World Financial Report

WFR Book Of The Month

2010-09-09T09:54:00.000-07:00

I want a Norwich

2010-08-30T13:23:00.000-07:00

Florida AG Seeks At Least $2.5B Escrow Account From BP

2010-06-10T14:18:00.001-07:00

DOW JONES NEWSWIRES

Florida Attorney General Bill McCollum asked BP PLC (BP, BP.LN) to put at least $2.5 billion into an interest-earnings escrow account to ensure money is available to cover potential losses.

The oil giant has pledged to cover all claims related to the oil spill in the Gulf of Mexico.

McCollum, who is running for the Republican nomination for governor this year, said in a statement that in light of the likely "staggering blow" to Florida's economy in the wake of the spill, "it is essential that BP establish immediately a dedicated escrow account solely for the purpose of paying claims and damages to Florida and its citizens."

A BP spokesman wasn't immediately available to comment.

Its American depositary shares closed up 12% Thursday after a 16% slump a day earlier, finishing at $32.78.

New Link Marketplace for Adult

2010-05-21T15:18:00.000-07:00

SANTA BARBARA, Calif.—The most controversial online marketing companies have always been text link brokers. From the first start-ups like Text Link Ads to new power houses like Conductor, text link ad brokers have been the easiest way to rank high on Google. Unfortunately none of them have ever worked with adult companies. For years the only way for adult companies to acquire back links to raise their search rankings have been through spam link exchanges and reciprocal link forms which are ineffective.

Launched in 2009, Adult Link Market gave the adult industry the first SEO specific text link marketplace. Websites in the adult space can now search ALM’s hundreds of relevant websites and blogs to drive targeted traffic and raise their rankings in Google, Bing and Yahoo.
Read the whole story on AVN

Ford’s Mulally Not Taking Cost Over Health-Care Law (Bloomberg)

2010-03-31T13:35:00.001-07:00

(Adds analyst’s comment in the fourth paragraph.)
By Keith Naughton and Katie Merx

March 31 (Bloomberg) -- Ford Motor Co. Chief Executive Officer Alan Mulally said the automaker won’t record a cost related to the new U.S. health-care law. Ford isn’t affected by the way the legislation reduces the corporate benefit for contributing to retirees’ Medicare and prescription-drug costs, Mulally said today at the New York auto show. The automaker is avoiding charges disclosed by companies including Boeing Co. and AT&T Inc. because liability for United Auto Workers retirees’ health expenses was shifted to a so- called Voluntary Employee Beneficiary Association, or Veba, in 2007. General Motors Co. and Chrysler Group LLC have the same contract provisions. “Ford, GM and Chrysler are no longer responsible for current or future retirees’ health-care or prescription-drug costs because of the VEBA,” said Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research in Ann Arbor, Michigan.

Health-care costs related to the law may shave as much as $14 billion from U.S. corporate profits, according to an estimate by benefits consulting firm Towers Watson. Ford fell 59 cents, or 4.4 percent, to $12.69 at 11:28 a.m. in New York Stock Exchange composite trading. The Dearborn, Michigan-based automaker has gained 27 percent this year.

--With assistance from Bill Koenig in Southfield, Michigan, and Will Daley in New York. Editors: Jamie Butters, Ed Dufner

Obama to Offer Banks Capital for More Small Businesses Lending

2009-10-21T11:18:00.000-07:00

By Rebecca Christie and Hans Nichols

Oct. 21 (Bloomberg) -- President Barack Obama plans to announce new measures to open up credit for small businesses, including capital injections for community banks to spur lending, the administration said. Community banks with less than $1 billion in assets will be eligible for lower-cost capital if they submit a small business lending plan and document their lending in quarterly reports, according to a White House fact sheet. If approved by regulators, these banks would pay the government an initial 3 percent dividend on the injection, instead of the previous 5 percent rate. Obama also will seek legislation raising the limits for Small Business Administration loans from $2 million to $5 million and as much as $5.5 million for manufacturing. The president will visit a small business in Maryland this afternoon to make the announcement, White House press secretary Robert Gibbs said. The Treasury Department will work with banks to develop program terms, including ways they could replace older, and more expensive, infusions from the Troubled Asset Relief Program. The Treasury also is looking at ways to expand its Community Development Financial Institutions program to promote small business lending, according to the administration statement. Some credit unions also will be eligible for capital assistance under the administration’s new plan, the first time those institutions have had access to the bank rescue funds, according to the fact sheet. Credit unions that qualify as community development financial institutions will be able to apply for capital injections in the form of subordinated debt.

Conference of Regulators

In addition, Obama will call for Treasury Secretary Timothy Geithner and SBA administrator Karen Mills “to convene a conference of regulators, congressional leaders and small business owners to establish further steps the government can take to help small businesses achieve greater access to capital,” Gibbs said this morning. Senate Democrats are pushing for more aid to small businesses to counter the perception that the administration is focusing on big banks. The announcement comes seven months after the Treasury’s March announcement of a $15 billion program to purchase pools of SBA loans, which so far has not been implemented. “We see continued evidence that Wall Street has been stabilized, but to date it seems that Main Street continues to struggle to create new jobs,” Senator Mark Warner, a Virginia Democrat on the banking committee, wrote in a letter to Obama yesterday that was signed by 30 other lawmakers. Co-signers include Senate Banking Committee Chairman Christopher Dodd of Connecticut.

New TARP Program

The lawmakers called on Obama to redirect bank rescue funds for community lending by creating a new program within the $700 billion TARP. The program suggests using federal financing to anchor a $40 billion pool to support new lending, accompanied by as much as $10 billion in private investment.

Gibbs said “Geithner’s announcement of TARP programs that had been set up for larger banks and were used also for the auto industry will begin to wind down.” Obama’s announcement today won’t dissuade Warner from pushing for further assistance to small businesses to make it easier for them to hire, aides said. “We certainly intend to continue working on this issue,” spokesman Kevin Hall said. Some Republican lawmakers argued that Obama’s small- business initiative won’t make a difference if Congress places new tax burdens on companies by enacting health-care legislation.

Pink Slip

“The president offering bailout funds to small businesses while pushing a government takeover of health care is like getting a Christmas bonus right before you get a pink slip,” said Indiana Representative Mike Pence, chairman of the House Republican Conference. House Republican Leader John Boehner said lower taxes and other policies to help small businesses invest in equipment and jobs are needed to restart the economy. “Until we get the small businesses working again, we are not going to get the economy working again,” he said. Uncertainty about more expenses contained in health-care and energy legislation is causing small business owners “to sit on their hands,” he said.

Fiat 3Q Trading Pft Down 62%, Write-Offs Seen

2009-10-21T11:12:00.000-07:00

By Gilles Castonguay (Wall Street Journal)

Of DOW JONES NEWSWIRES

MILAN (Dow Jones)--Italian auto maker Fiat SpA (F.MI) Wednesday posted a 62% drop in quarterly trading profit as the recession hit its sales hard, and it spoke of possible write-downs due to its partnership with Chrysler Group LLC. The warning is one of the first signs that its holding in the U.S. car maker, brokered by the U.S. government earlier this year, could weigh on its earnings even though Fiat had vowed it would not cost it any money.

"This is a sign that it might have an impact on its P&L," one London analyst said on condition of anonymity. In June, Fiat took a 20% stake and full management control of Chrysler. Fiat said it was reviewing the carrying value of some investments in platforms and architectures, especially in its cars, as it aligned its business with that of the U.S. company. "The group may revisit the future viability of some of its past investments, necessitating the write-off, as unusual items, of these legacy investments," it said. "They will not have a cash impact."

Fiat Chief Executive Sergio Marchionne declined to elaborate on a conference call with analysts ahead of the Nov. 4 presentation of his plan to revive Chrysler. UBS analyst Philippe Houchois said it likely meant ditching old platforms at the cost of hundreds of millions of euros. For the third quarter, Fiat's net profit tumbled 95% to EUR25 million, as revenue fell 16% to EUR12 billion. Its closely-watched trading profit - operating profit excluding exceptional items - totaled EUR308 million, ahead of analysts' expectations of EUR260 million, according to a Fiat poll.

"Aggressive cost containment actions helped mitigate the effect of revenue declines and pushed trading margins up to 2.6% (against 2.4% in the second quarter)," Fiat said in a statement. Like other car makers, the Turin-based maker of Fiat, Alfa Romeo and Lancia cars has suspended some production at its factories, cut costs and reduced cash burn in the face of the downturn. Fiat confirmed its 2009 targets, including a group trading profit exceeding EUR1 billion and a net industrial debt of less than EUR5 billion. Marchionne told analysts he expected Fiat to produce a trading profit of EUR1.5 billion in 2010 on a 2%-3% rise in sales as long as the government in its home market of Italy extended its scrapping scheme in some form beyond the Dec. 31 deadline.

Fiat and other manufacturers have had a fillip over the summer and autumn with demand for their cars being bolstered by government schemes across Europe to encourage the scrapping of old cars and the purchase of new, less polluting ones. Industry experts fear demand will fall once more when the scrapping schemes end. As for its Iveco truck and CNH (CNH) agriculture and construction equipment units, Fiat said it expected them to keep facing depressed demand for the whole year. Fiat shares ended 2.05% down at EUR11 in Milan, following the whole European auto sector lower following the publication of lower sales figures by France's PSA Peugeot-Citroen (UG.FR) earlier Wednesday. One Milan analyst cited profit-taking after a surge in Fiat's stock ahead of its results as well as speculation on the extent of the write-offs.

Alcoa Posts Surprise Profit on Cost Cuts

2009-10-07T14:55:00.000-07:00

By KATHY SHWIFF (Wall Street Journal)

Alcoa Inc. posted a third-quarter profit–after three quarterly losses in a row–surprising Wall Street, which had expected another loss, and getting the third-quarter earnings season off to a good start. Chief Executive Klaus Kleinfeld said cost-cutting and other steps the aluminum giant took earlier this year had a strong effect on the cash position and profit. "Despite unfavorable currency and energy headwinds, our performance this quarter indicates that Alcoa is weathering the economic storm and is in excellent shape to benefit when the market recovers," he added. Alcoa, the first blue-chip company to release quarterly results, said it sees signs that key markets are stabilizing and predicted global aluminum consumption would increase 11% in the second half of 2009. The company has cut output and costs during a brutal period for the aluminum industry, saving $1.61 billion in procurement costs and $375 million in overhead so far this year. Reductions in working capital generated $780 million in cash. Alcoa said it finished the quarter with $1.1 billion of cash on hand, up 29% from the end of the second quarter.

The company also has been investing in areas expected to recover early from the economic downturn, ranging from a construction-products factory in Russia to a small fasteners business in Morocco to sections of the oil-and-gas industry. Alcoa reported a profit of $77 million, or 8 cents a share, down from a year-earlier profit of $268 million, or 33 cents a share. The latest results included 3 cents a share in restructuring and other charges. Prior-year results included a 4-cent charge related to the curtailment of a smelter in Texas. Excluding items, earnings were 4 cents a share in the latest period. Revenue dropped 34% to $4.62 billion. Analysts' estimates were for a loss of 9 cents a share on revenue of $4.55 billion, according to a poll by Thomson Reuters. Alcoa's average realized aluminum price during the third quarter was $1,972 a metric ton, up 18% from the previous quarter. Shipments declined 8.3%. The company posted profits in all segments of its business, except primary metals. Alcoa's shares closed Wednesday up 2.2% at $14.20; trading was halted after hours. The stock, which has been rising recently on optimism about its results, has almost tripled from a 21-year low in March but is still down one-quarter from a year ago.

Russia lauds birthday strongman Putin

2009-10-07T13:33:00.000-07:00

By Anna Smolchenko (AFP)

MOSCOW — An ode was published in his honour. A painting was given to him by the president. A novelist wished him a long life. And the Orthodox Church praised him for his tact. There was no shortage of leading Russians Wednesday queuing up to congratulate their favourite politician Vladimir Putin on his 57th birthday, with his critics still sidelined after 10 years in power. "Fifty-seven years is an average age," mused leading novelist Valentin Rasputin at a meeting Putin attended with some of Russia's best known writers.

"Today people live for a long time and statesmen -- the more they work... the more energies remain for the rest of the life," Rasputin was quoted as saying by Russia's official news agency ITAR-TASS. "God willing you manage the same. We wish everything goes well for you. And what is well? That means well for the country, well for us." Analysts say Putin, who served eight years as Russia's second post-Soviet president and has now settled comfortably into the role of prime minister, remains Russia's favourite politician. He is keeping the world in suspense over whether he is plotting a return to the Kremlin but if he wins the 2012 polls he is likely to stay in power for another 12 years, until he turns 72.

A Russian newspaper, the Nezavisimaya Gazeta, carried an ode in honour of Putin on its front page that stepped a fine line between eulogy and irony. "I congratulate you, comrade Putin/ And may God give you another 120 years," it said. Patriarch Kirill, head of the Russian Orthodox Church, extolled what he described as Putin's openness, wisdom and tact.

"With inherent tact you persistently defend the interests of the state, confirming the authority of power far outside the country's borders," he said in a statement posted on the Church's website. Putin's protege and now president, Dmitry Medvedev, also took the time to meet with Putin and presented him with a painting, the Russian television said. Earlier Wednesday, Putin met with some of Russia's leading writers at the Pushkin Art Museum in Moscow, pledging more financial aide for them in an apparent attempt to win the intellectuals' support. But several top writers, including author Dmitry Bykov and prize-winning novelist Lyudmila Ulitskaya, said they had declined invitations to meet Putin.

"I am not attending," Ulitskaya told AFP.

"I am leaving today on my holidays and I bought my tickets in advance," she added without giving further details. Later Wednesday, Bykov attended an event to mark the memory of Anna Politkovskaya, an anti-Kremlin journalist killed three years ago. Neither the Kremlin nor Putin made any statements regarding her unsolved murder in 2006.
Bykov told Moscow Echo radio that he would have considered attending, but Putin's birthday was a bad choice for the event.

"The fact it's on his birthday turns it into protocol. My upbringing does not allow me to see someone on his birthday and then talk about problems with him, to express criticism." Putin's spokesman Dmitry Peskov confirmed that several writers were unable to come but denied this was because of any objections towards the prime minister. Putin loses no opportunity to stress that he is in good physical health -- be it by posturing with a naked torso in the Russian wilderness or diving to the bottom of the world's deepest lake. Moskovsky Komsomolets, a newspaper seen as being close to the Kremlin, said Medvedev's main problem was the elite didn't consider him to be a decision maker. "At a time when the president makes his speeches, the prime minister makes all the real decisions," it said. "That's the main internal political challenge faced today by Dmitry Medvedev."

Dell to lay off 905 in plant closure

2009-10-07T13:26:00.000-07:00

By David Goldman, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Computer maker Dell announced on Wednesday that it will close a plant in Winston-Salem, N.C., and will cut 905 jobs as a result. Dell said that 600 plant workers will be laid off in November, and the remaining 305 employees will be cut by January 2010, when the plant is scheduled to close. The cuts represent about 1% of the company's 76,000 employees. "This is a difficult decision, especially for our North Carolina colleagues, but a necessary one for Dell customers and our company," said Frank Miller, vice president of Dell, in a statement. "The efforts of our team members there have been significant and we're committed to helping them through their transition."

The Winston-Salem plant was used to make desktop computers. The company said the plant closing is part of a larger effort to simplify Dell's operations and improve its efficiency. Dell began cutting back staff and closing plants in January. In late September, Dell bought tech services provider Perot Systems (PER) for $3.9 billion as part of an effort to seek an additional source of revenue. Until the Perot deal, Dell has strictly been a hardware company, selling PCs and servers to its customers. But businesses have relied less on hardware recently, buying fewer computers and outsourcing their servers during the recent economic recession. Consumers also made fewer desktop and laptop purchases during the downturn. That cut into Dell's sales and profit in recent quarters and sent the stock down to an 11-year low in March before rebounding in recent months. Shares of Dell (DELL, Fortune 500) fell more than 1% in afternoon trading.

U.S. Consumers Reduce Debt for Fifth Month in a Row

2009-08-07T12:55:00.000-07:00

By JEFF BATER (Wall Street Journal

WASHINGTON -- Americans cut their borrowing a fifth time in a row in June, underscoring how consumer caution could dog the economy's recovery. Consumer credit outstanding fell at a seasonally adjusted annual rate of 4.9% to $2.503 trillion, according to Federal Reserve data. The drop outpaced analysts' expectations. The big retreat in borrowing points to weakness in the economy even as hints of recovery emerge. Earlier Friday, the government reported the U.S. unemployment rate edged down in July to 9.4%. Job losses were lower than expected, too. Last week, the Commerce Department reported gross domestic product receded April through June just 1.0%, far less than the contraction over the prior nine months.

But consumers are focusing on rebuilding their savings that have been slashed by the recession. Wall Street analysts had projected a $4.1 billion decline in consumer credit during June. The actual $10.3 billion drop marked the fifth consecutive decline. Consumer credit in May decreased $5.4 billion, adjusted down from a previously estimated $3.2 billion drop. Borrowing hasn't fallen so many months in a row since 1991, when credit fell June through December. Revolving credit, which includes credit-card use, dropped in June by $5.3 billion to $917.0 billion. It was the 10th drop in a row, which is a record. Revolving credit fell $4.9 billion in May. Non-revolving credit, including automobile and mobile home loans, decreased in June by 3.8%, or $5 billion to $1.586 trillion. Non-revolving credit in May decreased 0.4%, or $506 million.

The consumer-credit data exclude home mortgages and other real estate-secured loans. These tend to be highly volatile from month to month and are frequently revised. But the report still has interesting details on how Americans finance their lifestyles.

Cudia Will Succeed McGillin, World's Longest-Running Phantom, on Broadway

2009-05-27T11:50:00.000-07:00

Howard McGillin will exit Broadway's The Phantom of the Opera on July 25 to pursue new projects. He leaves the Majestic Theatre after ten years — with some breaks in between — and takes with him a new record: world's longest-running Phantom.

At a record-breaking 2,450 performances and counting, McGillin has already played the title role more than any other performer on Broadway. His closest competition, as far as performance count, at just under 2,400 performances, is the late Rob Guest, who played the title role in Australia and New Zealand. Americans Franc D'Ambrosio — the longtime record-holder before Guest — and Brad Little follow with over 2,100 performances each.

After ten years since his first of many engagements with the production, McGillin has decided to pursue other theatrical ventures, according to a statement released May 7.

McGillin is a two-time Tony Award nominee as Best Actor in a Musical (Anything Goes) and Best Featured Actor in a Musical (The Mystery of Edwin Drood).

Read More At Playbill.com

Obama Pushes Broad Rules for Oversight of Derivatives

2009-05-13T16:49:00.000-07:00

By STEPHEN LABATON (New York Times)

WASHINGTON — Marking its first major effort to overhaul financial regulation, the Obama administration will seek new authority to supervise the virtually unregulated complex financial instruments, known as derivatives, that were a major cause of the market crisis, Congressional aides and others who have been briefed on the decision said Wednesday.

The administration will ask Congress to approve legislation that would impose a new government oversight structure for the instruments, which Warren Buffett once called “weapons of mass destruction.”

In a two-page letter to Congressional leaders, Treasury Secretary Timothy F. Geithner asked for the swift approval of a measure that would require many kinds of derivative instruments, including credit default swaps, to be traded on exchanges and subject to tighter regulation. Derivatives can take many forms, but in total there are trillions of dollars’ worth exchanging hands every day around the globe.

The letter asked the lawmakers to give regulators the authority to impose new capital and business conduct requirements on the large Wall Street companies that issue the financial instruments. Capital requirements would, for example, require companies that issue derivatives to hold capital in reserve in case of a default, much the way banks must hold reserves when they make loans.

The letter leaves it to Congress to decide whether the Securities and Exchange Commission or the Commodity Futures Trading Commission would be playing the lead role in supervising the new system for trading such instruments.

People briefed on the plan said the administration had asserted four major principles guiding the legislative process. The legislation should be aimed at reducing trading practices that pose major risks to the financial system. The regulatory overhaul should promote efficiency and transparency in the markets. The legislation should discourage market manipulation and fraud. And it should protect investors.

Credit default swaps, a type of derivative instrument that acts like an insurance policy by protecting investors from defaults of mortgage backed securities, played a central role in the collapse of American International Group. The company, one of the largest issuers of such swaps, nearly collapsed as a result of issuing a huge volume of such instruments that it was unable to support.

Mr. Geithner, along with the leaders from the two agencies, was set to brief reporters about the proposal at the Treasury Department late Wednesday afternoon.

The proposal would not require that derivative instruments with unique characteristics negotiated between companies be traded on exchanges or through clearinghouses. But standardized or uniform ones would. If approved, the plan would require the development of timely reports of trades, similar to the system now used for corporate bonds.

During his confirmation hearings in January, Mr. Geithner vowed to move quickly to push for regulation of derivative instruments, and both Mary Schapiro, the new head of the Securities and Exchange Commission, and Gary Gensler, the nominee to head to the C.F.T.C., also made similar commitments.

Lawmakers in the House and Senate have already introduced legislation to regulate derivative instruments. But a number of members have pressed the administration to put out its own plan. Last Friday, at the confirmation hearing of Neal Wolin to be the next deputy Treasury secretary, Senator Maria Cantwell, Democrat of Washington, pressed the nominee to move quickly to get the administration’s views on the regulation of derivatives.

World Bank cuts China 2009 GDP forecast to 6.5 pct

2009-03-18T04:45:00.000-07:00

By Alan Wheatley, China Economics Editor

BEIJING, March 18 (Reuters) - The World Bank lowered its forecast for China's 2009 economic growth on Wednesday but warned Beijing that it would be thwarting its own medium-term goals if it tried to offset the slowdown by further boosting investment.

In a quarterly economic update, the bank cut its projection of gross domestic product growth this year to 6.5 percent from the 7.5 percent outcome it had forecast in November. It said there were both upward and downward risks to its outlook.

The global crisis would be a drag both this year and next, mainly via weaker exports and non-government investment, but the bank said China's economic fundamentals were still strong enough to give policymakers the luxury of looking well beyond 2009. The bank welcomed the inclusion of steps to boost consumption in the government's 4 trillion yuan ($585 billion) stimulus package since over-reliance on capital-intensive investment could damage the pace of job creation and the quality of growth. Indeed, it said there was room for a further shift towards consumption and for less emphasis on capital spending in order to rebalance the economy so that growth is more sustainable economically, socially and environmentally.

"The fundamentals for China are strong enough to ride out this storm, and it may be just as appropriate to shift the focus as much as possible to the medium and long-term challenges instead of a very narrow focus on short-term growth objectives," Louis Kuijs, the senior economist in the bank's Beijing office, said at a news conference to launch the report. The bank said it expected 16-17 million non-farm jobs to disappear this year but it played down the social repercussions.

"Somewhat lower overall growth is not likely to jeopardize China's economy or social stability, especially if the adverse consequences of dislocation and layoffs are alleviated by using and expanding the social safety net," the report said. The median forecast in a Reuters poll of economists published on Wednesday is for GDP to expand by 7.8 percent this year, narrowly missing Beijing's target of 8 percent. For a table with details of the World Bank's forecasts. For a graphic on China's growth over the past three decades.

COULD BE WORSE

The bank's advice flies in the face of the ruling Communist Party's determination to do whatever is necessary to meet its self-imposed target of 8 percent growth this year. Last Friday, Premier Wen Jiabao said the government was ready to roll out extra stimulus measures if needed. But the World Bank said Beijing should keep some of its powder dry in case growth next year proves even weaker. What's more, the government cannot hope to take up all the slack left by the collapse in exports and knock-on drop in private investment; for a start, there may be limits to how much money can be spent efficiently on traditional investment schemes. As it is, the bank already expects 4.9 percentage points of its projected 6.5 percent growth this year to stem from government-influenced investment and public-sector consumption.

"China's economy cannot escape the impact of the global weakness. Government-influenced activity makes up a modest share of the total: it cannot and should not offset fully the downward pressures on market-based activity," the report said. The bank tempered this message of resignation with the assurance that China would continue to grow substantially faster than most other countries this year and next. Indeed, the stimulus is already supporting activity and sentiment, even if it is too early to expect a sustained rebound, the World Bank said. The bank said it expected the yuan to keep strengthening in the next decade given China's prospective balance-of-payments and productivity trends. Kuijs described the outlook for exports this year as "grim" and "sombre". But he said depreciating the currency in the short term would not help revive exports, because global demand is so weak, and would slow China's switch to consumption-led growth.

2 dozen victims seek to be heard at Madoff plea

2009-03-09T16:40:00.000-07:00

NEW YORK - (Business Week) Federal prosecutors say they've received more than two dozen e-mails from investors seeking to speak Thursday when Bernard Madoff is expected to plead guilty. Prosecutors described the e-mails in a letter to Judge Denny Chin, who sent notification to investors last week saying they could speak Thursday. Prosecutors say they have received 25 e-mails from investors asking to be heard. They did not say if each e-mail pertains to a single investor or multiple ones. The 70-year-old former Nasdaq chairman was arrested in December on a securities fraud charge. Prosecutors say he confessed to family members that he had run a $50 billion Ponzi scheme for years.

Chrysler Considered, Abandoned, Bankruptcy Before Seeking Aid

2008-11-19T10:19:00.000-08:00

By Jeff Green

Nov. 19 (Bloomberg) -- Chrysler LLC Chief Executive Officer Robert Nardelli said his company studied a prearranged bankruptcy before dismissing the idea as unworkable and approaching the U.S. government for money to survive. Nardelli and General Motors Corp. CEO Rick Wagoner, who has repeatedly ruled out bankruptcy, told senators yesterday that a failure will lead to an economic ``catastrophe'' much costlier than the $25 billion in aid being proposed by Democrats. GM has said it may run out of operating cash this year.

``We did look at prepackaged,'' Nardelli testified in Washington. ``We looked at pre-negotiated. We've looked at almost every alternative within Chrysler as a privately held company before we came here and ask for support to -- to provide a bridge, if you will, through this economic trough.'' His comments highlighted U.S. automakers' objections to so- called prepackaged bankruptcies, as advocated by some Republican lawmakers. While proponents say a filing with financing in hand would let GM, Chrysler and Ford Motor Co. survive, the automakers say going to court would end in their liquidation. Wagoner, Nardelli and Ford CEO Alan Mulally returned to Capitol Hill today for a House committee hearing as they seek an industry bailout before Congress's lame-duck session ends this week. Opposition from President George W. Bush and Republicans threatens to scuttle Democrats' bid to tap the $700 billion bank-rescue plan for automaker loans. A defeat may push consideration of any new aid into 2009, because House Speaker Nancy Pelosi said yesterday she doesn't intend to reconvene in December.

`Fresh Capital'

``Without fresh capital, we project that GM may not have sufficient liquidity to make it to year end,'' Deutsche Bank AG analysts including Rod Lache in New York wrote in a note to investors today. A GM bankruptcy is the ``only way'' for the biggest U.S. automaker to end union costs that make it uncompetitive, Republican Senator James DeMint of South Carolina said in an interview on Bloomberg Radio. Nardelli, who said Chrysler is down to $6.1 billion in cash and burning about $1 billion more each month, told senators yesterday that bankruptcy would take too much time.

``To a certain degree, all of these take an extensive amount of time,'' he said of the options for arranging a filing for court protection. Auburn Hills, Michigan-based Chrysler would need support from ``all the players, all of the suppliers, all of the vendors, all of the labor,'' he said.

`Very Fragile'

``In fact, we are in a very fragile position,'' he said of Chrysler, whose 26 percent U.S. sales decline this year through October is the most among major automakers. The median time for a prepackaged bankruptcy is 45 days, according to Lynn LoPucki, who teaches bankruptcy law at Harvard University and the University of California at Los Angeles. The median time for an ordinary bankruptcy is about 1 1/2 years, or more than 10 times as long, he said. For GM, a prepackaged bankruptcy plan with federal assistance would involve fewer taxpayer dollars than a bailout done outside of court, said Mark Bane, a bankruptcy lawyer at Ropes & Gray in New York. He isn't involved in GM's case. The Detroit-based automaker could use court protection to reduce debt, reject unfavorable contracts and minimize the risk that it would need a future bailout, Bane said in an interview. ``It creates the environment to deal with GM's problems, but limits government financial commitment,'' he said.

No `Stigma'

``I don't understand the stigma that would come with prepackaged bankruptcy,'' with the benefit of government funds to the industry, Tennessee Republican Senator Bob Corker said yesterday. ``I don't know how that could possibly be detrimental.'' Mulally, who said Dearborn, Michigan-based Ford isn't yet running out of money, said he expects that the bankruptcy of one automaker may lead to the failure of the others. The failure of GM would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, estimates. A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' he said Nov. 15. Aid will likely be delayed until Congress attaches more conditions, JPMorgan Chase & Co. analyst Himanshu Patel in New York wrote in a report today. ``The tone of the hearing conducted on behalf of the Senate Banking, Housing and Urban Affairs Committee and the direction of questioning did not change our view that federal aid is more likely than not,'' Patel wrote. ``However, we feel it is clearer now that the timing of any such aid is not imminent as key differences remain amongst influential power-brokers.''

Molson Coors Rises on Sales Gains, Quicker Savings

2008-11-05T14:22:00.000-08:00

By Allison Abell Schwartz (Bloomberg)

Molson Coors Brewing Co., the third- largest U.S. beer maker, rose 8.3 percent in New York trading because of market-share gains in Canada and the U.K. and after the company said it expects to achieve total cost savings from its joint U.S. venture with SABMiller Plc six months early. Sales to retailers in Canada climbed 3.7 percent, led by “double-digit growth“ of Coors Light, Carling and Rickard’s, the company said today. Those sales gained 0.7 percent in the U.S. In the U.K., the brewer grew market share amid a slowing economy and fewer pub visits because of a smoking ban there. An increase in sales to retailers in the U.S. and Canada and Molson Coors’s cost savings announcement helped send the shares higher in New York trading today, Brian Yarbrough, an analyst at Ed Edward Jones in St. Louis, said in a telephone interview. “We are in probably the healthiest position we could wish to be in,” Chief Executive Officer Peter Swinburn said today in a telephone interview. Molson Coors, based in Denver and Montreal, climbed $3.20 to $41.78 at 4:12 p.m. in New York Stock Exchange composite trading. The shares have lost 19 percent this year. Net income jumped 29 percent to $173.2 million, or 94 cents a share, Molson Coors said in a statement. Profit excluding some one-time costs and gains was unchanged at 95 cents from a year earlier, 2 cents lower than the average estimate of 11 analysts surveyed by Bloomberg. Revenue after excise taxes dropped 45 percent to $921.1 mi million from $1.69 billion in the three months ended Sept. 28 as Molson Coors separated its U.S. operations into the MillerCoors venture. Including the U.S. business, its worldwide beer volume rose less than 1 percent to 12 million barrels.

