DealBook: Buffett’s Annual Letter Plays Up Newspapers’ Value

Over the last half-century, Warren E. Buffett has built a reputation as a contrarian investor, betting against the crowd to amass a fortune estimated at $54 billion.

Mr. Buffett underscored that contrarian instinct in his annual letter to shareholders published on Friday. In a year when Mr. Buffett did not make any large acquisitions, he bought dozens of newspapers, a business others have shunned. His company, Berkshire Hathaway, has bought 28 dailies in the last 15 months.

“There is no substitute for a local newspaper that is doing its job,” he wrote.

Those purchases, which cost Mr. Buffett a total of $344 million, are relatively minor deals for Berkshire, and just a small part of the giant conglomerate. Mr. Buffett bemoaned his inability to do a major deal in 2012. “I pursued a couple of elephants, but came up empty-handed,” he said. “Our luck, however, changed earlier this year.”

Mr. Buffett was making a reference to one of his largest-ever deals. Last month, Berkshire, along with a Brazilian investment group, announced a $23.6 billion takeover,of the ketchup maker H. J. Heinz.

Written in accessible prose largely free of financial jargon, Berkshire’s annual letter holds appeal far beyond Wall Street. This year’s dispatch contained plenty of Mr. Buffett’s folksy observations about investing and business that his devotees relish.

“More than 50 years ago, Charlie told me that it was far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price,” Mr. Buffett wrote, referring to his longtime partner at Berkshire, Charlie Munger.

Mr. Buffett also struck a patriotic tone, directly appealing to his fellow chief executives “that opportunities abound in America.” He noted that the United States gross domestic product, on an inflation-adjusted basis, had more than quadrupled over the last six decades.

“Throughout that period, every tomorrow has been uncertain,” he wrote. “America’s destiny, however, has always been clear: ever-increasing abundance.”

The letter provides more than entertainment value and patriotic stirrings, delivering to Berkshire shareholders an update on the company’s vast collection of businesses. With a market capitalization of $250 billion, Berkshire ranks among the largest companies in the United States.

Its holdings vary, with big companies like the railroad operator Burlington Northern Santa Fe and the electric utility MidAmerican Energy, and smaller ones like the running-shoe outfit Brooks Sports and the chocolatier See’s Candies. All told, Berkshire employs about 288,000 people.

The letter, once again, did not answer a question that has vexed Berkshire shareholders and Buffett-ologists: Who will succeed Mr. Buffett, who is 82, as chief executive?

Last year, he acknowledged that he had chosen a successor, but he did not name the candidate.

He has said that upon his death, Berkshire will split his job in three, naming a chief executive, a nonexecutive chairman and several investment managers of its publicly traded holdings.

In 2010, he said that his son, Howard Buffett, would succeed him as nonexecutive chairman.

Berkshire’s share price recently traded at a record high, surpassing its prefinancial crisis peak reached in 2007 and rising about 22 percent over the last year.

The company reported net income last year of about $14.8 billion, up about 45 percent from 2011. Yet the company’s book value, or net worth — Mr. Buffett’s preferred performance measure — lagged the broader stock market, increasing 14.4 percent, compared with the market’s 16 percent return.

Mr. Buffett lamented that 2012 was only the ninth time in 48 years that Berkshire’s book value increase was less than the gain of the Standard & Poor’s 500-stock index. But he pointed out that in eight of those nine years, the S.& P. had a gain of 15 percent or more, suggesting that Berkshire proved to be a most valuable investment during bad market periods.

“We do better when the wind is in our face,” he wrote.

For Berkshire’s largest collection of assets, its insurance operations, the wind has been at its back. We “shot the lights out last year” in insurance, Mr. Buffett said.

He lavished praise on the auto insurer Geico, giving a special shout-out to the company’s mascot, the Gecko lizard.

Investors also keep a keen eye on changes in Berkshire’s roughly $87 billion stock portfolio. Its holdings include large positions in iconic companies like International Business Machines, Coca-Cola, American Express and Wells Fargo. He said Berkshire’s investment in each of those was likely to increase in the future.

“Mae West had it right: ‘Too much of a good thing can be wonderful,’ ” Mr. Buffett wrote.

He also complimented two relatively new hires, Todd Combs and Ted Weschler, who now each manage about $5 billion in stock portfolios for Berkshire. Both men ran unheralded, modest-size money management firms before Mr. Buffett plucked them out of obscurity and moved them to Omaha to work for him.

He called the men “a perfect cultural fit” and indicated that the two would manage Berkshire’s entire stock portfolio once he steps aside. “We hit the jackpot with these two,” Mr. Buffett said, noting that last year, each outperformed the S.& P. by double-digit margins.

Then, sheepishly, employing supertiny type, he wrote: “They left me in the dust as well.”

A former paperboy and member of the Newspaper Association of America’s carrier hall of fame, Mr. Buffett devoted nearly three out of 24 pages of his annual report to newspapers.

While Mr. Buffett has been a longtime owner of The Buffalo News and a stakeholder in The Washington Post Company, he told shareholders four years ago that he wouldn’t buy a newspaper at any price.

But his latest note reflects how much his opinion has turned. His buying spree started in November 2011, when he struck a deal to buy The Omaha World-Herald Company, this hometown paper, for a reported $200 million. By May 2012, he bought out the chain of newspapers owned by Media General, except for The Tampa Tribune. In recent months, he continued to express his interest in buying more papers “at appropriate prices — and that means a very low multiple of current earnings.”

“Papers delivering comprehensive and reliable information to tightly bound communities and having a sensible Internet strategy will remain viable for a long time,” wrote Mr. Buffett.

Mr. Buffett said in a telephone interview last month that he would consider buying The Morning Call of Allentown, Pa., a paper that the Tribune Company is considering selling. But Mr. Buffett said he had not contacted Tribune executives.

“It’s solely a question of the specifics of it and the price,” he said about the Allentown paper. “But it’s similar to the kinds of communities that we bought papers in.”

Mr. Buffett has plenty of cash to make more newspaper acquisitions. To cover his portion of the Heinz purchase, Mr. Buffett will deploy about $12 billion of Berkshire’s $42 billion cash hoard. That leaves a lot of money for Mr. Buffett to continue his shopping spree for newspapers — and more major deals like Heinz.

“Charlie and I have again donned our safari outfits,” Mr. Buffett wrote, “and resumed our search for elephants.”

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Pictures From the Week in Business

Shari Lanning, assistant professor of anatomy at Ross University in the West Indies, a veterinary college, led a discussion with students as Georgia the dog was examined for a pain evaluation. They don’t teach much at veterinary school about bears, particularly the figurative kind, although debt as large and scary as any grizzly shadows most vet school grads, usually for decades. Nor is there much in the curriculum about the prospects for graduates or the current state of the profession. Neither, say many professors and doctors, looks very promising. The problem is a boom in supply (that is, vets) and a decline in demand (namely, for veterinary services). 

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High & Low Finance: Report Lays Out Plan to Reduce Government Role in Home Financing

Can the American mortgage market ever function again without Uncle Sam guaranteeing that lenders will be repaid?

It is amazing just how few people think it can.

“For the foreseeable future, there is simply not enough capacity on the balance sheets of U.S. banks to allow a reliance on depository institutions as the sole source of liquidity for the mortgage market,” stated a report on the American housing market this week, issued by a group that was filled with members of the housing establishment.

The panel, which included Frank Keating, the president of the American Bankers Association and a former governor of Oklahoma, does not see that as an indictment of the American banking system, which would much rather trade leveraged derivatives than keep a lot of mortgage loans on its books.

“Given the size of the market and capital constraints on lenders, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity,” added the report, issued by a housing commission formed by the Bipartisan Policy Center, a group that was begun by former Senate majority leaders from both parties. The group thinks investors will not be willing to finance enough mortgages — particularly 30-year fixed-rate loans — without a government guarantee.

