Tool Kit: Some Premium Headphones Amplify Celebrities Over Sound

If you are planning a $200 splurge on premium headphones — as millions of people are this year — who will give you the most for your money? Maybe a rapper like Dr. Dre, 50 Cent, Nick Cannon or Ludacris?

Or will you get better sound with headphones branded by rockers like Motörhead or inspired by the reggae artist Bob Marley?

Maybe headphones associated with the sports stars Tim Tebow and Michael Phelps or the reality television star Nicole Polizzi, better known as Snooki, produce even better sound?

This is how headphones are marketed these days — affinity headphones, if you will. The sequins, rhinestones, feathers and faux leopard print on Ms. Polizzi’s $60 headphones attract buyers as much as their sound quality does. Headphones are in high demand. The Consumer Electronics Association estimates 79 million were sold last year, and it predicts 10 percent more than that will be sold this year. But the category of headphones costing more than $100 is growing even faster — 64 percent, according to market analysts at the NPD Group.

That is wonderful news for retailers who feel their profit margins squeezed on laptops, televisions and most other electronic products. “Retailers can make more on a high-end pair of headphones than they can make selling a smartphone in many instances,” said Ross Rubin of Reticle Research, a consumer electronics research firm.

Knowing what’s behind the marketing can help a consumer avoid the hype when choosing a product. Headphone designers estimate the cost of making a “fashion headset” selling for $200 is as low as $14. “I would have guessed $20 to $22,“ said Tim Hickman, whose California Headphone Company and Fanny Wang Headphone Company brands are made in China.

“When you look at a $300 Beats headphone, how much does it cost to tool the enclosure, how much does it cost to stamp the thing out?” said John Chen, director of sales for the audio manufacturer Grado Labs. “Stamping it out is pennies.”

“I wish that were true,” said Noel Lee, founder of Monster Products, which until December produced Beats by Dr. Dre headphones. “I’m going to say it’s in the $40 and up range to make a quality product.” (Monster also makes those $80 HDMI cables at electronics stores, the ones that cost much less at Monoprice.com.)

The growth in pricey headphones is yoked to the growth of tablets and phones. IPods and other media players come with basic earphones, but the expanded menu of music and video apps now available encourage people to replace those with higher-quality headphones.

“What is really pushing premium headphones is not just the growth in mobile smartphones and tablets, but video and music services like Netflix and Spotify, that make people want a better listening device,” said Benjamin Arnold, a consumer electronics industry analyst for NPD. “It’s serious consumption rather than 30-second YouTube clips.”

The rush into premium headphones was set off in 2008 by the Beats by Dr. Dre brand, which marketed headphones like Air Jordan basketball shoes. (HTC, the Taiwanese cellphone maker, was once the majority shareholder of the Beats venture and still owns a 25 percent interest.) Headphones had traditionally been sold on technical specs like frequency response, but Beats created appealing designs in an array of colors. It also tweaked the headphones with brain-rattling bass.

Monster lost the rights to make the Beats, but has introduced 12 of its own headphones, none with a celebrity name on the brand, although some have celebrity endorsers. NPD found that celebrity endorsement was extremely or very important to 30 percent of consumers, and was the top factor driving purchases of headphones costing more than $100. Consumers say they want sound quality, but brand counts heavily too.

“Basically good-enough sound is good enough if everything else is in line, like brand and color,” Mr. Arnold said. “You see young people walking around the mall with them around their necks. They aren’t even on their ears.”

Not all headphones work on the same economics as the fashion brands. Classic brands like AKG, Shure, Audio-Technica, Grado and Klipsch still market based on realistic sound and value. With no celebrity endorsers to share profits and a nearly unlimited shelf life, because the style doesn’t change with fashion, the marketing model is different.

This article has been revised to reflect the following correction:

Correction: February 21, 2013

An earlier version of this article misstated the ownership stake of HTC, the Taiwanese cellphone maker, in the Beats venture. It is 25 percent, not a majority.

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Deadly Bombings Hit Southern India City

Mahesh Kumar A/Associated Press

A member of the bomb squad with a sniffer dog arrived at a blast site in Hyderabad on Thursday.

NEW DELHI — Two bombs planted on bicycles killed at least 13 people and wounded some 70 in a busy shopping district in the southern India city of Hyderabad at the height of Thursday’s evening rush hour, the largest terrorist bombing in the country since September 2011.

Sushil Kumar Shinde, India’s home affairs minister, said the central government had warned state governments that such an attack was planned. “We have had some information for the last two days of such an incident,” he said.

Hyderabad, one of India’s largest cities and a leading center of the country’s burgeoning pharmaceutical and biotechnology industries, has suffered other such attacks in recent years, usually linked to sectarian friction. The blast sites on Thursday — in the Dilsukh Nagar neighborhood, packed with shops, restaurants, theaters and a huge produce market — were quickly mobbed by protesters, reporters, the curious, and politicians and their large security contingents. Television news footage in the hours afterward showed chaotic scenes, with some investigators trying to find the remains of explosive devices while huge numbers of people jostled for space around them.

