What Went Right 2002 was a better year for business than you might have realized. We highlight a few of the bright spots--including some you probably missed.
(FORTUNE Magazine) – Journalists are a cynical lot. We are natural-born skeptics searching for the black clouds in every silver lining. Our mien is--well, how to put it?--mean.
So it may seem odd for us sunlight-starved nabobs of negativism--who earlier this year wrote cover stories such as "System Failure," "Why Companies Fail," and "Send Them to Jail"--to suggest that something good happened in the world of business and the economy in 2002. But grab hold of your storm-cellar doors: Believe it or not, despite corporate scandal, jaw-dropping bankruptcies, nonstop terror alerts, and stock market malaise, a heck of a lot went right. An icy, gimlet-eyed look at the facts shows that this annus horribilis wasn't so rottenis after all.
Start with that depressing mutual fund statement stuffed away in the file drawer in your den. Yes, the pages are spattered with minus signs. But then, your den (along with your kitchen, basement, and foyer) is probably worth far more than it was 12 months ago. The average U.S. home price has risen nearly 7% so far in 2002. Not a single state has had a drop in average home prices.
If such stats give you pause--we've seen boom turn to bubble, then to bust, too many times--consider not the market value but rather the real-life cost of owning your home. Rock-bottom mortgage rates, the lowest since Ozzie and Harriet were on the air, put property deeds in reach of tens of thousands of erstwhile renters. "The roughly one-point drop in mortgage rates we saw this year cut financing costs for new borrowers by some 15%," says Ethan Harris, chief U.S. economist for Lehman Brothers. "And for existing homeowners, those low rates have led to a mess of new kitchens and bathrooms."
Does that put the 14% year-to-date loss of the Dow Jones industrial average in perspective? Perhaps not, if you're looking at your fund statement instead of your new granite countertop and Vulcan range. Otherwise, yes.
As disturbing as the latest bump in the unemployment rate may be (it inched up two-tenths of a percentage point in 2002, to 6% in November), a bigger shock is how much personal incomes rose: 3.5% in the first ten months of the year. Couple that with barely budging consumer prices, and Americans can fill more shopping carts at Wal-Mart this holiday season than last. Low inflation, in fact, has been the North Star of bright spots for the economy. "You can argue that in the past year, the 20-year war on inflation was won," says Harris. "That victory will carry through to nearly everyone's benefit in the future." (We'll leave the question of deflation for another day.)
For every troublesome yin in the economy this year there has been a surprisingly happy yang, it seems. So in the pages that follow, we've decided to ring in the yang. From the mystery of raging productivity to the startling success of an Internet industry to, well, online dating, this has been an awfully upbeat time for much of American business. Cross your fingers that next year is better. --CLIFTON LEAF
It was a good year for autophiles. We were swept off our feet in a very big (and small) way by GM's gargantuan Hummer H2 and BMW's teensy-weensy Mini Cooper. Tragically, both have long waiting lists. What does this size schizophrenia say about the American psyche? Do we want to crush all that lies in our path or dart around life's obstacles? We have no idea. But we do have stats. --ALEX TAYLOR III
Hummer H2 Mini Cooper
HEIGHT Inches 77.8 55.9 LENGTH Inches 189.8 142.8 WEIGHT Pounds 6,400 2,315 Fuel economy 13 mpg 32 mpg Seating capacity 7 4 Base price $48,065 $16,425 2002 Sales Total U.S. (est.) 18,000 24,000
Hummer H2 Fantasy Buyer: Austrian-born bodybuilder turned movie star with political aspirations. Actual Buyer: Middle-aged city-dwelling men who fantasize about splashing mud.
Mini Cooper Fantasy Buyer: 6-foot 1-inch male with brown hair and a slightly cruel smile. Actual Buyer: Urban professionals who drive to their humdrum jobs every day.
More With Less Technological advances and plain old hard work meant that domestic productivity grew apace. That's good news in the long run.