Canadian Sales

Beer discounts and commodity inflation hurt earnings in Canada, where sales grew by a “high-single-digit” percentage, the brewer said. Profit in the country fell 8.1 percent to $151 million before taxes as the cost of goods sold rose 7 percent because of higher material, packaging material and fuel prices. Earnings in the U.K. climbed 19 percent before taxes, helped by new contracts with suppliers and lower pension costs. Sales volume declined and a 7 percent drop in the pound against the dollar trimmed profit, Molson Coors said. As commodity costs begin to slow, Molson Coors may be well positioned to boost profit, said Yarbrough, who recommends investors buy the shares.

MillerCoors Venture

Earlier today, MillerCoors reported third-quarter profit increased 15 percent to $168.2 million on sales gains of 1.9 percent, helped by purchases of Coors Light. It was the first period of joint operations. MillerCoors will cut “a lot” of jobs in the coming weeks, the unit’s executives said on a Webcast discussing earnings. The venture is the second-biggest U.S. beer company behind Anheuser- Busch Cos. and holds 30 percent of the country’s beer market. In June, Molson Coors and SABMiller joined their U.S. divisions and said they expect to save $500 million over three years from the combination. The brewer said today it anticipates accelerating by six months that savings plan, with the first $50 million by June 30 and $350 million in the second year of the venture. A year earlier, Molson Coors earned $134.7 million, or 74 cents a share.

Outsource Your Collections

2008-11-05T11:55:00.000-08:00

Debt collection is a touchy subject because of the economic climate in the US right now but still a necessity for companies. Although some companies do this in house, most businesses are looking to free up current staff and reduce overall costs that are associated with this process. We’ve been looking at a number of debt collectors and will report on them in the next few weeks. The first one we found was American Profit Recovery. They seem to have the right approach. They’ve streamlined the whole process to make it as easy as possible for a client to manage all of their accounts right on their website. Some of the pages in the site seem to be down but it looks like this is a temporary issues and I’ve been told that these kinks will be worked out soon. I’ve worked at a few companies that could have been greatly helped by APR’s work so I would recommend that if you’re looking for help with debt collection that you set up a call with them so they can answer any questions you might have. If you have used them before we’d love to hear your experiences so we encourage you to send us feedback. From all I can gather they have a great operation going.

Senior Journalist Casper Nightingale contributed to this article

Obama Is Elected President as Racial Barrier Falls

2008-11-05T06:52:00.000-08:00

By ADAM NAGOURNEY (NYTimes)

Barack Hussein Obama was elected the 44th president of the United States on Tuesday, sweeping away the last racial barrier in American politics with ease as the country chose him as its first black chief executive. The election of Mr. Obama amounted to a national catharsis — a repudiation of a historically unpopular Republican president and his economic and foreign policies, and an embrace of Mr. Obama’s call for a change in the direction and the tone of the country. But it was just as much a strikingly symbolic moment in the evolution of the nation’s fraught racial history, a breakthrough that would have seemed unthinkable just two years ago. Mr. Obama, 47, a first-term senator from Illinois, defeated Senator John McCain of Arizona, 72, a former prisoner of war who was making his second bid for the presidency.

To the very end, Mr. McCain’s campaign was eclipsed by an opponent who was nothing short of a phenomenon, drawing huge crowds epitomized by the tens of thousands of people who turned out to hear Mr. Obama’s victory speech in Grant Park in Chicago. Mr. McCain also fought the headwinds of a relentlessly hostile political environment, weighted down with the baggage left to him by President Bush and an economic collapse that took place in the middle of the general election campaign.“If there is anyone out there who still doubts that America is a place where all things are possible, who still wonders if the dream of our founders is alive in our time, who still questions the power of our democracy, tonight is your answer,” said Mr. Obama, standing before a huge wooden lectern with a row of American flags at his back, casting his eyes to a crowd that stretched far into the Chicago night.

“It’s been a long time coming,” the president-elect added, “but tonight, because of what we did on this date in this election at this defining moment, change has come to America.” The focus shifted quickly on Wednesday to the daunting challenges facing the president-elect, with his supporters offering sober reflections of what lies ahead. “We’re in deep trouble,” said Rep. John Lewis, a Georgia Democrat and leader in the civil rights movement, on the Today show on NBC.

“We’ve got to get our economy out of the ditch, end the war in Iraq and bring our young men and women home, provide health care for all our citizens,” Mr. Lewis said. “And he’s going to call on us, I believe, to sacrifice. We all must give up something.” Mr. McCain delivered his concession speech under clear skies on the lush lawn of the Arizona Biltmore, in Phoenix, where he and his wife had held their wedding reception. The crowd reacted with scattered boos as he offered his congratulations to Mr. Obama and saluted the historical significance of the moment.

“This is a historic election, and I recognize the significance it has for African-Americans and for the special pride that must be theirs tonight,” Mr. McCain said, adding, “We both realize that we have come a long way from the injustices that once stained our nation’s reputation.” Not only did Mr. Obama capture the presidency, but he led his party to sharp gains in Congress. This puts Democrats in control of the House, the Senate and the White House for the first time since 1995, when Bill Clinton was in office.The day shimmered with history as voters began lining up before dawn, hours before polls opened, to take part in the culmination of a campaign that over the course of two years commanded an extraordinary amount of attention from the American public. As the returns became known, and Mr. Obama passed milestone after milestone —Ohio, Florida, Virginia, Pennsylvania, New Hampshire, Iowa and New Mexico — people rolled spontaneously into the streets to celebrate what many described, with perhaps overstated if understandable exhilaration, a new era in a country where just 143 years ago, Mr. Obama, as a black man, could have been owned as a slave.

For Republicans, especially the conservatives who have dominated the party for nearly three decades, the night represented a bitter setback and left them contemplating where they now stand in American politics. Republican leaders began on Wednesday what will likely be a lengthy re-examination of their brand, as Democrats hope to shape a permanent re-alignment of the electoral map. “Certainly, we have to examine this,” said Rep. Kay Bailey Hutchinson, a Texas Republican, on CNN on Wednesday. “We have to listen to what the people are saying if we’re going to be a forceful voice.” Mr. Obama and his expanded Democratic majority on Capitol Hill now face the task of governing the country through a difficult period: the likelihood of a deep and prolonged recession, and two wars. He took note of those circumstances in a speech that was notable for its sobriety and its absence of the triumphalism that he might understandably have displayed on a night when he won an Electoral College landslide.

“The road ahead will be long, our climb will be steep,” said Mr. Obama, his audience hushed and attentive, with some, including the Rev. Jesse Jackson, wiping tears from their eyes. “We may not get there in one year or even one term, but America, I have never been more hopeful than I am tonight that we will get there. I promise you, we as a people will get there.” The roster of defeated Republicans included some notable party moderates, like Senator John E. Sununu of New Hampshire and Representative Christopher Shays of Connecticut, and signaled that the Republican conference convening early next year in Washington will be not only smaller but more conservative. Mr. Obama will come into office after an election in which he laid out a number of clear promises: to cut taxes for most Americans, to get the United States out of Iraq in a fast and orderly fashion, and to expand health care. In a recognition of the difficult transition he faces, given the economic crisis, Mr. Obama is expected to begin filling White House jobs as early as this week.

Mr. Obama defeated Mr. McCain in Ohio, a central battleground in American politics, despite a huge effort that brought Mr. McCain and his running mate, Gov. Sarah Palin of Alaska, back there repeatedly. Mr. Obama had lost the state decisively to Senator Hillary Rodham Clinton of New York in the Democratic primary.

Mr. McCain failed to take from Mr. Obama the two Democratic states that were at the top of his target list: New Hampshire and Pennsylvania. Mr. Obama also held on to Minnesota, the state that played host to the convention that nominated Mr. McCain; Wisconsin; and Michigan, a state Mr. McCain once had in his sights. The apparent breadth of Mr. Obama’s sweep left Republicans sobered, and his showing in states like Ohio and Pennsylvania stood out because officials in both parties had said that his struggles there in the primary campaign reflected the resistance of blue-collar voters to supporting a black candidate. “I always thought there was a potential prejudice factor in the state,” Senator Bob Casey, a Democrat of Pennsylvania who was an early Obama supporter, told reporters in Chicago. “I hope this means we washed that away.” Mr. McCain called Mr. Obama at 10 p.m., Central time, to offer his congratulations. In the call, Mr. Obama said he was eager to sit down and talk; in his concession speech, Mr. McCain said he was ready to help Mr. Obama work through difficult times. “I need your help,” Mr. Obama told his rival, according to an Obama adviser, Robert Gibbs. “You’re a leader on so many important issues.” Mr. Bush called Mr. Obama shortly after 10 p.m. to congratulate him on his victory. “I promise to make this a smooth transition,” the president said to Mr. Obama, according to a transcript provided by the White House .”You are about to go on one of the great journeys of life. Congratulations, and go enjoy yourself.” For most Americans, the news of Mr. Obama’s election came at 11 p.m., Eastern time, when the networks, waiting for the close of polls in California, declared him the victor. A roar sounded from the 125,000 people gathered in Hutchison Field in Grant Park at the moment that they learned Mr. Obama had been projected the winner.

The scene in Phoenix was decidedly more sour. At several points, Mr. McCain, unsmiling, had to motion his crowd to quiet down — he held out both hands, palms down — when they responded to his words of tribute to Mr. Obama with boos. Mr. Obama, who watched Mr. McCain’s speech from his hotel room in Chicago, offered a hand to voters who had not supported him in this election, when he took the stage 15 minutes later. “To those Americans whose support I have yet to earn,” he said, “I may not have won your vote, but I hear your voices, I need your help, and I will be your president, too.” Initial signs were that Mr. Obama benefited from a huge turnout of voters, but particularly among blacks. That group made up 13 percent of the electorate, according to surveys of people leaving the polls, compared with 11 percent in 2006.

In North Carolina, Republicans said that the huge surge of African-Americans was one of the big factors that led to Senator Elizabeth Dole, a Republican, losing her re-election bid. Mr. Obama also did strikingly well among Hispanic voters; Mr. McCain did worse among those voters than Mr. Bush did in 2004. That suggests the damage the Republican Party has suffered among those voters over four years in which Republicans have been at the forefront on the effort to crack down on illegal immigrants. The election ended what by any definition was one of the most remarkable contests in American political history, drawing what was by every appearance unparalleled public interest. Throughout the day, people lined up at the polls for hours — some showing up before dawn — to cast their votes. Aides to both campaigns said that anecdotal evidence suggested record-high voter turnout.

Reflecting the intensity of the two candidates, Mr. McCain and Mr. Obama took a page from what Mr. Bush did in 2004 and continued to campaign after the polls opened. Mr. McCain left his home in Arizona after voting early Tuesday to fly to Colorado and New Mexico, two states where Mr. Bush won four years ago but where Mr. Obama waged a spirited battle. These were symbolically appropriate final campaign stops for Mr. McCain, reflecting the imperative he felt of trying to defend Republican states against a challenge from Mr. Obama. “Get out there and vote,” Mr. McCain said in Grand Junction, Colo. “I need your help. Volunteer, knock on doors, get your neighbors to the polls, drag them there if you need to.” By contrast, Mr. Obama flew from his home in Chicago to Indiana, a state that in many ways came to epitomize the audacity of his effort this year. Indiana has not voted for a Democrat since President Lyndon B. Johnson’s landslide victory in 1964, and Mr. Obama made an intense bid for support there. He later returned home to Chicago play basketball, his election-day ritual.

Economy shrinks in 3Q, signaling recession

2008-10-30T09:23:00.000-07:00

AP WASHINGTON: The economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession. The broadest barometer of the nation's economic health, gross domestic product, shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department reported Thursday. It marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession. The latest GDP reading marked a rapid loss of traction for the economy, which logged growth of 2.8 percent in the second quarter, and is sure to buttress the belief of many economists that the nation is in the throes of a painful downturn.

"No question. We're definitely in a recession. That is just a reality," said Brian Bethune, economist at IHS Global Insight. The White House tried to downplay the significance of the numbers, saying they were not unexpected and caused partly by special circumstances such as hurricanes and a Boeing Co. strike.

"While we continue to face serious challenges, the United States remains the best place to do business, and we're positioned to bounce back," White House press secretary Dana Perino said. The deterioration reflected a sharp retrenchment by consumers, whose spending accounts for the largest chunk of national economic activity. Consumers ratcheted back their spending at a 3.1 percent pace in the third quarter, the most since the second quarter of 1980, when the country was in the grip of recession. GDP measures the value of all goods and services produced within the United States and is the broadest barometer of the country's economic health. While the third-quarter's contraction wasn't as deep as the 0.5 percent annualized decline analysts expected, the poor showing underscored the terrible toll of the housing, credit and financial crises. J. Steven Landefeld, director of the Commerce Department's Bureau of Economic Analysis, which puts together the GDP report, didn't use the word "recession" to describe economic conditions but said: "Certainly we are seeing a period of dramatic slowdown."

On Wall Street, however, the smaller-than-expected decline gave some comfort to investors. The Dow Jones industrials were up about 80 points in midday trading. Meanwhile, the Labor Department said Thursday that new claims for jobless benefits for the week ending Oct. 25 stood at a seasonally adjusted 479,000, the same as the previous week and above analysts' estimates of 475,000. Jobless claims above 400,000 are considered a sign of a struggling economy. The grim reports come just days before the nation picks the next president on Nov. 4. Whether Democrat Barack Obama or Republican John McCain wins the White House, the incoming president will inherit a deeply troubled economy and a record-high budget deficit that could cramp his domestic agenda. Many economists believe the economy will continue to contract into next year, which would more than meet a classic definition of recession two straight quarters of shrinking GDP. The National Bureau of Economic Research, the panel of experts that determines when U.S. recessions begin and end, uses a broader definition to determine recessions than two quarters of contracting GDP. That didn't happen in the last recession, in 2001. The NBER takes into account income, employment and other barometers. The finding is usually made well after the fact.

A collapse of the housing market and locked up lending have produced the worst financial crisis to hit the country in more than 70 years. To cushion the fallout, the Fed slashed interest rates on Wednesday by half a percentage point to 1 percent, a level seen only once before in the last half century.Fed Chairman Ben Bernanke has warned that the country's economic weakness could last for some time even if the government's unprecedented $700 billion financial bailout package and other steps do succeed in getting financial and credit markets to operate more normally. Unemployment now at 6.1 percent could hit 8 percent or higher next year. Disappearing jobs, battered nest eggs and retirement accounts, and falling home prices are likely to make consumers retrench even more. Underscoring the strain faced by consumers, the report showed that Americans' disposable income fell at an annual rate of 8.7 percent in the third quarter, the largest quarterly drop on records dating back to 1947.

In the third quarter, consumers cut back on purchases of cars, furniture, household appliances, clothes and other things.They pulled back after the bracing impact of the government's tax rebates disappeared. In addition to consumers, businesses cut back sharply in the third quarter. They cut spending on equipment and software at a 5.5 percent pace, the most since the first quarter of 2002, when the economy was struggling to recover from the 2001 recession. Home builders slashed spending at a 19.1 percent pace, marking the 11th straight quarterly cut back, and fresh evidence of the depth of the housing slump. Slower growth for U.S. exports reflecting less demand from overseas buyers who are coping with their own economic problems also factored into the weak GDP report. Exports grew at a 5.9 percent pace in the third quarter, a sharp deceleration from the second quarter's 12.3 percent growth rate. The U.S. economic downturn in the third quarter was accompanied by higher inflation. An inflation gauge tied to the GDP report showed prices excluding food and energy rose at a 2.9 percent pace, up considerably from the 2.2 percent growth rate in the second quarter. Although the new reading is outside the Fed's comfort zone, Fed officials predict the economy's slowdown will damp inflation pressures in the months ahead. The Fed has made clear that its primary mission at the moment is reviving the economy.

Newspapers see sharp circulation drop of 4.6 pct

2008-10-27T11:53:00.000-07:00

By ANICK JESDANUN
(AP) — The nation's daily newspapers, already finding advertising revenue fell sharply because of the weak economy, saw circulation decline more steeply than anticipated in the latest reporting period, an auditing agency said Monday. Average weekday circulation was 38,165,848 in the six-months ending in September, a 4.6 percent decline from 40,022,356 a year earlier at the 507 papers that reported circulation totals in both periods. The drop was only 2.6 percent in the September 2007 period, compared with September 2006. In the six-month period that ended in March 2008, the decline was 3.6 percent over a year earlier, according to circulation figures that newspapers submitted to the Audit Bureau of Circulations. Sunday circulation fell even more, 4.8 percent, to 43,631,646 in the latest period at the 571 papers with comparable totals. The drop was 3.5 percent a year ago and 4.6 percent in the period ending in March. Circulation and advertising have been dropping at newspapers as readers continue to migrate to the Internet. Ad revenue began to decline more steeply this summer as the weak economy prompted advertisers to pull back on spending. The sharper circulation declines appear to be a response to that, said Rick Edmonds, media analyst at the journalism think tank Poynter Institute.

"Times are tough, and they are looking at everything that's in their expense base," he said. "Building new subscribers is an expensive proposition." Some newspapers have purposely let some sales slide to focus on those readers who are coveted by advertisers and exclude those in outlying areas that are more expensive to reach. Circulation could drop even faster as regular readers, in a tight economy, decide they no longer need their printed newspapers, Edmonds warned. Many papers have offset circulation declines with price increases, though papers risk losing readers if they raise prices too much. In a sign of hope, the Newspaper Association of America said last week that usage of newspaper Web sites grew nearly 16 percent in the third quarter, compared with last year, to an average of more than 68 million monthly unique visitors. But online ad sales haven't increased fast enough to offset the declines in print, which still makes up the bulk of a paper's revenue. USA Today remains the nation's top-selling newspaper, with average daily circulation of 2,293,310, just 173 more than last year. The No. 2 daily, The Wall Street Journal, also reported flat circulation — up just 117 copies to 2,011,999.

The New York Times saw circulation decline 3.6 percent to 1,000,665, while the Los Angeles Times had a 5.2 percent drop to 739,147. The other papers in the top 25 also saw circulation drops of from 1.9 percent at The Washington Post to 13.6 percent at The Atlanta Journal-Constitution. The New York Times remains the top paper on Sundays, when USA Today and the Journal do not publish, with a circulation of 1,438,585, down 4.1 percent. The Los Angeles Times follows at 1,055,076, down 5.1 percent, and the Post at 866,057, a decrease of 3.2 percent. Among the top 25, only the St. Louis Post-Dispatch and the St. Petersburg (Fla.) Times reported Sunday gains, of 0.8 percent and 0.1 percent, respectively. Despite the industrywide decline in circulation, five papers outside the top 25 reported gains of at least 5 percent, led by the Wisconsin State Journal of Madison, where circulation rose 10.6 percent to 97,012. The other gainers are The Macomb Daily of Mount Clemens, Mich., The Daily Sun of The Villages, Fla., The Times of Trenton, N.J., and the Citizen Tribune of Morristown, Tenn.

Wells Fargo Chairman Prefers U.S. Plan to Buy Stakes

2008-10-22T08:25:00.000-07:00

(Bloomberg) -- Wells Fargo & Co. Chairman Richard Kovacevich said the U.S. Treasury's intention to buy stock in banks provides a better stimulus to escape the financial crisis than an earlier plan to purchase soured mortgage-related assets.

``Direct capital injections versus buying loans is a far more preferable way'' to help companies already facing credit losses, Kovacevich, 64, said yesterday at an event hosted by San Francisco's Commonwealth Club. ``It's an important tool to get the financial system back into the money business again.'' Wells Fargo, which agreed to buy Wachovia Corp. for about $14 billion this month, is one of nine large lenders slated to receive cash infusions as part of the government's plan to spend $700 billion unfreezing credit markets. Wells Fargo, based in San Francisco, will get $25 billion. JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. are among the others that will receive the cash.

U.S. Treasury Secretary Henry Paulson last week urged banks to ``deploy'' the money in loans. He was forced to change his strategy after the initial plan to buy distressed assets caused banks to hoard cash and failed to halt a slide in the stock market. Kovacevich declined to say if he initially opposed Paulson's plan as the New York Times reported. Wells Fargo dropped 99 cents, or 3 percent, to $31.65 at 10:04 a.m. in New York Stock Exchange composite trading. The shares gained 8.1 percent this year through yesterday, the biggest advance in the 24-comopany KBW Bank Index. Wachovia fell 17 cents to $5.92, adding to its 84 percent decline this year.

He's Seen Worse

Kovacevich said the current economic crisis isn't the worst he's seen, and the U.S. government's may help end the credit freeze ``reasonably soon.''

``Our customers, except those in residential home lending or autos, are doing quite well,'' he said. ``By far, the worst economic crisis of my career was in the 1980s.'' The Wachovia deal, orchestrated by Kovacevich, marks an eastward expansion and strategic shift for Wells Fargo, which maintained a profit during the financial crisis by avoiding riskier loans. Wachovia's mortgage portfolio includes an estimated $74 billion in future losses. The Wells Fargo-Wachovia deal will create the biggest U.S. bank network, with 6,675 branches. The Federal Reserve said yesterday that Wells Fargo agreed to reduce its deposit base to comply with U.S. bank-merger law should the combined company control more than 10 percent of deposits nationwide.

Wachovia reported its third straight quarterly loss today, hurt by crumbling mortgage markets and writedowns on securities backed by real estate. The loss for the three months ended Sept. 30 was $23.9 billion, or $11.18 a share, compared with net income of $1.6 billion, or 85 cents, in the same period a year earlier, the Charlotte, North Carolina-based company said in a statement. The Wachovia deal would be Wells Fargo's biggest acquisition since Norwest Corp. purchased the old Wells Fargo 10 years ago and adopted the name. Kovacevich was chief operating officer at Minneapolis-based Norwest in the 1980s when current Wells Fargo Chief Executive Officer John Stumpf, 55, was running the auto-dealer business and working on commercial loans. Kovacevich was promoted to CEO of Norwest in 1993 and stepped down in June 2007 to make way for the promotion of Stumpf, who has been with the company for 26 years.

Let 'Em Ride

2008-10-22T08:13:00.001-07:00

I haven't been playing much online poker since my party poker days at college but I've recently been getting into some of the new casino sites that offer table games. A friend of mine recommended a new German casino www.casino.de that is absolutely fabulous. They've got a great blackjack game and my favorite craps. Craps is possibly the most fun table game in casinos and although it's dangerous, can provide hours of fun online. There's nothing like being on a roll in craps. I remember being at the Luxor a few years ago and turning my gas money (that's all I had left after getting killed in blackjack) into a grand on the last night in the casino. The shooter at the table didn't crap out for 2 hours! I'll probably be gambling less after losing a lot in the markets this month but there will always be a place in my heart for that Las Vegas action that you can now get online. This casino is great because not only can I enjoy the gaming, I can also brush up on my German which I've used less and less since my days in Berlin. I'd be wary of spending too much on gambling, but the game play is great and if you can't make it to Vegas or Atlantic City (and you speak German) check our their site for good times. Good Luck!

Deal close on $700 billion financial bailout plan

2008-09-25T06:59:00.000-07:00

By JULIE HIRSCHFELD DAVIS

WASHINGTON (AP) - President Bush is bringing presidential candidates Barack Obama and John McCain into negotiations on a $700 billion rescue of Wall Street as Democrats and Republicans near agreement on a bailout plan with more protections for taxpayers and new help for distressed homeowners. Senior lawmakers and Bush administration officials have cleared away key obstacles to a deal on the unprecedented rescue, agreeing to include widely supported limits on pay packages for executives whose companies benefit. They're still wrangling over major elements, including how to phase in the eye-popping cost - a measure demanded by Democrats and some Republicans who want stronger congressional control over the bailout - without spooking markets. A plan to let the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also was under intense negotiation. A bipartisan meeting was set for Thursday to begin drafting a compromise, which top Democrats said they hoped could pass within days.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession. Bush acknowledged in a prime-time television address Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold," Bush said as he worked to resurrect the unpopular bailout package. "Our entire economy is in danger." Bush's warning came soon after he invited Obama and McCain, one of whom will inherit the economic mess in four months, as well as key congressional leaders to a White House meeting Thursday to work on a compromise. With the administration's original proposal considered dead in Congress, House leaders said they were making progress toward revised legislation that could be approved. Rep. Barney Frank, D-Mass., who has led negotiations with Treasury Secretary Henry Paulson on the package, said that given the progress of the talks, the White House meeting was a distraction.

"We're going to have to interrupt a negotiating session tomorrow between the Democrats and Republicans on a bill where I think we are getting pretty close, and troop down to the White House for their photo op," said Frank, the House Financial Services Committee chairman. "I wish they'd checked with us." Paulson and Federal Reserve Chairman Ben Bernanke have been crisscrossing Capitol Hill in recent days, shuttling between public hearings on the proposal and private meetings with lawmakers, to sell the proposal. Obama and McCain are calling for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

"The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail," they said in a joint statement Wednesday night. "This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe." Presidential politics intruded, nonetheless, when McCain said earlier Wednesday he intended to return to Washington and was asking Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead. Lawmakers in both parties have objected strenuously to the rescue plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on more conditions and help for beleaguered homeowners. But many in both parties said they were open to legislation, although on different terms than the White House has proposed. Some partisan sticking points remain. Democrats are pushing to allow bankruptcy judges to rewrite mortgages to ease the burden on consumers who are facing foreclosure - a nonstarter for Republicans.

Democrats acknowledge privately that the provision will almost certainly be dropped in the interest of a bipartisan deal. Obama told reporters it's "probably something that we shouldn't try to do in this piece of legislation." Democrats also want any potential proceeds the government reaps from the bailout to go to a fund designed to pay for housing for poor families. Many Republicans oppose the very existence of the fund, which they say is a backdoor means of funneling money to liberal political groups. Democratic demands that Congress be given greater authority over the bailout and that the government be required to help homeowners renegotiate their mortgages so they have lower monthly payments already have been accepted in principle. Under the bailout bill, which will let the government buy huge amounts of toxic mortgage-related assets, "we're now the biggest mortgage holder in town, and we can do serious foreclosure avoidance," Frank said.

Bush Warns "Entire Economy Is In Danger"

2008-09-25T06:54:00.000-07:00

Media reports are casting President Bush's televised address last night as both a warning to the nation on the severity of the financial crisis and an attempt to push Congress into passing his proposed bailout. A number of the stories remark on Bush's stark warnings about the health of the economy. Roll Call, for example, says Bush "sketched a frightening view of the economic danger," and used "unusually blunt and even dramatic language." The New York Times reports Bush told the country that "'a long and painful recession' could occur if Congress does not act quickly." Like many other media outlets this morning, the Times quotes the President saying, "Our entire economy is in danger." Bush's speech highlighted "a growing sense of urgency on the part of the administration that Congress must act to avert a far-reaching economic collapse." USA Today notes the President also said, "Without immediate action by Congress, America could slip into a financial panic. ... More banks could fail, including some in your community." He also "warned that inaction could cause millions of layoffs, bank failures, business closures, lost retirement savings, more foreclosures, a further drying up of credit." McClatchy, Los Angeles Times and Washington Post run similar reports.

The speech is also seen as a response to critics who accused the President of not having played a lead role in the government's efforts to defuse the crisis. USA Today reports, for example, that Bush faced "criticism from some Democrats for being AWOL in the debate," and the Wall Street Journal says that "until now," the President had "relied largely on Treasury Secretary Henry Paulson -- a former Goldman Sachs CEO -- and Federal Reserve Chairman Ben Bernanke to make the case for the plan," but "Republican support has been so soft that Democrats worried they would have to take on most of the responsibility -- and political risk -- for passing the package." And "to spread that risk, Democrats on Tuesday called on Mr. Bush to address the nation."

The Politico describes Paulson as "the captain of a crowded lifeboat" who "struggled to stay afloat in Congress Wednesday, battling the waves crashing in on his Wall Street rescue plan." With his speech, Bush was "lending a hand" and taking "back the helm long enough Wednesday night to deliver a nationally televised address," but "to the surprise of some in his own administration, Bush spent precious political capital by using the speech to try to help McCain by bringing him into what have been delicate negotiations with Congress."

McCain, Obama To Attend White House Talks Today The AP notes Bush "spoke just after inviting Democrat Sen. Barack Obama and Republican Sen. John McCain, one of whom will inherit the mess in four months, and key congressional leaders to an extraordinary White House meeting Thursday to hammer out a compromise." In his speech, the President "explicitly endorsed several of the changes that have been demanded in recent days from the right and left. But he warned that he would draw the line at regulations he determined would hamper economic growth." Another AP story and a report in the Los Angeles Times, among other media stories, note both Obama and McCain have said they will attend the meeting.

Lehman: Too big to fail?

2008-09-10T10:16:00.000-07:00

By Paul R. La Monica, CNNMoney.com editor

NEW YORK (CNNMoney.com) -- Lehman Brothers has finally announced a path to raising capital. But after Tuesday's 45% plunge in its stock price, it's unclear if Wall Street will let chief executive officer Richard Fuld carry out the plan. Lehman's (LEH, Fortune 500) stock was down about 2% late Wednesday morning after the company said it would slash its dividend, look for a buyer of the majority of its Neuberger Berman investment management unit and spin off part of its commercial real estate business. Shares are trading at their lowest point in 10 years, having plummeted nearly 90% so far this year. And by the way, the company lost $3.9 billion in the third quarter. So now, the natural question that needs to be asked is this: On the heels of the Treasury Department's takeover of mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), does the government now have to step in and bailout Lehman as well. Unfortunately, it may have no choice.

Talkback: Do you think Lehman should be allowed to fail or does it need to be bailed out?

The Federal Reserve set a dangerous precedent in March when it helped engineer the takeover of Bear Stearns by JPMorgan Chase (JPM, Fortune 500) by agreeing to guarantee $29 billion in potential losses. Since then, several Fed members, most notably chief Ben Bernanke, have gone out of their way to defend the action, arguing that Bear Stearns simply was too big to fail. The repercussions of allowing Bear to collapse could have been catastrophic. So if Bear was determined to be too big to fail, isn't it likely the Fed would think Lehman is as well?

Probably. That's because Lehman, the fourth-largest investment bank, is bigger than Bear, which was the fifth-largest at the time it nearly imploded. What's more, Lehman, a bond-trading powerhouse, is even a bigger player in the mortgage-backed securities market than Bear was. So the Fed could easily argue that letting Lehman go under could create even more chaos in the already volatile credit markets. Yes, Fuld wants to keep the bank independent by taking a piecemeal approach to breaking up the company. But the market may not let him do so. And until Lehman actually announces that it has, in fact, raised a substantial amount of capital, it's likely that there will be continued pressure on the stock. If Lehman's stock falls further, it's reasonable to think that some financial institution would take a gamble on buying the company, especially if it could get Lehman through a "takeunder" just as JPMorgan did with Bear.