Mr. Shinde, speaking to journalists in New Delhi, said that the bicycles were 150 meters away from each other and the bombs detonated about 10 minutes apart , killing eight at one site and three at the other. But he forewarned that the toll could rise, and it did so, with 13 reported dead by midnight.

In a Twitter message, Prime Minister Manmohan Singh said. “This is a dastardly attack, the guilty will not go unpunished.”

They and other officials sought to diminish the chances of the kind of sectarian rioting that has long plagued the country.

Asked in a news conference if he believed that Muslim extremists were to blame for the bicycle blasts, Mr. Shinde said: “We have to investigate. We should not come to conclusion immediately.”

Mr. Singh, said in another Twitter message, said: “I appeal to the public to remain calm and maintain peace.”

Asaduddin Owaisi, a Muslim member of Parliament from Hyderabad, called the blasts “cowardly.”

“I feel that the priority is to maintain peace,” he said. “Let us not fall pray to rumors.” The crush of government officials at the blast sites, along with their with enormous entourages and their own police squads, was portrayed by NDTV-News as particularly unhelpful. The money and resources spent on protecting bureaucrats and politicians has become a source of increasing controversy in India, especially in the wake of a highly publicized gang-rape case in December in New Delhi. But Indian politicians, like those elsewhere, often compete with each other to show who is tougher on acts of terrorism and other crimes.

“We’ve seen political leaders come into the area and hold press conferences,” the anchor on NDTV said. “That’s the last thing they should be doing.”

Kiran Kumar Reddy, the chief minister of Andhra Pradesh, held a news conference away from the scene late Thursday night and asked people to stay away from the blast areas. Renuka Chowdhury, a leader of the Indian National Congress Party, pleaded with other politicians to stay away as well.

“I really wish politicians would recognize this,” Ms. Chowdhury said.

The bombings in recent years in Hyderabad have often used homemade explosives.

In May 2007, 13 people died after a bomb went off at the Mecca Masjid, including some who were killed in clashes between the police and Muslim protesters afterward. In August 2007, a pair of synchronized explosions tore through two popular gathering spots in Hyderabad, killing at least 42 and wounding dozens. Police found and defused 19 more bombs in the hours after the blasts, left at bus stops, theaters, pedestrian bridges and intersections.

In New Delhi in September 2011, a briefcase exploded near the high court, killing at least 12 people and injuring scores.

Hari Kumar contributed reporting.

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DealBook: A Revolving Door in Washington That Gets Less Notice

Obsess all you’d like about President Obama’s nomination of Mary Jo White to head the Securities and Exchange Commission. Who heads the agency is vital, but important fights in Washington are happening in quiet rooms, away from the media gaze.

After a widely praised stint as a tough United States attorney, Ms. White spent the last decade serving so many large banks and investment houses that by the time she finishes recusing herself from regulatory matters, she may be down to overseeing First Wauwatosa Securities.

Ms. White maintains she can run the S.E.C. without fear or favor. But the focus shouldn’t be limited to whether she can be effective. For lobbyists, the real targets are regulators and staff members for lawmakers.

Ms. White, at least, will have to sit for Congressional testimony, answer occasional questions from the media and fill out disclosure forms. Staff members, however, work in untroubled anonymity for the most part. So, while everyone knows there’s a revolving door — so naïve to even bring it up! — few realize just how fluidly it spins.

Take what happened late last month as Washington geared up for more fights about the taxing, spending and the deficit. The Senate majority leader, Harry Reid, Democrat of Nevada, decided to bolster his staff’s expertise on taxes.

So on Jan. 25, Mr. Reid’s office announced that he had appointed Cathy Koch as chief adviser to the majority leader for tax and economic policy. The news release lists Ms. Koch’s admirable and formidable experience in the public sector. “Prior to joining Senator Reid’s office,” the release says, “Koch served as tax chief at the Senate Finance Committee.”

It’s funny, though. The notice left something out. Because immediately before joining Mr. Reid’s office, Ms. Koch wasn’t in government. She was working for a large corporation.

Not just any corporation, but quite possibly the most influential company in America, and one that arguably stands to lose the most if there were any serious tax reform that closed corporate loopholes. Ms. Koch arrives at the senator’s office by way of General Electric.

Yes, General Electric, the company that paid almost no taxes in 2010. Just as the tax reform debate is heating up, Mr. Reid has put in place a person who is extraordinarily positioned to torpedo any tax reform that might draw a dollar out of G.E. — and, by extension, any big corporation.

Omitting her last job from the announcement must have merely been an oversight. By the way, no rules prevent Ms. Koch from meeting with G.E. or working on issues that would affect the company.