The tech-fueled "productivity miracle" of the 1990s, you might think, is one of those boom-time phenomena that have crashed to earth along with the Nasdaq. Think again: Barring an unforeseen collapse in the fourth quarter, the most watched gauge of productivity--output per hour worked--may grow as much as 5% in 2002, the fastest annual pace since 1950.
It's unwise to read too much into single-year productivity numbers. But as the data keep rolling in, they provide ever more confirmation for economists' belief that the long productivity slump of the 1970s, 1980s, and early 1990s is ready to be consigned to the dustbin of history. We got here thanks to computers that keep getting cheaper and more powerful and to a business community that finally seems to be figuring out how to use them. "If you look at the next ten years, you have to be optimistic about the prospects for productivity growth," says Harvard's Dale Jorgenson, the dean of productivity researchers.
What does this mean for you? In the short term, either a lot more work or none at all. Rising productivity means businesses can produce more stuff with fewer workers, which explains why, despite respectable economic growth this year, jobs are scarce. Over time, though, rising productivity is what makes higher living standards possible--as happened during the 1960s. Jorgenson is not projecting that productivity will grow at the 2.97% pace of 1959-73 or even top the 2.07% of 1995-2000. But he's still expecting it to grow at close to 2% a year, well above the 1.33% rate that prevailed from 1973 through 1995. And if that difference doesn't sound like much, compound it over a decade, and you'll find $2,000 more a year in the average American's pocket. --JUSTIN FOX
How one website found that faith, plus ruthless cost cutting, could liberate it from the fourth ring of hell, otherwise known as bankruptcy.
When Beliefnet, an advertising-based religious website, went into Chapter 11 in April, the company's strategy was still in formative stages. "Our business model was to burn $500,000 a month," says founder and CEO Steve Waldman. That strategy was appropriately scuttled, along with seven of eight members on the business staff. Left was Sujay Jhaveri, now president. Seven months later, in October, Beliefnet emerged from Chapter 11 and turned a profit (albeit only $5,000) for the first time ever. Of Jhaveri, Elizabeth Sams, executive vice president, says, "We always felt he was underutilized."
Besides firing most of the staff, Jhaveri also eliminated Beliefnet's dental plan, its janitorial service, one of two floors of office space, and its $30,000-per-month DoubleClick ad server. In all, he cut costs by 70%.
Meanwhile, the daily multifaith newsletters took off; Beliefnet now has four million unpaid subscribers, and loyal advertisers who like the site's strong female demographics. The Pew Internet & American Life Project recently did a study showing that 28% of frequent web surfers use the Internet for spiritual purposes. Who knew? Now "un-bankrupt," the company can focus on content, which varies from morally trenchant ("Gossip Warps Your Soul") to Sunday school irreverent (a poll asking "Crucifixion Neck Ties. Doggie Buddha--Which Is the Kitschiest?"). A higher calling indeed. --GRAINGER DAVID
Fox hit a high note with its on-target, if off-key, American Idol. The talent contest, a guilty pleasure of coveted 18- to 49-year-olds, gave Fox its best nonsports ratings in ten years. The show returns soon to feed our appetite for catty commentary. --ALYNDA WHEAT
E-Commerce Remember when you thought that Jeff Bezos had come up with a genius idea and that pretty soon everyone would be shopping online? No need to be embarrassed. You were right.
People have said a lot of things about Jeff Bezos since he started Amazon.com in 1995. They've called him a pioneer, a "quintessentially aggressive American Netpreneur," and, when his stock was plunging from $106 a share to $6, the guy who would never succeed. This year Jeff Bezos got a new image: respectable businessman.
It's not just Bezos. The world of online shopping gained respectability this year. Sure, people still go to the mall. Yes, online shopping makes up a paltry 1.5% to 3% of all retail sales. But if you dig deeper into those statistics--and pay attention to your own computer-clicking habits--you'll notice a real change in how people buy stuff. In markets like books, music, videos, electronics, computers, and toys, online shopping now accounts for as much as 23% of sales. Online sales in the U.S. are growing 30%-40% a year, while offline retail has been growing at about 4%. "That's a meaningful channel shift," says Kate Delhagen, chief retailing analyst at Forrester. This year online retail even got its equivalent of Black Friday, the big shopping day after Thanksgiving. As people went back to work--and to their high-speed office connections--the following Monday, online sales spiked 37% from the previous year.
