterday that sales of previously
occupied homes in September dropped ____ from the same month a year ago to a
seasonally adjusted annual rate of 5.04 million units.
a. 6 %
b. 15 %
c. 19 % Correct
d. 26 %
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 26 of 26