The Wall Street Journal Weekly Review & Quiz
Covering front-page articles from August 22-26, 2005
Professor Guide with Summaries Fall 2005 Issue #1
Developed by: Scott R. Homan Ph.D., Purdue University
Questions 1 – 12 from The First Section, Section A
How Savannah Brought New Life To Its Aging Port
By DANIEL MACHALABA
August 22, 2005 Page: A1
http://online.wsj.com/article/0,,SB112467128342419224,00.html
SAVANNAH, Ga. -- For more than 250 years, the port of Savannah was a thriving
conduit from the farms and factories of the Southeast, exporting flax, silk and cotton to
Europe and the rest of the world. But by 1988, Savannah's docks sat half-empty,
decimated by an explosion of Asian products pouring into ports on the West Coast. Now,
with the year's peak ocean-freight delivery season under way, ships are churning into
Savannah again -- and bulging with Asian cargo. The Savannah port handled 1.7 million
cargo containers in 2004, up from 550,000 in 1994. Located on the Savannah River, 23
miles upstream from the Atlantic Ocean, it now ranks second among East Coast ports in
attracting cargo from Asia, lagging behind only the Port of New York and New Jersey.
Among North American container ports, Savannah is the 10th-busiest overall. Today,
Savannah's port generates about 120,000 jobs, with pay ranging from $12 an hour for
warehouse workers to $120,000 a year for some dockworkers, according to the
University of Georgia. Cargo handled in Savannah produces an estimated $1.4 billion a
year in state and local tax revenue. The story of how Savannah turned its aging, out-ofthe-way port into a source of new jobs says a lot about the booming port industry in
North America. Now that the biggest ports, Los Angeles and Long Beach, Calif., have
more business than they can handle, shippers and distributors are increasingly turning to
alternative ports to deliver their goods. Growth in trans-Pacific trade of about 10% a year
has triggered a building boom at ports throughout North America, with cities in the U.S.,
Canada and Mexico all trying to woo shippers. "There is so much freight growth, we
need to work every option that we can possibly dream of," says Peter Keller, an executive
vice president of NYK Line (North America) Inc., a major user of Savannah's port.
Savannah's port has been especially creative in its efforts to cash in on the boom. Doug
Marchand, executive director of the Georgia Ports Authority, aggressively marketed to
retailers, encouraging them to build distribution centers in his less-congested area. He
figured major retailers would be more committed to move their cargo through Savannah
if they could easily send it to a warehouse nearby. "Instead of concentrating everything
on the ocean carriers, we set out to get the cargo here," Mr. Marchand says, "and the
ocean carriers would follow." More than half of all retail goods sold in the U.S. enter
through a port, including most toys, footwear, apparel and consumer electronics,
according to the Retail Industry Leaders Association, an Arlington, Va., trade group.
Lured by the emergence of a dozen retail warehouses at Savannah, 16 shipping lines now
call at the port from the Far East every week, compared with four or five in 1990.
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WSJ Professor Guide: Page 1 of 22
Georgia has spent more than $500 million in the past 10 years to expand the port's docks
and rail yards, while luring importers such as Home Depot Inc. and Wal-Mart Stores Inc.
with economic incentives. An additional $150 million from the state will rebuild
terminals at the port so they can handle double their current volume in the next decade. In
an industry where business development once consisted of little more than waiting for
ships to pull up to the dock, Mr. Marchand embraced just-in-time and supply-chain
management techniques. He ordered containers taken off ships be readied for pickup by
trucks the night before drivers arrive. This is easier for Savannah to coordinate since,
unlike other ports, it owns and operates its own terminals. Many ports act mostly as
landlords for a number of different terminal operators.
1. __________ has spent more than $500 million in the past 10 years to expand
it’s port's docks and rail yards, while luring importers such as Home Depot Inc.
and Wal-Mart Stores Inc. with economic incentives.
a. Georgia Correct
b. Indiana
c. Colorado
d. New Hampshire
2. Growth in trans-__________ trade of about 10% a year has triggered a building
boom at ports throughout North America.
a. Atlantic
b. Pacific Correct
c. African
d. Antarctic
Mexican Standoff: Presidential Hopeful Vs. 'Deputy Lawsuit'
By JOSÉ DE CÓRDOBA and DAVID LUHNOW
August 23, 2005; Page A1
http://online.wsj.com/article/0,,SB112475827541220209,00.html
Tough, street smart and working class, Andrés Manuel López Obrador recently stepped
down as mayor of this sprawling metropolis to run for president of Mexico. Young, chic
and upper class, Gabriela Cuevas is determined to stop him. Ms. Cuevas, a 26-year-old
member of Mexico City's local congress, has stalked Mr. López Obrador during the past
four years, trying to goad him into political errors. Around town, she is known as
Diputada Demandona or Deputy Lawsuit for the many actions she has filed against the
51-year-old presidential hopeful. Mr. López Obrador can run, but he can't hide his record,
says Ms. Cuevas, who delves into the minutiae of city reports to gather ammunition for
weekly news conferences blasting the López Obrador administration for everything from
Mexico City's wave of kidnappings to the flagrant corruption among Mexico City
officials. "If he wins, I'll have to go into exile," says Ms. Cuevas. "He's very vengeful."
The antagonism between Ms. Cuevas and Mr. López Obrador goes to the heart of the
political drama unfolding as Mexico gears up for next July's presidential election. Many
wealthy and middle-class Mexicans see Mr. López Obrador as a dangerous radical. But
many of the country's more numerous poor think he's great. His 70% approval rating in
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 22
Mexico City polls comes, in part, from giving $60 monthly pensions to elderly Mexico
City residents, regardless of their income, railing against rich bankers and building a
spectacular elevated highway around the city. He is far ahead of his rivals in national
polls. The result is a political polarization that is starting to mimic the dangerous
divisions in Venezuela, where much of the middle and upper class loathe populist leader
Hugo Chávez and have tried unsuccessfully to strip him of power through a referendum
and a 2002 coup. The authoritarian Mr. Chávez is now more popular than ever because
the poor believe he's on their side. Ms. Cuevas catapulted to national prominence in April
when she posted $180 bail in order to prevent Mr. López Obrador from going to prison
over a minor land dispute. Under Mexican electoral law, a conviction would have
disqualified Mr. López Obrador from running for president. But Ms. Cuevas was
convinced that the mayor would use a conviction -- or even a night in jail -- to present
himself as a political martyr, chased out of the race on a technicality by a fearful
establishment. Unable to go to jail, the mayor angrily denounced Ms. Cuevas and a
colleague as "cowards and swindlers" and marched to the judge's office to demand he
return her money. The judge agreed with the mayor. According to jurists, this marked the
first time in Mexican history that anyone went to court in order to try to go to jail. Days
after Ms. Cuevas's failed attempt to provide bail, half a million Mexicans marched in
support of Mr. López Obrador, whose standing was soaring in the polls. President
Vicente Fox quickly dropped all charges against Mr. López Obrador, sparing him a trial
and clearing the way for him to run for higher office. Mr. Fox is barred by law from
running for re-election but is backing a López Obrador rival. Even Mexicans who don't
like Mr. López Obrador viewed Ms. Cuevas's bail offer as a clumsy misstep, but she is
unapologetic. "He wants to be Mexico's Gandhi, but he's a delinquent," she says. "If that
photo of him behind bars would have been taken, we'd never get rid of him." Cesar
Yáñez, Mr. López Obrador's spokesman, said the former mayor didn't want to comment
on Ms. Cuevas because to do so would be to give her an importance she doesn't possess.
