business

Nikkei dips after hitting 8-mth high, US rates weigh

2009-06-10T23:50:00.000-07:00

The Nikkei stock average briefly edged above 10,000 to an eight-month high on Thursday before slipping 0.1 percent on the day, with worries about rising U.S. interest rates offsetting a jump in steel shares on a brokerage upgrade.

The benchmark Nikkei .N225 inched down 10.16 points to 9,981.33, after rising as high as 10,022.23 in morning trade, its highest since Oct. 7 and a rise of roughly 43 percent from its March bear market low.

Progress Energy to pay business customers to go solar

2009-06-03T13:50:00.000-07:00

by Jeff Drew

Progress Energy opened the shades Wednesday on an expanded solar energy strategy that calls for the company to provide incentives to individuals and businesses to install solar-power systems.

Raleigh-based Progress (NYSE: PGN) said the goal of its new SunSense program is to increase the amount of solar energy produced in its Carolinas and Florida territories by more than 100 megawatts over the next decade.

The company intends to reach that goal by offering a series of incentives and rebates.

• Progress will pay commercial customers the going market rate for each killowat-hour of electricity produced by newly installed solar power systems. This program will debut in the Carolinas this summer and in Florida next year.

• Also starting this summer is a program that will provide incentives for Progress’ business customers to install solar water heaters. That program will not be available in Florida.

• For residential customers, Progress Energy will pay $1.50 to $2 per watt for residential solar installations. That should cover about 25 percent of the installation cost, Progress said. The program will debut late this summer in the Carolinas and next year in Florida.

• Also for residential customers, Progress will offer rebates to customers who install solar water heating systems. The program, already established in Florida, is being rolled out the in Carolinas.

A fifth arm of the Progress plan will see the company’s Progress Energy Carolinas and Progress Energy Florida subsidiaries install solar panels at selected schools in their territories.

With a market capitalization of almost $10 billion, Progress Energy is the most valuable company in the Raleigh-Durham area and the only one in the federally defined Triangle area to rank among the Fortune 500. Raleigh-based Progress Energy Carolinas supplies electricity to much of the Triangle area.

source: Triangle Business Journal

Automakers Defend Plans to Trim Dealerships

2009-06-03T13:49:00.000-07:00

By BERNIE BECKER

Executives at General Motors and Chrysler defended the methods they used to whittle down dealerships at a Senate hearing on Wednesday, calling it a painful but necessary part of creating leaner, more competitive companies.
The chief executive of General Motors, Fritz Henderson, and the vice chairman of Chrysler, James E. Press, said dealerships that sold a small number of vehicles weighed down their companies. A more streamlined corps of dealers, they said, was vital for survival.

“Does my heart go out to the dealers who will not be part of the new company? Absolutely,” Mr. Press said in his prepared testimony. “But we’ve had to make many hard choices to create a viable business and preserve jobs for tens of thousands of people.”

But Senator John D. Rockefeller IV, the chairman of the Senate Commerce committee, criticized both executives in his prepared testimony for “somehow implying that the dealers themselves are responsible for the companies’ problems.”

“Let me be very clear,” Mr. Rockefeller, Democrat of West Virginia, said. “I don’t believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real notice and no real help.”

Chrysler is expected to close about 800 dealerships by June 9, according to the testimony. General Motors hopes to reduce its dealerships to about 3,500 by the end of next year from around 6,000 currently.

The G.M. dealers marked for closing will stay open as late as October 2010, when their current agreements with G.M. expire. In general, auto dealerships are independent businesses and are not owned by manufacturers like Chrysler or G.M.

The executives noted in their testimony that government entities, like the Treasury Department and federal bankruptcy courts, had urged them to make tough decisions about which dealerships to close and that those decisions were made as objectively as possible.

The executives said that a variety of factors, including a dealerships’ location, the quality of its facility and its profitability, were used to determine which ones would remain.

“Underperforming dealers,” as the two executives called them, cost sales, reduced customer satisfaction and fractured advertising messages. Mr. Henderson also notedthat many dealerships have been around since the 1940s or 1950s, setting up shop when American automakers had a stranglehold on the market. Now, with the influx of foreign dealerships, many of those dealers are in small towns or rural areas, not the suburban and urban population centers where most people live.

For their part, two small-town dealers disputed that their dealerships were a drag on the auto companies.

Peter Lopez, who owns Chrysler and G.M. dealerships in Spencer, W.Va., and Russell Whatley, who has a Chrysler dealership in Mineral Wells, Tex., said they paid the auto companies for vehicles and parts, as well as other fixed costs, like the right to hang the manufacturer’s sign. Mr. Lopez saidhis dealerships produced roughly 15 percent of his town’s tax revenue and that he even bought additional Chrysler vehicles earlier this year, at the company’s insistence, to help it through the recent downturn. And Mr. Whatley said that he grossed almost $450,000 a month.

But both have been told their Chrysler dealerships will be closed. Mr. Lopez’s G.M. franchise will close next year.

“To be arbitrarily closed, with no compensation, is wasteful and devastating,” Mr. Whatley said.

source: The New York Times

FHA Loans: Return to 0% Down

2009-06-03T13:48:00.000-07:00

By Theo Francis

The days of home buying with little or no money down may be back—this time thanks to Uncle Sam.

Blamed for contributing to the housing bubble, zero-down-payment loans largely vanished when the market crashed and Congress blocked seller financing for government-backed loans. Now the federal government will be forking over cash at closing.

Buyers who haven't owned a home for three years or longer are eligible for an $8,000 tax credit, thanks to a provision in this winter's stimulus package. Now, under a little-noticed program announced May 29, the Federal Housing Administration will steer the funds to cover closing costs directly—in some cases even offsetting the 3.5% minimum down payment FHA loans require. That's enough to cover most or all of the down payment and fees for homes up to the U.S. median price, now about $169,000.

Officials hope "monetizing" the tax credit will help revive the housing market, because meeting closing costs is one of the biggest hurdles for new home buyers. The National Association of Home Builders predicts it will add 40,000 to the 160,000 sales originally expected to be spurred by the tax credit. Supporters say the move avoids the worst effects of seller financing, in that the credit is essentially the buyer's money, and government assistance doesn't give sellers a perverse incentive to inflate prices in an unsustainable manner.
Does Down Payment Aid Boost Defaults?

But while seller financing is riskiest, buyers who get down payment help have higher default rates, whether the money comes from government or other sources. That was shown in research by Austin Kelly—who oversees risk modeling at Fannie Mae and Freddie Mac for the FHA—published late last year in the Journal of Housing Research. FHA data on foreclosures show the same pattern.

The new program lets home buyers apply the tax-credit advance against the FHA's 3.5% down payment requirement only if the loan is handled through a state housing-finance agency; otherwise the tax advance may only be used to cover closing costs, to increase the down payment, or to buy down the mortgage's interest rate. The FHA already allows down payment assistance from family, employers, and governmental agencies, but generally bars it from sellers, mortgage writers, or others who would benefit financially from the transaction.

Ultimately, critics complain that the new program transforms a tax credit meant to reward sidelined buyers for taking the plunge into a subsidy that could goose sales to those who otherwise couldn't buy a home—and have little at stake if it doesn't work out. "Didn't we just have this big housing bust where people bought houses they can't afford?" says Peter Schiff, president of brokerage firm Euro Pacific Capital and an economic adviser to Representative Ron Paul's (R-Tex.) long-shot 2008 Presidential campaign. "We don't want people buying houses without using their own money."

source: Business Week

SEC, NY AG Finalize ARS Settlements With Firms

2009-06-03T13:46:00.000-07:00

By Sarah N. Lynch
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Bank of America (BAC), Royal Bank of Canada's RBC Capital Markets (RY) and Deutsche Bank (DB) on Wednesday settled civil charges filed by the Securities and Exchange Commission and the New York Attorney General's office, which accused them of misleading investors of the risks associated with auction-rate securities.

Without admitting or denying the charges, the three firms will provide nearly $6.7 billion to 9,600 customers who invested in auction-rate securities before the market froze in February 2008.

These are the latest settlements in the SEC's wide-ranging auction securities case. Three other settlements were also completed with Wachovia, Citigroup and UBS AG. Meanwhile, the SEC announced a preliminary settlement with Merrill Lynch last August, but a final settlement hasn't yet been reached.

"Through these latest settlements and prior ARS settlements with other firms entered into by the commission, more than $50 billion in liquidity is being made available to tens of thousands of customers so they can get back all of the money they invested in auction rate securities," said Scott Friestad, Deputy Director of the SEC's Division of Enforcement.

Preliminary settlements with Bank of America and RBC were first announced in October last year, but Wednesday's announcement represented final agreements with the firms.

According to the SEC's complaint, which was filed in federal court in New York City, the three firms led investors to believe that auction rate securities were safe and liquid investments that were comparable to money markets.

They made these claims, the SEC alleged, while knowing that their ability to support auctions by purchasing more auction rate securities had been reduced with the stress of the growing credit crisis.

When the banks stopped supporting the auction-rate securities market in February last year, customers were left holding billions in illiquid auction-rate securities.

Under the terms of the settlements, which still await court approval, Bank of America customers will have $4.5 billion of liquidity restored. RBC customers, meanwhile, will have $800 million in liquidity restored and Deutsche Bank customers will have $1.3 billion in restored liquidity.

Each firm will offer to purchase auction-rate securities from individuals, charities and other businesses that purchased the securities even if those customers have since moved accounts.

They also must work to provide liquidity solutions for institutional investors and other customers. In addition, they must pay eligible customers who sold their auction-rate securities below par the difference between the sale price and par.

New York Attorney General Andrew Cuomo's office finalized deals with Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS). In total, 11 firms that the office has reached agreement with have bought back $61 billion of ARS from investors. Citigroup Inc. and UBS AG in December finalized their deals with both the SEC and Cuomo's office. All the companies still need to provide liquidity to the ARS market.

source: The Wall Street Journal

Hoenig: Removing Econ, Mkt Aid Will Be Delicate Matter For Fed

2009-06-03T13:45:00.000-07:00

By Deborah Lynn Blumberg
Of DOW JONES NEWSWIRES

SHERIDAN, Wyo. (Dow Jones)--Withdrawing the help that it has extended to the economy and financial markets will be tricky for the Federal Reserve, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Wednesday, but it must be done as the economy begins to recover in order to stem inflation.

The Fed has doubled its balance sheet to help markets. It can't wait until inflation begins to become an issue before it acts, though, and needs to try to "pull the stimulus out at the right time," Hoenig said.

That will be a "very delicate matter," said Hoenig. If the Fed pulls its help too quickly, it could trip the U.S. economy back into a recession, he said. Failure to pull help away fast enough, though, risks causing inflation, he said.

When it does begin to pull back, the Fed will need to raise excess reserves and begin to dispose of the assets it purchased. The latter, though, does put downward pressure on prices and "people become annoyed," he said.

In that light, it is key to "withdraw carefully and systematically. It's a matter of judgment and timing, but it has to be done. It won't be easy."

Hoenig was responding to questions from the audience after delivering prepared remarks at a lunch meeting in Sheridan, Wyo.

In response to other questions, the central banker also said the financial system needs a clear set of disciplinary rules to keep it from falling into another crisis in the future.

"We really do need to diagnose this correctly," he said. "We did get away from some very fundamental standards."

However, a complete regulatory restructuring isn't the way to go, he said, pointing instead to developing a clear set of rules that are "a disciplinary force on the industry."

For example, he cited setting firm principles for examiners who audit the banks. A reasonable leveraged standard or reasonable loan ratios are examples of such principles, he said. Banks that exceed a reasonable figure that was set would have to correct the imbalance. Hoenig also said banks with securities off their balances sheet could perhaps be required to retain a portion of that.

He also said commercial real estate is a sharp issue, noting that some of the financing of commercial real estate was done at very low rates.

In commercial real estate, "there are serious adjustments that are taking place," he said, adding also that the adjustment period will last for a period of time.

Discussions are ongoing related to the government's Public Private Investment Program, which was designed to remove troubled assets from bank balance sheets, Hoenig said.

The U.S. will have to think about how to bring balance back to its economy, how to save more as a nation and how to build up productivity, the central banker noted.

"This will take time," he said, "but the only way to get it solved is to begin solving it."

source: The Wall Street Journal

Aetna Seen Cutting Outlook More As Woes Mirror Peers' 2008

2009-06-03T13:44:00.000-07:00

By Dinah Wisenberg Brin
Of DOW JONES NEWSWIRES

Aetna Inc.'s (AET) lowering of its 2009 earnings forecast has raised questions about whether the pressures that hobbled its managed-care peers a year ago - and caused them to repeatedly cut their guidance - are finally catching up with the Hartford, Conn., company.

The news has left some wondering if Aetna isn't done reducing its outlook amid lingering concerns that the company has priced its commercial plans too low relative to medical costs.

"We are concerned that industrywide margin pressure that hit most of the sector in 2008 has caught up with Aetna in 2009," Wachovia analyst Matt Perry said in downgrading the company to market perform.

Perry added that last year the average reduction in projected per-share earnings was 34% and that most companies cut their views more than once. Aetna on Tuesday lowered the midpoint of its per-share earnings guidance, given in February, by 7%.

"Both of these data points leave us concerned that [Aetna] could cut EPS again in 2009," the analyst said. Goldman Sachs analyst Matthew Borsch, who has rated Aetna at sell for the past year and also sees further forecast cuts as a possibility, blames aggressive pricing.

"We continue to see pricing as the chief culprit here," he said. "We argue the red flags for lower earnings have been evident for some time as Aetna maintained its view of cycle-peak margins in the face of industrywide deterioration last year and as Aetna has continued to show strong sector-relative market share gains in the price-sensitive commercial risk segment."

Aetna maintains it aims to price its health plans in line with increases in medical costs and will continue to do so.

"The tradeoff between growth and profitability is not one that we're willing to make," Chief Financial Officer Joseph Zubretesky said on a conference call. "If we have to sacrifice membership growth for [next year] in order to price to our new medical [cost] trend, we will do that."

Aetna late Tuesday reduced its outlook for per-share operating earnings to between $3.55 and $3.70, from a previous range of $3.85 to $3.95, citing ongoing increases in medical costs in its commercial health plans and lower-than-expected Medicare revenue.

The company said it is continuing to see a higher level and number of services applied on a per-patient basis at hospitals, linking the phenomenon to the weak economy.

Wachovia's Perry said Aetna had the weakest results in the first quarter of this year and was the only company to cite unexpectedly high medical costs, while last year it was the only company not to significantly lower guidance and had higher margins than its peers.

For most of 2008, Aetna maintained its earnings forecast and expanded its lucrative commercial health-plan enrollment as its managed-care competitors struggled with pricing, medical costs, membership and profits.

Since then, Aetna's peers have tried to correct their pricing in response to their margin troubles last year. As a result, Borsch - like others - sees Aetna's current commercial margin pressure as company-specific.

Meanwhile, Citigroup's Charles Boorady believes the managed-care industry as a whole is indeed facing higher cost increases as providers seek to offset effects of the weak economy, but that Aetna is less reserved for it than its peers.

These concerns are reflected in Aetna's stock price. Aetna shares recently traded at $25.90, down 5% Wednesday, and is the only one of the top four managed-care companies showing a decline in its stock price year to date.

A year ago, the stock traded at a premium to its peer group, as measured in price to earnings for the next 12 months, although on average Aetna has traded in the middle of the pack for the past five-plus years.

Now, Aetna trades at roughly seven times projected earnings, a discount to larger competitors UnitedHealth Group Inc. (UNH) and WellPoint Inc. (WLP), which trade at more than eight times, although still a premium to Cigna Corp. (CI), the fourth-largest player, which trades at 5.8 times.

Overall, Borsch sees 2009 as marking a pause in an industry margin down cycle, although the sector is unlikely to outperform the market from here.

source: The Wall Street Journal

DOJ Probes Hiring at Tech Firms

2009-06-03T13:35:00.000-07:00

By JESSICA E. VASCELLARO and JUSTIN SCHECK

The Justice Department is investigating whether a number of large U.S. companies violated antitrust laws by establishing agreements not to recruit each other's employees, according to people briefed on the investigation.

Members of the department have sought information from companies in the technology and biotechnology sectors, including Google Inc., Apple Inc., Yahoo Inc. and Microsoft Corp., these people said, adding the inquiry appears to be in an early stage. It is unclear which of the companies may be targets of the investigation.

A Google spokesman confirmed the company has been contacted about the investigation and is cooperating. A spokeswoman for Yahoo declined comment. An Apple spokesman couldn't immediately be reached.

A Justice Department spokeswoman declined comment.

The inquiry, reported earlier by the Washington Post, is the latest sign that the Obama administration is living up to its promise to enforce antitrust laws more aggressively. And it is further evidence that it intends to keep tech companies, in particular, in its sights.

The DOJ continues to investigate whether Google's proposed settlement with authors and publishers to resolve a copyright dispute over its book search service violates antitrust laws, according to people familiar with the matter. And the Federal Trade Commission has inquired about whether the fact that two directors--Google Chief Executive Eric Schmidt and former Genentech Inc. CEO Art Levinson--sit on both the Apple and Google board violates antitrust laws.

The latest investigation casts a wider net, looking at the hiring practices of companies in multiple industries, say people familiar with the inquiry.

Businesses frequently agree not to poach each other's employees as part of business deals or merger agreements and those pacts don't appear to violate antitrust laws, according to one person familiar with the investigation. Instead, the Justice Department is looking into whether companies establish blanket agreements not to do so, which may be considered collusion, this person said.

source: The Wall Street journal

Almost One-Quarter of U.S. Homeowners Underwater as Values Sink

2009-05-05T22:20:00.000-07:00

By Daniel Taub

A growing number of U.S. homeowners owe more than their properties are worth after prices extended their two-year decline in the first quarter, Zillow.com said.

Almost 21.8 percent of all owners were underwater as of March 31, the Seattle-based real estate data service said in a report today. At the end of the fourth quarter, 17.6 percent of homeowners owed more than their original mortgage, while 14.3 percent had negative equity three months earlier.

Property values dropped 14 percent from a year earlier in the first quarter, reducing the median value of all U.S. single- family homes, condominiums and cooperatives to $182,378, Zillow said. The gain in underwater homeowners will lead to more bank repossessions, the company said.

Many owners “would be more willing to bear the financial consequences of bankruptcy or foreclosure,” Stan Humphries, Zillow’s vice president of data and analytics, said in an interview. “You are going to continue to see home prices fall for the rest of this year and some portion of next year.”

The recession cut home values by $2.4 trillion last year, First American CoreLogic said in a March 4 report. More than 8.3 million U.S. mortgage holders owed more than their properties were worth and an additional 2.2 million borrowers will be underwater if prices decline another 5 percent, the Santa Ana, California-based seller of mortgage and economic data, said in the report.

Unemployment Rising

The data demonstrates the challenges facing Federal Reserve Chairman Ben S. Bernanke and the Obama administration as they seek to spark a housing recovery. The Fed has pushed 30-year fixed home loan rates to a record low by purchasing mortgage- backed securities. The jobless rate jumped to 8.9 percent last month from 8.5 percent in March and employers cut at least 600,000 workers from payrolls for a fifth straight time, according to the median estimate in a Bloomberg News survey ahead of a May 8 Labor Department report.

The U.S. market with the biggest drop in home values in the first quarter was Salinas, California, where the median price fell 37 percent to $301,793 from year earlier, Zillow said.

About 32 percent of all homes there were worth less than what’s owed on them, Zillow said. Among the worst-performing markets, Salinas was followed by Redding, Stockton, Madera, and Vallejo-Fairfield, all in California. The company estimates values for homes, whether or not they are sold in the period tracked, in 161 metropolitan areas.

Foreclosures Dominate

In 85 of the markets tracked, the annualized home-value change over the past five years was negative or little changed. About 20 percent of all home transactions in the past 12 months were foreclosures, and short sales made up about 12 percent. A short sale is when a home is sold for less than the outstanding mortgage balance.

The data for Zillow’s study dates to 1996 and comes from public records, the closely held company said. Its mortgage figures come from information filed with individual counties.

The decline in values is holding potential sellers back from putting their properties on the market, the company said. In a separate survey of homeowner sentiment, 31 percent of homeowners said they would be at least “somewhat likely” to put their property up for sale in the next 12 months should they see signs of a recovery.

source: Bloomberg

Small Businesses and the Estate Tax

2009-04-16T23:22:00.000-07:00

Small Businesses and the Estate Tax

of free enterprise on which our country was built. According to the editorial, the facts often do not support the claim that President Obama's proposed changes to the estate tax would hurt small businesses.

Nearly 60 percent of small-business owners do not believe that Mr. Obama's administration understands what they need. According to a survey conducted last month by City Business Journals Network, 40 percent of small- business owners are less optimistic about the economy than they were when the president took office.

Raising taxes on small businesses is a bad plan; it is reckless and threatens to make a bad economy worse. Data from the National Federation of Independent Business affirm that as many as 9 percent of businesses will be hit by increased taxes. Most important, these businesses are the job creators for our nation, generating approximately seven of every 10 new jobs in America. Tax hikes will therefore kill any chance for job growth. The president likes to refer to small businesses as the backbone of the American economy. He should throw them a bone instead of fetching them a higher tax bill.
Small-business owners, do not be led astray: Plan for Mr. Obama's tax changes to take a bigger bite of your revenue and put you in the doghouse.

Students show off business knowledge

2009-04-14T06:12:00.000-07:00

Students show off business knowledge

Pine View High School students Caitlin Trani, Nick Basset and Braedon Porter attended the Future Business Leaders of America state competition and placed second in two categories, Global Business and Entrepreneurship. Their high placement qualifies them to compete at FBLA's National Leadership Conference in Anaheim, Calif., in June.

Competitions require students to take a written exam as a prequalifier to advance to a final round, where students are given a simulated business situation. Student teams must present their recommendations for solving the problem to a panel of judges, who then determines a winner.

Trani and Basset teamed up to win the entrepreneurship competition by providing winning advice to increase revenues for owners of a coffee shop. Porter joined the duo in the global business category, where the team of three students proved its knowledge of expanding a business' global market. Classmate Kelcie Dean placed second in business communications and will be attending nationals with them.

"To place in the top 10 is, in itself, an honor and includes the most outstanding students in the state. In each event, students compete against hundreds of others for an opportunity to represent Utah on the national stage. Pine View's students showed their broad comprehension of business concepts in more than one event, and I'm confident they'll do well competing against the top in the nation," said Dianna Moore, FBLA advisor.

This will be Trani's second time traveling to California for academic achievement, having won first place in accounting at the DECA state competition in March.

DECA, the national association of marketing students, holds it's international competition later this month, and Trani will be the only student who qualified from Washington County School District to attend the event. Trani has been a member of both FBLA and DECA business clubs for four years and has served as the FBLA president this year. Trani, along with a select group of outstanding seniors, will graduate from Pine View's elite School of Business program in May. Pine View High boasts the largest business program in the district, offering students the ability to graduate with a strong portfolio and a business major.

"We have a vision of what we would like our Pine View students to become and to achieve," remarks principal Mike Mees. "Caitlin Trani is a perfect example of that vision."

With current budget constraints, Trani and her peers will be required to pay the majority of their travel expenses to compete at the national level. The competitions cost each student about $600 out of their own pockets.

source :The spektrum.com

When credit card firms adjust the interest, limits

2009-04-12T07:03:00.000-07:00

By Jeff Gelles

If credit-card companies ever seem like they're playing a cat-and-mouse game with your credit limits or interest rates, remember the perspective of the mouse - to whom it can be a very costly game.

Consider the case of Marc Crawford, of Philadelphia's Mayfair section. Crawford says he rarely used his HSBC MasterCard, which had a credit limit of $9,200. But after he splurged on $1,500 worth of Christmas gifts for a new grandbaby, he found his credit limit had been cut to $2,500 - a change that could hurt his credit score.

Or consider what happened to Roxanne Reitmeyer, of Ardmore, who has two Bank of America credit cards with interest rates under 10 percent. Last week, Bank of America notified her that the rates on each card would rise next month, essentially doubling her monthly interest costs.

Both kinds of changes are happening with rising frequency. Bank of America, for instance, acknowledged last week that it was raising rates on four million U.S. cardholders with characteristics similar to Reitmeyer's: They carry a balance, and have rates under 10 percent.

Card issuers say they're simply managing credit-card accounts more conservatively in light of the nation's economic distress, which has forced them to write off more credit-card debt and raised their costs of funds.

Bank of America spokeswoman Betty Riess says the four million cards represent fewer than 10 percent of the bank's U.S. cardholders. She says the bank is raising prices on cardholders whose cards are "underpriced relative to current market conditions."

Consumer advocates have a more skeptical view of lenders' recent changes. They believe financially stressed banks are trying to squeeze more profits from a relatively healthy segment of their businesses.

A case in point: Until it backed down last month under pressure from the New York Attorney General's Office, JPMorgan Chase & Co. had sought to impose a brand-new $10 monthly service fee on more than 300,000 cardholders. Chase agreed to refund $4.4 million.

For consumers facing any change in credit limits or terms, the most important thing is to understand what's happening and the choices you have in response. If you're already feeling financial stress, any changes in terms can make a bad situation worse.

Crawford had few options beyond the one he took: complaining to HSBC and to its federal regulator, the Comptroller of the Currency.

It's not clear what the comptroller can do. Credit cards are are open-ended extensions of credit, and banks say they need to respond swiftly to signs of increased risk. No advance notice is required.

Still, Crawford's complaints got some traction. Last month, HSBC bumped his limit up to $5,000.

Crawford was right to be concerned about his credit score, says Linda Sherry of the California group Consumer Action. She says the key worry is a "domino effect": Lower credit scores can prompt lenders to raise cardholders' interest rates, which in turn can boost balances and expose consumers to over-limit fees and penalty interest rates.

Sherry believes lenders should at least be required to notify cardholders of reductions in credit limits - as new federal rules will require next year in some circumstances. Crawford discovered his limit had changed when he went online to pay his February bill.

"It's a key term - along with interest rates, it's the term that matters most to people," Sherry says.

If they can't afford higher interest payments, Bank of America cardholders such as Reitmeyer face similar risks, but have another option: They can formally decline the change in terms - if they're willing and able to close their accounts.

That doesn't mean they must immediately pay off their balances. They simply have to continue to meet the terms of the old agreement and make timely payments.

But it does mean that they can't use their cards, because making additional charges constitutes "acceptance" of the new rates.

That seems fair enough. If you have an account you're closing to reject changed terms, the best thing to do is cut up the card, or tuck it in a drawer.

But there's a trap that snares many consumers: unintentional charges, such as recurring fees for online services or magazine subscriptions. If you use your card for such payments, make sure you provide another card or request a different payment method. Accidental or not, credit-card banks will treat any subsequent use as an excuse to reactivate the account at the higher rates - another trap that will disappear when new rules take effect in July 2010.

At that point, or perhaps sooner if Congress intervenes, cardholders won't face such stark choices. For instance, lenders won't be able to change rates on existing balances if cardholders are current with payments.

But for now, stressed consumers are being buffeted by unfriendly market conditions - including less opportunity to take the time-honored step of taking their business elsewhere.If credit-card companies ever seem like they're playing a cat-and-mouse game with your credit limits or interest rates, remember the perspective of the mouse - to whom it can be a very costly game.

Consider the case of Marc Crawford, of Philadelphia's Mayfair section. Crawford says he rarely used his HSBC MasterCard, which had a credit limit of $9,200. But after he splurged on $1,500 worth of Christmas gifts for a new grandbaby, he found his credit limit had been cut to $2,500 - a change that could hurt his credit score.

Or consider what happened to Roxanne Reitmeyer, of Ardmore, who has two Bank of America credit cards with interest rates under 10 percent. Last week, Bank of America notified her that the rates on each card would rise next month, essentially doubling her monthly interest costs.

Both kinds of changes are happening with rising frequency. Bank of America, for instance, acknowledged last week that it was raising rates on four million U.S. cardholders with characteristics similar to Reitmeyer's: They carry a balance, and have rates under 10 percent.

Card issuers say they're simply managing credit-card accounts more conservatively in light of the nation's economic distress, which has forced them to write off more credit-card debt and raised their costs of funds.

Bank of America spokeswoman Betty Riess says the four million cards represent fewer than 10 percent of the bank's U.S. cardholders. She says the bank is raising prices on cardholders whose cards are "underpriced relative to current market conditions."

Consumer advocates have a more skeptical view of lenders' recent changes. They believe financially stressed banks are trying to squeeze more profits from a relatively healthy segment of their businesses.

A case in point: Until it backed down last month under pressure from the New York Attorney General's Office, JPMorgan Chase & Co. had sought to impose a brand-new $10 monthly service fee on more than 300,000 cardholders. Chase agreed to refund $4.4 million.

For consumers facing any change in credit limits or terms, the most important thing is to understand what's happening and the choices you have in response. If you're already feeling financial stress, any changes in terms can make a bad situation worse.

Crawford had few options beyond the one he took: complaining to HSBC and to its federal regulator, the Comptroller of the Currency.

It's not clear what the comptroller can do. Credit cards are are open-ended extensions of credit, and banks say they need to respond swiftly to signs of increased risk. No advance notice is required.

Still, Crawford's complaints got some traction. Last month, HSBC bumped his limit up to $5,000.

Crawford was right to be concerned about his credit score, says Linda Sherry of the California group Consumer Action. She says the key worry is a "domino effect": Lower credit scores can prompt lenders to raise cardholders' interest rates, which in turn can boost balances and expose consumers to over-limit fees and penalty interest rates.

Sherry believes lenders should at least be required to notify cardholders of reductions in credit limits - as new federal rules will require next year in some circumstances. Crawford discovered his limit had changed when he went online to pay his February bill.

"It's a key term - along with interest rates, it's the term that matters most to people," Sherry says.

If they can't afford higher interest payments, Bank of America cardholders such as Reitmeyer face similar risks, but have another option: They can formally decline the change in terms - if they're willing and able to close their accounts.

That doesn't mean they must immediately pay off their balances. They simply have to continue to meet the terms of the old agreement and make timely payments.

But it does mean that they can't use their cards, because making additional charges constitutes "acceptance" of the new rates.

That seems fair enough. If you have an account you're closing to reject changed terms, the best thing to do is cut up the card, or tuck it in a drawer.

But there's a trap that snares many consumers: unintentional charges, such as recurring fees for online services or magazine subscriptions. If you use your card for such payments, make sure you provide another card or request a different payment method. Accidental or not, credit-card banks will treat any subsequent use as an excuse to reactivate the account at the higher rates - another trap that will disappear when new rules take effect in July 2010.

At that point, or perhaps sooner if Congress intervenes, cardholders won't face such stark choices. For instance, lenders won't be able to change rates on existing balances if cardholders are current with payments.

But for now, stressed consumers are being buffeted by unfriendly market conditions - including less opportunity to take the time-honored step of taking their business elsewhere.If credit-card companies ever seem like they're playing a cat-and-mouse game with your credit limits or interest rates, remember the perspective of the mouse - to whom it can be a very costly game.

Consider the case of Marc Crawford, of Philadelphia's Mayfair section. Crawford says he rarely used his HSBC MasterCard, which had a credit limit of $9,200. But after he splurged on $1,500 worth of Christmas gifts for a new grandbaby, he found his credit limit had been cut to $2,500 - a change that could hurt his credit score.

Or consider what happened to Roxanne Reitmeyer, of Ardmore, who has two Bank of America credit cards with interest rates under 10 percent. Last week, Bank of America notified her that the rates on each card would rise next month, essentially doubling her monthly interest costs.

Both kinds of changes are happening with rising frequency. Bank of America, for instance, acknowledged last week that it was raising rates on four million U.S. cardholders with characteristics similar to Reitmeyer's: They carry a balance, and have rates under 10 percent.

