Scarlett Johansson Hacker Gets 10 Years



A Florida man was sentenced Monday to 10 years in prison after pleading guilty to charges in connection to hacking the e-mail accounts of actress Scarlett Johansson and dozens of other celebrities.


Christopher Chaney, 35, of Jacksonville, Florida, had hijacked photos that Johansson took of herself in the nude. They appeared online and showed her looking seductively at a phone camera as she snapped images of her bare breasts while lying on a bed. Another image showed her bare backside, taken as she looked into a mirror.


Chaney told a local Florida news station last year that his hacking began simply as a “curiosity” but soon turned into an addiction for stealing celebrity secrets.


“It just happened and snowballed,” he said. “I didn’t know how to stop doing it myself.”


Some of Chaney’s victims also include Christina Aguilera, Mila Kunis and Renee Olstead. Dozens of other victims are identified by initials only.


U.S. District Judge S. James Otero of Los Angeles sentenced Chaney after reviewing a videotaped statement from a tearful Johansson.


Chaney, who used the online nicknames “trainreqsuckswhat,” “anonygrrl,” and “jaxjaguars911,” was indicted (.pdf) on nine counts of computer hacking, eight counts of aggravated identify theft, and nine counts of illegal wiretapping. His nickname “trainreqsuckswhat” is a reference to another alleged celebrity hacker named Josh Holly who told Threat Level in 2008 that he had hacked Miley Cyrus’ email account and stole suggestive photos of her that were later posted online.


Chaney was able to guess the passwords celebrities used for their email accounts by monitoring their social media accounts for possible clues — such as a pet’s name — that might point to a password.


Once he hacked into a celebrity’s e-mail account, he’d search the celebrity’s contact list for other celebrity e-mail accounts and then target those victims, too. He’d then alter the account settings to automatically forward a copy of any e-mails the celebrity received to an e-mail account Chaney controlled.


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Participant Media starts cable network for millenials






NEW YORK (TheWrap.com) – Participant Media, the company behind films including “Lincoln” and “The Help,” is starting a new cable network targeting millenial viewers, with content from Davis Guggenheim and The Jim Henson Company, among others.


It will be led by Evan Shapiro, who joined Participant in May after serving as President of IFC and Sundance Channel.






Participant has bought The Documentary Channel and entered into an agreement to acquire the distribution assets of Halogen TV from The Inspiration Networks. No terms were disclosed.


The combined and rebranded properties are expected to reach more than 40 million subscribers once the yet-to-be-named network launches in the summer.


“The goal of Participant is to tell stories that serve as catalysts for social change. With our television channel, we can bring those stories into the homes of our viewers every day,” said Participant chairman and founder Jeff Skoll.


Those producing content for the new network also include producer Brian Graden, The Jim Henson Company’s Brian Henson, columnist and blogger Meghan McCain, Morgan Spurlock, Gotham Chopra, filmmaker Mary Harron, writer/director Timothy Scott Bogart, and Cineflix Media, a TV producer and distributor in which Participant Media controls an equity interest.


Guggenheim directed the Oscar winning documentary “An Inconvenient Truth” for Participant.


“Our content will be specifically designed for the viewers that the pay TV eco-system is most at risk of losing,” said Shapiro. “We all know that Millennials are changing how media is consumed. However, they also have the strong desire and inimitable capacity to help change the world. Our research shows that there is a whitespace in the television landscape and we believe that a destination for ‘the next greatest generation’ will be a win for our affiliate partners, advertisers and the creative community.”


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A Conversation With S. Matthew Liao: Studying Ethical Questions as We Unlock the Black Box of the Brain


Béatrice de Géa for The New York Times


CAUTION S. Matthew Liao urges advance thinking about new technologies.







In a world of proliferating professions, S. Matthew Liao has a singular title: neuroethicist. Dr. Liao, 40, the director of the bioethics program at New York University, deploys the tools of philosophy, history, psychology, religion and ethics to understand the impact of neuroscientific breakthroughs.




We spoke over four hours in two sessions. A condensed and edited version of the conversations follows.


You’re a philosopher by training. How did philosophy lead to neuroethics?


Mine’s the typical immigrant’s story. My family moved to Cincinnati from Taiwan in the early 1980s. Once here, my siblings gravitated towards the sciences. I was the black sheep. I was in love with the humanities. So I didn’t go to M.I.T. — I went to Princeton, where I got a degree in philosophy. This, of course, worried my parents. They’d never met a philosopher with a job.