Ms. Cuevas says she decided to ramp up her crusade after two of the former mayor's
closest political allies were caught on video early last year stuffing thousands of dollars in
bribes from a city contractor into suitcases and suit-pockets. The contractor, Carlos
Ahumada, has remained in jail while the two former city officials are free on bail. Earlier
this month, Mr. Ahumada sewed his lips shut as part of a hunger strike to protest his
continued incarceration. Now, the young lawmaker cultivates a network of informants
within the city bureaucracy, who feed her the latest sorry statistics on the city's crime
wave, which she then passes on to reporters. Using her cellphone's text-messaging
system, she recently arranged a secret rendezvous with her undercover sources at a local
cafeteria. "It felt very James Bond," she says. She also hired a bus to take journalists on a
night-time tour of the city's dysfunctional police stations. Clad in blue jeans, she marched
into a grungy station, where fliers of unidentified murder victims hung on the walls, and
interviewed detectives who complained that they had to dig into their own pockets to
repair their patrol cars. Mr. López Obrador, the son of a shopkeeper, rose to political
prominence by organizing sometimes violent protests, blockades of oil wells and
marathon marches in the 1980s protesting Mexico's lack of democracy. After his political
career stalled in the former ruling party, he bolted to the leftist opposition Party of the
Democratic Revolution, casting himself as a champion of the downtrodden. As mayor, he
drove a beat-up Nissan Sentra to work and cut his salary when he took office in 2000. As
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 22
presidential candidate for the PRD, he promises to build a bullet train to the U.S. border
from Mexico City among other spending projects.
3. Mr. López Obrador, the son of a shopkeeper, rose to political prominence by
organizing __________ in the 1980s protesting Mexico's lack of democracy.
a. shopkeepers
b. downtown marches
c. bake sales
d. violent protests Correct
4. Mr. López Obrador as presidential candidate for the Mexican PRD, promises to
build a _________ to the U.S. border from Mexico City among other spending
projects.
a. new highway
b. bullet train Correct
c. monorail
d. canal
Energy Prices Continue to Surge As Hawaii Sets Cap on Gasoline
By RUSSELL GOLD and THADDEUS HERRICK
August 25, 2005; Page A1
http://online.wsj.com/article/0,,SB112493345095522658,00.html
Energy prices continued their recent rapid surge yesterday, with both oil and natural gas
setting new nominal records in trading, as the state of Hawaii prepared to impose a cap
on rising gasoline prices -- the first such move in the U.S. since the early 1970s.
Yesterday, crude oil for October delivery leapt $1.61, or 2.5%, to $67.32, to set its latest
benchmark on the New York Mercantile Exchange, topping the front-month contract's
previous closing high of $66.86, set Aug. 12. It was the first close above $67 for the
front-month crude contract. Adjusted for inflation, it is the highest crude has traded since
November 1982, though still short of the adjusted, all-time high above $90 a barrel that
was reached in April 1980. Year-to-date, crude is now up 55%. But while oil's surge has
been grabbing headlines, the rise in natural-gas prices has been even more steep.
Yesterday, natural gas rose 3.1%, or 30.1 cents, to close at $9.984 per million British
thermal units, a Nymex record settlement for the front-month contract. That is up more
than 80% from $5.44 a year ago. The main driver yesterday appeared to be worries about
Tropical Storm Katrina, which was on track to enter the Gulf of Mexico late this week
and potentially disrupt oil and natural-gas production. But energy markets across the
board have been moving higher for months, and often pushing each other upward. Both
oil and natural gas are in heavy demand by the fast-growing economies of China and
India, and both have supply bottlenecks. Moreover, as growing demand has pushed up
global oil prices, making gasoline -- which is refined crude -- more expensive, it also has
pulled up natural-gas prices, because natural gas competes with crude-derived heating oil.
As heating-oil prices climb, natural-gas traders worry there will be too much demand for
natural gas and bid up prices. So far, soaring natural-gas prices haven't stirred the type of
public and congressional concern that comes with high oil and gasoline prices.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 22
Consumers tend to use the most natural gas in the winter, so they haven't borne the brunt
of bulging heating bills yet. "High oil prices are highly visible to the customer because
we see the high price of gasoline when we fill up our car," said J. Larry Nichols,
chairman and chief executive of Devon Energy Corp., one of the largest North American
energy producers. "Natural-gas prices are passed through to the consumer in so many
different ways and spread over time, so you don't tend to see it that much." But market
forecasters are warning that a cold winter could push natural-gas prices even higher,
topping $12 per million BTUs in the coming months. That could mean far heftier heating
bills for any consumers this winter. The government estimates the average residential bill
this winter will be 23% higher than it was a year ago, when gas prices were driven up by
colder weather. Even with normal weather, "it will be a challenging winter" for naturalgas prices, says Marshall Adkins, director of energy research at Raymond James &
Associates. Already, some consumer advocates are stepping up efforts to persuade
homeowners to curb their use of natural gas. For instance, Janine Migden-Ostrander,
head of the Office of the Ohio Consumers' Counsel, says her office is advising people to
use duct tape to seal drafts and trying to get local utilities to participate in a program to
encourage people to buy more efficient furnaces.
5. The state of ________ prepared to impose a cap on rising gasoline prices -- the
first such move in the U.S. since the early 1970s.
a. California
b. Nevada
c. Idaho
d. Hawaii Correct
6. Both oil and natural gas are in heavy demand by the fast-growing economies of
__________________, and both have supply bottlenecks.
a. China and Mexico
b. China and India Correct
c. China and France
d. China and Sweden
Behind Citigroup Departures: A Culture Shift by CEO Prince
By MONICA LANGLEY
August 24, 2005; Page A1
http://online.wsj.com/article/0,,SB112484791833421457,00.html
On Sunday night July 10, the No. 2 executive at Citigroup Inc., Robert Willumstad,
phoned his mentor Sanford Weill with big news: He planned to quit. Mr. Weill, the man
who built the banking giant, didn't try to dissuade him, according to a person familiar
with the call, and said that he understood. Two weeks later, Mr. Weill himself tried to
bolt Citigroup, attempting to surrender his post as chairman. Then this week, Marjorie
Magner, Citigroup's global consumer-banking head and one of the highest-ranking
women in financial services, decided to bail out1 too. People inside and outside the firm
are asking: What is going on at Citigroup? The answer, in brief, is that it's being remade.
Charles O. Prince, the lawyer who took over two years ago as Mr. Weill's handpicked
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 22
successor, has replaced his mentor's intent focus on fast growth, acquisitions and year-toyear earnings gains with a longer-term perspective: shoring up the firm's reputation and
regulatory relations with a new concentration on internal controls and ethics. He is selling
off some operations, such as asset-management and life-insurance units, while acting to
mollify regulators who have come down hard on Citigroup in recent years. Where Mr.