The report does an excellent job of analyzing the history of the American housing finance system, as well as looking at the government’s efforts over the years to promote and subsidize rental housing. It calls for changes in those policies as well, aimed at assuring that those with very low incomes “are assured access to housing assistance if they need it.”

But those rental proposals are unlikely to lead to legislation any time soon, said Mel Martinez, one of four co-chairmen of the housing panel. Mr. Martinez, a former Republican senator from Florida and housing secretary under President George W. Bush, said in an interview that any proposal calling for spending government money, as this one does, would face tough sledding in Congress.

But he said it was possible that changes in the housing finance system, which is widely criticized on both sides of the aisle, had a better chance of getting approval.

Certainly, one principle enunciated by the panel will get wide support: “The private sector must play a far greater role in bearing housing risk.” But the details show that the panel still thinks sufficient money can be found for housing only if Uncle Sam remains the ultimate guarantor for most home mortgages.

Currently, the government backs about 90 percent of newly issued mortgages, more than ever before. The proportion fell in the years leading up to 2007 as subprime loans proliferated and then soared after that market collapsed. Since then, the Federal Housing Administration has expanded its role in backing home loans on the low end of the scale. But most mortgages are purchased by either Fannie Mae or Freddie Mac, the government-sponsored enterprises that the government took over after the housing bubble burst.

So-called jumbo mortgages, that is mortgages too large to qualify for purchase by Fannie or Freddie, account for most of the rest. Some mortgages are put into securitizations that have no government guarantee, but many jumbo mortgages end up being owned by the banks for the long term.

The F.H.A. appears to be more cautious than it used to be. The report notes that last year the average FICO score for an F.H.A. or Department of Veterans Affairs loan was close to 720 on a range of 300 to 850. That is about what the average Fannie Mae and Freddie Mac borrower had in 2001.

The commission, whose other co-chairmen were George J. Mitchell, the former Senate Democratic leader; Christopher S. Bond, a former Republican senator; and Henry Cisneros, who served as housing secretary under President Bill Clinton, wants to preserve the F.H.A., but orient it more to those who need the most help. It would phase out Fannie and Freddie — something that is politically necessary — but replace them with something that sounds sort of similar.

The new organization would be called a “public guarantor.” It would guarantee that investors in mortgage-backed securitizations would not lose money, much as Fannie and Freddie now do. But its responsibility would come after that of a “private credit enhancer,” which sounds like a monoline insurer that would make payments to securitization holders if the underlying mortgages were performing badly. That organization would be regulated by the public guarantor, and only after it goes broke — something that should happen only if housing prices fall more than they did in the recent crisis — would the public guarantor be responsible for making investors whole.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

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Penney Reports Big Loss for Fourth Quarter

NEW YORK (AP) — Boy, it just wasn't J.C. Penney's year.

The mid-priced department store chain on Wednesday reported another much larger-than-expected loss in the fiscal fourth quarter on a nearly 30 percent plunge in revenue in the latest sign that shoppers aren't happy with the changes it's made in the past year.

The results mark a full year of massive quarterly losses and revenue declines that miss Wall Street estimates since J.C. Penney Co. began a turnaround strategy that included ditching most of its coupons and sales events in favor of everyday low prices, bringing in hipper designer brands such as Betsy Johnson and remaking outdated stores.

The quarterly performance also puts additional pressure on CEO Ron Johnson, the former Apple Inc. executive who was brought in about a year ago to turn the stodgy retailer that was losing money into a hip and profitable company that can compete with the likes of Macy's or H&M. In the past year since Johnson rolled out his plan, though, even once loyal customers have strayed away from the 1,100-store chain.

Teresa Cansell, for instance, used to make the 45-mile trek from her farm near Leon, Kan., to a Penney store in Wichita about once a month. But since Penney started making changes last year, she's only been twice. And on her latest trip in December, she walked out empty handed because she couldn't find a leather jacket she wanted.

"I loved the old J.C. Penney. I liked the coupons," Cansell, 53, said. "I used to go to Penney every time I got them in the mail. I would buy a ton of stuff."

Penney's results show that other shoppers feel the same way. During the fourth quarter that ended Feb. 2, Penney's revenue at stores opened at least a year — a figure the retail industry uses to measure of a store's health — dropped 31.7 percent.

That's on top of hefty drops in the previous three quarters of 26.1 percent in the third, 21.7 percent in the second and 19 percent in the first. And it's steeper than the decline of 26.1 percent Wall Street had expected.

Penney, based in Plano, Texas, also widened its loss to $552 million, or $2.51 per share, up from a loss of $87 million, or 41 cents per share a year ago. Excluding charges related to restructuring and management changes, Penney's adjusted loss for the quarter was $427 million, or $1.95 per share.

Total revenue dropped 28.4 percent to $3.88 billion. Analysts had expected a loss of 23 cents on revenue of $4.08 billion, according to research firm FactSet.

Penney's results for the full year reveal just how much the company is struggling to shore up its business.

For the fiscal year, Penney lost $985 million, or $4.49 per share, compared with a loss of $152 million, or 70 cents per share, in fiscal 2011. And the company's revenue fell nearly a quarter, or 24.8 percent, to $12.98 billion from the previous year's $17.26 billion.

"It's the worst performance I have ever seen by a company in one year," said Walter Loeb, an independent retail consultant.

Wall Street hasn't been any happier than Main Street with Penney's changes.

On the quarterly news of its quarterly results, which were reported after markets were closed for the day, Penney shares fell nearly 9 percent, or $1.89, to $19.27 in after-hour trading.

In total, investors, who initially sent Penney shares soaring 24 percent to about $43 after the company announced the everyday pricing plan in late January of last year, have pushed them down by about half since early last year and the company's ratings are in junk status.

It's not the way Johnson had hoped things would go when he took the top job at Penney in November 2012. A couple of months later, on Feb. 1 of last year, Johnson launched a new pricing that was designed to wean customers off the markdowns they'd become accustomed to, but that ultimately eat into profits.

He got rid of the nearly 600 sales Penney offered at various times throughout the year for a three-tiered strategy that permanently lowered prices on all items in the store by 40 percent, offered monthlong discounts on select items and periodic clearance events throughout the year. He also got rid of the word "sales" from the company's marketing and rolled out colorful ads that featured dogs and children.

But customers weren't responding to the changes, so Johnson had to tweak his strategy. The latest change started this month when Penney began adding back sales events. The company also started putting price tags on half of its merchandise that show customers how much they're saving by shopping at Penney. The chain also rolled out ads to showcase that people can save money by shopping there.

In addition to those changes, Johnson has said that Penney is starting to see some positive results from its makeover of stores with sectioned-off shops that feature different brands. The company said the reception has been warm to the 10 mini-shops that it rolled out this fall, including those for Levi's brand and Penney's new JCP line of casual clothes. Other brands, including Joe Fresh, will be rolled out in coming years.

The worry on Wall Street is that Johnson won't be able to turn around business fast enough to finance the transformation of its stores. But customers like Ricky Rodriguez, from Fort Worth, Texas, offer hope for Penney.

"I feel like the guy section is getting more hip," said the 27-year-old who recently bought a dress shirt for $25 at Penney. "I've been going there every other week."

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DealBook: Tribune Hire Banks to Weigh a Sale of Its Newspapers

4:43 p.m. | Updated

The Tribune Company has hired investment banks to weigh a sale of its top newspapers, including The Chicago Tribune and The Los Angeles Times, the media conglomerate said on Tuesday.

The media company, which emerged from bankruptcy late last year, has retained JPMorgan Chase and Evercore Partners as advisers, a spokesman for Tribune said.

The spokesman, Gary Weitman, added that the move was prompted by unsolicited expressions of interest in the newspapers from various suitors.

“Hiring outside financial advisors will help us determine whether that interest is credible, allow us to consider all of our options, and fulfill our fiduciary responsibility to our shareholders and employees,” he said in the statement.