Brand-name retailers now recognize that, far from being a threat to stores, websites build brand loyalty and increase sales. J.C. Penney found that shoppers who bought in all three of its channels--stores, catalogs, and online--spent more than $800 a year, on average. Those who shopped in one place spent no more than $200. Bezos and eBay CEO Meg Whitman, who run the biggest online-only retailers, are also piggybacking on the draw of retail names. eBay now sells discontinued merchandise from Sears and other retailers, while Amazon is running the websites of Toys "R" Us, Circuit City, and Target.
Which brings us back to the respectable Mr. Bezos. This year Amazon was the best-performing stock of the Nasdaq 100, up more than 100%, to about $22 a share. Bezos finally got costs under control, and Amazon is expected to be profitable in the fourth quarter. There's also great optimism about growth; Amazon's revenues are expected to be up about 25% this year.
Growth in the online sector is strong internationally too. Look at eBay. Its German business now generates 16% of the company's revenue. Overall, eBay expects to post $1.18 billion in revenues this year, a gain of 60%. Says Safa Rashtchy, U.S. Bancorp Piper Jaffray's e-commerce analyst: "We're not talking about the next biotech revolution here, but e-commerce has become a very respectable and important business." All of which is to say that while you probably won't see Bezos's mug on a lot more magazine covers soon, maybe one day you'll see him in a suit. --FRED VOGELSTEIN
Beating the Odds, Part I Despite the weak economy and sluggish markets, these companies made money for investors.
Forest Labs (FRX) People had plenty of reasons to be depressed in 2002, so Forest Labs felt great. Its anti-depressant Celexa is snapping up market share from Zoloft, Paxil, and Prozac. This year the company introduced Lexapro--Celexa with fewer side effects--which analysts predict could produce $2 billion a year in sales over five years. Profits went from $63 million in 1998 to $512 million in 2002, and this year the stock soared 32%.
Intuit (INTU) Every small business keeps books and pays taxes. From that dull truth, Intuit put together an exciting year. Earnings at the $1.4 billion maker of software for personal finance, small-business accounting, and taxes, have risen 32% in 2002, while the stock has gained 18%. Intuit improved distribution, cut costs, and created higher-priced accounting software customized for industries.
Sysco (SYY) When people huddled at home after Sept. 11, shares of this food-service distributor fell. But the urge to eat out is powerful. That's good for Sysco, which gets two-thirds of its $2.3 billion in sales from restaurants. Its stock jumped 21% this year as it continued 150 straight quarters of earnings growth. Sysco delivers 200,000 products, including fresh and frozen meat, canned goods, and, yes, even the kitchen sink. --KIMBERLY ALLERS
Vices Became Virtues Barstool regulars and cafe crawlers, fear not. Scientific minds say that beer and coffee are good for you!
In need of some comforting justification for your bad habits? Turn to science! The year was rife with findings on two formerly maligned fluids: coffee and beer. First, researchers at the Institute of Public Health and the Environment in the Netherlands declared that coffee was useful in fighting diabetes--if you're willing to drink seven cups a day. Those who did, alas, were more likely to be men who smoked, carried extra weight, ate poorly, used more alcohol, and exercised less. Is the seven-cup diet worth it? Maybe not. On the other hand, labbies at the University of California in San Diego found that indulging a more modest, cup-a-day habit was useful in preventing memory loss among women over 80. (Subjects named as many animals as possible in a minute.) Time to break out the Scattergories, Edna!
Of course, justifying your stimulant abuse is so 1990s. That's where the beer studies come in. Specialists at King's College and St. Thomas's Hospital in London recently declared one beer a day good for developing strong, healthy bones.
Health benefits aside, both beer and coffee remain solid investments. U.S. coffeehouses have doubled in number since 1996. Starbucks alone opened 1,177 new shops in 2002, and its revenues are up 25% year to date. If you owned yeasty Anheuser-Busch this year instead of that lead-weight mutual fund, your stock would have gone up 8%. Cheers! --G.D.