Some analysts have tossed out investment manager BlackRock (BLK, Fortune 500), British bank HSBC (HBC) and private equity firm Blackstone (BX) as potential bidders. But why would any of them agree to take on all the risk without some assurance from the Fed? After all, that's exactly what JPMorgan got in the Bear deal. Don't get me wrong. I don't like the notion of big Wall Street firms getting saved after making irresponsible, reckless decisions. In what's supposed to be a free market, companies should be allowed to fail. But the Fed has already opened Pandora's box. It's too late now to say that Lehman should be left to wither away to nothing while Bear was allowed to escape that fate. To be sure, if one of the three aforementioned firms were to try and buy Lehman and wanted the Fed's help, this would be more complicated than the JPMorgan takeover. BlackRock and Blackstone aren't banks. And HSBC is not a U.S.-headquartered institution.

Still, Bernanke and Fed vice chairman Tim Geithner have demonstrated a remarkable willingness to be flexible and creative in dealing with the credit crunch. So if they wanted to help someone buy Lehman, one would think they would find a way to get it done. Like it or not, the age of the bailout is in full swing. To top of page

Fewer without health insurance, U.S. Census says

2008-08-27T08:16:00.000-07:00

By Ruth Mantell

WASHINGTON (MarketWatch) -- Even as the number of Americans living in poverty rose last year, fewer Americans overall went without health insurance and there was an increase in the median household income adjusted for inflation, the Census Bureau reported Tuesday. The number of people without health-insurance coverage fell to 45.7 million in 2007 from 47 million in 2006, the government said in its annual snapshot. The number of uninsured children also declined, slipping to 8.1 million from 8.7 million. Median household income, adjusted for inflation, rose 1.3% to $50,233 -- the highest level since 2000. Income includes items such as earnings, interest, alimony and unemployment compensation. For households at the 20th percentile, income fell 1.5% to $20,291. For households at the 80th percentile, income rose less than a percentage point to $100,000.

Meanwhile, following three years of annual declines in real earnings, both men and women experienced gains in 2007. The real median earnings for men working full-time and on a year-round basis rose 3.8% to $45,113, with women's earnings growing by 5% to $35,102. The poverty rate hit 12.5% in 2007, compared with 12.3% in the prior year -- not statistically different, according to the Census Bureau. The poverty rate reached 11.7% in 2001, when the economy was in a recession. The number of Americans living under the poverty line reached 37.3 million, including 13.3 million children. In the prior year, there were 36.5 million under the poverty line, 12.8 million of whom were children.

Cause for concern

Despite some good news in the data, there is also cause for concern, according to the Center on Budget and Policy Priorities, a policy and research organization that specializes in programs that affect low- and moderate-income families and individuals. In particular, the rate of those without health insurance hit 15.3% in 2007, up from 14.1% in 2001. "The data for 2007 are of particular concern given that the economy is now in a slowdown, and poverty is almost certainly higher now -- and incomes lower -- than in 2007," said Robert Greenstein, CBPP's executive director.

"The 2007 levels -- already disappointing because they are worse than those for the 2001 recession -- are likely to constitute a high-water mark for the next few years. This suggests that significant pain may lie ahead for many Americans," he commented in a statement. Dr. Nancy Nielsen, president of the American Medical Association, said in a statement that many patients are priced out of coverage, and that covering all Americans would be a "good first step."

"We advocate for a shift in tax incentives for health insurance so lower-income Americans get money to purchase coverage," she added. "We also want insurance-market reforms to provide individuals more choices and ensure coverage for high-risk patients." CBPP estimates that the absolute number of Americans and the percentage of the overall population who are uninsured can be expected to increase both this year and next. "The numbers of uninsured parents and children are likely to grow as employers lay off more workers and states consider cuts in their Medicaid programs to help balance their budgets during the economic slowdown," Greenstein said.

U.S. Producer Prices Surge More Than Forecast in July

2008-08-19T07:13:00.001-07:00

U.S. Producer Prices Surge More Than Forecast in July (Update2)

By Timothy R. Homan(Bloomberg) -- Prices paid to U.S. producers rose twice as much as economists had forecast in July, reflecting the jump in energy and commodity costs that has since started to wane. The 1.2 percent increase in the producer price index followed a 1.8 percent increase the prior month, the Labor Department said today in Washington. Costs were up the most in 27 years from a year before. So-called core prices that exclude fuel and food rose 0.7 percent after a 0.2 percent gain in June. Oil prices have dropped 21 percent since the start of last month, copper is down 15 percent and corn has dropped 14 percent, helping ease the cost pressures on companies. Federal Reserve officials anticipate the economic slowdown, along with a stabilization in commodity costs, will help contain inflation.

``It's not a pretty number,'' said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. ``Today's PPI is a bit of an echo and maybe a little bit of a rude reminder of how much of a problem inflation was in July.'' Another government report showed builders in the U.S. broke ground in July on the fewest houses in 17 years, signaling the residential-construction slump will continue to hurt economic growth. Treasuries were little changed after the reports, with benchmark 10-year notes yielding 3.80 percent at 8:37 a.m. in New York, from 3.82 percent late yesterday. Futures contracts on the Standard & Poor's 500 Stock Index were down 0.9 percent at 1,270.20.

Housing Starts

The 11 percent decrease in housing starts to an annual rate of 965,000, the lowest since March 1991, followed a 1.084 million pace the prior month, the Commerce Department said today in Washington. Building permits, a sign of future construction, also fell. Prices paid to factories, farmers and other producers were forecast to rise 0.6 percent following a previously reported 1.8 percent increase the previous month, according to the median of 77 forecasts in a Bloomberg News survey. Estimates ranged from gains of 0.1 percent to 1.8 percent. Core prices were projected to rise 0.2 percent, according to the survey median. Producers paid 9.8 percent more for goods from July 2007, the biggest year-over-year gain since June 1981, compared with a 9.2 percent gain in the 12 months ended in June. Excluding food and energy, the increase was 3.5 percent from a year earlier, its biggest jump since 1991, compared with a 3 percent gain in the prior month.

Gasoline

Producers paid 0.2 percent less for gasoline, and diesel fuel gained 2.6 percent, the report showed. Natural gas costs were up 7.8 percent from the previous month. The wholesale-price report is based on figures for the Tuesday of the week that includes the 13th of the month. On that basis, a barrel of crude oil cost $138.74 on the New York Mercantile Exchange for July, up from $131.31 the previous month. August producer prices are likely to reflect this month's drop in the cost of oil, which traded at $112.11 a barrel earlier today. Oil futures prices reached a record $147.27 a barrel July 11. Food was 0.3 percent more costly, after a 1.5 percent increase the previous month, today's report showed. Prices for raw materials, or so-called crude goods, increased 4.2 percent, after a 3.7 percent rise the prior month.

Inflation Outlook

Fed policy makers in their statement on Aug. 5 indicated that they expect inflation will moderate in the second half of the year and into 2009. Still, the outlook for prices is ``highly uncertain,'' the central bank's Federal Open Market Committee said in a statement when it voted to keep its benchmark interest rate at 2 percent. Today's report showed passenger car prices gained 1.4 percent and light trucks increased 0.8 percent. The report also showed prices for capital equipment increased 0.8 percent. Consumer goods prices were up 1.2 percent. Producer prices are one of three monthly inflation gauges reported by the Labor Department. Import prices rose 1.7 percent in July and consumer prices increased 0.8 percent for the same period, the Labor Department said last week. Both figures were higher than estimated. Higher raw-material costs are outpacing price increases for some companies. Deere & Co., the world's largest maker of farm equipment, last week said higher prices for tractors and combines weren't enough to counter a $140 million increase in production costs for materials such as steel.

``Escalating raw-material costs are expected to have an impact on margins'' for the fourth quarter, the Moline, Illinois- based company said last week in a statement. Hershey Co., the largest U.S. chocolate maker, on Aug. 15 said it will raise prices to counter higher commodity costs. The changes will result in a roughly 10 percent increase across Hershey's entire U.S. product line, the company said in a statement.

Cablevision Systems mulls spin-off of units

2008-08-05T11:04:00.000-07:00

By JEREMY HERRON

NEW YORK (AP) — Nine months after shareholders rejected the Dolan family's latest bid to take Cablevision Systems Corp. private, the cable operator said Tuesday it is considering options that could see it sell some of its diverse holdings. Chief Executive James Dolan, who has long criticized shareholders for undervaluing what is considered one of the strongest cable franchises in the country, said the Bethpage, N.Y., company may also buy back stock or pay a special dividend.

Dolan said Tuesday the company is "actively looking" at options to close the gap between operating performance and the market value of its shares. The company plans to hire investment banking firms. Its market capitalization stood at around $8.27 billion. The announcement comes a week after Dolan said investors are "significantly" undervaluing the company. The Dolan family controls Cablevision through a special class of shares and has tried to take the company private several times in the past few years. Its most recent attempt offered shareholders $36.26 per share, but that was rejected as too low in October 2007. Cablevision shares rose 7.5 percent to $27.82 in midday trading Tuesday.

Cablevision did not say which of its businesses it would consider selling. Analysts consider its cable franchise, which serves the affluent New York suburbs, one of the best in the business. The unit is the country's fifth-largest cable system and accounts for 75 percent of company revenue. It includes high-speed Internet and phone services that have helped beat back competition from phone companies and satellite TV operators. The company runs several cable television stations, including AMC, IFC and WE tv, as part of its Rainbow Media Holdings LLC unit. The market for popular cable networks has been hot in recent months, with General Electric's NBC Universal paying $3.5 billion for Weather Channel and $875 million for women's programming channel Oxygen. Cablevision paid about $500 million for independent film channel Sundance in June. The company also owns Madison Square Garden and the three sports teams that play there: basketball's New York Knicks and New York Liberty, and hockey's New York Rangers. But potential suitors may have trouble placing a value on the Knicks or Rangers because Cablevision has intertwined contracts among the teams, the arena and the regional sports network that airs their games.

"It will be next to impossible to assess the franchise values unless you know what the contracts are that they work under," said Andrew Zimbalist, a sports economist with Smith College.

Assuming the arena and cable contracts were broken, Zimbalist said the Knicks would be worth about $500 million and the Rangers about $300 million. He estimated average revenue for a National Basketball Association team is $150 million. Forbes magazine ranked the Knicks as the most valuable franchise in the NBA at $608 million in its 2007 rankings, which includes an estimate for the arena deal. Cablevision paid $300 million for the Knicks in 1997, the magazine said. Robert Johnson, the billionaire founder of Black Entertainment Television, paid $300 million for the expansion Charlotte Bobcats in 2003, one of the last NBA teams to be sold. Hockey's Edmonton Oilers, a storied franchise in a small media market, recently sold for about $200 million.

"There's a very special media market in New York for sports teams," Zimbalist said. "There is significant value over and above the average franchise because of the market."

Cablevision's other entertainment venues include Radio City Music Hall and the Beacon Theater, both in New York, and the Chicago Theater. Cablevision is unlikely to sell newspaper publisher Newsday Media Group, following its $650 million purchase of Newsday from Tribune Co. The acquisition closed in July. The company has paid a special dividend in past, returning $3 billion, or $10 per share, in cash to shareholders in 2006. The company took on debt to fund that dividend, which may not be an option now because of the credit crisis.

"We believe that Cablevision's options will be limited by the credit markets," said Goldman Sachs analyst Ingrid Chung in a note to clients.

Cable May Have Gained Broadband Share From Telcos In 2Q

2008-07-28T10:30:00.000-07:00

NEW YORK -(Dow Jones)- Disappointing high-speed Internet numbers from the two largest U.S. telecommunications companies suggest the cable companies could post surprisingly strong customer growth when they report their second quarter results. The second quarter marks a difficult time for all broadband providers because college students tend to disconnect their lines as they go on summer vacation. The weakened economy and housing problems have also weighed on the service providers. Even with the lowered expectations, the telcos failed to match Wall Street's estimates, suggesting competition was a more worrisome issue than previously thought.

"When the chapter is closed on the second quarter, the cable industry will very likely have garnered the highest share in the history of the broadband market," said Craig Moffett, an analyst at Sanford C. Bernstein & Co. LLC.

The telcos and cable providers are aggressively tustling over broadband customers because the Internet line is seen as the key service for customers. Consumers are more willing to forego phone service, where wireless is an alternative, or even television, which can be replaced by online videos, than their Internet connection.

Cable, however, still has an advantage in speed. While the telcos have been ramping up their faster fiber-optic-powered Internet service, the offering is limited. Cable, meanwhile, has pushed the advantage through aggressive marketing, with players such as Comcast Corp. (CMCSK, CMCSA) increasing the airtime for its Slowsky turtles commercials, which mock slower DSL customers. Moffett envisions a scenario where the cable companies gained as much as 75% to 80% of the net new broadband customers in the second quarter.

Wall Street will know if these trends play out according to his expectations when the cable companies report. Comcast Corp. (CMCSK, CMCSA) releases its results Wednesday. Cablevision Systems Corp. (CVC) reports Thursday. Time Warner Cable Inc. (TWC) reports on Aug. 6. Spokesmen for Comcast and Cablevision weren't immediately available for comment. Time Warner Cable declined to comment.

AT&T, which reported last Wednesday, set the tone by reporting 46,000 net new broadband connections, which analysts considered surprisingly weak. Chief Financial Officer Rick Lindner, speaking to analysts on a conference call, said that the company and its cable competitors have seen a fairly even split of the new customers. He blamed the weakness more on the seasonal factor and weaker economy than competition, but acknowledged the market share picture may have slipped in cable's favor.

"I don't think that's a big factor," he said, noting that AT&T had been ahead of cable in the last few quarters. Verizon, meanwhile, reported 54,000 net new high-speed Internet customers, with a decline of 133,000 DSL subscribers eating into the 187,000 net new FiOS Internet subscribers.

Verizon was more forthcoming on the disappointing figure. Chief Financial Officer Doreen Toben said in an interview with Dow Jones Newswires that in areas where FiOS isn't available, the company is unable to keep up with customers' demands for higher Internet speeds. She noted that a quarter of the DSL losses were from subscribers migrating to FiOS. Verizon has some reason to be optimistic. The company on Monday officially launched its rollout of FiOS TV in New York City. The bundling of television service with Internet is expected to drive growth in the lucrative market.

In addition to the economic issues and the seasonal impact, the companies are facing a maturing market where nearly everyone has a broadband connection.

"When you're starting to push on 90% broadband penetration, the growth rate was going to slow," Toben said. She declined to comment on whether she expects further DSL losses in the coming quarters.

The DSL numbers for Verizon have already been weak for the last several quarters, said William Power, an analyst at Robert W. Baird & Co. He doesn't expect the trend to change because the penetration rate is already at such a high level. Likewise, Moffett is pessimistic about the telcos. He expects the cable industry to continue to win market share in broadband and voice services at an accelerated rate.

"It's important not to get lost in the weeds from quarter to quarter and focus on the broader trend line," he said, which will continue to favor cable. Verizon slipped 1.8% to $33.84. AT&T fell 0.5% to $31.24.

-By Roger Cheng, Dow Jones Newswires

Mercedes to cut petroleum out of lineup by 2015

2008-07-14T07:17:00.000-07:00

By Jaymi Heimbuch (Yahoo! Green)

In less than 7 years, Mercedes-Benz plans to ditch petroleum-powered vehicles from its lineup. Focusing on electric, fuel cell, and biofuels, the company is revving up research in alternative fuel sources and efficiency. The German car company has a few new power-trains in the line-up that European journalists have had the opportunity to test out in the Mercedes facility in Spain. One vehicle includes the F700, powered by a DiesOtto engine that combines HCCI and spark ignition to get nearly the same efficiency as diesel, but minus the expensive after-treatment systems. The engine can run on biofuels, and we may have a purchasable vehicle by 2010 -- a year that seems to be popular for the debut of a lot of new alternative fuel car models, making ’08 and ’09 simply thumb-twiddling years for consumers. I don’t know, maybe car makers just like the roundness of “2010.” The company’s next big step will be to launch a Smart electric car which is fuel and emission-free.

Anyway, Mercedes is looking into electric vehicles, both battery-powered and fuel-cell powered. Not only are models in development, but we’ve also seen the company making steps towards its zero-petroleum goal right now, from better cabs in London to li-ion battery improvements. The company also has about 100 Smart electric cars undergoing testing in London, with that favorite 2010 year as the projected market release date. Mercedes is making serious investments, already putting nearly $4 million into the pot of its long-term Sustainable Mobility plan, with another nearly $1.4 billion going in before 2014. While car models may be able to run on fuels other than gasoline or diesel, we have yet to find a method of both running and producing vehicles entirely free of fossil fuels. I’m waiting for a mainstream car line that creates renewable fuel, clean-running vehicles out of 100% recycled materials in plants run on 100% renewable, clean power … Will I even be alive when that finally happens? I have hope.

EPA chief says Congress should pass greenhouse gases legislation

2008-07-11T14:51:00.000-07:00

(Los Angeles Times) Responding to a U.S. Supreme Court order, Environmental Protection Agency Administrator Stephen Johnson said today that the Clean Air Act was "the wrong tool for addressing greenhouse gases" because it would be too costly to the American public, and said that Congress should move forward with passing legislation to tackle the issue instead.

The high court had ordered the EPA more than a year ago to determine if greenhouse gases were a danger to the public. If so, the justices said, under the Clean Air Act, the agency was required to develop regulations to reduce the risk.

Instead, Johnson signed what he said was an unprecedented 1,000-page document this morning that included letters from numerous White House environmental and economic agencies detailing how such regulations could harm major sectors of the economy.

"One point is clear," Johnson said. "The potential regulation of greenhouse gases under any portion of the Clean Air Act could result in an unprecedented expansion of EPA authority that would have a profound effect on virtually every sector of the economy and touch every household in the land."

He said he would accept comments on the proposed EPA regulations in response to the court order, but stressed repeatedly that it was the wrong approach because of the costs.

The document also includes a sharply revised version of a May draft by EPA staff members in which they concluded as much as $2 trillion in savings to consumers at the gas pump could be achieved if greenhouse gas regulations were implemented. That number was slashed to $830 billion, and the price of gas was calculated at $2 a gallon for the next 30 years. EPA press secretary Jonathan Schradar said he did not know why the numbers had been changed, but said extensive review of the earlier draft had been performed by agency staff members.

Today's announcement once again effectively eliminates any likelihood of the Bush administration regulating greenhouse gases.

-- Janet Wilson

Scribe Fire

2008-07-01T10:27:00.001-07:00

This is my first post with ScribeFire. It's a blog editing addon for FireFox. Looks interesting.

Boeing Wins Protest of Northrop Aerial-Tanker Award

2008-06-18T11:32:00.000-07:00

June 18 (Bloomberg) -- Boeing Co. deserves another chance to bid on the $35 billion U.S. Air Force aerial-tanker contract won by rival Northrop Grumman Corp., a government agency said.

``Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman,'' the U.S. Government Accountability Office announced today in Washington. ``We therefore sustained Boeing's protest.''

Boeing appealed to the GAO after Northrop and partner European Aeronautic, Defence & Space Co. won the contract Feb. 29, snaring a program that had been Boeing's for more than half a century. Boeing claimed changes the Air Force made during the competition favored Northrop. The selection of Northrop was undermined June 12 when both companies confirmed the Air Force miscalculated operating costs of the competing aircraft.

``While the variance in costs is trivial, it points to a broader erosion in the government's rationale for picking the Northrop-EADS plane,'' Loren Thompson, an analyst at Lexington Institute, an Arlington, Virginia-based public policy research group, said in an e-mail before the announcement. ``The outcome of the competition was fairly close, as Boeing has argued in its filings, rather than a decisive win for the Northrop-EADS team as the Air Force asserts.''

Boeing shares have declined 11 percent since the decision, compared with a 12 percent drop in Northrop. Boeing rose $1.08 to $75.46 at 1:22 p.m. in New York Stock Exchange trading, while Northrop fell 33 cents to $70.76.

Air Force Response

Boeing beat the odds in winning support from the GAO, the investigative arm of Congress that sustains only one in four protests. Winning the protest also helps Boeing keep its main commercial-aircraft rival, EADS' unit Airbus SAS, from a getting a foothold in the U.S. defense industry. Airbus took the No. 1 commercial-plane position away from Boeing in 2003.

GAO rulings are advisory. While the Air Force isn't required to follow the agency's recommendation, the service has to explain to Congress if it chooses to ignore the advice.

The Air Force must now respond within 60 days with a course of action based on the GAO findings, adding to a four-year delay in the program that the service says is needed to replace a fleet of airborne tankers in use since 1956.

Replacing Fleet

Efforts to begin replacing the fleet of more than 500 tankers have been held up since 2004, when a plan to lease and buy 100 aircraft from Boeing collapsed amid ethical violations by an executive and an Air Force official that sent both to jail.

Alabama Governor Bob Riley was in an editorial board meeting at Bloomberg headquarters in New York when he learned of the news, which will create further delay in Northrop's plans to build the tankers in his state and create at least 1,500 jobs.

``Oh, God, that's not good,'' said Riley, a Republican serving his second term. Earlier, he said it would take ``an absolute nutcase'' to prefer the Boeing bid over Northrop's.

The GAO decision doesn't imply that Boeing now has an easy road to reversing the original award and capturing the work for itself, said Jim McAleese of McAleese & Associates, a government contracting and national-security law firm in McLean, Virginia.

``To be successful in any potential re-competition, Boeing must demonstrate that it is either technically superior at a reasonable cost/price-premium, or that it is significantly lowest-evaluated-cost,'' McAleese said in an e-mail before the announcement. He wasn't involved in the protest.

Bernanke's Rate Spike Poker Face

2008-06-10T14:47:00.000-07:00

By Maurna Desmond

(Forbes) Investors and economists placed their bets Tuesday, some with investments and some with pens, on whether Federal Reserve Chairman Ben Bernanke will make good on his tough inflation talk and spike U.S. fed funds interest rates.

Late Monday, the Fed chief said that the likelihood of a significant American economic downturn had diminished substantially in recent months. He expressed concern, however, about inflationary pressures in the United States. His statements implied the Federal Reserve is more worried about stemming inflation, perhaps by raising interest rates, than stimulating a not-quite-so-weak economy.

While many on Wall Street jumped at the prospect of a rate hike, some aren't buying that the Fed will increase interest rates again. Morgan Stanley's Global head of interest rate strategy said Monday that he thinks it is "unlikely" the Fed will raise rates until mid-2009. He added that U.S. two-year treasury bonds are undervalued due to Fed interest rate hike fears. The economist added that he views the U.S. as "lingering below-trend growth" and not a prolonged recession according to tradethenews.com.
Treasury bonds were hit hard by the Fed chairman's statement, with interest rates apparently rising both because of the outlook that the Fed might begin to undo its easy-money policy of the past year and because of the inflation threat. The yield on the 10-year Treasury note, a benchmark for the world's capital markets, rose to 4.10% from 3.99% late Monday. As inflation rises, investors demand higher returns on bonds since the purchasing power of the money invested will be eroded. The 10-year yield ended the first quarter of this year at 3.43% as fears of financial collapse had investors running for the perceived safe haven of the U.S. government market.

The dollar benefited from the idea that the Fed might raise short-term rates. While the greenback gained to 107.20 yen from 106.30 late on Monday, the euro fell to $1.547 from $1.563 and the British pound slipped to $1.9548 from $1.9733.

Boston Fed President Eric Rosengren echoed Bernanke's concerns Monday saying that rising food and energy costs are impacting the economy from the top down, complicating the outlook for inflation. Dallas Fed President Richard Fisher warned that gradualism was still a watchword for the central bank, even though it had acted very aggressively in lowering interest rates to combat the fallout of the subprime mortgage crisis last year.

Not everyone believes that inflation is the greatest threat to the U.S. economy, but rather the burgeoning U.S. trade deficit which hit $60.9 billion in April, up from $56.5 billion in March. April's gap was substantially larger than the $59.5 billion economists had expected.

"The trade deficit heightens the risk of recession and surging unemployment," said Peter Morici, a professor at the University of Maryland School of Business and Forbes columnist. "Ben Bernanke’s recent comments about oil driven inflation only serve to distract attention from these issues and aggravate risks."

Morici argued that money spent on foreign oil, China's lopsided trade relationship that is propped up by a devalued yuan, and a few other key deficit components pose a growing threat to the financial health of the United States.

Natus Medical cuts full-year profit expectations

2008-06-05T07:48:00.000-07:00

NEW YORK (Associated Press) - Natus Medical Inc., a provider of medical devices for newborn care, said Thursday it lowered its 2008 full-year profit projection as a result of an acquisition and two stock offerings. Natus now expects full-year profit between 68 cents and 70 cents per share on revenue between $163 million and $164 million. Previously, the company projected per-share profit between 70 cents and 72 cents and revenue between $161 million and $162 million. Analysts surveyed by Thomson Financial expect full-year profit of 69 cents on revenue of $161.7 million. The company reaffirmed its second-quarter earnings projection of between 14 cents and 15 cents per share. Analysts expect earnings of 14 cents per share. For the second quarter, the company now expects revenue of $38.3 million to $39.3 million. It had previously said it expected revenue of $38 million to $39 million. Analysts expect revenue of $39 million. In May, Natus completed its $9 million acquisition of privately held Sonamed Corp., which makes products to test for hearing loss in newborns. Natus also completed a public offering of 4.6 million shares in May, bringing in proceeds of $84.3 million before expenses. In April, the company closed a 885,500 share offering, raising $15.4 million.

Major Music Distributor Handleman Exits Music Business

2008-06-02T14:55:00.000-07:00

Major music distributor Handleman Corp. announced Monday (June 2) that it is exiting the music business. The Wal-Mart chain has been Handleman's biggest CD customer. Handleman president/CEO Albert A. Koch said, "CD music sales have been declining at double-digit rates for several years, both industry wide and at our customers' stores, resulting in a sharp drop-off in our business. Unfortunately, even the significant steps we've taken over the past two years to reduce our costs have not enabled the company to return to profitability." The Troy, Mich.-based company will lay off 260 workers. Its inventory and other assets will be sold to Anderson, based in Amarillo, Tex. Handleman said it will continue to operate its other units, including video game maker Crave Entertainment.

Analysts see JPMorgan Chase as suitor for Wachovia

2008-06-02T13:24:00.000-07:00

by Katy Finger

(The Business Journal of Milwaukee)Wall Street analysts say the ouster of Ken Thompson as Wachovia Corp. chief executive could lead to a sale of the bank, with JPMorgan Chase & Co., which has a large Milwaukee-area presence, identified as the most likely buyer.

Even without such a sale, Charlotte, N.C.-based Wachovia (NYSE: WB), which has no Wisconsin bank branches, is facing a period of significant change that some analysts view as a chance to improve the bank's earnings but others expect will mean more weakness and uncertainty.

"Under Ken Thompson's leadership, he took a defeated First Union franchise and transformed it into one of the premier retail banks in the country and significantly improved profitability," wrote Citigroup Global Markets Inc. analyst Keith Horowitz in a research note Monday. "Unfortunately, his legacy will more likely be defined by the ill-timed Golden West acquisition, which left Wachovia very exposed to the mortgage crisis."

Wachovia has been hit by a string of bad news in recent months, but the company's financial woes have revolved largely around its massive exposure to the declining mortgage market, a byproduct of its 2006 acquisition of Golden West Financial Corp., a California thrift that specialized in nontraditional, option-adjustable-rate mortgage loans. The deal put Wachovia in California and other Western states, but the bank bought the thrift at the peak of the mortgage market and has become swamped with defaulting mortgage loans.

Thompson has since conceded the acquisition was poorly timed.

The bank also recently cut its dividend to 37.5 cents per share from 64 cents per share while raising $8 billion in new common and preferred stock, which diluted the value of existing shareholders' stock.

Several analysts think a sale to New York City-based JPMorgan (NYSE: JPM) may be likely. JPMorgan Chase entered the Milwaukee market with its 2004 purchase of Bank One of Chicago. Chase is now the third-largest bank in the Milwaukee area based on local deposits.

"JPMorgan would be regarded as the most likely buyer," wrote Edward Najarian, research analyst at Merrill Lynch & Co. Inc., in a research note Monday. He points out that JPMorgan's CEO, James Dimon, has said he would like to expand JPMorgan's branch network in the Southeast. "He would also likely find Wachovia's over 14,000 retail brokers an attractive asset," he wrote.

Deutsche Bank analysts also say Wachovia offers what JPMorgan wants. "JPMorgan has indicated at times that it would be interested in franchises that include a combination of California, Texas, Florida and brokerage," analysts Mike Mayo and Chris Spahr wrote Monday, "and Wachovia contains all of these."

However, after JPMorgan, "potential buyers dwindle materially," Merrill Lynch's Najarian wrote. Charlotte, N.C.-based Bank of America Corp. (NYSE: BAC) is an unlikely suitor because of antitrust issues, he wrote. And Citigroup Inc. (NYSE:C) doesn't have the capital, he wrote.

3-US files WTO case vs EU over technology tariffs

2008-05-28T10:45:00.000-07:00

WASHINGTON, May 28 (Reuters) - The United States said on Wednesday it was taking action at the World Trade Organization aimed at overturning tariffs the European Union imposes on computer screens, multifunction printers and TV set-top boxes capable of accessing the Internet. U.S. technology heavyweights such as Hewlett Packard Co have argued that EU tariffs on the products violate the spirit and the letter of the WTO's 1997 Information Technology Agreement (ITA), which axed tariffs on a range of high-tech goods to boost trade. "The EU should be working with the United States to promote new technologies, not finding protectionist gimmicks to apply new duties to these products," said U.S. Trade Representative Susan Schwab.

"We urge the EU to eliminate permanently the new duties and to cease manipulating tariffs to discourage technological innovation," Schwab said at a news conference to announce the United States had requested formal dispute settlement talks with the European Union on the issue. Japan is joining the dispute on the side of the United States, Schwab said. As the three products have evolved, EU customs officials have decided they are no longer covered by the pact and hit them with tariffs of up to 14 percent. Global exports of the three products are estimated to be worth more than $70 billion, Schwab's office said. The European Commission said it "strongly rejected" the arguments of the United States and accused Washington of refusing to heed its calls for negotiated changes in the products covered by the ITA deal.

"The ITA has a review clause which can be invoked by members at any time. The EU has said it is willing to negotiate with all other ITA members. The U.S. is not willing to do this. Why not?" the Commission said in a statement. Schwab told reporters the EU position would render the Information Technology Agreement meaningless over time because it would cover fewer and fewer products.