Tribune’s move comes as little surprise. Speculation has been swirling around the media industry for some time that a number of potential suitors had emerged for the company’s holdings. That group may include News Corporation, which is in the middle of spinning off its newspaper holdings from its far bigger Fox entertainment operations. That new company may consider acquisitions as a way to gain more clout and reap cost savings.

Another potential buyer is Aaron Kushner, who owns a group of newspapers that include the Orange County Register and who has been publicly vocal about his interest in the Tribune properties.

Peter Liguori, Tribune’s recently appointed chief executive, told The Los Angeles Times last month that he had not ruled out a sale of the company’s newspaper brands but added that he wasn’t “going into this job with a fire-sale sign.”

Tribune is considered likely to hold onto its newspapers, which also include The Baltimore Sun and The Hartford Courant, if the price it fetches is not high enough.

A sale would help Tribune focus more on its bigger broadcasting operations, which includes WGN America and 24 stations across the country. Mr. Liguori himself is a television veteran, having formerly worked in News Corp.’s TV division and at Discovery Communications.

Tribune filed for bankruptcy protection in 2008, just one year after the media concern was taken over by the billionaire Samuel Zell in a deal that relied heavily on borrowed money.

The company emerged from Chapter 11 protection on Dec. 31, under the control of the investment firms Oaktree Capital and Angelo, Gordon, as well as JPMorgan.

It left bankruptcy in relatively healthy financial condition, reporting about $9.8 billion in assets and $1.3 billion in liabilities as of Dec. 30.

Evercore was hired earlier this month to advise The New York Times Company as it considers a sale of its New England media assets, principally The Boston Globe.

Shares in Tribune, which trade over the counter, were up 1.3 percent on Tuesday at $53.50. That values the media conglomerate at about $3 billion.

News of the hiring of the banks was reported earlier by CNBC.

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Media Decoder Blog: Online Piracy Alert System to Begin This Week

The Copyright Alert System, a program of escalating warnings and prods against people suspected of online copyright infringement, is finally going into effect this week, more than a year and a half after the plan was announced as part of an agreement between the entertainment industry and five major Internet service providers.

The Center for Copyright Information, the organization created to administer the system, announced on Monday that the Internet providers would begin putting it in place “over the course of the next several days,” though it gave no specifics. The Internet companies are AT&T, Cablevision, Comcast, Verizon and Time Warner Cable.

In the alert system, media companies monitor online traffic through a third party and can complain to Internet providers if a file is downloaded illegally. The suspected violator is then given the first of six warnings, some of which carry “educational” messages and must be acknowledged. After the fifth and sixth warnings, the customer’s Internet speed can be slowed to a crawl.

The Center for Copyright Information says it will not ask for repeat offenders’ Internet access to be blocked, but most service providers have the right to do that if a customer violates its terms of service. The findings can be contested for a $35 fee, to be refunded if an appeal is successful.

The introduction of the alert system has been notably slow. Nearly a year passed before the group had a leader in place, and its own prediction failed when it said in October that the system would be coming in two months. Part of the reason for that might be the relationships between media companies and Internet service providers, which in the past have often been adversarial over issues of piracy and control.

So-called graduated response programs like the Copyright Alert System have been tried in other countries, with mixed results. France’s Hadopi law, passed in 2009, set up a system of three “strikes,” culminating in a fine. More than a million warnings have been issued through that plan, but a recent government report said that its effects were “hard to evaluate precisely.”

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Major Banks Aid in Payday Loans Banned by States

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.

“Without the assistance of the banks in processing and sending electronic funds, these lenders simply couldn’t operate,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts. “The industry is not in a position to monitor customer accounts to see where their payments are going,” said Virginia O’Neill, senior counsel with the American Bankers Association.

But state and federal officials are taking aim at the banks’ role at a time when authorities are increasing their efforts to clamp down on payday lending and its practice of providing quick money to borrowers who need cash.

The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are examining banks’ roles in the online loans, according to several people with direct knowledge of the matter. Benjamin M. Lawsky, who heads New York State’s Department of Financial Services, is investigating how banks enable the online lenders to skirt New York law and make loans to residents of the state, where interest rates are capped at 25 percent.

For the banks, it can be a lucrative partnership. At first blush, processing automatic withdrawals hardly seems like a source of profit. But many customers are already on shaky financial footing. The withdrawals often set off a cascade of fees from problems like overdrafts. Roughly 27 percent of payday loan borrowers say that the loans caused them to overdraw their accounts, according to a report released this month by the Pew Charitable Trusts. That fee income is coveted, given that financial regulations limiting fees on debit and credit cards have cost banks billions of dollars.

Some state and federal authorities say the banks’ role in enabling the lenders has frustrated government efforts to shield people from predatory loans — an issue that gained urgency after reckless mortgage lending helped precipitate the 2008 financial crisis.

Lawmakers, led by Senator Jeff Merkley, Democrat of Oregon, introduced a bill in July aimed at reining in the lenders, in part, by forcing them to abide by the laws of the state where the borrower lives, rather than where the lender is. The legislation, pending in Congress, would also allow borrowers to cancel automatic withdrawals more easily. “Technology has taken a lot of these scams online, and it’s time to crack down,” Mr. Merkley said in a statement when the bill was introduced.

While the loans are simple to obtain — some online lenders promise approval in minutes with no credit check — they are tough to get rid of. Customers who want to repay their loan in full typically must contact the online lender at least three days before the next withdrawal. Otherwise, the lender automatically renews the loans at least monthly and withdraws only the interest owed. Under federal law, customers are allowed to stop authorized withdrawals from their account. Still, some borrowers say their banks do not heed requests to stop the loans.

Ivy Brodsky, 37, thought she had figured out a way to stop six payday lenders from taking money from her account when she visited her Chase branch in Brighton Beach in Brooklyn in March to close it. But Chase kept the account open and between April and May, the six Internet lenders tried to withdraw money from Ms. Brodsky’s account 55 times, according to bank records reviewed by The New York Times. Chase charged her $1,523 in fees — a combination of 44 insufficient fund fees, extended overdraft fees and service fees.

For Subrina Baptiste, 33, an educational assistant in Brooklyn, the overdraft fees levied by Chase cannibalized her child support income. She said she applied for a $400 loan from Loanshoponline.com and a $700 loan from Advancemetoday.com in 2011. The loans, with annual interest rates of 730 percent and 584 percent respectively, skirt New York law.

Ms. Baptiste said she asked Chase to revoke the automatic withdrawals in October 2011, but was told that she had to ask the lenders instead. In one month, her bank records show, the lenders tried to take money from her account at least six times. Chase charged her $812 in fees and deducted over $600 from her child-support payments to cover them.

“I don’t understand why my own bank just wouldn’t listen to me,” Ms. Baptiste said, adding that Chase ultimately closed her account last January, three months after she asked.

A spokeswoman for Bank of America said the bank always honored requests to stop automatic withdrawals. Wells Fargo declined to comment. Kristin Lemkau, a spokeswoman for Chase, said: “We are working with the customers to resolve these cases.” Online lenders say they work to abide by state laws.

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Fundamentally: Investors Rediscover Risk-Taking Abroad

RISK-TAKING may be staging a comeback overseas.

While equities around the world soared last year, the stock market rebound abroad was decidedly different from the one that sent the Standard & Poor’s 500-stock index up 16 percent in 2012.

In the United States, the most economically sensitive stocks, like shares of banks and other financial businesses, posted the biggest gains as investors grew confident that an economic recovery was at hand. Overseas, by contrast, it was the defensive-oriented shares like health care and consumer staples stocks that performed the best for most of the year.

What’s more, investors favored stocks in the developed world over riskier but faster-growing emerging markets equities.

This is not all that surprising. “The economic situation abroad in the last 12 to 18 months has either been worse or has slowed more dramatically than in the U.S., creating an even bigger ‘risk off’ mind-set in those markets,” said James W. Paulsen, chief investment strategist at Wells Capital Management.