The senator’s office, which declined to make Ms. Koch available for an interview, says that she will support the majority leader in his efforts to close corporate tax loopholes. His office said in a statement that the senator considered her knowledge of the private sector to be an asset and that she complied with “all relevant Senate ethics rules and disclosures.”

In a statement, the senator’s spokesman said, “The impulse in some quarters to reflexively cast suspicion on private sector experience is part of what makes qualified individuals reluctant to enter public service.”

Over in bank regulatory land, meanwhile, January was playing out like a Beltway remake of “Freaky Friday.”

Julie Williams, chief counsel for the Office of the Comptroller of the Currency and a major friend of the banks for years, had been recently shown the door by Thomas J. Curry, the new head of the regulator. Banking reform advocates took that to be an omen that a new era might be dawning at the agency, which has often been a handmaiden to large banks.

Ms. Williams, of course, landed on her feet. She’s now at the Promontory Financial Group, a classic Washington creature that is a private sector mirror image of a regulatory body. Promontory is the Shadow O.C.C. The firm was founded by a former head of the agency, Eugene A. Ludwig, and if you were to walk down the halls swinging a copy of the Volcker Rule, you would be sure to hit a former O.C.C. official. Promontory says only about 5 percent of its employees comes from the O.C.C., but concedes that more than a quarter are former regulators.

Promontory, as the firm explains on its Web site, “excels at helping financial companies grapple with and resolve critical issues, particularly those with a regulatory dimension.” But it plays for the other team, too, by helping the O.C.C. put into effect regulatory reviews. The dreary normality of this is a Washington scandal in the Michael Kinsley sense: a perfectly legal one.

Promontory, which demurred on a request to talk with Ms. Williams, has a different view. The firm doesn’t lobby or help in litigation. It argues that after banks stop fighting regulators and lobbying against rules, then they come to Promontory to figure out how to fix their problems and comply.

“We are known in the industry as the tough-love doctors,” said Mr. Ludwig, the chief executive of Promontory. “I am deeply committed to financial stability, and the only way to have stability is to do the right thing in both the spirit and letter of the law.”

Hmm. Remember the Independent Foreclosure Review, the program that the O.C.C. and other federal bank regulators trumpeted as the largest effort to compensate victims of big banks’ foreclosure abuses? As my colleague at ProPublica, Paul Kiel, detailed last year, that review involved consultants like Promontory essentially letting banks decide who was victimized. How well did that work? So well that the regulators had to scuttle the program because it hadn’t given one red cent to homeowners but somehow, I don’t know how, managed to send more than $1.5 billion to consultants — including Promontory.

Promontory maintains that it complied with the conditions set out by the O.C.C. And the review was replaced by a settlement, which the regulators say will compensate victims — though the average payout is small beer.

Who, exactly, makes the rules at the O.C.C.? I mentioned “Freaky Friday.” That’s because at the agency, Ms. Williams is being replaced by Amy Friend. And where is Ms. Friend coming from? Wait for it … Promontory. In March, maybe they’ll do the switcheroo back.

The O.C.C. didn’t make Ms. Friend available but said that her “talent, integrity and commitment to public service are beyond reproach” and would be subject to the rule requiring her to recuse herself for a year on matters specifically relating to her former employer.

I spoke with people who said she was a smart and dedicated public servant, an expert on the Dodd-Frank Act who can help complete the scandalously long list of unfinished rules and expedite its adoption.

“Amy Friend is absolutely rowing in the right direction,” said a Senate staff member who worked on efforts to push for stronger financial regulation.

Let’s hope so.

But people also described Ms. Friend as pragmatic. In Washington, that’s the ultimate compliment. Sadly, that has come to mean someone who seeks compromise and never pushes for an overhaul when a quarter-measure will do.

Washington today resembles something like the end of “Animal Farm.” People move from one side of the table to the other and up and down the Acela corridor with ease. An outsider looking at a negotiating table would glance from lobbyist to staff member, from colleague to former colleague, from pig to man and from man to pig and find it impossible to say which is which.

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Global Update: New Polio Strains That Protect Vaccine Factory Workers

Scientists have created new strains of polio intended to protect workers in factories that make polio vaccine. The new strains have the same ability to invoke an immune reaction as the live viruses now used to make vaccine do, but there is virtually no risk anyone will get polio if one of the new strains somehow escapes.

The research team, at the State University of New York at Stony Brook, is led by Eckard A. F. Wimmer, a molecular geneticist who made headlines in 1991 when he synthesized polio virus in the lab from its chemical components, the first time a virus had been made outside of living cells.

The world is very close to eliminating polio, which is now endemic to only three countries: Afghanistan, Nigeria and Pakistan. But to be sure the disease is gone, children will have to be vaccinated for several years after the last detected case.

