India's Bernie Madoff

Just how important is India's economy becoming? Important enough to generate a financial scandal that pushes Bernie Madoff's Ponzi scheme off the home pages of the New York Times and Wall Street Journal. Both report on Ramalinga Raju, head of Satyam Computer Services—one of India's most important outsourcing companies—who resigned yesterday after admitting he cooked the books, including maintaining a fictitious cash balance of more than $1 billion. "It was like riding a tiger, not knowing how to get off without being eaten," said Raju with a candor that would cause U.S. corporate defense lawyers to have a breakdown. Satyam runs back-office operations for one-third of the Fortune 500, handling computer systems and customer service for companies such as General Electric, Nestlé, and Cisco, and the U.S. government. Both newspapers note that Raju's indiscretions have cast a pall over other high-flying Indian companies and are "prompting investors to question other corporate results as the once-hot economy slows."

Which brings us back to that bastion of stability and integrity—the U.S. economy. CNN Money has the lowdown on a bad day on Wall Street, in which investors pulled back from six-week sustained rally on grim news from Alcoa and Intel (more on that below). The Dow Jones industrial average lost 245 points (2.7 percent), Standard & Poor's 500 index fell 3 percent, and the Nasdaq composite was down 3.2 percent. And you can bet there's more bad news to come today when the nation's retail chain stores report December sales figures. The results are expected to be "pretty dismal," says CNN Money. That explains part of the pain for commercial real estate. The WSJ reports that "delinquencies on mortgages for hotels, shopping malls and office buildings were sharply higher in the fourth quarter, as the weaker economy hit landlords and threatens to cause losses for investors in the $3.4 trillion market." No wonder economists and politicians meeting on Capitol Hill yesterday to contemplate the prospect of a $1.2 trillion federal deficit "admit they are in uncharted territory," writes the NYT. That figure will balloon further after President-elect Barack Obama's economic stimulus plan is approved, but now is not the time for restraint, economists urge. "Reviving the economy requires major fiscal stimulus from tax cuts and increased government spending," Martin Feldstein, a self-described "fiscal conservative who dislikes budget deficits," told Congress.

To the tech beat now, where Intel sent the sector reeling yesterday by announcing its second sales warning in the past two months. The chips giant expects to report fourth-quarter sales—usually the strongest quarter of the year—to come in at 20 percent below its already reduced estimate. "Intel's latest warning, which caused its stock to drop about 6% Wednesday, indicates that demand for computers that use the companies chips has faded quickly," the WSJ writes. If the chip guys aren't doing well, then computer makers cannot be faring much better. And, on cue, China's Lenovo Group announced this morning from Hong Kong that it will cut 2,500 jobs after reporting its first loss in three years amid sagging global demand for PCs, Bloomberg reports.

From the convention centers of Las Vegas, however, some good news for Microsoft. The software giant out-muscled Google and Yahoo to land a lucrative search deal with Verizon Wireless to bring its search engine to Verizon handsets, and it secured a similar arrangement for Dell's laptops and computers, the WSJ writes.

Could the 1999 merger of AOL and Time Warner be the worst "corporate marriage in history"? the NYT wonders today. The debate will surely be reignited after Time Warner announced a $25 billion write-down yesterday, primarily to reflect the declining value of AOL, the newspaper writes. But the Internet division isn't the only area dragging down the media giant. The Time Inc. division—publishers of Fortune, Sports Illustrated, and Time—is also underperforming and is expected to drag down the company's results, which come out next month. Still, the AOL property is seen as the real culprit. As the NYT calculates, "Time Warner had already taken more than $100 billion in write-downs to reflect the steady erosion of value at AOL." As the Financial Times reports, Time Warner is not alone in its woes. News Corp. and Viacom have also slashed their outlooks as the downturn in advertising worsens.

Finally, and it's not too often in recent history that you could say this, Pittsburgh is thriving while the rest of the United States suffers, writes the NYT. The city has bounced back from the death of its steel industry, and now unemployment is 5.5 percent, far below the national average, and housing prices and wages were on the up last year. Deindustrialization "set the stage for an economy that is [now] the envy of many recession-plagued communities." Detroit take note.