Yet Mr. Paulsen believes that investors’ appetite for risk-taking overseas is likely to improve. In fact, that process may have already begun.

Among the early signs are that economically cyclical sectors, like financial stocks in the MSCI EAFE index of foreign equities, have been outperforming defensive areas like health care and consumer staples since December.

Part of this can be attributed to the growing clarity about the state of the global economy, money managers say. It is not so much that the economy is booming, but that some of the greatest potential dangers seem to have receded.

Most prominently, concerns about a euro zone breakup have abated since Mario Draghi, president of the European Central Bank, declared that the bank would do “whatever it takes” to save the euro. Ever since that announcement, in late July, European equities have been in rally mode.

“In the international markets, you saw the removal of major tail risks last year, particularly in Europe,” said Jason A. White, a portfolio specialist at T. Rowe Price.

Meanwhile, fears over China’s slowdown seemed to subside at the end of last year on signs that the world’s second largest economy was finally beginning to re-accelerate. In November, government data showed that industrial output and retail sales in China grew much faster than expected, bolstering the bullish case for Chinese and emerging-market stocks. Since then, the Shanghai Stock Exchange Composite Index has soared nearly 20 percent.

The improving global economy, though, isn’t the only reason risk-taking may be re-emerging.

Money managers note that fear over Europe’s debt crisis has been driving investors into defensive-oriented stocks overseas for several years. This is particularly true for shares of consumer companies that manufacture staples like food and household products that continue to be in demand regardless of the health of the economy.

“In an environment where returns for the equity markets were quite poor, you saw very decent returns in those staples,” said Harry Hartford, president of Causeway Capital Management. As a result, though, “consumer staples outside the U.S. looks pretty fully priced,” he said.

Take Diageo. Shares of the British spirits maker, which has sales in about 180 countries, have climbed more than 26 percent a year for the last three years. That means Diageo shares now trade at a price/earnings ratio of more than 18, based on forecast profits. By comparison, the average P/E for MSCI EAFE stocks is less than 14.

Unilever, the packaged food and household goods company, is another example. In 2008, amid the global financial crisis, the stock was trading at around 11 times earnings. Today, Unilever’s P/E ratio stands at 17 times earnings.

“A lot of the defensive industries had big runs, so valuations got extended,” said W. George Greig, head of international investing for the asset manager William Blair & Company. As a consequence, he said, “some investors are starting to say that the defensive stocks aren’t as defensive as they thought.”

NOT all money managers are convinced that the worst of the economic storm is behind us. “We know that after a financial crisis, it takes a long time to recover,” said Simon Hallett, chief investment officer for the asset manager Harding Loevner. “We think a conservative approach is still appropriate — there are still an awful lot of things that can go wrong.”

Mr. Greig said investors were not seeking economically sensitive stocks out of a newfound sense of euphoria. “This is not a venturesome ‘risk on’ mind-set,” he said. Rather, investors are reluctantly seeking out cyclically oriented stocks because their valuations are so low that they now look compelling, and there may be better values in areas that had been considered riskier.

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

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Shortcuts: Why It’s Not Always Good to Forgive

IT seems, these days, that we can barely keep pace with the tales of the famous and near famous who climb to great heights, plummet to great depths and then try to work their way back into the public’s affection.

Robyn Beck/Agence France-Presse — Getty Images

A man in Los Angeles watched Lance Armstrong acknowledge his use of performance-enhancing drugs.

Since the beginning of this year alone, we’ve had Lance Armstrong’s sort-of apology interview with Oprah Winfrey acknowledging his use of a variety of performance-enhancing drugs, the efforts by the fashion designer John Galliano to put an anti-Semitic tirade behind him and the seemingly ill-fated, public (and lucrative) mea culpa by the best-selling author Jonah Lehrer for plagiarism and fabrication.

Even as I was writing this column, news broke about another fallen celebrity: Oscar Pistorius, the South African double-amputee Olympic runner, was charged with murder in the shooting death of his girlfriend.

These never-ending stories may not affect our lives — except, perhaps, to make us more cynical when the mighty fall. But they do raise questions about forgiveness and atonement that are important outside the world of the celebrity.

“Stories of trust violations abound in the media and business press,” Kurt T. Dirks, a professor of managerial leadership at Washington University in St. Louis, and colleagues wrote in a recent journal article. “However, these high-profile incidents are vastly outnumbered by the many trust violations that occur in the offices and hallways and other arenas of virtually all work organizations.”

And with our friends, partners, children, parents and, of course, the companies we do business with.

I’ve written quite a bit about the need for our society to be more open to mistakes and failure. But what happens after that? Is forgiveness automatic? And how difficult is it — or should it be — to get redemption after a serious misstep?

First, what is forgiveness? Jeffrie Murphy, a professor of law, philosophy and religious studies at Arizona State University, who has written about the issue for years, says it is “a change of heart toward someone — overcoming the feelings of anger and resentment that typically come from being wronged by another.”

But it is important to differentiate between forgiveness and trusting someone again, Professor Dirks said. So you may be willing to forgive a business that messed up a deal but nevertheless decide not to work with that business again. Or forgive an abusive partner, but never be in a relationship with that person again. Or even forgive those who committed a crime against you, but still believe they should be punished.

“The question is how much you’ve been personally harmed and what’s at stake for you in the future,” he said. “It depends, also, if we have something to gain by interacting” with the person or business again.

Of course, it is often easier to avoid interacting with a person who has harmed you than a business, because often no good alternatives are available.

But we can feel that we have some control by refusing to buy from a company that has sold us a lemon or provided terrible service. And, on occasion, enough consumers have pulled together to force a company to back down, as they did in 2011, when Bank of America bowed to customer pressure and dropped plans to impose a $5 monthly fee on debit cards.

Research has also shown that we seem to be more willing to forgive — and trust again — those who make errors of competence rather than of character, Professor Dirks said.

“We believe issues of competence are changeable over time, but not issues of character or integrity,” he said. “And the truth is that probably you can change certain skills, but the underlying value system is probably harder to change.”

It has become somewhat common wisdom to believe that forgiving a person who did you wrong is not just the right thing to do, but will make you emotionally, and even physically, healthier in the long run by alleviating the anger and stress you feel.

But Professor Murphy warned against assuming that forgiveness was always the right answer and that someone who failed to offer forgiveness was “not a good person or a mentally healthy person.”

E-mail: shortcuts@nytimes.com

This article has been revised to reflect the following correction:

Correction: February 22, 2013

An earlier version of this article misspelled the given name of a professor at Arizona State University. He is Jeffrie Murphy, not Jefffrie.

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H.P. Reports Decline in First-Quarter Revenue and Profit

SAN FRANCISCO — Battling a declining demand for personal computers, Hewlett-Packard, the PC maker, reported lower quarterly earnings on Thursday.

The earnings were significantly higher than analysts had expected, however.

“The turnaround is starting to gain traction as a result of the actions we took in 2012 to lay the foundation of H.P.’s future,” Meg Whitman, the chief executive, said in a statement accompanying the earnings. “I feel good about the rest of the year.”

H.P. said net income fell 16 percent to $1.2 billion, or 63 cents a share, from the year-ago quarter.

The company said revenue fell 6 percent, to $28.4 billion.

Wall Street analysts had expected net income of 71 cents a share and revenue of $27.8 billion, according to a survey of analysts by Thomson Reuters.

H.P., based in Palo Alto, Calif., is one of the world’s largest suppliers of both PCs and computer servers. Demand for PCs has been shrinking, because of the popularity of tablets and smartphones, which H.P. doesn’t make. Servers face shrinking profit margins as more companies look beyond brand names and buy low-priced machines in bulk from Asian vendors.

Under Ms. Whitman, H.P. has focused on restructuring its printers and high-end server business to incorporate more data-analysis software that searches for documents and compiles reports like the energy use of the data center. She has warned, however, that the turnaround may take until 2017. In 2012, the company announced it would lay off 29,000 employees.