Need We Say More? Harvey Pitt Resigns
Corporate Reform Sure, there are reasons to be cynical, but at least Eliot Spitzer got those great e-mails.
CONGRESS TO CARE ABOUT CORPORATE REFORM FOR NEXT TEN MINUTES That's how a prescient headline writer last July might have summed up the mood in Washington. There would, of course, have been the follow-up:
WHITE HOUSE KEEPS POINTING AT WATCH; NOTES TEN MINUTES ARE UP For reformers eager to attack corporate malfeasance, giddiness quickly gave way to disillusionment when dark forces blocked the appointment of shareholder-advocate John Biggs to the new accounting oversight board. But lest we get too cynical--we are talking about What Went Right, after all--let's note that in those important ten minutes, the Senate passed a major corporate reform bill--97 to 0!--that just months earlier was the stuff of reformers' wildest imaginings. As they say, hey, that's something.
CEOS TO CHANGE WAYS, EXPERT SAYS EXPERT RECONSIDERS: CEOS TO CHANGE CLOTHES Whoever thought CEOs as a class would voluntarily surrender their perks and power were probably the same people who thought therapy would reform Tony Soprano. It turned out that CEOs weren't real interested in reform--though, like Tony, they learned to speak a new language (repeat this after me: "restoring investor confidence"). Yet a few courageous souls did speak up for real. Goldman Sachs chief Hank Paulson acknowledged his industry was rife with conflicts of interest. Warren Buffett banged the table for the expensing of stock options. Vanguard founder John Bogle scolded the mutual fund industry for its passivity. Hey, that's something, too.
SEC CHIEF ORDERS WIDE-RANGING REFORMS "SEC CHIEF" ADMITS HE'S FORMER SEC CHIEF ARTHUR LEVITT Poor guy. Think of George S. Patton, spending his whole life believing he's destined to lead a great army through France, having to sit out World War II while Harvey Pitt straps on the commander's helmet. That was 2002 if you were Levitt, the man who spent his tenure warning about auditor conflicts, earnings manipulations, and other dour topics no one much cared about at the time. But for all the talk of the leadership black hole at the SEC, we did get some leadership, albeit from unexpected places. Sure, New York attorney general Eliot Spitzer might have his eye on the governor's mansion. But the point is, somebody stepped up--and boy, was he good at finding really embarrassing e-mails. Hands off my computer, man!
CAPITALISTS SAVE CAPITALISM FROM THEMSELVES Now, that would be a headline worth clipping. Failing that, there's always HEY, AT LEAST WE'RE NOT JAPAN. --JERRY USEEM
Beating the Odds, Part II The airline and telecom sectors nose-dived, but these two companies broke away from their peers and showed there could be hope in troubled industries.
JetBlue (JBLU) Discount carrier JetBlue is pulling off the mission impossible of the airline industry--making money. It took off in April, after going public in one of the year's few stellar IPOs. During the third quarter, which ended in September, JetBlue earned $94.8 million. (Southwest and Air Tran were the only other carriers to make a profit.) While USAir and United are in bankruptcy, JetBlue has little debt; a new, fuel-efficient fleet; and perks like cushy leather seats and DirecTV. Its stock can't defy gravity--it fell 22%--but compare that with the S&P Airline index, down 40%.
Alltel (AT) When other wireless companies poured money into video-conferencing, web access, and the like, Alltel passed. Alltel also ignored large cities where pricing is competitive and profits hard to come by. Instead it targeted rural service in the Southeast, West, and Midwest. The success of the model is crystal clear. As the S&P 500 Wireless Telecom Services index dropped 54% this year, Alltel declined only 11%. And it's well positioned for 2003 with over $1 billion of free cash flow--more than all other wireless companies combined. --K.A.
Renewable Energy There are oilmen in the White House, but even so, wind power lit up more homes than ever before.