Do you have any insight on why scientific careers are so attractive to new Americans?


You don’t need to speak perfect English to do science. And there are job opportunities.


Define neuroethics.


It’s a kind of subspecialty of bioethics. Until very recently, the human mind was a black box. But here we are in the 21st century, and now we have all these new technologies with opportunities to look inside that black box — a little.


With functional magnetic imaging, f.M.R.I., you can get pictures of what the brain is doing during cognition. You see which parts light up during brain activity. Scientists are trying to match those lights with specific behaviors.


At the same time this is moving forward, there are all kinds of drugs being developed and tested to modify behavior and the mind. So the question is: Are these new technologies ethical?


A neuroethicist can look at the downstream implications of these new possibilities. We help map the conflicting arguments, which will, hopefully, lead to more informed decisions. What we want is for citizens and policy makers to be thinking in advance about how new technologies will affect them. As a society, we don’t do enough of that.


Give us an example of a technology that entered our lives without forethought.


The Internet. It has made us more connected to the world’s knowledge. But it’s also reduced our actual human contacts with one another.


So what would be an issue you might look at through a neuroethics lens?


New drugs to alter memory. Right now, the government is quite interested in propranolol. They are testing it on soldiers with post-traumatic stress disorder. The good part is that the drug helps traumatized veterans by removing the bad memories causing them such distress. A neuroethicist must ask, “Is this good for society, to have warriors have their memories wiped out chemically? Will we start getting conscienceless soldiers?”


What do you think?


It is a serious business removing memories, because memories can affect your personal identity. They can impact who you think you are. I’d differentiate between offering such a drug to every distressed soldier and giving it only to certain individuals with a specific need.


Let’s say you have a situation like that in “Sophie’s Choice,” where the memories are so bad that the person is suicidal. Even if the drug causes them to live in falsehood, that would have been preferable to suicide.


But should we give it to every soldier who goes into battle? No! You need memory for a conscience. Doing this routinely might create super-immoral soldiers. As humans we have natural moral reactions to the beings around us — sympathy for other people and animals. When you start to tinker with those neurosystems, we’re not going to react to our fellow humans in the right way anymore. One wonders about the wrong people giving propranolol routinely to genocidal gangs in places like Rwanda or Syria.


Some researchers claim to be near to using f.M.R.I.’s to read thoughts. Is this really happening?


The technology, though still crude, appears to be getting closer. For instance, there’s one research group that asks subjects to watch movies. When they look at the subject’s visual cortex while the subject is watching, they can sort of recreate what they are seeing — or a semblance of it.


Similarly, there’s another experiment where they can tell in advance whether you’re going to push the right or the left button. On the basis of these experiments some people claim they’ll soon be able to read minds. Before we go further with this, I’d like to think more about what it could mean. The technology has the potential to destroy any concept of inner privacy.


What about using f.M.R.I. to replace lie detectors?


The fact is we don’t really know if f.M.R.I.’s will be any more reliable or predictive. Nonetheless, in India, a woman was convicted of poisoning her boyfriend on the basis of f.M.R.I. evidence. The authorities said that based on the pictures of blood flow in her brain, she was lying to them.


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European Mobile Stocks Fall After Costly Spectrum Auction


BERLIN — Shares of four big European cellphone operators fell Monday after they paid more than twice what investors had been expecting in a spectrum auction in the Netherlands, raising concern that a damaging bidding war could sap the industry.


The Dutch auction began Oct. 31 and ended Friday, raising 3.8 billion euros, or $5 billion, for spectrum that the companies plan to use for high-speed service using Long Term Evolution, or LTE, technology. But analysts warned that the sale, to be followed next year by a much larger spectrum auction in Britain, could herald a new round of expensive infrastructure levies that might restrict operators at a time when their sales have been stagnating.


The winners were KPN, the former Dutch monopoly; Vodafone, the British mobile group; the German company T-Mobile; and the Swedish operator Tele2.


LTE supports all of the typical high-speed applications, including audio and video streaming and Internet browsing, but is much faster, cutting download times and significantly expanding the capacity of existing networks to handle increases in data traffic.


After the bidding, KPN, which is owned in part by the Mexican communications mogul Carlos Slim Helú, canceled its dividend for 2012 and lowered its projected investor payout for 2013 to cover the 1.35 billion euros the company spent in the auction.