Card issuers say they're simply managing credit-card accounts more conservatively in light of the nation's economic distress, which has forced them to write off more credit-card debt and raised their costs of funds.

Bank of America spokeswoman Betty Riess says the four million cards represent fewer than 10 percent of the bank's U.S. cardholders. She says the bank is raising prices on cardholders whose cards are "underpriced relative to current market conditions."

Consumer advocates have a more skeptical view of lenders' recent changes. They believe financially stressed banks are trying to squeeze more profits from a relatively healthy segment of their businesses.

A case in point: Until it backed down last month under pressure from the New York Attorney General's Office, JPMorgan Chase & Co. had sought to impose a brand-new $10 monthly service fee on more than 300,000 cardholders. Chase agreed to refund $4.4 million.

For consumers facing any change in credit limits or terms, the most important thing is to understand what's happening and the choices you have in response. If you're already feeling financial stress, any changes in terms can make a bad situation worse.

Crawford had few options beyond the one he took: complaining to HSBC and to its federal regulator, the Comptroller of the Currency.

It's not clear what the comptroller can do. Credit cards are are open-ended extensions of credit, and banks say they need to respond swiftly to signs of increased risk. No advance notice is required.

Still, Crawford's complaints got some traction. Last month, HSBC bumped his limit up to $5,000.

Crawford was right to be concerned about his credit score, says Linda Sherry of the California group Consumer Action. She says the key worry is a "domino effect": Lower credit scores can prompt lenders to raise cardholders' interest rates, which in turn can boost balances and expose consumers to over-limit fees and penalty interest rates.

Sherry believes lenders should at least be required to notify cardholders of reductions in credit limits - as new federal rules will require next year in some circumstances. Crawford discovered his limit had changed when he went online to pay his February bill.

"It's a key term - along with interest rates, it's the term that matters most to people," Sherry says.

If they can't afford higher interest payments, Bank of America cardholders such as Reitmeyer face similar risks, but have another option: They can formally decline the change in terms - if they're willing and able to close their accounts.

That doesn't mean they must immediately pay off their balances. They simply have to continue to meet the terms of the old agreement and make timely payments.

But it does mean that they can't use their cards, because making additional charges constitutes "acceptance" of the new rates.

That seems fair enough. If you have an account you're closing to reject changed terms, the best thing to do is cut up the card, or tuck it in a drawer.

But there's a trap that snares many consumers: unintentional charges, such as recurring fees for online services or magazine subscriptions. If you use your card for such payments, make sure you provide another card or request a different payment method. Accidental or not, credit-card banks will treat any subsequent use as an excuse to reactivate the account at the higher rates - another trap that will disappear when new rules take effect in July 2010.

At that point, or perhaps sooner if Congress intervenes, cardholders won't face such stark choices. For instance, lenders won't be able to change rates on existing balances if cardholders are current with payments.

But for now, stressed consumers are being buffeted by unfriendly market conditions - including less opportunity to take the time-honored step of taking their business elsewhere.Consumers can shop online for credit cards at sites such as www.LowCards.com. But those who rely on solicitations from card issuers, which topped 5 billion in 2007, are likely seeing fewer offers.lern more BestCredit: How to Win the Credit Game, 2nd Edition

source :Pilly.com

Investments Can Yield More on K Street, Study Indicates

2009-04-12T07:00:00.000-07:00

By Dan Eggen

In a remarkable illustration of the power of lobbying in Washington, a study released last week found that a single tax break in 2004 earned companies $220 for every dollar they spent on the issue -- a 22,000 percent rate of return on their investment.

The study by researchers at the University of Kansas underscores the central reason that lobbying has become a $3 billion-a-year industry in Washington: It pays. The $787 billion stimulus act and major spending proposals have ratcheted up the lobbying frenzy further this year, even as President Obama and public-interest groups press for sharper restrictions on the practice.

The paper by three Kansas professors examined the impact of a one-time tax break approved by Congress in 2004 that allowed multinational corporations to "repatriate" profits earned overseas, effectively reducing their tax rate on the money from 35 percent to 5.25 percent. More than 800 companies took advantage of the legislation, saving an estimated $100 billion in the process, according to the study.

The largest recipients of tax breaks were concentrated in the pharmaceutical and technology fields, including Pfizer, Merck, Hewlett Packard, Johnson & Johnson and IBM. Pfizer alone repatriated $37 billion, representing 70 percent of its revenue in 2004, the study found. The now-beleaguered financial industry also benefited from the provision, including Citigroup, J.P. Morgan Chase, Morgan Stanley and Merrill Lynch, all of which have since received tens of billions of dollars in federal bailout money.

The researchers calculated an average rate of return of 22,000 percent for those companies that helped lobby for the tax break. Eli Lilly, for example, reported in disclosure documents that it spent $8.5 million in 2003 and 2004 to lobby for the provision -- and eventually gained tax savings of more than $2 billion.

"There's always been speculation that lobbying is a lucrative area," said Stephen W. Mazza, a Kansas tax-law professor who is one of the authors of the study. "We've been able to come up with quantifiable returns and show that it really is the case."

Mazza added that the results are "troubling" because they show how large companies can distort tax policy to benefit their bottom line.

Obama has made lobbying a key target of his ethics policies, sharply limiting the access of lobbyists to the administration and forbidding the appointment of many former lobbyists in the government without special waivers. The moves have angered many lobbying groups but have had little apparent impact on the ongoing boom in K Street business.

"It's always hard to measure the financial benefits of lobbying, but generally everyone knows it does bring in a lot," said Craig Holman, government affairs lobbyist for Public Citizen. "That's why corporations are pouring more and more money into lobbying every year. Clearly, they understand it has a very good rate of return."

The tax break in question was included as part of the American Jobs Creation Act of 2004, and was billed as a way to create jobs in the United States by requiring companies to use the money for specific purposes.

But the Congressional Research Service and others have since found that many companies cut jobs in the wake of the tax break and that nearly all the money was used for stock buybacks or dividends. Supporters failed in a bid to include a similar tax break in this year's stimulus legislation, and a Senate subcommittee has launched an investigation into how companies used their tax savings under the 2004 program.

The provision was championed in part by the Homeland Investment Coalition, a group of companies and trade associations that was formed to push for the repatriation holiday. The Pharmaceutical Research and Manufacturers of America (PhRMA), one of the disbanded coalition's members, said in a statement Friday that "repatriation of profits provided a new source of investment for American companies."

"PhRMA supported the legislation four years ago as part of a broad business coalition because of the additional economic benefits the bill would provide," senior vice president Ken Johnson said. "It meant jobs and skilled training for American workers, as well as a shot in the arm for local economies."

source:The Washigton Post

U.S. Economy: Jobless Claims Climb to Highest Level Since 1982

2009-04-02T09:59:00.000-07:00

By Shobhana Chandra

The number of Americans seeking jobless benefits last week climbed to the highest level in 26 years, providing a reminder that unemployment will keep mounting long after the economy stabilizes.

Initial jobless claims swelled by 12,000 to 669,000 in the week ended March 28, the most since 1982, the Labor Department said today in Washington. A Commerce Department report showed orders to factories improved in February for the first time in seven months.

Attention now turns to tomorrow’s monthly employment report that is projected to show the jobless rate climbed in March to a 25-year high. The biggest slump in profits in five decades means companies will cut more staff to reduce expenses in coming months, even as orders begin to trickle in.

“There are positive signs in the economy, solid signs that the downdraft has diminished,” said Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “But because the labor market lags, we don’t think we’ve seen the worst of that yet.”

Stocks gained, extending a global rally, as investors welcomed a change in regulation that may boost bank profits, and leaders of the most powerful nations, meeting in London, neared agreement on joint efforts to stem the recession. The Standard & Poor’s 500 index was up 3.8 percent to 841.86 at 11:19 a.m. in New York. Treasury securities fell and oil jumped.

First-time jobless claims were estimated to fall to 650,000 from 652,000 initially reported for the prior week, according to the median projection of 43 economists in a Bloomberg News survey. Estimates ranged from 630,000 to 682,000.

Job Cuts

The report from Labor also showed the total number of people collecting benefits soared in the week ended March 21 to a record 5.73 million. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, increased to 4.3 percent in the same week, the highest since 1983.

The jobless rate last month climbed to 8.5 percent, the highest level since 1983, according to the median forecast in a Bloomberg survey before tomorrow’s report. Payrolls probably fell by 660,000 workers, bringing total job losses since the downturn began to about 5 million.

Less employment and slowing incomes may thwart a rebound in consumer spending, setting back prospects for an economic turnaround in the second half of 2009.

“It is difficult to sustain any rebound in consumer spending when you have such sharp declines in employment,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “It’s getting harder to get a job once you lose it.”

Factory Orders

Orders placed with factories rose 1.8 percent in February, the first gain since July, reflecting a rebound in demand for construction machinery, computers and air-conditioning equipment that signals the worst of the manufacturing slump has passed.

The gain followed a 3.5 percent drop in January that was larger than previously estimated, the Commerce Department said.

A pickup in bookings, combined with plunging stockpiles, is setting the stage for gains in output in coming months that may stem the slide in factory employment.

“There are signs that the pace of decline in manufacturing activity may be slowing,” said Tim Quinlan, economic analyst a Wachovia Corp. in Charlotte, North Carolina.

The Commerce report showed demand for motor vehicles and parts rose 1.1 percent in February, and improving sales indicate gains may continue.

Auto Purchases

Auto purchases last month were stronger than forecast, rising to a 9.9 million annual pace from a three-decade low of 9.1 million in February, according to industry figures released yesterday. Carmakers were forced to spend a record $3,169 on incentives per vehicle on average, surpassing the previous mark set in September 2004, to entice consumers.

“It’s one month in a row, and it’s of interest and there may be a small sign of hope,” Chrysler LLC President Jim Press said on a call with reporters yesterday. “But if you look at the trends out there, there’s a lot of concern.”

President Barack Obama earlier this week gave General Motors Corp. and Chrysler deadlines to “fundamentally restructure” or lose government aid that has kept them running. He rejected the companies’ recovery plans and forced GM Chief Executive Officer Rick Wagoner to resign.

In addition to providing funds to the U.S. automakers, policy makers are trying to unclog credit. The Financial Accounting Standards Board voted today to relax fair-value rules that Citigroup Inc. and Wells Fargo & Co. say don’t work when markets are inactive.

The changes allow companies to use “significant” judgment when gauging the price of some investments on their books, including mortgage-backed securities. Analysts say the measure may reduce banks’ writedowns and boost their first-quarter net income by 20 percent or more.

source :Bloomberg

Bank of America CEO sees economy bottoming in 2009

2009-04-02T09:57:00.001-07:00

By Greg Morcroft & John Spence

While he's seeing "mixed signals," Bank of America Corp.'s chief executive says he expects the U.S. economy to bottom in the second half of this year, and he doesn't anticipate the government to ask the company to raise more capital.
In a wide-ranging TV interview on CNBC, CEO Ken Lewis -- who spearheaded Bank of America's controversial acquisitions of Countrywide Financial and Merrill Lynch at the height of the recent credit crisis -- also said that the Charlotte, N.C.-based company (BAC:7.38, +0.33, +4.7%) remains willing to
work with customers to avoid mortgage foreclosure and that tens of billions of dollars of the bank's capital remains tied up in reserves for losses on consumer loans such as mortgages and credit cards.

Regarding the government's recent investment in the company under the Troubled Asset Relief Program stabilization plan, Lewis said that he regretted taking a larger piece of government money than the company needed, adding that he's "anxious" to return at least some of those funds to the government.
Lewis said that the company is continuing to make "every good loan we can make," despite a continuing rise in consumer loan delinquencies.
He said that the next six months will be tough but that the current economic downturn is beginning to feel to him more like a typical recession than a freefall.
'Mixed signals'
Asked about the current state of the economy, Lewis said he sees mixed indications with some housing sales data coming in better than expected, and some auto sales not quite as bad as forecasted.
"When you see mixed signals, I think it signals that you're getting close to the bottom," the chief executive told CNBC.
He said he shares the consensus view that can have things moderate in terms of the declines and that the economy hits bottom in the second half 2009, with a recovery in the first part of next year.
"You can't throw as many things as we're throwing at it and not break the back of this thing," Lewis said.
He said the recent wave of mortgage refinancing will reduce monthly payments for many borrowers and help kick-start the economy.
Lewis said Bank of America is working on modifying home loans for strapped borrowers.
"Nobody wants to foreclose," he said. "It's bad for everybody, and it's particularly devastating for communities."
TARP regrets
Lewis said he erred by taking the second round of TARP capital from the government when it was closing the controversial acquisition of Merrill Lynch.
B. of A. took another $20 billion after earlier accepting $25 billion.
"That was my mistake," he said. "We took more than we needed. I regret having taken that much. That's why I'm so anxious to pay at least some of it back."
Lewis explained he didn't take the second capital infusion solely because of Merrill Lynch, but also to protect the bank from the economy worsening more than it actually did. He said the government didn't force the company to complete the Merrill Lynch deal, and that it was "the right thing to do" for both B. of A. and the American financial system. Lewis lauded the Merrill acquisition, saying the brokers have more banking products to sell now.
He said the purchases of Merrill and mortgage giant Countrywide "will prove to be two of the best acquisitions we've ever made if you judge us over two or three years, rather than two or three months."
'Earnings power'
When asked about B. of A. shares still trading below $8, the CEO said the stock price reflects "fear of the unknown," as well as questions over the economy and further write-downs.
"This is going to be a tough year for all institutions," Lewis said.
Yet a year from now, "we'll be coming out of this, and you'll be able to see a lot of the earnings power of the financial institutions and the unemployment rate should at least be holding steady if not starting to improve slightly."
Lewis is also optimistic the bank will pass the so-called stress tests being conducted by the government.
"The bad news is it creates a lot of uncertainty," he remarked. "The good news is we will get through it now and hopefully get that uncertainty behind us and get some closure."
He said he doesn't expect the government will ask B. of A. to raise additional capital.
Finally, he acknowledged the compensation system in the banking business is changing during the financial crisis. He expects salaries will represent a greater percentage of overall compensation relative to incentives, which can encourage too much risk-taking.Lords of Finance: The Bankers Who Broke the World

source :MArketWatch

Greenberg: Government AIG Plan Has Failed; Restructure Co

2009-04-02T09:52:00.000-07:00

By Michael R. Crittenden

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- American International Group Inc.'s (AIG) former chairman blamed the executives who replaced him for the company's collapse, refusing to accept any responsibility despite coming under fire from lawmakers on his role in fostering the firm's financial products division.

"I think they got greedy. I think they wrote considerably more business than they should have," Maurice Greenberg told the House Oversight and Government Reform Committee Thursday.

Greenberg, who headed AIG for 38 years before departing under pressure in 2005, said the U.S. government's effort to prop up the firm - to the tune of $ 170 billion in government aid - has "failed" and that the company should be restructured. Liquidating the firm and selling off its assets should be abandoned, he said, and the government should reduce its stake in the firm from 80% to 15%.

"My approach focuses on reconstructing and sustaining AIG so that it will in the future be a healthy and vibrant company once again," Greenberg said in his testimony before the House Oversight and Government Reform committee.

Added Greenberg: "Let me be clear: AIG's business model did not fail - its management did."

Lawmakers wanted more from Greenberg, pressing him on his ongoing litigation with AIG and what role he played in fostering AIG's financial products division, the unit that wrote vast amounts of credit-default swap contracts that ended up forcing the government's rescue of the firm.

"Mr. Greenberg's testimony should be taken with a grain of salt," Rep. Darrell Issa, R-Calif., said. "At the very least, we must acknowledge these biases."

Rep. Elijah Cummings, D-Md., was more direct, asking Greenberg during a heated exchange, "Do you take any responsibility at all?"

Greenberg, accompanied by high profile attorney David Boies, refused to accept any blame.

"No I don't," Greenberg said, referring to subsequent losses at the financial products division and downgrades of AIG's ratings. He said the management that took over when he left the firm "must have paid very little attention" to the growing problems that led to the firm's demise.

Additionally, Greenberg said billions in government funds should not have been paid to AIG's counterparties; giving other financial firms guarantees would've been a better option.

"These cash payments to [credit-default swap] counterparties should never have occurred," Greenberg said. "It would have been more beneficial for the American taxpayer if the federal government had walled off AIG Financial Products ... and provided guarantees to AIGFP's counterparties rather than putting up billions of dollars in cash collateral to those counterparties."

source :CNNmoney.com

Obama Issues Ultimatum to Carmakers

2009-03-30T10:03:00.000-07:00

By SHERYL GAY STOLBERG and BIL VLASIC

President Obama announced what amounts to a do-or-die ultimatum for the struggling automobile industry on Monday, laying out strict standards that the carmakers must meet to get more government aid and declaring that the industry must survive because it is “like no other, an emblem of the American spirit.”A failure of leadership “from Washington to Detroit” over the years has led the industry to the brink of collapse, the president said, and in more recent days both General Motors and Chrysler have failed to come up with plans adequate to justify the billions more in government help that they are requesting.

“And so today, I am announcing that my administration will offer G.M. and Chrysler a limited period of time to work with creditors, unions and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars; a period during which they must produce plans that would give the American people confidence in their long-term prospects for success,” the president said at the White House.

Speaking a day after the White House pushed out the chairman of G.M., the president said Chrysler has been instructed to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid.

The president said he was designating Edward Montgomery, a former deputy labor secretary, to oversee the auto-recovery effort. His mission will be far-reaching, to cut through government red tape and identify initiatives to support those communities hit hard by the industry’s troubles.

Other salient features of the latest plan to pull Detroit out of its decades-long skid include a tax break, being started by the Internal Revenue Service at once, for auto purchases made between Feb. 16 and the end of 2009; incentives for people to turn in older, less fuel-efficient vehicles and buy more energy-efficient cars, and government-backed warrants to assure customers that they have nothing to fear by buying a car from G.M. or Chrysler.

While the president’s announcement embodies firm government control of the car industry, at least for the time being, he said, “These companies — and this industry — must ultimately stand on their own, not as wards of the state.”

Mr. Obama said his administration has been working closely with the Canadian government, which was to announce its own “specific commitments” later Monday. Both G.M. and Chrysler have extensive operations north of the border.

The concept of encouraging people to buy more fuel-efficient cars, which has been tried with considerable success in Europe, will require the cooperation of Congress. Mr. Obama said he would work with lawmakers to identify portions of the recently enacted multibillion-dollar stimulus package that could be trimmed to finance the purchase-incentive idea — and make it effective at once.

General Motors, in a statement released after the president’s comments, said that over the next 60 days, the company would try to “address the tough issues to improve the long-term viability of the company, including the restructuring of the financial obligations to the bond holders, unions and other stakeholders.”

“Our strong preference is to complete this restructuring out of court,” G.M. said. “However, G.M. will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.”

The president tried to project optimism as he summoned images of Detroit’s mighty past, even as he spoke of decades of complacency and problems left for another day “even as foreign competitors outpaced us.”

“Well, we have reached the end of that road,” he said. “And we, as a nation, cannot afford to shirk responsibility any longer.”

The president did not mention Ford, the other company in Detroit’s Big Three. While it has had problems, Ford has not yet found it necessary to seek government assistance.

The president envisioned an auto industry much different, almost surely smaller, and more nimble. Yet in doing so, and voicing confidence that the industry can travel that road, he recalled an earlier Detroit that “built an arsenal of democracy that propelled America to victory in the Second World War, and that powered our economic prowess in the first American century.”

The decision to ask G.M.’s chairman and chief executive, Rick Wagoner, to resign caught Detroit and Washington by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression.

“This is not meant as a condemnation of Mr. Wagoner, who has devoted his life to this company; rather, it’s a recognition that it will take a new vision and new direction to create the G.M. of the future,” the president said.

The report said the company would get no more help from the government unless it can finalize a proposed alliance with the Italian automaker Fiat by April 30. It must also reduce its debt and health-care obligations.

If a deal is reached between Chrysler and Fiat, the administration says it would consider another loan of $6 billion to Chrysler.

G.M., on the other hand, has made considerable progress in developing new energy-efficient cars and could survive if it can cut costs sharply, the task force reported. The administration is giving G.M. 60 days to present a cost-cutting plan and will provide taxpayer assistance to keep it afloat during that time.

Although some observers of the auto industry have attributed Detroit’s troubles in part to generous wages and health benefits for assembly line workers, the president made no mention of those factors. “The pain being felt in places that rely on our auto industry is not the fault of our workers, who labor tirelessly and desperately want to see their companies succeed,” he said. “And it is not the fault of all the families and communities that supported manufacturing plants throughout the generations.”

Rather, he said, there has been a failure of leadership.

Along with Mr. Wagoner’s ouster, the task force said most of the company’s board would be replaced over the next few months. In a statement Monday, Mr. Wagoner said he had been urged to “step aside” by administration officials, “and so I have.”

His resignation is the latest example of the government taking a hands-on role in making major decisions at companies it is bailing out. The government has already pushed banks to make management changes and sharply reduce or eliminate their dividends, and it also is directing many of the decisions at the troubled insurance giant American International Group, which is nearly 80 percent owned by the government after its rescue.

In deciding to urge Mr. Wagoner to step down, the Obama administration seemed mindful of the public’s growing outrage over bailouts of private companies, as well as the bonuses paid to employees of A.I.G.

Mr. Obama is well aware that he cannot afford to give the appearance of using tax dollars to reward executives who have done a poor job, and he began signaling as early as last week that he would take a tough stance with the automakers.

The plan Mr. Obama announced on Monday will also include government backing of warranties for G.M. and Chrysler cars and trucks, to give consumers enough confidence to buy them, even if one or both are forced into bankruptcy.

Mr. Wagoner has presided over a steep drop in G.M.’s domestic market share, which has led to tens of billions of dollars in losses. His critics have said that management’s failure to move aggressively to address the company’s problems contributed to its dire financial situation.

G.M. and Chrysler have almost exhausted the combined $17.4 billion in federal aid they have received since December. G.M. has asked for up to $16.6 billion more, and Chrysler has requested another $5 billion.

Bondholders are under pressure to convert two-thirds of the $27 billion owed them into G.M. stock, while the United Auto Workers union is being asked to substitute stock for 50 percent of their health care benefits for retirees. Both groups have resisted those changes.

Administration officials say they have enough money to offer the assistance they envision under plans already approved by Congress. Even so, Mr. Obama may face skepticism on Capitol Hill and from the public.

As part of the companies’ original agreement for the loans, both were required to submit restructuring plans. Mr. Wagoner’s removal underscores how much more G.M. needs to cut than was proposed in the plan the company submitted.

Administration officials stressed that the company needed a fresh approach and leadership changes; they said Steven Rattner, the former investment banker who co-chairs the auto task force, delivered the news to Mr. Wagoner.

Frederick A. Henderson, G.M.’s president, will succeed Mr. Wagoner on an interim basis as chief executive; Kent Kresa, a board member, will assume the chairmanship. Members of the auto panel spoke with Mr. Henderson recently and came away with a favorable impression of him, people familiar with the panel’s discussions said.

G.M. collapsed last fall when new-vehicle sales in the United States plummeted to their lowest level in 25 years. G.M. lost more than $30 billion in 2008, and has been subsisting on government loans since the beginning of the year.

source :The new york times

London braces for G20 protests

2009-03-30T10:01:00.000-07:00

By William L. Watts

The Associated Press said an estimated 35,000 persons marched to London's Hyde Park Saturday as part of the "Put People First" event organized by around 150 groups. The peaceful march was one of several demonstrations in European capitals over the weekend that organizers said was designed to demand G20 leaders focus on poverty, inequality and the threat posed by climate change.
And London will be the center of protests this week as anti-war, environmental, anti-globalization and other groups converge on the U.K. capital ahead of the G20 summit.
All police leave has been canceled. London's police forces have allocated 84,000 man hours to security for the G20 summit, according to the BBC.
The biggest events are expected on Wednesday, when thousands of demonstrators plan to block traffic and buildings in the City of London's, the capital's financial district, as part of an event dubbed "Financial Fools Day."
On Web postings, protest groups say they plan to lead processions from four Underground stations in the City, converging on the Bank of England at noon, local time.
Environmental protesters also plan a "Climate Camp" in the City on April 1. They plan to "swoop" in to create a camp in front of the European Climate Exchange at 12:30 p.m. London time to protest carbon trading.
"First the city traders speculated with our homes, jobs and money - with disastrous results," the Climate Camp group says on its Web site. "Now they are speculating with our climate and the very future of life on earth - and once again our governments are cheering them on."
An anti-war march and other protests are also slated for Wednesday, while various groups have also said they plan to march at the ExCel conference center in East London on Thursday during the G20 meeting.
A number of firms have urged staff to dress down during the week or to work from home, news reports said.
Meanwhile, City of London Police have urged banks and other businesses in the financial district to take a range of steps including canceling unnecessary meetings, canceling deliveries, keeping movement in and out of business premises to a minimum. Firms were also urged to "advise staff not to antagonize protestors and risk escalation in incidents," the police advisory said.

source :MarketWatch

WORLD FOREX: Euro Falls To 1 1/2-Week Low Vs Dollar

2009-03-30T09:56:00.000-07:00

By Riva Froymovich

The euro fell to a one-and-a-half-week low against the dollar Monday morning as U.S. stocks declined amid fresh turmoil in the auto and financial sectors.

Risk appetite in the currency markets is also down ahead of Thursday's Group of 20 summit and European Central Bank meeting, with traders waiting to see the results.

Leaks of the draft G20 communique indicate there won't be a fresh round of coordinated stimulus spending coming from the April 2 summit, a cause for concern for the euro, whose monetary authorities have been unwilling to match U.S. efforts, according to strategists.

However, the euro was boosted very slightly from its lowest intraday levels on comments by ECB chief Jean-Claude Trichet Monday.

He told the European Parliament that the euro-zone economy has weakened since January and that there is "a high degree of uncertainty" surrounding the economic outlook. But, he said there are no significant risks for deflation and that the central bank will do what is needed to cope with the financial crisis.

Trichet also added that the central bank will achieve its medium-term objective, to keep inflation below but near 2%.

Monday morning in New York, the euro was at $1.3162 from a low of $1.3114 and from $1.3298 late Friday. The dollar was at Y96.99 from an overnight low of Y95.96 and from Y97.91 late Friday, according to EBS. The euro was at Y127.66, off a two-week low of Y126.43 Monday, and from Y130.20 Friday. The U.K. pound was at $1.4202 from $1.4286, and the dollar was at CHF1.1522 from CHF1.1438.

The Obama administration auto task force, after more than a month of analysis, suggested that the best chance for success for General Motors and Chrysler "may well require utilizing the bankruptcy code in a quick and surgical way." Using the threat of withholding more bailout money, the administration forced out General Motors Corp. Chief Executive Rick Wagoner.

The euro is under additional pressure after a monthly survey by the European Commission showed business and consumer confidence in the 16 countries that use the euro weakened to a record low in March as new orders continued to dry up and concerns about job losses mounted.

source :The Wall street journal

Seattle Post-Intelligencer newspaper goes Web-only

2009-03-17T02:54:00.000-07:00

SEATTLE: The Seattle Post-Intelligencer, which has chronicled the news of the city since logs slid down its steep streets to the harbor and miners caroused in its bars before heading north to Alaska's gold fields, will print its final edition Tuesday.

Seattle becomes the second major city to lose a newspaper this year, following Denver, as many U.S. dailies face uncertain futures, battered by quickly declining ad revenue in the age of the Internet and a teetering economy.

Hearst Corp., which owns the 146-year-old P-I, said Monday that it failed to find a buyer for the newspaper, which it put up for a 60-day sale in January after years of losing money.

The P-I's roots date to 1863, when Seattle was still a frontier town. It will now shift to another frontier for newspapers: entirely to the Web.

"Tonight will be the final run, so let's do it right," publisher Roger Oglesby told the newsroom.

The last print edition began rolling off the presses at a suburban printing plant shortly after 10 p.m. Monday. The front page featured a headline saying, "You've meant the world to us," and a photo of the 30-foot neon globe atop the P-I's building, which has a slogan rotating around the equator saying, "It's in the P-I."

The paper was to be delivered wrapped with 20 to 24 pages of photos and stories on the P-I's history.

Hearst's move to end the print edition leaves the P-I's larger rival, The Seattle Times, as the only mainstream daily in the city. The Times plans to deliver a copy of the newspaper to every P-I subscriber on Wednesday morning, spokeswoman Jill Mackie said.

The Rocky Mountain News in Denver closed earlier this month after its owner, E.W. Scripps Co., couldn't find a buyer. In Arizona, Gannett Co.'s Tucson Citizen is set to close Saturday, leaving one newspaper in that city.

And last month Hearst said it would close or sell the San Francisco Chronicle if the newspaper couldn't slash expenses in coming weeks.

The U.S. newspaper industry has seen ad revenue fall in recent years as advertisers migrate to the Internet, particularly to sites offering free or low-cost alternatives for classified ads. Starting last summer, the recession intensified the decline in advertising revenue in all categories.

Four newspaper companies, including the owners of the Los Angeles Times, Chicago Tribune and The Philadelphia Inquirer, have sought bankruptcy protection in recent months.

Hearst's decision to abandon the Post-Intelligencer's newspaper format in favor of an Internet-only version is the first for a large American newspaper, raising questions about whether the company can make money in a medium where others have come up short.

While the P-I's Web site ensures it a continued presence in the Seattle news market, it will likely be a pared-down version of its former self — with a heavy reliance on blogs and links to other news outlets.

The P-I had 181 employees, but Managing Editor David McCumber said the Web site would employ about 20 in the newsroom operation and another 20 to sell ads. He said he would not be working on the new site.

Meanwhile, with backing from three entrepreneurs, staffers of the recently shuttered Rocky Mountain News plan to start an online news publication if they can get 50,000 paying subscribers by April 23 — what would have been the News' 150th anniversary.

The local venture, InDenverTimes.com, would go live on May 4 if backers meet their subscription goal.

source:Herald Tribune

Oil Falls From Two-Month High on Speculation Stockpiles Gained

2009-03-17T02:52:00.000-07:00

By Alexander Kwiatkowski and Christian Schmollinger

Oil fell from a two-month high in New York on speculation U.S. stockpiles gained last week because of lower demand in the world’s largest crude consumer.

Crude oil inventories climbed 1 million barrels in the week ended March 13 from 351.3 million barrels, according to estimates in a Bloomberg survey before an Energy Department report tomorrow. Oil also dropped as European stocks fell for the first time in six days.

“We have very high crude oil inventories in the U.S.” said Sintje Diek, an HSH Nordbank analyst in Hamburg. “We still have very weak oil demand. We will remain in this trading range of $45 to $50 a barrel for the coming weeks.”

Crude oil for April delivery fell as much as 82 cents, or 1.7 percent, to $46.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $47.10 a barrel at 9:22 a.m. London time.

Yesterday, April futures rose $1.10 to $47.35 a barrel, the highest settlement since Jan. 6. Prices have gained 5.1 percent this year. Crude in New York tumbled from a record $147.27 a barrel in July because of the economic contraction in major consuming countries.

European stocks fell after American Express Co. reported rising credit-card defaults. Europe’s Dow Jones Stoxx 600 Index dropped 2 percent to 171.22 at 8:47 a.m. in London, ending a five-day, 9.6 percent surge.

The Organization of Petroleum Exporting Countries deferred another production cut for at least 11 weeks at its weekend meeting. OPEC has reduced daily output targets by 4.2 million barrels since September to prevent a glut and slow the decline in prices. The group is scheduled to meet again on May 28.

Brent Crude

Brent crude oil for May settlement fell as much as $1.24, or 2.7 percent, to $45.22 a barrel, and was trading at $45.97 on London’s ICE Futures Europe exchange at 9:23 a.m. in London.

Saudi Arabia, the world’s biggest oil exporter, is the only member to cut more output than agreed last year, according to a monthly OPEC report released on March 13. Iran and Nigeria have made good on only about half of their promised reductions, the report showed.