With Iraq II looming, bringing with it handwringing about dependence on Middle Eastern oil, you might be wondering: What's up with alternative energy? We hate to say it, but we just can't help ourselves: The answer, friends, may be blowin' in the wind.
Wind is the world's fastest-growing source of power. It's renewable, relatively inexpensive, and totally devoid of nasty byproducts. Europe blows the U.S. away in the use of wind power (in parts of northern Germany, for example, wind generates 25% of the power; in the U.S. it's less than 1%). But wind is starting to kick up in this country too. In 2002, wind farms generated a record-breaking ten billion kilowatt hours of energy, enough to power one million homes. That's up from six billion kilowatt hours in 2001. Renewable energy tax breaks for Texas utilities have even prompted a wind-farm rush across dormant oilfields. And this year FPL Energy built the mother of all wind farms, Stateline Energy Center, on 50 square miles along the Oregon-Washington border. The modern windmills (above) have sleek, fiberglass blades atop 160-foot poles--more Sci-Fi channel than Dutch countryside--and the 460 turbines offer clean electricity to 70,000 homes and businesses. Just 1,700 more wind farms like it, and we're talking electricity for every home in the nation! Of course you'd need 85,000 square miles of unpeopled, windswept land mass, but doesn't that describe South Dakota? --CORA DANIELS
Stability of a Sort The war in Afghanistan routed the Taliban. Many educated girls will remember that.
Difficult as it may be to remember now, just three weeks after the war in Afghanistan began on Oct. 7, 2001, the establishment press was whining about a "quagmire" and dredging up Vietnam analogies. About a month after that, the war was basically all over except for the mopping up. The medieval-minded Taliban had fallen, and thousands of al Qaeda fighters were either dead or on the run. The brief Afghan war was not a total success, of course, because lots of al Qaeda loyalists escaped, including, alas, Osama bin Laden. But in the year since the Taliban's demise, al Qaeda has been deprived of a secure home base, Afghan girls--like those pictured above in Kandahar--can now go to school, and the government of Hamid Karzai, sworn in at the end of last year, is still in place--though the new Afghan leader has been the target of at least two assassination attempts. By the standards of one of the world's most turbulent and dangerous countries, that counts as progress. --BILL POWELL
Ideas A book swept away junk thinking.
The tidal wave of half-baked, vanity-driven business books may now have reached the point of detracting from the sum of human knowledge. A thousand hosannas, then, for Searching for a Corporate Savior, the most important--and timely--management book of 2002. In a closely argued attack, Harvard Business School assistant professor Rakesh Khurana pulls back the curtain on what his subtitle calls The Irrational Quest for Charismatic CEOs: the vogue for hiring celebrity outsiders over capable insiders; the weak-willed boards who hand them the keys to the kingdom; the celebrities' often corrosive effects on the companies they run; and Wall Street's misguided betting on the jockey instead of the horse.
Khurana's findings buttress an even more influential book--Jim Collins's 2001 Good to Great, which spent much of 2002 on the New York Times bestseller list--that also used empirical rigor to demolish junk management science. Together the books offer a blueprint for humble, inner-directed leadership. To judge from the virus-like spread of their ideas, we're ready to listen. --J.U.
DVDs Take Over No more rewinding!
American consumers, God bless 'em, just want to be entertained. Preferably without leaving the couch. Thus do we account for the spectacular rise in popularity of the digital video disc, or DVD.
Surely you've noticed it in your neighborhood video store--the insidious shelf creep of the DVD. Blockbuster has remodeled 4,400 stores to make room for the newcomers. Why? Because they sell. Revenue from DVD sales and rentals exceeded that of videotapes for the first time in 2002. On average, people who own DVD players buy 17 discs a year--three times the number of tapes bought by VCR owners when video sales were at their peak.
It's not just Blockbuster and Wal-Mart that are cheering. Columbia TriStar banked about $140 million in just three days on its Spider-Man DVD, and Disney's film division's fourth-quarter revenues jumped 52%, thanks in part to the home release of Monsters, Inc. So what if Treasure Planet bombed? Just release Cinderella on DVD.