Weill watched Citigroup's share price vigilantly, his eyes often darting to his stock
monitor during meetings, Mr. Prince sees Citigroup not just as a profit-making business
but as a "quasipublic institution." In the past year, the former general counsel says, he has
spent half of his time on issues of culture and values. His management style also is new,
and unsettling to some. In place of Mr. Weill's habit of brainstorming over strategic
issues with a few close aides and giving operating chiefs considerable autonomy, the
more cerebral Mr. Prince has set up a host of oversight committees, hired lawyers for top
positions, studied reports and polls, and centralized operations and technology. Mr. Weill,
Mr. Willumstad and Ms. Magner all chafed at having their advice ignored on key
strategic decisions, people who know them say. Meanwhile, Citigroup in July reported its
first year-to-year quarterly earnings drop in four years, and its stock has been largely
stuck in the 40s for about a year. When Mr. Prince took over in 2003, the world's largest
financial-services company was embroiled in a series of scrapes that hurt its reputation. It
was penalized for blurring the line between analysts and investment banking. It lost its
private-banking license in Japan and faced probes of an aggressive bond-trading strategy
in London that participants dubbed "Dr. Evil." The Federal Trade Commission accused a
Citigroup consumer-lending unit of misleading customers. And Citigroup drew flak over
its role in financing fraud-ridden companies including Enron Corp., WorldCom Inc.,
Adelphia Communications and Parmalat. In all, the firm faced billions of dollars in fines
and settlements. Moreover, Citigroup had no choice but to change Mr. Weill's modus
operandi of continually extending its reach and devouring competitors. Citigroup has
grown into a giant that operates in 100 countries with 300,000 employees, offering
everything from investment banking to credit cards. But in an unusual rebuke, the Federal
Reserve in March barred Citigroup from making major acquisitions until it gets its
regulatory and ethical house in order. The Fed didn't say just what kind of acquisitions it
was banning or for how long, but said management mustn't let mergers distract it from
improving its governance. The result: a sprawling multinational colossus is now drawing
inward, focusing on internal controls while curbing the expansionary thrust that long
defined it. Add a new chief's moves to consolidate his power, plus a difficult interest-rate
climate for banks, and the result is to make Citigroup a scene of executive-suite tensions.
7. Charles O. Prince is the leader of Citigroup because _____________.
a. he owns the company
b. he was lucky
c. he has a law degree and experience
d. he was hand picked by the previous leader Correct
8. The Federal Reserve in March barred Citigroup from making ____________
until it gets its regulatory and ethical house in order.
a. major acquisitions Correct
b. profits
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 22
c. loans
d. government backed loans
Amid JetBlue's Rapid Ascent, CEO Adopts Big Rivals' Traits
By SUSAN CAREY
August 25, 2005; Page A1
http://online.wsj.com/article/0,,SB112491924218222286,00.html
FOREST HILLS, N.Y. -- Last year, upstart JetBlue Airways became a "major" airline,
one the government recognizes as having more than $1 billion in annual revenue. When
employees ask founder and Chief Executive David Neeleman what that means, he
responds: "We ought to lose money, I guess." He's only half joking. All of the nation's
larger full-service carriers have piled up billions of dollars in losses while discounter
JetBlue has been a profitable bird for 18 consecutive quarters. For JetBlue to remain one
of the industry's most successful new entrants ever, it has to become more like those
giants -- but not too much. JetBlue and other budget carriers have been growing rapidly,
poaching customers from the country's more established but deeply troubled big airlines.
Now, in an attempt to perpetuate its ascent, JetBlue has shown a new willingness to take
on some of the unwieldy characteristics of its bigger competitors. The move marks a
clear break from the so-far-successful formula pioneered by discount king Southwest
Airlines and copied by a handful of other, newer low-cost carriers. JetBlue has
distinguished itself from Southwest by offering many long-haul flights and treating
customers to more creature comforts. But until now, it has hewed closely to Southwest's
strategy of staying simple. For most of its five-year life, JetBlue has embraced a costconscious culture in which it flew only one type of plane, limited its New York flights to
John F. Kennedy International Airport, and eschewed building costly hangars and
terminals. Operating from a crowded, rented office tower near its base at Kennedy,
JetBlue now is the nation's 10th-largest airline by traffic. With 8,600 employees, the
discount carrier serves 32 cities in the U.S. and Caribbean with a fleet of 80 midsize
Airbus A320s. With a small work force, the company cultivated fierce loyalty among
employees, keeping at bay labor tensions that have embroiled competitors. Those
tensions surfaced last weekend at Northwest Airlines, whose mechanics and aircraft
cleaners were replaced by the company after workers went on strike to protest plans for
job and pay cuts. By the end of 2010, JetBlue expects to employ up to 30,000 workers
and operate 275 planes, more than No. 7 US Airways flies today. Many of those planes
will be new Embraer 190s, a smaller jetliner aimed at new, shorter routes that will
complement JetBlue's long-haul workhorse Airbus A320s. The new jets will require the
airline to have double the spare parts, two maintenance programs, separate pilot-training
tracks and more complex scheduling. The first is scheduled to be delivered by the middle
of next month and will go into service Nov. 1. Meanwhile, JetBlue has added New York's
La Guardia Airport to its roster of destinations. This fall, it will add Newark, N.J., where
it will go up against Continental Airlines. JetBlue is on a construction spree, too. In June,
Mr. Neeleman and Florida Gov. Jeb Bush cut the ribbon on a $25 million training facility
near the Orlando, Fla., airport. By venturing into new markets with a more complex
business model, JetBlue will face more competition from a greater number of rivals -and thus become more vulnerable to even small missteps. And the leap in size will test
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 22
JetBlue's ability to keep costs under control while sustaining its close-knit, nonunion
work force. "We've gone from being a big small company to a small big company," says
John Owen, JetBlue's chief financial officer. "My biggest worry is that we screw
something up with our people." The airline says it can make the transition without
abandoning its cost-conscious focus. The shift illustrates the strong headwinds the entire
discount-airline segment is feeling these days. Over the past several years, budget airlines
have swept into markets with rock-bottom fares and lean operating costs, wreaking havoc
on the bloated major carriers. Caught in the worst industry downturn ever, big airlines are
fighting to slim down and regain the customers they lost.