"If ITA participants only provided duty-free treatment to products with the technology that existed at the time the ITA was concluded, very few ITA products would be eligible for duty-free treatment today," she said. "That is not what ITA participants intended when this landmark sectoral agreement was reached more than 10 years ago," Schwab said, adding the United States did not want to "pay twice" for trade concessions it believes the EU is already obligated to honor. Most of the products at issue are manufactured in countries such as China and Malaysia but are based on U.S. design and engineering and sold under U.S. brand names.

Laveranues Picks

2008-05-27T04:03:00.000-07:00

I thought I would start shedding light on a few securities that I find promising. I'll try to do this about once a week. One stock that's on my radar is Chicago Bridge & Iron Co (CBI). Chicago Bridge is a dutch company who is a supplier and construction engineering company for oil and gas. This should be a great way to cash in on rising oil prices. I've set my price target at $60.

Ford: Fewer trucks, more losses

2008-05-22T08:18:00.000-07:00

By Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) - Ford Motor Co. cited record-high gas prices in announcing Thursday that it will cut production of pickups and SUVs and likely miss its long-held goal of returning its core North American auto unit to profitability next year. The company said it now hopes to break even companywide next year as overseas profits balance out losses at home. It also announced it would slash production of pickups and SUVs due to changing consumer demand.

"We saw a real change in the industry demand in pickups and SUV in the first two weeks of May," said Ford Chief Executive Alan Mulally. "It seems to us we reached a tipping point." Ford now believes that the change in vehicle choice is structural, not cyclical, Mulally said. Mulally said the company in July will detail longer-term changes, including personnel reductions. Ford had already offered buyouts and early retirement to all of its U.S. hourly employees. Ford (F, Fortune 500) said it will ramp up production of some other models such as cars and so called crossovers, a vehicle designed to bring a more car-like ride to SUVs. But the cuts in its pickup and SUV output will be greater than its increased car production. Ford trimmed an additional 20,000 vehicles, or 3%, from its North American plans, for the second quarter, putting its target at 690,000 vehicles. That will leave output down 15% from year-ago levels. The company said it now plans to produce between 510,000 and 540,000 units in the third quarter, down 15-20% from the same period last year, while the fourth-quarter production target is now between 590,000 and 630,000 units, down 2-8% from year-earlier levels. The shift is bad news for the nation's No. 3 automaker, which has lost money on its North American auto operations since 2005. The smaller cars for which it will ramp up production - Ford Focus, Fusion, Edge and Escape, the Mercury Milan and Mariner, as well as the Lincoln MKZ and Lincoln MKX - generally have lower prices and profit margins than the light truck models for which it is cutting production, such as the F-Series pickup, still the nation's best selling vehicle.

Also since the car models cannot be built on the same assembly lines where the pickups and SUV are built, the decreased production will mean more idled plants. Ford will have to pay employees who are not working while it increases the hours for those at car plants. Ford said it plans further manufacturing capacity realignments and additional cost reductions as part of its turnaround plan. Also Thursday Ford said it was not taking a position on a previously-announced proposal by investor Kirk Kerkorian to buy an increased stake in Ford.

Microsoft Creates Unified Ad Brand, Expands Mobile Offerings

2008-05-21T06:49:00.000-07:00

ClickZ News) Microsoft SVP Brian McAndrews yesterday unveiled new mobile ad sales initiatives along with a new brand to house all the company's offerings to marketers: Microsoft Advertising.

The company is also planning to roll out a program to offer searchers cash back on the purchase of products discovered through its search interface. The move is partly an attempt to capture search share from Google, a more urgent goal in the wake of Microsoft's aborted bid to acquire Yahoo.

Speaking at the company's Advance08 advertising summit on its Redmond campus, McAndrews said the new brand will offer a "one stop shopping" experience for advertisers. The move is a baby step toward integrating the company's many free-floating ad units, including aQuantive's Avenue A/Razorfish, Atlas, and DrivePM brands; the AdECN exchange; and its own Search, MSN Network and MSN Ad Direct Response units.

To an extent, the brand consolidation is superficial. Internally those brands will continue to reside separately within the Advertiser and Publisher Solutions group, while Microsoft will use the Microsoft Advertising brand in its external business. "It's designed to let customers know that we're committed to making sense out of a complex environment, and that we have everything they need, all under one roof," McAndrews said in a statement.

McAndrews also touched on enhancements to the company's new Windows Live for Mobile environment, including the availability of display advertising on Windows Live Hotmail and Messenger for mobile in four markets: the U.S., U.K., France, and Spain. Microsoft claims 25 million people in the U.S. access Windows Live Hotmail and Windows Live Messenger on their mobile phones.

Microsoft also announced plans to offer mobile search advertisements on Live Search Mobile, currently in beta in the U.S. but scheduled for wider release in the second half of 2008. Advertisers will be able to create keyword campaigns through adCenter targeting users of Live Search Mobile.

More information is available at the Microsoft Advertising Web site.

In his presentation to some 400 advertisers, marketers, and industry professionals, McAndrews also discussed the signing of nearly 100 new publishers to the Microsoft platform, and key recent acquisitions such as those of Rapt, AdECN, and YaData, and the launch of Engagement Mapping, now in beta. Microsoft touts Engagement Mapping as a superior way to measure and optimize digital media spending, allowing advertisers to assign a share of conversions to non-search "touch points" and to assign them weight according to frequency, recency, ad size, and day part. McAndrews claimed the average user sees an average of 17 ads before clicking on one, but only the last one typically gets credit.

Advance08 will continue through tomorrow, with Live Search announcements due from SVP Satya Nadella, and an appearance by Bill Gates.

Wall Street Brokerages Look To Shed Light on Dark Pools (Wall Street Journal)

2008-05-20T06:23:00.000-07:00

By DONNA KARDOS

Goldman Sachs Group Inc., Morgan Stanley and UBS AG announced a series of deals that will allow their clients to share access to all three firms' pools of non-displayed liquidity as they try to address the growing complexity of market fragmentation amid so-called dark pools. The moves come as dark pools -- the secretive electronic trading networks that match buyers and sellers anonymously -- are booming in popularity as big institutional investors look for ways to trade blocks of stock without triggering ripples in the share price, as can happen on traditional stock markets such as the NYSE and Nasdaq Stock Market. But all that darkness is causing nightmares on Wall Street because there are now so many that using them is increasingly frustrating and time-consuming. The deals announced Tuesday allow algorithmic-trading orders of each firm to interact with the U.S. equity liquidity found in three of the nation's largest broker-dealer-operated dark pools -- Goldman Sachs' SIGMA X, Morgan Stanley's MS POOL and UBS' PIN ATS. Forty-two such U.S. trading networks now are competing for orders, up from seven dark pools five years ago, according to Tabb Group, a Westborough, Mass., research firm. Large brokerage firms, trading boutiques and even stock exchanges have designed systems that allow shares to be bought and sold out of the sight of prying eyes. "We're confident that providing our respective clients access to each other's liquidity will achieve even better crossing results for our clients in an increasingly fragmented market," said Greg Tusar, managing director of electronic trading for Goldman.

BCE shares fall on report saying buyout in trouble

2008-05-19T12:00:00.000-07:00

BUSINESS WEEK - Shares of BCE Inc., the parent of Bell Canada, declined Monday following reports that its proposed $52 billion takeover by an investor group led by the Ontario Teachers' Pension Plan was in trouble. Citing unnamed people on both sides of the deal, the New York Times reported Monday that the banks that have committed to finance the deal wanted to re-negotiate the lending terms. Bill Fox, a spokesman for BCE, wouldn't comment on whether the banks are trying to re-negotiate the terms, but he said the company still expects the deal to close before the end of the second quarter.

"We have an agreement," Fox said. "I'm not going to comment on any aspect of the work being done to close the transaction. We're working to close on the basis of the terms set out in the agreement."

BCE's is not the first private equity deal to be affected by the credit crunch. Earlier this month, Clear Channel Communications Inc. agreed to take a lower price and slightly higher interest rates to settle a dispute with its lenders and allow its buyout to proceed. The BCE offer, valued at about $52 billion, includes debt, preferred equity and minority interests. According to the New York Times report, the banks backing the deal sent revised terms to the investor group, and these terms included higher interest rates, tighter loan restrictions and stronger protections for banks. The negotiations surrounding the deal, the report said, started to fray late Friday. Citigroup spokeswoman Danielle Romero-Apsilos declined to comment, saying it's too early to discuss what took place over the weekend regarding the BCE deal. Deborah Allen, a spokeswoman with Ontario Teachers Pension Fund, said they can't comment on discussions with the banks or BCE but said "we expect everyone will honor their commitments and we look forward to closing the transaction." Shares of BCE fell $2.02, or 5.2 percent, to $36.79 in afternoon trading. In the past 52 weeks, the stock has traded between $32.94 and $44.59.

Microsoft Revives Talks With Yahoo, Proposes New Deal

2008-05-19T07:25:00.000-07:00

May 19 (Bloomberg) -- Microsoft Corp., the world's biggest software maker, revived the possibility of a deal with Yahoo! Inc. to challenge Google Inc. after failing to agree on a merger. Microsoft said yesterday it's exploring an agreement with Yahoo that stops short of a full takeover. Redmond, Washington- based Microsoft didn't elaborate on the proposal and said it ``reserves the right'' to reconsider its bid to buy all of Yahoo. The proposal gives Yahoo, owner of the second-most popular Web search engine, another chance to forge an agreement with Microsoft as investor Carl Icahn threatens to oust the Internet company's board. Yahoo Chief Executive Officer Jerry Yang demanded a higher price than Microsoft's $47.5 billion offer, prompting Microsoft CEO Steve Ballmer to abandon talks on May 3. ``Many analysts expected Microsoft to retrace its steps and seek a deal with Yahoo,'' said Raffaella Sommariva, a fund manager at AZ Fund Management SA in Luxembourg, which oversees the equivalent of $14.5 billion. ``An accord would be a great opportunity for both of them.''

Yahoo said in a statement yesterday that it is open to pursuing any transaction in the best interest of investors. The company said it will continue to consider all of its options, including any proposal from Microsoft.

Yahoo Gains

Yahoo rose 82 cents, or 3 percent, to the equivalent of $28.48 at 9:31 a.m. in German trading from the U.S. close of $27.66 on May 16. Microsoft fell 20 cents to $29.79 in Germany from the U.S. close of $29.99 last week, while Google lost 66 cents to $579.41 in European trading. The agreement Microsoft and Yahoo are discussing involves Yahoo carrying search advertisements from Microsoft, the Wall Street Journal said yesterday, citing people familiar with the matter. That may be a way for Microsoft to scuttle talks between Yahoo and Google for a similar partnership, the newspaper said. Yahoo said in April it would run some Google ads next to its search results to boost sales. Google made as much as 70 percent more in sales from each query at the end of last year, Yahoo has said. Google CEO Eric Schmidt said on May 8 that while the test has ended, the two companies are on ``very friendly'' terms. ``Investors in Yahoo were very disappointed after Microsoft abandoned the talks,'' Sommariva said. ``Microsoft hasn't managed to reach a critical size with MSN to compete and Yahoo is battling with Google.''

`Strong Enough'

Icahn, who has the backing of Paulson & Co., the New York hedge-fund manager run by John Paulson, said last week that a combination of Microsoft and Yahoo would create ``a force strong enough'' to fight Google. Microsoft hasn't held talks with Icahn, a person familiar with the situation said yesterday. Icahn didn't return a call seeking comment. ``The best strategy for Yahoo is to embrace Microsoft,'' Troy Mastin, an analyst at William Blair & Co. in Chicago, said in a Bloomberg Television interview last week. He predicts Yahoo shares will perform in line with the market. ``If they structure a deal correctly, they might still be able to retain a lot of the control and autonomy that they have today.'' Microsoft spent three months wooing Yahoo to expand its Internet-search business and compete with Google in the $41 billion worldwide online advertising market. Microsoft said its next move will depend on discussions that may take place with Yahoo, shareholders of the two companies, or other parties. Microsoft spokesman Frank Shaw and Yahoo spokeswoman Tracy Schmaler declined to comment.

`Major New Initiative'

Microsoft and Yahoo had discussed a partnership designed to boost each other's share of the Web search and advertising market, people briefed on the discussions said last May. Separately, Microsoft said yesterday it will talk about a ``major new initiative'' in its search engine technology on May 21. Microsoft will also make changes to its online branding, which is ``fragmented and confusing,'' Kevin Johnson, president of Microsoft's Internet business, said in a memo to employees. The company will ``double down'' on investments in Europe, pursue small acquisitions and expand partnerships to build up the online business, he said. Online ad sales reached $41 billion worldwide last year, according to Piper Jaffray & Co. Microsoft projected that may almost double by 2010. Icahn disclosed that he owned 10 million Yahoo shares and options to buy 49 million more. He submitted his own slate of nominees for Yahoo's board, including himself, Dallas Mavericks owner Mark Cuban and former Viacom Inc. CEO Frank Biondi. All 10 of Yahoo's current directors are up for re-election at the annual meeting on July 3. The 72-year-old investor, who helped orchestrate Oracle Corp.'s takeover of BEA Systems Inc., said in a letter to Yahoo's board that directors had ``botched'' talks with Microsoft. Yahoo disputed the claim, saying Icahn had a ``significant misunderstanding'' of the discussions.

Does purchasing CNET really help CBS?

2008-05-15T14:41:00.000-07:00

By John Simons, writer

(Fortune) -- With its bold $1.8 billion purchase of CNET, CBS is making a play for ad dollars that are shifting to the Internet. But the company may be paying too much for a network of Web sites that won't address the conglomerate's main problem: an over-reliance on advertising dollars as a source of revenue.

CBS Corp. President and CEO Leslie Moonves announced Wednesday morning that the company will make a cash tender offer to purchase CNET Networks Inc. for $11.50 per share, or about $1.8 billion. CBS will add CNET to its collection of media holdings: a TV broadcast network, 29 local television stations, outdoor advertising displays, 140 radio stations, cable channels such as Showtime, and Simon & Schuster publishing.

CBS management touted various "synergies" that the acquisition will unlock, but on the conference call with investors Thursday, executives offered few specifics. In a release, Moonves pointed out that the CNET deal would give the company exposure to the "fastest-growing advertising sector" - Internet advertising.

The acquisition takes place against a backdrop of slower ad spending. Overall advertising outlays grew at their slowest pace in five years during the last quarter of 2007, and that pace is expected to continue, according to Bernstein Research. Internet advertising grew 27% during all of 2007 to $25.5 billion, according to research firm, International Data Corp. Even so, that $25.5 billion represents only 7% of all U.S. advertising.

CBS's online empire will be vast. CNET is the 10th most visited Internet site in terms of global unique users and ranks 17th in unique U.S. users. CBS will add CNET's Web sites such as BNET (a business news and information site), GameSpot, News.com, TV.com and MP3.com to its own online operations CBS.com, CBSNews.com, and CBSSports.com. "By acquiring CNET, CBS will more than double Internet revenue and [ad] inventory space," said Frederick Moran, an analyst with the Stanford Group. "CNET also brings a dedicated online sales force and online advertising technology to CBS."

However, the CNET acquisition doesn't address CBS's oft-discussed Achilles Heel. CBS is more vulnerable to an advertising downturn than any of its peers in the industry: 72% of the company's revenue last year was derived from ad dollars, compared to 44% for News Corp., 35% for Viacom, 23% for Disney and 19% for Time-Warner. Although online advertising is expected to grow this year by 20%, companies who derive greater portions of their income from subscriptions generally fare better in a slowing economy.

Some observers are concerned that CBS, which offered a 45% premium to CNET's Wednesday closing price of $7.95 per share, is paying too much for its new Internet baby. Doug Creutz, an analyst with Cowen and Company, put it delicately Thursday morning in a communication with clients, when he called the acquisition "value-dilutive".

Creutz doesn't believe that the synergies CBS has outlined thus far merit the high acquisition price the company will pay. "One of our concerns about CBS has been that management might pursue expensive acquisitions to offset concerns about secular trends in the company's core broadcast television and radio businesses," Creutz said. "The CNET deal underlines this concern." Creutz reaffirmed his "underperform" rating on CBS shares.

Citigroup analyst Jason Bazinet is equally nonplussed. He noted in a message sent to investors Thursday morning that CBS is clearly trying to build a formidable presence on the Web with the addition of an online content company that commands ad rates "well above rivals". However, Bazinet observed, "the key CBS challenge will be sustaining premium [ad rates]." The Citigroup analyst reiterated his "hold" rating on CBS shares. "Merger and acquisition risk and sluggish ad growth continue to keep us on the sidelines," he wrote.

Around midday Thursday, CBS (CBS, Fortune 500) shares had fallen 2.9% to $24.09, while CNET shares had risen more than 43% to $11.39. The acquisition is expected to close sometime this summer.

Research In Motion to Start Selling Faster Blackberry Bold

2008-05-12T11:32:00.000-07:00

May 12 (Bloomberg) -- Research In Motion Ltd. introduced a BlackBerry phone with quicker Web browsing and more room for songs and videos, getting a jump on a faster iPhone that analysts expect next month. The device, called the BlackBerry Bold, has a brighter screen and better Web browser than previous models, co-Chief Executive Officer James Balsillie said in an interview. The phone, which also has satellite navigation and a video camera, will start selling at AT&T Inc. for $300 to $400 this summer in the U.S., he said. The product sets up a showdown between Apple Inc. CEO Steve Jobs and Balsillie in the market for so-called third-generation phones, which offer speedier Web access and video downloads. Phones with Internet, e-mail and video are the fastest-growing part of the handset market, with users quadrupling to 400 million in the next three years, RBC Capital Markets estimates.

``You need to provide faster networks, faster processors,'' said Balsillie, 47. Consumers are using ``more and more multimedia'' and ``there are lots of contenders out there.'' Research In Motion, based in Waterloo, Ontario, rose $9.07, or 6.8 percent, to $141.84 at 1:06 p.m. New York time in Nasdaq Stock Market trading. Apple advanced $4.30, or 2.3 percent, to $187.75. Research In Motion had more than doubled in the past 12 months before today, while Apple is up 72 percent over that span.

Faster Connection

The Bold, which also will go on sale in Europe and Asia, is the first BlackBerry to use high-speed downlink packet access, or HSDPA, a network technology that speeds data delivery. Apple may introduce an iPhone with faster data in June, according to analysts such as RBC's Mike Abramsky. Since the iPhone's debut last June, Apple has seized the No. 2 spot in the U.S. market for so-called smart phones, handsets with computer and Internet functions. The BlackBerry ranks first. To fend off the iPhone, Research In Motion has expanded beyond business customers, releasing devices that have music players and cameras. The new BlackBerry lets users listen to songs from Apple's iTunes music program.

``Where Research In Motion falls short against Apple is in marketing and on the entertainment side,'' Rob Enderle, president of research firm Enderle Group in San Jose, California, said today in a Bloomberg Television interview. ``Where Apple's been moving is on entertainment, particularly video.''

Venture Fund

In a bid to foster new uses for the BlackBerry, the company started a $150 million venture-capital fund with the Royal Bank of Canada and Thomson Reuters Corp., Balsillie said. The fund invests in companies developing smart-phone applications. The Bold has 1 gigabyte of memory, more than any previous BlackBerry. Users can expand it to 8 gigabytes with a memory card. Cupertino, California-based Apple sells the iPhone in 8- gigabyte and 16-gigabyte versions. While Balsillie unveiled the Bold before Jobs showed the new iPhone, the Apple device may still be the one that starts selling first, said UBS AG analyst Maynard Um. Apple, whose iPhone is sold exclusively in the U.S. through AT&T, usually waits to show new products until they are available to shoppers. Research In Motion might benefit from following Apple's introduction because AT&T's rivals are likely to battle the new iPhone with their products, Um said. That may allow the Bold to start selling in a less competitive market later on.

Touch Screen?

With rounded corners, the Bold's design resembles that of the iPhone. Unlike Apple's product, it has a regular keyboard and not a touch screen. Still, Balsillie said he isn't ``religious'' about having a keyboard in the BlackBerry. Analysts say he may release a touch-screen model later this year.

``The BlackBerry design has improved quite a bit,'' UBS's Um said in an interview. ``We are going to see more innovation coming from them.'' Separately, Research In Motion said today it would make it easier to access Microsoft Corp.'s e-mail and messenger programs with the BlackBerry. The BlackBerry dominated U.S. shipments for e-mail phones in the fourth quarter with 41 percent of the market, according to Reading, England-based research firm Canalys. The iPhone had 28 percent and Palm Inc., maker of the Treo, had 9 percent. While Research In Motion dominates the market, Apple may grow faster this year. Apple may more than triple its shipments to 14 million this year from last year's 4 million, RBC's Abramsky estimates. BlackBerry shipments will almost double this fiscal year to 25 million from 14 million last year, he projects. Research In Motion will probably start selling other new BlackBerrys this year, including one that flips open to reveal a keyboard, Toronto-based Abramsky wrote in a note this month. He recommends buying both Apple and Research In Motion shares.

Playboy posts quarterly loss, shares drop

2008-05-12T11:22:00.000-07:00

By Robert MacMillan

NEW YORK (Reuters) - Adult entertainment publisher Playboy Enterprises Inc posted a quarterly loss on Tuesday because of weaker publishing and domestic television revenue and forecast more trouble during the year, pushing its shares down 8 percent. The worse-than-expected results illustrate the trouble that Playboy and other publishers and television companies face as more people get their entertainment online, and often for free. Its results also show that, at least for Playboy, licensing its bunny ears brand and bachelor lifestyle cachet is proving a more resilient business than the magazine that created them.

"Our publishing and domestic entertainment businesses continue to face unprecedented change in the way consumers access and use media content," Chief Executive Christie Hefner said in a statement accompanying the quarterly results. Hefner forecast the licensing business would grow throughout the year but said Playboy did not expect it to offset the weaker results it anticipates in its media business. The publisher of the iconic men's magazine reported a loss of $3.1 million, or 9 cents a share, compared with a profit of $1.5 million, or 4 cents a share, in the first quarter a year ago. Excluding restructuring and severance charges, the company's loss was 6 cents a share. Analysts' average forecast was a profit of 6 cents a share, according to Reuters Estimates. Revenue fell 8 percent to $78.5 million, missing the average analyst estimate of $85.4 million.

"I think the company has a fantastic brand and I think there's a tremendous opportunity to exploit that brand across multiple platforms, particularly on the location-based entertainment side," said RBC Capital Markets analyst David Bank. "The challenge is to rightsize the other businesses, which aren't really growth businesses." Licensing revenue, not counting an art sale last year, rose 5 percent, helped by a 10 percent rise in revenue from international consumer products. Other businesses did not fare as well. Domestic television revenue fell 16 percent despite growth in monthly subscription revenue at Playboy TV. Publishing revenue fell 14 percent as circulation and ad sales at Playboy magazine fell. Advertising pages in the second quarter will be down 5 percent compared with last year. Online revenue fell 3 percent to $15.2 million because of lower pay site revenue. Hefner said the company is redesigning the Playboy.com website to attract more visitors and create a better portal to its other properties.

"This will be a transitional year as we are still in the investment stage of the retooling process, and results won't be apparent until year-end at the earliest," Hefner said. Playboy shares fell 66 cents to $7.60 in morning trade on the New York Stock Exchange.

Cablevision to Buy Newsday After Outbidding Murdoch

2008-05-12T09:11:00.000-07:00

By Gillian Wee and Tim Mullaney

May 12 (Bloomberg) -- Cablevision Systems Corp., the New York-area cable provider, topped offers from Rupert Murdoch and Mortimer Zuckerman to buy Tribune Co.'s Newsday in a transaction valuing the Long Island newspaper at $632 million. Tribune will get $612 million for a 97 percent stake in Newsday, plus an additional $18 million in prepaid rent for some facilities, the companies said in a statement today. Tribune will keep a remaining 3 percent stake worth $20 million. Cablevision plans to use Newsday, located about 7 miles from its Bethpage headquarters, to expand local advertising and subscription businesses. Murdoch's News Corp. dropped a $580 million bid on May 10, saying a purchase was no longer economical. For Tribune Chairman Sam Zell, the higher offer from Cablevision helps him pay down the $13 billion in debt he acquired through his takeover of Chicago-based Tribune last year.

``If Rupert Murdoch, with an adjacent market newspaper and local TV broadcaster, can't see a way to make money at $580 million, it's a stretch to think that Cablevision can make this work at $650 million,'' said Craig Moffett, an analyst at Sanford C. Bernstein & Co., before the announcement. He has an ``outperform'' rating on Cablevision and doesn't own the shares. Cablevision said last week that it wouldn't rule out more acquisitions beyond cable after announcing plans to build a high-speed wireless network and purchase the Sundance Channel for independent films. The Bethpage, New York-based company also owns Madison Square Garden and the New York Knicks basketball team.

Expansion Concern

Cablevision, led by Chairman Charles Dolan and his son, Chief Executive James Dolan, said in today's statement that they will use Newsday to generate ``substantial operating cash flow'' as they expand in local ads and subscriptions. The company's stock dropped 63 cents, or 2.5 percent, to $24.34 at 10:48 a.m. in New York Stock Exchange composite trading and had risen 1.9 percent this year before today. Gains have been held back on concern over the Dolans' investments outside of their main business, according to Richard Greenfield, an analyst at Pali Capital LLC in New York.

``All they seem intent on doing now is making acquisitions in non-core businesses,'' Greenfield said in an interview today with Bloomberg Television. He raised his recommendation on Cablevision to ``neutral'' last week. ``This is not like buying a brand like Dow Jones or the New York Times. This is a very challenged long-term business.'' Zell, who took control of Tribune last year, is cutting jobs and selling assets to repay debt as print advertising and circulation decline. Tribune is the second-largest U.S. newspaper publisher after Gannett Co. The owner of the Los Angeles Times and Chicago Tribune has $1.85 billion in debt maturing by the end of 2009. The company also plans to sell its Chicago Cubs baseball team and the Cubs' home stadium, Wrigley Field.

Dropped Bid

New York Daily News owner Zuckerman declined to comment on his bid today. News Corp.'s decision to drop its offer came three days after Chairman Murdoch said talks with Chicago-based Tribune were at a ``pretty advanced stage.'' Murdoch, who completed News Corp.'s $5.2 billion purchase of Dow Jones & Co. in December, had planned to combine Newsday's printing and distribution operations with his New York Post. The move would have helped News Corp. increase cash flow by $100 million a year, Murdoch said on a May 7 conference call. Newsday had a circulation of 379,613 in the six months through March, according to the Audit Bureau of Circulations. That's a 4.7 percent drop from a year earlier. The newspaper had $80 million in earnings before interest, taxes, depreciation and amortization last year, a person familiar with the sale talks said last month. Cablevision was advised by Banc of America Securities LLC and Merrill Lynch & Co., as well as Hughes Hubbard & Reed LLP and Sullivan & Cromwell LLP. Tribune was advised by Citigroup Inc., McDermott Will & Emery, Sidley Austin and Paul Hastings.

Wall Street set to stumble on AIG loss

2008-05-09T06:46:00.000-07:00

By Jennifer Coogan

NEW YORK (Reuters) - Stock index futures fell on Friday, with financial stocks poised to decline after American International Group (AIG.N), the world's largest insurer, reported a larger-than-expected record loss. Equity markets overseas were pushed lower as the price of oil topped $125 a barrel. Tokyo's main index lost more than 2 percent and Europe's broad benchmark was down by nearly the same amount. Shares of AIG fell 8.3 percent to $40.50 before the opening bell. The company had to write down assets linked to subprime mortgages and said it would raise $12.5 billion to strengthen its balance sheet.

Another big financial company, Citigroup Inc (C.N) said it intends to shed roughly $400 billion of non-core assets in a bid to become more competitive. AIG "rekindles fears about the credit markets and that we're not through with the write-downs," said Jim Awad, chairman of W.P. Stewart Asset Management in New York. "On top of that, you've got Citi selling assets, which in the long run is a good thing, but it implies several more years of turmoil and restructuring."

S&P 500 futures were down 6.8 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 81 points, and Nasdaq 100 futures slipped 8 points. Transportation and other energy-dependent stocks were likely to sag as U.S. crude for June delivery was up $1.55 to $125.24 a barrel after hitting a record of $125.98. Airlines particularly be under pressure after UBS cut its price target on shares of six major carriers. Semiconductor shares may lag after graphics chip maker Nvidia Corp (NVDA.O) posted quarterly earnings and gross margins that missed estimates. Nvidia shares were down 3 percent at $21.29 before the open. Stock futures showed a muted reaction to government data showing the U.S. trade deficit narrowed more than expected in March on a record plunge in the value of imports, underscoring the U.S. economic slowdown.

Oil nears $123 on $200 oil prediction, supply concerns

2008-05-06T11:56:00.000-07:00

By John Wilen, AP Business Writer

NEW YORK (AP) -- Oil futures blasted to a new record over $122 a barrel Tuesday, gaining momentum as investors bought on a forecast of much higher prices and on any news hinting at supply shortages. Retail gas prices edged lower, but appear poised to rise to new records of their own in coming weeks. A new Goldman Sachs prediction that oil prices could rise to $150 to $200 within two years seemed to motivate much of Tuesday's buying, although a falling dollar and increasing concerns about declining crude production in Mexico and Russia contributed, analysts say.

The Energy Department raised its oil and gasoline price forecasts, but also predicted that high prices will cut demand more than previously thought. Light, sweet crude for June delivery jumped to a new record of $122.73 a barrel before retreating slightly to trade up $2.10 at $122.07 on the New York Mercantile Exchange. Oil prices have nearly doubled from about $62 a barrel a year ago, which Goldman sees as a sign that the world is in the midst of a "super spike" in oil prices. Analyst Arjun Murti said in a research note released Monday that prices would ultimately force demand to fall sharply.

Not everyone shares Goldman's view. Tim Evans, an analyst at Citigroup Inc., countered Goldman's analysis with a note predicting that crude prices could as easily fall to $40 a barrel as rise to $200 over the next two years because supplies are, as Evans put it, comfortable. James Cordier, president of Tampa, Fla., trading firms Liberty Trading Group and OptionSellers.com, said Goldman's prediction isn't necessarily new: "We've heard numbers like these out of Goldman Sachs, especially over the last 12 months." Indeed, it's not the first time Murti has espoused a super spike theory; in an April 2005 note, he predicted the oil market was in the early stages of an unprecedented rally that would send prices from a then-record of about $57 a barrel to $105. But some investors respond to such predictions by buying, Cordier said.

Meanwhile, in a monthly report, the Energy Department's Energy Information Administration predicted oil prices will average $110 a barrel this year, up $9 from last month's forecast. The EIA also said high prices will cut U.S. demand for petroleum products by 330,000 barrels a day this year; last month, the EIA predicted U.S. petroleum consumption would fall by 210,000 barrels a day. But strong demand for oil from countries such as China, India, Russia, Brazil and in the Middle East will support high prices and keep global oil demand growing by about 1.2 million barrels a day this year, unchanged from last month's forecast, the EIA said.