Consumers love its sharper images, simple format (no need to rewind), and superb sound. Research firm Gartner forecasts that 40% of U.S. households will own DVD players by the end of 2002, up from 5% in 1999.
DVD players do have a drawback: Most aren't able to record. But, hey, did you ever learn to program your VCR? --JULIE SCHLOSSER
The Hershey Kiss-Off The folks of Hershey banded together to stop the candymaker's sale.
It was as if Hollywood had done a remake of It's a Wonderful Life, except the plucky little Pennsylvania town rescued its chocolate factory instead of its savings and loan. That's what happened for real in Hershey after the 77% owner of Hershey Foods put the candy king up for sale. The heated reactions of local citizens could have melted the daily run of 33 million Hershey Kisses. The would-be seller was the Hershey Trust--founded, like the town and the company, by Milton Hershey. The locals saw the trust ripping asunder their close-knit company town, and they fought it hard: seven weeks of marching in protests, signing petitions, seeking injunctions, posting
derail the sale signs. Trust directors finally succumbed to the pressure. They rejected bids of $12.5 billion and $11.2 billion and took Hershey Foods off the block. An uprising of little people thwarting a big deal? A righteous holler defeating the almighty dollar? Sweet. --JOHN HELYAR
New Sight An eye implant gives some sight to a few, and hope to many.
Every eye doctor dreads telling a patient that he will never see again. In 1987, after delivering such news to an 11-year-old Chicago boy, ophthalmologist Alan Chow vowed "no more." His hope was to create an artificial retina--a silicon microchip thinner then a strand of hair--that could be implanted in the eye. A year later he and his brother Vincent, an electrical engineer, sat down after Thanksgiving dinner to sketch ideas for a prototype: an implant that could convert light into electric current, which would stimulate damaged retina cells to work again and help combat the eye disease retinitis pigmentosa, a common cause of blindness. (See schematic above; the chip is on the far right.)
Last May the brothers' vision became reality. Clinical trials revealed that six formerly blind people given the implant can now see. Their quality of sight ranges from the ability to see shadows and movement to one patient who can see faces for the first time in 15 years. The results were promising enough that the FDA gave the brothers' company, Optobionics, the go-ahead to expand its trials. --C.D.
Small Investments, Big Returns
My Big Fat Greek Wedding Budget: $5 million Gross: $210 million
Which bonds had a better year--Barry or the bond market? Barry Bonds batted .370, hit 46 home runs, and moved closer to Hank Aaron's record. But while Barry was getting all the attention, the bond market was playing its own version of long ball. Bonds are poised to beat stocks for an unprecedented third year in a row. Next time Charles Schwab goes looking for a pitchman, it might consider dumping Barry and checking out the brawny ten-year Treasury. Here's how they stack up since 1986, Barry's rookie year. --DAVID RYNECKI
2002 highlight Named National League MVP
2002 average .370
Best year 2001--hit 73 home runs
Number of years voted MVP 5
Long-term performance .295 (lifetime average)
What people say about him: A curmudgeon
Outlook Eager to avenge World Series loss
2002 highlight Beat stocks a record third consecutive year
2002 average 8%
Best year 1995--gained 31.7%
No. of years it beat stocks 6
Long-term performance 10.3% (avg. annual return)
What people say about them Perfect for curmudgeons
Outlook Four straight? Stock investors hope not
SOURCE: IBBOTSON ASSOC.; PIMCO
Medical Milestone Merck scientists appear to have made a vaccine for cervical cancer. With any luck, your daughters will never have to worry about the disease.
The ugly sphere you see on this page has been in the sights of drug company scientists for close to a decade. It represents one of the human papillomaviruses (HPVs), a group of sexually transmitted viruses responsible for most cases of cervical cancer.
Now researchers at Merck say they might be able to blow the sucker away. They have developed an experimental vaccine that was 100% effective in preventing HPV infections in 2,392 women. Testing on the vaccine is still in early stages, and a drug isn't expected to reach the market for five years. Nevertheless, there is hope of wiping out a cancer that afflicts 470,000 women worldwide each year, killing some 225,000. The New England Journal of Medicine, which published the Merck research just before Thanksgiving, called the vaccine "the beginning of the end of cervical cancer."