9. JetBlue has been a profitable airline for _____ consecutive quarters.
a. 2
b. 5
c. 18 Correct
d. 1800
10. JetBlue has modeled closely the strategy of __________ which is to stay
simple.
a. Delta Airlines
b. United Airlines
c. Southwest Airlines Correct
d. Northwest Airlines
Fixing Up Grounds Around Beijing Palace Is No Walk in Park
By KATHY CHEN
August 26, 2005; Page A1
http://online.wsj.com/article/0,,SB112501187593523589,00.html
BEIJING -- For more than a century after invading foreign armies burned down
Yuanmingyuan, one of China's imperial palaces, in 1900, its dilapidated grounds and
necklace of lakes were largely neglected. Weeds and saplings sprouted among the ruins
and along the rubbish-filled paths. Ponds and canals became mud holes. Then, someone
tried to give the park a makeover. Visiting this past spring, life-sciences professor Zhang
Zhengchun saw workers covering the bottoms of the drained lakes with plastic sheeting,
even as diggers uprooted huge boulders along their banks. The goal was to prevent water
from leeching into the ground, sucked dry by the overuse of ground water by the people
of Beijing. But Mr. Zhang fretted that the project would destroy the park's ecosystem and
its traditional Chinese gardens. He told a local reporter, who wrote a story and spawned a
national obsession: fighting over the park's new look. The issue dominated headlines,
sparked a rare public hearing that was broadcast live, and generated tens of thousands of
comments on Internet bulletin boards."In the last 10 to 20 years of economic reforms,
pollution, environmental problems and the destruction of the ecosystem and cultural
relics have been too widespread," says Mr. Zhang. "Yuanmingyuan is the last straw. To
save a little water, they have totally destroyed an ancient landscape." The uproar
underscores the concern among China's rising middle class over the toll that rapid
economic change is taking on the country's environment and cultural heritage. Traditional
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 22
architecture -- from courtyard houses in Beijing to the formerly ubiquitous canals in the
eastern city of Suzhou -- has been pushed aside to make way for highways and high rises.
Western aesthetics have, for many Chinese, become synonymous with prosperity. In the
race to rev up its economy, China has devastated much of its natural surroundings.
Overgrazing and strip mining have encouraged an encroaching desert in the North.
Automobiles and factory smokestacks belch pollutants that hang over cities in a gray
haze. Industrial waste ejected into waterways has heavily polluted rivers and lakes. The
environment is one area in which the government has allowed limited activism. Nonprofit
groups and protests are increasing in number. Even so, the government sometimes cracks
down. In April, thousands of police and officials skirmished with farmers protesting a
dozen polluting factories in the eastern town of Huaxi, causing 36 injuries mostly among
police, say local authorities. Half the plants have since been moved or shut down in
response to the protests. Built in 1709 for China's imperial family, Yuanmingyuan was
designed as a sort of extravagant water park, situated over what used to be wetlands just
north of Beijing. Man-made canals, lakes and ponds were interspersed among hills,
gardens and palaces; fountains and statues spouted water. Imperial boating expeditions
set off on the largest lake, named Fuhai or "Sea of Fortune." In the park's heyday, water
made up 40% of its total area. Because Yuanmingyuan's lakes were built on wetlands,
they were intended to have a self-sustaining ecosystem. The plentiful underground water
helped keep the man-made ponds filled. Rainwater that fell into the ponds helped
replenish the underground water tables. Aquatic life -- and foliage near the banks of the
ponds -- flourished. Birds and other wildlife were plentiful. That ecosystem was disrupted
in recent years as Beijing residents tapped into the underground water at a faster rate than
rain could replenish it. The drier soil under and around the lakes soaked up the water
from the lakes at a faster rate. Recent years of drought have made the situation worse.
11. Western aesthetics have, for many Chinese, become synonymous with
__________________.
a. long work hours
b. poverty
c. prosperity Correct
d. corruption
12. The Yuanmingyuan ecosystem was disrupted in recent years as
_________________ tapped into the underground water at a faster rate than rain
could replenish it.
a. amusement parks
b. textile factories
c. computer factories
d. Beijing residents Correct
Questions 13 – 17 from Marketplace, Section B
Real Unreal World Copies Sci-Fi Models, But With More 'Chillin'
August 22, 2005; Page B1
By LEE GOMES
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 22
http://online.wsj.com/article/0,,SB112466168896819060,00.html
Science fiction often becomes science fact, though sometimes the accomplishment isn't
recognized for what it is because of the prosaic manner in which it takes place. Think
about one sci-fi set piece: the computer-generated, alternate-reality world, where people
spend their time playing and interacting, like the Metaverse in the novel "Snow Crash" or
the Holodeck on "Star Trek" or the "Matrix" movies from Hollywood. They create
environments so real, so immersive, that users lose themselves in them. It is becoming
clear that the collective Internet is growing into that immersive reality, even if it doesn't
have the animated "avatar" guides and realistic 3D graphics that these places have in
science fiction. How else can you explain Web sites like MySpace
(www.MySpace.com1)? There, untold tens of thousands of young people spend many
hours a day wandering around as if in a suburban shopping mall, looking for friends,
expressing opinions, acquiring trends and, in general, leading a life that at times seems to
have more reality to it than the life they lead when they log off. MySpace is a "social
networking" site. In fact, it's currently the hottest of the scores of such sites on the Web.
Last month, Rupert Murdoch's News Corp. bought its parent company for $580 million,
bringing unimagined wealth to the group of California twentysomethings who started the
operation two years ago, and who are now busy trying to assure their users that nothing
about the site will change. In a social-networking site, users create a home page for
themselves, with pictures and descriptions of their interests, and then go off and look for
other like-minded people. You ask these other people if they will be your friends. If they
say yes, you get to put their picture on your page, along with a link to their page. Some
Internet brands -- Yahoo, Google, eBay, Amazon -- seem to grow only stronger with each
passing year. The social-networking sites, though, seem to come and go like boy bands,
going from hot to cold on the whim of the crowd. Some of the arrivals at MySpace told
me they came there after spending time on TheFacebook. As for social-networking
pioneer Friendster, well, that might as well be the Atkins diet. It's so 2003. Analysts who
try to follow this world say they are continually amazed at the apparently random manner
in which a site becomes popular. MySpace professes to have a music orientation. It
jumped on the blogs trend early, and it makes it easy for users to pile all manner of
graphics and multimedia onto their home pages. As a result, many of them come to
resemble a scrapbook put together after a long night of drinking, during which everything
looked good so everything got added in.
13. MySpace is a ___________ site.
a. e-music
b. e-commerce
c. corporate networking
d. social networking Correct
To Some Executives, Football Star's Battle Is Like Office Games
August 23, 2005 Page B1
By CAROL HYMOWITZ
http://online.wsj.com/article/0,,SB112475064726320013,00.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 22
A lot of buzz has been going through corner offices over the antics of Terrell Owens of
the Philadelphia Eagles. The tempestuous wide receiver made news when, after a year
with the National Football League team, he asked to renegotiate his seven-year, $49
million contract. He also landed in hot water when he lambasted the team's quarterback,
Donovan McNabb, and argued with his coach, Andy Reid. But T.O., as he is known, was
back at training camp last week and working hard, according to team managers, after
being sent home for seven days for disruptive behavior. Many business leaders have a lot
to say about T.O.'s in-your-face feistiness, and how they've dealt with similar behavior in
their own employees, clients and themselves. Though few admit it, the fascination is
partly because many executives envy the role of the bad-boy superstar at the top of his
game, unafraid to challenge the boss and win more recognition and money. Most also
know the headache of managing a supertalent. "T.O. wouldn't be a problem [to his
bosses] if he wasn't so talented; he'd just be out of the game," says Dave House, former
head of Bay Networks, now a unit of Nortel, and a former Intel executive. Such talent has
to be cultivated and certainly can't be dismissed, he adds. Still, he knows that "hugely
talented people often feel, and have been treated, as special all their lives and so can be
hard to deal with." Mr. House learned that during his 23 years at Intel, where he launched
the successful Inside Intel marketing campaign for the company's microprocessors, got to
know Apple Computer CEO Steve Jobs and did business with Microsoft Chairman Bill
Gates. "Having dealt with both of them personally, I can tell you it's a challenge to work
with brilliance," he says. "You've got to get their respect and prove you're up to dealing
with them." His strategy was just to listen when Mr. Gates talked about software. "I never
tried to question him in areas he believed he knew better than me, even when I disagreed
with him," Mr. House says. But he didn't hesitate to push his own ideas about
semiconductor technology, "which I knew more about," he adds. He figures Mr. Owens
needs to be listened to by his coach and managers, and understands that stars often expect
to be the center of attention. T.O. once pulled a pen out of his sock after scoring a
touchdown, ran over to fans and signed an autograph. But he lives up to his hype. Last
season he snagged 77 balls for 1,200 yards and 14 touchdowns, and made a quick
comeback, against doctor's orders, from a serious leg injury to play well in the Super
Bowl. "He is special, so why shouldn't he want to be recognized for that?" asks Mr.