Saudi Arabia is willing to keep oil output below its OPEC quota level of about 8 million barrels a day unless consumers want more, Saudi Arabian Oil Minister Ali al-Naimi said yesterday.

“Maybe we will see even lower prices because OPEC decided not to make further cuts,” said Diek of HSH Nordbank. “Maybe compliance is not enough.”

source: Bloomberg

FOREX-Euro near 11-week high vs yen, risk appetite rises

2009-03-17T02:42:00.000-07:00

The euro climbed back towards an 11-week high against the yen and a five-week high against the dollar on Tuesday as a rise in regional share prices pointed to some recovery in appetite for risk.

The yen and the dollar slipped against higher-yielding currencies, with global stock markets having shown signs of stabilising over the past couple of weeks and currency market volatility lessening.

"The dollar and the yen had been bought before on risk aversion but the pendulum is swinging the other way," said a trader for a major Japanese bank.

"There has been a strange sort of alleviation in strains, a sense that a huge economic depression may be averted, and this seems to be spurring buying of the euro and the Australian dollar," he said.

The euro rose 0.6 percent to 128.15 yen , nearing the previous day's peak of 128.74 yen, which was the highest since late December.

The single European currency rose 0.4 percent against the dollar to $1.3016 , inching up towards Monday's high of $1.3072, which was the highest since Feb. 10. The dollar rose 0.3 percent against the yen to 98.44 yen .

During the global financial crisis the dollar and the yen have often been bought when risk appetite fell and worries about the outlook for the global economy intensified.

When risk appetite improves, the dollar and yen tend to come under pressure.

The yen's safe-haven appeal has, however, lost some of its lustre due to a rapid deterioration in Japan's economy, with the trade balance falling into deficit, and political uncertainty with an unpopular government facing an election that must be held by October.

The benchmark Nikkei share average rose 3.3 percent .N225.

EURO TO RALLY FURTHER?

With its rally this week, the euro is showing tentative signs of breaking above a range of around $1.2500 to $1.3000 that has held for the past month and a half, said a trader for a Japanese trust bank.
But it is still too early to say with conviction whether the euro is ready to break out of this zone, he said.

"If the euro can clear the $1.3000 level at the end of the week, expectations for a further rally will probably grow," the trader said.

The Australian dollar rose 0.4 percent against the yen to 65.01 yen , nearing a two-month high of 65.36 yen hit on Monday.

Against the dollar, the Australian dollar rose 0.3 percent to $0.6609 , hovering near a one-month high of $0.6638 hit on Monday. Australia's central bank decided this month to keep interest rates unchanged at a record low 3.25 percent, surprising many in the markets who had bet on a cut.

The minutes of that meeting showed that the Reserve Bank of Australia considered cutting interest rates again at its policy meeting earlier this month but chose to pause so as to gauge the effect of past easing. [ID:nSYC000169]

The Bank of Japan is seen likely to keep interest rates unchanged at 0.10 percent at a two-day policy meeting that ends on Wednesday [ID:nT314125].

source:Reuters

Madoff Employees Helped Dupe Investors, U.S. Prosecutors Say

2009-03-11T03:33:00.000-07:00

By David Glovin, David Voreacos and Erik Larson

U.S. prosecutors shed new light yesterday on how they believe Bernard Madoff’s subordinates helped him operate a $64.8 billion Ponzi scheme, without saying whether those employees knew they were defrauding investors.

Madoff, 70, will plead guilty tomorrow to fraud, money laundering and perjury charges, his lawyer said yesterday. Madoff told 4,800 investors in November that their accounts held $64.8 billion, though their holdings were a “small fraction” of that, prosecutors alleged in 11 charges filed in Manhattan federal court.

The money manager told his employees to create false account documents and trade confirmations reflecting phony returns so as to transfer funds while giving the appearance of legitimate trades, and to generate false financial statements for regulators, prosecutors said. Those actions gave the appearance of a “legitimate investment advisory business,” according to the government, which said the investigation of the largest Ponzi scheme in U.S. history is continuing. No employees have been charged with any wrongdoing.

“The issue will be whether the government can establish that they knew what in the paper was in fact phony,” Christopher Steskal, a former federal prosecutor, said in a telephone interview. “If the facts show it, they will likely pursue those people. It seems improbable that he would do it alone.”

Madoff was arrested Dec. 11 and charged with one count of securities fraud for using billions of dollars from new investors to pay off old ones. Investors in Madoff’s New York-based firm, Bernard L. Madoff Investment Securities LLC, included celebrities, charities and money managers from around the world.

150-Year Sentence

Madoff is charged with securities fraud, mail fraud, wire fraud, investment adviser fraud, three counts of money laundering, false statements, perjury, false filings with the U.S. Securities and Exchange Commission and theft from an employee benefit plan. Madoff, who is free on $10 million bond, faces a prison sentence of as long as 150 years, prosecutors said.

In court yesterday, defense attorney Ira Sorkin disclosed Madoff’s plan to plead guilty. U.S. District Judge Denny Chin held a hearing to ask Madoff if he would waive Sorkin’s possible conflicts of interest. Madoff, wearing a gray suit and wire- framed glasses, gave brief answers to more than 50 questions from Chin about the alleged conflicts. Madoff didn’t discuss a guilty plea.

No Plea Bargain

Assistant U.S. Attorney Marc Litt said Madoff doesn’t have a plea bargain. Through such deals, defendants often receive some benefit for pleading guilty, such as a reduced sentence, in return for providing details about a crime. The lack of a plea deal may suggest Madoff isn’t helping prosecutors determine who may have helped him in the alleged fraud. Litt said Madoff will be required to plead guilty to all 11 counts.

The absence of a plea bargain is “unusual,” said Richard Strassberg, a lawyer with Goodwin Procter LLP in New York. He said the government probably didn’t offer a deal.

“If that’s what happened, the government viewed the scope of the conduct to be so egregious that a plea deal wasn’t warranted,” Strassberg said in an interview.

By not entering a plea deal, Madoff may be trying to protect employees of his firm, Steskal said.

Madoff’s brother Peter was chief compliance officer at the company, and his sons Mark and Andrew held senior positions in the market-making and proprietary trading businesses. None of Madoff’s family members have been accused of any wrongdoing.

Her Own Lawyer

Bernard Madoff’s wife, Ruth, who had been represented by Sorkin, will hire her own lawyer, Sorkin said yesterday.

An attorney for Peter Madoff, John “Rusty” Wing, didn’t return a call seeking comment. Martin Flumenbaum, an attorney for the sons, has said they “were not involved in the firm’s asset management business” and “had no knowledge whatsoever of the fraud.”

Madoff, who promised annual returns of up to 46 percent, “created a broad infrastructure” to give the appearance of “a legitimate investment advisory business,” according to new charges filed against him yesterday. His back-office staff had little or no experience and at Madoff’s direction misled clients about investments, prosecutors alleged in court papers.

“Certainly lower level employees are unlikely to be involved, but people with auditing function or authority to access accounts or make trades are more likely to have knowledge of the alleged fraud,” Steskal said.

Prosecutors and regulators have been probing whether the chief financial officer at the advisory firm, Frank DiPascali Jr., knew of the fraud, according to people familiar with the case. DiPascali has denied wrongdoing. His lawyer, Marc Mukasey, didn’t return a call seeking comment.

Madoff’s Auditor

Andrew Lankler, a lawyer for Madoff’s auditor, David Friehling, declined to comment. A call to Madoff’s longtime aide, Annette Bongiorno, wasn’t immediately returned. They aren’t accused of wrongdoing.

Madoff was able to defraud his investors by claiming he used a “split-strike conversion strategy” in which he promised to invest in stocks that mimicked the price movement of the Standard & Poor’s 100 Index, while “opportunistically” timing purchases, Acting Manhattan U.S. Attorney Lev Dassin alleged in a statement.

The new allegations include a claim that Madoff “repeatedly lied” to the SEC in written submissions and sworn testimony during questioning in 2006. Prosecutors also said Madoff used $250 million from his advisory business to finance market-making and proprietary trading operations. Madoff stole $10 million from 35 labor union pension funds, prosecutors alleged.

$170 Billion

In a separate court filing, the government said they will seek to force Madoff to forfeit more than $170 billion, representing “proceeds traceable” to the alleged scheme. The figure represents funds that flowed through Madoff’s firm during its operation, prosecutors said.

Sorkin said in a letter to Chin that the monies prosecutors seek are “grossly overstated -- and misleading -- even for a case of this magnitude.”

“The issues related to forfeiture, restitution and sentencing in this matter are highly complex and will require extensive time to resolve,” Sorkin wrote.

At yesterday’s hearing, Chin asked Madoff whether he understood that his lawyer might have a conflict of interest because Sorkin’s sons held an account that was invested with Madoff.

“I understand that potentially, in the issue of restitution, his interest might be divided and he might not defend me in a way that’s most beneficial to me,” Madoff said as he waived his lawyer’s conflict of interest.

The criminal case is U.S. v. Madoff, 08-cr-00213, U.S. District Court for the Southern District of New York (Manhattan).

source :Bloomberg

Citi Lights Up Wall Street; Best Day of '09

2009-03-11T03:30:00.000-07:00

by:Matt Egan

The Dow surged nearly 400 points Tuesday -- its best day in an otherwise dismal 2009 -- as Wall Street cheered after embattled Citigroup said it was profitable during the first two months of the year.

Today’s Markets

The Dow Jones Industrial Average jumped 379.44 points, or 5.80%, to 6926.49, the S&P 500 rose 43.07 points, or 6.37%, to 719.60 and the Nasdaq Composite picked up 89.64 points, or 7.07%, to 1358.28. The consumer-friendly FOX 50 added 31.86 points, or 6.24%, to 542.69.

The markets were in the green for the entire trading day in a broad-based rally that ended at session highs. The gains were even stronger for the Nasdaq Composite, which enjoyed its biggest one-day percentage gain since October 2008.

“We were looking for a little bit of good news and we got it from Citigroup,” said Paul Nolte, director of investments at Hinsdale Associates. “As much as we get excited about [this rally], the key will be whether we can rally for more than one day.

Aside from positive comments from Citigroup (C) CEO Vikram Pandit, the markets were lifted Tuesday by a huge rally in big-name tech stocks like Google (GOOG), comments about a possible reinstatement of the "uptick" rule and Dow Chemical’s (DOW) agreement to buy rival Rohm & Haas (ROH).

“The market was ready for something. It’s been dramatically oversold,” NYSE trader Ted Weisberg told FOX Business. “Until something fundamentally changes, we are still going to be in difficult territory. But we’ll take what we can get.”

Tuesday's rally represents the Dow's biggest one-day rally since Nov. 24 when it jumped 396 points. The benchmark index, which hasn't seen two straight days of gains since Feb. 6 and was trading at its lowest levels since April 1997, is still off by 21% year-to-date.

“We seem to be shocked by an up day, which I guess is natural when you are down 50% from the peak. The fact that it doesn’t take much to bounce an oversold market is pretty well displayed today,” said Art Hogan, chief market strategist at Jefferies & Co.

All 30 components of the Dow closed in the green, led by double-digit gains for financial companies JPMorgan Chase (JPM), Citi, Bank of America (BAC) and General Electric (GE). JPMorgan alone accounted for 28 points of the gain on the index. Defensive stocks like McDonald's (MCD) and Coca-Cola (KO) saw more modest gains but still closed in positive territory.

The Nasdaq Composite jumped even further than the broader market Tuesday as big-name tech stocks like Cisco (CSCO) and Apple (AAPL) recovered from Monday’s slide. Tech stocks were helped by chip maker Texas Instruments, which raised its quarterly outlook slightly even as it said no recovery in the chip market is in sight.

Citi-Sized Rally

Financial stocks and market sentiment received a big shot in the arm Tuesday from Pandit, who wrote a memo to Citi employees saying the embattled bank is having its best quarter-to-date performance since the start of the credit crisis in the third quarter of 2007. The comments were unexpected as Citi has received three rescues from the government and its shares plunged below $1 last week for the first time ever. Also, the bank lost $8.29 billion last quarter, its fifth straight quarterly loss. Citi's stocks surged almost 40% Tuesday.

The financial sector surged almost 15% in response on Tuesday and some individual banks like State Street (STT) and PNC Financial (PNC) jumped even further.

The Pandit memo showed Wall Street that “these guys aren’t at the edge of a cliff,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “I never thought they were because they have an unlimited checkbook” through the backing the bank has received from the Federal Reserve, he said.

The Citi news comes as The Wall Street Journal reported U.S. officials are considering further steps to stabilize the bank if its problems mount. Officials described the talks, which are wide-ranging and preliminary, as “contingency planning” and said no new rescue was imminent, the paper reported.

The markets were also boosted by U.S. Rep. Barney Frank, who told reporters he expects the "uptick" rule to be restored in about a month. The rule would be aimed at slowing the pace of short selling. Frank also said the mark-to-market accounting rule, which has forced billions of writedowns for banks, must be improved and made more flexible.

Meanwhile, Federal Reserve Chairman Ben Bernanke made the case for an overhaul of financial regulations in a speech on Tuesday and said officials are ready “to ensure that systemically important financial institutions continue to be able to meet their commitments.”

In the commodity markets, crude oil's hot streak was torpedoed by a late-day slide. The price of a barrel of crude closed at $45.71, down $1.36 on the day. Gold ended in the red for the 10th time out of the last 12 days, settling at $859.90 per ounce, down $22.10.

Corporate Movers

Dow Chemical (DOW) relented by agreeing to acquire rival Rohm & Haas (ROH) for the original $78-a-share price plus penalties, settling a legal battle that nearly went to trial. However, the new deal aims to bolster Dow’s financial security by including up to $3 billion in new investments from two top Rohm & Haas shareholders.

United Technologies (UTX) unveiled plans to slash 11,600 jobs this year. The world's largest elevator and air condition maker also cut its 2009 earnings and revenue guidance, saying the “economic recovery previously anticipated in the second half of 2009 appears unlikely.”

Tiffany (TIF) is planning to shut its underperforming Iridesse pearl jewelry retail chain that was opened in 2004 due to the recession, the Journal reported, citing an internal memo.

Genentech (DNA) is close to selling itself to majority owner Roche (RHHBY) in a deal that would value the biotech giant at $46.7 billion, or $95 per share, the Journal reported. The two sides nearly announced the deal Monday and have been haggling over timing and closing conditions, the paper reported.

Bank of America (BAC) CEO Ken Lewis is mounting a full-court press to argue his struggling bank is not in the same condition as Citigroup (C), the Journal reported. Instead, in internal memos Lewis has argued BofA will not need more money and plans to “earn” its way out of the recession, the newspaper reported.

Office Depot (ODP) surged by more than 50% after the office supplies retailer said it believes its first-quarter results will be "significantly better" than the fourth quarter.

Merrill Lynch, which is now a unit of Bank of America (BAC), made a huge bet in Brazil last year by luring 10 investment bankers from rival banks, the Journal reported. However, the company’s investment bankers in Latin America brought in only $50 million through late December, while piling up more than $100 million in mostly compensation-related expenses.

Boeing (BA) reaffirmed it expects the first delivery of its widely-anticipated 787 Dreamliner in the first quarter of 2010.

Global Markets

European markets closed sharply higher across the board but Asian stocks ended mixed overnight.

The Dow Jones Euro Stoxx 50, which tracks the 50 largest companies in Europe, soared 6.05% to 1919.53, London's FTSE 100 rose 4.88% 3715.23 and Germany's DAX gained 5.28% to 3886.98.

In Asia, Japan's Nikkei 225 fell 0.44% to 7054.98 while Hong Kong's Hang Seng gained 3.08% to 11694.05. Australia's ASX 200 rose 0.95% to 3184.50.

source : fox Business

Kuwait official says OPEC likely to cut output: report

2009-03-11T03:26:00.000-07:00

OPEC is likely to cut oil supply to support prices at its meeting on Sunday, a member of Kuwait's Supreme Petroleum Council said in remarks published on Wednesday.

"A (supply) reduction decision by OPEC is likely to be taken unanimously due to what's happening to the prices," Imad al-Atiqi told al-Seyassah newspaper.

The Organization of the Petroleum Exporting Countries (OPEC) should act to strengthen and stabilize prices, said Atiqi, adding a fresh supply cut would revive the oil market.

OPEC has agreed cuts of 4.2 million bpd since September to prop up prices.

U.S. crude has slumped over $100 to trade under $46 a barrel from a peak near $150 in July, putting a big dent in oil exporter income.

OPEC-member Kuwait, the world's seventh-largest oil exporter, relies on oil for 97 percent of state revenue.

Another member of the council, Kuwait's top energy decision making body, said on Monday that the oil price would rise above $50 if OPEC cut by a million barrels per day on Sunday.

(Reporting by Rania El Gamal; editing by Simon Webb)

source :Reuters

UBS Has SF20.9 Billion 2008 Loss, ‘Extremely Cautious’ Outlook

2009-03-11T03:18:00.000-07:00

By Elena Logutenkova

UBS AG, Switzerland’s biggest bank, posted a 20.9 billion Swiss franc ($18 billion) loss for 2008, more than initially reported, and said it remains “extremely cautious” about the outlook for this year.

The full-year net loss widened by 1.19 billion francs from the figure reported on Feb. 10 because of costs to settle a U.S. tax investigation and additional writedowns on securities, the Zurich-based bank said in its annual report, published today. UBS fell as much as 3.9 percent in Swiss trading.

UBS agreed on Feb. 18 to pay $780 million and disclose the names of about 300 secret account holders to avoid U.S. criminal prosecution on a charge that it helped wealthy Americans evade taxes. The bank also marked down securities that haven’t yet been transferred to the Swiss National Bank’s fund as part of a government aid package following record losses.

“Our near-term outlook remains extremely cautious,” Chairman Peter Kurer and Chief Executive Officer Oswald Gruebel said in a letter to shareholders.

UBS hired Gruebel, the former head of rival Credit Suisse Group AG, last month to replace Marcel Rohner as CEO to restore investor confidence. Last week, the bank nominated Kaspar Villiger, a former Swiss finance minister, as a new chairman of its board of directors, replacing Kurer.

UBS fell 18 centimes, or 1.8 percent, to 9.61 francs by 9:37 a.m. in Zurich. The shares are down 35 percent so far this year, compared with a 33 percent decline in the 65-company Bloomberg Europe Banks and Financial Services Index.

Cutting Risks, Costs

The 2008 loss is the biggest in Switzerland’s history. UBS amassed more than $50 billion in writedowns and losses since the beginning of the financial crisis, forcing it to raise more than $32 billion in capital from investors, including the Swiss government, and cut 11,000 jobs.

Financial institutions worldwide have reported $1.2 trillion of losses and shed more than 284,000 jobs since the U.S. subprime mortgage market collapsed, data compiled by Bloomberg show. The U.S., Britain, France and Germany are among nations that injected billions into banks to prevent a wider financial calamity following the September collapse of Lehman Brothers Holdings Inc.

UBS plans to further cut risks, reduce assets on the balance sheet and lower costs this year to return the bank “as soon as possible to a sustainable level of overall profitability,” Kurer and Gruebel’s letter said. While reporting earnings on Feb. 10, Rohner said the bank would have a profit in 2009.

Rohner, who was the highest-paid member of the executive board last year, received total compensation of 1.8 million francs. Kurer’s compensation was 1.57 million francs, UBS said.

Client Investments

UBS is fighting a U.S. lawsuit that seeks to force the disclosure of as many as 52,000 names of American customers who allegedly hid their Swiss accounts from tax authorities.

The bank said today that net new money at its wealth management Americas unit “remains positive.” Those gains have been partially offset by withdrawals at the wealth management and Swiss bank division. The asset management unit is also experiencing further client redemptions, UBS said.

Clients of UBS’s money-managing units pulled 226 billion francs from the bank in 2008. In the fourth quarter, the only area where UBS saw an inflow of new money was in the U.S., where the bank hired almost 400 brokers. The bank lured advisers from rivals by offering signing bonuses of as much as 260 percent of the revenue they brought in over the previous 12 months, two people with knowledge of the matter said last month.

source ;Bloomberg

China’s 2009 Rebound Is Pure Fantasy: William Pesek

2009-03-05T20:30:00.000-08:00

Commentary by William Pesek

The idea that China can grow strongly as the world unravels is a fantasy. Ditto for the view that China is going to save the global economy.

China is already slowing, of course. The third-biggest economy grew 6.8 percent in the last quarter of 2008. Such growth sounds like heaven just about everywhere else. Yet for an economy at China’s level of development, one that zoomed along at a 13 percent pace in 2007, it’s hell.

Premier Wen Jiabao was wrong to err on the side of caution yesterday when he delivered the Chinese equivalent of the U.S. State of the Union address. He said the country’s 8 percent growth target is within reach, indicating an additional stimulus package isn’t needed. It’s a bad call, and Wen is likely to regret it as 2009 unfolds.

Markets are sensing as much. On Wednesday, stocks around the globe soared on hopes that at least one major economy would skirt disaster. Markets came back to Earth yesterday after China quelled stimulus speculation. As the global meltdown deepens, it probably means the export demand that drives China won’t return until well into 2010.

Here are five reasons a Chinese rebound in 2009 may not pan out:

1. World growth is collapsing. This isn’t hyperbole, but a sobering fact. The International Monetary Fund can’t downgrade its global growth estimates fast enough as the credit crisis overwhelms economies as diverse as Ireland, Japan, the United Arab Emirates and the U.S.

Asian governments are increasing spending to soften the blow from falling asset prices, consumer spending and manufacturing. The European Central Bank is struggling to keep up with the region’s plunging economy.

The trillions of dollars of wealth being lost as markets plummet are depleting public coffers and damaging consumer psychology. It’s not a good environment for any government hoping for a revival in global demand.

2. China’s key customer is in hiding, indefinitely. Just when you thought conditions in the $14 trillion U.S. economy couldn’t get any worse, they “deteriorated further” in almost all corners of the country over the last two months, the Federal Reserve said in its regional business survey.

Wang Hanmin, a sales manager at Yixing Bochangyuan Garments Co. in Jiangsu province, spoke for many this week when he said exporters are facing a “life and death” crisis. Exporters are so worried that they are calling on the government to weaken the yuan after the biggest slump in overseas sales in more than a decade.

One thing is for sure: The U.S. consumer isn’t about to help China out of this dilemma.

3. A lack of tools. It’s important to remember that the 4 trillion yuan ($585 billion) spending plan unveiled in November was more spin than reality. Much of it wasn’t new, but a tally of existing spending efforts. They were never going to boost a $3.3 trillion economy anyway.

China’s almost $2 trillion of currency reserves would seem to give the nation considerable policy latitude. Yet China’s vast economy lacks the financial infrastructure to get the bang it needs from its stimulus in yuan. Would building more roads, bridges and dams do the trick?

“Eight percent GDP doesn’t really tell you anything about job creation,” says Stephen Green, Shanghai-based head of research for China at Standard Chartered Plc. “Many of these projects are not particularly job-intensive.”

The spending will help, but such projects didn’t propel growth as hoped over the last 30 years. Exports did.

4. All those U.S. Treasuries. Financing loads of new projects could prove dicey, even for cash-rich China. Any move to draw down $696 billion of U.S. government debt could leave China with major losses and prolong the U.S. recession.

That leaves domestic lending institutions. If China wants to avoid a Japan-like bad-loan crisis, or something far worse, it has to be careful about massive public-works projects with questionable economic benefits.

Of course, there’s the “official” gross-domestic-product figure, and then there’s the real situation in the most populous nation. The double-digit drops in exports among China’s biggest trading partners in Asia show how bad things are getting. Offsetting those trends won’t be easy and it won’t be cheap.

5. Rebalancing takes time. Just as the U.S. needs to become a nation of savers, China needs more consumers. That’s a destabilizing, decade-long process that requires the creation of national safety nets and more education and health-care spending.

Making that transition would be a big enough challenge with a healthy world economy. Doing it while Group of Seven members are in recession and developing Asia is slowing rapidly will prove extraordinarily difficult.

Wen wasn’t exaggerating yesterday when he said China faces its “most difficult” year of the past 30. How much China’s export collapse is hurting can been seen in the 20 million migrant workers who are suddenly unemployed. The risk of social unrest is higher than at any time since 1989, the year of the Tiananmen Square protests.

China’s top-down system has worked extraordinarily well in recent years. It’s still a stretch to think the country can turn its economy upside down in this ever-worsening environment.

Wen says China needs to “reverse the economic slide as soon as possible.” Too bad officials in Beijing think their work is largely done. It’s not, no matter what the official spin is.

source :Bloomberg

BOE’s King ‘Groping in the Dark’ as U.K. Expands Money Supply

2009-03-05T20:26:00.000-08:00

By Brian Swint and Jennifer Ryan

Bank of England Governor Mervyn King, criticized for his initial response to the credit crisis, is now embarking on one of the biggest risks in British economic history.

The central bank yesterday won authority to print as much as 150 billion pounds ($212 billion) and pump it into an economy facing its worst recession since World War II, after cutting interest rates close to zero. With markets clogged and economic activity shriveling, King can’t be sure the gamble will work.

“We’re groping in the dark,” said Willem Buiter, a former Bank of England policy maker and now a professor at the London School of Economics. “Ultimately, we’ll know it works if the economy turns around, and that we won’t know for a couple of years.”

The risk for King is that the strategy fails, forcing him to create yet more money, or it backfires and fuels inflation. While U.K. officials are at pains to deny similarities with the economic policies of Robert Mugabe’s Zimbabwe, where printing money has fueled hyperinflation, some economists argue that the Bank of England hasn’t much of a choice left.

“You have to ask what it would be like if they weren’t doing anything and I suspect a lot worse,” said Amit Kara, an economist at UBS AG in London. “But the whole banking system has yet to be fixed, the economy has yet to deliver and credit is not available. It’s all a shot in the dark.”

Bank Run

King drew criticism from bankers and economists for waiting a month to extend an emergency funding program following the collapse of Lehman Brothers Holdings Inc. last year. Before Northern Rock Plc faced the first run on a British bank in more than a century in 2007, he told cash-strapped banks that lending them extra funds risked sowing the seeds of the next crisis.

Yesterday’s move now puts King ahead of European Central Bank President Jean-Claude Trichet in devising new tools to tackle the economic crisis. Trichet said in Frankfurt yesterday that the ECB still hasn’t decided whether to step up its response and buy securities in the market.

“We don’t know whether quantitative easing works or not, but it’s a good thing to try,” said Christopher Allsopp, a former U.K. policy maker. “The amount looks serious, and it needs to be to make sure it has a chance of working. They’re doing what they can.”

Gilt Purchases

The bank’s purchases may lower long-term gilt yields, reducing benchmark corporate borrowing costs in the process. U.K. 10-year government bond yields fell the most in at least at least 17 years yesterday on the bank’s announcement.

Still, Buiter said that the bank’s focus on buying government bonds with outstanding maturities of five to 25 years won’t help and may raise costs for pension funds, which depend on buying long-term securities.

“This is really quite pointless and in some ways counterproductive,” Buiter said. “They could indeed end up hurting pension funds more than helping anything.”

Policy makers may also have to come up with further measures, said Lena Komileva, an economist at Tullett Prebon in London. “I don’t think it will work,” she said.

Printing money has become linked with economic mismanagement. In the 1920s, the German government fueled inflation to fund World War I loan repayments and reparations, eroding the authority of the Weimar Republic. Mugabe’s monetary policy has left Zimbabwe with the world’s fastest inflation, last estimated at 231 million percent in July 2008.

‘Lost Decade’

Quantitative easing was also tried in Japan in the 1990s, where authorities struggled to stimulate the economy in what became known as the country’s “Lost Decade.”

King himself has noted how it’s all too easy for central bankers to let prices slip out of control once they start printing money.

“Zimbabwe has determined very clearly that if you want a higher inflation rate you could have it,” he told reporters in August 2007.

With the U.K. slipping deeper into recession, some economists nevertheless say the Bank of England’s policies are bold enough to help turns things around.

“Ultimately it has to have an effect,” said Matthew Sharratt, an economist at Bank of America Corp. in London. “It’s going to bring an extraordinary amount of stimulus into the pipeline along with all the other measures that have already been taken.”

source :Blommberg

Two banks to return U.S. bailout money: Rep Frank

2009-03-05T20:24:00.000-08:00

A senior U.S. lawmaker said in on Thursday he expects two large financial companies that received $8.2 billion of bailout money will repay borrowings, though he did not provide a timeframe for the process.

Northern Trust Corp (NTRS.O), which has been faulted for treating clients to concerts and fancy food at a recent golf tournament, will return $1.6 billion it took from the $700 billion Troubled Asset Relief Program (TARP), House Financial Services Committee Chairman Barney Frank said.

"The public has the right, for us, to be very tough on how recipients of TARP money spend it," Frank said at a briefing with reporters.

Frank also said U.S. Bancorp (USB.N), the eight-largest U.S. bank, will return $6 billion. The bank received $6.6 billion from the fund.

Northern Trust and U.S. Bancorp are among hundreds of companies that took money from TARP, which is administered by the U.S. Treasury Department.

Northern Trust has said it plans to repay $1.6 billion as fast it can, while U.S. Bancorp said it plans to do so as soon as possible. The latter cut its common stock dividend 88 percent on Wednesday to help save $2.6 billion annually.

"We have not filed a notice of redemption with the Treasury Department," U.S. Bancorp spokesman Steve Dale said.

"We reduced our dividend to help accelerate our company's ability to repay the $6.6 billion of TARP capital, which we intend to do as soon as possible with the consultation and approval of our regulators," he said.

A growing number of U.S. banks are finding that participating in the bailout program designed to spur lending is more troubled than it is worth.

Three smaller lenders, TCF Financial Corp (TCB.N), Iberiabank Corp (IBKC.O) and Sussex Bancorp (SBBX.O), have in the last week decided to give back TARP money.

Banks have complained about new rules being imposed on them under the new economic stimulus law.

One new rule can limit pay for a bank's 20 top executives, which banks say would make it harder for them to hire and retain top talent.

Another has sowed confusion about whether TARP lenders must hold new capital for three years, or can repay it early.

source:Reuters

GameStop pounded as Amazon steps up to compete

2009-03-05T20:21:00.000-08:00

By Dan GallagherBy Dan Gallagher

By the closing bell, shares of Grapevine, Texas-based GameStop (GME:gamestop corp new cl a
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23.46, -3.84, -14.1%) were down more than 14% at $23.46. The stock previously has been on the rise, gaining 26% since the first of the year. Before the opening bell, Amazon (AMZN:Amazon.com Inc
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64.77, -0.04, -0.1%) announced on its Game Room blog that it has launched a service to allow customers to trade in used games for credit that can go to the purchase of new titles. The service is being run through a company called NorAm International, one of Amazon's third-party merchants.
For GameStop, the move could threaten a key portion of its business. For the first 10 months of 2008, the retailer drew about 25% of its total revenue through the trade-in and sale of used games. The business also accounted for 49% of the GameStop's total gross profit for the same time period, according to the company's financial statements.
"We believe the primary risk to GameStop from Amazon's initiative is greater competition for inventory of used games, and the potential for trade-in values to increase," game analyst Colin Sebastian of Lazard Capital Markets wrote in a note Thursday. "Our survey of 10 games on both sites suggests that the Amazon merchant is offering a slight premium to GameStop for a number of trade-ins."
But analysts also said that Amazon faces the challenge of relying on a mail-order service, which has had limited success in the used-game market. GameStop itself tried such a tactic before, but discontinued the effort.

source:Marketwatch

GE Capital Still Ticking

2009-03-05T20:18:00.000-08:00

by: Carl Gutierrez and Miriam Marcus

Conglomerate's triple-A rating might not stand, but it's unlikely to fall too far.