Currently, factories making the injectable Salk vaccine used in the United States and Europe start with the dangerous wild-type viruses known as Types 1, 2 and 3. After growing a large batch, vaccine makers “kill” the virus with formaldehyde and prepare it for syringes. The finished product is safe, but if the growing live viruses ever escaped “because of a leak, an explosion, an earthquake, a tsunami, a flood,” Dr. Wimmer said, “the spill could spread like wildfire.”

Right now, polio eradication depends on large sweeps by volunteers putting drops of the oral Sabin vaccine into children’s mouths. It is easy to give, and it produces better immunity because it reaches the intestines, which are lined with receptors for the virus.

The Sabin vaccine has drawbacks, however: it contains a still-live virus that was mutated long ago so that it is usually too weak to produce disease. In rare cases, it can mutate back into a dangerous form that paralyzes or kills. And the vaccine is risky in children with immune-system problems. For those reasons, the World Health Organization plans to eventually phase it out.

Once that happens, factories around the world will have to make millions more doses of the injectable version, so five years ago, the W.H.O. began looking for safer seed strains of virus.

Dr. Wimmer and colleagues took a part of the virus’s RNA that is crucial for growth, mutated it to weaken it, and inserted it in another stretch of RNA that controls how virulent the virus is. That renders the virus less lethal. “If it were to get into the brain, it doesn’t do any harm,” he said.

And, he explained, even if the virus evolved to defeat that virulence-lowering mutation, it would simultaneously cripple its own ability to reproduce.

Now Dr. Wimmer’s team is working with the Crucell vaccine company to prove that the safer strains grow well in Crucell’s proprietary human cell line. Ideally, he said, the new vaccine will eventually be mixed with others like those for measles and diphtheria, and all will be delivered together in one painless shot by a jet injector.

This article has been revised to reflect the following correction:

Correction: February 20, 2013

An earlier version of this article misstated the location of a university. It is in Stony Brook, not Stonybrook.

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Global Update: New Polio Strains That Protect Vaccine Factory Workers

Scientists have created new strains of polio intended to protect workers in factories that make polio vaccine. The new strains have the same ability to invoke an immune reaction as the live viruses now used to make vaccine do, but there is virtually no risk anyone will get polio if one of the new strains somehow escapes.

The research team, at the State University of New York at Stony Brook, is led by Eckard A. F. Wimmer, a molecular geneticist who made headlines in 1991 when he synthesized polio virus in the lab from its chemical components, the first time a virus had been made outside of living cells.

The world is very close to eliminating polio, which is now endemic to only three countries: Afghanistan, Nigeria and Pakistan. But to be sure the disease is gone, children will have to be vaccinated for several years after the last detected case.

Currently, factories making the injectable Salk vaccine used in the United States and Europe start with the dangerous wild-type viruses known as Types 1, 2 and 3. After growing a large batch, vaccine makers “kill” the virus with formaldehyde and prepare it for syringes. The finished product is safe, but if the growing live viruses ever escaped “because of a leak, an explosion, an earthquake, a tsunami, a flood,” Dr. Wimmer said, “the spill could spread like wildfire.”

Right now, polio eradication depends on large sweeps by volunteers putting drops of the oral Sabin vaccine into children’s mouths. It is easy to give, and it produces better immunity because it reaches the intestines, which are lined with receptors for the virus.

The Sabin vaccine has drawbacks, however: it contains a still-live virus that was mutated long ago so that it is usually too weak to produce disease. In rare cases, it can mutate back into a dangerous form that paralyzes or kills. And the vaccine is risky in children with immune-system problems. For those reasons, the World Health Organization plans to eventually phase it out.

Once that happens, factories around the world will have to make millions more doses of the injectable version, so five years ago, the W.H.O. began looking for safer seed strains of virus.

Dr. Wimmer and colleagues took a part of the virus’s RNA that is crucial for growth, mutated it to weaken it, and inserted it in another stretch of RNA that controls how virulent the virus is. That renders the virus less lethal. “If it were to get into the brain, it doesn’t do any harm,” he said.

And, he explained, even if the virus evolved to defeat that virulence-lowering mutation, it would simultaneously cripple its own ability to reproduce.

Now Dr. Wimmer’s team is working with the Crucell vaccine company to prove that the safer strains grow well in Crucell’s proprietary human cell line. Ideally, he said, the new vaccine will eventually be mixed with others like those for measles and diphtheria, and all will be delivered together in one painless shot by a jet injector.

This article has been revised to reflect the following correction:

Correction: February 20, 2013

An earlier version of this article misstated the location of a university. It is in Stony Brook, not Stonybrook.

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F.C.C. Moves to Ease Wireless Congestion

WASHINGTON — The Federal Communications Commission on Wednesday took a step to relieve growing congestion on Wi-Fi networks in hotels, airports and homes, where Americans increasingly use multiple data-hungry tablets, smartphones and other devices for wireless communications.

The commission proposed making a large chunk of high-frequency airwaves, or spectrum, available for use by unlicensed devices, including Wi-Fi routers like those that many Americans use in their homes.