House.
14. Dave House, former head of Bay Networks, now a unit of Nortel, and a
former Intel executive, says that "hugely talented people often feel, and have been
treated, as special all their lives and so they _____________________."
a. are generally easy going
b. are rude
c. can be very easy to deal with
d. can be hard to deal with Correct
Trailer Park No More
By MICHAEL CORKERY
August 24, 2005 Page B1
http://online.wsj.com/article/0,,SB112483307391821062,00.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 22
JONESBORO, Ga. -- Susana Galindo was tired of the booming music, the beer-soaked
parties and the leering neighbors who used to watch her when she left her trailer-type
home for her job at a produce store. The young, single woman from Mexico wanted out.
One day, she saw a brightly colored sign on the side of a road in suburban Atlanta
advertising a different kind of complex in a nicer neighborhood. The sign was in Spanish,
which was handy as Ms. Galindo speaks limited English. Almost immediately, she
became hooked on a two-bedroom unit. "It's clean," she says through an interpreter.
"There're no more people hanging out, drinking." Ms. Galindo's new neighborhood is run
by Affordable Residential Communities, a Denver-based owner of 315 so-called
manufactured-home communities around the country. The publicly traded real estate
investment trust, or REIT, both sells and rents manufactured houses. Scott Jackson, the
company's founder and chief executive officer, wants to boost occupancy and profit
margins by turning run-down "trailers parks" into more family-oriented communities. To
that end, the company is evicting unruly and delinquent tenants, replacing
underperforming managers, building soccer fields, and fixing pools and playgrounds. In
theory, the business promises large profits because it enjoys a steady rental stream. The
properties also typically require less maintenance than a multifamily apartment building.
But the company has stumbled lately, sending its share price sliding. To fill its parks in
some markets, the company is aggressively marketing to Hispanics, a group that Mr.
Jackson says make ideal candidates for manufactured housing. Company research, he
says, shows that Hispanics tend to have reliable payment habits, are interested in
maintaining nice communities and "tend to do business by word of mouth," thus pulling
other family members and friends into the parks.
15. Affordable Residential Communities, develops and owns 315 so-called
_____________________________ around the country.
a. busing communities
b. college student communities
c. apartment communities
d. manufactured-home communities Correct
Wal-Mart Sets Out To Prove It's in Vogue
By ANN ZIMMERMAN
August 25, 2005; Page B1
http://online.wsj.com/article/0,,SB112492891982922543,00.html
Advertisements for the nation's biggest retailer, Wal-Mart Stores Inc., have long featured
sword-wielding smiley figures and workers singing the praises of their jobs. With
employees and their children serving as models in the monthly circulars, the company's
homespun marketing message hardly comes across as hip or fashionable. So why is the
big box suddenly popping up in Vogue? In a particularly bold move for the Bentonville,
Ark., company, Wal-Mart bought an eight-page advertising spread in the fashion bible's
September issue, which just hit newsstands. Real customers -- an art professor, an actress,
a fund-raiser for the Juilliard School -- wear Wal-Mart clothing and describe their
sartorial whims in first-person testimonials. Although Vogue might seem like the wrong
vehicle to grab Wal-Mart shoppers, chief marketing officer John Fleming points out that
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 22
93% of all U.S. households include a person who shops at the chain at least once a year.
"We chose to team up with fashion authority Vogue to show the female consumer that
dressing fashionably is now easier to achieve than ever before," says Mr. Fleming. More
ad changes are on the way as Wal-Mart undergoes a major marketing makeover. Three
months ago, the retail giant named Mr. Fleming, the former chief executive of
Walmart.com and a 19-year Target Corp. veteran, to the top marketing post. "The
message before was branding our low-price message and telling our story as a company,"
says Mr. Fleming. "Now we want to drive the product. Customers' expectations are
higher. Merchandise cycles are quicker." Wal-Mart's latest ads are a slick departure from
its store-based product shots. Significantly, they don't always focus on price. In one TV
spot geared to college freshmen, for instance, a teenager unpacks a computer and makes
up his dorm-room bed with snappy brown and beige striped sheets. Then the commercial
shifts to quick cuts of other must-have college gear, from MP3 players and colorful mod
furniture to cell phones. When the camera returns to the dorm scene, the student finds out
he's in the wrong room. While Wal-Mart insists it isn't about to abandon its cash-strapped
core customer, executives say they want to appeal more to the upscale shopper who
frequent its stores for great buys on underwear, cleaning products and other commodity
products, but who otherwise bypass the higher-margin merchandise such as ladies
apparel. In short, Wal-Mart wants to gain points with the more well-heeled shoppers that
have helped drive Target Corp.'s same-store sales gain at twice the rate of Wal-Mart's in
the past year. To that end, Wal-Mart is continuing to upgrade the quality and style of its
products, particularly in apparel and home accessories with such offerings as $60 400thread-count sheets and more contemporary and coordinated bedding styles. The ads in
Vogue, meanwhile, showcase Wal-Mart's recent efforts to improve the fashion quotient
of its apparel. "We're going to look for ways to broaden the message to more of our
customers that we have quality products," Mr. Fleming told a recent gathering of Wall
Street analysts.