Wall Street may be expecting a cut to General Electric’s credit rating, but the wound likely won’t be too deep. The conglomerate drew a modicum of strength Thursday from comments that its financial arm was likely to remain a blue-chip credit as Chief Financial Officer Keith Sherin insisted there was no "time bomb" hidden in its GE Capital finance arm.

Fixed-income research service Gimme Credit recommended that investors buy General Electric Capital's nine-year notes, saying the company will likely remain a top-tier credit in the AA range. Gimme Credit acknowledged that 2009 will probably be a tough year for both GE Capital, the finance arm of General Electric (nyse: GE - news - people ), as well as the parent company, but the research service said it continued to view the consolidated firm as a AA credit after factoring in parent-company support, Gimme Credit analyst Kathleen Shanley said in a research note on Thursday. For now, both parent and opaque finance subsidiary are rated triple-A by the major credit agencies, which has historically allowed GE Capital to borrow money very cheaply, but that pristine level is in doubt.

The two top credit-rating agencies are evaluating their ratings on GE's debt. Moody's Investors Service is reviewing its "triple-A" on GE for a possible downgrade, and Standard & Poors has a negative outlook on its bonds.

Gimme Credit's report came on the same day CFO Sherin of General Electric said during a television interview that GE Capital will be profitable in the first quarter and that speculation about GE risks are overdone. (See “Bears Feast On GE.”) He also said GE can fund itself through 2010 without having to raise capital.

Not everyone agrees. On Tuesday, UBS analyst Jason Feldman said GE may need to raise funds, (See “GE May Need More Capital,”) despite the expected $9.0 billion annually in savings resulting from Friday’s dividend cut. (See "GE Turns On The Thrift.")

Thursday's developments kept General Electric's shares in positive territory some of the day while the major indexes languished on renewed concerns over General Motors and the banking sector. (See "Street's Optimism Wanes.") GE shares closed down just 3 cents, or 0.5%, at $6.66, in trading in New York.

source ; Forbes.com

Craigslist Under Fire for 'Erotic Services' Ads

2009-03-05T20:12:00.000-08:00

By BARBARA PINTO

Craigslist may be best known for online classified ads that 40 million Americans use every month to find apartments, jobs and used furniture -- but today Sheriff Tom Dart of Cook County, Ill., demanded that Craigslist "stop being the largest source of prostitution in America."

A glance at the online "erotic services" ads leave little to the imagination.

Recent banner ads read "Teens for Cash" and "Hot young girls needed for NaughtyDart said that the majority of the prostitutes jailed by his department -- and other law enforcement agencies nationwide -- do business on Craigslist. A recent bust in Florida netted 35 arrests.

"The marketplace for prostitution has shifted. It's going away from what we commonly see on the street to online," said Salim Goswani of the Chicago Alliance Against Sexual Exploitation. "And Craigslist is the biggest facilitator of this."

Nanny Service."

"It's abundantly clear it's prostitution," said Dart. "You have pictures that are pornographic. You have people setting out their rates of what they charge for what services and what amounts of time."

Dart wants to ban the erotic services ads. He filed a federal lawsuit against Craigslist today, claiming that the erotic ads on the classified site are a public nuisance and damage the property, health and safety of the community.

In an e-mail to ABC News, Craigslist said that it is taking measures to prevent illegal activity on the site, including the removal of inappropriate ads.

"Misuse of Craigslist to facilitate criminal activity is unacceptable, and we continue to work diligently to prevent it," the company said. "Misuse of the site is exceptionally rare compared to how much the site is used for legal purposes. Regardless, any misuse of the site is not tolerated on Craigslist."

With only a 28-person staff and more than 30 million new classified ads posted every month, it's nearly impossible for Craigslist to monitor and review each individual ad.

"It's a very big burden to place on them to be the ones to police the content that's on their site," said Evan Brown, an Internet lawyer at Hinshaw & Culbertson
source:ABCnews

Banks fall out of bed, Citi shares fall under a buck

2009-03-05T20:08:00.001-08:00

By Greg Morcroft

The KBW Bank exchange-traded fund (KBE:KBW Bank ETF
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KBE 9.54, -1.23, -11.4%) , which tracks the largest U.S. banks, fell 11%, and the Financial Select Sector SPDR (XLF:Select Sector SPDR: Financial Select Sector SPDR Fund
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XLF 6.24, -0.65, -9.4%) , which tracks all the financial stocks in the S&P 500, shed 9%.
For some perspective, the financial stocks in the S&P 500 (SPX:S&P 500 Index
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SPX 682.55, -30.32, -4.2%) had more of the riskiest types of assets on their balance sheets at the end of 2008 than they did at the end of that year's first quarter, according to research from market strategist Ed Yardeni and his team.
Yardeni's latest research shows that there were $537.4 billion of Level 3 assets at the firms at the end of 2008. "That's actually up to 10.3% of total assets from 8.0% at the end of the first quarter" of 2008, Yardeni said.
"Even uglier is that 80.6%, or $7.4 trillion, of the assets held by the S&P financials companies were Level 2," he said in a research report. Level 2 assets are so-called mark-to-model, which are carried at a value based on assumptions, not true market prices.
Stock action
Shares of Citigroup (C:Citigroup Inc
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C 1.02, -0.11, -9.7%) fell 10% Thursday and closed at $1.02, after trading as low as 97 cents, the lowest Citi has traded ever. The drop sent chills through investors, before recovering to $1.02. Despite the dismal stock market, the $1 mark is still a psychological threshold.
Citi's stock is unlikely to find firm footing for at least a month, when it completes the conversion of what it hopes will be $27.5 billion of preferred stock and trust preferred securities into common stock. Until then, arbitrage players will seek to exploit the difference between the premium Citi is paying for the conversion and the current stock price, executives and analysts say.
Citi does not face any immediate risk of delisting because of a temporary suspension of New York Stock Exchange rules. However, any real recovery in the stock will require investors to anticipate an economic turnaround - a hope that keeps getting pushed farther into the future. See full story
And Wells Fargo and J.P. Morgan (JPM:JPMorgan Chase & Co
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JPM 16.60, -2.70, -14.0%) fell 16% and 14%, respectively. Long viewed as two of the best-positioned firms in the global financial collapse, the banks saw their stocks fall after Moody's expressed renewed concern about their near-term future.
Moody's on Wednesday said it is reviewing Wells Fargo & Co.'s (WFC:Wells Fargo & Company
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WFC 8.12, -1.54, -15.9%) long-term ratings and may downgrade them, depending on its analysis of the impact that future credit costs could have on Wells' capital ratios.
"The review was prompted by a concern that Wells Fargo's capital ratios could deteriorate in 2009 from their current levels, which are comparatively low, because of the potential need to take high loan loss provisions in 2009," Moody's said in a statement.
Moody's cut J.P. Morgan's rating outlook to negative from stable. The change reflects the rating agency's expectations that J.P. Morgan's results will continue to be saddled by sustained high provisions and credit costs for the next several quarters, and, as a result, J.P. Morgan's capital generation is likely to be modest, Moody's said.
Shares of asset manager Legg Mason Inc. (LM:Legg Mason, Inc
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LM 12.29, -0.08, -0.6%) closed off about 1%.
The shares had risen most of the day after the firm said it had sold most of its holdings of debt from structured investment vehicles and other similar conduits.
Costs incurred by the holdings, once worth billions of dollars, had contributed to Legg Mason's poor recent performance, which included a $1.5 billion net loss in the fourth quarter of 2008.

source : MarketWatch

Marvell shares higher after results; Citi steady

2009-03-05T20:03:00.000-08:00

By Carla Mozee

Marvell (MRVL:marvell technology group ltd ord
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MRVL 7.52, -0.06, -0.8%) shares gained 8.9% to $8.19. The company reported a fourth-quarter loss of $65 million, or 11 cents a share, from $1.3 million, or breakeven on a per-share basis, in the year-ago period. Excluding one-time items, the communications chip provider said it would have reported earnings of 5 cents a share.
Sales were $512.9 million, down from $844.7 million last year. Analysts surveyed by Thomson Reuters had expected earnings of a penny a share on sales of $511 million.
Gross margin, a gauge of profitability, improved to 50.7% from 48.1% in the year-ago period. But the company said it believes "the current economic climate will not substantially improve over the short term," said Marvell Chief Executive Sehat Sutardja in a statement.
The company outlined plans to reduce its global workforce by about 15%, a move that will affect 850 employees and result in related charges of $20 million.
Citigroup (C:Citigroup Inc
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C 1.02, -0.11, -9.7%) shares were up 1% at $1.03, and have dipped down to $1. Citi shares finished the regular session with a loss of 9.7% after hitting an all-time low of 97 cents, pummeled on concerns about the future of the company and as banking stocks tumbled.
Late-traded shares of J.P. Morgan Chase & Co. (JPM:JPMorgan Chase & Co
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JPM 16.60, -2.70, -14.0%) were up 0.4% at $16.66 and Bank of America shares (BAC:bank of america corporation com
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BAC 3.17, -0.42, -11.7%) rose 1.3% to $3.21.
The KBW Bank exchange-traded fund (KBE:KBW Bank ETF
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KBE 9.54, -1.23, -11.4%) , which gauges the country's largest banks, ticked up 0.5% in light volume following an 11% drop on Thursday. See Financial Stocks.
The Nasdaq Composite Index (COMP:Nasdaq Composite Index
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COMP 1,299.59, -54.15, -4.0%) closed the regular session down 4% and the S&P 500 Index ($SPX:S&P 500 Index
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$SPX 682.55, -30.32, -4.2%) slid 4.3% to 682.55 as investors also braced for Friday's jobs report for February, which is expected to show the largest nonfarm payroll loss in nearly 60 years.
Economists surveyed by MarketWatch expect payrolls to fall by 650,000, and project the unemployment rate to rise to 8% from 7.6%.

source:MarketWatch

GM Auditors Raise Doubt On Auto Maker's Viability

2009-03-05T20:00:00.000-08:00

By Sharon Terlep

General Motors Corp.'s (GM) auditors cast doubt Thursday on the Detroit auto maker's ability to survive without more U.S. government loans, in a foreboding assessment of the company's financial plight.

GM's continuing losses, negative net worth and an inability to generate cash for continued operations led the auditors to determine there was substantial doubt that the company can survive. GM warned last week it may not be able to able meet its auditors' "going concern" requirements.

The determination comes as GM tries to persuade bondholders to swap around $16 billion in debt for equity in a restructured company. Despite the auto maker's dire situation, a bondholders' committee wants GM to restructure outside of bankruptcy, according to people close to the situation.

Even an expedited, or so-called pre-packaged bankruptcy, "would be a complete catastrophe," the person said. "From a bondholder's perspective, it must be avoided at all costs.

"While a pre-pack would be better than a bankruptcy. It would result in a free fall, guerilla warfare and could lead to liquidation."

GM has said it could cost as much as $100 billion to restructure and emerge from bankruptcy.

Advisers to the bondholders committee were scheduled to meet Thursday with U.S. President Barack Obama's auto task force to discuss government backing for any new debt issuance. Representatives of the committee declined to comment Thursday.

GM disclosed the assessment by Deloitte and Touche in a filing with the Securities and Exchange Commission. When it reported a $30.9 billion loss for 2008 last week, GM warned it might not be able meet its auditors' "going concern" requirements, meaning it could break covenants on billions of dollars in debt in coming months. However, GM said Thursday it had received waivers from its lenders that would allow it to avoid having its loans recalled.

GM played down the significance of its auditors' conclusions. "It is not fundamentally a big deal," said GM spokeswoman Julie Gibson. She said GM's main concern was getting the waivers from its lenders, which it managed to do.

"Negotiations will continue as they have" with bondholders and the United Auto Workers, Gibson said. GM is trying to cut a deal with the UAW that would change the terms under which the company funds retiree health care, to relieve some of the company's $20 billion cost burden. GM needs this and other concessions to keep $13.4 billion in government loans that have kept it operational.

"If we fail to do so for any reason, we would not be able to continue as a going concern, and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," GM said in the filing.

GM shares were down 34 cents, or 15%, at $1.86, at the close of trading Thursday on the New York Stock Exchange. GM shares have lost more than 90% of their value over the last year.

The formal going-concern warning is impacting GM's relationship with some creditors. Terms of the company's $4.5 billion revolving-credit facility, a $1.5 billion U.S. term loan and a $125 million inventory-financing facility allowed lenders to demand instant repayment if GM's auditors expressed doubts about its ability to remain a going concern.

GM has obtained waivers from those creditors, but with the provision that the loans can be called if the Treasury doesn't approve GM's viability plan.

The auditor's warning "should not be a revelation," but underscores the auto maker's fundamental problems, Standard & Poor's said in a statement reiterating its sell rating on GM shares.

"GM is dependent upon the largesse and forbearance of the U.S. and foreign governments to sustain its various entities through this downturn," it said. The ratings agency also lowered its estimate for 2009 U.S. auto sales to 10.55 million cars and trucks from 10.8 million.

"We see international demand shrinking, as well, leading GM's non-U.S. profits to evaporate," S&P said in a note. The company also is seeking billions in dollars in aid from overseas governments and has said it may even give up a majority stake in its Opel unit to secure backing from European states.

The company warned it could be forced to seek bankruptcy court protection if it can't somehow restructure the securities or otherwise settle the obligation, as a default would trigger cross defaults on other outstanding debt.
source:CNNMoney.com

Walmex Rises After Same-Store Sales Beat Estimates

2009-03-05T19:54:00.000-08:00

By Veronica Espinosa

March 5 (Bloomberg) -- Wal-Mart de Mexico SA, Latin America’s largest retailer, rose to the highest in two weeks after reporting February same-store sales above expectations.

Walmex, as the company is known, gained 0.9 percent to 30.04 pesos in Mexico City trading, the highest since Feb. 16.

Sales at stores open at least a year rose 1.5 percent in February, the Mexico City-based company said yesterday in an e- mailed statement after the market closed. The sales exceeded estimates at Banco Santander SA and Actinver SA.

“They managed to increase sales even when February was a day short compared to 2008”, said Joaquin Ley, analyst with Santander in Mexico City. Ley expected a 1 percent decline in sales. He recommends buying the stock.

Sales data “shows the good performance of the company’s pricing campaigns and promotional efforts”, Actinver analyst Mexico-based Marisol Huerta wrote in a report today. Huerta expected a 1 percent increase in sales and has an “overweight” recommendation on the shares.

source:Blommberg

Violations in Metrolink crash stir safety debate

2009-03-05T19:39:00.000-08:00

By DAISY NGUYEN

The human error detailed this week in hearings on the 2008 Metrolink commuter train disaster that killed 25 people has stirred debate over what the rail industry can do to ensure passenger safety for at least six more years until technology is installed that could prevent another collision.

The tragedy occurred when a Metrolink train ran a red traffic signal and collided head-on with a Union Pacific freight train on a single shared track in the San Fernando Valley.

Federal investigators have found a rash of rule violations involving the crews of both trains: The Metrolink engineer was text messaging 22 seconds before the collision and was planning to let a teenage train buff drive the train that evening. Also, the conductor of the freight train was texting while he was on duty and tested positive for marijuana.

After the Sept. 12 disaster in suburban Chatsworth, officials stepped up effort to improve safety measures. Federal regulators banned cell phone use by train operators and Congress passed a new law requiring technology to stop trains on a collision course. The law requires the installation of a computerized "positive train control" system by 2015.

While making plans to deploy the costly and sophisticated technology, Metrolink has added a second person in the locomotive cab and plans to install security cameras focused on train operators. However, the union representing the nation's train engineers opposes putting cameras in the trains, and some safety experts question its efficacy.

William Walpert, an official with the Brotherhood of Locomotive Engineers and Trainmen, said the recording device would be "overly intrusive."

George Gavalla, a railroad safety consultant and former head of the Federal Railroad Administration's safety office, said installing cameras and hiring people to monitor hundreds of hours of recordings will be expensive. He said the money could be better spent on positive train control.

"I question how effective it'll be as a deterrent," Gavalla said. "There's cameras all over the place, but do they prevent robberies all the time?"

Metrolink, a 512-mile system operated by a five-county regional rail authority, said it will cost nearly $1 million to install 218 cameras and recorders, but officials have not determined how they will monitor or review the recordings, the cost of monitoring the videos, and how to address the privacy concerns of train employees.

"You have to make sure that people reviewing the data and analyzing it keep it secure," agency spokesman Francisco Oaxaca said.

Union officials are also advocating that all passenger, freight and commuter trains employ two workers in the cab to provide a second set of eyes, but safety experts worry that in some situations it could create unintended distractions.

Often an engineer works alone in the locomotive cab while the conductor is performing other duties.

"With another person in the cab, the workers could get into a conversation and affect each other's concentration," said Najmedin Meshkati, a professor of industrial and systems engineering at the University of Southern California.

Two engineers were in the cab of a Metrolink train that ran a red signal and sideswiped a freight train, causing four minor injuries, in the weeks after the deadly September crash.

During a National Transportation Safety Board hearing on the Chatsworth collision this week, NTSB member Kitty Higgins noted that the conductor of the Union Pacific train was texting in the locomotive cab even while sitting next to the engineer. She said federal investigators found out about the texting after receiving an anonymous tip from "somebody outside."

"The issue of safety in numbers is not the case here," Higgins said.

While experts agree it will take time and money to install positive train control, they say the short-term solution is to improve the safety culture at railroads by adding more inspectors, boosting random field tests and reinforcing company rules.

"It's a matter of having enough managers out there providing oversight for their employees," Gavalla said.

source:Assosiated press

US ECON: January Construction Spending Down 3.3%

2009-03-02T09:09:00.000-08:00

Total US construction spending fell more than expected in January as cutbacks in federal, state and local building helped fuel the downturn carried by continuing declines in both business and residential construction spending, the Commerce Department reported today.

Total US construction fell 3.3% in January to its lowest level since June 2004. Economists were expecting only a 1.5% decline in spending after three months of cutbacks. Worsening this downturn was a steep revision to December construction spending, from a 1.4% decline to a 2.4% decline.Total private construction fell 3.7% in January to its lowest level since August 2003.

Housing continued its steady contraction with private residential construction falling 2.9% to its lowest level since April 1998. Over the year, homebuilding was down 28.0%.

Business construction fell by 4.3%, the largest decline since January 1994, bringing total private non-residential construction spending to its lowest level in a year. Despite January's steep decline, business construction spending is still up 0.3% over the last twelve months.

Private non-residential construction fell in all categories except for a meager 0.3% gain in education construction spending.

Construction by state and local governments fell by 1.9%, marking the third consecutive month of decline in this category. Federal construction fell by 6.6%, the first and largest decline since September.
source:Forbes.com

Oil drops 9% on economic worries, falling stocks

2009-03-02T09:06:00.000-08:00

By Polya Lesova & Moming Zhou

Oil futures plunged 9% Monday, pressured by falling global equity markets, strength in the U.S. dollar and comments that OPEC may not cut production further at its upcoming meeting.
Crude oil for April delivery traded down $3.94, or 8.8%, to $40.82 a barrel.
Earlier, oil prices tumbled as low as $40.64 a barrel on Globex, posting their biggest loss since Jan. 27.
Oil prices fell "as global equity markets slumped and comments by an OPEC member suggest there may not be more cuts in March," said Brenda Sullivan, an analyst at Sucden Financial Research, in a report.
On Wall Street, U.S. stocks fell sharply, with the Dow Jones Industrial Average ($INDU:
6,840.08, -222.85, -3.2%) dropping below 7,000 for the first time in 11
years. Financial giants American International Group (AIG:
0.48, +0.06,
+13.6%) and HSBC Holdings (HBC:
27.79, -7.01, -20.1%) took moves to raise
more capital. Equity markets in Asia and Europe also posted losses.
In currency markets, the euro lost ground versus major rivals Monday after European Union leaders refused over the weekend to consider a coordinated bail-out package for troubled Eastern European economies. See Currencies.
The U.S. dollar index (DXY:
88.88, +0.87, +1.0%) , which measures the
currency against a trade-weighted basket of six global counterparts, rose to 88.81 in recent trade, up from 88.166 late Friday.
Iran's oil minister said Sunday that the Organization of the Petroleum Exporting Countries has no plans to cut its oil production again at its March 15 meeting, Dow Jones Newswires reported, citing Iranian media.
The comments differ from statements from other OPEC members that have indicated recently more production cuts are coming. The cartel already has announced an output reduction of 4.2 million barrels a day since September, equivalent to about 5% of global oil demand.
Also on Monday, April reformulated gasoline fell 7 cents, or 5%, to $1.31 a gallon and April heating oil dropped 9 cents, or 7%, to $1.18 a gallon.
source : marketwatch

U.S. ISM Manufacturing Drops for 13th Straight Month

2009-03-02T09:05:00.000-08:00

By Bob Willis

Manufacturing in the U.S. contracted in February for a 13th consecutive month as factories cut production to match collapsing sales.

The Institute for Supply Management’s factory index rose to 35.8 last month from 35.6 in January. Readings less than 50 signal contraction. Another report showed consumer spending rose more than expected in January after six straight declines as Americans took advantage of post-holiday discounts.

Factories are cutting jobs and scaling back on output and investment as the housing and credit crises squeeze global demand for everything from cars to appliances. President Barack Obama last month announced a stimulus package to jolt the economy out of what may become the worst recession in seven decades and introduced a record $3.55 trillion budget designed to chart a path toward long-term growth.

“Manufacturing is struggling and certainly the indication we have right now is it will continue to struggle for months to come,” Norbert J. Ore, chairman of the ISM’s manufacturing survey said on a conference call with reporters. “Manufacturing is still operating at relatively low rates.”

The median estimate of 67 economists surveyed by Bloomberg was for an ISM reading of 33.8. Forecasts ranged from 30 to 37.

The ISM’s gauge of new orders fell to 33.1 from 33.2 the prior month. ISM’s export orders gauge held at 37.5.

Job Losses

The gauge of inventories dipped to 37 from 37.5. The group’s employment index fell to 26.1, the lowest since record-keeping began in 1948, from 29.9 in January. The recession has already cost 3.6 million job losses since December 2007 and more cuts are in the pipeline.

Earlier today, the Commerce Department said consumer spending rose 0.6 percent in January after declining for a record six consecutive months. Incomes increased by 0.4 percent.

ISM’s gauge of prices paid held at 29. Economists had projected that the measure, which averaged 66 in 2008, would rise to 33.5. A measure of goods imported by factories fell to 32, the lowest since records for that gauge began in 1989.

Consumer spending, which dropped at a 4.3 percent rate in the fourth quarter after a 3.8 percent decline in the prior three months, may slip through the first six months of this year, according to economists surveyed last month. Purchases have not shrunk for four straight quarters since records began in 1947.

Deepening Recession

The recession that began in December 2007 will probably persist at least through the first half of this year, according to economists surveyed, which would make it the longest downturn since 1933. The economy shrank at a 6.2 percent pace in the fourth quarter of last year, the biggest contraction since 1982, and business investment fell at a 21 percent rate.

In Obama’s first address to a joint session of Congress on Feb. 24, he said the staggering economy has left “confidence shaken” and the credit freeze paralyzing the banking system will need to be fixed or “our recovery will be choked off before it even begins.”

Obama signed his $787 billion stimulus into law on Feb. 17 and his administration has unveiled measures to boost housing and banks. Also, the Federal Reserve has flooded markets with cash.

Among manufacturers, carmakers have been the hardest hit. Detroit-based General Motors Corp. last week reported the second- biggest quarterly loss in its 100-year history, as Chief Executive Officer Rick Wagoner asked the Treasury for $16.6 billion more in loans to survive through 2009.

Appliance Sales

Whirlpool Corp., the world’s biggest appliance maker, said Feb. 9 that profit will probably fall for a second straight year as the recession and a plunge in home construction stifle demand. Appliance sales in the U.S. will decline 10 percent this year, Chief Executive Officer Jeffrey Fettig said on a conference call.

Companies that rely on exports are also hurting. Honeywell International Inc., the world’s largest maker of airplane-cockpit controls, last week said 2009 sales will be lower than previously projected because of slowing demand in China and India and “weakness” in commercial aerospace. New Jersey-based Honeywell has cut jobs and frozen hiring because of the global slowdown.

source : Bloomberg

Capital worries may linger over HSBC, analysts say

2009-03-02T08:31:00.000-08:00

By Simon Kennedy

The global banking giant (UK:HSBA: news , chart , profile ) (HBC:
27.76, -7.04,
-20.2%) will raise the cash to both strengthen its capital ratios and allow it to make limited acquisitions in the event opportunities arise. It's also lowered its dividend payout after reporting a 70% drop in net profit for 2008 and said it's withdrawing from some of its U.S. lending operations. See full story.
But at the same time, the deficit in HSBC's available-for-sale reserves has soared to more than 21 billion pounds from about 7 billion pounds at the end of June.
Assets that are classified as available for sale are those that aren't held for immediate trading purposes, but also aren't expected to be held for the asset's entire lifetime.
In that way, the bank doesn't have to record a drop in the market price as a loss unless the asset is sold or the drop in value is deemed to be permanent.
"The key question around the stock will remain, despite the capital increase, whether the balance sheet is strong enough to get the bank through a difficult 2009," said Deutsche Bank analyst Jason Napier.
Previous analysis by Deutsche Bank suggests HSBC's capital ratios could potentially fall as much as three percentage points in 2009 due to impairments on bad loans and other risky assets.
At Keefe, Bruyette & Woods, analysts said the current deficit in the available-for-sale accounting line is equivalent to 1.9 percentage points of the existing capital ratios.
"We welcome the rights issue, but the increase in the [available-for-sale] reserve means that it will not put the capital debate to rest in our view," said KBW's Mark Phin.
Not all analysts were so negative. Celent analyst Cubillas Ding said that HSBC seems to have taken a quite conservative line with its reserves, and the intention of its announcements on Monday seems to be to help it draw a line under U.S. losses.
Douglas Flint, HSBC's finance director, said the bank's own stress tests indicate a possible risk in the range of $2 billion to $2.5 billion over the next two to three years and a "likely ultimate expected loss" of about a third of that figure.
Fearful of deeper losses
Separately, activist investment firm Knight Vinke Asset Management said HSBC could face a further $34 billion of losses if it were to write down to fair value all the subprime assets it holds.
Knight Vinke has been lobbying HSBC to shutter the U.S. lending operations -- the former Household International and Beneficial businesses -- since September 2007, potentially by just walking away and putting them in receivership. HSBC bought Household in 2003.
The possibility of further losses appears to be rising because of the deteriorating economy in the U.S., the asset manager said. It also called for assurances that the $17.7 billion being raised in the rights issue won't go to Household's lenders, saying they have no contractual legal recourse to HSBC.

source :Marketwatch

FOREX-Dollar gains vs yen; Citi report gives a lift

2009-02-23T11:12:00.000-08:00

* Dollar hits 3-month high vs yen of 94.94

* Euro falls vs dollar after Trichet, Fitch comments

(Recasts, updates prices, adds comment)

By Nick Olivari

NEW YORK, Feb 23 (Reuters) - The dollar rose to a near-three month high against the yen on Monday as the Japanese currency fell broadly on expectations the U.S. government could take a large stake in U.S. lender Citigroup, but stop short of nationalization.

The Wall Street Journal reported earlier in the global session that the U.S. government would take a 40 percent stake in Citigroup by converting preferred stock into common stock [ID:nHKG310337].

This eased fears the U.S. government will completely nationalize large U.S. banks while bolstering optimism it will stay more proactive in stemming a recession than other nations. The dollar and yen had been seen as the two safe haven currencies, but Monday's news made the dollar more attractive.

The Treasury Department, Federal Reserve and three other federal agencies said in a joint statement they will initiate a program on Wednesday to assess large U.S. banks' capital needs and determine whether a bigger buffer is warranted. [IO:nWEQ000701].

The U.S. agencies insisted they did not want to nationalize banks as investors fretted over how struggling firms will cope with rising recession-driven losses. The euro surrendered early gains against the dollar after European Central Bank president Jean-Claude Trichet said the euro-zone financial system is under severe strain and Fitch voiced concern about Austria's AAA rating. For details, see [ID:nLN456587] and [ID:nLN487356].

"The constant intervention is worrisome but a necessary step to take at this part in the financial crisis," said Andrew Bekoff, Chief Investment Officer, LPB Capital LLC, a Doylestown, Pennsylvania-based wealth management firm. "The dollar is nearing a retest of its November highs."

Midway through the New York session, the dollar was up 1.6 percent at 94.63 yen , less than half a yen from the near three-month high of 94.94 yen touched earlier in the session, according to Reuters data.

The euro rose 0.9 percent to 120.52 yen after earlier touching a one-month high of 121.91 yen.

The yen fell 1.1 percent against the Canadian dollar , 0.9 percent against the Swiss franc and 2.7 percent against the pound , according to Reuters data.

EURO/DOLLAR CUTS GAINS

The euro erased early gains against the dollar, last trading down 0.9 percent at $1.2729 , nearer the session low of $1.2714 than the earlier 12-day peak of $1.2991.

Analysts said Trichet's comments brought back into focus the economic and banking woes in the euro zone, while the Fitch comments highlighted the problems facing some of the countries on the region's periphery.

"I was surprised how strong the euro was right at the start of the European session on the Citigroup news. This is potentially just based on reports so far," said Chris Turner, head of forex strategy at ING in London. Traders said investors were wary of more bad news emerging about the euro-zone economy, with the closely watched Ifo index on the German economic climate due on Tuesday.

Analysts also noted disappointment that the weekend's meeting of European leaders, who were crafting a joint approach to an April G20 meeting, failed to yield any concrete agreement on ways to deal with the recession [ID:nLM126747].

"There was disappointment that the main focus of the G20 meeting was on financial market regulation, which is not the most important problem at a time of global recession," said Commerzbank head of FX research Ulrich Leuchtmann in Frankfurt. (Additional reporting by Jessica Mortimer in London, Editing by Chizu Nomiyama)

source : Reuters UK

In Latest Plan for Banks, U.S. Could Demand a Voting Stake

2009-02-23T11:10:00.000-08:00

By EDMUND L. ANDREWS

The Obama administration put the nation’s biggest banks on notice Monday that the government could become their biggest shareholder if regulators decide they are not strong enough to weather a deeper-than-expected downturn in the economy.In an unexpectedly assertive joint statement, the Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might end up demanding a direct ownership stake in major banks after they undergo a tough evaluation of their strength, which is to begin shortly.

“The capital needs of major U.S. banking institutions will be evaluated under a more challenging economic environment,” the administration said. “Should that assessment indicate that an additional capital buffer is warranted,” it continued, the banks could be required to give the government a right to acquire common shares, with voting rights.

The statement came as federal regulators confirmed that they were in discussions with Citigroup over precisely that kind of swap. Citigroup, which has received $45 billion in direct assistance and given the Treasury nonvoting preferred shares that pay a guaranteed dividend — is negotiating to swap the preferred shares for common shares that would give the government a stake as high as 40 percent.

Administration officials said Citigroup had initiated the talks with federal regulators, and the new statement stopped well short of declaring that regulators were ready to partly or wholly “nationalize” any major banks.

On Wall Street, most major bank shares were higher in noon trading, while the overall market was down more than 1.5 percent.

The administration said its “strong presumption” was that “banks should remain in private hands.”

But the statement also officially amounted to a road map under which the federal government could, if it wanted to, demand a major and possibly a controlling stake in systemically important banks like Citigroup and Bank of America.

The 20 biggest banks will be required to undergo a new “stress test,” starting Wednesday, which is intended to determine whether each bank has enough capital to survive if the economy spirals down even more than most forecasters already expect.

Treasury officials plan to introduce details of the stress test on Wednesday, and it is expected to take several weeks to complete.

If a bank comes up short, Treasury officials said on Monday, the government will require it to raise more capital. If the bank cannot get that money from private sources, the government will demand that the bank swap out the government’s existing, nonvoting preferred shares — issued during the first phase of the Treasury’s $700 billion financial bailout program last September — and replace them with new preferred shares that are convertible to common stock with voting rights.