H.P.’s earnings announcement followed by two days a report of lower revenue and earnings by Dell Computer, H.P.’s main American rival.

Dell said its first-quarter revenue fell 11 percent, to $14.3 billion, while net income was off 31 percent, to $530 million, or 30 cents a share.

Michael Dell, Dell’s founder, has proposed taking his company private, for about $24.4 billion, to focus on restructuring the company away from the eyes of Wall Street.

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American Executive Lashes Out at French Unions, Touching Off Uproar

PARIS — “How stupid do you think we are?”

With those choice words, and several more similar in tone, the chief executive of an American tire company touched off a furor in France on Wednesday as he responded to a government plea to take over a Goodyear factory slated for closure in northern France.

“I have visited the factory a couple of times,” Maurice Taylor Jr., the head of Titan International, wrote to the country’s industry minister, Arnaud Montebourg, in a letter published in French newspapers on Wednesday. “The French work force gets paid high wages but works only three hours. They have one hour for their breaks and lunch, talk for three and work for three.“

“I told this to the French unions to their faces and they told me, ‘That’s the French way!’ ” added Mr. Taylor, a swaggering businessman who is nicknamed “the Grizz” by Wall Street analysts for his abrasive negotiating style.

His decidedly undiplomatic assessment quickly struck a nerve in France, where concerns about declining competitiveness and the divisive tax policies of President François Hollande’s government have led some economists to ask whether the nation is at risk of becoming the next sick man of Europe.

Mr. Montebourg, who is known for lashing out at French corporate bosses without hesitation, initially seemed at a loss for words on how to respond to the American charge. “I do not want to harm French interests,” he said when asked about Mr. Taylor’s letter. Later, Mr. Montebourg released a letter to Mr. Taylor, calling the executive’s comments “extreme” and “insulting,” adding that they pointed to a “perfect ignorance” about France and its strengths, which continue to attract international investors.

French media outlets minced no words. “Incendiary!” “Insulting!” and “Scathing!” were just a few of the terms replayed on French newspaper Web sites and on the airwaves throughout the day. The French blogosphere lit up with hundreds of remarks condemning the “predatory“ American corporate culture that Mr. Taylor seemed to represent; other commentators who ventured to admit that there might be something to Mr. Taylor’s observations were promptly bashed.

And France’s main labor union wasted no time in weighing in.

Mickaël Wamen, the head of the Confédération Générale du Travail union at the Goodyear plant, in Amiens, said Mr. Taylor belonged in a “psychiatric ward.”

A spokesman for Mr. Taylor did not immediately respond to calls for comment. France’s 35-hour workweek, its rigid labor market and the influence that labor unions hold over the workplace have long been a source of aggravation for businesses. Last month, after a government report warning that French competitiveness was slipping, labor unions and business leaders struck a deal to overhaul swaths of the labor code, a move Mr. Hollande said was needed to burnish France’s international allure as a place to do business.

With unemployment above 10 percent and growth slowing, the government has also been desperate to avoid large-scale layoffs. Mr. Montebourg has even brandished the threat of nationalization to try to save jobs. PSA Peugeot Citroën, ArcelorMittal, Sanofi and Air France all announced big job cuts last year as Europe’s long-running debt crisis hit their bottom lines.

So it was no surprise that Mr. Montebourg approached Titan International last year to ask if it would take over the Goodyear factory, which was scheduled to close because of labor disputes and sagging profitability — a move that would threaten 1,173 jobs.

Titan had already considered taking over the Goodyear factory’s farm tire operations. But it dropped the plan in 2011 after union representatives opposed a deal, saying they suspected Titan would close production of passenger-vehicle tires if the group took over. Tensions between Mr. Taylor and the union were evident at the time in a Titan news release, which included Mr. Taylor’s observation that “only a nonbusiness person would understand the French labor rules.”

In January, Mr. Montebourg tried to entice Titan back to the negotiating table, saying he hoped unions would put “some water in their wine, that managers put some wine in their water, and that Titan would drink the wine and the water of both” and reach an accord.

But last month, as union workers protested en masse at the Amiens site, with a large police presence, Goodyear told workers it would close the plant and cut its French work force by 39 percent.

In his letter, dated Feb. 8, Mr. Taylor explained his reasons for refusing to come back to the negotiating table. “Goodyear tried for over four years to save part of the Amiens jobs that are some of the highest-paid, but the French unions and the French government did nothing but talk,” Mr. Taylor wrote.

“Sir, your letter says you want Titan to start a discussion,” he added. “How stupid do you think we are? Titan is the one with the money and the talent to produce tires. What does the crazy union have? It has the French government.“

He said his company would seek to produce cheaper tires in India or China, where he said Titan would pay the workers less than one euro an hour, and then sell the tires back to the French. He predicted that Michelin, the French tiremaker, would not be able to compete with lower prices and would have to halt production in France within five years.

“You can keep your so-called workers,” he wrote. “Titan is not interested in the Amiens factory.”

In his response, Mr. Montebourg reacted strongly to what he called Mr. Taylor’s “condemnable calculation” and noted that France and its European partners were working to stop illegal dumping of imports.

“In the meantime,” he added, “rest assured that you can count on me to have the competent government agencies survey your imported tires with a redoubled zeal.”

This article has been revised to reflect the following correction:

Correction: February 20, 2013

An earlier version of this article misstated the status of the Goodyear factory in Amiens. While it is scheduled for closure, it remains open; it is not closed. The error was repeated in a picture caption.

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DealBook: Einhorn Has Edge in Dispute With Apple

In the battle between Apple and David Einhorn, score a point for the hedge fund manager.

A federal judge said on Tuesday that he was leaning toward Mr. Einhorn’s contention in a lawsuit that the iPad maker violated securities regulations by improperly bundling several shareholder proposals into one matter.

The lawsuit by Mr. Einhorn’s Greenlight Capital, filed in Federal District Court in Manhattan, claims that Apple unjustly tied a vote to eliminate the company’s ability to issue preferred stock at will with other initiatives that the hedge fund manager supports.

While the judge overseeing the case, Richard J. Sullivan, didn’t immediately grant Mr. Einhorn’s request for an halt to the vote, he said that the facts of the case favored the investor’s interpretation.

“I think success on the merits lies with Greenlight,” Judge Sullivan said at the end of a two-hour hearing.

He is expected to decide whether to grant a preliminary injunction within days, citing the Feb. 27 cutoff for voting on Apple’s shareholder proposals.

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The Media Equation: In Omaha Manhole Fire Photo, Logging Off in Search of Some Clues

Stephanie Sands

This image, which was taken after an underground fire cut power in half of downtown Omaha, captivated the Web last month.

When photographs of spontaneous events miraculously appear on the Web, it generally prompts two responses: wonder and skepticism.

Matt Miller/Omaha World-Herald

Matthew Hansen, a columnist at The Omaha World-Herald, showed how to follow a trail. 

So it was with an image of exploding manhole covers in Omaha that took over the Web last month. On Sunday, Jan. 27, an underground fire cut power in half of downtown. A vivid photograph of unknown provenance, showing fire shooting out of manholes on a city street, began popping up on Reddit, where it had 1.5 million views, and Gawker.

The photo — an indifferently composed shot of an event that looks very far away — would not win any Pulitzers, but something incredible seems to be under way at the precise moment it was taken. You can almost hear the sequential explosions emanating below the street: boom, boom, boom as flames appear to shoot up from hell itself.

In this age of Photoshop, it wasn’t long before the debates cropped up, on the Web and in Omaha, about the picture’s authenticity.

Matthew Hansen, a columnist at The Omaha World-Herald, wondered the same thing, and one night found himself in a bar engaged in the real-versus-fake debate. Like many photos on the Web, this one came from everywhere — forwarded, tweeted and blogged — and nowhere — there was no name on the image nor any text to indicate its origin.