On Monday, the first day of stock trading after the completion of the auction, shares of KPN fell nearly 15 percent in Amsterdam, the steepest drop in more than a decade. Shares of Vodafone were down 1.7 percent by the close of the day in London. Shares of Deutsche Telekom, the parent company of T-Mobile, fell 0.3 percent in Frankfurt, and shares of Tele2 declined 1 percent in Stockholm.


“The money raised in the Dutch auction was a lot more than investors were expecting,” said Phil Kendall, an analyst at Strategy Analytics in Milton Keynes, England. “The concern now is that the sums will now be so great the technology will be unprofitable.”


Mr. Kendall said mobile operators were eager to obtain additional spectrum because extensive bandwidth had become increasingly critical to handle the explosion of mobile Internet data, which is testing the capacity of some carriers’ grids and causing overloading.


“Really, for many operators, the only way they will be able to differentiate themselves from other operators is by having enough spectrum to manage the demand on their services,” Mr. Kendall said. “That is why there is such intense interest in buying more frequency.”


More radio spectrum, or wireless network capacity, is crucial to delivering the high speeds advertised for LTE, which theoretically can produce download rates of up to 300 megabits per second on a wireless connection. Such speeds and the expanded capacity of the networks are considered essential to support the rapid expansion of the wireless Internet, as well as the increasing use of mobile grids for robotic communication between devices.


Speeds on the first generation of LTE networks activated in Germany, South Korea, Sweden and the United States have averaged much less, generally 10 to 25 megabits per second, in part because operators do not have enough spectrum to exploit the technology’s full potential.


The Dutch auction also raised the specter of another costly round of infrastructure fees on the cellphone industry similar to those in 1999 and 2000, when operators paid billions for the first European 3G mobile licenses.


Investors were concerned that the Dutch prices could set a precedent for auctions planned in Britain and perhaps Poland next year, as well as others that will be held across Europe over the next five years, as bandwidth is freed up and sold by national governments to wireless carriers. Germany, which held its latest spectrum auction in 2010, has indicated that it may hold another in 2016.


Those license sales in 1999 and 2000, engineered in most cases by governments to extract the maximum from mobile operators, led to large profit write-downs by operators including Vodafone and Telefónica, which owns the carrier O2.


With completion of the Dutch auction, the focus will now shift to Britain, where the sector’s regulator is planning to begin its spectrum auction in January.


All four British mobile network operators are expected to bid: Everything Everywhere, the venture of Deutsche Telekom and France Telecom; Vodafone; O2 U.K.; and 3, a unit of Hutchison Whampoa. The former landline monopoly BT has not ruled out a potential bid, which could further raise the stakes.


Matthew Howett, an analyst at Ovum, a research firm in London, said the British auction could raise £2 billion to £4 billion, or $3.2 billion to $6.5 billion.


“The £2 billion to £4 billion range that is widely touted is based on similar auctions elsewhere in Europe,” he said. “There is nothing to suggest that the U.K. should be any different. It’s possibly the most competitive market in Europe and all existing operators will want to make sure they walk away with spectrum to feed the almost insatiable appetite we in the U.K. now have for data.”


This article has been revised to reflect the following correction:

Correction: December 17, 2012

An earlier version of this article erroneously stated the amount paid by KPN for spectrum in the auction. It was 1.35 billion euros, not $1.35 billion.



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Connecticut school gunman shot mother multiple times, autopsy finds









NEWTOWN, Conn. -- School shooter Adam Lanza killed his mother with "multiple" shots to her head and killed himself with a single shot to his head, according to a coroner’s report released Sunday.


After killing his mother in the home they shared, Lanza, 20, drove her car to Sandy Hook Elementary School, where he opened fire in two classrooms Friday morning, killing 20 children and six adults. He then turned the gun on himself.


The autopsy reports were released by Connecticut Chief Medical Examiner Dr. H. Wayne Carver II, who said earlier that all the children had been shot multiple times.





Officials have not identified the make of Lanza's weapon, which Carver has described only as a “long gun.”


As the autopsy reports were being released Sunday, a threatening phone call to a local church prompted a mid-service evacuation that jarred a day of mourning as residents throughout this community grappled with the aftermath of the elementary school massacre.