The agency’s five commissioners also expressed hopes that the new airwaves would unleash new innovations, just as unlicensed spectrum in the past has made possible such devices as cordless phones, garage door openers and television remote controls.

After a public comment period, the commissioners will try to issue final rules and regulations, a process that could take a year or more. But all of the commissioners expressed hope that the new airwaves could be put to use without unnecessary delay.

Possible roadblocks do exist, however, mainly because some of the airwaves proposed for the new applications are already in use by private organizations and government agencies, including the United States military.

Congress has mandated that the F.C.C. undertake the expansion of unlicensed spectrum, and the Obama administration has urged the freeing up or sharing of airwaves currently allocated to the federal government.

But various government agencies, including a division of the Commerce Department, have warned against allowing consumer uses to interfere with current applications.

Lawrence E. Strickling, assistant commerce secretary for communications and information, said in a letter to the commission that the Pentagon, the Department of Homeland Security and NASA use parts of the same airwaves for communication between aircraft and ground stations. Those communications enable activities like drug interdiction, combat search and rescue, and border surveillance.

Julius Genachowski, the F.C.C. chairman, said he was confident that the commission’s engineers would be able to work with the affected government and private entities to solve interference problems.

“It’s very important for the country that we all lean into this in a problem-solving way,” Mr. Genachowski said. “This is not a new challenge for the commission to address.”

While “it will require significant consultation with stakeholders” to avoid problems, he added, “consultation can’t be an excuse for inaction or delay.”

The commission also voted unanimously to approve a new regulation allowing consumers and companies to use approved and licensed signal boosters to amplify signals between wireless devices, like cellphones, and the wireless networks on which they operate.

Those boosters, millions of which are currently used in ungoverned applications, help consumers and businesses improve coverage where cell signals are weak. Boosters are also used by public safety departments to extend wireless access in tunnels, subways and garages.

The order, which takes effect March 1, creates two classes of signal boosters, for use by consumers and businesses, each with distinct requirements to minimize interference with wireless networks.

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Boiko Borisov, Prime Minister of Bulgaria, Submits Resignation

Prime Minister Boiko Borisov of Bulgaria submitted his government’s resignation on Wednesday after a tumultuous week of public anger over rising electricity prices, corruption and worsening living standards that ignited mass protests nationwide and led to bloody clashes with the police on Tuesday night.

“The people gave us power, and today we are returning it,” Mr. Borisov said on Wednesday morning in Parliament, according to local news reports.

The speaker of Parliament, Tsetska Tsacheva, said the resignation of the prime minister and his cabinet would not be effective until Parliament put it to a vote on Thursday. Since Mr. Borisov controls Parliament, acceptance would seem sure.

The protests — the biggest in at least 15 years — were triggered by electricity price increases and corruption scandals, including one over the nominee to head the state electricity regulatory commission, which sets rates. She was accused of selling cigarettes illegally online and her nomination was later withdrawn.

Tempers were inflamed further when Bulgaria’s finance minister Simeon Djankov, the architect of painful fiscal probity, stepped down on Monday. Rather than allaying anger, analysts said the resignation was greeted by the public as an admission that the government’s economic policies, had not worked.

Tens of thousands of Bulgarians took to the streets across the country to protest. Some yelled “Mafia!” Others burned their utility bills.

While the country’s fiscal prudence has helped it to avoid having to seek an international bailout like Hungary or Romania, analysts said that rising unemployment and weak growth, coupled with wage and pension freezes and tax increases, had mobilized the country’s increasingly disgruntled middle class, who felt themselves squeezed during the financial crisis.

Opposition political parties had been trying to exploit public anger over the government’s austerity measures as general elections planned for July approached. Elections are now expected in April or May, and analysts said the opposition Socialist party was expected to benefit from the turmoil.

Daniel Smilov, program director at the Center for Liberal Strategies, a political research organization, in the Bulgarian capital, Sofia, said that Bulgarians were disillusioned that the overthrow of Communism in 1989 and the country’s subsequent democratization had not delivered the expected prosperity.

Bulgaria has struggled to shed a reputation for lawlessness and corruption. It remains poor, with an average monthly wage of just $480, the lowest in the European Union.

“What we are seeing is the result of a general distrust in government and the political system,” Mr. Smilov said, noting than protests had engulfed wealthy as well as poorer regions of the country. “These are not the bottom layers of society, but people in the middle strata who been hit hardest by the financial crisis. They fear they are losing their status, and they might become poor very fast.”

Trying to appease the protesters, the prime minister said on Tuesday that the license of the Czech utility CEZ, which provides power to many residential customers in Bulgaria, would be withdrawn. Mr. Borisov cited beatings of protesters Tuesday by the police as one reason.

“Every drop of blood for us is a stain,” he said. “I can’t look at a Parliament surrounded by barricades, that’s not our goal, neither our approach, if we have to protect ourselves from the people.”