A falling dollar on Tuesday also gave traders reason to buy. Investors often buy commodities such as oil as a hedge against inflation when the dollar falls, and a weaker greenback makes oil cheaper to investors overseas. Many analysts feel the dollar's protracted decline is the real reason oil prices have nearly doubled since last year.Cordier said investors are also increasingly concerned about falling oil production in Russia and Mexico, which are both major oil producers. And prices are still supported by concerns about supply disruptions in Nigeria, where production at a Royal Dutch Shell PLC facility was cut after a weekend attack, and in Iraq, where Kurdish rebels warned they could launch suicide attacks against American interests to punish the U.S. for sharing intelligence with Turkey after Turkey bombed rebel bases in Iraq on Friday.

At the pump, meanwhile, the national average price of a gallon of regular gas slipped 0.1 cent overnight to $3.61, according to AAA and the Oil Price Information Service. Analysts are split over how high gas will go; while prices have slipped lower since May 1, leading some analysts to say gas is close to peaking, others predict the fuel will follow oil's upward surge. "You're going to see new highs for gas prices, probably for the weekend," said Cordier, who predicts an average price of $4 a gallon in the coming weeks. In its report, the EIA said gas prices will peak at a montly average of about $3.73 a gallon in June, about 13 cents higher than its previous forecast.

In other Nymex trading Tuesday, June gasoline futures rose 5.87 cents to $3.1116 a gallon after earlier setting a new trading record of $3.126. June heating oil futures rose 5.48 cents to $3.3613 a gallon after rising to their own trading record of $3.3634, and June natural gas futures rose 5.4 cents to $11.232 per 1,000 cubic feet. In London, June Brent crude futures rose $2.35 to $120.48 on the ICE Futures exchange.

Stocks trade lower after Microsoft pulls Yahoo bid

2008-05-05T07:57:00.000-07:00

By TIM PARADIS, AP Business Writer

NEW YORK - Wall Street pulled back Monday as investors digested Microsoft Corp.'s decision to withdraw its bid for Yahoo Inc. and a better-than-expected reading on the service sector. Microsoft had offered $43.7 billion to buy Yahoo Inc., but scrapped the bid late Saturday after the software maker and the Internet provider could not agree on a sale price. The failed deal came as a disappointment to Wall Street, as merger-and-acquisition activity tends to boost shareholder value, and also signals to the broader market that corporate America is optimistic about the future. But investors did appear to take some encouragement from a key reading on the U.S. service sector. The Institute for Supply Management said its April index of nonmanufacturing activity rose to 52 from 49.6 in March. A reading above 50 signals economic expansion; analysts had expected the figure would come in at 49.3, according to economists surveyed by Thomson Financial/IFR.

In midmorning trading, the Dow Jones industrial average fell 64.97, or 0.50 percent, to 12,993.23. Broader stock indicators were mixed. The Standard & Poor's 500 index fell 3.73, or 0.26 percent, to 1,410.17, and the Nasdaq composite index fell 4.52, or 0.18 percent, to 2,472.47. Helping to offset some of investors' disappointment over the abandoned Yahoo deal was a report from The Wall Street Journal, which said Deutsche Telekom AG is considering a bid to buy Sprint Nextel Corp., according to people familiar with the discussions. Bond prices slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.87 percent from 3.86 percent late Friday.

Overall, first-quarter earnings reports and economic data have been coming in weak, but not as poor as many on Wall Street had braced for. Optimism for an economic rebound later in the year has lifted the Dow back above the 13,000 mark. Investors have lingering concerns, however — not only is the housing market still extremely weak, but commodities prices remain near record levels, threatening consumers' discretionary spending and their ability to pay off debt.

Crude oil futures for June delivery rose $2.84 to $119.16 a barrel on the New York Mercantile Exchange, boosted by news of an attack on a Nigerian oil facility. Crude oil had spiked more than $3 a barrel on Friday, and some analysts are concerned the commodity will surge back above its record near the $120-a-barrel level. Gold prices also climbed Monday, while the dollar traded mixed against other major currencies. Overseas, Japan's and Great Britain's markets were closed. In afternoon trading, Germany's DAX index rose 0.13 percent, and France's CAC-40 rose 0.08 percent.

Microsoft Earnings Decline 11%; Forecast Is Tempered

2008-04-24T16:25:00.000-07:00

By Amy Thomson

(Bloomberg) -- Microsoft Corp. said profit declined 11 percent and gave a measured forecast for this quarter as sales of Windows software fell short, sparking concern about a slowdown in technology purchases and sending the shares down 4.4 percent. Third-quarter net income fell to $4.39 billion, or 47 cents a share, from $4.93 billion, or 50 cents, a year ago. Revenue was little changed at $14.5 billion, matching analysts' estimates and disappointing investors looking for more after industry reports showed better-than-expected demand for personal computers. The world's biggest software maker said sales of Windows for PCs sank 24 percent and revenue from its online advertising unit came in at the low end of its projections. Microsoft's report contrasted with positive comments from chipmaker Intel Corp. and computer company International Business Machines Corp. ``People were expecting more of a blowout,'' said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon. ``It's a decent quarter. It's not a great quarter by any means, and people were expecting a great quarter.'' Earnings in the quarter, which included costs of 15 cents a share for a European Commission fine, beat the 44.5-cent average of analysts' estimates. Profit and sales a year ago were helped by $1.67 billion in Windows and Office software orders held over from the previous quarter for accounting reasons. For this quarter, Microsoft said profit will be 45 cents to 48 cents on sales of $15.5 billion to $15.8 billion. That compares with analyst estimates of 48 cents and $15.5 billion. Microsoft declined $1.41 to $30.39 in extended trading after closing at $31.80 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has fallen 11 percent this year.

Windows Concerns

The results stoked concern that corporations are tightening their belts as the U.S. economy cools, even after a report from researcher IDC showed PC sales exceeded forecasts in the quarter. PC shipments rose 15 percent, Framingham, Massachusetts-based IDC said this month. Microsoft had forecast as much as 11 percent. Windows sales fell to $4.03 billion in the quarter. UBS AG's Heather Bellini, the top-ranked software analyst by Institutional Investor, predicted $4.3 billion. Sales of Office word-processing and spreadsheet applications trailed forecasts slightly as well. Chief Executive Officer Steve Ballmer has sought to bolster sales by selling more higher-priced versions of Windows, the operating system that runs more than 90 percent of the world's PCs. Those gains were limited last quarter. More Windows sales came from emerging markets, where prices are typically cheaper, Chief Financial Officer Chris Liddell said in an interview. ``That means that we are seeing revenue growth relative to unit growth isn't as strong,'' he said. The company expects PC growth of as much as 13 percent for fiscal 2008.

Online Business

Microsoft said total sales in the year that starts in July will rise to between $66.9 billion and $68 billion, beating the $66.6 billion average of estimates in a Bloomberg survey. Profit will increase to between $2.13 and $2.19 a share, topping an estimate of $2.11. In the online business, where Ballmer is seeking to build sales by bidding for No. 2 search engine Yahoo! Inc., the loss widened to $228 million. Sales rose 40 percent to $843 million. Microsoft had forecast 40 percent to 45 percent growth. Google Inc.'s revenue climbed 46 percent in the period, to $3.7 billion. Yahoo CEO Jerry Yang dodged Microsoft's advances, rejecting the $31-a-share bid and approaching rivals such as Time Warner Inc.'s AOL. Ballmer may begin a proxy contest to oust Sunnyvale, California-based Yahoo's board as soon as this weekend. The acquisition, which would be the largest in Microsoft's history, may help the software maker take a bigger chunk of the $41 billion market for Internet ads away from Google.

Xbox Growth

One bright spot in the quarter came from the Xbox video-game unit, where sales growth was almost double some forecasts. The business posted its third straight quarterly profit and revenue rose 68 percent to $1.58 billion. Microsoft predicted growth of 25 percent to 35 percent. Ballmer has lined up exclusive titles such as ``Halo 3'' and ``Mass Effect'' to win users from Nintendo Co.'s Wii system and achieve the first annual profit in the Xbox unit. It was ``an outstanding Xbox quarter,'' said Canaccord Adams Inc. analyst Peter Misek in Toronto. ``It's just amazing that a company this size is being driven by video games.''

Amazon earnings jump as sales beat forecasts

2008-04-23T14:15:00.001-07:00

Online retailer projects better-than-expected revenue for second quarter
By Dan Gallagher, MarketWatch

SAN FRANCISCO (MarketWatch) -- Amazon.com saw earnings jump 30% in the first quarter on strong sales growth, and the company issued a stronger-than-expected sales forecast for the current period. For the quarter ended March 31, the online retailer (AMZN)reported earnings of $143 million, or 34 cents a share, compared with earnings of $111 million, or 26 cents a share, for the same period last year. Revenue grew 37% to $4.13 billion for the quarter compared with $3.02 billion last year. Analysts were expecting earnings of 33 cents a share on revenue of $4.09 billion, according to consensus estimates from FactSet Research. Amazon said operating income grew 36% to hit $198 million. The company's closely watched operating margin figure was 4.8% for the quarter -- essentially flat with last year's first quarter as well as the margin figure for the fourth quarter. For the second quarter, Amazon projected revenues between $3.875 billion and $4.075 billion. The midpoint of that outlook -- $3.97 billion -- was ahead of the $3.83 billion expected by analysts for the period. Amazon projected operating income for the second quarter to come in between $120 million and $160 million. Shares of Amazon slipped 2% in after-hours trading after closing the regular session up 1.8% at $81

Family Solution Centers

2008-04-22T07:54:00.000-07:00

I found a new site on the web that provides legal aid in the family law sector. They've helped a lot of people with father's rights. I also have a friend who's used them with child visitation advice. It's worth a look. In the legal system it's never a bad idea to get as much information as possible.

AT&T to layoff 4,650 employees

2008-04-18T12:24:00.000-07:00

(Wichita Business Journal - St. Louis Business Journal) AT&T Inc. is laying off 4,650 employees, or 1.5 percent of its workforce, in order to operate more efficiently after bringing together several companies in recent years, according to a regulatory filing Friday with the Securities and Exchange Commission. The job cuts are primarily among management employees. AT&T is streamlining its operations particularly in non-customer-facing areas so that the company is more focused on customers, according to the filing. The company's overall headcount is expected to remain stable in 2008, though, as the company hires additional employees to support growth areas, according to the filing. Those growth areas include AT&T's wireless, home TV and broadband businesses.

"It's important to put the announcement in context. AT&T is a huge organization, with more than 300,000 employees," Walt Sharp, AT&T spokesman, said in a statement. "We are constantly adjusting our headcount, primarily to get more employees into our growth areas. The bottom line is that we remain one of America's largest employers and we are putting jobs where our customers are." AT&T will take a pre-tax charge of $374 million in the first quarter of 2008 associated with these force reductions. San Antonio-based AT&T Inc. provides local and long-distance telephone and Internet service in Missouri and Illinois.

Oil eases from record over $115

2008-04-18T08:55:00.000-07:00

(Reuters) - Oil prices slipped from record highs on Thursday after a drop in U.S. inventories and the weaker dollar had pushed prices above $115 a barrel. U.S. crude settled down 7 cents at $114.86 a barrel after rallying to an all-time peak of $115.54. London Brent settled 23 cents lower at $112.43 a barrel, off the record $113.38 set earlier. U.S. crude inventories fell unexpectedly last week, while a drop in gasoline stocks exceeded analyst expectations, a government report said on Wednesday, raising supply concerns as the world's top consumer gears up for the summer driving season. Gasoline stocks in the United States fell by 5.5 million barrels in the latest week, more than the 1.8-million-barrel decline analysts had expected. "Summer driving season is approaching. And, even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain," Jan Stuart at UBS said in a research note. "But, before we get there, the stress already put onto the supply chain globally by middle distillate demand and supply dynamics is not still abating," he added. In the latest indication of strong demand for middle distillates, China's top refiners were set to extend high imports into a sixth straight month. Oil prices have more than quadrupled since 2002 as supply struggles to keep up with booming demand, especially in China and other emerging economies. The slide in the U.S. dollar has supported prices for oil and other dollar-denominated commodities, luring investors seeking to hedge against inflation and compensate for the shrinking value of dollar assets in their portfolios. The dollar pared gains after the Philadelphia Federal Reserve's business index fell sharply in April, adding to concern about the health of the U.S. economy. Earlier, the dollar had gained against the euro after Jean-Claude Juncker, chairman of euro zone finance ministers, spoke out against the single currency's rise.

Saudi to leave some oil finds for future

2008-04-14T09:37:00.000-07:00

Reuters)Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations, the official Saudi Press Agency (SPA) reported. "I keep no secret from you that when there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said in remarks made late on Saturday. US President George W Bush in January urged the Saudi King to help tame soaring prices by encouraging Opec to pump more oil. On separate trips to Saudi Arabia this year, the US Energy Secretary also asked for more oil, while the Vice-President discussed high prices with the king. The kingdom has spent billions on building over 2 million bpd of spare crude capacity and is the only country in the world able to bring online large volumes of crude supply quickly to deal with unexpected supply shortages. Opec held production steady at meetings in February and March despite calls for more oil from the US and other consumers. Opec officials blame the high price on factors beyond the group's control such as the weak dollar, investment flows into commodities and speculation. Saudi Oil Minister Ali Al Naimi said last week that global oil markets were well supplied and there was no need to put more oil on the market, despite prices hitting a record of over $112 a barrel last week. Saudi Arabia has trimmed its output to around 9 million bpd to reflect lower customer demand, a Saudi oil source said on Friday. The kingdom had in previous months pumped around 9.2 million bpd. Crude demand traditionally dips at this time of year after the end of winter as refiners carry out maintenance and prepare to meet summer demand. Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12. 5 million bpd next year.

Southwest Planes Had Cracks an Inspection Might Have Found

2008-04-11T06:34:00.000-07:00

By MATTHEW L. WALD

WASHINGTON — Five Southwest Airlines planes grounded last month because they had not been properly inspected had precisely the kind of cracks that the inspection order was intended to detect, an official of the agency testified Thursday to a Senate subcommittee. The testimony, by the associate administrator for safety of the Federal Aviation Administration, was the most explicit statement so far that the epidemic of aircraft groundings had genuine safety roots. But the agency’s troubles seemed to deepen as the subcommittee chairman, Senator John D. Rockefeller IV, Democrat of West Virginia, compared the F.A.A.’s handling of its lapses to the Pentagon’s handling of the abuse of prisoners at Abu Ghraib, and suggested that punishments should reach higher into the ranks. “Nobody at the top ever gets fired,” said Mr. Rockefeller, chairman of the Senate Commerce aviation subcommittee, while questioning Nicholas A. Sabatini, the F.A.A. associate administrator.

Mr. Sabatini blamed subordinates for the problem, though he acknowledged his responsibility. Senator Rockefeller, suggesting that heads should roll, remarked, “You’re responsible, but you don’t have to be accountable?” The F.A.A.’s recent decision to audit the airlines for compliance with its rules, resulting in an unprecedented wave of aircraft groundings, has been driven largely by revelations from a House committee, but the Senate was hardly friendlier. Mr. Rockefeller told a panel of witnesses, “It’s catastrophic economically, and it’s an embarrassment to the nation. ‘’

Mr. Sabatini stressed that statistically, the recent past has been the safest period in aviation history.

“We didn’t get here by accident,” he said, with no evident recognition of the double entendre. He attributed safety gains to extensive use of operating data by his agency and the airlines to isolate areas of risk and focus on them. In recent audits to determine if the airlines were complying with F.A.A. orders, “we found we had achieved 99 percent compliance, but it’s the other 1 percent that keeps me up at night,” Mr. Sabatini said. He used stronger language to describe what Southwest had done in flying planes that it knew had not been properly inspected. While the airline’s executives testified under oath last week that there was no safety-of-flight problem, Mr. Sabatini’s prepared testimony said the flights had been putting thousands of passengers at risk. Some senators said, however, that in a data-driven system, under which F.A.A. inspectors mostly review records rather than look at aircraft, the agency might have lost touch with actual conditions. Calvin L. Scovel III, the inspector general of the Transportation Department, of which the F.A.A. is part, said the problems at Southwest, where planes that had not been inspected were allowed to keep flying, amounted to “fundamental breakdowns in F.A.A. oversight.” These troubles, he said, were “symptomatic of much deeper problems in several key areas of F.A.A.’s oversight.”

In addition to the current maintenance crisis, the agency faces severe challenges in hiring employees in large numbers to replace air traffic controllers and safety inspectors; thousands have reached retirement age in the last few years or will soon. The biggest safety challenge of all may be the risk of runway collision, said Steven R. Chealander, a member of the National Transportation Safety Board. Mr. Chealander said that the number of serious runway incidents this year was double the level of early last year.

Frontier Airlines files for Chapter 11 protection

2008-04-11T06:33:00.000-07:00

Wichita Business Journal - by Denver Business Journal

Frontier Airlines filed for Chapter 11 bankruptcy late Thursday in federal bankruptcy court in New York City in response to what the airline said was a threat to its liquidity resulting from actions by its principal credit card processor. On its website, the airline said it would continue its full schedule of flights and will honor tickets and reservations and provide refunds and exchanges under its standard policies. Frontier offers three flights a day to Denver from Wichita's Mid-Continent Airport using its Lynx carrier. Its frequent flyer program and customer service programs would remain unaffected, as will wages and benefits, the company said. Suppliers and other vendors payments would be unaffected, the airline said.

"Frontier is committed to delivering exceptional customer service and we intend to continue delivering on that promise with normal operations throughout our reorganization process," said Sean Menke, Frontier President and CEO. "To be clear, we filed for very different reasons than those of other recent carriers, and our customers and employees can be confident that we intend to keep on flying and providing outstanding service and products." The airline said it made the decision to file for Chapter 11 bankruptcy after its credit processor changed its fee schedule, specifically its hold back of customer receipts. That, the airline said, severely threatened its liquidity.

"Given the recent progress we have made towards strengthening our balance sheet and obtaining additional financing, it is truly unfortunate that we have had to take this action," Menke said. The company listed assets of $98.3 million and debts of $92.2 million as of Dec. 31, 2007. Its top five creditors are Wells Fargo $93,491,208.79; the City & County of Denver $2,408,887.38; Total Petrochemicals Inc. $2,366,875.29; Airport Revenue Fund $1,817,919.59; World Fuel Services Inc. - Wire $1,557,138.66, according to the bankruptcy filing. Frontier Airlines Holdings, Inc. common stock is traded on NASDAQ's National Market under the symbol FRNT.

Alliant Bid for MacDonald Rejected by Canada

2008-04-10T16:28:00.001-07:00

By Alexandre Deslongchamps and Sean B. Pasternak

April 10 (Bloomberg) -- The Canadian government rejected the C$1.33 billion ($1.31 billion) sale of MacDonald Dettwiler and Associates Ltd.'s satellite business to Alliant Techsystems Inc., marking the first time Canada has blocked a foreign takeover since at least 1985.

Industry Minister Jim Prentice wrote to Edina, Minnesota- based Alliant on April 8 to say the proposed takeover doesn't provide a ``net benefit'' to Canada, according to an e-mailed statement today from his office in Ottawa.

``It's a shot across the bow and the government knows that this will be taken very seriously, not only by the prospective buyer, but also the U.S. government,'' said Richard Clark, a lawyer with Stikeman Elliott LLP in Toronto who specializes in mergers.

MacDonald Dettwiler fell C$4.13, or 8.8 percent, to C$42.72 at 10 a.m. trading on the Toronto Stock Exchange, the biggest decline in 11 months. Alliant gained 30 cents to $107.89 in New York Stock Exchange trading.

Alliant offered in January to acquire the space business of MacDonald Dettwiler, including Radarsat-2, a remote sensing satellite that scans Canada's Arctic region.

Technology Concern

Canadian lawmakers from all parties said at hearings in Ottawa this month that they're concerned the technology may become subject to U.S. national security laws and that Canada may lose its priority with Radarsat.

``If you are an investor in MacDonald Dettwiler at the moment, you are not going to be happy about this decision at all,'' said Paul Bradley, an analyst at Fraser Mackenzie Ltd. in Toronto. The sale made sense for the company, because the unit's lack of access to the U.S. market made it difficult to grow, he said.

Under Canadian investment law, Prentice can block any takeover of a Canadian company worth more than C$295 million if the deal doesn't provide ``net benefits'' to the economy, such increased productivity and research and development. This is the first time a foreign takeover has been rejected under the Investment Canada Act, which has governed takeovers since 1985.

There's a good chance Alliant will succeed in reversing Prentice's decision, Clark said. Alliant has 30 days to respond to the notice. Prentice will comment on his decision later today, spokeswoman Deirdra McCracken said in an email.

High Stakes

``It's a pretty high stakes game, and I would think that the potential U.S. buyer will try and see what it can do to resurrect the deal,'' Clark said.

Richmond, British Columbia-based MacDonald Dettwiler is an information technology company that also builds robotic parts for the International Space Station, including the Dextre robot that was installed during the Shuttle Endeavour's last mission.

The purchase would help Alliant build complete satellite systems. The MacDonald Dettwiler unit has 1,900 employees and estimated sales of $500 million for fiscal 2009.

``I don't think as a general term investors will look at this and say all of a sudden Canada is not open to foreign investment,'' because a similar acquisition in other countries would also face a stringent review, Bradley said.

Alliant spokesman Brian Grace and MacDonald Dettwiler spokeswoman Wendy Keyzer didn't immediately return phone calls placed before business hours today seeking comment.

Pfizer warns of lung cancer with inhaled insulin

2008-04-09T07:51:00.000-07:00

(Reuters) - Pfizer Inc (PFE) and Nektar Therapeutics (NKTR) said on Wednesday clinical trials of the inhaled insulin Exubera found increased cases of lung cancer, leading Nektar to end talks with potential partners to market the product. Nektar shares tumbled 24 percent in early trading, while shares of MannKind Corp (MNKD), which has been developing its own inhaled insulin, plummeted more than 56 percent. Pfizer was little changed at $21.00. Over the course of the clinical trials, Pfizer said six of the 4,740 Exubera-treated patients versus one of the 4,292 patients not treated with Exubera developed lung cancer. One lung cancer case was also found after Exubera reached the market. Pfizer updated the Exubera labeling to include a warning with safety information about lung cancer cases found in patients who used Exubera, which U.S. regulators approved in January 2006.

The warning states all patients who developed lung cancer had a prior history of cigarette smoking, and that there were too few cases to determine whether the development of lung cancer is related to Exubera use. Pfizer said in October it would stop marketing Exubera, ending its involvement with a product once thought to have the potential to become a $2 billion-a-year blockbuster with the promise of helping diabetics avoid needle sticks. Instead, sales were negligible.

The warning in the label stemmed from an ongoing review of data from the Exubera clinical trial program and post-marketing experience by Pfizer and the U.S. Food and Drug Administration, Pfizer said. Pfizer said it will be discussing the timing of marketing authorization withdrawals with regulatory agencies. Since Pfizer's exit last year, Eli Lilly (LLY) and Novo Nordisk (NOVOb) also ended inhaled insulin development programs. Nektar said it will cease all spending associated with its inhaled insulin programs and will not incur charges related to the event.

Washington Mutual Gets $7 Billion From TPG-Led Group

2008-04-08T08:34:00.001-07:00

(Bloomberg) -- Washington Mutual Inc., the largest U.S. savings and loan, got $billion from a group of investors led by David Bonderman's TPG Inc. after losses on subprime loans ate up capital and erased 74 percent of its market value.

Washington Mutual sold 176 million shares at $8.75 a piece, 33 percent below yesterday's closing price on the New York Stock Exchange, and preferred shares, the company said in a statement today. The lender also slashed its dividend and announced 3,000 job cuts. The stock fell as much as 13 percent.

Chief Executive Officer Kerry Killinger, struggling to reassure investors the bank has enough capital to stay afloat, said the dividend cut will preserve $490 million annually. Seattle-based Washington Mutual, which said today it lost $1.1 billion in the first quarter, will stop making loans through mortgage brokers and close 186 home-lending offices.

``It's dilutive for shareholders on a massive basis, so it's not great for the company, but it's great for the system that capital can be raised during these stressful times,'' Vincent Farrell, a principal at New York-based Scotsman Capital Management LLC, said on Bloomberg Radio.

Washington Mutual fell 76 cents to $12.39 a share at 10:28 a.m. in New York Stock Exchange composite trading.

Banks and securities firms including Citigroup Inc. and Lehman Brothers Holdings Inc. sought cash infusions after record losses tied to subprime home loans. The world's biggest financial companies have written down assets or set aside money to cover more than $232 billion in bad loans, according to data compiled by Bloomberg.

`Substantial' Capital

``This substantial new capital -- along with the other steps we are announcing today -- will position us for a return to profitability as these elevated credit costs subside,'' Killinger said in the statement.

Washington Mutual said it will set aside $3.5 billion because of expected losses on home loans and expects to charge off $1.4 billion in losses during the first quarter. The company had been expected to lose $344 million, or 39 cents per share, the average of industry analysts who follow the company, CreditSights Inc. analyst David Hendler said in a report today.

As part of the agreement Washington Mutual will stop making loans through mortgage brokers and close its freestanding home loan offices, while focusing on its 2,500 bank and small business lending offices. The quarterly dividend was cut to 1 cent a share from 15 cents.

Bonderman, TPG's founding partner, will be added to the board. Larry Kellner, CEO of Continental Airlines and former chief financial officer of American Savings Bank, will be an observer at TPG's request. Bonderman declined to comment through a spokesman, Owen Blicksilver.

Market Value

The lender, known as WaMu, once ranked among the 11 biggest originators during 2006 of subprime mortgages, which are made to people with the weakest credit.

Overdue loans and foreclosures set a record last year in the U.S., and Washington Mutual posted its first loss since 1997 in the fourth quarter. The company wrote down the value of its home-mortgage unit by $1.6 billion.

Washington Mutual has lost about three-quarters of its market value in the past year ended last week, leaving the company almost tied with Cleveland-based National City Corp. among the worst performers in the 24-stock KBW Bank Index. National City, Ohio's biggest bank, ranked 10th among subprime lenders in 2006, according to a March ranking last year by Inside Mortgage Finance.

Washington Mutual ranked sixth among U.S. mortgage companies last year, according to trade publication Inside Mortgage Finance.

Default Rates

Subprime loans typically have the highest default rate, and bad subprime mortgages set a record in the fourth quarter, according to the Mortgage Bankers Association. That contributed to the current U.S. housing slump, the worst in at least a quarter of a century.

More than 100 home lenders have sought buyers, halted loans or gone out of business since the start of 2007, according to data compiled by Bloomberg.

The company ranks sixth with a 3.2 percent share of U.S. bank deposits behind Bank of America Corp., JPMorgan Chase & Co., Wachovia Corp., Wells Fargo & Co. and Citigroup Inc., Killinger said in a Jan. 29 investor conference. It had $194.3 billion in deposits as of Dec. 31.

Santander Sells Interbanca to GE in $1.6 Billion Swap

2008-03-27T08:25:00.000-07:00

By Charles Penty (Bloomberg)

Banco Santander SA, Spain's largest bank, agreed to buy finance companies in Germany and the U.K. as part of an asset swap valued at 1 billion euros ($1.58 billion) with General Electric Co.

GE is buying Italian wholesale lender Interbanca, a unit that Santander retained after selling Banca Antonveneta SpA to Banca Monte dei Paschi di Siena SpA, the Santander-based lender said in a statement today. Santander will take over GE Money's units in Germany, Austria and Finland and credit-card and auto-finance divisions in the U.K.

Santander is taking on 9 billion euros in loans to expand its consumer-finance unit, which accounted for 9 percent of group profit last year. The expansion comes as slowing economies in Spain, Europe and the U.S. threaten to drive up loan defaults, said Alejandro Ruyra, an analyst at Landsbanki Kepler in Madrid.

``It's more efficient to leverage this business as much as they can,'' said Ruyra in an interview today. ``In the short-term it's true this business doesn't have the greatest outlook.''

Santander Consumer Finance earned 168 million euros in the fourth quarter, up 18 percent from a year earlier. Loan defaults as a proportion of total loans for the business stood at 2.84 percent in December, up from 2.57 percent a year earlier. The loan-loss ratio for the group as a whole was 0.95 percent.

Santander shares climbed 0.9 percent to 12.66 euros at 12:40 p.m. in Madrid, valuing the bank at 79.2 billion euros. The shares are down 14 percent this year.

GE is seeking partners or buyers for credit card, mortgage and loan units outside the U.S. to reduce riskier financial assets, three people with knowledge of the plan said last month.

The sale of GE's consumer-loan units in Europe expands on CEO Jeffrey Immelt's announcement in December to do the same for the U.S. card unit. He wants to shift as much as $50 billion in assets to commercial-finance businesses that have higher returns and lower risks of default.

Justice Department approves XM-Sirius radio deal

2008-03-25T06:19:00.001-07:00

WASHINGTON (AP) - The proposed $5-billion buyout of XM Satellite Radio by rival Sirius Satellite Radio has crossed a major hurdle.

The Justice Department today approved the deal, saying it is unlikely to hurt competition or consumers. Approval came despite opposition from consumer groups and an intense lobbying campaign by the land-based radio industry.

Shareholders approved the purchase last November and the companies say the merger will save hundreds of millions of dollars in operating costs -- savings that will ultimately benefit their customers.

In explaining its decision, the Justice Department said the two companies compete not just with each other but also with other forms of radio and entertainment. It noted that the likely evolution of technology in the future makes it "unlikely that the transaction would harm consumers in the longer term."

JPMorgan to Buy Bear for $2 a Share

2008-03-17T06:31:00.001-07:00

By Joe Bel Bruno and Madlen Read (AP)

JPMorgan Says It Will Buy Ailing Bear Stearns for Fire-Sale $2 a Share, or $236.2 Million

NEW YORK (AP) -- Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.

The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse.

The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.

"This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."

JPMorgan Chase & Co. said it will guarantee all business -- such as trading and investment banking -- until Bear Stearns' shareholders approve the deal, which is expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.

JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression, two World Wars and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.

"Having taking Bear Stearns out of the problem category, and the strong action by the Federal Reserve, we would anticipate the market will behave quite differently on Monday than it was Thursday or Friday," Cavanagh said.

Some analysts expected it to be a brutal day for global stocks, nevertheless. Shortly after the news broke, Japan's benchmark Nikkei stock index plunged more than 3 percent in morning trading.

A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis -- more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.

JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.

"The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."

Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks -- it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.

After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.

This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.

Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities -- and what was once a cash cow turned into the investment bank's undoing.

In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.

The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.

Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.

Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."

Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.