FULL COVERAGE: Connecticut school shooting


A church spokesman said police gave an all-clear soon after the evacuation at St. Rose of Lima Church. A SWAT team had surrounded the rectory across the parking lot from the main church building and hundreds of parishioners were forced to leave services that had been packed all morning.


"This is a very difficult time for all the families. We have seen incredible dignity in the faces of these people," church spokesman Brian Wallace said. The church was locked following the all-clear to "restore calm," Wallace said.


"I don't think anyone can be surprised about anything after what has happened," he said.


Earlier police said in a morning briefing that they may have to interview the youngest survivors of the school shooting as they try to determine the motive of the gunman.


State Police Lt. Paul Vance and Newtown Police Lt. George Sinko offered few new details of the crime or the investigation into the so-far inexplicable rampage at the elementary school.


Any motive -- speculation about Lanza's video game habits, and his relationship with the school and with his mother -- remained unconfirmed. Two days later, police still aren't saying why he did what he did.


PHOTOS: Connecticut school shooting


“For us to be able to give you the summary of the motive, we have to complete the investigation; we have to have the whole picture to say how and why this occurred," said Vance of the Connecticut State Police, the lead agency on the investigation. "There are weeks’ worth of work left for us to complete this."


Lanza's mother legally purchased the guns later recovered at the scene of the massacre, law enforcement officials have said. Officials have previously said those weapons included a military-style Bushmaster .223 rifle, a Glock 9-millimeter pistol and a Sig Sauer semiautomatic pistol, officials said.


Vance said police would be tracing the weapons' origins "back to their origin" at their manufacturers.


Connecticut Gov. Dan Malloy told CNN on Sunday morning: "What we know is he shot his way into the building, so he penetrated the building -- he wasn't buzzed in. He penetrated the building by literally shooting an entrance into the building."

Sinko, meanwhile, said it was "too early" to say if children ever would return to the two classrooms where the killings occurred. "It's too early to say, but I would find it very difficult for them to do that," he said.


Arrangements were under way for some children to report to another elementary school in Newtown when classes resume.


"We want to keep these kids together," said Sinko, explaining that they hoped children who were moved to new schools could stay with their classmates. "We want to move forward very slowly and respectfully," he added, by way of explaining why it was expected to take so long to interview surviving children.


At the news conference, Vance also said the FBI had been asked to help investigate false postings on social media sites that included "some things in somewhat of a threatening manner," and some that purported to be messages from the shooter himself or others involved in the incident.


"There are quotes by people who are posing as the shooter.... Suffice it to say, the information has been deemed as threatening," he said when asked to elaborate.


ALSO:


Suspect in massacre tried to buy rifle days before, sources say


In Newtown, death's chill haunts the morning after school shooting


Connecticut shooting: Gunman forced his way into school, police say






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‘Hobbit’ bests ‘Rings’ with $84.8 million opening






NEW YORK (AP) — Peter Jackson‘s “The Hobbit” led the box office with a haul of $ 84.8 million, a record-setting opening better than the three previous “Lord of the Rings” films.


The Warner Bros. Middle Earth epic was the biggest December opening ever, surpassing Will Smith’s “I Am Legend,” which opened with $ 77.2 million in 2007, according to studio estimates Sunday. “The Hobbit: An Unexpected Journey” also passed the December opening of “Avatar,” which opened with $ 77 million. Internationally, “The Hobbit” also added $ 138.2 million, for an impressive global debut of $ 223 million.






Despite weak reviews, the 3-D adaptation of J. R. R. Tolkien‘s first novel in the fantasy series was an even bigger draw than the last “Lord of the Rings” movie, “The Return of the King.” That film opened with $ 72.6 million. “The Hobbit” is the first of another planned trilogy, with two more films to be squeezed out of Tolkien’s book.


While Jackson’s “Rings” movies drew many accolades — “The Return of the King” won best picture from the Academy Awards — the path for “The Hobbit” has been rockier. It received no Golden Globes nominations on Thursday, though all three “Rings” films were nominated by the Hollywood Foreign Press Association for best picture.


Particularly criticized has been the film’s 48-frames-per-second (double the usual rate), a hyper-detailed look that some have found jarring. Most moviegoers didn’t see “The Hobbit” in that version, though, as the new technology was rolled out in only 461 of the 4,045 theaters playing the film.


Regardless of any misgivings over “The Hobbit,” the film was a hit with audiences. They graded the film with an “A” CinemaScore.


