Harold Maass of The Week The Best of Today's Business

Two Bear Stearns hedge funds collapse

Bear Stearns late yesterday informed investors in two battered hedge funds that their investments have become practically worthless. The firm's higher-risk Enhanced Leverage Fund, vested heavily in subprime mortgage assets, has effectively lost all of its value, but the more conservative High-Grade fund is also down 91 percent. Bear Stearns shares dropped 3.6 percent in after-hours trading. (The New York Times, free registration required) At the end of March, the Leveraged fund held $638 million of capital and the High-Grade fund $925 million. The meltdown is a "watershed" event, said Sean Egan of Egan-Jones ratings. "It begs the question of how other market participants have fared." (Bloomberg)

Stocks point down on subprime, tech sector fears

U.S. stock futures pointed to a lower opening as investors digested the subprime mortgage-fueled collapse of two Bear Stearns hedge fund and after-hours earnings reports from Yahoo! and Intel. (AP in Yahoo! Finance) Intel reported that lower computer prices had cut into profit margins, while Yahoo! lowered its earnings forecasts. (MarketWatch) The markets are also awaiting consumer-price inflation data and Fed Chairman Ben Bernanke's testimony before Congress later this morning. "The Bear Stearns hedge fund debacle will be the main theme weighing on markets today," said Juergen Lukasser of Vienna-based Constantia Privatbank. (Bloomberg)

Food industry tries out self-policing

Eleven large U.S. food and beverage companies unveiled a variety of plans to limit advertising to children under age 12. Seven of the companies pledged to stop using licensed characters like Shrek and SpongeBob SquarePants to sell junk food during children's programming, while four others said they don't advertise to the under-12 set at all. The voluntary restrictions were announced before today's Federal Trade Commission hearings on the role of junk-food ads in childhood obesity. (AP in BusinessWeek.com) "This is great public relations for the companies, but it doesn't go nearly far enough," said Campaign for a Commercial-Free Childhood co-founder Susan Linn. (The New York Times, free registration required)

Illuminating the dark side of phone cards

Immigrants, the elderly and other low-income people largely rely on prepaid phone cards to stay in touch, and their suspicions that the phone cards are short-changing them are being confirmed -- by phone-card providers. In March, the largest player in the lightly regulated $4 billion-a-year industry, IDT Corp., sued nine competitors for selling cards with about 60 percent fewer minutes than advertised. Three firms settled, but six other are fighting back, noting that IDT settled a class action suit over similar charges in January. "The number of minutes the card tells you that you have, you get half of that," notes Alma Hernandez, 22, a native Mexican living in Atlanta. (BusinessWeek.com)

BEST COLUMNS OF THE DAY

The Dow 14,000 in context

As the Dow approaches 14,000, "all the talk about records is accurate" technically but "also fundamentally wrong," says David Leonhardt in The New York Times. The market's "record high does not mean that stocks have been a wonderful investment lately. They haven't been." For instance, the S&P 500, "which is a much better measure than the Dow," is up only 1.4 percent over its March 2000 peak. In that time, "the price of bread has increased almost one-third." And adjusted for inflation, the S&P 500 is actually 17 percent below its 2000 peak. If we're going to talk records, it would be just as accurate to trumpet: "Loaves of Bread Surge to New Highs."

Not every hybrid is a Prius

"Toyota Motor's Hybrid Prius is a big success," says Jerry Flint in Forbes.com. But Toyota's five other hybrid models aren't, and neither are hybrids from Honda, Ford and Nissan. In fact, Honda is dropping some of its models. Perhaps "the major factor behind the success of the Prius is that it looks like nothing else on the road," helping its owners make "a social statement about energy and the environment." Also, in a shift for U.S. consumers, "richer people, it may turn out, are willing to pay a higher price for a car with great fuel economy, even if it is small." But Prius aside, it's clear that today's most common hybrid approach "creates even less excitement than the minivan did."

GOOD DAY FOR: Organic humble pie, as Whole Foods CEO John Mackey apologized for posting pseudonymous messages on a Yahoo! financial message board promoting himself and his company. The Whole Foods board of directors said they had opened an internal investigation into the matter. (Financial Times in MSNBC)

BAD DAY FOR: Internet chats, as Internet phone provider SunRocket abruptly ceased operations. SunRocket was the second-largest independent VoIP provider, after Vonage. "I don't see why they couldn't have sent out an e-mail," said San Antonio customer Jacqueline Fairclough. "It's not like we don't all have Internet access." (The Washington Post)

NOTED: The Dow Jones board of directors formally endorsed Rupert Murdoch's $5 billion takeover offer, pushing the final decision to the divided Bancroft family. The family, which controls a majority of Dow Jones voting shares, is expected to decide on the offer next week. (AP in Yahoo! Finance)

Harold Maass is on vacation. Contributing editor Peter Weber wrote this column.