16. Wal-Mart bought an eight-page advertising spread in the September issue of
the fashion magazine _________.
a. Fashion Weekly
b. GQ
c. New Yorker
d. Vogue Correct
One Mechanic's Journey to Aid Northwest Air
By JANET ADAMY
August 26, 2005; Page B1
http://online.wsj.com/article/0,,SB112501880971123781,00.html
MINNEAPOLIS -- Jim Jones showed up here two weeks ago in an unreliable van
carrying a toaster, a computer, a stack of CDs and heavy brown work boots. Now he's
repairing jets for Northwest Airlines, filling in for striking mechanics. Atop his head sits
a worn black NWA baseball cap, his souvenir from years spent fixing the company's DC9s and DC-10s as a contract worker. Among the replacement crew, "there are more than a
few people here who have been basically working for Northwest already," says Mr.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 22
Jones, a husky 50-year-old with a gray beard and a Southern drawl. "The replacement
mechanics, I'm sorry to say, are just as good." Mr. Jones's path to Northwest offers a
glimpse at why the airline's striking mechanics have considerably less clout that in years
past to extract a better contract from the nation's fourth-largest carrier. Years of laying off
workers and paring flights after the Sept. 11 terrorist attacks have created a vast group of
skilled replacement workers, which the airline has tapped to keep its planes running
during a potentially crippling strike. (Related article1) Northwest officials have said they
had no trouble lining up a cadre of 1,200 replacement mechanics, who the carrier claims
have an average of 14 years' experience working on planes, many of the type Northwest
operates, and are all federally licensed. Northwest is paying the replacements $26.53 an
hour, slightly less than the $27.17 scale in its final offer to the Aircraft Mechanics
Fraternal Association union. Before the strike, top pay for an experienced AMFA
mechanic with a federal "airframe and powerplant" license was $36.39, yielding annual
pay of more than $70,000, near the top in the industry. Andy Roberts, Northwest's
executive vice president of operations and architect of the strike-contingency plan, said
last weekend that "at some point" the airline will take applications from the temporary
staffers to fill the jobs permanently. "I'm sure many of these guys would be interested,"
he said. If the strike is settled, the mechanics who had walked out would have the right to
return, but only if there were positions available. An aircraft mechanic since 1981, Mr.
Jones has considerable experience. Growing up in Dallas, he lingered at the airport just to
watch the planes fly in. He learned about the basics of engines, albeit automotive ones,
while tinkering with a 1954 Ford Fairlane he bought for $50. He joined the military after
high school and worked as a guard at a naval base in Illinois. He studied horse production
at Sul Ross State University in Alpine, Texas, and planned to help his grandfather raise
horses. "I finally realized I was spending more of my time in the parking lot fixing
people's cars," he says. So he scraped together $5,000 and signed up for aircraftmaintenance classes in San Antonio. Mr. Jones studied electrical theory, mechanics
fundamentals, psychology and other topics. After 100 credit hours, he earned his
associate degree in applied science. By 1981, he was working as a general aviation
mechanic at a small county airport in Texas. He dreamed of getting a job as a mechanic
for a major carrier, but was reluctant to join a union. Instead, he spent most of the next
two decades working as an aircraft maintenance contractor. Often, he was doing the same
type of work as the carrier's on-staff mechanics, he says. As recently as this spring, he
helped overhaul planes while working for a vendor that had Northwest as a customer.
Among other tasks, he helped strip down the aircraft frame, check for corrosion and
repair worn-out parts. Since the job paid $18 an hour and offered no stability, he kept his
eyes open. He left earlier this year. Bills started to pile up. His wife needed a new car, so
he bought her a 1999 Dodge Stratus. Then the engine blew out on his van. So last month,
Mr. Jones drove to Tuscon, Ariz., for a six-week training course run by Northwest that
would prepare him to be a replacement mechanic in the event of a Northwest strike. The
pay during a strike is about $30 an hour, which includes a stipend for his expenses, along
with a discount on airline tickets. He and 28 other replacement trainees spent afternoons
in a hotel conference room, where they pored over a dozen books on airline maintenance.
Twice a week they were fed a hot lunch, the other days a sandwich, he says. Mr. Jones
left with a three-by-two-foot box of training materials. But most of what they taught him
he already knew from previous experience, he says. "It's the same thing that people have
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 22
been doing all their careers," he says. Two weeks ago he got in his van and headed for
Minneapolis, bringing with him a worn blue folder filled with maintenance certificates to
prove his credentials. He set himself up in a room at a Holiday Inn, though he didn't
know whether the strike would actually take place and so whether he'd actually be called
to work. When TV reports said last Friday that Northwest's mechanics were set to strike,
he headed to the Cub Foods supermarket to buy bread, lunch meat, lettuce and
mayonnaise so he could make sandwiches to take to work. Now Mr. Jones gets up at 4
a.m., makes a slice of toast, slips on his blue uniform and boards a yellow school bus
before sunrise. In the darkness, strikers hurl insults as the bus pulls away from the hotel.
Replacement workers sit in silence during the ride to work, he says. The biggest
challenge isn't the maintenance work itself, Mr. Jones says, but completing the paperwork
necessary to record repairs and navigating the company's computer system. He says this
is less of a challenge for him than for some other replacement mechanics because he used
the same system during his old contract job fixing Northwest aircraft. On Tuesday, he
and four other workers had to replace the brakes on a plane. Workers had to ask "where
do we get the jack, where do we get the tools," he says. "It wasn't, 'How do we get the job
done?' "There's a vast pool of qualified mechanics, more so than 10 years ago," he says.
Mr. Jones says he wishes the workers hadn't gone on strike. He would have been happy
enough to have earned some extra money during training without having to endure the
heckling of the picketers. (Despite his aversion to unions, he joined the International
Association of Machinists, a competitor to the union striking Northwest, three years ago
and remains a member.)
17. During the strike of the Aircraft Mechanics Fraternal Association union
Northwest is paying the mechanic replacements $_______ an hour.
a. 6.53
b. 6.35
c. 26.53 Correct
d. 80.53
Questions 18 – 22 from Money & Investing, Section C
Money's Worth
August 22, 2005; Page C1
By Justin Lahart
http://online.wsj.com/article/0,,SB112466488872719160,00.html
Traders overseas have likely been having better summer vacations than their U.S.
counterparts. While the U.S. stock market has struggled, with the Dow Jones Industrial
Average down slightly for the year, stocks in those countries have done better. Tokyo's
benchmark Nikkei Stock Average is up 7% this year, while Frankfurt's Xetra DAX Index
is up 16%. London's FTSE 100 index has risen 10% and, in Paris, the CAC 40 Index is
17% higher. Countries whose stock markets have been faring worse than the U.S. market
are, in fact, hard to come by. There is Venezuela. There is Portugal. That's about it.
Investors' lack of interest in U.S. stocks shows up in more than just the indexes. Last
week, the Treasury Department reported that foreigners' net purchases of U.S. stocks
came to about $107 million in June. In contrast, U.S. investors' net purchases of overseas
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 22
shares came to $9.6 billion. It is a trend that has been in place all year, though not so
starkly. In the first half of 2005, foreigners bought $23 billion of U.S. stocks, while U.S.
investors bought $50.9 billion of overseas shares.
18. Countries whose stock markets have been faring worse than the U.S. market
are _________.
a. located in Europe only
b. hard to come by Correct
c. located in Africa only
d. located in South America only
Shakier Foundation
August 23, 2005; Page C1
By Justin Lahart
http://online.wsj.com/article/0,,SB112475061041120011,00.html
America's housing boom got a little less loud last month. But don't take the earplugs out
just yet. The National Association of Realtors will issue its July report on existing-home
sales today, and many Wall Street economists expect that it will show the U.S. real-estate
market came off its record June pace. The trade group's index of pending sales, which
leads existing-home sales by a couple of months, has declined from its April high.
Summer tends to be a slow time of year. It isn't hard to find signs that the real-estate
market is cooling. Lumber prices have been falling, mortgage applications have been
down and the inventory of homes available for sale has been rising in some of the
country's hottest markets. The problem, says Lehman Brothers economist Joe Abate, is
that it always is going to be possible to find such signs -- and right now, with so much
attention focused on the U.S. housing market, there are plenty of people looking. Mr.