“What’s really important, what makes this special is the CinemaScore,” said Dan Fellman, president of domestic distribution for Warner Bros. “All these things point to a great word of mouth. We haven’t even made it to the Christmas holidays yet. Kids are still in school this week.”


The strong opening culminated a long journey for “The Hobbit,” which was initially delayed when a lawsuit dragged on between Jackson and “Rings” producer New Line Cinema over merchandizing revenue. At one point, Guillermo del Toro was to direct the film with Jackson producing. But eventually the filmmaker opted to direct the movie himself, originally envisioning two “Hobbit” films. The production also went through the bankruptcy of distribution partner MGM and a labor dispute in New Zealand, where the film was shot.


The long delay for “The Hobbit,” nearly a decade after the last “Lord of the Rings” film, made it “one of those movies that had everyone scratching their heads as to how it would open,” said Paul Dergarabedian, an analyst for box-office tracker Hollywood.com.


“It’s been a decade since the ‘Lord of the Rings‘ trilogy concluded,” said Dergarabedian. “There’s been so much anticipation for this film and having Peter Jackson back at the helm just made it irresistible both to fans and the non-initiated alike.”


The Hobbit” was far and away the biggest draw in theaters, with no other new wide release. Paramount’s “Rise of the Guardians” continued to draw the family crowd, with $ 7.4 million, bringing its cumulative total to $ 71.4 million. The Oscar contender “Lincoln” from Walt Disney crossed the $ 100 million mark, adding another $ 7.2 million to bring its six-week total to $ 107.9 million. And Sony‘s James Bond film “Skyfall,” with another $ 7 million domestically, drew closer to a global take of $ 1 billion.


The box office continued to be on the upswing and with anticipated releases like “Les Miserables,” ”Django Unchained” and “The Guilt Trip” approaching in the holiday moviegoing season. Dergarabedian expects the year to break the 2009 record of $ 10.6 billion. With some $ 10.2 billion in revenue thus far, he said, “We’re on track to be in that realm.”


Estimated ticket sales for Friday through Sunday at U.S. and Canadian theaters, according to Hollywood.com. Where available, latest international numbers are also included. Final domestic figures will be released Monday.


1. “The Hobbit: An Unexpected Journey,” $ 84.8 million ($ 138.2 million international).


2. “Rise of the Guardians,” $ 7.4 million ($ 20.1 million international).


3. “Lincoln,” $ 7.2 million.


4. “Skyfall,” $ 7 million ($ 12.2 million international).


5. “Life of Pi,” $ 5.4 million ($ 11.5 million international).


6. “The Twilight Saga: Breaking Dawn, Part 2,” $ 5.2 million ($ 13 million international).


7. “Wreck-It Ralph,” $ 3.3million ($ 4.7 million international).


8. “Playing for Keeps,” $ 3.2 million ($ 1.4 million international).


9. “Red Dawn,” $ 2.4 million.


10. “Silver Linings Playbook,” $ 2 million ($ 370,000 international).


___


Estimated weekend ticket sales at international theaters (excluding the U.S. and Canada) for films distributed overseas by Hollywood studios, according to Rentrak:


1. “The Hobbit: An Unexpected Journey,” $ 138.2 million.


2. “Rise of the Guardians,” $ 20. 1 million.


3. “The Twilight Saga: Breaking Dawn, Part 2,” $ 13 million.


4. “Skyfall,” $ 12.2 million.


5. “Life of Pi,” $ 11.5 million.


6. “Wreck-It Ralph,” $ 4.7 million.


7. “26 Years,” $ 3.5 million.


8. “Whatcha Wearin’? (My P.S. Partner),” $ 3 million.


9. “Tutto Tutto Niente Niente,” $ 2.4 million.


10. “Pitch Perfect,” $ 2.3 million.


___


Universal and Focus are owned by NBC Universal, a unit of Comcast Corp.; Sony, Columbia, Sony Screen Gems and Sony Pictures Classics are units of Sony Corp.; Paramount is owned by Viacom Inc.; Disney, Pixar and Marvel are owned by The Walt Disney Co.; Miramax is owned by Filmyard Holdings LLC; 20th Century Fox and Fox Searchlight are owned by News Corp.; Warner Bros. and New Line are units of Time Warner Inc.; MGM is owned by a group of former creditors including Highland Capital, Anchorage Advisors and Carl Icahn; Lionsgate is owned by Lions Gate Entertainment Corp.; IFC is owned by AMC Networks Inc.; Rogue is owned by Relativity Media LLC.