Intensifying Credit Fears Sink Stocks

2008-03-14T07:33:00.000-07:00

Wall Street Tumbles After Plan to Boost Bear Stearns Liquidity Worsens Credit Fears

By Tim Paradis, AP Business Writer
NEW YORK (AP) -- Stocks plunged early Friday as investors worried that a plan to ease a liquidity crisis at Bear Stearns Cos. indicates how severe credit troubles have become. Each of the major indexes lost more than 1.5 percent; the Dow Jones industrials fell about 200 points.

Investors were busy examining the plan from JPMorgan Chase & Co. and the New York Federal Reserve to provide secured funding to Bear Stearns for an initial period of 28 days. The move offers Bear Stearns relief from a sudden liquidity crunch and could help instill confidence in the stagnant credit markets. Bear Stearns shares fell sharply, dragging down other financial companies. Bear skidded $24.45, or 43 percent, to $32.55. Stocks showed moderate gains in the early going after a Labor Department report showed the Consumer Price Index remained flat for February. Wall Street has been expecting inflation would show an increase. But the gains quickly disappeared after investors learned more about how close Bear Stearns appeared to have come to financial implosion.

"The Bear Stearns news reversed the early positive sentiment from the inflation data," said Peter Cardillo, chief market economist at Avalon Partners. "There had been nervousness about Bear Stearns for some time and now the market's concerns about the company have been proven true." In the first hour of trading, the Dow Jones industrial average fell 207.60, or 1.71 percent, to 11,938.14 after having fallen as much as 300 points. Broader stock indicators also fell. The Standard & Poor's 500 index fell 30.17, or 2.29 percent, to 1,285.31, and the Nasdaq composite index fell 45.82, or 2.02 percent, to 2,217

Brandidentityguru.com

2008-03-13T15:30:00.000-07:00

I stumbled upon web site today that I thought I'd blog about. It's for a marketing company and it has some good aspects and some bad. The company is Brand Identity Guru out of Boston, Mass. I like the operation board graphic and their work has been highly recommended so they'd probably do a good job. Branding should also be an essential part of your marketing strategy if you want to gain trust in the marketplace and get your product out there. I do have a couple criticisms of the site itself that I thought I would mention. First, the scroll bar on the site doesn't go all the way to the bottom which is a bit annoying. Secondly, the fonts at the bottom are unreadable. It's too bad because they are a great company so it's not a knock on them but on their designer. For a company to be offering free web site consulting I think it's essential Brand Identity Guru have a good layout. I think Brand Identity Guru needs to redo the CSS on this and they should have a great site!

http://www.brandidentityguru.com

Humana Slashes Outlook Amid Higher Drug Costs

2008-03-12T08:50:00.000-07:00

By DONNA KARDOS (Wall Street Journal)

Humana Inc. on Wednesday nearly halved its first-quarter earnings guidance and cut its full-year earnings projection on higher Medicare drug costs stemming from a cut in co-payment levels. The new guidance which sent shares of the managed-care provider plunging in premarket activity calls for first-quarter earnings of 44 cents to 46 cents a share, compared with the company's prior projection for 80 cents to 85 cents a share. Humana now expects 2008 earnings to come in between $4 and $4.25 a share, down from the prior forecast of $5.35 to $5.55. The company had given that full-year projection just a month ago when it raised a previous projection by five cents a share amid reporting a 57% rise in fourth-quarter net income.

The latest mean estimates of analysts polled by Thomson Financial were for per-share earnings of 84 cents in the first quarter and $5.50 in the full year. The news came a day after investors walloped managed-care stocks on a dramatic earnings warning by WellPoint Inc. Humana smashed through its 52-week low Tuesday as the stock closed down 24%. Shares fell to $39.02 in recent premarket trading Wednesday, levels last seen three years ago. While WellPoint's warnings was based on higher medical costs, Humana was hurt by drug costs. In a slide presentation accompanying a conference call by executives, Humana said it cut 2008 copays after overestimating the use of so-called Tier 3 drugs. That pushed member costs above the threshold called for by the Centers for Medicare and Medicaid Services and resulted in Humana lowering copays.

"In hindsight, we should have assumed that members would likely change their behavior and substitute lower tier drugs, rather than lowering our copays," Humana said in the presentation.

As a result, members' shares of drugs costs has become 26%, not the 33% target allowed. As a result, Humana is picking up an additional $160 million in drug costs. The lower copays also resulted in some higher-cost members transferring to Humana's enhanced plan, which saw member growth of 188,000 last year. The company much of growth was from previous members returning. The possibility of higher costs facing health insurers have added to other investor worries, leaving the group vulnerable. Wall Street also has grown worried about health plans' exposure to mortgage-backed securities in their investment portfolios. While the holdings apparently are largely investment grade and perform well, investor concerns are likely to linger until the broader credit markets stabilize, according to an analyst.

Top 3 Financial Reporting Tips

2008-03-06T08:32:00.000-08:00

Bart Holemue – Financial Wizard and WFR Staff Writer

If there’s one thing I’ve learned after 27 years as a financial wizard it’s that you can never be too cautious about how your company’s pecuniary reports are digested by prospective investors. More significantly, when spotlighting the international aspect of this beast it becomes even more imperative to ensure the most helpful information is being displayed. This might not always be easy, especially when the readers typically are government employees and potential investors on a global scale! Here are 3 tips to writing reports that financial analysts want to read and invest in - regardless of locale.

Be Profitable! This might sound obvious to most business savvy individuals, but investors tend to choose entities which have more assets than liabilities. As you can imagine, showing a loss can be quite detrimental to future investment. Quite simply, if you feel you will be profitable in the future, make sure you account for that. The easiest way I’ve found is to add future sales to your accounts receivables while concurrently undervaluing your liabilities, for example: If you attend a business conference and you meet with 10 clients and expect $50,000 in new business from each of them in the next 3 months this formula would be calculated C*n=AR+aAR where C are your potential deals, n is the total spend on each deal, AR is accounts receivable, and aAR are actual accounts receivables. So in this case we have: 10 x $50,000 that’s half a million dollars! I know what you’re thinking…Bart, some will not get to the 50k mark quarterly, exactly some may do much, much, more!

Growth. Is your business growing and what exactly is growth? Growth might not be your current business. In fact, growth is a relative term. For example, if you take a market survey and only 1% of people have heard of your brand this is not wholly accurate. In fact, 100% of that percentage those people are familiar with the brand, and a certain percentage of their friends are also aware. Compounded, with the original percentage this total market cap could be well over 100%. Think about it, investors certainly will…

Finally, investors want what they think other investors want. This may be the most important element of all. I find the most effective method to do this is hold shareholder meetings and invite potential investors. The best way to locate current investors (who can help you encourage new investment) are agencies such as http://www.auditionagency.com/ or http://showbizltd.com/_sbl_pages/acting_agents.php. I’ve found for around $50,000 you can employ over 100 shareholders for nearly two hours. Simply invite twice as many potential investors and include testimonials from the “current” investors. Combined with a $5,000 outlay for a conference hall at your local hospitality establishment with food and beverages one could parlay $55,000 into almost a million in capital in a fraction of a day.

In all, there are many ways to encourage your financial reporting success. These are only three points out of a myriad of options. We will be holding a meeting at the Radisson in Minnesota in late April 08, please email me at bart@worldfinancialreport.com for details, we hope to see you there!

President Fails to Budge OPEC on Production

2008-03-06T07:09:00.000-08:00

By JAD MOUAWAD (New York Times)

OPEC on Wednesday rebuffed calls from President Bush to increase oil output, instead citing “mismanagement” of the American economy as a major factor driving prices up. Record prices are suddenly creating the sharpest tensions in years between the oil cartel and the United States, the world’s largest oil consumer. Two days after the president called for more oil on the global market, OPEC members, meeting in Vienna, chose to leave their production levels unchanged, declaring that the market has plenty of oil already. The cartel’s president blamed financial speculators and American economic problems, which have helped lower the value of the dollar, for the high oil prices. After the meeting, oil prices settled above $104 a barrel, a record. President Bush, who said this week that it would be a mistake for the Organization of the Petroleum Exporting Countries not to raise production, was disappointed by the outcome of Wednesday’s meeting, according to the White House. It is the second time this year that OPEC had ignored public calls from the United States to increase supplies. In January, Mr. Bush traveled to Saudi Arabia and urged producers to open their taps. But the plea failed to sway OPEC. When the group met in February, it kept its production level unchanged.

The rally in oil prices on Wednesday was caused in part by tensions on the border between Venezuela, a major oil exporter, and Colombia, as well as by government data in the United States showing a drop in stockpiles of oil and some of the fuels made from it. Oil prices settled at a record of $104.52 a barrel on the New York Mercantile Exchange, a gain of $5. Prices, which have risen 73 percent during the last year, have settled above $100 a barrel for seven of the last 12 trading sessions.

While members of OPEC chose not to increase supplies, they were not entirely oblivious to the political and economic impact of $100 oil. Gasoline prices have been rising rapidly in the United States in recent weeks, hitting a nationwide average of $3.18 a gallon Wednesday. That is only a nickel below the record set last May. The sharp surge in oil prices in recent days has deterred the group from cutting its production, a move that some members like Algeria and Iran were seriously contemplating a few weeks ago.

With the United States economy slowing down, oil prices have risen as investors flee the stock market and seek refuge in hard assets like commodities. The fall in the value of the dollar gives OPEC an incentive to keep prices high. Since oil is sold in dollars, petroleum producers see the value of their exports decline any time the dollar drops. The dollar has lost 17 percent of its value against the euro in the last year. On Wednesday, it fell to a new low against the euro, trading at $1.53.

“OPEC is angry that President Bush wants them to increase production while the dollar is sinking and the administration is doing nothing about that,” said Fadel Gheit, an oil analyst at Oppenheimer & Company in New York. “It’s really not surprising that they have ignored him.”

The falling dollar has complex economic effects in the United States, not all of them bad. The drop is helping to fuel a surge of American exports, one of the few bright spots in a struggling economy. Higher energy prices, which have been rising relentlessly for nearly a decade, are creating tensions between consuming nations and producers around the world. Oil-rich countries like Russia and Venezuela have become more demanding in their dealings with foreign oil companies, often restricting access to prime drilling locations. In the United States, rising energy costs are weighing on an economy that is struggling with a housing slump and a credit crisis. As a sign of growing impatience, Mr. Bush criticized OPEC this week for not increasing supplies.

“I think it’s a mistake to have your biggest customer’s economy to slow down” because of high energy prices, he said. Most energy analysts dismissed the call for additional supplies as political rhetoric. In comments on Wednesday, the president said the United States needs to reduce consumption.

“America’s got to change its habits; we’ve got to get off oil,” Mr. Bush said at a conference on renewable fuels in Washington. “Until we change our habits, there’s going to be more dependency on oil.” Mr. Bush’s earlier comments echo remarks he made more than eight years ago, while running for president. Then, the onetime Texas oilman said that if prices rose, he would not hesitate to call OPEC producers and persuade them to increase supplies.

“I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply,” Mr. Bush said at the time. “Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot.” But OPEC members are proving difficult to sway. Chakib Khelil, Algeria’s oil minister and OPEC’s president this year, said on Wednesday that the high price of oil was not because of a lack of supply, but instead resulted from the “mismanagement of the U.S. economy” that has helped send the dollar tumbling.

“If the prices are high, definitely they are not due to a lack of crude,” Mr. Khelil said in Vienna. “They are due to what’s happening in the U.S.” He added: “There is sufficient supply. There’s plenty of oil there.”

Most energy analysts agree there is no shortage of oil. Commercial oil inventories are high, and refiners are not lacking oil.

“The market continues to be well supplied,” Rex W. Tillerson, the chairman and chief executive of Exxon Mobil, said at a conference in New York. “There has been no interruption of supplies.” Still, OPEC recognizes the threat posed by a slowing economy on its business. In its final statement, the group said that the United States economic slowdown and housing crisis could damp global oil demand this year.

Ali al-Naimi, Saudi Arabia’s oil minister, said there was no need to increase supplies by “even one barrel of oil.” But he stressed that Saudi Arabia, the world’s top exporter, would keep oil markets well supplied. As a sign of how seriously it sees its role, Mr. Naimi told reporters that the kingdom was pumping 9.2 million barrels, “day in, day out,” or roughly 300,000 barrels a day above its formal OPEC target. The oil cartel, which is next scheduled to meet in September, indicated it might call for an emergency meeting earlier depending on “market conditions.” OPEC producers account for about 40 percent of the world’s oil exports. Some of its members, like Saudi Arabia and Kuwait, are United States allies; others, like Iran and Venezuela, are political foes.

“OPEC’s biggest fear is that this is a bubble and that prices will drop by $30 a barrel,” said Roger Diwan, a managing director at PFC Energy, who was in Vienna to attend the meeting. “So they keep tightening supplies and prices keep going up.”

OPEC hints output will not change

2008-03-05T07:05:00.000-08:00

VIENNA, Austria

By WILLIAM J. KOLE (Business Week)

OPEC's president urged the cartel Wednesday to be vigilant with oil prices hovering above $100 per barrel, but said despite a turbulent world economy, the global market for crude was stable. "The growing sense of despondency about the future global economic outlook is generating much uncertainty in energy circles," Chakib Khelil said in an opening address to oil ministers gathered in Vienna. Khelil said, however, that crude stocks were well within their five-year average and the 13-nation group would likely leave unchanged its global output of about 32 million barrels a day. Khelil cautioned that the Organization of Petroleum Exporting Countries would have to maintain "constant vigilance" as the weak dollar, the U.S. subprime mortgage crisis and political tensions in the Middle East rattle markets worldwide. While it is common for OPEC to say it must remain vigilant, oil ministers suggested this week that the cartel would keep even closer tabs on prices and supply, and might authorize Khelil to take quick action in the next six weeks or so if he deems it necessary. "There have been signs that the oil market is moving into a new phase," Khelil said, adding: "It should be characterized by stability and not volatility."

Saudi Arabia, OPEC's top producer and by far its most influential member, also said it saw no reason to change output targets -- despite record high prices and a rebuke Tuesday from President Bush. "Understand the consequences of high energy prices," Bush said after meeting with King Abdullah II of Jordan in the Oval Office. "I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices," he added. Japan, the U.S. and other major industrialized nations have urged OPEC -- which supplies about 40 percent of world demand for crude -- to bring more oil on the market and pull down prices, which reached an inflation-adjusted record of nearly $104 a barrel this week. OPEC is resisting, pointing to slackening demand in the second quarter and suggesting it would hold off to see what happens with supply and prices this spring. "Why do we need to take any new measure if the health of the market that we follow for our policies is sound?" the pan-Arab newspaper Al Hayat quoted Saudi Oil Minister Ali Naimi as saying. Naimi told reporters in Vienna that his country is pumping roughly 300,000 barrels a day over its quota and is selling every drop "day in, day out" -- an upbeat assessment. Analysts said they didn't expect any significant action Wednesday.

"In truth, OPEC's decision not to pump more oil is a reflection that supply is relatively good," said Anthony Sabino, a professor of business at St. John's University in New York. "What is driving oil prices up to the stratospheric level of over $100 per barrel is the U.S. economy, now undeniably in recession," he said. "It's not so much the price of oil is going up -- it's that the value of the U.S. dollar, sad to say, is slumping." Oil shot up a dramatic 19 percent last month as the falling dollar prompted speculators and other investors to shift cash to crude and other commodities as a hedge. Khelil said Wednesday that OPEC was not happy at the speculation rocking an already jittery market, saying the influence has "not been welcomed by this organization." Key cartel members said this week that prices in the $85 to $90 per barrel range would be optimal. The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Iraq is the only member not subject to the cartel's output quotas.

Check Into Cash

2008-03-04T06:33:00.000-08:00

By Greg Gortz - Featured Journalist and WFR Staff Writer

I like to consider myself a market-savy individual. I keep a watchful eye on the daily high and lows of the DOW, S&P, and of course NASDAQ. I even go as far as to follow the international market – as it seems to be eclipsing our own in terms of ROI at this given time. Even so – we still all make mistakes. I was discussing a particularly poor day with a co-worker of mine over drinks and we got to talking about contingency plans. If, in the event things continue to go south in the market, if the mortgage crisis continues, if I decide to make a few trades online, while slightly buzzed – what then? Well – to be honest – my co-worker and I really didn’t have a contingency plan. Things have been so good for so long and he and I are both so young, we just never had to think about it. So I did a little research on my own – with all the defaults on loans – what were people doing to save their homes? Where were they getting the equity? I found a great website that will offer the Cash advance that many home owners could really use. Maybe it was the night cap I was drinking while doing my research – maybe not – all I know is that my heart was a little warmer knowing that there are Cash advance websites like these out there that can help people who need it most.

Staples Net Income Falls 1% on Lower Retail Sales

2008-03-04T06:17:00.000-08:00

By Heather Burke

March 4 (Bloomberg) -- Staples Inc., the world's largest office-supplies retailer, said fourth-quarter profit fell 1 percent on lower North American retail sales to small companies and consumers. Net income declined to $333.2 million, or 47 cents a share, from $336.5 million, or 46 cents, a year earlier, Staples said today in a statement. Profit met some analysts' estimates. Revenue for the three months ended Feb. 2 rose less than 1 percent to $5.32 billion. Staples cut its full-year forecast. Sales at U.S. and Canadian stores open at least a year dropped 6 percent. Office-supply retailers' sales slowed as customers concerned about a declining job market and the worst housing slump in a quarter century reduced purchases of copiers and desks. North American sales have also declined at smaller competitors such as Office Depot Inc. ``The environment is hitting everyone pretty hard,'' Walter Todd, who helps manage $800 million for Greenwood Capital Associates LLC in Greenwood, South Carolina, said yesterday in an interview. ``It's all macro-driven.'' The firm held 175,048 Staples shares as of Dec. 31. The retailer predicted a ``mid single-digit'' percentage increase in sales and ``high single-digit'' percentage growth in earnings per share for the year ending next Jan. 31. Staples said in November that it expects earnings per share this year to increase by a percentage in the ``low teens,'' with ``high single-digit'' sales growth.

Staples Stock

Staples, based in Framingham, Massachusetts, rose 24 cents, or 1.1 percent, to $22.49 yesterday in Nasdaq Stock Market composite trading. The stock lost 2.5 percent of its value this year through yesterday, compared with a 20 percent decline for Office Depot, the second-largest office-supplies retailer. ``In the context of a tough retail environment, we view Staples as relatively stable,'' Jack Murphy, an analyst at William Blair & Co. in Chicago, wrote yesterday in a research note. He rates Staples shares a ``buy.'' Analysts estimated fourth-quarter profit of 47 cents a share, the average projection of 16 analysts surveyed by Bloomberg. Eleven analysts, on average, estimated sales of $5.4 billion. In November, Staples forecast a ``low double-digit'' sales growth in the fourth quarter, with North American same-store sales unchanged or ``slightly negative.''

Corporate Express Bid

Staples last month made an unsolicited offer to buy Corporate Express NV, the world's biggest distributor of office supplies, for 1.33 billion euros ($2.02 billion). Amsterdam- based Corporate Express rejected the proposal, saying in a statement that it ``significantly'' undervalues the company. The takeover of Corporate Express, whose U.S. sales account for more than half its revenue, would bolster Staples' division that sells office supplies directly to companies. Last week Office Depot said fourth-quarter profit plunged 85 percent. Revenue declined both for the North American retail and direct sales divisions and North American same-store sales dropped 7 percent. Chief Executive Officer Steve Odland said U.S. and U.K. sales this quarter-to-date ``remain sluggish.'' The retailer operates more than 2,000 stores worldwide and sells office supplies in 22 countries.

With Software and an iBand, There’s No Need for Roadies

2008-03-03T10:34:00.000-08:00

By ERIC A. TAUB (New York Times)

Many people who own the Apple iPhone speak with a sort of evangelical fervor about the product and the things it can do. E-mail! Music! Internet! Phone calls! It takes pictures!

Three art students from Austria have pushed the envelope a bit further, hacking into their iPhones — a big no-no, from Apple’s perspective — and loading them with music-playing software, which they have used to record songs. The videos they put on YouTube last month of what they call the first iBand have been drawing heavy traffic from technophiles and curiosity-seekers.

Their debut video, posted Feb. 17 and briefly the top-featured video on the site, is fairly rudimentary, from a musical perspective at least: in what the band describes as a “jam session,” one iPhone plays keyboard software, another plays a virtual guitar program and a Nintendo DS video game player plays percussion. The result is more songlike noise than melody.

But the outpouring of fascination was instant: the three were immediately deluged with requests for interviews, for copies of the song, and for information about the software and equipment they used. They acknowledge being somewhat startled, and said by e-mail that they were trying to figure out how to “deal with the situation.”

“We did our first video as an example of what could be done with the new music applications that are used, and to present our idea of an iBand,” wrote one of the band members, Seb, age 24, in response to e-mailed questions.

He said that the other band members were Marina, 26, and Roger, 25, and that they preferred not to give their surnames for privacy reasons. “We are all students of different fields of art, and share our interest in making music as well as modern media,” Seb wrote.

The original video had been viewed more than two million times as of Sunday, with more than 13,000 viewers leaving comments. Some people reviewed the music itself (“Needs some iDrums” “ALL of them have tempo problems”) but others just effused at the novelty (“OMG AWESOME.”).

Enough viewers found the video mesmerizing that the band was prompted to post a message on its Web site, at www.iband.at: “Some of you requested an MP3 version of the jam session. Unfortunately, the quality is too bad so we really can’t release it. I mean, honestly we still need some practice guys and we’re also still lacking a third iPhone. We’ll release an MP3 when we have a real song.”

That happened last Wednesday, when the students, who are from Vienna, put up their second video, this one more sophisticated. Using two iPhones and an iPod Touch (but no Nintendo), the trio, wearing fingerless gloves, plays an original composition called “Life Is Greater Than the Internet,” with vocals, in accented English, by Marina.

While the jam session took just an hour to record, the second opus required a lot more work, Seb said: the band spent two sleepless days and nights composing, practicing and recording the video, taking considerably more time to light the scene, set up the camera and mix the tracks.

The viewers who left comments were mostly impressed, though there was a smattering of snide quips (“What if you would have got a phone call???”).

Two more videos quickly followed, both showing an iPhone playing virtual drums. In one, the song is indeed interrupted by a phone call, on purpose.

“To use the iPhone as a musical instrument isn’t about getting a technically perfect song together,” Seb wrote. “It has very innovative input methods, but we could also use any sort of synthesizer and full band equipment; with today’s technology there are no limitations. But we think that exactly the limitation is what creates a spirit. Of all possible things you can do with a mobile phone, what could be more meaningful than to create music?”

The group’s goal, he said, was to work with other people who are developing music applications for the iPhone. The band is offering Marina’s first song free on its Web site and accepting donations from those who download it.

The band was first mentioned on Gizmodo.com, a Web site for technology fans, where the mechanics of the iBand’s work were of particular interest. To satisfy the tech crowd, the band named the software programs it loaded onto its hacked iPhones to make the music (they include PocketGuitar, Moo-Cow-Music Pianist and Moo-Cow-Music Drummer). And the Nintendo DS played an interactive music video game called Electroplankton.

“We have been thinking about forming a band that would only use iPhones as musical instruments for a long time now,” Seb wrote. “Time seemed just right to take the first step when a new piano application came out.”

The Moo-Cow-Music applications were developed by Mark Terry, 35, a Java developer in Southampton, England, who wrote the code simply “to be creative,” he said.

For those who cannot wait to try this at home, a word of caution: to install these programs on an iPhone or iPod Touch requires the user to “jailbreak” the devices, modifying the software to allow the phone to accept third-party applications. This voids the product’s warranty.

Although Apple discourages it, jailbreaking is quite simple; instructions are posted on various Web sites. “We don’t support unlocked iPhones,” an Apple spokeswoman said.

On Thursday, Apple will reveal its plans for an iPhone software developers’ kit, a road map outlining how third-party developers can create officially sanctioned applications. Mr. Terry is considering rewriting his programs to fit within those guidelines.

According to the iBand’s Web site, the three Viennese students are busy rehearsing and testing sound applications written for the iPhone.

“If you know of, or develop, any other apps please let us know, we’re very interested in collaborations,” the site says. “The development of instruments for the first hand-held device that lets us create pocket-sized music are important to establish this scene!”

New Line Cinema to merge into Warner Bros.

2008-02-29T07:08:00.000-08:00

By Claudia Eller, Los Angeles Times Staff Writer

The consolidation marks the end of the line for the once scrappy producer that prided itself on taking creative risks that other studios wouldn't. But in recent years New Line strayed from its street-smart roots with a slew of costly flops that ended its role as a big-time player in the volatile movie business. In a sign of retrenchment
that is increasingly prevalent in Hollywood, the company will now focus on making fewer movies limited to the kind of smaller, low-cost "genre" horror and comedy pictures upon which it built its name. New Line becomes the latest free-standing Hollywood studio to abandon its ambitions as a full-fledged company in a market in which bloated overhead and soaring production and marketing costs have squeezed profits amid flat movie attendance and sagging DVD sales. It comes just as the studio is to release today what could be one of its most promising comedies in a long time, the basketball spoof "Semi-Pro" starring Will Ferrell.

Over the last three years, DreamWorks SKG, the once highflying live-action studio founded by Steven Spielberg, David Geffen and Jeffrey Katzenberg, was sold to Viacom Inc. and scaled back as part of the media company's Paramount Pictures. At the same time, Harvey and Bob Weinstein's Miramax Films became a much smaller unit of owner Walt Disney Co. after the brothers were forced out. Metro-Goldwyn-Mayer was gobbled up by a consortium of investors including Sony Pictures, Comcast Corp. and two major private equity firms. "People start out with high hopes for these indie studios," media analyst Harold Vogel said. "But ultimately they encounter rising costs and difficulties in managing the businesses. At some point, the cash flow and balance sheets fall short of their ambitions."

The consolidation of New Line is the first corporate maneuver by Time Warner Inc.'s recently named Chief Executive Jeffrey Bewkes to rein in costs at the New York media giant, whose stock price has stagnated since its merger with America Online eight years ago. Bewkes is under pressure from shareholders to boost profitability at Time Warner, which owns cable channels such as CNN and HBO; cable systems that are the largest in Southern California; and publishing operations that include Time, Sports Illustrated and People magazines. In a conference call with media analysts this month, Bewkes announced plans to immediately eliminate 100 jobs at Time Warner's corporate headquarters, split AOL into two parts, possibly reduce its 84% ownership of Time Warner Cable and target New Line for "near-term cost cuts." That was an understatement. As a part of Warner Bros., New Line's staff of 600 will be vastly scaled back and the company will no longer greenlight, market or distribute its own movies. Although New Line executives will continue to oversee the development and production of its own films, final say on all matters rests with Warner Bros. President Alan Horn. New Line will make only half the 12 to 14 pictures a year it did previously, which will now be distributed worldwide by Warner Bros. Bewkes will meet today with New Line's New York employees and address its Los Angeles staff via satellite at the Pacific Design Center.

"Between the cost savings and the revenue enhancements, we believe we can at least double the earnings of New Line," Bewkes said in an interview. He added that those gains would more than offset "substantial restructuring charges" that Time Warner would incur as a result of New Line's consolidation and would benefit earnings as soon as next year.

"This is a no-brainer move," said Richard Greenfield, an analyst with Pali Research. "There's no reason to have two separate infrastructures." New Line's diminished star is a huge blow for New Line founder, Bob Shaye, 68, and his longtime top lieutenant, co-Chairman and co-Chief Executive Michael Lynne, 66, both of whom learned Thursday that they would leave the company. No successor was named. In recent weeks, the pair, whose contracts expire at the end of the year, made a last-ditch attempt to stay, presenting Time Warner management with a plan that would have ensured their continued employment. In an e-mail to employees, Shaye said their departure was a "painful decision, because we love New Line and the people who work here have been like our second families." Shaye, who founded New Line in his Greenwich Village apartment in 1967 by peddling "Reefer Madness" to college campuses, continued to reign over the company even after he sold it to media magnate Ted Turner in 1994. Two years later the company was swept up in Time Warner's purchase of Turner's cable empire. Over the next 12 years, Shaye continued to run New Line as a fiefdom.

But his and Lynne's relationship with their corporate parent grew strained as New Line began making costlier mainstream movies in the mid-1990s, including Warren Beatty's "Town and Country," "Little Nicky" with Adam Sandler and "The Island of Dr. Moreau," starring Marlon Brando. Such misfires prompted Time Warner to exercise more scrutiny. In 1997, Time Warner considered selling New Line but was resisted by Shaye's ally Turner, who as vice chairman and a major shareholder held a lot of sway. A couple of years later, Shaye made an audacious bet that changed the course of New Line's fortunes -- at least temporarily. He committed hundreds of millions of dollars to making three "Lord of the Rings" movies after New Zealand director Peter Jackson's idea to bring the literary classic to the screen was rejected by other major studios.

The first "Rings" movie grossed $871 million worldwide, followed by a two sequels that amassed more than $2 billion in ticket sales. That was a tough act to follow. Although all studios have ups and downs, New Line's poor track record in recent years added to the pressures on Shaye and Lynne. Since the last "Rings" film in 2003, the studio has had some hits -- "The Wedding Crashers," "Elf" and last year's "Hairspray." But the hits were outnumbered by flops such as "The Last Mimzy," a family sci-fi fantasy directed by Shaye himself; "Rendition," a thriller with Reese Witherspoon; and "The Number 23," a dark thriller starring Jim Carrey. Its biggest miscalculation came in December with a failed attempt to launch a new movie franchise based on Philip Pullman's literary trilogy "His Dark Materials." New Line spent at least $180 million to produce and tens of millions more to market the first film, "The Golden Compass," which only managed $70 million in domestic ticket sales.

Although the movie grossed more than $250 million overseas, New Line had sold off the foreign rights to offset its high budget. But that longtime practice of the company to hedge its bets runs counter to Warner's strategy to retain worldwide distribution rights. "International revenues are becoming more important and it doesn't make sense to give up foreign rights, where a lot of the upside is," Bewkes said. The Burbank studio will now also be able to exploit New Line's valuable library of about 500 titles, including "Teenage Mutant Ninja Turtles," "The Texas Chainsaw Massacre," David Fincher's thriller "Seven," and the Jim Carrey comedies "The Mask" and "Dumb and Dumber." But the jewel in the crown is a planned adaptation of "The Hobbit," J.R.R. Tolkien's predecessor novel to the "Lord of the Rings" trilogy. The project was in abeyance until New Line and Jackson settled a lawsuit in December over the accounting of the first film's income. That paves the way for Jackson to co-executive produce "The Hobbit," which MGM will co-finance and release internationally. But New Line's legal troubles are far from over. Tolkien's trust is suing the studio for allegedly cheating it out of at least $150 million in profit from the franchise. On a more promising note, New Line has several potential hits in the wings, including a movie version of HBO's popular series "Sex and the City," a screen adaptation of Cornelia Funke's fantasy novel "Inkheart" and "Journey 3-D," based on Jules Verne's classic "Journey to the Center of the Earth," starring Brendan Fraser.