Mr. Hansen, intrepid journalist that he is, solved the mystery and wrote a column about it. The photo was real, it turned out, but not in the way people thought. (More on that later.) So, did Mr. Hansen use deep photo analytics or examine metadata to peel back the truth?

Nope. There was a notebook involved, a lawyer, some phone calls, a cursory digital investigation and some street reporting, which included an interview with a man with no pants.

Shoe leather never looked or smelled so good.

Mr. Hansen’s first step in solving what he called the “Great Omaha Manhole Fire Photo of 2013” was to determine from the angle of the photo that it could have been taken from only one apartment building — called the Kensington Tower. He then used an architectural detail to conclude that it was shot from the top floor, on the west side.

He managed to gain entry to the building — that is, he sneaked in — and made his way to the top floor, where he began knocking on doors.

Mr. Hansen found a man named Kenneth who would not let Mr. Hansen in because he was indisposed — he became “Pantsless Kenneth” in the column — but said that he knew the photo in question and thought his neighbor had taken it.

But the neighbor wasn’t home, so Mr. Hansen stuck his business card in the door jamb and left.

When he returned to the office, Mr. Hansen jumped onto Reddit, found the person who had originally posted the photo there and through him found the person, Gwendolyn Olney, who had posted the photo on her Facebook page, the source for the Reddit posting.

Ms. Olney happened to be the associate counsel for The World-Herald. “Omaha is indeed a small town,” Mr. Hansen wrote in his column. He began to follow the pixilated bread crumbs.

“Gwen didn’t take the photo,” he added. “She got it from Rebecca, who didn’t take the photo. She got it from Brandon, who didn’t take the photo. They led me to Gwen’s friend Andrea, who didn’t take the photo, who led me to ... well, she couldn’t remember who she had gotten the photo from.”

Reading the column, you could almost hear his sigh when he wrote, “Dead end.”

Then his phone rang. “I took that photo,” the voice said.

The caller was Stephanie Sands, a graduate student at the University of Nebraska at Omaha. She said that the day after she took the photo, which she had no idea had become a sensation, she learned from her friends that a reporter was asking about it.

“I was impressed that he had sneaked upstairs and put a card in my door, so I called him,” she said in an interview by phone.

Ms. Sands agreed to meet Mr. Hansen and told him that she had heard the explosion and took two photos with her phone. She sent one to friends and thought nothing more of it.

“I was actually disappointed in how it turned out,” she told me. “Because I was shooting at a distance with an iPhone, it didn’t really capture the severity of what I saw and heard.”

This article has been revised to reflect the following correction:

Correction: February 17, 2013

An earlier version of this column misquoted Matthew Hansen, a columnist at The Omaha World-Herald, about the author of a profile on Edna Buchanan, a crime writer. Mr. Hansen said the writer of the profile was Calvin Trillin, not Gay Talese. 

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Treasury Auctions Set for This Week

The stock and bond markets will be closed on Monday in observance of Washington’s Birthday. The Treasury’s schedule of financing this week includes the regular weekly auction on Tuesday of new three- and six-month bills and an auction of four-week bills on Wednesday.

At the close of the New York cash market on Friday, the rate on the outstanding three-month bill was 0.10 percent. The rate on the six-month issue was 0.13 percent, and the rate on the four-week issue was 0.09 percent.

The following tax-exempt fixed-income issues are scheduled for pricing this week:

TUESDAY

Cambridge, Mass., $65.3 million of general obligation bonds. Competitive.

Harford County, Md., $76.9 million of general obligation bonds. Competitive.

King County, Wash., $73.9 million of general obligation bonds. Competitive.

WEDNESDAY

Santa Clara County, $490 million of general obligation bonds. Competitive.

THURSDAY

Eastern Carver, Minn., $68 million of debt securities. Competitive.

Minnesota, $57.5 million of colleges and universities revenue bonds. Competitive.

ONE DAY DURING THE WEEK

California, $590.3 million of cash reserve program debt securities. Piper Jaffray.

Colorado, $198 million of university system enterprise revenue refinancing bonds. Morgan Stanley.

Delaware, $115 million of general obligation refinancing bonds. Bank of America.

Georgia Housing and Finance Authority, $149.5 million of single-family mortgage bonds. Bank of America.

Grand Blanc, Mich., Community Schools, $62.6 million of refinancing bonds. Stifel, Nicolaus.

Illinois Finance Authority, $101.3 million of revenue bonds. BB&T Capital Markets.

Indianapolis Local Public Improvement Bond Bank, $61.1 million of taxable bond bank refinancing bonds. Morgan Stanley.

Los Angeles Department of Water and Power, $521 million of power system revenue bonds. Bank of America.

Manatee County, Fla., $81.9 million of revenue refinancing bonds. Wells Fargo Securities.

New York City Housing Development Corporation, $100 million of debt securities. Morgan Stanley.

New York City Municipal Water Finance Authority, $435 million of water and sewer general resolution revenue bonds. Barclays Capital.

St. Lucie County, Fla., School Board, $71.5 million of certificates of participation. Wells Fargo Securities.

Tarrant County, Tex., Cultural Education Facilities Finance Corporation, $177.6 million of health care revenue bonds. Goldman Sachs.

Utah, $307 million of power supply revenue bonds. J. P. Morgan Securities.

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The Boss: Bert Quintana of Sitel, on Making Career Choices

I WAS born in Cuba, and I was 2 when my parents brought me to the United States in 1962 with my baby brother, Jorge.

Bert Quintana is the president and C.E.O. of Sitel, a call center and telemarketing company based in Nashville.

AGE 52

NAME OF HIS BOAT Sea Gem

FAVORITE SPORT Golf

SPORTS HERO Don Shula, former Miami Dolphins coach

We passed through the Freedom Tower, an assistance center in Miami for Cuban refugees, and a year later a religious group, the Damas Catolicas, moved us to Dallas and helped my mom find work as a nurse. My dad, who had a fifth-grade education, was a mechanic. My mother would work the evening shift at a hospital, often followed by the night shift, and my dad would work from 7 a.m. to 3 p.m. so that one of them could be home with us.

We couldn’t afford laundry detergent, so my mom used gasoline to clean our clothes. One day she was using a space heater at the same time. We knew nothing about the danger. The gas caught fire, and my mom and brother were burned. They still have a few scars.

My parents eventually bought a house, but they divorced when I was 9 and my mother moved back to Miami with Jorge and me. In high school I worked in a hospital lab after classes as part of a research program. I won a community science award and several science fair awards as a result of what I learned. On the weekends, I apprenticed as a machinist in my uncle’s production shop, which sparked my interest in engineering. I was high school valedictorian and attended the University of Miami for a bachelor’s degree in electrical engineering, graduating in 1983.

In 1984, I started at Florida Power and Light in an entry-level engineering position. One of my responsibilities was to put into practice the business process improvement techniques of W. Edwards Deming. My training for that led to my moving to the company’s call centers, and within six years I was managing the largest one.

In 1994, I moved to MCI Telecommunications. By the time I left, two years later, I’d risen to regional director of the customer service support division.

I was a vice president for the customer care call centers at ADT in 1997, the year it was acquired by Tyco, and the next year I served as president for another home security company.

A headhunter called about a position at Dell as director of its consumer sales operation. Because it was an international company, the job would mean that I could leverage my bilingual skills and learn more about the global marketplace. I accepted, and by 2003 was promoted to vice president of the international services division.

I had been planning to take a sabbatical for quite a while, or perhaps start my own business, and the planets aligned when there was a reorganization at Dell. I left the company in 2006 and my wife, Alicia, and I sailed around the Bahamas and explored the islands on our 43-foot sailboat. We also started fixing and selling homes in Key Largo, where we now live part of the time.

In 2009, another headhunter called about the position of chief operating officer at Sitel. When I was considering whether to take the job, I asked one of the company’s major investors what winning looked like to him. He described it as having someone help him build a company he could be proud of. That response persuaded me to take the job. In 2010, I was appointed president and, in 2011, C.E.O.