Mr. Smilov said that after the Parliament accepted the government’s resignation, President Rosen Plevneliev would then appoint a caretaker government. Mr. Borisov said his party would not participate in an interim government.

Mr. Borisov’s resignation could signal the political demise of one of the country’s most colorful political figures. A former karate instructor, bodyguard, fireman and mayor of Sofia with a shaved head and a talk-tough approach, Mr. Borisov was once viewed as being so invincible that Bulgarians called him “Batman.”

As the owner of a private security company, he provided security services for Todor Zhivkov, the former Communist leader of Bulgaria. Mr. Borisov was then the personal bodyguard for Simeon Saxe-Coburg-Gotha, the child czar who returned to be elected prime minister in 2001.

Mr. Borisov rose to oversee the police at the Interior Ministry, before being elected mayor of Sofia and then becoming prime minister in 2009.

“Mr. Borisov is a typical populist leader who came to power promising to take revenge against the transition on behalf of the poor,” says Andrei Raichev, a political analyst at Gallup International in Sofia. “Now the people realize that they were lied to.”

Mr. Raichev said that no one could predict how the public will react to the resignation. “We could even reach the absurd situation that the protests continue against no one,” he said. “Which means that they are against everyone.”

This article has been revised to reflect the following correction:

Correction: February 20, 2013

An earlier version of this article and an accompanying photo caption misspelled the given name of Bulgaria’s prime minister. He is Boiko Borisov, not Boyko.

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DealBook: Morgan Stanley Strives to Coordinate 2 Departments Often at Odds

Several hundred Morgan Stanley retail branch managers descended on the JW Marriott Orlando Grande Lakes resort in Florida early this month for a retreat. They were greeted by an unlikely colleague, Colm Kelleher, who runs the company’s sales and trading and investment banking departments.

Traditionally, traders and investment bankers think of themselves as the elite of Wall Street and look down on the retail business, seeing it as pedestrian. Yet Mr. Kelleher had a message for the branch managers: His group can work with retail brokers to increase profits at Morgan Stanley.

That message evokes the strategic emphasis that followed the 1997 merger of Morgan Stanley with Dean Witter, Discover & Company. The rationale for that deal was to create a financial supermarket where the retail brokerage and the investment banking businesses could complement each other.

But the company’s swaggering traders wanted little to do with the financial advisers, creating tension and turmoil that would lead to upheaval at the top.

The company over the years has set up revenue sharing agreements between bankers and traders. But that, too, created strife, with bankers and traders accusing each other of deliberating misstating revenue to avoid splitting fees, which some traders called the investment banker tax.

“Morgan Stanley has a horrible history of getting these groups to work together,” said Richard Bove, an analyst with Rafferty Capital Markets.

Yet since Morgan Stanley moved to acquire control of the Smith Barney brokerage business from Citigroup in 2009, the balance of power has shifted to wealth management, which now accounts for almost 52 percent of the company’s revenue, up from roughly 16 percent in 2006.

Gregory J. Fleming, the chief of the brokerage business, and Mr. Kelleher have been under pressure from shareholders to coax greater profits from the low-margin brokerage business by finding ways for retail and investment banking to work better together. The two men are said to have a good working relationship, leading to renewed optimism that the company can finally find synergies among its various divisions.

That is a change from a few months ago, when cooperation was difficult, according to employees at the company, because of personality conflicts between Mr. Kelleher and the investment banker Paul Taubman, who were the two co-heads of the institutional securities business. The employees spoke on the condition of anonymity because of the policy against speaking to the news media without permission.

Mr. Taubman departed recently after a power struggle, leaving Mr. Kelleher solely in charge of sales and trading, and investment banking.

In recent months, the company has made changes intended to improve communication among divisions. Last fall, Morgan Stanley transferred Eric Benedict, an ally of Mr. Kelleher, to wealth management to run its capital markets operation. Previously Mr. Benedict worked for Mr. Kelleher on the equity syndicate desk.

A few months after Mr. Benedict moved to wealth management, the company created a bond, or fixed income, sales group to focus on middle-market clients. The company then transferred some of its smaller banking clients into wealth management to give them more attention. The fixed-income division will share revenue from this middle-market unit with wealth management.

James P. Gorman, the chief executive of Morgan Stanley, is hoping that its sales and trading unit will work more closely with wealth management to increase lending, better tailor structured products for retail clients and improve collaboration on events like public offerings, company insiders said.

For instance, Morgan Stanley may take a company public and the executives at that company may need advice managing their personal wealth. In such an instance, the bankers would alert wealth management, which could dispatch a broker to assess the situation.

In January, on a call with investors to discuss the company’s fourth-quarter results, Mr. Gorman said 35 projects were under way to encourage collaboration between these businesses. One focus is how to increase lending to the firm’s corporate and individual clients.