Ambac bail-out fears dent Wall Street

2008-02-29T07:05:00.000-08:00

By Stacy-Marie Ishmael in New York (Financial Times)

US equity markets opened lower on Friday, setting the stage for a fourth consecutive month of declines, after reports that the proposed rescue of bond insurer Ambac was at risk and record losses at AIG. The S&P 500 fell 1.2 per cent to 1,351.99 in early trade, while the Dow Jones industrial average fell 1.1 per cent to 12,445.74. The Nasdaq composite traded 0.9 per cent lower at 2,309.79. The Short View: Brazil’s bull run - Feb-28 CNBC said the Ambac bail-out had hit a “significant snag” over the amount of capital the consortium of banks are willing to put up. Ambac’s shares fell 5.7 per cent to $11.13; CNBC said the deal was “far from dead.” Ambac’s rival MBIA fell 4.1 per cent to $13.48 after the bond insurer said it could incur claims payments amounting to a “significant portion” of its reserves. Elsewhere in the insurance sector, Assured Guaranty’s shares soared 14.2 per cent to $26.01 after Wilbur Ross agreed to buy up to $1bn in shares of the triple-A rated bond insurer. But AIG fell 5.9 per cent to $47.18 after the world’s largest insurer posted a fourth-quarter net loss of $5.3bn due to $11.5bn in writedowns on its derivatives portfolio. A report from UBS that credit-market losses at financial firms might top $600bn added to the jitters around financial stocks, which have sold-off sharply this week. “Leveraged risk positions are a cancer in this market and the sooner it is treated the better,’’ UBS strategist Geraud Charpin wrote in a note to clients on Friday. AIG’s $11.5bn writedown “is also the clearest indication that banks are not the only ones to suffer potential losses,” he said. An index of financial stocks fell 2.2 per cent, while an investment banking index declined 1.7 per cent. But there was good news for technology, media and telecommunications companies. Technology consulting company Sapient rose 15.9 per cent to $7.23 after its first quarter sales would exceed analysts’ estimates. Novell rose 4.1 per cent to $6.88 after the Linux software distributor reported a fiscal first-quarter profit that beat estimates. Video game publisher Take-Two Software rose 1.5 per cent to $26.40 after it said had received “informal indications of interest” from other potential bidders following Electronic Arts’ unsolicited $2bn takeover offer for the company earlier this week. The company added that it had not received any written offers and was not in any discussions for a buyout with any party, including EA, according to a filing with the Securities and Exchanges Commission. 3Com leapt 19.6 per cent to $3.48 after the Wall Street Journal said Bain Capital and Huawei Technologies planned to reapply for approval to acquire the networking systems and services provider in a deal worth $2.2bn. On the economic front, data showed US personal income and personal spending in January rose more than expected, but inflation ate up a bigger portion of these as a key price index also rose. In the bond market, yields on the 2-year Treasury note fell 17 basis points 1.7 per cent. The 10-year Treasury note fell 12bp to 3.60 per cent.

HSBC Gets $3.2 Billion Bid for French Regional Units

2008-02-29T06:52:00.000-08:00

HSBC Gets $3.2 Billion Bid for French Regional Units

Feb. 29 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest bank by market value, may sell its French regional consumer- banking network to Banque Federale des Banques Populaires for 2.1 billion euros ($3.2 billion) as it focuses on faster growth in French cities and emerging markets. HSBC is in exclusive talks and has got a ``firm'' cash offer for what would be its biggest sale ever, the London-based bank said today in a statement. The price is 21 times the units' after-tax earnings last year and 3.7 times shareholders' equity on Dec. 31, HSBC said. The 400 branches generated less than 20 percent of French pretax profit last year. The London-based bank aims to earn 60 percent of pretax profit from emerging markets, up from about 50 percent in the first half of 2007. In the U.S., it has cut lending, closed mortgage units and changed management to curtail bad debts from subprime consumers. It may need to add $13 billion to provisions, Goldman Sachs Group Inc. analysts wrote last month. The French sale ``is logical, it is consistent with their strategy,'' said Derek Chambers, an analyst at Standard & Poor's Equity Research Ltd. in London who has a ``hold'' rating on the stock. ``The real challenge is to sort out the U.S.'' The regional banks are Societe Marseillaise de Credit; Banque de Savoie; Banque Chaix; Banque Marze; Banque Dupuy, de Parseval; Banque Pelletier; and Credit Commercial du Sud-Ouest, the company said. They had assets worth 8.38 billion as of Dec. 31 and generated net income of 100 million euros last year. They have 400 branches and 2,950 people.

`Faster Growing Businesses'

``This offer is an opportunity for HSBC to redeploy capital to other investments as we pursue our strategy and rebalance our activities towards emerging markets and faster growing business segments,'' HSBC Chairman Stephen Green said in the statement. There are still ``significant opportunities'' for banking in urban France through HSBC's international network, Green said. HSBC fell 1.8 percent to 766 pence in London trading as of 1:40 p.m. The company is down 9.1 percent this year, valuing it at 90.8 billion pounds ($179 billion). Banque Federale des Banques Populaires is the central coordinating unit of Groupe Banque Populaire, a network of regional lenders that isn't traded. ``This acquisition allows Groupe Banque Populaire to improve its growth prospects in retail banking,'' Banque Populaire Chairman Philippe Dupont said in the statement. ``We intend to retain the brands of the regional banks and their individual identities.''HSBC reports full-year earnings on March 3. It plans to complete its $6.45 billion acquisition of Korea Exchange Bank from U.S. buyout firm Lone Star Funds in April.

Sprint Returns A Shot in the Battle of the Bundle

2008-02-28T12:01:00.000-08:00

By Saul Hansell (New York Times)

What do you do when you just lost nearly $30 billion and customers are fleeing? How about slashing prices to win back business? Sprint Thursday, as expected, introduced its version of an unlimited use wireless plan. Called “Simply Everything,” the plan is at the same $99 price point plans introduced by Verizon, AT&T and T-Mobile. But Sprint includes everything: voice, messages, data, G.P.S. and TV broadcasts. Verizon, for example, charges $139 for the same package. Daniel R. Hesse, Sprint’s new chief executive, told investors in the conference call that the unlimited plan will not be anywhere near enough to stem Sprint’s losses of customers, according to Silicon Alley Insider’s write up of the call. Fewer than 10 percent of wireless customers are in the market for plans that expensive, he said. But the high-end customers are worth fighting for. More interesting will be whether Sprint takes the price war to the mainstream. Mr. Hesse said the company would also introduce an $89 unlimited voice plan with fewer features. And it will streamline its cheaper plans, seemingly lowering the prices for bundles of voice and data services. For now the leading companies are saying they won’t need to cut prices. Dennis F. Strigl, Verizon’s president, told CNBC earlier this week that its unlimited plan “isn’t about launching a price war.” And he dismissed the prospect of further price cuts from Sprint:

What Sprint may go after is not our market. Our market is the customer who wants the high-quality network, good customers service and the dependability of a bill that they know will be about the same every month. So if Sprint goes after the low-end market, that’s not what we’re focused on.

Of course, that is what you would expect him to say. My guess is that the average price for the wireless plans may not fall. But customers will see fewer add-on charges for text messages and other services as the battle of the bundle escalates.

Alcoa to fight Bahrain allegations (Pittsburgh Business Times)

2008-02-28T07:38:00.000-08:00

Alcoa Inc., accused of overcharging and fraud by a company controlled by the Persian Gulf state of Bahrain, said it is unaware of wrongdoing and will "vigorously defend" itself in a lawsuit. The lawsuit was filed in federal court in Pittsburgh by Aluminum Bahrain BSC, the Wall Street Journal reported in its Thursday edition. According to the suit, Aluminum Bahrain alleged that New York-based Alcoa (NYSE:AA) steered payments for an aluminum precursor ingredient to a group of companies abroad in order to pay kickbacks to a Bahrani government official. The firm also alleged that Alcoa had overcharged it for the precursor material, alumina. Alcoa spokesman Kevin Lowery said the suit was filed late Wednesday, "so we have not had an opportunity to completely review the allegations. "However, we are completely unaware of any wrongdoing by any Alcoa employees or representatives," Lowery said. But, Lowery said, Aluminum Bahrain contacted Alcoa two weeks ago. "They gave us two weeks to investigate the claims and to settle. That's not enough time to do any serious work. In that time frame, we did a fast review and haven't found anything that deviates from our normal practices. We offered (Aluminum Bahrain) an opportunity to do a full review of the last 20 years, but obviously they chose to immediately file a lawsuit instead. "We will vigorously defend ourselves in the matter. We have a strong commitment to compliance and don't tolerate any improper conduct by any employee," he said. Attorney Mark J. MacDougall of Akin, Gump, Strauss, Hauer & Feld, which represents the Bahraini manufacturing firm, could not immediately be reached for comment.

Fannie Mae Has $3.55 Billion Fourth-Quarter Loss

2008-02-27T06:47:00.000-08:00

By James Tyson

Feb. 27 (Bloomberg) -- Fannie Mae, the largest source of money for U.S. home loans, posted a $3.55 billion fourth-quarter loss and said the slump will continue through this year as rising foreclosures send credit costs soaring. The net loss was wider than analysts anticipated, sending the shares down 6 percent in early New York trading. The loss included a $3.2 billion drop in the value of derivative contracts and $2.9 billion in credit expenses, the Washington-based company said today in a Securities and Exchange Commission filing. ``We are working through the toughest housing and mortgage markets in a generation,'' Fannie Mae Chief Executive Officer Daniel Mudd said in an accompanying statement. Homeowners falling behind on their loan payments and an economy teetering near recession are reducing the value of the $2.3 trillion of mortgages the government-chartered company owns or guarantees. The slump may force Fannie Mae, which sold preferred stock in December to bolster capital, to raise more money, said Paul Miller, an analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. Fannie Mae ``will continue to have trouble with both credit losses and capital levels,'' said Miller, who on Feb. 25 downgraded the stock to ``underperform.'' Credit impairments will exceed company estimates and ``the Street's expectations.'' The company, which accounts for at least one in five home loans, has lost more than half its market value in the past year as the housing slump deepened. Analysts at Goldman Sachs Group Inc. and Merrill Lynch & Co. cut their recommendations to ``sell'' in the past week on concern that falling home prices will restrict earnings.

Loan Losses

Fannie Mae fell $1.30, or 4.6 percent, to $26.97 yesterday in New York Stock Exchange composite trading. The shares dropped to as low as $25.10 in early trading today. Freddie Mac, which ranks second to Fannie Mae, dropped 97 cents to $25.21 yesterday and is down more than 61 percent in the past year. The net loss amounted to $3.80 share, compared with profit of $604 million, or 49 cents, a year earlier, Fannie Mae said. Excluding some items, the per-share loss was $3.79, compared with the $1.20 average estimate of 12 analysts in a Bloomberg survey.

Fannie Mae's loan loss ratio was 9 basis points in 2007, up from 0.3 basis points at the end of 2006. Miller says credit losses will rise to a range of 15 basis points to 25 basis points this year and in 2009. Howard Shapiro, an analyst at Fox-Pitt Kelton Cochran Caronia Waller in New York, forecasts a range of 11 basis points to 14 basis points. A basis point is 0.01 percentage point. Freddie Mac is scheduled to report tomorrow. The McLean, Virginia-based company had losses of $2.02 billion in the third- quarter and $480 million in the year-earlier fourth quarter.

Timely Earnings

Fannie Mae, by reporting timely audited financial results for the first time since 2004, met conditions for the removal of a federal limit on its $724 billion in mortgage investments imposed after a $6.3 billion overstatement of earnings. Its portfolio of home loans and mortgage-backed securities is one of its two main sources of profit. Still, the need to bolster capital against the worsening housing market will inhibit growth this year, Miller said. Fannie Mae sold its preferred shares in December after its third-quarter loss of $1.4 billion. ``For me to get very comfortable in recommending this stock, I'd like to see something above $15 billion in capital raising,'' Miller said. Fannie Mae needs to complete the final items on a list of 81 changes in accounting, internal controls and governance in order to shed a requirement that it set aside 30 percent more reserve capital than normal, the company's regulator told a Senate committee on Feb. 8.

Credit-Default Swaps

The cost of protecting Fannie Mae bonds from default have doubled this year. Credit-default swaps tied to the bonds rose 8 basis points to 87 basis points today, according to broker Phoenix Partners Group in New York. A basis point on a credit-default swap contract protecting $10 million of debt for five years is equivalent to $1,000 a year. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. Congress created Fannie Mae and Freddie Mac to increase mortgage financing by buying loans from lenders. The publicly traded companies profit by holding mortgages and mortgage bonds as investments and by charging a fee to guarantee and package loans as securities. They record losses when defaults rise.

Foreclosures Rise

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates. Fannie Mae and other companies use derivatives to hedge against losses on assets and investments including home loans and mortgage bonds. Bank seizures of U.S. homes almost rose 90 percent to 45,327 last month from the same period a year ago, according to RealtyTrac Inc., a seller of foreclosure statistics that has a database of more than 1 million properties. Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57 percent. More than 233,000 properties were in some stage of default last month, RealtyTrac said in a statement. The foreclosures are plunging the housing industry deeper into recession by pushing more houses onto a market where existing home sales are now at the lowest level since records began nine years ago and prices are dropping. There's a 10-month supply of unsold homes, the highest in at least eight years. Senate Banking Committee Chairman Christopher Dodd and other lawmakers have urged the Bush administration for more than seven months to ease constraints on Fannie Mae and Freddie Mac to help revive the housing market. ``The restrictions imposed on Freddie and Fannie have a direct impact on their flexibility to assist the struggling housing markets,'' Senator Charles Schumer, a Democrat from New York, said in a Feb. 25 letter to James Lockhart, the director of the Office of Federal Housing Enterprise Oversight.

The Ben Bernanke Show

2008-02-26T06:29:00.001-08:00

Brian Wingfield (Forbes)

Federal Reserve Chairman Ben Bernanke spends so much time testifying before Congress these days, it might seem he barely has time for his day job as the central bank's top regulator. Wednesday, Bernanke heads back to Capitol Hill, where he'll give his mandatory, semi-annual report on monetary policy to the House Financial Services Committee. He'll repeat those remarks to the Senate Banking Committee on Thursday. They'll be the 12th and 13th times he's faced Congressional panels since January 2007. In all probability, he'll parrot much of what he has said in the three appearances he's made on the Hill since September: The economy is growing more slowly than usual, it will rebound later this year, recession isn't likely, more rate cuts are possible, inflation remains a concern, etc., etc. Tedious? Absolutely. But lawmakers can't seem to get enough of Bernanke. So far this year, he's appeared before the Senate Banking Committee and the House Budget Committee for routine oversight hearings. Committee chairmen are well aware that Bernanke is a big draw, especially in an election year, when the economy is ailing. Of course, every time he's speaks publicly, he might hint at a further rate cut. Rep. Paul Ryan, Wisc., the top Republican on the House Budget Committee, says that when a Fed chairman testifies before his committee in early January, he is simply trying to get a better understanding of how the Fed is deriving its monetary policy decisions. Allan Meltzer, a professor of political economy at Carnegie Mellon University who has written a history of the Federal Reserve, says it doesn't necessarily sully Bernanke's reputation to repeat the same mantra every time he visits the Hill. "What will hurt him is the fact that he's not saying things like 'I have to watch both inflation and the unemployment rate,'" he adds. And surprising as it may seem, Bernanke actually appears before Congress less than his predecessor Alan Greenspan did. Not counting his re-nomination hearings, Greenspan testified an average of more than 10 times per year between 2000 and 2005. In 2005, his last year at the central bank's helm, Greenspan saw a Congressional panel 12 times. The year before that, he was there 11 times. Bernanke, by contrast, appeared before lawmakers 9 times in 2007 and 6 times in 2006.

The figures for both men include the Fed chairman's semi-annual reports to Congress, which account for four separate hearings each year (two each for the House and Senate). In addition to the House Financial Services and Senate Banking Committees, where the semi-annual remarks are delivered, Fed chairmen often face the Joint Economic Committee and the budget panels of both chambers. Every one of Bernanke's appearances before Congress has focused on the general economic outlook, the subprime mortgage mess or fiscal challenges for the United States--often a combination the three issues. No surprise there, given the state of the economy in recent months. Congress summoned Greenspan for his wisdom on a range of topics outside the overall health of the U.S. economy. Examples: China's exchange-rate policy (June 2005), education (March 2004), the nation's natural-gas supply (twice--in June 2003 and again the next month), the aging global population (also 2003), U.S. trade policy (April 2001) and commodity futures trading (June 2000). "What Greenspan did was somewhat on the unusual side," says Meltzer. "He had a view and he wanted it to be heard." Bernanke, on the other hand, has deliberately stayed relatively far from the policy debate.

Markets generally don’t like the Fed chairman’s remarks. On the dates coinciding with Bernanke’s four most recent appearances before Congressional panels, the Dow Jones industrial average closed slightly down. The most severe example was on Jan. 17, 2008, when it closed at 12,159.21 from an opening of 12,467.05--a 2.5% slide. During his semi-annual testimony on July 19, 2007, the Dow closed just half a percentage point higher. The day before, down 0.2%. The Wall Street barometer treated Greenspan in much the same way. On the day of his final testimony as Fed chairman, the market closed up 0.5%. During his last semi-annual address, it ended the first day of testimony up 0.6%, the second day down 0.5%. But a month earlier, when Greenspan addressed the Senate Finance Committee on China’s exchange rate, the Dow dropped 1.6%, from 10,587.09 at the start of the day to a close of 10,421.44. Nonetheless, markets and policymakers will be paying close attention to what he says this week. During his semi-annual report last July, Bernanke made this pronouncement: "Overall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy's underlying trend."

"Moderate" growth isn't exactly what happened. The economy grew at a 4.9% rate during the third quarter of 2007 before dropping sharply to 0.6% growth for the final three months of the year. Amid a deluge of economic data to be released this week are revised figures for growth in the fourth quarter, due out Thursday. If the update is worse than the previous estimate and the economy continues to falter, expect the Ben Bernanke Show to become a running feature this year on Capitol Hill.

Ahead of the Bell: Senate's Mortgage Fix

2008-02-26T05:39:00.000-08:00

AP - WASHINGTON

The Senate could begin debating Tuesday another round of remedies for homeowners caught in the worsening housing crisis. Senators may vote this week on a package of legislative proposals, designed by Democrats, that includes easing bankruptcy rules and boosting funds for foreclosure-prevention counseling. The proposed revision to the U.S. bankruptcy code would allow judges to cut interest rates and reduce what's owed on troubled borrowers' mortgages. At stake are potentially millions of dollars of profits for mortgage lenders, which have been lobbying against the measure. Their opposition is echoed by many Republican lawmakers. Consumer advocates, meanwhile, are pushing senators to approve the change. Currently, lenders can foreclose against a homeowner in default on a primary residence 90 days after a bankruptcy filing, and judges have no authority to order changes in mortgage terms.

The Mortgage Bankers Association has said the proposal would hurt more borrowers in the long run by requiring "higher interest rates and larger down payments to offset the risk" of bankruptcy court intervention for some homeowners. The measure is expected to face tougher resistance than the recently approved economic stimulus package, which narrowly touched on the mortgage crisis. Democratic backers consider the new legislation a way to make up for shortcomings in the Bush administration plan to freeze interest rates on a relatively small percentage of loans made to high-risk borrowers.

Monday brought more evidence of the housing sector's ills. The National Association of Realtors reported that sales of existing homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month. "Today's dismal housing news reinforces the need for congressional Republicans to join Democrats to address the bulls-eye of our economic troubles by passing a housing recovery package this week," said Sen. Charles Schumer, D-N.Y. "The housing crisis has mushroomed in part due to Washington's inaction, and declining home values cut to the very heart of families' sense of financial security and our economy's overall health." Also included in the Senate package is a measure mandating $200 million for foreclosure-prevention counseling services -- a near doubling of funds already committed by Congress -- and an allowance for states to issue more tax-exempt bonds so that housing agencies could help homeowners refinance high-cost mortgages.

GTx Surges on Late-Stage Trial Results (The Street)

2008-02-25T07:51:00.000-08:00

Shares of GTx(GTXI) soared nearly 50% Monday after the biopharmaceutical company said its Acapodene drug showed success in a late-stage study in reducing side effects from certain prostate cancer treatments. The Memphis, Tenn.-based company's shares recently were up $6.21, or 48%, to $19.10. The phase III trial looked at Acapodene in patients receiving androgen deprivation therapy, a common first line treatment for advanced prostate cancer patients. Acapodene, or toremifene citrate 80 mg, is designed to fight the side effects of the hormone therapy, such as loss of bone density, fractures and increased cholesterol and heart attack risk. GTx said the drug reduced vertebral fractures by 50% in patients who were given at least one dose of the drug or placebo and who had at least one evaluable study radiograph. There was a 5% rate of these fractures in the placebo group. Of those who were more than 80% compliant with the treatment, the drug reduced the fractures by 61%. GTx said Acapodene also resulted in a statistically significant increase in bone mineral density. It also showed a statistically significant decrease in LDL, or "bad," cholesterol, and an increase in HDL, or "good" cholesterol, among other things. The company said the drug had a favorable safety profile and was well tolerated. Based on the results, it will file a new drug application for Acapodene by this summer. GTx licensed the rights to toremifene citrate from Finnish drug company Orion for all indications worldwide, except breast cancer outside the U.S. GTx also has a development and collaboration agreement with French specialty pharmaceutical company Ipsen in Europe. Ipsen is responsible for filing the drug for regulatory approval in Europe, but GTx will seek its approval and commercialize it in the U.S. GTx also markets Fareston, a treatment for metastatic breast cancer in postmenopausal women.

U.S. Stocks Fall, Led by Financials; Fannie Mae, Goldman Drop

2008-02-22T09:48:00.000-08:00

By Michael Patterson

Feb. 22 (Bloomberg) -- U.S. stocks fell for a second day, led by financial shares, on concern that profits at brokerage firms will decline and dropping demand for mortgages will curb growth at Fannie Mae and Freddie Mac. Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. slumped after Sanford C. Bernstein & Co. analyst Brad Hintz slashed his first-quarter profit estimates by more than 40 percent. Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, tumbled after Merrill Lynch & Co.'s Kenneth Bruce said the worst housing market in a quarter century will stifle earnings through 2011. The Standard & Poor's 500 Index retreated 8.4 points, or 0.6 percent, to 1,334.13 at 11:55 a.m. in New York. The Dow Jones Industrial Average slid 77.42, or 0.6 percent, to 12,206.88. The Nasdaq Composite Index decreased 22.83, or 1 percent, to 2,276.95. More than two stocks declined for every one that rose on the New York Stock Exchange. Shares in Asia and Europe also fell. ``People are coming to grips with what is the degree of financial issues,'' David Darst, the New York-based chief investment strategist at Morgan Stanley Global Wealth Management, which oversees $734 billion, said in a Bloomberg Television interview. ``We think caution is called for.'' The S&P 500 has lost 1.1 percent this week and is down 9.1 percent in 2008 after a worse-than-forecast manufacturing report yesterday added to evidence that the economy is falling into a recession. The world's largest banks and securities firms have reported about $160 billion of credit losses and asset writedowns since the beginning of 2007 as the collapse in subprime mortgages spreads across debt markets.

Weekly Declines

Financial shares in the S&P 500 lost 1.2 percent today, bringing their decline over the past year to 30 percent, the worst performance among 10 industries. The 92-member S&P 500 Financials Index is still 3.5 percent above its four-year low on Jan. 18, buoyed by the Federal Reserve's fastest easing of monetary policy since 1990. Goldman, the biggest U.S. securities firm by market value, dropped $1.11 to $174.06. Lehman Brothers fell 95 cents to $53.19. Hintz said slumping credit markets, combined with weak revenue from underwriting and advisory fees, will hurt profits this quarter. Fannie Mae declined $1.24 to $27.75 today. Freddie Mac fell $2.24 to $25.51. Bruce downgraded the shares to ``sell'' from ``neutral.''

`More Pain'

``We do not think the stocks fully reflect the severity or duration of the financial headwinds facing the companies,'' he wrote in a research note to clients dated today. There is ``more pain than gain.'' Intuit Inc. lost $3.60 to $26.19. The world's largest maker of tax-preparation software lowered its third-quarter profit forecast to between $1.31 and $1.34 a share. Analysts predicted profit of $1.37, according to the average in a Bloomberg survey. Express Scripts Inc. gained $1.95 to $66.71. The third- largest U.S. manager of drug benefits raised its 2008 earnings forecast and reported profit that beat analysts' estimates as clients used a higher proportion of cheaper generic medicines. Eli Lilly & Co. added 38 cents to $50.20. The drugmaker said its experimental blood-thinning drug prasugrel will get a priority review by U.S. regulators. With no major economic reports due today, investors will look to next week for further clues on the economy. A report on Feb. 25 will probably show existing home sales declined in January, while a release on Feb. 27 is likely to show a drop in durable goods orders for the same month, according to economists' estimates compiled by Bloomberg News.

Next up: Amazon sides with Blu-ray

2008-02-20T06:49:00.000-08:00

Posted by Caroline McCarthy (CNET)

On Wednesday, online retailer Amazon.com became the latest to declare its support for the victorious high-definition technology, announcing that it "will more prominently promote Blu-ray hardware and software products on its Web site." The company will not, however, discontinue its sales of HD DVD products. "The high-definition landscape is rapidly changing, and consumers are looking for guidance on how to make the best high-definition buying decisions," Peter Faricy, Amazon's vice president of movies and music, said in a statement from the company. "Our customers have clearly voiced their support for the Blu-ray format." But in a sense, Amazon is also an indicator that Blu-ray's struggles aren't quite over. With its Unbox movie download service, Amazon is among a number of major Web retailers that offer digital downloads of movies and TV shows. Some have said that with all the bickering over HD DVD and Blu-ray for so many months, digital downloads from companies like Amazon, Netflix, and Apple's iTunes were able to find a steadier footing. Luckily for Blu-ray overlord Sony, your average digital movie download isn't nearly up to par in the quality department.

Antitrust Fears Few in Airline Deal

2008-02-20T06:00:00.003-08:00

By SUSAN CAREY (Wall Street Journal)

A merger between Delta Air Lines Inc. and Northwest Airlines Corp. -- which could be announced as early as this week -- has less to fear from antitrust enforcers than past aviation deals, unless regulators grow uncharacteristically squeamish about the combination's sheer size. If the airlines can reach an accord with their unionized pilots and hammer out the final details of a deal to create the world's largest carrier by traffic, the U.S. Department of Justice will be the ultimate judge of whether the merger can proceed. The department, which would be likely to review the case before a new administration arrives in Washington in January, has been kind in the past to deals like this one that don't involve a lot of overlap. A transaction -- as well as any airline mergers that could follow a Delta-Northwest deal -- is certain to face political opposition from some members of Congress, and could run into turbulence with Northwest's other labor unions. Delta's pilots are its only major union. Rep. James Oberstar, a Minnesota Democrat who is chairman of the House Transportation and Infrastructure Committee, has warned that he will oppose big airline mergers. "We can't stop a merger ourselves," said Jim Berard, spokesman for the House committee. "But we can make a lot of noise." AFL-CIO union leaders met in Washington last week to develop strategies on possible mergers, and issued a statement saying they were "united in our commitment to protect airline employees from the severe harm that may stem from poorly conceived airline consolidations that ignore the needs of employees and the flying public." In assessing proposed airline mergers, the Justice Department reviews nonstop and connecting routes between cities where the two carriers overlap, as well as whether their respective hubs are close enough to make them dominant in a region. The department also weighs the likelihood of rivals starting service within two years on city-pairs where the merged airline would have increased market power, potentially reining in the new carrier's ability to raise prices.

Delta, the world's No. 3 airline by traffic, has a big market share in the Southeastern U.S., in New York, and on trans-Atlantic routes. Northwest, which is ranked sixth globally and fifth in the U.S., is strong in the upper Midwest and on trans-Pacific routes. "There isn't that much overlap between Northwest and Delta," said Andrew Steinberg, a former airline antitrust lawyer who recently stepped down as the Department of Transportation's assistant secretary for aviation and international affairs. If another airline merger is proposed soon, that doesn't mean the regulators will automatically reject the first, he said. "They analyze each transaction separately." The last time the Justice Department shot down a big merger proposal was in 2001, when it identified competitive problems in the proposed combination of UAL Corp.'s United Airlines and US Airways Group Inc. At the time, the government found the two were the only significant providers of nonstop flights from Washington, D.C., to a number of cities, were the most significant carriers on a number of nonstop routes between their hubs, and would have had undue concentration along the East Coast. The department in 2005 approved a merger of US Airways and America West Airlines, whose operations had little duplication. Delta and Northwest see their proposed marriage as a merger with little overlap domestically and none on overseas routes, said people familiar with the matter. The two also don't anticipate reducing a lot of capacity, shuttering existing hubs or laying off many front-line workers.

In the past, Justice Department officials have said that if a merger brings cost and operational efficiencies, regulators could perceive those benefits as outweighing a merger's anticompetitive impact. Diana Moss, vice president of the nonprofit American Antitrust Institute, which advocates aggressive antitrust enforcement, said that because the big carriers now have marketing alliances with rivals domestically and internationally, regulators "will need to look at claimed efficiencies closely in light of anticompetitive effects." William Swelbar, an airline researcher at the Massachusetts Institute of Technology, says there are parallels between the current merger fever and the wave of combinations that occurred in the late 1980s. "In 1985, the industry was in its infancy and the focus was on the domestic market," he said. The same is true today, "but now we're talking about network size in the global marketplace."

Antitrust Fears Few in Airline Deal

2008-02-20T06:00:00.002-08:00

By SUSAN CAREY (Wall Street Journal)

A merger between Delta Air Lines Inc. and Northwest Airlines Corp. -- which could be announced as early as this week -- has less to fear from antitrust enforcers than past aviation deals, unless regulators grow uncharacteristically squeamish about the combination's sheer size.

If the airlines can reach an accord with their unionized pilots and hammer out the final details of a deal to create the world's largest carrier by traffic, the U.S. Department of Justice will be the ultimate judge of whether the merger can proceed. The department, which would be likely to review the case before a new administration arrives in Washington in January, has been kind in the past to deals like this one that don't involve a lot of overlap.

A transaction -- as well as any airline mergers that could follow a Delta-Northwest deal -- is certain to face political opposition from some members of Congress, and could run into turbulence with Northwest's other labor unions. Delta's pilots are its only major union.

Rep. James Oberstar, a Minnesota Democrat who is chairman of the House Transportation and Infrastructure Committee, has warned that he will oppose big airline mergers. "We can't stop a merger ourselves," said Jim Berard, spokesman for the House committee. "But we can make a lot of noise."