While on sabbatical, I mentored former colleagues who asked for advice. My wife said my eyes would light up whenever I talked to them — a sign to both of us that I wanted to get back in the game. People talk about passion, focus, balance and making a difference as the definition of success. I feel as if the planets are aligned for me again.

As told to Patricia R. Olsen.

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U.S. Manufacturing Weakens, but May Rebound Quickly

Manufacturing got off to a weak start this year in the United States as motor vehicle output tumbled in January, but a rebound in factory activity in New York State suggested that any setback would be temporary.

In a further sign that the sluggish economic recovery remains on track, consumers were a bit more upbeat early this month even as they paid more for gasoline and a tax increase reduced their paychecks, other data on Friday showed.

“The economy is on a slowly improving course and it’s got enough headwinds that we are going to see some volatility in these month-by-month numbers,” said Jerry Webman, chief economist at Oppenheimer Funds in New York.

Manufacturing output fell 0.4 percent last month, the Federal Reserve said. But production in November and December was much stronger than previously reported, and the 3.2 percent drop in auto output in January — the largest since August — followed two solid months, suggesting it was just a temporary pause.

“Given that most of the weakness was due to the giveback in motor vehicle production after the 11 percent surge in activity during the last two months of last year, we expect this retreat in industrial output to be temporary,” said Millan Mulraine, senior economist at TD Securities in New York.

In a separate report, the New York Federal Reserve Bank said its Empire State general business conditions index, which gauges factory activity in the state, rose to 10.0 from minus 7.8 the month before. The index for February showed the first growth in the sector since July and the best performance since May 2012.

The rebound was driven by new orders, which hit their highest level since May 2011. Economists said the rising activity most likely reflected recovery from Hurricane Sandy, which struck the East Coast in late October.

“What we are seeing in manufacturing is that growth that had been leading the economy is now roughly keeping pace with the overall economy, and that’s likely to remain the case through 2013,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.

Separately, the Thomson Reuters/University of Michigan index of consumer sentiment rose to 76.3 in early February, from 73.8 in January.

Households drew comfort from steady job gains, which together with rising home and stock prices should help offset a recent increase in payroll taxes and underpin consumer spending.

“Consumers are getting over the fact that their paychecks are a little smaller since the beginning of the year due to the sunset of the payroll tax holiday,” said Thomas Simons, an economist at Jefferies & Company in New York.

“This offers some encouragement that consumption will recover following a weak month in January.”

The weakness in manufacturing last month contributed to push overall industrial production down 0.1 percent.

Production at the nation’s mines fell 1 percent, but cold weather lifted utilities’ production by 3.5 percent. Americans who needed to spend more money on utilities in January should support consumer spending this quarter.

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Higher Prices Help PepsiCo to 17% Gain in Profit

Investors in PepsiCo saw glimmers of the end of the tunnel on Thursday when the company reported a 17 percent increase in fourth-quarter profit after a long lackluster performance.

Net income was $1.66 billion, or $1.06 a share, lifted by higher prices for the company’s products, significant investments in marketing of crucial brands like Pepsi and Lay’s and strong sales in Latin America and other emerging markets. Earnings were $1.42 billion, or 89 cents a share, in the period a year earlier.

Signs that PepsiCo was moving out of what Indra K. Nooyi, the chief executive, called a transition year — as well as her announcement on a call with analysts that the company plans to apply to the Food and Drug Administration for approval of a new, lower-calorie sweetener — moved it share price up more than $2 by midday before it closed at $72.28, up 78 cents.

“It was an encouraging quarter,” said Kevin V. Dreyer, associate portfolio manager of the $2 billion Gabelli Asset Fund, which owns PepsiCo shares. “It looks like things might be getting a bit better.”

He said the news of Berkshire Hathaway’s purchase of Heinz for $23 billion, or more than 13 times earnings before interest, taxes, depreciation and amortization, suggested that the value of PepsiCo’s vast Frito-Lay business was higher than the company’s stock price suggested. “That other announcement may be having an impact as well,” he said.

Investors were also heartened by a slight improvement in the North American beverage business, which grew 2.5 percent in the fourth quarter even though sales of carbonated beverages were down a bit.

The company introduced several twists on various products last year, including a Gatorade chew, Doritos dressed up with new, spicier flavors and Pepsi Next, which has roughly half the calories of a regular Pepsi.

The picture for the full year that ended in December was less uplifting. Earnings of $6.18 billion, or $3.92 a share, failed to match profits of $6.44 billion, or $4.03 a share, in 2011. Revenue slipped to $65.49 billion from $66.5 billion.

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Media Decoder Blog: Comcast Buying G.E.'s Stake in NBCUniversal for $16.7 Billion

5:30 p.m. | Updated Comcast said Tuesday that it has agreed to acquire General Electric’s remaining 49 percent stake in NBCUniversal for approximately $16.7 billion, completing a sale process that was expected to take several more years.

The acquisition will wrap up by the end of March, Comcast said in a news release. The move reflects Comcast’s optimism about NBCUniversal going forward, from its highly profitable cable channels to its theme parks and Web sites and the flagship NBC broadcast network.

Comcast also said that NBCUniversal would buy the NBC studios and offices at 30 Rockefeller Plaza, as well as the CNBC headquarters in Englewood Cliffs, N.J. Those transactions will cost about $1.4 billion. With the office space comes naming rights for the General Electric building, according to a GE spokeswoman. So it is possible that the giant red “GE” sign atop 30 Rockefeller Center could be replaced by a Comcast sign.

“This is an exciting day for Comcast as we have agreed to accelerate the purchase of NBCUniversal,” Comcast’s chief executive, Brian Roberts, said in a statement. “The management team at GE has been a wonderful partner during the past two years and their support has been very valuable. Our decision to acquire GE’s ownership is driven by our sense of optimism for the future prospects of NBCUniversal and our desire to capture future value that we hope to create for our shareholders.”

Comcast took control of NBCUniversal in early 2011 by acquiring 51 percent of the media company from General Electric.

At the time, Comcast committed to paying about $6.5 billion in cash and contributed all of its cable channels, including E! and some regional sports networks, to the newly established NBCUniversal joint venture. Those channels were valued at $7.25 billion.

The transaction made Comcast, the single biggest cable provider in the United States, one of the biggest owners of cable channels, too. NBCUniversal operates the NBC broadcast network, 10 local NBC stations, USA, Bravo, Syfy, E!, MSNBC, CNBC, the NBC Sports Network, Telemundo, Universal Pictures, Universal Studios, and a long list of other media brands.

Comcast had another five years to buy out General Electric’s interest in NBCUniversal, according to the terms of the original deal.

“We didn’t have to do it; GE didn’t have to sell now,” Mr. Roberts noted in an interview on CNBC on Tuesday. “But we came to an understanding that I think works out well for everybody. They get a lot of cash … and our shareholders have 100 percent of the upside here.”

Asked about a possible logo swap on the building, Mr. Roberts said, that’s “not something we’re focused on talking about today.”

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Frequent Flier: Lessons From a Talkative Airplane Seatmate - Frequent Flier

I’VE spent most of my career in the cosmetics industry, and now, as chief executive of Ahava North America, I’m doing many more business trips.

Q. How often do you fly for business?

A. Three to four times a month, mostly domestic, but international maybe once a month.

Q. What’s your least favorite airport?

A. Atlanta’s Hartsfield airport. There are just too many trams. I like an airport you can walk.

Q. Of all the places you’ve been, what’s the best?

A. Paris. I love the energy, the city’s grandeur, the architecture, everything. I think I was born to be there.

Q. What’s your secret airport vice?

A. I eat too much, always have a Starbucks, buy too many weekly magazines, and I always go into the lounges and look for yogurt-covered raisins. As far as I’m concerned, all those raisins are mine.