The requirements will apply both to banks that receive additional money in the months ahead and to banks that have already received money.

In the case of Citigroup, the negotiations do not involve any additional infusions of taxpayer money. Rather, the negotiations are aimed at strengthening Citigroup’s capital position by replacing preferred shares, which resemble debt more than equity, with common shares.

Acquiring common stock would give the government more control, but expose it to more risk. Armed with voting shares, government officials would have more power to oust existing management and change the company’s strategy. But the Treasury would also lose its claim to dividend payments, which in Citigroup’s case amount to more than $2.25 billion a year.

source : The New York Times

U.S. vows bank aid and aims to avoid nationalisation

2009-02-23T11:08:00.000-08:00

By Emily Kaiser

WASHINGTON (Reuters) - U.S. regulators promised on Monday to prop up struggling banks if needed and said lenders should remain in private hands, even as a source said Citigroup was in talks to give the government a greater stake.

In Europe, the French government said it was pumping extra cash into two mutually owned banks, and the central European central banks took the unprecedented step of talking up the region's currencies.

U.S. stocks, which started higher on the Citigroup talk, turned lower on fears that the bank stabilization plan would not be enough to keep the economy from sliding into a deeper hole. U.S. government bond prices were little changed and the dollar gained against a basket of currencies as investors scrounged for safety.

Amid worries that the United States may still have to nationalize some of its banks, the Treasury Department, Federal Reserve and three other federal agencies said they will start assessing large U.S. banks' capital needs on Wednesday to determine whether a bigger buffer is warranted.

The money could come from the private sector or the government in the form of preferred shares that convert into common stock over time as needed to ensure banks have enough resources to withstand deepening credit losses.

"Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands," the agencies said.

Healthy banks are vital to stemming recession. While some economists have argued that nationalizing weaker institutions would be the fastest way to revive lending, many investors -- particularly in the United States -- worry that government intervention would have a chilling effect on business.

"If the government tells the bank that they need more capital, it's highly unlikely any 'private' source would step up due to the stigma," said Andrew Busch, global foreign exchange strategist with BMO Capital Markets in Chicago."This means that the government's designation could signal a further death spiral for the bank's common stock shareholders," he said.

Citigroup, whose stock has been pounded by fears that the government may seize the bank and wipe out shareholders, was in talks to give the government a larger stake, a person familiar with the matter told Reuters.

The idea under consideration would involve converting a big chunk of the $45 billion (31 billion pounds) in preferred shares the government bought last year into common stock, putting as much as 40 percent of Citigroup into public hands.

The British government announced a similar move last month, saying it would convert preferred shares in Royal Bank of Scotland, which is expected to announce more restructuring this week.

France on Monday also reached out to its lenders, pledging up to 5 billion euros (4 billion pounds) in additional aid for Banque Populaire and Groupe Caisse d'Epargne.

The two mutual banks are expected to detail a merger this week and the new aid could give the government a stake of up to 20 percent in what is set to be France's second-biggest retail bank behind Credit Agricole.

LOSSES MOUNT

Banks around the world have already reported hundreds of billions of dollars in losses and write-downs as defaults spike on mortgages, credit cards, corporate debt and a host of other loans. Investors worry that losses will intensify as the economy weakens, and banks may lack sufficient resources to withstand any further deterioration.

Tighter credit conditions have constrained consumer and business spending, and contributed to a steep decline in global trade. Dresdner Kleinwort economists think corporate bankruptcies worldwide will rise by at least 20 percent this year, after a 14 percent increase in 2008. In the auto industry, one of the hardest hit by the credit contraction and consumer spending slump, Ford reached a tentative agreement with the United Auto Workers union on changes to a retiree health care trust, becoming the first Detroit automaker to secure union concessions on the key issue.

European Central Bank President Jean-Claude Trichet said on Monday that the financial crisis was spilling over into the wider economy and that the euro zone's financial system is under "severe strain.

Joaquin Almunia, the EU's economic chief, said on Monday that the European Union could have to bail out a member state in financial trouble but such a move was unlikely, especially among countries in the euro zone.

European Union leaders at a weekend summit in Berlin backed a doubling of funds for the International Monetary Fund, which has spent billions of dollars in recent months shoring up economies in eastern Europe and elsewhere.

Latvia's government collapsed on Friday and the currencies of countries such as Poland, the Czech Republic and Hungary have come under severe pressure, hitting millions of citizens who have borrowed in foreign currencies such as the euro.

Emerging European Union central banks coordinated to prop up their currencies on Monday, with Czech central bank Governor Zdenek Tuma saying they had agreed that recent falls were overplayed.

In Asia, Japan's biggest brokerage Nomura Holdings Inc said it planned to raise 302 billion yen ($3.3 billion) by selling new shares to boost its capital.

Japan's second-largest bank Mizuho Financial Group said it would issue $850 million in preferred securities to replenish capital erased by a sliding stock market and economy.

Japan also saw its biggest bankruptcy of the year measured by debt as SFCG, a lender to smaller companies, failed with debts of $3.6 billion.

source : Reuters UK

Ritz Camera Centers Files for Bankruptcy Protection

2009-02-23T11:06:00.000-08:00

By Dawn McCarty and Erik Larson

Feb. 23 (Bloomberg) -- Ritz Camera Centers Inc., the largest camera-store chain in the U.S., filed for bankruptcy protection, blaming the deepening U.S. recession and the consumer transition to digital photography.

The 91-year-old company, which had sales of almost $1 billion in 2008, has both assets and debt of less than $500 million, according to Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Ritz sought court permission to tap a new $85 million loan from existing secured lenders.

Ritz has about 800 locations in more than 40 states, including the Ritz Camera chain, Wolf Camera, Kits Cameras, Inkley’s and the Camera Shops. The Beltsville, Maryland-based company suffered from a drop in photo printing, as well as slumping sales at its 130 Boater’s World Marine Centers, which were hurt by last year’s record oil prices, court papers show.

The advent of digital photography, which ended “enormous profits” from photo finishing, “proved too much of a burden, coupled with the losses experienced by the Boater’s World business,” Marc Weinsweig, the closely held company’s chief restructuring officer, said in court papers.

Ritz’s debt includes $47.7 million on a secured revolving credit agreement and $13.1 million owing on subordinated debentures, court papers show. Including letters of credit, the bank debt increases to $54.5 million. Wachovia Bank NA is the agent for the lenders.

Boater’s World

Ritz officials sought to diversify their business by launching Boater’s World, a boating-and-fishing supply retailer, in 1987. The stores are located from Maine to Florida and also in Texas, California, Oklahoma, Tennessee and Nevada, according to the unit’s Web site. The rise in fuel prices helped lead to a “sharp” drop in sales at the unit’s stores, Weinsweig said in the filing.

Ritz in 2001 acquired Wolf Camera, the second-largest U.S. camera-store chain with 500 locations in 20 states, for about $85 million. Wolf filed a liquidating Chapter 11 plan that paid the secured bank lender about 50 cents on the dollar, while unsecured creditors received nothing for their $100 million in claims.

Ritz’s 30 largest unsecured creditors without collateral backing their claims are owed about $65.6 million, court papers show. The two biggest unsecured creditors are Nikon Inc., owed $26.6 million, and Canon USA Inc., owed $13.7 million. Ritz owes another $8.4 million to Fuji Photo Film USA Inc., whose affiliate invested about $197 million in Ritz between 1996 and 2001, according to court papers.

Benjamin Ritz opened his first portrait studio in 1918 on the boardwalk in Atlantic City, New Jersey. Twenty years later, Benjamin’s younger brother, Edward, opened their first photo processing lab in Washington and later expanded to Baltimore. The company’s wider expansion began in 1969 under Edward’s son, David.

source : Bloomberg

US Airways cuts nonalcoholic drink charge

2009-02-23T11:05:00.000-08:00

US Airways Group Inc. will resume serving free soda and other nonalcoholic drinks Sunday, the airline’s CEO said in an e-mail to employees.

The move reverses a six-month policy that charged passengers in coach $2 per drink on domestic flights. First-class and international passengers received free drinks.

Passengers will be offered free soda, juice, tea, water and coffee in flight. Beer, wine, and cocktails will still be available for purchase for $7.

“We know customers don’t buy an airline ticket based on whether or not they will get a free soda onboard, but with US Airways being the only large network carrier to charge for drinks, we are at a disadvantage,” Chief Executive Doug Parker said in an e-mail to employees.

The carrier will still charge for checking baggage, blankets and pillows, a move the carrier says will generate $400 million to $500 million this year. Parker didn’t say how much the airline garnered from charging for drinks.

Parker said the airline’s policy of charging for nonalcoholic drinks detracted from the airline’s improvements in on-time performance and baggage handling.

But he said the recession has sparked a need for the airline to try programs that include charging for individual items.

“Moving to an a la carte model has helped us build an airline that can withstand the uncontrollable factors that influence our industry and we need to keep trying new programs, like a-la-carte pricing,” Parker said. “Frankly, it would have been a bigger risk for us not to have tried charging for drinks because innovation and a new business model are desperately needed.”

source : Business journal

Stocks flirt with multi-year lows

2009-02-23T11:03:00.000-08:00

By Alexandra Twin

Stocks tumbled Monday afternoon as investors continued to worry that the government's efforts to slow the recession won't be sufficient.

The Dow Jones industrial average (INDU) lost 140 points, or 1.9%, with roughly 2-1/2 hours left in the session. The Dow ended the last session at the lowest point since Oct. 9, 2002, at the bottom of the last bear market.

Should it close where it stood at 1:30 p.m. ET, the Dow would be at an 11-year low.

The S&P 500 (SPX) index lost 16 points, or 2.1%. The index ended the previous session at the lowest point since Nov. 20, seen by some as the low of the current bear market.

Should it close where it stood at 1:30 p.m. ET, the S&P 500 would also be at an 11-year low.

The Nasdaq composite (COMP) lost 34 points, or 2.4%. The tech-fueled index has done better than the rest of the market and remains above its January lows.

Stocks had gained in the early going on enthusiasm that the government may boost its stake in Citigroup, briefly assuaging fears that the troubled bank would have to be nationalized.

But any early advance petered out, as the worries of the last few weeks returned.

"There is just nobody who wants to buy right now," said Ron Kiddoo, chief investment officer at Cozad Asset Management.

"The news was a little bit upbeat overnight when it looked like Citigroup might find some stability, but now the skepticism is back," he added. "I think we need to hear some optimistic talk from our leaders and soon."

Financials: Stocks have tumbled over the last two weeks on worries that the government won't be able to slow the recession, despite announcing a series of programs. On Friday, stocks slipped on worries that Citigroup and Bank of America might have to be taken over by the government altogether.

Some of those worries were tempered Monday on reports that the government is looking to boost its stake in Citigroup (C, Fortune 500), something that would fall short of full nationalization but would enable it to avoid bankruptcy. Should Citigroup be fully nationalized by the federal government or forced to declare bankruptcy, that would wipe out all shareholder value. Citi shares gained 10%.

Separately, Treasury said in a joint statement with other departments that the government is ready to give more money to banks if they need it. The Capital Assistance Program begins Wednesday.

The program, previously announced by Treasury Secretary Timothy Geithner, involves giving banks "stress tests" to determine how they are doing and whether they need more money.

Company news: Meanwhile, the Treasury is also considering its options as General Motors (GM, Fortune 500) and Chrysler continue to flounder, despite having received billions in federal aid. According to a Wall Street Journal report Monday, the administration believes the possibility of Chapter 11 bankruptcy filings by the two companies must be seriously considered. GM shares gained 5%.

Fellow automaker, Ford Motor (F, Fortune 500) has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 10%.

A variety of big tech stocks slumped, including Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500) and Dell (DELL, Fortune 500).

Yahoo (YHOO, Fortune 500) could announce a major management reorganization as early as Wednesday, although more likely next week, according to a published report Monday. Yahoo shares declined modestly.

Market breadth was negative. On the New York Stock Exchange, losers beat winners four to one on volume of 740 million shares. On the Nasdaq, decliners topped advancers by more than two to one on volume of 1.01 billion shares.

Economists: A leading group of economists expect a deeper recession in the first half of the year followed by a modest recovery in the second half and a bigger recovery in 2010.

Reports are due later this week on housing, manufacturing and gross domestic product growth.

Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.80% from 2.79% Friday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, most Asian markets ended mixed, while European shares fell in afternoon trading.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for April delivery fell $1.19 to $38.34 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $5.20 to $997 an ounce.

source : CNNmoney.com

Microsoft asks for refund from some laid off workers

2009-02-23T11:01:00.000-08:00

By Jasmin Melvin

WASHINGTON (Reuters) - An accounting error reportedly led Microsoft Corp to notify some laid off employees last week that they would need to give back part of their severance pay.

The world's largest software maker laid off 1,400 workers last month, the first of 5,000 jobs the company plans to cut over the next 18 months.

The error is believed to have overpaid some former employees and underpaid others. Those that were overpaid were sent letters requesting them to refund the company by sending a check or money order.

"An inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft," a letter obtained by the blog TechCrunch reads. "We ask that you repay the overpayment and sincerely apologize for any inconvenience to you."

A Microsoft spokesperson confirmed that such letters were sent, but would not comment on how many former employees were affected or how much the total overpayment amounted to, according to CNN.

source : Reuters

Cuomo Has More Questions for Merrill Chief on Bonuses

2009-02-23T10:58:00.000-08:00

By LOUISE STORY

John A. Thain, the former chief of Merrill Lynch, faced six hours of questioning last week with the attorney general of New York.But it was not enough.

Attorney General Andrew M. Cuomo filed a motion on Monday asking that Mr. Thain return and provide more details about the bonuses that were given out on eve of Merrill’s merger with Bank of America. The attorney general says in the motion that Mr. Thain, in complying with a subpoena, did not answer all of Mr. Cuomo’s questions.

The motion, filed in the Supreme Court of New York, coincides with the start of a week in which two of Bank of America’s top executives will meet with Mr. Cuomo. On Monday, the bank’s chief administrative officer, J. Steele Alphin, will answer questions, and later this week, the bank’s chief executive, Kenneth D. Lewis, will do so.

A spokesman for Mr. Thain said that Bank of America had directed Mr. Thain not to discuss specific bonus details. But, the spokesman added that Mr. Thain was continuing to cooperate fully with the attorney general’s office.

The attorney general’s investigation has focused on some $3.6 billion in bonuses that Merrill paid at the end of last year. Merrill, struggling to survive, agreed to be acquired by Bank of America in September, but the merger did not close until year-end, and in the months before the merger closed, Merrill’s business deteriorated, resulting in a $15.3 billion post-tax loss in the fourth quarter.

Neither company disclosed Merrill’s problems before the merger closed, and Mr. Cuomo’s office is expected to broaden his inquiry beyond Merrill’s bonuses into disclosure issues involving the transaction. The loss, which Mr. Lewis called a surprise, prompted Bank of America to seek a second round of taxpayer money.

Some details about the loss emerged in the motion filed on Monday. Merrill and Bank of America were $7 billion off in their estimates of Merrill’s pretax loss in the fourth quarter, Mr. Thain told the attorney general’s office. It was using those incorrect estimates on Dec. 8 when Merrill set its bonus pool, the filing says. Normally, companies do not make bonus payments until after they close the books for a year — which Merrill did not do until Dec. 31.

Mr. Thain, when asked if the worsened results would have lowered bonuses, avoided answering the question last week, according to a partial transcript of his session with Mr. Cuomo’s office.

Mr. Thain said that Merrill as a routine matter did not disclose projections, even as conditions worsen, as they did in December, according to the court filing.

“I don’t think it’s necessarily the case that we can predict what was going to happen between Dec. 8 and Dec. 31,” Mr. Thain said at the session. “Bonuses were determined based upon the performance and the retention of the people, and there is nothing that happened in the world or economy that would make you say that those were not the right thing to do for the retention and the reward of the people who were performing.”

Mr. Thain also declined to discuss specific bonuses, telling the attorney general’s office that Bank of America had asked him not to.

Mr. Thain told Mr. Cuomo’s office that he met with Andrea Smith, a manager in human resources for Bank of America, just after the bonus pool was set on Dec. 8. The two compared bonus awards line by line and Ms. Smith objected to some. In response, Mr. Thain lowered those bonuses, according to the motion. Ms. Smith also detailed what types of employees at were paid at Bank of America, like employees in human resources, risk and public relations, to give Mr. Thain an idea of what to pay Merrill employees in those roles, Mr. Thain said, according to the transcript.

Mr. Thain would not name the people whose bonuses were lowered, and that is why the attorney general is asking him to reappear. Mr. Thain’s lawyer said that the bank had instructed Mr. Thain not to discuss compensation paid to specific employees, beyond the top five executives at Merrill, whose compensation is publicly disclosed.

The transcript provided a glimpse at the tone of the questioning in Mr. Thain’s session last Thursday.

“I feel bad for you because you’re getting caught in between this,” said Benjamin Lawsky , the deputy counselor and special assistant to the executive division in the attorney general’s office, in the session. “We’re going to end up back here doing this all over again.”

source : The New york Times

Lending Down at Bailout Recipients

2009-02-17T20:47:00.000-08:00

By Binyamin Appelbaum

The largest U.S. banks reduced the availability of money for consumers and businesses during the final months of 2008 even as the government invested tens of billions of dollars to help them make new loans, according to data released yesterday by the Treasury Department.

The banks that got the most government money, Bank of America and Citigroup, led the retreat. Mortgage loan originations by the two companies in December fell $3.6 billion, or 15 percent, compared with October. New lending commitments to commercial and industrial customers dropped by $2.4 billion, or 11 percent. And the companies reduced the collective spending limit of their credit card holders by $45 billion, about 2 percent.

But the overall decline in lending was modest as some large banks even posted small increases. The data underscores that banks are responsible for only a small part of the overall decline in lending, which is mostly the result of the collapse of rival industries such as mortgage lenders, small-business lenders and Wall Street, which before the crisis collectively provided more than twice as much financing as banks.

Treasury released lending data for the last three months of the year from the 20 largest banks that got taxpayer money as part of the government's financial rescue program. The data is part of a broader effort to increase transparency and accountability. Treasury chose to focus on the largest banks, which together got more than $206 billion, or more than two-thirds of the amount invested so far, rather than requiring reports from all of the more than 350 banks that got money.

Treasury officials urged caution in drawing conclusions from the decline in lending. They argued that much of the decline is the result of a recession that has reduced customer demand and diminished the creditworthiness of many borrowers. Furthermore, they say, the proper baseline for measuring the government's investments is how much lending would have declined without public aid, something it described as impossible to determine.Still, Treasury issued an analysis with the data that reiterated the judgment of senior officials that the investments are working.

Lending "levels would likely have been lower had Treasury not taken actions to stabilize the financial system," the analysis said.

Representatives of the banking industry also viewed the findings as a favorable report card, noting that lending increased across the board from November to December.

"In the wake of the financial crisis, our banks are lending," said Steve Bartlett, chief executive of the Financial Services Roundtable.

But the December numbers remained generally below October levels, a trend that is likely to fuel renewed demands from members of Congress and consumer advocates that the banks must take new steps to increase lending.

The data present a complicated picture for each bank. For example, most companies reported that outstanding credit card balances increased as customers took advantage of borrowing limits. Companies also continued to issue large numbers of new cards. But at the same time, most credit card lenders sharply reduced the amount that their cardholders are allowed to borrow. The combination reflects a short-term increase in lending but a long-term decrease in the availability of loans.

Citigroup, for example, reported that outstanding credit card balances grew by about $800 million, but it reduced total available credit by almost $37 billion.

Similarly, many banks increased lending in selected areas. Citigroup, which has a relatively modest business in lending to commercial and industrial companies, increased its volume of new loans by about $2 billion in December. Bank of America said it was making more auto loans, which it attributed to the struggles of the financing arms of the major car companies.

source: The washington post

Global markets fall on fears of deepening downturn

2009-02-17T20:45:00.000-08:00

By Bettina Wassener, Jack Healy and Matthew Saltmarsh

Stock markets in Asia on Wednesday continued a slide that began in the United States and Europe amid renewed concerns over the effectiveness of the U.S. efforts to shore up the economy, although falls were more muted.

The declines come amid continued concerns that Asian economies, once thought relatively immune to the global crisis that began as U.S. mortgage-related problems in 2007, have now been fully caught up in a global economic crisis that is set to worsen before stimulus measures can begin to take effect.

With demand in Europe and the United States withering, Asian exports have been severely hit, sharply slowing overall growth rates in the region's once booming economies.

The Nikkei 225 index in Japan was down 1.35 percent by midday. On Tuesday, the index had fallen by a similar amount, showing only a muted reaction to news that the Japanese finance minister, Shoichi Nakagawa, was resigning.

The Hang Seng index in Hong Kong and the Kospi in South Korea were both down around 1.5 percent by midday on Wednesday, while the key indexes in Singapore and Taiwan eased 0.5 percent."With the continuing slump in export-led growth in the region, and exports likely to remain negative for a considerable time, it's difficult to get optimistic," said Stephen Davies, chief executive of Javelin Wealth Management in Singapore. "Investors are continuing to do what they have been since the second half of last year – staying on the sidelines. And who can blame them."

The past two months have brought a steady stream of data showing the impact of the global crisis on Asia was more severe than expected, and economists broadly agree that the picture is set to become worse before any improvement can take root.

Hopes that the new government in the United States would be able to bring a swift turnaround have dissipated as "optimism has become overcome by reality again," Davies said.

He said the market reaction to the Obama administration's "so far vague proposals for the banking sector has been naïve, given the that the issues they are grappling with are so enormous that they cannot be solved overnight."

Earlier, worries about the deteriorating financial situation in countries like Romania and Hungary led to a huge sell-off on Tuesday that began in Europe and crashed ashore on Wall Street.

Every sector sank, with financial stocks leading the way and energy companies falling on tumbling oil prices. Rattled investors rushed to buy safer investments like gold and Treasury debt.

The losses on Wall Street were part of a global wave of selling that highlighted fears about how banks, automakers — entire countries — will fare in a deepening global downturn.

The news helped send the Dow Jones industrial average to nearly the same low that it hit amid the credit crisis last fall. The Dow fell 297.81 points, or 3.8 percent, to 7,552.60, which was almost the same as the 7,552.29 close for the Dow on Nov. 20.

On Tuesday, losses in General Motors, Bank of America and American Express dragged the blue chips lower. The only Dow stock in positive territory was Wal-Mart, which rose after reporting better-than-expected profits.

The broader Standard & Poor's 500-stock index slid 37.67 points, or 4.6 percent, to 789.17, dropping below what analysts said was an important trading threshold of 800. The S&P's drop of 4.56 percent was only the 16th biggest percentage drop in the last year, highlighting the pounding that stocks have taken in recent months.

The Nasdaq fell 63.70 points, or 4.2 percent, to 1470.66.

Moody's Investor Services warned of "hard landings" for Eastern European countries that had grown rapidly in recent years as they embraced American-style capitalism, becoming fertile ground for West European banks and investors. Moody's warning underscored the volatility in the banking sector, particularly for banks that operate in Eastern European countries like Hungary, Croatia, Romania and Bulgaria.

"Eastern Europe fed from the global tidal wave of liquidity and easy money," said Nick Chamie, head of emerging-markets research at RBC Capital Markets in Toronto. "They will now see significant collateral damage — a major contraction in growth, and the financial system will continue to implode. You'll probably see some of the fixed exchange rates broken."

In addition, Chamie said, there was likely to be a significant rise in unemployment, accompanying social tension and perhaps even a reconsideration of the benefits of integration with the European Union for populations in the East.

The gyrations in stocks came on a day when President Barack Obama signed the $787 billion economic stimulus bill. Despite the size and scope of the package, some investors have said it may not be enough to right the economy."Nobody believes it's going get better yet," said Howard Silverblatt, senior index analyst at Standard & Poor's.

Shares of General Motors, which were more than $25 last February, fell nearly 13 percent, to $2.18, as GM and Chrysler submitted major reorganization plans to the U.S. government. Shares of the Ford Motor Company, which has not received any bailout funds, were down 4 percent, to $1.69. Chrysler is not publicly traded.

Analysts said the markets would continue to lurch as long as the banking system remained on life support. Although Tuesday's drop was stark, there have been 15 other trading days since September when the S&P has posted bigger losses.

"Without any further concrete details, the market's really left to wonder," said Ryan Larson, head equity trader at Voyageur Asset Management.

Crude oil fell $2.58 to settle at $34.93 a barrel, and Exxon Mobil, Chevron and Total skidded as consumers and industries continued to scale back their demand for oil and gasoline.

Also on Tuesday, the Treasury Department released data from the 20 largest banks that accepted government money showing modest declines in lending during the fourth quarter of 2008. New loans made to commercial real estate developers saw a big pullback, with the typical bank reporting a 19 percent drop amid weak demand. Residential mortgage balances declined about 1 percent during the same period.

Credit card balances, on average, increased about 2 percent. But the biggest card issuers reported "more marked" decreases in both total credit extended to cardholders. Many big lenders, it seems, are continuing to cut back on untapped lines of credit.

Corporate loan balances also fell slightly in the fourth quarter, even though reports were mixed. Banks reporting declines said that fewer small-business customers were seeking new loans; many had trouble accessing short-term funds amid troubles in the commercial paper market.

In a sign of further deterioration in the industrial sector, a gauge of manufacturing fell precipitously in February. The Empire State Manufacturing Survey, which is calculated by the Federal Reserve Bank of New York, fell to a new low of negative 34.7 in February, from negative 22.2 in January.

"Robust export demand had been the main support for U.S. manufacturing for many months," Joshua Shapiro, chief United States economist at MFR, wrote in a note. "Now, with economic activity weakening sharply around the world, exports are dropping like a stone."

source : Herald tribune

Asian Stocks Decline for Third Day as Global Recession Deepens

2009-02-17T20:44:00.000-08:00

By Shani Raja

Asian stocks dropped for a third day, driving Japan’s Topix index toward the lowest close in 25 years, as the deepening global recession hurts corporate earnings and demand for commodities.

Westpac Banking Corp., Australia’s biggest lender by market value, slipped 2.6 percent as a fivefold surge in bad-debt charges dragged quarterly profit lower. BHP Billiton Ltd., the world’s largest mining company, lost 4.3 percent in Sydney after metal and oil prices declined. Sony Corp., which gets a quarter of its sales from the U.S., fell 3.1 percent after manufacturing in New York shrank at the fastest pace on record.

“I’d be very surprised if profit numbers didn’t keep on coming down,” said San Francisco-based Robert Horrocks, who helps manage $4.7 billion including Asian equities at Matthews International Capital Management LLC. “You’re seeing the ripples from the credit shock, where the medium-term effect on demand is a chronic problem that governments are trying to combat.”

The MSCI Asia Pacific Index declined 0.9 percent to 78 as of 11:53 a.m. in Tokyo, set to close at the lowest level since Nov. 24. Finance and commodity shares were the biggest drag on the gauge, which has lost 13 percent this year. The measure tumbled by a record 43 percent in 2008, as the credit crisis dragged the world’s biggest economies into recession.

Japan’s Topix lost 1 percent to 749.04 and earlier sank to as low as 744.37, which would be the lowest close since January 1984. Hong Kong’s Hang Seng Index dropped 1.3 percent, while Australia’s S&P/ASX 200 Index fell 2.6 percent.

Government Action

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. The gauge slumped 4.6 percent yesterday as U.S. President Barack Obama signed a $787 billion stimulus bill into law. After U.S. markets closed, General Motors Corp. said it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid to date it needs to survive.

Governments and central banks have been cutting interest rates and introducing spending packages to reverse the worst global slump since World War II. International Monetary Fund Managing Director Dominique Strauss-Kahn said last week that he expects more countries to apply to the IMF for aid.

The Japanese government, which yesterday appointed Kaoru Yosano as its new finance minister, said two days ago that gross domestic product contracted 12.7 percent in the fourth quarter, the most since the 1974 oil shock. The Federal Reserve Bank of New York’s general economic index sank to the lowest level since records began in 2001, according to a report yesterday.

A gauge of finance companies on the MSCI index dropped 1.4 percent. The finance measure is the second-worst performer in the past 12 months of 10 industry groups as the credit crisis caused losses at institutions worldwide to swell to more than $1 trillion.

‘Volatile’ Conditions

Westpac Banking Corp. declined 2.6 percent to A$16.34 after profit fell 2 percent in the three months to Dec. 31 as bad debts outweighed increased fee income from last year’s purchase of St. George Bank Ltd.

“With global economic conditions continuing to be volatile, operating conditions will remain difficult,” Chief Executive Officer Gail Kelly, said in a statement.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, fell 2 percent to 442 yen. Sony Financial Holdings, which cut its profit forecast last week, lost 6.7 percent to 256,000 yen.

The Markit iTraxx Japan index of credit-default swaps, which measures the cost of protecting investors in Japanese corporate bonds from default, rose to a record today, Barclays Capital prices show.

BHP fell 4.3 percent to A$30.36 in Sydney. Rio Tinto Group, the world’s third-largest mining company, dropped 2.4 percent to A$47.86.

Slowing Global Demand

Concern the global economic slump will deepen drove down commodity prices. Crude oil tumbled 6.9 percent to settle at $34.93 a barrel in New York, the steepest drop since Jan. 27. Copper futures slumped 7.2 percent, the most since Oct. 30.

Sony lost 3.1 percent to 1,608 yen on concern global demand for its televisions and video-game consoles will slow further. The company reported a 95 percent plunge in third-quarter profit on Jan. 29. Canon Inc., the world’s biggest digital-camera maker, slid 2.3 percent to 2,310 yen.

“There are looming prospects that corporate earnings will deteriorate even further,” Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc., said in an interview with Bloomberg Television. “We’re getting ever closer to historic lows, and that weighs on investor sentiment as well.”

source: Bloomberg

Detroit, Prepare For Big Changes

2009-02-17T20:41:00.000-08:00

By Steven Mufson

Only one thing lies at the end of the pothole-strewn road for America's automobile industry: smaller companies making fewer cars with fewer workers and dealers.Getting there will be a hair-raising ride -- for workers, dealers, investors and taxpayers. Yesterday, General Motors and Chrysler beseeched Washington to give them massive new infusions of financial aid in an effort to avert bankruptcy, which they say would depress sales even more than they have been depressed by the slumping economy. But whether the restructuring process the ailing giants undertake is called bankruptcy may be largely a matter of semantics.

"I don't know what you're going to call it, but they're going to go through bankruptcy, whether outside the bankruptcy system or with the benefit of the courts," said Maryann Keller, who has written about the U.S. auto industry for three decades. "At the end of day, the United Autoworkers are going to have to take a haircut, creditors are going to take a huge haircut and equity is gone. What will effectively happen is exactly the same as bankruptcy."

Financial experts close to the Obama administration say that any financial aid given to the ailing U.S. automakers will come fully loaded with wrenching restructuring plans.

"I think the new administration's hope is that we come to a thoughtful and sensible outcome. Walking away and saying 'Let the private market figure it out' is not either politically or economically the right outcome," said one financial expert who has talked with administration members and spoke on condition of anonymity because he is not authorized to speak on their behalf. "But I also don't think giving money without being sure of a better outcome is right, either."Among the most nettlesome stakeholders are dealers, who are protected by a variety of state laws and franchise agreements that usually can be broken only in bankruptcy court. One way or the other, the dealers are bound to suffer as brands die off. Stephen Girsky, a former Morgan Stanley analyst who now works for the private-equity and consulting firm Centerbridge Partners, has said that U.S. carmakers should close 70 percent of their dealerships, far more than GM recently set as its restructuring goal.