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Mislabeled Foods Find Their Way to Diners’ Tables





ATLANTA — The menu offered fried catfish. But Freddie Washington, a pastor in Tuscaloosa, Ala., who sometimes eats out five nights a week and was raised on Gulf Coast seafood, was served tilapia.







Dustin Chambers for The New York Times

Consumers are misled most frequently when they buy fish, investigators say, because diners have such limited knowledge about seafood. 







It was a culinary bait and switch. Mr. Washington complained. The restaurant had run out of catfish, the manager explained, and the pastor left the restaurant with a free dinner, an apology and a couple of gift certificates.


“If I’m paying for a menu item,” Mr. Washington said, “I’m expecting that menu item to be placed before me.”


The subject of deceptive restaurant menus took on new life last week when Oceana, an international organization dedicated to ocean conservation, released a report with the headline “Widespread Seafood Fraud Found in New York City.”


Using genetic testing, the group found tilapia and tilefish posing as red snapper. Farmed salmon was sold as wild. Escolar, which can also legally be called oil fish, was disguised as white tuna, which is an unofficial nickname for albacore tuna.


Every one of 16 sushi bars investigated sold the researchers mislabeled fish. In all, 39 percent of the seafood from 81 grocery stores and restaurants was not what the establishment claimed it was.


“This thing with fish is age old, it’s been going on forever,” said Anne Quatrano, an Atlanta chef who opened Bacchanalia 20 years ago and kick-started the city’s sustainable food movement. “Unless you buy whole fish, you can’t always know what you’re getting from a supplier.”


Swapping one ingredient for a less expensive one extends beyond fish and is not always the fault of the person who sells food to the restaurant. Many a pork cutlet has headed to a table disguised as veal, and many an organic salad is not.


The term organic is regulated by the Department of Agriculture, but many other identifying words on a menu are essentially marketing terms. Unscrupulous chefs can falsely claim that a steak is Kobe beef or say a chicken was humanely treated without penalty.


In cases of blatant mislabeling, a chef or supplier often takes the bet that a local or federal agency charged with stopping deceptive practices is not likely to walk in the door. “This has been going on for as long as I’ve been cooking,” said Tom Colicchio, a New York chef and television personality. “When you start really getting into this stuff, there’s so many things people mislabel.”


At Mr. Colicchio’s New York restaurants, all but about 5 percent of the meat he serves is from animals raised without antibiotics, he said. It costs him about 30 percent more, so he charges more. “Yet I have a restaurant down the street that says they have organic chicken when they don’t, and they charge less money for it,” he said. “It’s all part of mislabeling and duping the public.”


Consumers are misled most frequently when they buy fish, investigators say, because there are so many fish in the sea and such limited knowledge among diners. The Food and Drug Administration lists 519 acceptable market names for fish, but more than 1,700 species are sold, said Morgan Liscinsky, a spokesman with the agency.


Marketing thousands of species in the ocean to a dining public who often has to be coaxed to move beyond the top five — shrimp, tuna, salmon, pollock and tilapia — is not an exact science.


The line between marketing something like Patagonian toothfish as Chilean sea bass or serving langostino and calling it lobster is a fine one.


Robert DeMasco, who owns Pierless Fish, a wholesaler in New York, used a profanity to describe someone who buys farm-raised fish and sells it as wild. “But on some of this, they’re splitting hairs,” he said.


In 2005, a customer sued Rubio’s, a West Coast taco chain, for misleading the public by selling a langostino lobster burrito. The FDA ruled that practice acceptable, which allowed chains like Long John Silver’s and Red Lobster to sell the crustacean called langostino and legally attach the word lobster to it. Maine lobstermen and lawmakers fought the decision unsuccessfully.


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Fiscal Cliff Casts Big Shadow on Sunnier 2013 Economic Forecasts





The American economy could finally have a pretty good year next year — assuming Washington does its part.




Economists see a number of sources of underlying strength in the economy, but for the growth to gain traction, they say, political leaders need to avoid the broad tax increases and spending cuts now being debated.


The nascent housing rebound, the natural gas boom, record profit margins, a friendlier credit market for small businesses, along with pent-up demand for autos and other big purchases, could in combination unleash growth and hiring that the economy needs.


“Underneath all the shenanigans in Washington, there’s a lot of strengthening,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.