A lot is riding on Mr. Gorman’s strategy. Morgan Stanley, which for years was best known for its high-flying trading operations and investment bank, was badly bruised in the financial crisis. Since then regulators have established rules that require banks to post more capital against riskier operations, compelling Morgan Stanley to scale back or get out of certain businesses. Morgan Stanley has shrunk its fixed income department, where most of its risk taking was embedded.

But, if Mr. Gorman can make it work, Mr. Bove predicted the chief could return Morgan Stanley to its former glory, “albeit in a different form.” Mr. Bove has a buy rating on Morgan Stanley.

Morgan Stanley emerged from the financial crisis safer, but less profitable. In 2012 it posted a return on equity (excluding a charge related to its debt) of 5 percent. Return on equity is an important measure of how effectively shareholder money is being deployed. Goldman posted a return on equity for the same period of 10.7 percent. To simply cover its debt expenses and other capital costs, Morgan Stanley must achieve a return on equity closer to 10 percent.

Investors also focused on another number, from Morgan Stanley’s wealth management unit. That division posted a pretax profit margin of 17 percent in the fourth quarter of 2012, exceeding most analysts’ expectations.

The number was higher than expected, according to people briefed on the matter but not authorized to speak on the record, because the company deferred from the fourth quarter some major costs like compensation for certain executives.

As a result, some analysts and rivals are wondering how sustainable that level is. Morgan Stanley insiders say while some one-time items did help increase that number, it wasn’t significant and they expect Mr. Fleming to produce a lower but still high pretax profit margin for the current quarter.

“Although the first-quarter margin is seasonally lower, we believe that we can drive margins to the high teens and above over time even with only with modest revenue growth and a low interest rate environment,” said Ruth Porat, chief financial officer at Morgan Stanley, on a conference call last week with fixed-income investors.

For that number to rise significantly, Mr. Fleming must make some of recent initiatives work, analysts say.

“Everyone is watching that number,” said an executive at a rival firm who was not authorized to speak on the record. “If they can increase, it will be a sign Gorman’s strategy is working, but so far not everyone is convinced.”

---

This post has been revised to reflect the following correction:

Correction: February 19, 2013

An earlier version of the article incorrectly stated that wealth management now accounts for almost 52 percent of the company’s profit. Wealth management now accounts for almost 52 percent of the company's revenues.

A version of this article appeared in print on 02/19/2013, on page B1 of the NewYork edition with the headline: Morgan Strives To Coordinate 2 Departments Often at Odds.

Read More..

Ask Well: Coaxing Parents to Take Better Care of Themselves

Dear Reader,

Your dilemma of wanting to get your parents to change their ways to eat better and exercise reminds me of an old joke:

How many psychologists does it take to change a light bulb? Answer: Only one, but the light bulb has to really want to change.

Sounds like your parents may be about as motivated as the light bulb right now. Still, there are things you can do to encourage them to move in a healthier direction. But the first step should not be to hand them a book. Unless you lay some prior groundwork, that gesture may seem almost as patronizing as an impatient tone of voice – and probably as likely to backfire.

Instead, start a conversation in a caring, nonjudgmental way. Ask, don’t tell. “Say, ‘You know, I might not know what I am talking about, but I am really concerned about you,” suggested Kevin Leman, a psychologist in Tucson, Ariz., and author of 42 books on changing behavior in families and relationships. Ask simply if there is anything you can do to help.

Leading by example is also more effective than lecturing. “The son can role-model health by inviting his parents to dinner and serving healthful items that he is fairly certain they will find acceptable, or ask them if they are interested in going out dancing with him and his wife,” suggested Ann Constance, director of the Upper Peninsula Diabetes Outreach Network in Michigan.

Pleasure is a better motivator for change than pain or threats. Use the grandchildren as bait. Ask if they want to take the grandchildren to the zoo or a park that would require a good bit of walking around for everyone. Or the grandchildren could ask them to come along on one of those 2K fund-raiser-walks that many schools hold. After all, a day with the grandchildren is always a pleasure in itself. (O.K., usually a pleasure.)

Tempted to give them the gift of a health club membership? “Save your money,” Dr. Leman said. Try a more indirect (and cheaper) approach. Create a mixed-tape of up-tempo music from their era. (“Songs they listened to from the ages of 12-to-17, which is what we all listen to for the rest of our lives,” said Dr. Leman) They will enjoy it any time — maybe even while walking.

If you really want someone you love to make a change, the key is to ask them to do something small and easy first because that increases the chances they will do something larger later. Psychologists call that “the foot in the door technique,” said Adam Davey, associate professor of public health at Temple University in Philadelphia, referring to a classic 1966 experiment called “Compliance Without Pressure.” In the study, which has been duplicated by others in many forms, researchers asked people to sign a petition or place a small card in a window in their home or car about keeping California beautiful or supporting safe driving. About two weeks later, the same people were asked to put a huge sign that practically covered their entire front lawn advocating the same cause.