Even these restructuring plans are no guarantee that the onetime automobile behemoths will make money, analysts said. The current credit crunch will pass eventually, but the loose lending that spurred sales in recent years will probably not return. And high federal fuel-efficiency standards and California's proposed limits on greenhouse emissions from tailpipes will require changes in engines.

As it is, GM has been steadily losing market share for decades. Its profits in the early part of the decade were inflated by a mortgage business it owned. Profits overseas disguised weakness in the United States for years, and now those markets are weakening. Plans for a new plug-in hybrid vehicle, championed by members of Congress as the car of the future, come equipped with new uncertainties. It will have a tiny production run and a large, expensive battery that many analysts say will make it a sure money-loser.

"GM has been dying for 30 years. We're only now writing the obit," said Keller, who 20 years ago wrote "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors."

Chrysler, on the other hand, is still suffering the after-effects of its broken marriage to Daimler. After the German automaker acquired Chrysler in 1998, it all but eliminated Chrysler's ability to design and engineer new cars in an effort to cut duplicative costs. Then Daimler sold the company to the private-equity firm Cerberus. Chrysler now has primarily two valuable vehicles, the Chrysler minivan and Jeep; the Dodge pickup truck is also popular in some areas of the country. It has touted a proposed affiliation with Italy's Fiat as a way to introduce new small-car models in the United States, though the two have yet to finalize a partnership.

"We believe Chrysler will be viable and will play a vital role in supporting the American economy and in providing American jobs," Chrysler chief executive Robert L. Nardelli said yesterday.

But Keller said: "Chrysler's the harder one. When the Germans took the last flight to Stuttgart, they didn't leave a lot of infrastructure in Chrysler to enable Chrysler to be self-sufficient in designing vehicles." She added, "In GM, you at least have a company that has resources, that has talent, that has technology and assets that are important and a scale that frankly enable it to emerge from this process as a healthier company. GM at end of the day can conceive, engineer and assemble a car. Those skills have been lost in Chrysler because they were drained out of the company during the 10 years Daimler owned it."

One measurement of pessimism about the fate of leading brand names is the Automotive Lease Guide's estimate of their residual values after 36 months. This week, the guide slashed its estimates on Dodge, Jeep, Saturn, Saab and Hummer by four to nine percentage points because of uncertainty about their future. That would deliver another blow to sales by making it more expensive for consumers to lease new vehicles. Last month, 3.3 percent of Chrysler's new-vehicle sales were leases, down from 24.7 percent in January 2008, according to Power Information Network. GM leases also fell sharply.

Even the Detroit companies' rivals are sympathetic to their plight. "All of us, not just Americans but Europeans, are running through the same stuff, and Japanese are, too," said Bill Reinert, national manager of Toyota's advanced-technology group in the United States. He predicted "smaller, leaner organizations" that will "need to look at product planning and whether it is in line with where the public is going from an economic and environmental point of view."

But Reinert said that simply shrinking auto companies isn't enough. Big companies benefit from economies of scale, so smaller companies will have to be more nimble. He said that "in the end . . . what you'll see is a much more competitive market and two models of automobiles: one as an appliance for people who don't care about cars, and the next as a social icon much like the iPhone and iPod." And because of new climate regulations, he added, automakers will have to "do that within an ever smaller carbon footprint."

That's more than Reinert had to worry about when he started working at age 17 in the same Ford plant where his father worked, making models of yesteryear: Fairlane, Comet, Maverick. He worked there before going to serve in the Vietnam War and again when he came back.

Now the auto industry is stuck in its own quagmire. Toyota is suffering from big losses and plunging sales. But Reinert is not ready to say that the Detroit three will fail to transform themselves into viable companies. "Never underestimate your competition," he said. But he added: "I'm not saying it's going to be easy. Or pretty."

source : The Washington post

Postal service hits back at criticism of postmaster's pay

2009-02-17T20:39:00.000-08:00

Postmaster General John E. Potter has come under criticism for his total 2008 compensation of nearly $800,000, but the agency's board of governors says the pay is less than what leaders of several other independent government agencies receive.
And the amount is far below that given to CEOs in the private sector, even though compensation and benefit packages for postal service officers are required by law to be comparable to those given to private-sector employees doing similar work, the board of governors says.

"That's a difficult standard to achieve given the compensation restraints within the federal sector," said Carolyn Lewis Gallagher, the chairman of the agency's board of governors.

She added that the postal service, with $75 billion in revenues and nearly 700,000 employees, compares with Fortune 100 companies.

Potter received a salary of $263,575 in 2008. His total compensation of nearly $800,000 included deferred earnings toward his retirement plan.

Compensation and benefit packages for officers of the postal service are governed by Congress and not funded by taxpayers.

Gallagher said effective compensation was necessary for effective managers.

"Even in these difficult times, the postmaster general continues to exhibit visionary leadership, effecting billions of dollars in cost reductions," she said.

Critics have tried to paint Potter's compensation as excessive, given that he had recently appeared before Congress warning that, with a $2.8 billion loss in 2008, the postal service may need to reduce its congressionally mandated six-days-a-week delivery schedule. iReport.com: Mail five days a week?

"Apparently compensating executives well is still a possibility at the post office," Pete Sepp of the National Taxpayers Union told CNN on Tuesday. "And despite all the delivery problems they may have, despite the deficits they may have, executive compensation is still nice, fat and round."Other independent government agencies pay their executives much more, however.

Richard Syron, former Freddie Mac CEO, had a compensation package of $3.4 million and reportedly took home much more in cash, stocks and other compensation before he was fired in September, according to Forbes magazine. Daniel Mudd, former CEO of Fannie Mae, had a total compensation package of $8.79 million before he, too, was fired that month, according to Forbes.

Frederick Smith, the long-time CEO of delivery giant FedEx, had a total compensation package of $32.21 million, Forbes said.

Fannie Mae and FedEx are among Forbes' top 100 firms.

A new postal law in 2006, Gallagher said, gave the postal service more flexibility to devise a compensation plan that didn't focus on salary. As a result, she said, the agency adjusted salaries and benefits packages, including performance-based initiatives, that became effective in 2008.

Potter saw his civil service pension fund rise by $381,496 in 2008, and he received a $135,041 incentive pay that will be deferred to his retirement, according to a filing released December 10.

Civil service pension rules are applied to all federal employees to calculate compensation, postal service spokesman Gerald McKiernan said. The calculation is based on salary and years of service, he said.

Sepp compared Potter's earnings to "Detroit auto executives flying to Washington in a fancy jet to ask for tax dollars" and said he "would not be surprised" if the postal service asked for a Wall Street-like bailout.

Automakers General Motors and Chrysler on Tuesday asked Congress for another $21.6 billion to keep them out of bankruptcy. They plan to cut 50,000 jobs between them by the end of the year.

source : CNN.com

Lawsuit Says Google Was Unfair to Rival Site

2009-02-17T20:37:00.000-08:00

By MIGUEL HELFT

A small Web site operator filed an antitrust suit against Google on Tuesday, accusing it of unfairly manipulating its advertising system to harm a potential competitor.TradeComet.com, which operates a site called SourceTool.com, a vertical search engine for those seeking business products and services, accused Google of raising the advertising rates it charged the company after it realized that SourceTool was a potential competitor.

TradeComet also said that Google entered into an anticompetitive agreement with Business.com, a SourceTool rival, which despite having a similar business model was offered more favorable advertising terms.

“Google understood the threat that vertical search engines posed to its business model,” said Jonathan Kanter, a partner in Cadwalader Wickersham & Taft.

Mr. Kanter’s firm represents Microsoft in antitrust matters. Mr. Kanter said Microsoft “has no involvement in this matter at all.” Google said it had not reviewed the complaint in detail. “But as we have consistently made clear, the advertising market in which Google operates is highly competitive and advertisers have a huge range of choices,” said Andrew Pederson, a Google spokesman.

Ben Hanna, a vice president for marketing at Business.com, said his company had no special relationship with Google.

TradeComet said that Google initially welcomed SourceTool, which bought ads on Google to drive traffic to its site.

That traffic grew quickly, reaching 650,000 visitors a day. By the following year, however, Google increased the prices that SourceTool had to bid for its ads by as much as 10,000 percent, the company charged.

Google uses a proprietary algorithm to assign “quality scores” to advertisers’ sites, using measures like the apparent usefulness of the sites. Advertisers with low scores have to pay more for their ads, and many advertisers have complained that Google can use the system to manipulate prices.

Last year, SourceTool urged the Justice Department to block a proposed search advertising partnership between Google and Yahoo. Its story became the subject of a column in The New York Times.

After the Justice Department notified Google and Yahoo that it planned to file suit to block the agreement, Google abandoned the partnership.

Legal experts said that the lawsuit appeared to be fallout from the Justice Department review of the partnership, which concluded that Google’s market share in search advertising amounted to a monopoly. But they were split on the merits of the case.

“I do believe that this properly alleges harm to competition, not just harm to one plaintiff,” said Samuel Miller, a partner at Sidley Austin in San Francisco.

But EricMr. Goldman, a law professor at Santa Clara University, cast a skeptical eye on TradeComet’s accusations , noting that courts had dismissed a similar antitrust case against Google. “We’ve heard all these arguments before and they haven’t gotten much traction,” Mr. Goldman said.

source : The new york times

A Painful Departure for Some G.M. Brands

2009-02-17T20:34:00.000-08:00

By MICHELINE MAYNARD

The brand that was once hailed as an important part of the future of General Motors now will be part of its past.G.M. said Tuesday that it would phase out its Saturn brand by 2012. It does not plan to develop any more new vehicles for Saturn, which began 19 years ago as an effort to attract owners of small Japanese cars.

G.M. also said it was considering its options for the Pontiac division. The Pontiac name, part of the car business since 1932, could remain on some models, but may no longer be a separate division. G.M. said Pontiac would be a “focused brand” with fewer models.

The disclosures by G.M., contained in a viability plan submitted to the government, means that G.M. plans to cut its brands in half, to four: Chevrolet, Cadillac, Buick and GMC.

It said last fall that it would try to find buyers for Hummer and Saab. On Tuesday, it said it would decide on Hummer’s fate by March 31.

But is four the right number?

After all, most of its big competitors, including Toyota, Honda and Chrysler, build their businesses around three brands or fewer in the United States. Ford is moving to shed its foreign brands and plans to focus primarily on three — Ford, Lincoln and Mercury.

“A volume brand and a premium brand can get the job done. Toyota has proven that,” said Karl Brauer, editor in chief of Edmunds.com, a Web site that offers car-buying advice. “Cadillac, Chevy, done.”

The more brands a carmaker has, the more it must spread money around to develop vehicles and market them.

As a result, “every brand suffers,” said A. Andrew Shapiro, a managing partner with the Casesa Shapiro Group. “No particular brand or brands can achieve the share of voice that they need.”

Its extensive brand lineup has long been G.M.’s primary weapon. Founded in 1908 by William C. Durant, who brought together a collection of car companies, G.M. made the concept of “a car for every purse and purpose” its strategy during the 1920s for retaining buyers from their first car to their last.

Brands were a crucial element in G.M.’s effort to thwart Ford, then the country’s biggest car company, whose founder joked that buyers could have any color they wanted, as long as it was black.

G.M.’s strategy paid off during its best years, when it controlled more than half the American car market. But it held only 22 percent of United States auto sales last year, with more than half of its share coming from a single division, Chevrolet.

G.M. found out last decade just how expensive it could be to unwind a brand. It spent more than $1 billion to buy out dealers at Oldsmobile, which built its last cars in 2004.

Rick Wagoner, G.M.’s chief executive, said the automaker had set aside money to buy out dealers, but declined to specify a figure. “We have reserves in our plan to facilitate that,” he said.

He cited the economic downturn as the reason G.M. was phasing out Saturn. “Frankly, the opportunity for any brand, and for our volume as a whole, just looks radically different,” he said. “It is unfortunate and it seems like a cruel twist of fate at a time when Saturn is loaded up with a fantastic product portfolio.”

In a letter sent Tuesday to Saturn dealers, G.M. said it would entertain a plan from Saturn dealers or other investors for a spinoff of the division to keep it operating. It said it would provide information to potential investors.

But it warned a spinoff would be “a difficult and complex task, and some of the issues that must be resolved include product sourcing, capitalization and financing issues,” G.M. said in the letter signed by Mark LeNeve, a G.M. vice president for North American sales, and Jill Lajdziak, the general manager of Saturn.

When Saturn was started in 1990, as a “different kind of car, a different kind of car company” aimed at owners of small Hondas and Toyotas, its small cars were immediate hits. But G.M. executives decided in the mid-1990s that they needed to support G.M.’s other brands over Saturn, which by then had cost $5 billion.

G.M. did not add any new vehicles to the Saturn lineup for five years, despite pleas from dealers for bigger vehicles. Earlier this decade, G.M. decided to start selling vehicles from its Opel division, with some design changes, as Saturns in the United States.

Saturn sold 188,004 vehicles in 2008, down 21.7 percent from the previous year. Its best-selling vehicle was the Saturn Vue, a small sport utility vehicle.

Strict franchise laws protect dealers across the country from seeing their operations shut down without advance notice.

G.M. dealers said they were led to believe that the company was committed to the division.

“G.M. is picking on Saturn,” said Sherrill Freeborough, who owns Saturn dealerships in Grand Ledge and Okemos, Mich. “I want G.M. to be successful but I don’t think that always happens the other way around.”

In 1992, when G.M. began discussing the end of Oldsmobile, the division sold 412,000 vehicles. Except for Chevrolet, none of G.M.’s current brands sold that many vehicles last year.

Mr. Shapiro, the analyst, said G.M. should have rethought its divisions in the 1980s, when a number of new brands appeared in the United States, including Acura, Lexus and Infiniti, the Japanese luxury brands, and the Korean makers Hyundai and Kia.

“There were always good short-term reasons for not doing something,” Mr. Shapiro said.

Ed Dena, a Pontiac dealer in Dinuba, Calif., said he would eventually have to focus on his other G.M. brands, including Chevrolet, Buick and GMC. “Of course we’re sad because Pontiac is an icon,” he said. “But right now, in this industry, nothing is a shock anymore.”

source : The New york times

Financier and sports fan "Sir Allen" loses Midas touch

2009-02-17T20:31:00.000-08:00

By Pascal Fletcher

Allen Stanford, the high-flying Texas billionaire with a Caribbean knighthood and a penchant for publicity and cricket, has been brought down to earth with a thud by U.S. fraud charges against him and his companies.

In a self-congratulatory posting on the Stanford Group's website, its founder and chairman credits his grandfather with giving him "the inspiration to dream" and "an unwavering desire to build a business that is second to none." He speaks of "a passion for service and the values that hold us together".

On Tuesday, as U.S. marshals swooped down on Stanford's U.S. headquarters in Houston, federal authorities charged the flamboyant 58-year-old moustachioed financier and three of his companies with a "massive ongoing fraud."

Accusing him of far less altruistic aspirations than those trumpeted on his website, the U.S. Securities and Exchange Commission alleged Stanford and two fellow executives fraudulently sold $8 billion in high-yield certificates of deposit.

The SEC said they and the bank reported "improbable" high returns and gave "false" assurances to investors.

The SEC's revelation that Stanford's business empire -- stretching from the Caribbean island of Antigua to Houston, Miami and Caracas -- was exposed to losses from the alleged Ponzi scheme run by financier Bernard Madoff completes the picture of a finance king who somehow lost his Midas touch along the way.

Before the SEC civil charges were announced, Stanford dismissed the U.S. federal probe as "routine" and triggered by complaints from disgruntled former employees. He said his company was fully compliant with all U.S. regulations and that he would "fight with every breath to continue to uphold our good name."

Only months ago, Stanford, known as "Sir Allen" in Antigua whose authorities knighted him in 2006, was providing fodder for the British tabloids by flying in by helicopter to bankroll international cricket matches in a blaze of publicity.

Now he is out of sight, as his harassed staff in plush company offices from Memphis to Atlanta fend off queries from panicked investors and posses of probing journalists.

CARIBBEAN POTENTATE

Once described as "haughty, arrogant and obnoxious" by Antiguan Prime Minister Baldwin Spencer, Stanford, America's 205th richest man according to Forbes magazine, has often walked a fine line between critics and admirers in a business and sporting empire that reaches well beyond Texas to Europe and across the Caribbean.

Spencer said at the weekend he feared the Stanford scandal would hurt the image of the tiny Caribbean state of Antigua and Barbuda, which has undergone scrutiny in the past for alleged money laundering by Ukrainian and Russian Mafia bankers.

But many local islanders expressed support for the country's biggest investor. "He is the best investor to come into the Caribbean, not only Antigua, but the region," said islander Julian Exeter. "He puts food in the mouth of everyone in Antigua and money in their pocket," he said.

Friends say the financier is as genial as he is thick-skinned.

"Allen enjoys life and is the kind of person that doesn't worry about what other people think," said David LeBoeuf, a Texan who went to school with Stanford. "Larger than life is one way to describe him, but he's also an extremely talented, unique and hard-working individual," he said.
A fifth-generation Texan, Stanford made his first fortune in Houston, snapping up distressed real estate in the early 1980s before inheriting the insurance and real-estate company his grandfather founded in 1932.

Forbes put his personal wealth at $2.2 billion last year and said his list of wealth-management clients includes pro golfer Vijay Singh. He credits his recent success in part to avoiding investments in subprime mortgages that snowballed into a global financial crisis.

Asked by CNBC television in September if it's fun being a billionaire, he smiled and replied, "Yes, yes, yes. I have to say it is fun being a billionaire. But it's hard work."

With dual U.S. and Antiguan-Barbudan citizenship, Stanford has homes sprinkled across the region -- from Antigua to St. Croix in the U.S. Virgin Islands to Miami.

A generous patron of several sports, Stanford financed a $1 million-per-player Twenty20 tournament in November in which his "Stanford Superstars" side of West Indian cricketers became instant millionaires when they beat England's team at his Stanford Cricket Ground in Antigua.

But now, after the SEC charges, the England and West Indies cricket boards have suspended negotiations on future projects with him.

In recent months, he has let staff go in Antigua, closing a cricket office there. There has been a variety of reasons for the cutbacks -- from bad press to the global financial crisis.

Back in the United States, he stirred controversy by claiming family ties to Leland Stanford, who founded Stanford University in the 1890s. The university says there is no genealogical connection between the two and sued Stanford Group in October for infringing on its trademark.

source : reuters

Currency Issues Weigh on Eastern Europe

2009-02-17T20:26:00.000-08:00

By JUDY DEMPSEY

A new dividing line is settling across central Europe with economic repercussions that are already painful and could potentially be disastrous.

Rather than being based on ideology, the division this time is based on countries that use the euro and those that do not.

Only two out of 10 of the newest Eastern European members of the European Union, Slovakia and Slovenia, are members of the 16-nation euro zone. And the other eight countries are desperate for help as their companies and economies are buffeted by currency fluctuations and declines.

The European Central Bank, which oversees the euro, puts money into the system by lending against collateral, and since the beginning of the current economic crisis, this practice has expanded vastly.

While euro zone members have priority, such lending also has become broader. British banks have benefited through their euro zone subsidiaries, and the central bank has even provided loans to central banks in Poland and Hungary.

What the central bank has not done for the new members yet to adopt the euro is to provide temporary currency swaps — along the lines of what the Federal Reserve did for Brazil, Mexico, Singapore and South Korea last October to enable those countries to convert their currencies more easily to dollars.

And the central bank does not accept as collateral the bonds issued in zlotys, forints or the other local currencies in Eastern Europe.

“This has made it unattractive for euro-area financial institutions to hold noneuro government bonds, thus contributing to their sell-off,” said Zsolt Darvas, a visiting fellow at Breugel, an independent economics research group in Brussels.

The global financial crisis was slow to reach this part of Europe because its banks had few troubled assets. But when the collapse of Lehman Brothers last September sent new shock waves through the global banking system, Eastern Europe and other emerging markets were no longer spared.

Hungary and Latvia were particularly vulnerable; Hungary because of its deep exposure to foreign lending, and Latvia because of its shaky banking system and overextended consumers. When foreign currency financing dried up, the domestic interbank money markets stumbled and currencies came under pressure. Both countries were rescued by the International Monetary Fund and the European Union, with a heavy price attached in the form of government spending cuts.

Political and psychological factors also make attracting funds more difficult outside the euro zone, said Vasily Astrov, an economist at the Vienna Institute for International Economic Studies.

“Investors have become risk averse, at least with regard to financial markets,” he said. “They are opting for countries which hold the major currencies.”

The extraordinary pace with which currencies have declined has only aggravated such problems. In Poland, the zloty has fallen in value by 50 percent against the euro.

In theory, that should help exporters. But Aleksander Drzewiecki, chairman of the House of Skills, a consulting company, said many export-driven companies depend on imports in the first place. “The turbulence with the exchange rate is horrible,” he said. “We have no idea where we stand.”

Poland, with almost 40 million people, is the biggest of the new member states. It lost an opportunity right after joining to quickly prepare to adopt the euro. The nationalist-conservative government then, led by Lech Kaczynski, was intensely skeptical toward the euro and resistant to abandoning the zloty.

The new center-right government, led by Donald Tusk, which took office in late 2007, is more “euro friendly,” Mr. Astrov said. But its target entry date of 2012 is now called into question by the economic turmoil.

Elsewhere in Eastern Europe, the Czech Republic is keeping its options about joining the euro zone open, although it would need support from President Vaclav Klaus, a euro skeptic.

The Baltic states would like to join as quickly as possible, but their economies are contracting so much that it would be impossible to meet the criteria, which, among other things, stipulates that budget deficits should be below 3 percent of gross domestic product.

Without its subsidiary in Germany, things could be a lot worse for Ergis-Eurofilms, the biggest manufacturer of plastic films and laminates in Poland, which last year had revenue of 150 million euros ($189 million at current exchange rates) and a profit of about 10 million euros.

By contrast, Fiam, a family-owned company in Slovakia that specializes in recycling plastic materials, has its subsidiaries outside the euro zone, in Hungary, Poland and the Czech Republic. As a result, Fiam has been protected from currency fluctuations in its home market, which has adopted the euro, but faces havoc when selling eastward.

“Leaving aside the fact that many economies are all in recession, there is predictability inside the euro zone because there are no currency fluctuations,” said Ivan Saro, the company’s chief financial officer, whose father started the business in 1988.

Andreas Tostmann, chairman of the board of Volkswagen’s subsidiary Skoda in Slovakia, said the elimination of exchange rates meant “higher stability in planning and not least, the simplification of transactions inside the VW Group.”

But VW, similar to Fiam, has markets outside the euro zone area, where its products become more expensive. “It is a nightmare,” Mr. Saro said.

The fluctuations have motivated the company to try to sell more to the euro zone area.

But Mr. Saro is still facing problems with tight credit. The banks, he said, are stricter in granting loans and customers are paying late.

“We get paid but we don’t know when,” he said. “The point is that having adopted the euro, it is some kind of guarantee. But don’t ask me to look beyond the short term. These times are just too crazy.”

source : The New york times

Analysis: Stimulus and tax credits to help the poor

2009-02-13T00:42:00.000-08:00

By NANCY BENAC

More than 37 million Americans live in poverty, and the vast majority of them are in line for extra help under the giant stimulus package coming out of Congress.
Millions more could be kept from slipping into poverty by the economic lifeline.
People who get food stamps — 30 million and growing — will get more.
People drawing unemployment checks — 4.8 million and growing — would get an extra $25 and keep those checks coming longer. People who get Supplemental Security Income — 7 million poor Americans who are elderly, blind or disabled — would get one-time extra payments of $250.
Many low-income Americans also are likely to benefit from a trifecta of tax credits: expansions to the existing Child Tax Credit and Earned Income Tax Credit and a new refundable tax credit for workers. Taken together, the three credits are expected to keep more than 2 million Americans from falling into poverty, including more than 800,000 children, according to the private Center on Budget and Policy Priorities.
The package also includes a $3 billion emergency fund to provide temporary assistance to needy families.
There are other, more indirect ways that the stimulus package is likely to benefit poor people.
For example, cash-strapped states will get an infusion of $87 billion for Medicaid, the government health program for poor people, and that should help them avoid cutting off benefits to the needy.
Sharon Parrott, a senior analyst at the Center for Budget and Policy Priorities, said that while the benefits provided under the stimulus program are short-term, they could have a lasting impact on families by helping them maintain stable housing and avoid disruptions in schooling.
Opponents of the stimulus bill are skeptical that the expanded benefits will ever be allowed to expire and question whether they’re warranted in the first place.

source : chron.com

Toyota Seeks To Shed U.S. Workers

2009-02-13T00:40:00.000-08:00

by :Tina Wang

Toyota Motor's incoming president, Akio Toyoda, has promised to make aggressive changes. They're already happening.
The Japanese automaker will try to buy out American workers for the first time as it cuts production, and will slash compensation for North American executives. But it seems no matter what it does, Toyota will simply not make money until at least 2010.
Facing its first-ever full-year loss, of around $5 billion, Toyota (nyse: TM - news - people ) is operating in crisis mode, conserving cash and hunkering down to ride out a deepening demand slump. Toyota said Thursday it will make buyout offers to about 18,000 workers at three U.S. assembly plants and three U.S. auto parts factories, cut salaries of its North American executives by 5% and eliminate their bonuses, and further slash output at U.S. plants.
Toyota will idle some U.S. factories for two to eight days, starting in April, based on inventory levels, and reduce the number of work hours at some plants. The changes will affect the automaker's assembly plants in Indiana, Kentucky, Mississippi and Texas and auto parts factories in Alabama, Missouri and West Virginia.
The company doesn't expect a large number of workers to accept the buyout offer given the poor state of the economy, so most of the savings likely will come from the reduction of compensation and work hours.
“If no one decides to leave, that is fine by Toyota,” said Toyota spokesman Paul Nolasco, who added that Toyota has no target for how many employees will exit.
The moves are part of Toyota's effort to save 800 billion yen ($8.8 billion) for the fiscal year ending March, through reduction of fixed costs by 500 billion yen ($5.5 billion) and savings of 300 billion yen ($3.3 billion) from lower input costs.

source : Forbes.com

London Stock Exchange Names Rolet as New CEO, Replacing Furse

2009-02-13T00:39:00.000-08:00

By Nandini Sukumar

London Stock Exchange Group Plc named Xavier Rolet to succeed Clara Furse as chief executive officer, bringing an end to her eight-year reign at Europe’s oldest independent bourse.
Rolet, 49, who was head of Lehman Brothers Holdings Inc. in France until Nomura Holdings Inc. bought its European investment bank last year, will join the board on March 16, the exchange said in a Regulatory News Service statement today. He ran equity trading at Goldman Sachs Group Inc., European equities at Credit Suisse First Boston and Dresdner Kleinwort Benson before joining Lehman in 2000. He will start as CEO on May 20.
Under Furse, LSE’s first female CEO, the bourse fought off five takeover offers in two years and bought the operator of the Milan stock exchange in 2007. While LSE has remained independent, rivals including Euronext NV, Deutsche Boerse AG and Nasdaq OMX Group Inc. have forged alliances, adding to the range of products they offer and giving them greater size. LSE’s shares lost 74 percent last year on concern falling stock prices and competition from electronic exchanges will erode earnings.
“He’s a very smart and capable man and has a good track record,” said Bruce Weber, professor of finance at the London Business School. “He’s been a customer and probably knows the good side and bad side of the exchange as well as anyone. He sees it from the customer perspective and not the old stock exchange monopoly perspective.”
Rolet agreed to give a lecture to Weber’s students last year on how trading desks work and the way they coordinate with exchanges. He was educated at France’s Ecole Superieure de Commerce and has a masters in business administration from Columbia University.
Lisbon-Dakar Rally
Rolet, who took part in the Lisbon-Dakar Rally in 2007 to raise money for Medecins Sans Frontieres, faces a barrage of new rivals including so-called multilateral trading facilities Turquoise and Chi-X Europe Ltd., which are backed by investment banks, and European ventures of Bats Trading Inc. and Nasdaq OMX. The new entrants have taken about a quarter of LSE’s business by offering cheaper trading and clearing of stocks listed on its markets and faster trades.
“Going forward the LSE faces headwinds in equity trading,” said Dirk Hoffmann-Becking, exchange analyst at Sanford C. Bernstein & Co., in a Jan. 22 note to investors. “Low market caps, slowing trading velocity, market share erosion, pricing pressure, a slow IPO market, and weakening demand for market information.”
The exchange, which started in 1698 when a group of brokers met in Jonathan’s Coffee House to trade stocks and commodities, hired Furse, 51, in 2001 after shareholders forced Gavin Casey to resign following a failed attempt to merge with Frankfurt- based Deutsche Boerse.

source : Bloomberg

Microsoft to Open Stores, Hires Retail Hand

2009-02-13T00:37:00.000-08:00

By NICK WINGFIELD

Microsoft Corp. said it hired a former Wal-Mart Stores Inc. executive to help the company open its own retail stores, a strategy shift that borrows from the playbook of rival Apple Inc.
The Redmond, Wash., company said it hired David Porter, most recently the head of world-wide product distribution at DreamWorks Animation SKG, as corporate vice president of retail stores for Microsoft.
In a statement, Microsoft said the first priority of Mr. Porter, who is also a 25-year veteran of Wal-Mart, will be to define where to place the Microsoft stores and when to open them. A Microsoft spokesman said the company's current plans are for a "small number" of stores.
It remains to be seen whether the effort can add some pizzazz to Microsoft's unfashionable image, which Apple has sought to reinforce with ads that mock its competitor. Mr. Porter, in a statement, said there are "tremendous opportunities" for Microsoft to create a "world-class shopping experience" for the company's customers.
"The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy," Microsoft said in a statement.
The move is a sign of the deeper role consumer-technology companies are playing in the retail business, despite the many risks of straying from their traditional businesses of making hardware and software. Apple, of Cupertino, Calif., encountered widespread skepticism when it first began opening its own retail stores in 2001.
Eight years later, though, Apple's chain of more than 200 stores around the world are widely credited with helping the company boost sales of its Mac, iPod and iPhone product lines. The Apple stores, with their eye-catching architecture, highly-trained sales staff and "genius bars" that provide technical support, gave Apple a way to showcase its products in an environment where they weren't lumped in with a gamut of other electronics items. Sony Corp. and Bose Corp. also operate their own stores.
At the same time, some large electronics retailers have fallen on hard times amidst the weakening economy. CompUSA Inc. last year closed most of its retail stores, while Circuit City Stores Inc. is in the process of shutting down all of its stores and laying off more than 30,000 employees.
Microsoft has long flirted with the idea of doing its own store, even as it has tested ways that retail partners can better sell Microsoft products. In a 20,000-square-foot warehouse near its campus in the suburbs of Seattle, Microsoft has tested various retail concepts, complete with shelves displaying Xbox games and big computer monitors with touch-sensitive screens.
Key details about Microsoft's retail plans still need to be worked out, though. Microsoft said the stores could feature a range of products from personal computers running its Windows operating system to cellphones running the company's Windows Mobile operating system to its Xbox videogame console.
One of Mr. Porter's tasks will be to figure out whether to actually sell computers rather than merely show off their features. Any decision that favored some PC makers and left others off store shelves could anger some hardware partners.
Stephen Baker, an analyst at NPD Group Inc., which tracks retailers, said Apple doesn't face the dilemmas Microsoft will in the retail business because Apple makes the hardware and software for its products. "That's going to be a big challenge for Microsoft," Mr. Baker said.
A spokeswoman for Hewlett-Packard Co., one of Microsoft's biggest hardware partners in the PC business, declined to comment on Microsoft's retail strategy. Spokesmen for Dell Inc. didn't respond to requests for comment.
Microsoft's store plans could also irk existing retail partners like Best Buy Co., on whom Microsoft is especially dependent for sales to consumers. Best Buy representatives didn't return calls requesting comment. Microsoft said it will share the lessons it learns from its own stores with other retailers.
The failures of other stores opened by technology companies will loom over Microsoft as it launches its stores. In 2004, computer maker Gateway Inc. shuttered a network of more than 188 company-owned retail stores after weak sales. Microsoft itself operated a Microsoft store inside a movie-theater complex in San Francisco beginning in 1999, but two years later shut down the store -- which showcased, but didn't sell, Microsoft products.