Abate, who estimates that July's existing-home sales fell to an annualized 7.2 million
homes from June's 7.33 million pace, thinks that when real estate stumbles for real, it will
be easy to tell. "You'll know it when the housing market is going to pop," he says. "I can't
define it, but you'll know it when it's popping." Traders aren't as willing to wait for clear
signs of a housing slowdown as Mr. Abate is, however. They lately have been pushing
down the shares not just of homebuilders, but of companies whose sales are seen as
dependent on a strong real-estate market. The stock of upscale home-furniture and
kitchenware retailer Williams-Sonoma, which reports today, has fallen 7.8% this month.
19. Market indicators reveal that America's housing boom __________.
a. increased 23 percent
b. increased 3 percent
c. stopped
d. slowed down Correct
Looking Abroad
August 24, 2005; Page C1
By Justin Lahart
http://online.wsj.com/article/0,,SB112484302789221334,00.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 22
With gasoline prices rising to the point that people are joking about taking out interestonly loans to fill their fuel tanks, the U.S. economy may be in for another cooling-off
period. But the rest of the world looks like it is on better economic footing. Yesterday,
Japan's Ministry of Economy, Trade and Industry said its index of business activity
gained 1.3% in June. In Germany, the closely watched economic-sentiment index put
together by think tank ZEW showed an unexpected sharp jump for this month. Meantime,
rebounds in the Baltic Dry Index, a measure of freight-shipping rates, and scrap-steel
prices point to strength in China and other developing economies, say economists at
research firm International Strategy & Investment. And the high price of crude oil, while
the source of much hand-wringing, also is an indication of robust global demand.
Overseas strength can be a boon to companies that might have faltered if they had to rely
on their U.S. customers for growth. Take Boeing. Of the 88 jets it received orders for last
month, only four came from U.S. carriers. Given the sorry state of the U.S. airline
business, Boeing is an extreme example, but it may be that other companies with heavy
sales overseas are getting a similar benefit. The chances of any of that showing up in
today's report on durable-goods orders last month, however, may be slim. The key metric
to look at is non-defense capital-goods orders, excluding aircraft, a mouthful that
economists reduce to core capital-goods orders. It is a good measure of business spending
on capital equipment, like backhoes and mainframes, but it also is quite erratic.
Economists at J.P. Morgan reckon core capital-goods orders fell 2.5% in July -- a
giveback from June's 7.1% increase.
20. The high price of crude oil is an indication of ____________________.
a. robust global demand Correct
b. minimal global demand
c. no global demand
d. robust global supply
Coming Home
By CRAIG KARMIN
August 25, 2005; Page C1
http://online.wsj.com/article/0,,SB112492163993322354,00.html
Despite the dollar's impressive rally this year, the euro and yen have been trumping it in
recent weeks. But the U.S. currency may still have one ace left to play. That card is the
American Jobs Creation Act, which allows U.S. companies to repatriate earnings at a
discounted tax rate for a limited time. Currency strategists expect about $300 billion or
more of these overseas profits to return home, and they estimate that a third of that -nearly $100 billion -- will have to be converted from another currency to dollars. For a
foreign-exchange market with a daily volume of $1.9 trillion, even $100 billion might not
seem that noteworthy. But that depends in part on how concentrated those U.S.-bound
flows prove to be. Goldman Sachs figures that nearly half the repatriated earnings will
come from Europe. U.S. companies announced only $24 billion in earnings intended for
repatriation during the first quarter. But momentum seems to be building. As expected,
those bringing back earnings have been primarily pharmaceutical and technology
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 22
companies because of their fast overseas growth. The largest commitment has come from
Pfizer, which said it could return as much as $37 billion. But the siren song of tax relief
has also lured money back from industrial giants like 3M, Honeywell and Caterpillar, as
well as consumer-staple companies like PepsiCo and Altria. In all, Goldman Sachs has
identified 150 companies in the S&P 500-stock index that have indicated they were
planning to repatriate or are considering doing so. Following the Treasury Department's
guidance last week, which further clarified which funds are eligible for the lower tax rate,
some think that floodgates are now set to open. "We expect most of the activity in the last
four months of the year," says Steve Englander, a director at Barclays Capital. He thinks
that any acceleration in these repatriated earnings, combined with additional rate
increases from the Federal Reserve, should provide support for the dollar in the months
ahead. The greenback could use the good news: since reaching a peak against the euro of
$1.1869 on July 5, it has retreated to $1.2273, despite a wellspring of positive U.S.
economic news.
21. Currency strategists expect about $_______ or more of overseas profits to
return to the United States during 2005.
a. 300 billion Correct
b. 30 billion
c. 3 billion
d. 300 million
Consumer Affairs
By JESSE EISINGER
August 26, 2005; Page C1
http://online.wsj.com/article/0,,SB112500781675323481,00.html
Economists forecast that the University of Michigan consumer-sentiment survey will
demonstrate a strong desire to get out of the office early today. Well, not exactly. But that
is about how relevant a late August reading will be. Investors can go broke betting on the
inevitable decline in American consumption, and sentiment surveys surely won't be a
helpful guide. Americans buy when they are happy; they buy when they are sad; they buy
when they have been good; they buy when they have been bad. For those keeping score,
the university's final reading on consumer sentiment for August is expected to decline to
92.8 from a final July reading of 96.5. That would be a slight improvement from the
preliminary August reading of 92.7. But debt and the noninflation inflation that everyone
but government officials seems to be experiencing could start to take their toll. The Fed's
tightening campaign -- 2.5 percentage points and continuing -- and gasoline prices are
finally squeezing consumers. According to Northern Trust economist Paul Kasriel,
growth in consumer spending should slow this year, adjusted for inflation. Measured
from the fourth quarter to the fourth quarter, such spending should be up 3.2%, compared
with the 3.8% logged last year. How overstretched is the American consumer? New
borrowings as a percent of disposable income reached a post-World War II high of 12%
in the first quarter. And despite the rapid increase in housing prices, the value of
household debt has been increasing at a faster pace than household assets. Certainly
investors in retailing stocks seem to think ominous signs abound. The Dow Jones U.S.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 22
retail index has crumpled 6% this month. Wal-Mart Stores stock is at a 52-week low -and has been flat for just under 6½ years now. Also, General Motors said yesterday that it
will continue "Operation Desperate Unload" -- officially dubbed the "Employee Discount
for Everyone" program -- through the end of September. As with past discounting
schemes, GM is reaping diminishing returns the longer it lasts. In June, the first month of
the giveaway, sales were up a blockbuster 42%. The second month, it was a giddy 20%.
But Merrill Lynch forecasts a year-over-year decline of about 10% for GM in August.
Today, the annual confab of the shining lights of central banking begins at Jackson Hole,
Wyo. Alan Greenspan, five months from retirement, will bask in glory. But the cheapmoney consumer-spending bubble he created to combat the last bubble has yet to play
out.