“A surprisingly large number of those who agreed to the small sign agreed to the billboard,” because agreeing to the first small task built a bond between asker and askee “that increases the likelihood of complying with a subsequent larger request,” Dr. Davey explained.

Any plan for behavioral change is most likely to succeed if it is very specific, measurable and achievable, according to Ms.Constance.

And the new behavior should also be integrated into daily life — and repeated until it becomes a habit. For example, if you want to walk more, start with a 10-minute walk after dinner on Monday, Wednesday and Friday, Ms. Constance suggested. The next week, bump it up to 12 minutes.

Don’t give up, even if you meet initial resistance — it is never too late for your parents or you or any of us to change. “Taking up an exercise program into one’s 80s and 90s to build strength and flexibility can result in very tangible and enduring benefits in a surprisingly short time,” insisted Dr Davey.

As for instructive reading, Dr. Leman is partial to one of his own books, “Have a New You by Friday,” and Dr. Davey recommends “Biomarkers: The 10 Keys to Prolonging Vitality,” by William Evans. Ms. Constance recommends the Centers for Disease Control and Prevention’s Web site on physical activity and exercise tips for the elderly, as well as the National Institute of Health’s site on the DASH diet.

Read More..

Ask Well: Coaxing Parents to Take Better Care of Themselves

Dear Reader,

Your dilemma of wanting to get your parents to change their ways to eat better and exercise reminds me of an old joke:

How many psychologists does it take to change a light bulb? Answer: Only one, but the light bulb has to really want to change.

Sounds like your parents may be about as motivated as the light bulb right now. Still, there are things you can do to encourage them to move in a healthier direction. But the first step should not be to hand them a book. Unless you lay some prior groundwork, that gesture may seem almost as patronizing as an impatient tone of voice – and probably as likely to backfire.

Instead, start a conversation in a caring, nonjudgmental way. Ask, don’t tell. “Say, ‘You know, I might not know what I am talking about, but I am really concerned about you,” suggested Kevin Leman, a psychologist in Tucson, Ariz., and author of 42 books on changing behavior in families and relationships. Ask simply if there is anything you can do to help.

Leading by example is also more effective than lecturing. “The son can role-model health by inviting his parents to dinner and serving healthful items that he is fairly certain they will find acceptable, or ask them if they are interested in going out dancing with him and his wife,” suggested Ann Constance, director of the Upper Peninsula Diabetes Outreach Network in Michigan.

Pleasure is a better motivator for change than pain or threats. Use the grandchildren as bait. Ask if they want to take the grandchildren to the zoo or a park that would require a good bit of walking around for everyone. Or the grandchildren could ask them to come along on one of those 2K fund-raiser-walks that many schools hold. After all, a day with the grandchildren is always a pleasure in itself. (O.K., usually a pleasure.)

Tempted to give them the gift of a health club membership? “Save your money,” Dr. Leman said. Try a more indirect (and cheaper) approach. Create a mixed-tape of up-tempo music from their era. (“Songs they listened to from the ages of 12-to-17, which is what we all listen to for the rest of our lives,” said Dr. Leman) They will enjoy it any time — maybe even while walking.

If you really want someone you love to make a change, the key is to ask them to do something small and easy first because that increases the chances they will do something larger later. Psychologists call that “the foot in the door technique,” said Adam Davey, associate professor of public health at Temple University in Philadelphia, referring to a classic 1966 experiment called “Compliance Without Pressure.” In the study, which has been duplicated by others in many forms, researchers asked people to sign a petition or place a small card in a window in their home or car about keeping California beautiful or supporting safe driving. About two weeks later, the same people were asked to put a huge sign that practically covered their entire front lawn advocating the same cause.

“A surprisingly large number of those who agreed to the small sign agreed to the billboard,” because agreeing to the first small task built a bond between asker and askee “that increases the likelihood of complying with a subsequent larger request,” Dr. Davey explained.

Any plan for behavioral change is most likely to succeed if it is very specific, measurable and achievable, according to Ms.Constance.

And the new behavior should also be integrated into daily life — and repeated until it becomes a habit. For example, if you want to walk more, start with a 10-minute walk after dinner on Monday, Wednesday and Friday, Ms. Constance suggested. The next week, bump it up to 12 minutes.

Don’t give up, even if you meet initial resistance — it is never too late for your parents or you or any of us to change. “Taking up an exercise program into one’s 80s and 90s to build strength and flexibility can result in very tangible and enduring benefits in a surprisingly short time,” insisted Dr Davey.

As for instructive reading, Dr. Leman is partial to one of his own books, “Have a New You by Friday,” and Dr. Davey recommends “Biomarkers: The 10 Keys to Prolonging Vitality,” by William Evans. Ms. Constance recommends the Centers for Disease Control and Prevention’s Web site on physical activity and exercise tips for the elderly, as well as the National Institute of Health’s site on the DASH diet.

Read More..