More robust growth next year — perhaps higher than 3 percent later in the year, according to some of the more optimistic forecasts — would certainly be a stark reversal from the current sluggish path.


There is a range of opinion among economists, though, and some warn of continued sluggishness, especially in the beginning of the year.


Estimates for the last quarter of 2012 are hovering around an unusually weak 1 percent annualized rate.


That dismal pace is driven partly by drags from Europe’s recession and China’s slowdown; partly by companies readjusting after potentially overstocking their back-room shelves in the third quarter; and largely by worries about the so-called fiscal cliff of spending cuts and tax increases set for early 2013.


Surveys of consumer and business confidence in recent weeks have plummeted to recession-era lows. With such uncertainty, businesses have also recently curtailed spending on capital investments like computers, delivery trucks and other equipment, apparently in anticipation of higher tax rates and the destructive side effects of government cutbacks. Given that capital expenditures have been weak recently, some economists believe businesses will start spending more if Congress ends or at least delays the risk of severe fiscal tightening.


“You would think there must be for most businesses a list of projects they’d like to do which they’ve just been pushing a little bit into the future because they haven’t been able to justify taking the risk because they don’t know what’s around the corner,” said Nigel Gault, chief United States economist for IHS Global Insight. “When they know more about the future, and what tax rates they’ll be paying, they will be able to dust off those plans and finally execute them.”


Improving access to credit helps these capital expenditures become not only more attractive, but also more accessible. Commercial and industrial loans have been rising in recent months, according to the Federal Reserve. The National Federation of Independent Business has also reported that the share of small business owners who say their credit needs are not being met has been falling.


Additionally, corporate profits reached a high, even adjusting for inflation, in the third quarter. Companies have amassed a lot of cash that they can use to buy equipment or hire people if they feel secure enough about the recovery.


Consumers, on the other hand, are still not exactly cash-rich, particularly since their disposable income has been flat to falling in recent months. But in the last few years they have deleveraged greatly — either by paying down debt or having it written off through default — and, more important, they are feeling a little wealthier because the housing market appears to have bottomed out. The country has finally worked its way through the excess housing inventory from the bubble years, and now housing prices and housing construction are rising.


Household formation is picking up: young people are finally moving into their own homes, as are other Americans who had lived with family or friends.


“We’re slowly but steadily improving, with more job opportunities in particular for younger households,” said Mark Zandi, chief economist at Moody’s Analytics. “They can only live with their parents for so long. There are powerful centrifugal forces in those households, on both sides. As soon as they have a chance to get out, many will take it.”


Demographic data suggests that there should be about a million more households headed by younger Americans today than there actually are. That bodes well for continued formation of households next year, and new household formation is typically accompanied by other spending like furniture and kitchenware. Under normal circumstances, each new household adds about $145,000 to output that year as the spending ripples through the economy, Mr. Zandi says.


As is the case with businesses, economists see consumers unleashing some of their pent-up demand for cars. The average age of all vehicles in operation in America is at a record high of 11.2 years, according to the research firm R. L. Polk, which tracks vehicle sales and registrations. Vehicle sales have already been posting large gains this year.


The major caveat to all these relatively upbeat indicators, of course, is that Congress might override all this strength with deep austerity measures.


Even without all of the federal tax increases and spending cuts scheduled for 2013, the government sector will slow growth because state and local governments are still shrinking, said Michael Feroli, chief United States economist for JPMorgan Chase. The sharp fiscal tightening at the federal level under current law would not only drag on growth but throw the entire economy back into recession, according to numerous private and government forecasters.


The nonpartisan Congressional Budget Office has estimated that the entirety of the so-called fiscal cliff would shave about three percentage points off gross domestic product growth next year.


A more modest tightening along the lines of what President Obama wants — which would include extending most existing tax rates and spending programs — would still substantially reduce growth, analysts say. Charles Dumas, the chairman of Lombard Street Research, forecasts about a two percentage point subtraction from output growth next year under a situation where most of the Bush tax cuts are kept, the payroll tax holiday is phased out and most of the scheduled spending cuts are eliminated.


“The full drag posed by the cliff is sufficient to erase roughly two and a half years’ worth of economic gains,” said Joseph A. LaVorgna, chief United States economist at Deutsche Bank.


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Apple takes investors on a wild ride









SAN FRANCISCO — With only modest expectations, Robert Leitao of Santa Clarita made a decision in 1994 that would change his life. He bought Apple stock.