22. According to Northern Trust economist Paul Kasriel, growth in consumer
spending should _______ this year, adjusted for inflation.
a. stop
b. slow Correct
c. increase
d. increase greatly
Questions 23 – 25 from Personal Journal, Section D
Bubble-Metrics: Economists Handicap Housing Markets
By JAMES R. HAGERTY
August 23, 2005; Page D1
http://online.wsj.com/article/0,,SB112474611480519927,00.html
Spurred on by the growing concern that America's housing market is heading for a crash,
a number of top economists are producing lists that rank the metropolitan areas most
likely to experience a sharp drop in housing prices. The problem is that these studies,
which look at factors from local income to lending practices, come to strikingly different
conclusions. Even so, the raft of data can provide useful clues for home buyers and
investors wary of getting in at the top. Economists at PMI Mortgage Insurance Co., a unit
of PMI Group Inc., for instance, recently calculated that the Boston area faces the
greatest risk of a drop in housing prices among 50 U.S. cities they analyzed. But Boston
doesn't even make the top 10 in lists of potentially overpriced markets compiled by
researchers at mortgage lender National City Corp. and investment bank Credit Suisse
First Boston, a unit of Credit Suisse Group. The PMI ranking puts the New York area at
No. 14 on a list of frothy places. But National City ranks the Big Apple at a mere 68 out
of 299 metro areas -- below such places as Flint, Mich., and Duluth, Minn. National City
isn't claiming that Flint is pricier than New York, of course, but says Flint appears more
overvalued in terms of supply-and-demand fundamentals. No national study can take into
account all of the factors that affect house prices, or determine whether a particular home
or neighborhood is dangerously overpriced or a screaming bargain. Such assessments
require the expertise of people in the local market. But the rankings do highlight certain
cities and regions where buyers may want to be more cautious than usual. That's
particularly true in the cases where the studies agree: The PMI, National City and CSFB
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 22
rankings differ markedly -- but all include the Riverside-San Bernardino, Calif., as an
area ripe for a downward correction
23. The PMI, National City and CSFB ranking lists that indicate the metropolitan
areas most likely to experience a sharp drop in housing prices ______________.
a. are always in agreement
b. selected the same 10 cities
c. selected the same 30 cities
d. differ markedly Correct
Parents Barred From Teen Health Files
August 24, 2005; Page D1
By LAURA LANDRO
http://online.wsj.com/article/0,,SB112484137114721288,00.html
Using her health plan's Web site, Ursula Scott of Seattle can view the medical records of
her 2- and 5-year-old daughters, check their immunization schedules, look up test results,
exchange email with a pediatrician, and make appointments for the next office visit. But
when it comes to her 16-year-old stepson, no one in the family can gain access to any
aspect of his electronic medical records -- including the teen himself. In the long-running
effort to balance the rights of parents and adolescents in making decisions about medical
care, technology has opened up a thicket of new legal and technical issues. The result is
that teens are being left out of one of the most important advances in the administration
of health care today. A growing number of health plans, hospitals and doctor's offices are
making the switch to electronic medical-record systems, in response to the Bush
administration's push to make online records available to all Americans within the next
decade. Such systems, like the one run by Group Health Cooperative of Seattle, which
covers the Scott family, offer more than just convenience. They hold the promise of faster
sharing of vital medical information, reduction of medical errors and more control for
consumers over their care. But with teens, these efforts risk running afoul of a complex
patchwork of federal and state laws that allow adolescents to seek confidential familyplanning and mental-health services without their parents' consent. Such laws make
certain aspects of teens' health records off-limits to parents. However, electronic medicalrecords systems don't yet have a foolproof way to flag confidential material and hide it
from parents -- something that can more easily be done with paper records. And as
minors, teens can't on their own enter into the security agreements required to grant
access to their online records. Until providers can figure out how to give parents access to
basic health-care information for a child, without breaking confidentiality or access rules,
many are leaving adolescents out of new electronic medical-records systems altogether -and revoking parental access to children's records as soon as they turn 13. "Parents are
often floored to learn that when their kid turns 13 they are still responsible for them but
they can't know certain things about them," says Maureena Moran, who oversees the
parental access program for Group Health. Families still have access to paper versions of
a teen's non-confidential records, including immunizations, treatment for chronic
conditions such as diabetes, and general medical care. But without access to electronic
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 22
records, teens miss out on a host of benefits, including secure email messaging with their
doctors.
24. Many health care providers are leaving adolescents out of new electronic
medical-records systems -- and revoking parental access to children's records as
soon as the child turns ________.
a. 9
b. 11
c. 13 Correct
d. 16
In Defense of Hovering: Why Parents Say They Meddle in College Students' Lives
August 25, 2005; Page D1
By SUE SHELLENBARGER
http://online.wsj.com/article/0,,SB112492142560822345,00.html
Sue Kirkpatrick had every intention of letting her daughter manage her own life at
college -- until bureaucratic bungling threatened to cost the family $12,000. When the
university miscounted the daughter's credits and mistakenly revoked her scholarship, the
Cincinnati homemaker and her husband stood back and let their daughter try to handle
the problem on her own. But when the university sent a bill for full tuition with the
scholarship missing, Ms. Kirkpatrick's husband felt he had to intervene. He called a
university vice president who hadn't returned his daughter's calls, and finally got the
mistake fixed. "Colleges," Ms. Kirkpatrick says, "don't always listen to their students."
After I wrote a column about parents meddling in college students' lives, I received a
sizzling response from readers. Dozens confessed to being hovering, helicopter parents:
"My wife and I laughed," writes Michael Bingham, New Haven, Conn., seeing
themselves, he says, "in nearly every paragraph." But other parents, like Ms. Kirkpatrick,
said the problems families face with universities are worse than I suggested. Beyond the
soaring tuition costs and campus-safety fears I mentioned, parents cited other reasons
they approach the college years differently than their own parents did. A proliferation of
scholarships and loans have created Byzantine eligibility requirements. Soaring tuition
costs make it essential for many families to make sure kids don't extend their stay beyond
four years. Also, many parents are simply more perfectionist and demanding than their
parents were. Jeff Gordon, an admitted helicopter parent in Columbus, Ga., says, "Having
attended college in the 1970s, I look back and define that era as one of mediocrity. That's
something I don't want for my children." Administrative bureaucracy is nothing new. But
parents say they are dealing with complexities that didn't exist in the past -- such as
advanced communications technologies, new laws, even toxic mold. It never occurred to
Peter Fox, a Chattanooga, Tenn., systems programmer, that he would have to cite the
federal disabilities law to help his daughter. But when she broke her leg as an
undergraduate at a $20,000-a-year university and failed, despite repeated attempts, to get
a handicapped-parking pass, Mr. Fox's wife finally called campus officials, cited the law,
and got the pass. Parent intervention also was needed to force a cleanup of mold growing
in the ductwork of his daughter's dorm room. Barbara Barschak, a Los Angeles parent of
three children ages 33, 31 and 18, says she gets so many emails from her 18-year-old
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 22
son's university, selling merchandise, tickets and services, that it seems natural to send
her own communiqués through cyberspace. She has already emailed the university
several times, asking about tuition bills, dorm storage and finding a neighborhood bank.
25. The term given to describe parents that continue to closely monitor and
attempt to control the lives of their college age children is________________.
a. Byzantine parents
b. helicopter parents Correct
c. perfectionist parents
d. beam me up Scotty parents
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 22 of 22