Unlike cancers whose genesis is still mysterious, most cases of cervical cancer are known to be caused by HPVs. That gave scientists at Merck--as well as at GlaxoSmithKline and the National Cancer Institute--a clear target. HPV is a wily opponent; it is extremely contagious and can be transmitted by touch or after just one sexual encounter, even with a condom. More than 50% of women will be infected with the virus in their lifetime, although most infections will not lead to cancer. "The only protection now is abstinence," says Dr. Eliav Barr, chief researcher on the vaccine project for Merck, adding, dryly, "but at some point most women will want to have sex." The vaccine would have to be given to girls and boys--Merck hopes to inoculate them too--before they become sexually active.
Regular Pap tests, while far from foolproof, keep cervical cancer to about 13,000 cases a year in the U.S. The vaccine could prevent those cases, as well as the unnecessary procedures, follow-up testing, and surgeries that accompany abnormal Pap smears and cost as much as $6 billion a year. But it would have its greatest impact in developing countries. "I was in a clinic in Latin America," says Barr. "There were lines of women all around with advanced cervical disease. It was awful. Then I realized, [the vaccine] will take care of all of that!" --C.D.
Home Sweet Home Housing was the bedrock of the economy.
Look around, dear homeowner. Observe your handsome hearth, your solid oak floors, your four-inch clapboard wood-grain textured-aluminium siding. Take it in and feel proud, because upon this edifice our economy is built.
It wasn't supposed to be this way. Real estate generally slumps along with the stock market in a recession. We had our recession and our sagging stocks, but instead of collapsing, housing weathered the storm with nary a broken windowpane. Now it's defying history again by thriving during a slow recovery.
Oh, to be a homeowner in 2002! In the ten months ended in October, the price of the average home increased an extraordinary 6.9%. Americans milked their houses like cash machines, taking out $270 billion from home equity loans and refinancings. They lavished that money on bathroom fixtures, Persian rugs, trips to Disney World--the gamut of glorious consumption that keeps the economy bubbling. As a result, housing should contribute 40% of projected GDP growth in 2002, more than twice what it usually adds.
We'd be remiss if we didn't point out that housing indicators have begun to shift. Home prices in coastal cities, from New York to San Francisco, are inflated. In the next few years they should either fall or stay flat. And because so many people bought houses during the recession and the slow recovery over the past two years, housing won't contribute nearly as much to the next upturn as it has in past recoveries. Still, in 2002, there was no place like home. --SHAWN TULLY
Online Dating Microbyte2000 + Superkaye = True Luv 4Ever
Karen Bruneteau (a.k.a. superkaye) and Corbin Kloewer (a.k.a. microbyte2000) met this year on Match.com--two of 653,180 hopeful singles. In their case, marriage followed. Congratulations are in order to the online-dating sector, whose revenues will grow 37%, to $313 million, in 2002, according to Jupiter Research. --J.S.
Distractions In which we praise the tale of the snakehead fish.
When a good distraction emerges, resistance is futile. For some, the summer's top diversion was the Nelly single "Hot in Herre." For the rest of us, it was the snakehead.
If you missed the headlines, a snakehead is a fish. It can walk. It looks like a cucumber. It can grow up to three feet long. It eats other fish and ducks, and this summer it was discovered terrorizing pond life along the East Coast. In China marauding snakeheads have been known to attack humans. (This may or may not be true; we're not betting against the fish).
The general public's initial reaction to the snakehead was swift: Kill it. But think outside the box, citizenry! The snakehead could be useful in solving international conflicts. Need to get weapons inspectors into Iraq? The snakehead is elusive. Want to take out a pesky world leader? Snakeheads are ravenous. Not convinced? Well, that's not the point. Were you not torn away from thoughts of impending war, corporate malfeasance, and J. Lo? Were you not tempted to visit snakeheadstuff.com for the T-shirt? Of course you were. That's what makes a damned good distraction. Kill it, if you must. We wish it well. --G.D.