This was several years before Steve Jobs returned to resurrect Apple, long before the iPod, the iPhone or the iPads that would make Apple the most valuable company in the world. A $1 investment in Apple at the start of 1994 is now worth about $70.


"Even with the recent sell-off, I'm still doing very well with the stock," said Leitao, who works as director of operations at a Catholic church in Burbank. "Apple provided for a down payment on our home for our blended family of four kids."





Leitao is one of the countless people whose lives have been touched by Apple's stock, which has become a global economic force. It is now one of the most widely held stocks, and the most valuable. Even as Apple Inc.'s market value fell to $480 billion on Friday, it was still larger than the gross domestic product of Norway or Argentina, and more than the combined value of Google Inc. and Microsoft Corp.


Yet that astonishing size and economic influence is also what, many analysts believe, contributes to the extraordinary volatility that can make owning Apple's stock a hair-raising experience.


It was inevitable, analysts say, that after Apple's stock rose 74% in the first nine months of this year, a huge wave of selling would occur as fund managers locked in their profits. And yet, in recent years, these huge dips have been followed by even bigger run-ups that led to new record highs, a dynamic that one trader refers to as the "Apple slingshot."


That pattern has some analysts betting Apple will soar above $1,000 a share in 2013, a scenario almost guaranteed to drive the global obsession with the company's stock into an even greater frenzy.


"The impact on shareholders and on the economy is incredible," said Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. "We've not seen anything like this in the modern trading era. Ever."


Even after the remarkable decade of Apple's revival, the company's stock managed to reach new milestones this year. Early in 2012, Apple became the sixth company ever to surpass $500 billion in market value. In August, it became the only company in history with a market value topping $622 billion.


That performance affects just about anyone who has a 401(k) account or a pension. According to FactSet, a research firm that tracks investment funds, 2,555 institutional investors — mutual funds, hedge funds and pension funds, among others — owned stock in Apple, just behind the 2,590 that held Microsoft stock, as of Sept. 30, the most recent date funds had to disclose their holdings. However, the value of that Apple stock held by institutional investors on that day was $427 billion, compared with $172 billion for Microsoft, according to FactSet.


Silverblatt said the only company that has come close to having such a strong influence on the broader stock markets since World War II is IBM in the early 1980s, when the PC revolution was just getting started. But not only is the value of Apple's stock remarkable, so is its volatility. Such large stocks rarely have such big, quick swings.


Apple shares peaked at $702.10 on Sept. 19, up from $401.44 at the start of the year, a run that astonished analysts. But just as remarkable has been its collapse, falling as low as $505.75 in intra-day trading Nov. 16.


"It's just amazing because it's such a large company," said Brian Colello, a senior research analyst at Morningstar. "The company lost about $35 billion in market cap in one day. That's the size of some large-cap stocks."


Yet such swings have become commonplace for Apple stock. Before its latest swoon of 23.4% since its September high, Apple had experienced three previous corrections of more than 10% over the last two years.


The value of Apple's stock and its extreme swings have made researching it and trading it almost a full-time job for some people. Jason Schwarz of Marina del Rey edits EconomicTiming.com, which sends out up to five newsletters each week to its 1,000 clients that focus in large measure on Apple. He also helps run Lone Peak Asset Management, which has about $500 million in assets.


Schwarz says that what he calls the "Apple slingshot" is actually a virtue of the shares.


"The extraordinary volatility is the result of Apple's strength," Schwarz said. "People try to blame the volatility on Apple's weaknesses."


Schwarz and many other Apple believers argue that people are making a big mistake when they try to understand the stock's behavior by focusing on various bits of bad news such as an executive shake-up, the Maps controversy or questions about market share or competition. They have almost nothing to do with the regular hits taken by Apple shares, the argument goes.


Instead, folks like Schwarz say more technical factors are at work, such as the fact that the fiscal year for many stock funds ends Oct. 31. When the stock peaked in September, many fund managers rushed to sell to lock in profits for the year. Apple stock makes so much money for so many people, then plummets when shareholders pause to reap their profits, Schwarz says.


The volatility has continued in recent weeks, the argument goes, because fears of higher taxes next year have many fund managers trying to take advantage of short-term swings to make bigger profits. That volatility offers tantalizing windows for huge, short-term profits for investors willing to take the risk.





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