source : The wallstreet journal

China’s Stocks Gain for Fifth Week on Stimulus Plan Optimism

2009-02-13T00:35:00.000-08:00

By Chua Kong Ho

China’s stocks advanced, driving the benchmark index higher for a fifth straight week, on optimism government spending plans will revive growth and bolster corporate earnings.
Sichuan Changhong Electric Co. and GD Midea Electrical Appliances Co. surged 10 percent after 21st Century Business Herald said the government plans to invest $88 billion in the electronics industry. China Railway Group Ltd. gained 7.7 percent after winning construction contracts. Aluminum Corp. of China Ltd. jumped 8.8 percent after its parent bought a stake in Rio Tinto Group.
The rally is being “fueled by expectations of additional incentives for various sectors,” said Gabriel Gondard, Shanghai-based deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7 billion in assets. “It will not be sustainable in the long run if we don’t get actual data showing the stimulus plan is effective.”
The Shanghai Composite rose 3.2 percent to 2,320.79 at the close, the highest since Sept. 1. The measure gained 6.4 percent this week, capping the longest weekly winning streak since October 2007, the same month the measure closed at a record 6,092.06 points.
Shares in the world’s third-largest stock market by capitalization have rallied since Nov. 9, when China pledged a 4 trillion yuan ($585 billion) stimulus package. The index has gained 27 percent this year, the most among 90 stock gauges worldwide tracked by Bloomberg, as the government unveiled plans to aid industries from shipbuilding to textiles.
Economic Growth
Raw-materials producers and consumer-related stocks were the top gainers among industries on the CSI 300 Index, which tracks shares on the Shanghai and Shenzhen exchanges.
There are signs the stimulus package is taking effect. China’s economy may expand 6.6 percent in the second quarter after slowing to 6.3 percent in the three months to March 31, the weakest pace since 1999, according to the median estimate of 14 economists surveyed by Bloomberg News.
Stock transactions in China surged to a three-year high on Feb. 11, with 32 billion shares traded. An average of 17.7 billion shares have changed hands daily this year, compared with 15 billion in 2007, when the Shanghai Composite doubled. Trading volumes plunged to an average 9.8 billion shares last year as the index tumbled 65 percent amid a global recession.
Sichuan Changhong, a Chinese television maker, gained 10 percent to 4.84 yuan, capping a six-day, 27 percent rally. GD Midea, China’s second-biggest appliance maker, added 10 percent to 12.13 yuan. Gree Electric Appliances Inc., which makes air conditioners, climbed 6.7 percent to 24.03 yuan.
Spending Plan
The government plans to invest more than 600 billion yuan in the telecommunications and electronics industries, the 21st Century Business Herald reported. China may also raise export tax rebates for 25 electronics products to 17 percent, it said.
“This will be a big boost to the whole IT industry in China,” DBS Vickers Ltd. analyst Steven Liu wrote in a note to clients today. “Market leaders would benefit most.”
China Railway, the nation’s largest construction company by total assets, gained 7.7 percent to 6.02 yuan, the most since Nov. 13. The Beijing-based builder said it secured contracts worth 23 billion yuan to build railways, stations and highways in the country. The orders are equal to 13 percent of 2007 operating income, it said.
Chalco, as the nation’s biggest aluminum producer is known, gained 8.8 percent to 11.41 yuan after its parent agreed to invest $19.5 billion in Rio Tinto, the world’s third-largest mining company.
The following stocks also rose or fell in China trading. Stock symbols are in parentheses after company names:
Fushun Special Steel Co. (600399 CH), the Chinese steel products manufacturer, gained 3.4 percent to 5.18 yuan. The company said 2008 profit climbed 46 percent from a year earlier to 34.7 million yuan.
Ningxia Hengli Steel Wire Rope Co. (600165 CH), a Chinese rope and wire producer, gained 10 percent to 5.67 yuan. Profit for 2008 gained 7.5 percent from a year earlier to 5.63 million yuan, the company said in a filing to the stock exchange.
Zhongtian Urban Development Group Co. (000540 CH), a Guizhou-based property developer, added 10 percent to 8.90 yuan. The company said 2008 profit rose 58 percent to 191 million yuan from the year earlier.

source : Bloomberg

Google is exiting radio ad business

2009-02-13T00:28:00.000-08:00

By Alana Semuels

Continuing its retreat from traditional media, Google Inc. is bowing out of the radio advertising business. It plans to keep trying to sell ads for streaming audio on the Web.
The cutback reflects a general belt-tightening at the Internet giant, which is trying to curb its big spending by shutting down businesses that aren't working.
"While we've devoted substantial resources to developing these products and learned a lot along the way, we haven't had the impact we hoped for," Susan Wojcicki, vice president of product management, wrote in a post on the company’s blog. About 40 employees will lose their jobs.
Google launched its radio efforts when it bought DMarc Broadcasting Inc., a Newport Beach company with radio advertising technology. The 2006 deal was initially valued at as much as $1.1 billion but ended up costing less because DMarc failed to hit performance goals.
The Google Audio Ads and Radio Automation programs sought to create new revenue streams for broadcast radio and to streamline the process of buying and selling radio advertising.
"It's just not making them enough money for the cost," said Greg Sterling, an analyst at Sterling Market Intelligence. "It speaks to the weakness of the medium itself."
What's more, he said, the recent cutbacks suggest Google's efforts to become a multiplatform media company are dormant. In January, it killed its Print Ads program for newspapers, ended uploads to Google Video and closed its mobile social-networking service Dodgeball.
But Sterling said Google's media "will probably resurface in a less ambitious form when the economy revives."

source : Los Angleles times

Nikkei slips 1.6 pct as Hitachi, earnings weigh

2009-02-01T21:59:00.000-08:00

Japan's Nikkei average fell 1.6 percent on Monday as Hitachi Ltd (6501.T) plunged after it warned of a record $7.8 billion loss amid a deepening global recession, while a string of others with grim earnings outlooks also tumbled.

Panasonic Corp (6752.T) slid after news that it was set to book an annual $3.9 billion net loss, while Mizuho Financial Group (8411.T) sank after booking a $1.6 billion quarterly loss and further slashing its full-year forecast. [ID:nT305489] [ID:nT202016]

Major Japanese companies now expect to see a 62 pct tumble in net profit in the year ending in March from a year earlier, according the latest data from Thomson Reuters. That compared with a 38 percent decline forecast just a few weeks ago.

"This year the situation surrounding corporate earnings has continued to deteriorate every day and that has been worse than market expectations," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.

"But the market as a whole seems to have factored in the dismal earnings trend on Friday and this morning as most major companies have finished reporting results."

He said the market's focus will once again shift to the U.S. government's economic steps and currency moves from corporate earnings announcements.

The benchmark Nikkei .N225 declined 125.90 points to 7,868.15, after falling more than 2 percent earlier.

It extended Friday's loss of 3.1 percent. In the month of January, it lost 9.8 percent -- its worst month since October, when it fell 24 percent. The broader Topix shed 2 percent to 778.44.

The dismal outlook for many companies was underlined by data showing the U.S. economy shrank 3.8 percent in the fourth quarter, its fastest pace in 27 years, though analysts had predicted an even steeper fall.

U.S. President Barack Obama, under pressure to move swiftly to get his nearly $900 billion economic recovery plan through Congress by mid-February, called Congressional leaders to a meeting on Monday to drive home his message of urgency. [ID:nN01420749]

"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans," said Yutaka Miura, senior technical analyst at Shinko Securities.

HITACHI TUMBLES

Shares of Hitachi Ltd (6501.T) plunged 15.7 percent to 248 yen after the company warned of a record annual loss, which would be the worst ever by a Japanese manufacturer, due to weak sales, a firmer yen and costs to restructure its sprawling operations. [ID:nT249327]

Panasonic lost 3.2 percent to 1,064 yen after a source, who spoke on condition of anonymity because the information is not yet public, confirmed a report by the Yomiuri newspaper that Panasonic was facing an annual loss of 350 billion yen.

The loss would be Panasonic's biggest in six years.

Fujifilm Holdings Corp (4901.T) dropped 8.2 percent to 1,841 yen after the maker of digital cameras and electronics devices slashed its full-year profit outlook, hurt by a sharp fall in demand for flat panel display parts and mobile phone handset lens units.The broader Topix shed 2 percent to 778.44.

"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans," said Yutaka Miura, senior technical analyst at Shinko Securities.

HITACHI TUMBLES

The loss would be Panasonic's biggest in six years.

"Given how bad economic fundamentals have gotten, the market is really hoping for stimulus plans," said Yutaka Miura, senior technical analyst at Shinko Securities.

HITACHI TUMBLES

The loss would be Panasonic's biggest in six years.

Mizuho sank 5.7 percent to 214 yen, while Japan's top bank Mitsubishi UFJ Financial Group (8306.T) shed 4.9 percent to 485 yen.

But Daiichi Sankyo (4568.T) bucked the trend, rising 2.2 percent to 2,085 yen after U.S. regulatory staff on Friday recommended approval its anti-clotting drug prasugrel that it has jointly developed with Eli Lilly and Co (LLY.N). (Reporting by Aiko Hayashi; Editing by Edwina Gibbs)

source : Reuters UK

Refiners, Steelworkers Plan to Extend Contract Talks Second Day

2009-02-01T21:56:00.000-08:00

By Aaron Clark and Jordan Burke

Feb. 1 (Bloomberg) -- Refiners and the United Steelworkers plan to extend negotiations on a new contract for 30,000 U.S. employees for a second day tomorrow, delaying a potential strike that would affect almost two-thirds of production capacity.

The union didn’t receive any new proposals from Royal Dutch Shell Plc today, Lynne Baker, a spokeswoman for the United Steelworkers union, said in an e-mail. “Both parties continue to discuss bargaining issues,” she said, without providing details.

“We are still working under a rolling 24-hour contract extension and will continue to bargain till we reach an agreement or either party terminates the contract,” Baker said.

The negotiations cover workers at 86 plants representing about 64 percent of U.S. refining capacity, including operations owned by Exxon Mobil Corp., Valero Energy Corp., BP Plc and Chevron Corp. as well as Shell. Gasoline futures prices soared almost 10 percent last week on concern over a walkout. The contract extension was agreed on late yesterday in Austin, Texas, where the talks started Jan. 20.

“We’re pleased progress is being made and we’re optimistic that a mutually satisfactory agreement can be reached with the USW,” Stan Mays, a spokesman for Shell, said earlier today. He declined to discuss the negotiations.

Last week the union rejected Shell’s third offer, a three- year contract with a $500 signing bonus and 2.5 percent wage increases in the second and third years, according to a Jan. 28 memo distributed by the union. Employees would have received a 75 cent-an-hour increase in the first year.

Workers authorized a strike in October. Most local contracts have been negotiated and workers are waiting to hear if there is a settlement or if they will go on strike, W.E. Sonny Sanders, the sub-district director for the state of Louisiana, said in an interview.

Pickets Ready

“We have picket captains waiting if a strike becomes imminent, but I think most people would like to watch the Super Bowl,” Sanders said. “I wouldn’t be surprised if they settled this Monday or Tuesday.”

Sanders said he believes Shell is working on a fourth contract offer. The union needs assurances another offer will be followed by other oil companies, he said. “I think they’re close. We’re interested in an agreement.”

Valero, the largest U.S. refiner, plans to operate its Port Arthur, Texas, refinery with a contingency workforce and shut refineries in Delaware City, Delaware, and Memphis, if there is a strike.

“At the local level, Valero is still in talks with the unions,” Bill Day, a spokesman for Valero, said in an e-mail today. “At Port Arthur we are prepared to continue operations in the event of a work stoppage, but again, we are hopeful we can get an agreement without a work stoppage.”

Valero Preparations

Valero has agreements with unions at the Memphis and Delaware City refineries that if they call for a work stoppage, employees will stay on the job for 72 hours to help complete a safe and orderly shutdown of the plants, Day said yesterday.

The Memphis refinery can process about 182,000 barrels of oil a day, according to Energy Department data. The Delaware City plant can process 190,200 barrels a day, while the Port Arthur plant can process about 294,000 barrels a day.

BP, Europe’s second-largest oil company, has estimated that a walkout could affect four of its U.S. refineries processing about 1.3 million barrels of crude a day, said Scott Dean, a spokesman. The company plans to shut plants where there is a strike.

The union at BP’s Texas City, Texas, refinery reached an agreement on local issues with the London-based company, said Sanders.

Lyondell Chemical

Lyondell Chemical Co. “continues to bargain in good faith and will continue as long as we make progress,” David Harpole, a company spokesman, said yesterday. About 500 of the 950 workers at its Houston refinery are union members.

Lyondell has been training salaried personnel for the past year to be replacement workers “who can safely operate the refinery” in the event of a strike, Harpole said. “They are able to take over if necessary. There would be no impact to operations.”

Shell and Exxon Mobil are preparing to keep their U.S. plants running in a walkout, using managers and other non-union employees to keep sites operating. Prem Nair, a spokeswoman for Exxon Mobil, the world’s largest fuel maker, declined to comment yesterday on the status of the negotiations.

Chevron, the second-biggest U.S. oil company, may keep operating its refineries in the event of a strike.

A strike could affect 58 percent of the workers responsible for the nation’s fuel supply, union spokeswoman Baker said. The current contract was reached in 2002 and was extended in 2005.

The union’s national bargaining policy calls for higher wages, including a cost-of-living adjustment, as well as full medical, dental and vision-care benefits for workers and retirees. Local unions also may call strikes if they don’t reach agreement on issues such as work schedules and overtime.

source : Bloomberg.com

The Imp in a Bottle: Ponzi/Madoff in a Broader Perspective

2009-02-01T21:49:00.000-08:00

By JOHN ALLEN PAULOS

Less than two months ago, Bernard Madoff was arrested by the FBI for securities fraud. Given the relative amounts of money involved and pain inflicted, Ponzi schemes should perhaps henceforth be called Madoff schemes.

Whatever their outward appearance, almost all such scams involve collecting money from an initial group of investors by promising them solid and sometimes extraordinary returns. The returns to the initial group come from money contributed by a larger secondary group of people. A still larger group of people contributes to both of the smaller earlier groups, and so on.

This burgeoning process continues for a while, but the number of people needed to keep the pyramid growing and the money coming in increases exponentially and soon becomes difficult to maintain. People drop out, and the easy marks become scarcer. The system collapses under its own weight when enough new people can no longer be found.

source : ABC news

N.Z. Dollar May Slide 20% to Record Low on Rate Cuts, RBC Says

2009-02-01T21:47:00.000-08:00

By Candice Zachariahs

Feb. 2 (Bloomberg) -- The New Zealand dollar may plunge more than 20 percent to a record low as the central bank cuts interest rates and the global slowdown saps investor appetite for riskier assets, RBC Capital Markets said.

The currency may weaken to an all-time low of 38.98 cents in coming months, said Sue Trinh, a senior currency strategist at RBC Capital Markets, a unit of Royal Bank of Canada. Reserve Bank of New Zealand Governor Alan Bollard lowered the official cash rate to 3.5 percent last week, the lowest ever, and said there is room for further reductions to steer the economy out of a deepening recession.

“A move to all-time lows of 38.98 cents in coming months can no longer be ruled out,” Sydney-based Trinh said, confirming the contents of a research note today. “The New Zealand dollar is most vulnerable to dwindling appetite from offshore investors and the risk of persistent capital outflow in the coming year will likely see our 43-cent target by mid-2009 achieved earlier.”

New Zealand’s dollar fell 0.1 percent to 50.85 U.S. cents as of 1:10 p.m. in Wellington, from late in New York last week. The currency traded at 39 cents in October 2000, the lowest since at least 1971, according to Bloomberg News records.

The central bank’s 4.75 percentage points of rate cuts since July has lowered the extra yield offered by the nation’s three-year bonds over similar-maturity Japanese debt to 2.85 percent last week, the narrowest since 1994.

The currency will extend January’s 12 percent loss against the U.S. currency as NZ$15 billion ($7.63 billion) of New Zealand dollar bonds issued in Japan and through global issues, so-called uridashi and eurokiwis, mature this year, Trinh wrote in the note. “We anticipate the largest net negative issuance in history.”

‘Bearish Impact”

International investors hold 73.6 percent of the New Zealand government bond market, according to RBC Capital. “For every 0.1 percentage point decline in foreign ownership, there will be a disproportionately bearish impact on the New Zealand dollar,” Trinh wrote.

Standard & Poor’s lowered its foreign-currency credit- rating outlook for the nation on Jan. 13, citing concern the nation’s current-account deficit and overseas debt will curb growth and investment.

Interest rates in New Zealand will fall to a low of 2.5 percent by the second quarter, RBC Capital said. The benchmark rate is 0.1 percent in Japan and as low as zero percent in the U.S., a record low.

source : Bloomberg.com

Five fire stations ordered shut

2009-02-01T21:43:00.000-08:00

By Bill Torpy, Kathy Jefcoats

Declaring the Atlanta Fire Department in “an extremely vulnerable situation” because of a wave of firefighter absenteeism, Chief Kelvin J. Cochran on Sunday ordered five stations temporarily closed.

Fire stations were closed in Buckhead, Candler Park and the Donald Hollowell Parkway, Cleveland Avenue and Cascade areas.

Cochran said 27 firefighters called in sick Sunday, more than double that of a usual day.

He said he did not know if the increase was sort of a “blue flu” or “political statement” but added that firefighters call in sick more often on a payday weekend with a holiday or a big event like the Super Bowl.

Lt. Jim Daws, head of the International Association of Fire Fighters, Local 134, which represents Atlanta firefighters, said there is no blue flu or Super Bowl-related goofing off.

“This is just a normal consequence of the budget cuts,” Daws said. “The conditions the city is asking firefighters to work under plus an 18 percent pay cut is adding to absenteeism. I’m not surprised absenteeism is up.”

He said the 18 percent is a combination of furloughs and overtime being cut.

“There is no buffer in the staffing scene,” he said. “We can expect more of this.”

Sunday’s absenteeism caused the department to shut down seven pieces of equipment and close five stations as it rearranged staffing to high-call and high-risk areas, Cochran said.

The normal citywide minimum staffing to operate is 147 firefighters, he said.

That allows each truck to be manned by three firefighters. On Sunday, there were 131 firefighters on duty.

Budget cuts in a city strapped for cash has caused the department to furlough employees, cut overtime and leave unfilled spots open.

Two other firehouses were previously closed, one for the rest of the year and one permanently.

Candler Park Neighborhood Organization president Amy Stout said Sunday she was keeping her fingers crossed that a fire didn’t break out in her home.

“I don’t know what I’d do,” she said. “I do have some rain barrels.”

Fellow Candler Park resident Bill Murphy shared her frustration.

“I don’t see what we can do to get the city’s attention,” he said. “I just feel helpless. … We pay really heavy taxes and feel we deserve the same services as anyone.”

Murphy lives four houses from the closed Candler Park fire station.

Stout said the next nearest station is four miles away.

“I know there is no money,” Stout said. “And you can’t get blood from a turnip. But I’d rather see the city do something else than close our stations.”

Cochran said he hoped the department would be back to normal operations today.

“We are on the edge of our seats hoping nothing bad will happen in the areas where we have station closings,” Cochran said. “Today is one of those uncomfortable days.”

source : AjC.com

The SEC Should Leave Steve Jobs Alone

2009-02-01T21:38:00.000-08:00

By HARVEY SILVERGLATE

The Securities and Exchange Commission is investigating whether Apple committed securities fraud by failing to inform the public about CEO Steve Jobs's health. This investigation exemplifies how the agency has run amok.

Mr. Jobs has been synonymous with Apple since he revived the struggling company in 1997. A technical, design and marketing genius, Mr. Jobs and his team performed one of the most fabled turnarounds in corporate history. To the horror of his cohorts and Apple's investors, Mr. Jobs was diagnosed with pancreatic cancer in 2004. Despite heavy odds, his surgery appeared successful, and he returned to his post after just two months of recovery.

Over the next two years, however, rumors spread as his weight fluctuated. In June 2008, when a gaunt Mr. Jobs debuted the iPhone 3G, concerns about his health competed for headlines with the latest Apple gadget.

Unsurprisingly, investors began to press for information. At first, Mr. Jobs chalked his weight loss up to a "relatively simple" problem: a hormone imbalance that prevented his body from extracting full nutrition from food. Shortly thereafter, Mr. Jobs admitted the situation was "more complex" than he originally thought and announced he would take a five-month medical leave starting Jan. 14. On Jan. 16, Bloomberg reported that Mr. Jobs might have to undergo a liver transplant to correct complications from his prior cancer treatment.During all of this, Apple's share price swung wildly with each rumor and bit of news. After the announcement of his leave, the company refused to be more specific about his health. Mr. Jobs met persistent inquiries with a snippy, "Why don't you guys leave me alone? Why is this important?"

It was important, of course, to those who had invested in Apple precisely because of Mr. Jobs. His health was surely material information for investors. And under federal securities laws, it is a serious felony -- securities fraud -- for corporate officials to disseminate false material information, or to fail to disclose true material information related to the company's financial prospects. But while the legal meaning of "materiality" has long been the subject of dispute and little regulatory definition, it should not dictate that corporate officers have no right to any privacy.Yet when the severity of Mr. Jobs's health began to leak, the SEC -- whose reputation has suffered mightily in recent months due to Wall Street's cratering and the Madoff scandal -- jumped in to commence a review of the apparently incomplete disclosures.

The SEC's investigation is the latest in a long history not only of incompetence, but of connivance with Department of Justice prosecutors. The absence of a comprehensive definition of "fraud" has enabled the SEC to harass, and the DOJ to prosecute, businessmen who engage in seemingly normal professional behavior. Such investigations and prosecutions -- for "securities fraud" as well as the equally malleable "mail fraud" and "wire fraud" -- have become the hallmark of prosecutorial juggernauts since the mid-1980s. The same technique, based upon an absence of clear definitions, is used against a vast array of people in other fields, from accountants to artists.

And so the feds will investigate whether Apple misled investors by not disclosing the intimate details of Mr. Jobs's latest health scare. But the notion that investors were entitled to every detail, when they knew the CEO's health history and saw his obvious weight loss, is ludicrous. That a man's desire to maintain a shred of privacy under these circumstances can justify a fraud investigation tells us much about the lack of legal precision, not to mention decency, with which federal investigators and prosecutors too often operate.

source : The Wall Street Journal

Sun Micro beats consensus, shares rally

2009-01-27T19:31:00.000-08:00

By David Lawsky

SAN FRANCISCO (Reuters) - High-end computer and software company Sun Microsystems (JAVA.O) posted better-than-expected results as a strong software and open storage business cushioned declining overall sales, and its shares rose.

The company, which like rivals Dell Inc (DELL.O) and EMC Corp (EMC.N) is struggling with diminishing tech spending, posted an 11 percent decline in quarterly revenue.

Gross margins shrank to 41.9 percent from 48.5 percent a year ago.

Sun sold more storage products than analysts had expected.

"This is an expectations game and things weren't as bad as people thought, but trends are still eroding," said Brent Bracelin of Pacific Crest Securities. "It doesn't mean there is any sign of improvement, year over year."

Excluding restructuring and related impairment charges and including stock-based compensation and amortization charges, Sun posted a loss of 1 cent per share in the fiscal second quarter ended December 28, versus a consensus loss of 9 cents, according to Reuters Estimates.

Sun reported a profit of 15 cents per share, excluding charges for amortization and stock compensation, which Bracelin took as a positive sign.

"The company returned to profitability, while people were looking for it to lose money again," he said.

Sun again declined to give an outlook for the current quarter.

The company -- which is shedding up to 6,000 jobs or 18 percent of its workforce -- said it had a net loss of $209 million, or 28 cents a share for the quarter, compared with a net profit of $260 million, or 31 cents a share, a year ago.

The company reported revenue of $3.22 billion, compared with $3.62 billion one year ago.

At the end of the second quarter total software billings rose 21 percent year over year, and is now at an about $600 million annual run rate.

Billings on open storage products climbed by the same percentage to an annual run rate of about $100 million.

In contrast, total sales of server systems fell 9 percent in the quarter by volume, to about 80,000 units.

Sun Microsystems shares were up 6.5 percent in after-hours trading at $4.25, after closing at $3.99 on the Nasdaq.

The shares embarked on a steady downtrend from May, when the company surprised investors with a quarterly net loss.

Goldman Sachs had added Sun to its "sell" list and cut its price target, saying the company's lack of a diversified portfolio put it at a competitive disadvantage.

Sun offers much of its software free in an open model, including a database and an office suite, seeking to foster its broad adoption. It sells other software, along with service and hardware.

Like much of the industry, the company is now struggling to slash costs as tech spending dissipates globally. It said in November it would cut 5,000 to 6,000 jobs, or 15 to 18 percent of its workforce, as part of a plan to save $700 million to $800 million a year.

Most of the Santa Clara, California-based company's competitors have similar plans. Sun competes against International Business Machines (IBM.N), Hewlett-Packard Co (HPQ.N) and Dell Inc (DELL.O) in the sale of server computer systems. It competes against EMC as a maker of data storage equipment.

Early this year, Sun acquired Q-Layer, a "cloud computing" company that does off-site storage.

source : Reuters

Santander Offers $1.8 Billion to End Claims by Madoff Investors

2009-01-27T19:29:00.000-08:00

By Charles Penty and Katherine Burton

Banco Santander SA will offer 1.38 billion euros ($1.82 billion) to clients who lost money with Bernard Madoff, a settlement that may pressure banks worldwide to reimburse customers blindsided by the alleged Ponzi scheme.

Spain’s largest bank said yesterday it also will close seven hedge funds run by its Optimal Investment Services unit after the Madoff scandal triggered a surge in withdrawal requests. It didn’t disclose the size of the funds or amounts clients had sought to get back.

Santander, which said Dec. 14 it had 2.33 billion euros in client funds with Madoff, was sued in U.S. federal court in Miami by investors who accused the bank of failing to adequately vet Madoff. Its settlement offer may elicit similar proposals from firms such as Bank Medici AG, the Vienna-based firm that funneled $3.2 billion to Madoff, the most among European banks, and Geneva-based Union Bancaire Privee, with $700 million.

“Other banks are going to see this and customers are going to say, ‘What about us? Are you going to make a similar offer to us?’ ” said Marvin Pickholz, a litigation attorney at Duane Morris in New York and former U.S. Securities and Exchange Commission enforcement official.

Santander, based in the city of the same name, proposed issuing preferred shares with an annual payout of 2 percent to compensate clients, a bank spokesman said yesterday in a telephone interview. The bank would have the option to buy back the securities after 10 years, he said. Santander, which reports earnings on Feb. 5, will take a charge to 2008 pretax profit of 500 million euros to cover the settlement.

The company “acted at all times with due diligence” and “in accordance with all applicable laws,” Santander said in a statement.

Madoff, 70, was arrested Dec. 11 after allegedly confessing to his sons that his investment business was a fraud and cost clients as much $50 billion. In a Ponzi scheme, early investors are paid with money from subsequent victims.

‘Right Direction’

European banks sold Madoff-run investments to their clients and provided loans to hedge funds that aggregated money for the New York financier. Santander branch managers channeled customers into Madoff funds through Optimal, according to lawyers for the investors.

The offer is “a step in the right direction,” said Javier Cremades, chairman of Madrid-based law firm Cremades & Calvo- Sotelo, which filed the suit with U.S. partner Labaton Sucharow LLP. Still, “at first sight, it looks insufficient,” he said.

Investors who accept the offer wouldn’t be able to sue the bank over its Madoff investments, said Pickholz.

“It is obviously good public relations for the bank, and it is also very good legal judgment on their part,” he said.

Santander’s Geneva-based Optimal said in a separate statement it plans to shut down the Arbitrage, Multi-Strategy, European Opportunities, US Opportunities, Asian Opportunities, Global Opportunities and Global Trading funds.

source : Bloomberg.com

Delta predicts 4% drop in key measure of revenue

2009-01-27T19:21:00.000-08:00

By Justin Baer in New York

Delta Air Lines yesterday delivered a revenue forecast that appeared to confirm fears that carriers will confront a slump in air-travel demand this year.

In its first reporting quarter since merging with Northwest Airlines to create the world's biggest carrier by traffic, the company said that passenger unit revenue - an industry measurement that factors how well an airline fills aeroplane seats and how much it charges for tickets - would fall 4 per cent this year.

"The recession is clearly causing leisure customers to rethink or postpone some of their discretionary travel decisions," Ed Bastian, Delta's president, said. "On the corporate side, companies continue to trim travel budgets and as a result business travellers are purchasing their tickets in advance to take advantage of lower fares."

However, Delta executives argued that demand would improve as the year progressed, noting the first quarter is normally the industry's weakest.

"Despite the difficult economic environment, we expect to be solidly profit-able in 2009 driven by lower fuel costs, capacity discipline, and merger synergies," said Richard Anderson, chief executive. "Delta people have a great track record for achieving their goals, and I am confident that 2009 will be another successful year."

Delta said it had made a fourth-quarter net loss, which includes two months of Northwest results, of $1.4bn, or $2.11 a share, due to costs from employee stock awards and jet-fuel hedges.

The airline paid more than $900m in stock to employees following the merger, and recorded a $91m loss to mark down the value of fuel-hedging contracts. Excluding those items as well as one-time costs from the Northwest deal, the loss still missed many analysts' estimates.

Delta lost $70m, or 18 cents per share, as a standalone company in the fourth quarter of 2007. Including Northwest in both periods, revenue changed little from a year earlier, slipping to $7.77bn from $7.79bn. Passenger revenue - the amount Delta collects from ticket sales - fell 1 per cent.

Delta plans to shed as much as 8 per cent of its capacity this year as it removes 40-50 aircraft from its fleet. The company also initiated a second voluntary workforce reduction plan this month.

The October deal with Northwest created the world's largest carrier, promising $2bn in annual synergies and a widening advantage over its peers on both costs and revenue.

Executives reiterated those goals yesterday, even as merger expenses and accounting charges overwhelmed any evidence of early progress in the fourth quarter.

Mr Anderson's optimism was not shared by investors. By midday in New York, Delta's shares had plunged 17 per cent.

source : FT.com

SEC defends its role

2009-01-27T19:18:00.000-08:00

The head of the agency told a Senate committee investigating the SEC's role in the Madoff scandal that it lacks the resources to follow up on all fraud tips.

by :Julian Cummings
The Securities and Exchange Commission's director of enforcement told a Senate committee Tuesday that the agency lacks the resources to pursue all the leads and tips about possible fraud that come to it.

"The enforcement division receives hundreds of thousands of tips each year (and) while we appreciate and examine every lead we receive, we simply do not have the resources to investigate them all," Linda Thomsen said in her prepared remarks to the Senate Banking Committee.

The hearing was looking into the role the SEC played in investigating Bernard L. Madoff's alleged $50 billion Ponzi scheme. Thomsen appeared along with Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations.

Thomsen, citing an ongoing investigation, largely avoided direct responses to committee members' questions, which included why Madoff was not investigated by the SEC earlier, despite red flags sent to the commission by tipster Henry Markopolos in 2006.

She said the SEC's inspector general is looking into who saw the information provided by Markopolos and whether that investigation was conducted correctly. "Some of the conduct in the prior investigation may itself have resulted in crimes," she said.

The fiery exchange of the day occurred after Thomsen told Sen. Robert Menendez of New Jersey, "We don't turn a blind eye to fraud. If we see it and we suspect it, we pursue it. We don't want fraudsters out there."