Flying can be a hassle since I miss my family. I’m married and have three daughters, and I like to spend as much time with them as possible. But I think, too, that my family is proud of me and my job, so there are certainly lessons they can learn from mom traveling a lot for work, but still making them the priority.

My husband and I have a standing joke. Since I fly with United so often both domestically and internationally, I see their brand videos constantly and I feel like I know the president, Jeff Smisek, personally. So when I’m on an evening flight, I always send a text to my husband before takeoff and say, “Jeff Smisek says good night.”

I recently participated in a parent-teacher conference while I was in Paris. I was in an airline lounge on the phone with the teacher. You learn to make do. I am in a book club with other mothers and their daughters. I need to keep up with everyone, and I get the bulk of my reading done when I’m traveling. I miss my daughters a lot when I do have to go away. So even feeling that connection by reading the same books makes going away a little easier.

Since I’ve traveled so much, especially internationally, I’m absolutely maniacal about full disclosure on customs forms. I don’t want any hassle.

One of Ahava’s shareholders produces dates, and as a way to welcome me to the company when I started, the shareholder gave me a few boxes. I put them in my luggage and then totally forgot they were in there. So I didn’t disclose them on the customs forms at Newark.

It was very early in the morning, about 4:30 a.m., and I went to the luggage carousel to wait for my bags. I did see my bags, as well as several dogs and their handlers huddled around my luggage. I had to go through a second round of security, which was pretty embarrassing. I should have eaten those dates during my trip.

I try to maximize my time in flight. I usually go straight to sleep and actively avoid conversation. However, recently, on a business trip to Israel, this woman sat next to me and introduced herself, saying, “Hi, my name is Mary Alice. We’re going to be spending a lot of time together on this flight.” The first thing I thought was, “Oh no, a talker.” But she was very sweet, so I figured we could talk for a few minutes.

I learned that this was her first time flying internationally, and that she was an 80-year-old Catholic nun. Traveling to Israel was at the top of her bucket list, and her sister-in-law donated her own frequent flier miles to her. Then her community pitched in and gave her some money so her dream could come true.

I wound up talking to her almost the entire trip. I realized how jaded I was becoming about travel. I’m so much younger than she was, but she was like a child, just so eager to see and experience new things. I gave her a lot of tips and advice about Israel, and she was very grateful.

But it was really me who was grateful. She made me realize that all the traveling I do really is a gift, and maybe all of us who travel a lot need to open up to our seatmates once in a while. Like me, you might learn something wonderful.

By Elana Drell-Szyfer, as told to Joan Raymond. E-mail: joan.raymond@nytimes.com.

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Bits Blog: Disruptions: Apple Is Said to Be Developing a Curved-Glass Smart Watch

Dick Tracy had one. As did Inspector Gadget and James Bond. A watch that doubled as a computer, two-way radio, mapping device or television.

Though such a device has been lost to science fiction comics and spy movies of the era before smartphones, the smart watch might soon become a reality, in the form of a curved glass device made by Apple.

In its headquarters in Cupertino, Calif., Apple is experimenting with wristwatch-like devices made of curved glass, according to people familiar with the company’s explorations, who spoke on the condition that they not be named because they are not allowed to publicly discuss unreleased products. Such a watch would operate on Apple’s iOS platform, two people said, and stand apart from competitors based on the company’s understanding of how such glass can curve around the human body.

Apple declined to comment on its plans. But the exploration of such a watch leaves open lots of exciting questions: If the company does release such a product, what would it look like? Would it include Siri, the voice assistant? Would it have a version of Apple’s map software, offering real-time directions to people walking down the street? Could it receive text messages? Could it monitor a user’s health or daily activity? How much will it cost? Could Timothy D. Cook, Apple’s chief executive, be wearing one right now, whispering sweet nothings to his wrist?

Such a watch could also be used to make mobile payments, with Apple’s Passbook payment software.

Although it would take Dick Tracy to find the answers to those questions, and it’s uncertain when Apple might unveil such a device, it’s clear that Apple has the technology.

Last year, Corning, the maker of the ultra-tough Gorilla Glass that is used in the iPhone, announced that it had solved the difficult engineering challenge of creating bendable glass, called Willow Glass, that can flop as easily as a piece of paper in the wind without breaking.

Pete Bocko, the chief technology officer for Corning Glass Technologies, who worked on Willow Glass, said via telephone that the company had been developing the thin, flexible glass for more than a decade, and that the technology had finally arrived.

“You can certainly make it wrap around a cylindrical object and that could be someone’s wrist,” Mr. Bocko said. “Right now, if I tried to make something that looked like a watch, that could be done using this flexible glass.”

But Mr. Bocko warns that it is still quite an engineering feat to create a foldable device. “The human body moves in unpredictable ways,” he said. “It’s one of the toughest mechanical challenges.”

To add to the excitement of an Apple watch, late last year the Chinese gadget site Tech.163 reported that the company had begun development of a watch featuring Bluetooth and a 1.5-inch display.

“Apple’s certainly made a lot of hiring in that area,” said Sarah Rotman Epps, a Forrester analyst who specializes in wearable computing and smartphones. “Apple is already in the wearable space through its ecosystem partners that make accessories that connect to the iPhone,” she said, adding: “This makes Apple potentially the biggest player of the wearables market in a sort of invisible way.”

“Over the long term wearable computing is inevitable for Apple; devices are diversifying and the human body is a rich canvas for the computer,” Ms. Epps said. “But I’m not sure how close we are to a new piece of Apple hardware that is worn on the body.”

Investors would most likely embrace an iWatch, with some already saying that wearable computing could replace the smartphone over the next decade.

“We believe technology could progress to a point where consumers have a tablet plus wearable computers, like watches or glasses, that enable simple things like voice calls, texting, quick searches, navigation,” Gene Munster, an analyst at Piper Jaffray, said in a report last month. “These devices are likely to be cheaper than an iPhone and could ultimately be Apple’s best answer to addressing emerging markets.”

Mr. Cook is clearly interested in wearables. In the past he has been seen wearing a Nike FuelBand, which tracks a user’s daily exertion. The FuelBand data is shared wirelessly with an iPhone app.

Bob Mansfield, Apple’s senior vice president for technologies, who previously ran hardware engineering, has also been particularly interested in wearables, an Apple employee said. Mr. Mansfield is engrossed by devices that connect to the iPhone, through Bluetooth, sharing information back and forth from the human body to the phone, including the Nike FuelBand and Jawbone Up.

If smartphones do become smart watches and smart glasses, Apple seems to have the technology to make standout wearable computers.

Last year the company filed patents for displays that sit over the eye and stream information to the retina. Given that the iPod Nano is about the size of an overfed ant, the company clearly knows how to make small devices, too.

But, maybe there are other devices coming before wearables. Apple has long been rumored to be working on a television-like experience. And, there is the possibility of an Apple car.

In a meeting in his office before he died, Steven P. Jobs, Apple’s co-founder and former chief executive, told John Markoff of The New York Times that if he had more energy, he would have liked to take on Detroit with an Apple car.

In August, during the company’s patent trial with Samsung, Philip W. Schiller, Apple’s senior vice president for worldwide product marketing, said on the stand that Apple had explored making “crazy stuff” before development of the iPhone and iPad, including a camera or a car. While Apple continues its experiments with wearables, its biggest competitor, Google, is pressing ahead with plans to make wearable computers mainstream.

According to a Google executive who spoke on the condition that he not be named, the company hopes its wearable glasses, with a display that sits above the eye, will account for 3 percent of revenue by 2015. Olympus is also working on wearable computers.

Google is holding private workshops in San Francisco and New York for developers to start building applications for its glasses. At the event in San Francisco last week, Hosain Rahman, chief executive of Jawbone, the maker of the Up, a wrist device that tracks people’s energy and sleep, said that “a decade from now we won’t be able to imagine life without the wearables that we use to access information, unlock our doors, pay for goods and most importantly track our health.”

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