Menendez responded loudly, "So, Mr. Madoff was smarter than all of you?"

Also appearing before the committee was John C. Coffee Jr., a professor at Columbia University Law School; Dr. Henry A. Backe Jr., a Madoff investor; Stephen Luparello, interim CEO of FINRA, the nation's largest independent regulator of securities firms; and Stephen P. Harbeck of the Securities Investor Protection Corp.

Thomsen and Luparello agreed with a request from the committee's chairman, Sen. Chris Dodd of Connecticut, to come back every three months to provide updates on the status of regulations and safeguards to avoid fraud.

Madoff faces felony securities fraud charges for allegedly operating a multibillion-dollar Ponzi scheme that resulted in high-profile charities, celebrities, and many other investors losing their investments.

In a Ponzi scheme, money coming in from new investors is paid out to earlier investors as "profits," creating the appearance of a profitable fund.

source : CNNmoney

Consumer mood at record lows, house prices sag

2009-01-27T19:15:00.000-08:00

By Lucia Mutikani

WASHINGTON (Reuters) - Consumer confidence plumbed historic lows in January and home prices fell at a record pace in November, data showed on Tuesday, highlighting a rapidly deteriorating economy.

Mounting job losses as the year-long recession deepens are piling misery on consumers already grappling with sharp declines in wealth following the collapse of the U.S. housing and stock markets.

Economists say the recession is on track to be the longest, if not the deepest, since the Great Depression.

The Conference Board, an industry group, said its sentiment index fell to 37.7 this month from an upwardly revised 38.6 in December. Wall Street analysts had forecast the index would climb to 39 from a previously reported reading of 38.

"Consumers remain quite pessimistic about the state of the economy," said Lynn Franco, director of The Conference Board Research Center. "Until we begin to see considerable improvements in the expectations index, we can't say the worst of times are behind us."

U.S. stocks brushed aside the grim economic data as some companies reported earnings above market expectations. The Dow Jones industrial average ended up 58.70 points at 8,174.73.

Treasury debt prices, which tend to benefit from news of worsening economic conditions, tapped a safe-haven bid from the data and were also buoyed by speculation the Federal Reserve would announce a purchasing program of long-dated government bonds at the end of its policy meeting on Wednesday.

Suggesting the economic rout was far from over, the Conference Board's expectations index dropped to 43.0 in January from 44.2 the previous month.

"The adverse feedback loop from extremely tight credit conditions to reduced asset prices and ... reductions in demand for labor services continued to spin at an alarming velocity in January," said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts.

"The continued ferocity of this negative feedback process highlights the policy challenge that lies ahead."

President Barack Obama, pushing for a $825 billion stimulus package for the distressed economy, on Tuesday expressed confidence the plan would get bipartisan support.

A surge in unemployment and an accompanying rise in job insecurity has led many consumers to defer decisions to buy homes, while costing others theirs. This has resulted in a huge inventory of homes for sale, further depressing prices.

Data from an S&P/Case-Shiller report on Tuesday showed U.S. home prices plunged a record 18.2 percent in November from a year earlier.

Prices in 20 metropolitan areas tracked by the Home Price Index fell 2.2 percent from October. Prices in 11 metro areas fell at record rates from a year earlier, while 14 cities had drops of more than 10 percent.

Analysts said while the report illustrated continued distress in the housing sector, it did not capture measures taken late last year to lower mortgage rates.

"We're still looking at fourth-quarter numbers when the credit crisis was in full swing and before the Federal Reserve took steps to push mortgage rates down," said Gary Thayer, senior economist at Wachovia Securities in St. Louis. "We'll have to watch very closely during the next few months to see if we get a recovery in housing started."

Analysts say restoring stability to the housing market is crucial for the economy's recovery.

The fall in house prices has crimped consumer spending, which accounts for about two thirds of U.S. economic activity.

But housing's downward spiral shows little sign of reaching a bottom soon, with inventories remaining elevated.

The National Association of Realtors said on Monday sales of existing homes rose in December, driven mainly by distressed sales, which saw prices falling on an annual basis by the biggest margin in over 40 years.

"I wouldn't take a lot of comfort in the existing home sales number yesterday because a lot of them were short sales and foreclosed homes," said Keith Hembre, chief economist at FAF Advisors in Minneapolis. "Housing will shave close to three-quarters of a percentage point in fourth-quarter GDP."

The housing meltdown meant retailers continued to suffer sharp falls in sales last week. The International Council of Shopping Centers said sales fell 2.4 percent on a year-over-year basis, the seventh straight weekly decline.

The Fed, which started its two-day meeting on Tuesday, is expected to hold its target range for the key overnight federal funds rate steady at zero to 0.25 percent.

Markets, however, will watch out for further announcements on purchases of mortgage securities or even long-dated U.S. Treasuries.

(Additional reporting by Alister Bull in Washington, Pedro Nicolaci da Costa, Ellen Freilich and Julie Haviv in New York. Writing by Lucia Mutikani; Editing by Leslie Adler)

source : Reuters UK

A newly disclosed Ponzi scheme may cost investors 380 million dollars

2009-01-27T19:12:00.000-08:00

One more Ponzi scheme has been discovered by the US authorities. 37-year old Nicholas Cosmo, CEO of Agape World Inc., has turned himself in late Monday after FBI and US Postal Inspection Service officials raided the financing firm's Long Island, New York headquarters. According to Nicholas Cosmo his investment firm has defrauded about 1500 investors and stolen about 380 million dollars (288 million euros). However, speaking with Long Island Business News, a few hours after the arrest Nicholas Cosmo has deflected accusations.

Long Island paper also reported that Cosmo has founded his business 9 years ago in 2000 when he was just broken out of federal prison where he served time for defrauding investors of a Long Island securities dealer. The company was offering its investors to get up to 14% in as little as 72 days, according to the Long Island paper.

Up to that date the largest scam was the pyramid of Bernard Madoff which has been disclosed after the owner, Madoff, has told one of its executives about $50 billion he had scammed. At the moment Madoff is under house arrest awaiting an indictment.

source :Ecommerce Journal

US STOCKS-Wall St set for higher open, boosted by IBM

2009-01-21T10:25:00.000-08:00

By Leah Schnurr

Wall Street was poised for a higher open on Wednesday, buoyed by a solid outlook from IBM, while investors were looking for measures from President Barack Obama to keep the year-long recession from worsening.

Dow component International Business Machines Corp (IBM.N: Quote, Profile, Research) could provide a boost after the world's top technology services firm posted quarterly profit and a 2009 profit outlook that surpassed expectations. For details, see [ID:nN20268352].

Shares of IBM were up 4.2 percent at $85.45 in premarket trading.

"IBM's guidance painted a rosy picture which the market's going to hang their hat on today," said Andre Bakhos, president of Princeton Financial Group in Princeton in New Jersey.

"With the inaugural pomp and circumstance being over, President Obama will be rolling up his sleeves to work on bank rescue plans and there is a little optimism that under the new administration, something magical can come out."

The U.S. stock market had ushered in the Obama presidency with a record Inauguration Day drop on Tuesday amid fresh signs the global bank crisis was far from over. Now investors were watching for maneuvers from the new president, who has vowed bold and swift action to deal with the economic downturn.

Obama will meet with his economic advisors, who are working with the Democratic-led Congress on an $825 billion fiscal stimulus package. [ID:nN20421893].

S&P 500 futures SPc1 were up 6.10 points and above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 were up 48 points, and Nasdaq 100 NDc1 futures were up 3.25 points.

Tuesday's decline for the Dow marked the largest point and percentage drop for the index since Dec. 1, 2008, and the first time the Dow has been below 8,000 since Nov. 20, 2008.

Although the broad S&P 500 has rebounded from its Nov. 21 intraday low, the broad index has fallen 10.9 percent this year on worries about the deepening global recession.

Investors will also be watching a hearing by the Senate Finance Committee on the nomination of Timothy Geithner to be Treasury secretary.

Wall Street had initially cheered Obama's choice of Geithner but the nomination has since come under controversy and Geithner is expected to face questions about his past failure to pay some taxes. [ID:nN20429629].

Among the morning's round of earnings results, diversified manufacturer United Technologies Corp (UTX.N: Quote, Profile, Research) posted a rise in profit as revenue from maintenance of its products offset slowing orders for new equipment.
The Financial Select Sector SPDR XLF.P rose, snapping a five-day losing streak the day after a sell-off in banks led the markets lower. JPMorgan Chase (JPM.N: Quote, Profile, Research) was up 2.9 percent at $18.60 before the opening bell, while Bank of America (BAC.N: Quote, Profile, Research) rose 3.7 percent to $5.29.

However, Bakhos noted that the sector remains plagued by fears of further losses at banks and the possibility they will have to raise more capital.

Analysts also said expectations for the earnings season overall remain low.

But the tech sector saw another bright spot when Ericsson (ERICb.ST: Quote, Profile, Research), the world's top mobile telecom equipment maker, posted better-than-expected earnings, although the company promised deeper savings, including 5,000 job cuts. [ID:nLL732625].

Wall Street will get a further look at how the tech sector is faring when iPod and iPhone maker Apple Inc (AAPL.O: Quote, Profile, Research) reports quarterly results after the bell. (Editing by Chizu Nomiyama)

source : Reuters UK

IBM sunny about 2009 despite dreary forecasts

2009-01-21T10:10:00.000-08:00

By JORDAN ROBERTSON

In what promises to be a dismal year for tech spending, IBM Corp. packed a wallop of a surprise with its 2009 profit guidance: the numbers were so far ahead of Wall Street's forecast they were initially met with disbelief.

The Armonk, N.Y.-based company predicted at least $9.20 per share in profit in 2009, a full 45 cents per share better than the average estimate of analysts polled by Thomson Reuters. The forecast is an extremely bullish statement by IBM. It reflects the company's belief that it can outmaneuver the financial crisis by focusing on services and software deals that carry big profit margins, but also help businesses cut costs by offloading some of their tech chores.

IBM revealed the rosy forecast Tuesday as it reported profit for the fourth quarter of 2008 that also sailed past analyst estimates, while sales fell short.

IBM's net income for the period was $4.4 billion, or $3.28 per share. That amounted to a 12 percent profit increase from $3.95 billion, or $2.80 per share, in the same period a year earlier.

Analysts were expecting IBM to earn $3.03 per share this time.

IBM shares jumped 4 percent in extended trading.

"To be honest, I didn't believe they could show something like this — I think the results they posted were stellar," said Peter Misek, an analyst with Canaccord Adams. "They just executed really well — really, really, really well."

Analysts had been expecting IBM to be hurt worse by its heavy dose of sales to big banks and other customers devastated by the economic downturn. Instead, IBM's results show that while the company has seen some sales vaporize, it is still able to wring out better profits because of aggressive cost-cutting and by focusing only on the most profitable deals.

One key measure of profitability — IBM's gross profit margin — expanded to 47.9 percent of revenue, three percentage points better than the year-ago period. IBM credits its services business with leading the gain.

The higher profits came even as IBM's revenue fell 6 percent to $27 billion, short of the $28.1 billion analysts were expecting. IBM said revenue would have decreased only 1 percent were it not for currency fluctuations, but sales were down in all major geographic areas.

Revenue in services, IBM's largest business segment, dropped 4 percent, but IBM was able to ink $17.2 billion in new services contracts. That was a healthy showing that demonstrates companies are still forking out for outsourcing and other technical support contracts, which are often viewed as money-savers in the long run.

Hardware revenue fell 18 percent. Mainframe revenue fell 6 percent, and sales of lower-end servers based on industry-standard processors fell 32 percent.

Weakness in hardware sales was expected, since companies don't buy as much new machinery when times get tough. But even struggling businesses generally keep ponying up for the services contracts they have locked into, since many of those arrangements are for vital parts of the business, like managing their billing or maintaining the databases.

Rick Hanna, an equity analyst with Morningstar Inc., said he is concerned about the slowdown in some of IBM's hardware sales, since having IBM machines inside a business helps sell software and other services. Still, Hanna said he was "very, very impressed" with IBM's ability to improve profit margins despite the grisly economic landscape.

"When I was reading through it my first comment was 'wow,'" he said. "It really speaks to them developing their high-value-added strategy and executing it. ... You've got to recognize that this isn't your father's IBM. It's not the one that's so hardware-dependent. Software and services tend to be more resilient, and they're proving that."

IBM did not announce widespread job cuts, which some analysts believed were imminent, but repeated that it is still doing targeted layoffs as part of ongoing cost-cutting. IBM lays off thousands of workers each year, but overall head count keeps rising as the company adds jobs in faster-growing regions or more profitable divisions.

IBM employed more than 400,000 people at the end of 2008, the first time in more than 20 years the company's work force has swelled that big. The last time IBM employed a work force that size, a severe downturn caused the company to jettison many of those workers in waves of brutal downsizing.

IBM shed more than 150,000 workers in the 1990s as the company racked up nearly $16 billion in losses over a five-year stretch.

For all of 2008, IBM earned $12.3 billion, or $8.93 per share. That represents an 18 percent jump from a year ago. Sales were $103.6 billion, a 5 percent increase.

The earnings report came out after IBM shares closed at $81.98, down $2.94, or 3.5 percent. The stock jumped to $85.30 in after-hours trading.

source : Assosiated Press

Obama Wins Legislative Test as Senate Allows Use of TARP Funds

2009-01-15T23:11:00.000-08:00

By Nicholas Johnston and Laura Litvan

President-elect Barack Obama won his first legislative test when the U.S. Senate voted to allow the use of $350 billion in financial-rescue funds.

Senators yesterday defeated, 52-42, a resolution that would have prevented the release of the second half of the $700 billion in the Troubled Asset Relief Program, enacted last fall to boost the sagging U.S. economy. President George W. Bush sought the release of the money at Obama’s request.

“I know this wasn’t an easy vote because of the frustration so many of us share about how the first half of this plan was implemented,” Obama said in a statement after the vote. He promised to set strict pay limits on executives at companies receiving funds, provide more loans to small businesses and ensure “taxpayers can see where their money is spent.”

Lawmakers have objected to the outgoing Bush administration’s use of the first $350 billion of the money, saying the government failed to set limits on banks that received payments, including Citigroup Inc. and JPMorgan Chase & Co.

Louisiana Republican David Vitter, who introduced the Senate resolution, criticized the “complete lack of accountability in the TARP program” in urging senators to block release of the remaining funds. “If we don’t pass this resolution of disapproval, nothing will change in the TARP program,” he said.

Democratic Dissent

Obama has faced some Democratic dissent this month over tax cuts he’s seeking and his nomination of Leon Panetta as his intelligence chief. Obama visited the Capitol and met with Senate Democrats behind closed doors this week to push for release of the additional rescue funds.

Eight Democrats and one independent joined most Republicans in voting to block the funds, while six Republicans joined Democrats in voting to allow release of the money. Arizona Republican John McCain, who as a presidential candidate backed creation of the TARP program, voted against the release.

The vote came after Obama’s economic adviser, Lawrence Summers, told Congress that up to $100 billion of the funds will be used to ease the housing crisis. Lawmakers in both parties have said they want more of the money used to help homeowners at risk of defaulting on their mortgages.

“This program must promote the stability of the financial system and increase lending, preserve home ownership, promote jobs and economic recovery” and be used in a manner accountable to the public, Summers wrote in a letter to Senate Majority Leader Harry Reid.

California Democrat Barbara Boxer said she was voting to allow use of the money because Obama will run the program differently. “If the Bush administration was going to continue to dole out this money, I wouldn’t give them three dollars, let alone $350 billion,” Boxer said.

Under the rescue legislation, the Treasury Department can use the money unless both the Senate and the House pass a resolution within 15 days that rejects Bush’s Jan. 12 request for the second $350 billion. If Congress voted to block use of the money, the president could veto the resolution.
source : Bloomberg

Report: Bank of America Could Get More Government Aid

2009-01-15T22:48:00.000-08:00

Bank of America Could Get Billions in Additional Government Money

The U.S. government is nearing a deal to inject Bank of America Corp. with billions of dollars in more aid, The Wall Street Journal reported late Wednesday, citing people familiar with the situation.

The nation's biggest bank by assets acquired Merrill Lynch & Co. on Jan. 1. Bank of America received $25 billion from the government's $700 financial rescue fund, including $10 billion that would have gone to Merrill had it not been acquired.

Bank of America and the U.S. Treasury spokesmen declined to comment in response to inquiries made by The Associated Press.

The Journal, citing a person familiar with the talks, reported that the discussion between the government and Bank of America began in mid-December when the Charlotte, N.C., bank said it wasn't likely to go through with its acquisition of New York-based Merrill because the losses at the troubled company were larger than expected.

Treasury Department officials grew concerned that the stability of the U.S. financial markets would be at risk if the deal fell apart, the newspaper reported. Officials said they would work on "formulation of a plan" that includes new money from the government, the Journal said, citing the person familiar with the talks.

Details of a possible agreement, the Journal said, are likely to come out with the company's quarterly results, which are expected Tuesday.

The Journal reported that any possible plan could shield Bank of America from the bad assets on Merrill's books. One person familiar with the situation told the paper that there could be a limit to how much Bank of America might have to be liable for, with the government covering the remainder.

Banks are struggling to mend their balance sheets after bad bets on mortgages spread to other forms of debt. Some analysts and economist are saying the U.S. government will have to spend far more than the $700 billion it has already approved to aid the financial industry. Only the first half of the $700 billion has been allocated and Congress has not released the second half of the fund.

source :ABC news

An Executive Guide to Sustainable Business Strategies

2008-12-10T09:42:00.000-08:00

Join us for a Webcast that will give you a clear understanding of how to focus your organization’s sustainability efforts.

You will hear from Andrew Winston, founder of Winston Eco-Strategies; Laura Ipsen, Senior Vice President of Global Policy and Government Affairs for Cisco and Alyssa Farrell, Marketing Manager for Sustainability Solutions of SAS. All have key lessons to share from many years of experience.

Find out what works and which paths to avoid. Techniques and technology have evolved and made way for innovations that were previously considered unrealistic. Make sure your organization is not left behind.

Andrew Winston, founder of Winston Eco-Strategies

Andrew Winston is a respected author, consultant and thought-leader on corporate sustainability initiatives; particularly how strategies can be employed for competitive advantage.

He is the co-author of Green to Gold: How smart companies Use Environmental Strategy to Innovate,create value,and build competitive advantage, the best-selling guide to what works – and what doesn't – when companies go green. Andrew is a nationally recognized expert on green business, and has written for or appeared in Time, Newsweek, BusinessWeek, Forbes, The New York Times, The Washington Post, ABC News, National Public Radio, and CNBC.

Winston received his BA in Economics from Princeton, an MBA from Columbia, and a Masters of Environmental Management from Yale.

Laura Ipsen, Sr. VP, Global Policy and Gov't Affairs. Cisco

Laura Ipsen is Senior Vice President of Global Policy and Government Affairs for Cisco, the global leader for networking for the Internet. Since 1996, she has been responsible for developing Cisco’s public policy agenda and managing government affairs activities worldwide. She is also the co-chair of Cisco’s Eco-Board focusing on Cisco’s initiatives and leadership on environmental issues.

Ipsen represents a company that has embraced sustainability. She is a key executive on Cisco's corporate EcoBoard. She understands the cultural and organizational challenges that this topic represents.

Alyssa A. Farrell, Marketing Manager for Sustainability Solutions, SAS

Alyssa Farrell is the Marketing Manager for Sustainability Solutions and works with SAS customers around the world to understand best practices and solutions for challenging business issues. She participates in environmental industry groups and is a member of the Corporate Leadership Council of the National Association of State CIOs.

Prior to joining SAS, Farrell was a senior consultant in the Deloitte Public Sector practice. She is a graduate of the Eller College of Management at the University of Arizona, where she earned her MBA degree with a concentration in Management Information Systems. She also holds a Bachelor of Arts degree from Duke University.

How to be your own (very good) management consultant

2008-12-10T09:36:00.000-08:00

First, let me explain where we get our information: Via two of the world's greatest management thinkers, you can learn from the world's most successful business leaders and management gurus - such as Tom Peters, Warren Buffett, Bill Gates, Jack Welch, Peter Drucker and Andrew Grove.

What if two of the world's greatest management thinkers were invited into hundreds of businesses, talked to Chief Executive Officers and their executives about business theory, took an analytical look at how their management processes work, and then sent you a monthly briefing on what techniques are working and where?

Could you use that personal information to improve your own business management skills, performance and prospects? Could it help you achieve quality management? Could it boost creativity in managers you employ? Could it help you improve business strategy and put an effective business plan into place?

The Letter to Thinking Managers provides solutions to hundreds of common management problems. I'd like you to try it, at no risk, over the next two months.

Most managers are far too busy to do our kind of investigative business management analysis. And we are the best, by far, at doing it.

Our two editors are Robert Heller and Edward de Bono, two of the leading creative thinkers in management today. Both are highly critical of many business management practices.

They give examples of bad practice so you'll avoid making the same mistakes as others. Then they offer guidelines for a way forward to help you achieve quality management. We are currently offering a two-month free trial. If you decide to subscribe, you'll build a substantial workbook of best practice procedures for every important aspect regarding the management and development of a successful business.

Types of Business Insurance

2008-12-10T09:26:00.000-08:00

By Gregory Boob, About.com

Business insurance is a broad description that can be broken down into a list of nine types of insurance policies and here I will briefly explain the coverage and expand on these as individual topics. For now, these are general descriptions so that we are talking about the same thing when I use these terms in later articles.

property insurance.Property insurance insures against loss or damage to the location of the business and its contents. It can also insure the property of others in your control when the loss occurs. Property insurance can be for a specific risk. For example, a fire insurance policy insures only against a fire loss to the location. A tornado is not a fire and, therefore, that loss would not be covered. The insured location can be owned, leased or rented.

Casualty Insurance.Some insurers will lump property and casualty insurance together and refer to the coverage as property and casualty insurance. In fact, packaged policies of property and casualty are often the best purchase a business owner can make. However, to have an understanding of the difference between the coverage, I will discuss this as a separate type of insurance. Casualty insurance insures against loss or damage to the business.

Liability Insurance.Liability insurance insures against liability legally imposed upon your business because of the negligence of the business or its employees. Put another way, it protects your business when the business is sued for negligence.

Commercial Auto.Your personal automobile policy does NOT cover vehicles used by your business. If your business uses vehicles or anything that is required to be titled by your state, then you need a commercial auto policy. Commercial auto coverage insures against property damage to vehicles and damage caused to others by those vehicles.

Worker Competation.You will need to insure your employees against on-the-job injuries. Every state is different. But, most states have put into place some form of workers' compensation system. Workers' compensation is a system where the employee is not allowed, by statute, to sue their employer for on-the-job injuries; but, in return, the employer must participate in a system that provides nearly automatic payment to the employee in case of injury for medical bills and damages. There are many options for workers' compensation coverage. Some states allow an employer to opt-out of the system if the employer is self insured, some run the system through private insurers while others use state agencies.

Business Interruption.Business interruption insurance insures against loss or damage to the cash flow and profit of a business caused by the business being unable to operate because of interruption. The easiest example is to think about a critical piece of machinery being struck by lightning. The repairs to the machine may be covered by other coverage such as property or casualty insurance. But, if you can not make widgets for three months, than there is no replacement of that income without this coverage.

Health Insurance.To be competitive, most businesses need to offer their workers health insurance. This insurance offers a health coverage benefit to your employees (and you).

Life and disability insurance.Life and disability insurance protects the business against the death or disability of key employees. For example, one partner carries a life insurance policy naming the partnership as a beneficiary. If that partner dies, and the business has planned properly, the proceeds of the policy can be used by the business to buy out the share of the decedent's partnership interest from the estate.

Other Insurance or Scripted Policies.It could very well be that your business is so unique to have need for coverage that is a mixture of some of the coverage listed above or something written specifically for your particular risk. One can think of some actresses, actors, or sports stars that have had legs insured at some point in there careers. This would be an example of a scripted policy.

What is management?

2008-12-10T09:22:00.000-08:00

ByF.John Reh, About.com

These are standard questions that most of us in the management profession have been asked more than once. And questions we asked once in our careers too. Here, then, is a basic look at management, a primer, Management 101 from my perspective.

Art and Science
Management is both art and science. It is the art of making people more effective than they would have been without you. The science is in how you do that. There are four basic pillars: plan, organize, direct, and monitor.

Make Them More Effective
Four workers can make 6 units in an eight-hour shift without a manager. If I hire you to manage them and they still make 6 units a day, what is the benefit to my business of having hired you? On the other hand, if they now make 8 units per day, you, the manager, have value.

The same analogy applies to service, or retail, or teaching, or any other kind of work. Can your group handle more customer calls with you than without? Sell higher value merchandise? Impart knowledge more effectively? etc. That is the value of management - making a group of individual more effective.

Plan
Management starts with planning. Good management starts with good planning. And proper prior planning prevents… well, you know the rest of that one.

Without a plan you will never succeed. If you happen to make it to the goal, it will have been by luck or chance and is not repeatable. You may make it as a flash-in-the-pan, an overnight sensation, but you will never have the track record of accomplishments of which success is made.

Figure out what your goal is (or listen when your boss tells you). Then figure out the best way to get there. What resources do you have? What can you get? Compare strengths and weaknesses of individuals and other resources. Will putting four workers on a task that takes 14 hours cost less than renting a machine that can do the same task with one worker in 6 hours? If you change the first shift from an 8 AM start to a 10 AM start, can they handle the early evening rush so you don't have to hire an extra person for the second shift?

Look at all the probable scenarios. Plan for them. Figure out the worst possible scenario and plan for that too. Evaluate your different plans and develop what, in your best judgement, will work the best and what you will do if it doesn't.

Its accounting in the business cycle Mass Market

2008-12-10T09:20:00.001-08:00

Almost the same with the computerization of business in the trade, dakalanya people think that by applying computerized accounting system, then all problems will terselesaikan.Meskipun accounting assumption is not entirely wrong, but also can be said is not entirely truthful. Because the actual purpose of computerized accounting system is only for

* Zoom error recording,
* Control and cheating
* Acceleration calculations.

However, computerized systems can not be right that a system that has been applied correctly or incorrectly, because the computer only act in a dummy (Passive), meaning that any given command to be done for the countdown, the computer will calculate the direct, but he (computer) do not know whether that was in the countdown is a matter that should be counted or not a matter that needs to be calculated (by way of such).

Departure from there, if we want to start a turnaround in the accounting business, which is a new walk, which needs to be is that we must first know the accounting system (manual), which will be applied in our business. After we merancangnya, we can apply the new accounting system that terkomputerisasi. There will be compromise, compromise occurred in the calculation of the accounting method.

The need to first be prepared to start the cycle accounting is true, actually has bebererapa stages, depending on the destination to be achieved from the accounting calculation.

Starting sikulus Akuntnasi diusaha savings and loans will be divided into 2 groups basis, namely:

1.

Savings and loans that have been there before and computerization
2.

Saving and Loans where there are no new data.

1. If the Save Borrow your business running, of course, you have a little more to apply methods or how accounting calculation that can generate a report Balance Profit and Loss. From the way you gunkana at this time, you can applying it to the system that you will use.
the need to become your attention is when you apply perhituangan accounting Savings and Loans are self-taught (think own), then your accounting system should be replaced by adopting the system that you use, because there is a possibility if you still use your self-taught system, the method is not ready for the development of your business.

some points that need attention:

1.

Loan interest calculation method
2.

Method of calculation of interest savings
3.

treat income and the cost basis or cash basis accruel

2. Saving and Loans If you just stand, the most important point is that you must have at least one that can never run or (become) an interpreter at a book store business loans. Because with this, then the business will be reported (in the manage) is how, will be set at the start.
You try to imagine the business if you do not understand that one of the savings and loans (usually cooperative), the "obligation" to make a report and rugilaba balance that must be reported to the Member be difficult.
Different business trade (private) that do not have the obligation to make reports and balance sheets rugilaba.

jurubuku needs a new business due to system (computerization), which is not 100% dictate how melaporakan how the accounting should (be), but some will be set up in advance (by the user) to comply with state savings and loans (cooperative) that run. and this need in the pen "design" the report forms and methods of calculation.

CPA teaches businesses techniques for survival

2008-12-10T09:17:00.000-08:00

Written by ArticleCafe.NET
It's a jungle out there for business owners, but we plan to teach people how to survive in it.

"I believe all your professionals should save you either tax dollars or make you more money or give you good advice or preclude bad things happening to you, easily exceeding the fees they get for their services", he said.

We make plans to spotlight the practical aspects of running a business. Schools teach business concepts, but our firm narrows the focus to particulars such as preparing financial statements, developing business plans and calculating a business's vital statistics.

We give other very specific advice. For instance, in the case of loans either going to or coming from a company, if a promissory note doesn't exist, IRS officials could call the exchange of money additional capital for the company or a dividend for an individual and tax the money. Standard loans, on the other hand, normally aren't taxed.

Most business owners are very willing to loan their companies money or vice versa. But most fail to document the full (meaning of the transaction), he said.

The course is designed for small business owners. Leaders of large businesses, he said, generally know how to survive in the business world; that's how their businesses became large.

Then Jesus came to them and said, "All authority in heaven and on earth has been given to me. Therefore go and make disciples of all nations, baptizing them in the name of the Father and of the Son and of the Holy Spirit, and teaching them to obey everything I have commanded you. And surely I am with you always, to the very end of the age."

What Directors Should Ask about Talent Management

2008-12-10T09:10:00.000-08:00

By Claudya Lacy KElly

The global creedit squence and resulting meltdown in financial markets have clearly taken over not just the headlines but corporate leaders' share of mind as well. However, boards ignore other issues at their peril. Global competition and the war for talent have reached a point that require to be confident that their companies are focusing on talent management at the highest levels.

It has been 10 years since MC.Kinsey&CO issued its much-cited report, "The War for Talent," which stated that the U.S. was facing a long-term talent shortage. The U.S. Government Accountability Office estimated that half of 3.2 million baby boomers who turned 62 in 2008 would take early retirement. While that seems less likely given the recent hit most retirement funds have incurred, the underlying demographic trend of an aging workforce continues to haunt corporations.

There are other factors at play as well. For example, the recent spate of mega-mergers will have long-term talent implications. At the outset, merged companies, in search of economies of scale, lay off employees. Post-merger, these companies frequently face talent shortages in critical areas where the scale of operations have been greatly increased. The global span of large corporations, an inability to bring professional and technical workers into the U.S. because of visa limits, and a dearth of U.S. graduates in such critical specialties as engineering also underscore the need for increased diligence in managing human capital.

To determine how well career development and succession planning are being implemented at the senior executive level and below, there are seven key questions directors should be asking about the companies they govern:

1. What C-level succession-planning process is in place?

There are generally three levels of succession planning for senior executives (including the CEO, CFO, CIO, CHRO, and business-unit leaders). The first is an orderly succession plan based on the executive retiring at a specific age. The second is an intermediate succession plan that anticipates that a key executive may leave prior to an orderly retirement. The third is an emergency plan that can be immediately enacted if an executive is suddenly incapacitated or leaves the company precipitously. Boards should ensure that all three plans are in place and should spend time getting to know the individuals named as next-generation successors.

2. How is the company assessing competencies of its senior executives and those immediately below them?

The board should know the strengths and weaknesses of the senior team and the methodology used to create those assessments. These evaluations should include both assessments and other sources of data, as well as external benchmarking. As a result, HR should have a list of internal and external candidates who can take over any mission-critical job. There should be a seamless transition if a critical member of the team needs to be replaced.

3. How much time do senior executives spend on succession planning at the senior executive level?

It is one thing to say a company has a thorough succession plan and another for senior executives to implement it on a programmatic basis. Companies like General Elektrik(GE) and PepsiCo (PEP) spend considerable time on talent development. HR facilitates, helps with assessments, and coordinates the activity, but it is not HR's job to make final decisions. That is the role of line managers.