AFL-CIO union leaders met in Washington last week to develop strategies on possible mergers, and issued a statement saying they were "united in our commitment to protect airline employees from the severe harm that may stem from poorly conceived airline consolidations that ignore the needs of employees and the flying public."

In assessing proposed airline mergers, the Justice Department reviews nonstop and connecting routes between cities where the two carriers overlap, as well as whether their respective hubs are close enough to make them dominant in a region. The department also weighs the likelihood of rivals starting service within two years on city-pairs where the merged airline would have increased market power, potentially reining in the new carrier's ability to raise prices.

Delta, the world's No. 3 airline by traffic, has a big market share in the Southeastern U.S., in New York, and on trans-Atlantic routes. Northwest, which is ranked sixth globally and fifth in the U.S., is strong in the upper Midwest and on trans-Pacific routes.

"There isn't that much overlap between Northwest and Delta," said Andrew Steinberg, a former airline antitrust lawyer who recently stepped down as the Department of Transportation's assistant secretary for aviation and international affairs. If another airline merger is proposed soon, that doesn't mean the regulators will automatically reject the first, he said. "They analyze each transaction separately."

The last time the Justice Department shot down a big merger proposal was in 2001, when it identified competitive problems in the proposed combination of UAL Corp.'s United Airlines and US Airways Group Inc. At the time, the government found the two were the only significant providers of nonstop flights from Washington, D.C., to a number of cities, were the most significant carriers on a number of nonstop routes between their hubs, and would have had undue concentration along the East Coast.

The department in 2005 approved a merger of US Airways and America West Airlines, whose operations had little duplication.

Delta and Northwest see their proposed marriage as a merger with little overlap domestically and none on overseas routes, said people familiar with the matter. The two also don't anticipate reducing a lot of capacity, shuttering existing hubs or laying off many front-line workers.

In the past, Justice Department officials have said that if a merger brings cost and operational efficiencies, regulators could perceive those benefits as outweighing a merger's anticompetitive impact.

Diana Moss, vice president of the nonprofit American Antitrust Institute, which advocates aggressive antitrust enforcement, said that because the big carriers now have marketing alliances with rivals domestically and internationally, regulators "will need to look at claimed efficiencies closely in light of anticompetitive effects."

William Swelbar, an airline researcher at the Massachusetts Institute of Technology, says there are parallels between the current merger fever and the wave of combinations that occurred in the late 1980s. "In 1985, the industry was in its infancy and the focus was on the domestic market," he said. The same is true today, "but now we're talking about network size in the global marketplace."

Dollar Advances Against Euro, Yen Before U.S. Inflation Report

2008-02-20T06:00:00.001-08:00

By Kim-Mai Cutler

Feb. 20 (Bloomberg) -- The dollar rose against the euro and yen before a government report that may show U.S. inflation accelerated last month, giving the Federal Reserve less reason to lower interest rates. The dollar rose against 13 of the 16 most-active currencies tracked by Bloomberg today as traders pared bets the Fed will reduce its benchmark rate by three-quarters of a percentage point next month. Crude oil traded below yesterday's record $100.10 a barrel in New York. The U.S. dollar index traded on ICE Futures in New York, which tracks the currency against its six major counterparts, rose 0.2 percent to 76.1. ``There's a distinct possibility inflationary pressures could grow and grow,'' said Simon Derrick, the London-based head of currency strategy at Bank of New York Mellon Corp. ``There is a risk we could see a high CPI number today.'' The U.S. currency rose to $1.4658 by 7:10 a.m. in New York, from $1.4725 yesterday. Against the yen, it climbed to 107.87 from 107.78. The euro fell 0.4 percent to 158.11 yen. Consumer prices rose at an annual rate of 4.2 percent in January from a year earlier, compared with 4.1 percent the previous month, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department will release the report at 8:30 a.m. today in Washington. Interest rate futures on the Chicago Board of Trade show a 4 percent chance the Fed will lower rates by three quarters of a percent to 2.25 at its March 18 meeting, down from 32 percent odds a week ago. The remaining odds are for a half-point reduction.

STRIKE OVER: Hollywood Back To Work! (deadlinehollywooddaily.com)

2008-02-13T14:11:00.000-08:00

UPDATE: Here's what the moguls have to say:

This is a day of relief and optimism for everyone in the entertainment industry. We can now all get back to work, with the assurance that we have concluded two groundbreaking labor agreements - with our directors and our writers -- that establish a partnership through which our business can grow and prosper in the new digital age. The strike has been extraordinarily difficult for all of us, but the hardest hit of all have been the many thousands of businesses, workers and families that are economically dependent on our industry. We hope now to focus our collective efforts on what this industry does best - writers, directors, actors, production crews, and entertainment companies working together to deliver great content to our worldwide audiences.
Peter Chernin, Chairman and CEO, the Fox Group
Brad Grey, Chairman & CEO, Paramount Pictures Corp.
Robert A. Iger, President & CEO, The Walt Disney Company
Michael Lynton, Chairman & CEO, Sony Pictures Entertainment
Barry M. Meyer, Chairman & CEO, Warner Bros.
Leslie Moonves, President & CEO, CBS Corp.
Harry Sloan, Chairman & CEO, MGM
Jeff Zucker, President & CEO, NBC Universal

News Corp. Enters Yahoo Fray

2008-02-13T12:27:00.001-08:00

By Jessica E. Vascellaro (WSJ Online)

News Corp. and Yahoo Inc. are in discussions about combining MySpace and other News Corp.-owned online properties with Yahoo, according to people familiar with the matter.

The discussions are aimed at helping Yahoo fend off Microsoft Corp's unsolicited takeover offer, which was initially valued at $44.6 billion. Under the deal being discussed, News Corp. would get a stake in Yahoo which could be more than 20%.

The deal under discussion, which would also include a contribution of cash ...

U.S. Economy: Retail Sales Unexpectedly Rose 0.3% in January

2008-02-13T08:39:00.001-08:00

By Shobhana Chandra

Feb. 13 (Bloomberg) -- Retail sales in the U.S. unexpectedly rose in January, easing concern that the world's largest economy has already slipped into a recession.

The 0.3 percent increase was led by spending on autos, clothes and gasoline, the Commerce Department said today in Washington. The figure followed a 0.4 percent decrease the previous month. Purchases excluding automobiles and gasoline were unchanged.

Excluding automobiles, purchases gained 0.3 percent after a 0.3 percent decline in December.

``Today's report will diminish recession anxieties, but it doesn't dispel them altogether,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland, who accurately forecast the sales gain.

Demand from consumers, whose spending accounts for about 70 percent of the economy, will probably wane in coming months, forcing the Federal Reserve to lower interest rates further, economists said. Macy's Inc., Target Corp. and Limited Brands Inc. said last week that sales at stores open more than a year declined in January. Macy's cut 2,300 jobs.

Treasury securities dropped after the report, with 10-year note yields rising to 3.70 percent at 10:22 a.m. in New York, from 3.66 percent late yesterday. The Standard & Poor's 500 Index added 0.6 percent to 1,356.24. At the same time, the S&P Retailing Index, which includes Home Depot Inc. and Best Buy Co., retreated 0.4 percent.

Retail sales were projected to fall 0.3 percent after an originally reported 0.4 percent drop the prior month, according to the median estimate in a Bloomberg News survey of economists.

Threats to Spending

The worst housing slump in a quarter century and shrinking access to credit threatens to hurt spending this quarter. The economy lost 17,000 jobs in January, the first drop in more than four years. The Standard & Poor's 500 Index has fallen three consecutive months, the longest losing streak since 2003, eroding households' investment portfolios.

Consumers are increasingly limiting expenses to those they can't avoid. The amount Americans must spend each month on debt service, housing, medical costs, and food and energy bills rose to 66.9 percent of their total spending in December, the highest since records began in 1980, according to Bloomberg figures.

``Food prices have been rising and gasoline prices have been rising and so we got a little boost to overall sales there,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who forecast retail sales would advance 0.2 percent. ``There's evidence here that the slump in the housing market is affecting spending.''

Excluding automobiles, purchases gained 0.3 percent after a 0.3 percent decline in December.

Car Dealers

Sales at automobile dealerships and parts stores rose 0.6 percent after a decline of 1.1 percent in December, the Commerce Department said.

That contrasts with industry figures that showed cars and light trucks sold last month at a 15.2 million annual pace, down 6.7 percent from December. Auto industry sales this year are forecast to drop to the lowest level since 1998.

Filling station sales rose 2 percent in January after remaining unchanged the prior month, today's report showed. Regular gasoline reached as high as $3.11 a gallon in early January, about 11 cents more than the average for the prior month, according to AAA. Excluding gas, retail sales rose 0.1 percent.

Sales also rose at clothing retailers, which posted a 1.4 percent increase, and grocery and beverage stores, which gained 0.6 percent. Purchases at non-store retailers, which include online and catalog sales, rose 0.5 percent.

Department Stores

Department-store sales dropped 1.1 percent. Stores selling building materials showed a 1.7 percent decrease in sales, after falling 2.5 percent. Sales also fell at electronics, appliance and sporting goods stores.

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales rose 0.2 percent, after a 0.1 percent decrease the prior month. The government uses data from other sources to calculate the contribution from the three categories excluded.

Today's Commerce Department report also runs counter to industry figures that show January sales fell at stores from Target to Nordstrom Inc. even as some retailers slashed prices by as much as 75 percent. Sales at stores open at least a year rose 0.5 percent from a year earlier, the worst January since 1970, according to the International Council of Shopping Centers.

The industry figures account for about 17 percent of total retail sales, which make up almost half of consumer spending. Retailers' January results followed the worst holiday shopping season since 2002, according to ICSC.

A U.S. recession over the next 12 months is now an even bet, according to a Bloomberg survey of economists taken from Jan. 30 to Feb. 7. The odds of a recession rose from 40 percent in January.

Google Rips Microsoft's Proposed Takeover of Yahoo, Saying It Would Stifle Internet Innovation

2008-02-04T06:36:00.000-08:00

By Michael Liedtke, AP Business Writer

SAN FRANCISCO (AP) -- Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.

The critical remarks, posted online Sunday by Google's top lawyer, represented the Mountain View-based company's first public reaction to Microsoft's unsolicited bid for Yahoo since the offer was announced Friday.

"Microsoft's hostile bid for Yahoo raises troubling questions," David Drummond, Google's chief legal officer, wrote. "This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."

Google's opposition isn't a surprise, given that Microsoft views Yahoo as a crucial weapon in its battle to gain ground on Google in the Internet's booming search and advertising markets.

Redmond, Wash.-based Microsoft has been trying to depict a Yahoo takeover as a boon for both advertisers and consumers because the two companies together would be able to compete against Google more effectively.

But Google is painting a starkly different picture, asserting that Microsoft will be able to stifle innovation and leverage its dominating Windows operating system to set up personal computers so consumers are automatically steered to online services, such as e-mail and instant messaging, controlled by the world's largest software maker.

In a move that illustrates just how badly Google wants to torpedo the deal, Google Chief Executive Officer Eric Schmidt called Yahoo CEO Jerry Yang Friday to offer his help in repelling Microsoft, according to a report Sunday on The Wall Street Journal's Web site, which cited anonymous people familiar with the matter.

The assistance didn't include a counterbid, but may have included supporting other potential suitors, or a revenue guarantee in exchange for an ad partnership with Yahoo, the people said, according the newspaper.

AT&T Inc., Time Warner Inc. and News Corp. aren't planning to enter the bidding, the Journal said, citing the people familiar.

To help make its point, Google pointed to the way Microsoft previously used Windows to help extend the reach of its Web browser and other applications -- a strategy that triggered a U.S. Justice Department lawsuit alleging the software maker illegally used its operating system to stifle competition. The dispute ended with a 2002 settlement that required Microsoft to abandon some of its past practices.

"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?" Drummond wrote.

Brad Smith, Microsoft's general counsel, said preventing Microsoft from buying Yahoo would undermine competition by allowing Google to become even more dominant than it already is on the Internet

"Microsoft is committed to openness, innovation, and the protection of privacy on the Internet," Smith said. "We believe that the combination of Microsoft and Yahoo! will advance these goals."

If they get together, Microsoft and Yahoo would have about 16 percent of the worldwide Internet search market -- still far behind Google's 62 percent share, according to comScore Media Metrix. But Microsoft and Yahoo already are far bigger in than Google in e-mail and instant messaging, and conceivably would be in a better position to squash rival services if they combined.

Illustrating the enormous stakes involved in a deal that could reshape the technology and media industries, Google and Microsoft are already debating the pros and cons before Yahoo has responded to the offer.

Yahoo so far has little to say except that its board will carefully examine Microsoft's bid -- a process that "can take quite a bit of time," according to a message posted on the Sunnyvale-based company's Web site.

The review "will include evaluating all of the company's strategic alternatives, including maintaining Yahoo as an independent company," Yahoo said on its Web site.

Most analysts believe Yahoo will have little choice but to sell to Microsoft, with its stock price near a four-year low at the time of the bid and its profits falling since late 2006. When it was first announced, Microsoft's offer was 62 percent above Yahoo's market value -- a premium analysts doubt any other suitor will be able to top.

If Yahoo accepts, antitrust regulators in both the United States and Europe are expected to begin an exhaustive review that some experts think could last a year. Microsoft believes it could get the necessary approvals to take over Yahoo late this year.

If nothing else, Google probably will try to raise enough alarms about the Microsoft-Yahoo deal to delay its approval for as long as possible. By doing so, Google would have more time to draw up plans to counteract the combination.

Google also is borrowing a page from Microsoft's book by urging antitrust regulators to take a hard look at the proposed marriage between its two rivals.

Just days after Google struck a $3.1 billion deal to buy online ad service DoubleClick Inc. last year, Microsoft began lobbying regulators to block the transaction. U.S. regulators blessed Google's DoubleClick acquisition late last year after an eight-month review, but the antitrust inquiry in Europe remains open.

Ackman Devoured 140,000 Pages to Prove `MBIA Was Never AAA'

2008-01-31T06:57:00.000-08:00

By Christine Richard and Katherine Burton of Bloomberg

Jan. 31 (Bloomberg) -- It was the $109,000 photocopying bill that hedge fund manager William Ackman says made him realize how much he'd read and underlined before betting against bond insurer MBIA Inc. in 2002.

His law firm charged him for copying 725,000 pages of financial statements and other documents, 140,000 of them about MBIA, to comply with a subpoena. Following New York and U.S. probes of his trading and reports, Ackman persisted in challenging MBIA's AAA credit rating for more than five years, based on his own research.

Ackman may soon be proved right. MBIA, the largest provider of insurance against defaults in the global credit market, today reported a fourth-quarter net loss of $2.3 billion because of a slump in the value of mortgage-related securities it guaranteed. The independent research firm CreditSights Inc. this week said MBIA's credit rating may be downgraded. Ackman had warned that MBIA was magnifying its risks by backing instruments such as those based on loans to the least creditworthy homebuyers.

``It's in the nature of a shareholder activist to be persistent,'' says Ackman, now 41. ``I've been persistent because it's an important issue. People are obsessive about stupid things. They are persistent about important things.''

In the MBIA documents, Ackman says he saw that the insurer was guaranteeing untested asset-backed securities. He also found a reinsurance transaction that allowed the company to downplay a loss. MBIA agreed in January 2007 to pay $75 million to settle U.S. regulators' inquiries into that deal.

$2,000 Bet on SAT

Ackman peppered rating companies and regulators with letters, e-mails and presentations criticizing MBIA's credit rating. He also got then-New York Attorney General Eliot Spitzer, who was investigating Ackman's activities, to probe MBIA.

Shares of MBIA, based in Armonk, New York, fell $2.02, or 13 percent, to $13.96 yesterday in New York Stock Exchange composite trading. The stock is down 81 percent from a 52-week high of $72.85 on Feb. 6, 2007.

In high school Ackman bet his father $2,000 that he would get a perfect score on the verbal portion of the SAT college- entrance exam. He says his dad called off the wager the morning of the test for fear he would lose the bet, though Ackman ended up scoring wrong on one answer.

Betting against MBIA and the No. 2 bond insurer, New York- based Ambac Financial Group Inc., helped Ackman's New York-based fund, Pershing Square Capital Management, to return 22 percent net to investors last year. He says he plans to give his personal gains on the bond insurers to Pershing Square's charitable foundation.

Speaking Publicly

``He has spoken out publicly about it, approached regulators, talked to the media,'' says David Einhorn, 39, head of New York-based Greenlight Capital LLC, who also has wagered against MBIA. ``He's not more right today than he was five years ago that MBIA was never AAA.''

Yesterday, in a letter to the Securities and Exchange Commission and to New York Insurance Superintendent Eric Dinallo, Ackman said MBIA and Ambac may each lose $11.6 billion on guarantees of mortgage-linked debt and other securities. He posted a list of the securities the two companies guaranteed on the Internet, along with a model supplied by an unnamed investment bank, so investors could do their own forecasts of what the insurers might lose.

In 2003, as the New York attorney general's probe was under way, Ackman fired off a memo to MBIA posing 146 questions he says the company never answered. The first was, ``Why did you have me investigated?''

`Emperor Has No Clothes'

``No one wanted to believe that a AAA-rated company was doing what it was doing,'' says Roger Siefert, a forensic accountant Ackman hired in 2003. ``We were treated like the little boy saying `the emperor has no clothes.'''

Chuck Chaplin, MBIA's chief financial officer, says in an interview that Ackman's criticism reflects misperceptions of the bond insurer's business. He disputes Ackman's estimates of MBIA's losses and says the trader is benefiting more from lucky timing than smart analysis.

``He was at the right place at the right time,'' Chaplin says. ``The past six months turned out to be a good time to be short business sectors with mortgage-market exposure, and as it turned out, the bond insurers ended up being one of them.''

Martin Whitman, the 83-year-old chairman of New York-based Third Avenue Management LLC, dismissed Ackman's criticism of MBIA in a December interview on CNBC.

``Mr. Ackman is a slick salesman who doesn't know much about insurance,'' Whitman said. Whitman's firm owned more than 10 percent of MBIA's stock, he said in the interview.

Advertising Commissions

Ackman earned undergraduate and business degrees from Harvard. His father, Lawrence Ackman, recalls that his son and another student worked one summer selling advertising for the ``Let's Go'' travel guides and earned unusually high commissions of $15,000 to $20,000.

``The next year they reduced the commission rates and ruined it for all future students,'' Lawrence Ackman says.

Straight out of business school, Ackman started his first hedge fund, Gotham Partners, with fellow student David Berkowitz. In the mid-1990s, Gotham tried to buy Rockefeller Center. During the talks, Ackman, then 28, says he got a call from Donald Trump.

Call From Trump

``He said to me, `Bill, Goldman Sachs is stealing Rockefeller Center and we've got to sit down and try to work something out,''' Ackman says. The two never agreed to work together.

In July 1996, a group led by Goldman Sachs and David Rockefeller, the philanthropist and former chief of Chase Manhattan Corp., took control of the center for $1.2 billion in cash and assumed debt. Gotham made a profit selling a stake in the property to Goldman, Ackman says. Trump didn't respond to a request for comment.

Ackman took an interest in MBIA after asking a credit- market trader which companies didn't deserve AAA ratings, he says. In a report entitled, ``Is MBIA Triple-A?'' he argued that the company had insufficient reserves to cover potential losses and was guaranteeing increasingly risky debts.

He disclosed taking a short position in MBIA, in which an investor sells borrowed stock, expecting to repurchase it later at a lower price and return the shares to the owner. Ackman also bought credit-default swaps, financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. The swaps would rise in value if doubts about MBIA grew.

Spitzer Investigation

Late in 2002, Ackman published his MBIA findings on Gotham's Web site. Ron MacDonald, the head of reinsurance at MBIA until 1999, read the report early in 2003 and e-mailed Ackman praising it, MacDonald says.

Ackman learned in January 2003 from a Wall Street Journal reporter that Spitzer was investigating whether Gotham had engaged in manipulative trading on MBIA and other companies and that the newspaper would publish an article the next day. The SEC later started its own probe.

``This is going to be a good thing,'' Ackman says he told friends that evening. ``I'm going to meet Eliot Spitzer.'' He says he saw it as an opportunity to turn the tables and present his concerns about MBIA.

Spitzer was investigating not only Ackman's position in MBIA, but also his trading in two other companies, Pre-Paid Legal Services and Federal Agricultural Mortgage Corp., or Farmer Mac. Spitzer, now the New York governor, didn't respond to a request for comment.

Turning the Tables

Ackman and Siefert, the forensic accountant, drew investigators' attention to the reinsurance deal that led to the $75 million settlement a year ago. The transaction covered MBIA for losses related to the 1998 bankruptcy of a Pennsylvania hospital group.

Meanwhile, Ackman made a series of presentations to Moody's Investors Service Inc., the New York-based credit rating company, challenging the bond insurer's top credit grade. In 2005, he wrote to Moody's warning that it was risking its own credibility by keeping MBIA at AAA.

``I apologize for putting you and Moody's on the spot,'' Ackman wrote. ``I have simply lost patience, and it is 2 in the morning.'' A Moody's spokesman said no one was available to comment.

Ackman says he recently received notification that the SEC had ended its investigation of him without any finding of wrongdoing. The letter arrived only after he wrote to the SEC chairman and the agency's four commissioners demanding it.

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2008-01-31T06:56:00.001-08:00

McDonald's Slides on Consumer Cutbacks

2008-01-28T16:15:00.000-08:00

Ruthie Ackerman (Forbes)

McDonald’s fourth-quarter profit jumped on strong international sales, but flat domestic same-store sales in December sent the company’s shares sliding as investors worried that the downturn in the economy could impact the world’s No. 1 hamburger chain. The Oak Brook Ill.-based company’s shares slid 6.4%, or $3.48, to $50.62 in afternoon trading, but the decline held the Dow Jones industrial average back from even stronger gains. On Monday, McDonald's reported that its net income rose to $1.3 billion, or $1.06 per share, up from $1.2 billion, or $1 per share, in the prior year. Excluding income tax benefits of 33 cents per share, the company still earned 73 cents per share, beating analysts’ estimates of 71 cents per share. Sales rose 6% to $5.8 billion from $5.5 billion in the fourth quarter of 2006. Analysts polled by Thomson Financial predicted sales of $5.6 billion.

UBS analyst David Palmer said Europe's profit growth was the main driver in the quarter, but flat same-store sales in the U.S. were worse than expected. The company blamed its flat domestic same-store sales for December on winter weather and weaker consumer spending, but says it remains confident in its U.S. business. While its United States business posted same-store sales growth of 3.3% for the fourth quarter, global same-store sales soared 6.7% led by a 11.4% comparable sales increase in the Asia/Pacific, Middle East and Africa segment. Palmer said that McDonald's sales slowed substantially more than the industry in December, indicating that it benefited from Taco Bell's e-coli scare in December 2006. McDonald’s said it will begin paying its dividend on a quarterly basis in 2008. The next payout will be for 37.5 cents per share on March 17 for the first quarter to shareholders of record on March 3. The board will review the dividend rate on an annual basis each fall. Palmer maintained his "buy" rating and his $67 price target.

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2008-01-24T12:02:00.000-08:00

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Pressure Mounts on ECB to Trim Rates

2008-01-22T13:49:00.000-08:00

By JOELLEN PERRY (Wall Street Journal)

DAVOS, Switzerland -- As recession fears rout global markets, the Federal Reserve slashes interest rates and the governor of the Bank of England hints of another rate cut, what will it take for the European Central Bank to finally cut its short-term interest rates? The short answer now: A little time.

The ECB has been an outlier among major central banks since the summer, keeping its key rate on hold as inflation worries trumped growth concerns, even as the Fed, the Bank of England and the Bank of Canada cut borrowing costs to rescue ailing economies. "Now, the question for the ECB is not if they'll lower rates, but when," says Neville Hill, economist with Credit Suisse in London.

Pressure on the ECB is mounting. Investors Tuesday priced in up to three one-quarter-percentage point ECB rate cuts this year, which would bring the ECB's key rate to 3.25%. Markets are betting on a rate cut in May; some economists say signs of a weakening in euro zone growth prospects could bring a rate cut as early as March.

Despite some recent softening in their rhetoric, ECB policymakers have, so far, maintained that strong domestic momentum coupled with solid global growth could help the 15 nations that share the euro currency expand close to its 2% trend rate this year -- even as the U.S. slows. But "if the US problem is so large that the Fed has this kind of reaction, then it will have an impact in Europe as well," says Marco Annunziata, chief economist with UniCredit in London. "So the idea that Europe is doing just fine doesn't hold anymore."

But subtle shifts in ECB officials' recent rhetoric suggest the 21-member Governing Council may be starting to worry more about weaker growth than higher inflation. Several have suggested that new central-bank staff growth projections in March could come in under December's estimate of gross-domestic-product growth around 2% this year. Others have stressed that the current inflation increase will be short term and highlighted the rate should fall back below 2% in 2009. And tough ECB rhetoric about inflation preceded rate cuts back in 2001.

Moreover, lower rates in the U.S. -- and in the U.K. -- without a cut in European rates would put even more upwards pressure on the euro, which some analysts predict could hit $1.50 in the wake of the Fed's cut as investors flock to the promise of higher returns. That could crimp European export growth and suppress import prices, both of which could help push ECB policymakers towards lowering rates.

Bank of England Governor Mervyn King said in a speech Tuesday that U.K. economic growth could slow "quite sharply" near-term even though consumer-price inflation may accelerate. Speaking to businessmen in the west of England, Mr. King said that the central bank's key interest rate is probably restricting economic growth.

"In the short run, [tighter credit conditions] will slow economic activity, possibly quite sharply," Mr. King said, acknowledging that the central bank faces the difficult balancing act of supporting growth, while not allowing inflation to get out of control. "But we start the year from a position in which Bank Rate, at 5.5%, is probably bearing down on demand," he added.

The next meeting of the Bank's Monetary Policy Committee is now set for Feb. 6-7. Most economists expect it to reduce the key rate to 5.25% then; it cut the rate in December for the first time since August 2005.

Unlike the Fed, which is responsible for maximizing growth and minimizing inflation, the ECB's sole mandate is keeping euro zone prices steady. For policymakers to consider a cut, euro zone growth prospects need to deteriorate enough for policymakers to be able to argue that inflationary pressures are ebbing. There are signs of such deterioration already.

The ECB's most recent bank lending survey showed euro zone banks further tightened lending standards for households and firms late last year and expect to continue doing so. Policymakers and private economists alike already expect euro zone growth for the last three months of 2007 to come in well below the third quarter's 0.8% pace, perhaps as low as 0.3%. Fresh evidence of weakness could come this week, as both the euro zone purchasing managers' index -- which the ECB watches closely -- and a key survey of German business expectations are likely to continue slipping.

"Together with the ongoing weakness the US, that would be enough to make them change their rhetoric and make a U-turn on rates," says Mr. Annunziata. But he doesn't expect an ECB move until summer.

ECB policymakers have made clear why they haven't yet joined the Fed in cutting rates: Domestic inflation pressures remain strong. On the heels of two years of solid growth, unemployment hit a record low of 7.2% in November and factories continue working at near-capacity. In addition, soaring food and energy prices pushed euro zone inflation to a six and a half year high of 3.1% in November and December, well above the ECBs goal of just below 2%. Consumer inflation expectations are at multi year highs.

Paramount in the minds of policymakers is the danger that rising commodity prices will lead euro zone workers leverage to demand productivity-beating wage increases. ECB President Jean-Claude Trichet stressed after the ECB's most recent policy meeting on Jan 10 that the bank would act "pre-emptively" to forestall such spillovers. Days later, German train drivers won an 11% pay increase, in a deal that could herald similarly generous rises across the bloc.

As successful as the ECB was at keeping markets afloat with its liquidity injections last year, some economists say the continuing credit crunch offers a lesson on the primacy of the interest rate. "Ultimately, all the different vehicles the central banks have tried to provide liquidity to the system without changing the interest rate have proven only modestly helpful," says Kenneth Rogoff, a Harvard University economist. Since U.S. remains at the center of the subprime storm, "the ECB has the luxury of waiting longer. But eventually, they're going to have to turn course as well."

2008-01-21T10:28:00.000-08:00

Merrill Lynch Posts a $9.8 Billion Loss

2008-01-17T13:41:00.000-08:00

By JENNY ANDERSON (NY Times)

Merrill Lynch, a firm one-third the size of Citigroup, posted an equally huge fourth-quarter loss of $9.8 billion on Thursday, fueled by write-downs totaling $16.7 billion, more than double the firm’s 2006 profits.

The staggering losses came from packaging and holding onto complex securities that seemed safe but have recently unraveled. The result was the worst quarterly loss in Merrill Lynch’s history, underscoring both the severity of the credit crunch and the brokerage firm’s failure to adequately understand or manage the risks it was taking.

For the year, Merrill lost $7.78 billion, compared with profits of $7.5 billion in 2006.

Merrill’s stock was down almost 8 percent in midday trading as analysts expressed concern about remaining exposure to the mortgage market — from the subprime market to the safer so-called Alt-A market and commercial real estate — as well as the reality that the firm will be constrained in many aspects of its business.

“There is still a lot of uncertainty ahead for Merrill,” said Brad Hintz, a securities analyst at Sanford C. Bernstein & Company.

Like Citigroup, Merrill Lynch has been forced to tap capital — from locales as close as New Jersey and the Upper East Side of New York, and as distant as Singapore, Korea, Japan and Kuwait —to plug the gaping holes left by losses associated with complex debt instruments packed with mortgages whose value has plummeted. Merrill earlier this week raised $6.6 billion from Korea, Kuwait and Japan. In December, the bank raised an additional $6.2 billion from Singapore’s Government Investment Corporation and Davis Selected Advisors.

John Thain, who took over as Merrill’s chief executive officer in December, called the firm’s results “unacceptable” but expressed certainty that the firm would not have to raise any more money. “We’re very confident that we have the capital base now that we need to go forward in 2008,” he said.

Mr. Thain tried to highlight the positive elements of the firm’s results — record results in equity capital markets, investment banking and global wealth management — but expressed a certain level of dismay at the risks taken to incur such hefty losses. “They shouldn’t be taking risks that wipe out the earnings of the entire firm,” he said, referring to the trading desk.

In his first weeks, Mr. Thain said he focused on three things: the firm’s liquidity, its capital, and its reporting structure, which he said should be flattened to “reduce the siloing that has taken place at Merrill Lynch over the last few years.” Merrill announced the appointment of Noel B. Donohoe to co-chief of risk, joining Edmond N. Moriarty, and Mr. Thain said he would hire a new global head of trading, reporting directly to him.

Merrill losses included a $9.9 billion write-down on collateralized debt obligations, a $1.6 billion write-down on subprime mortgages and a $3.1 billion write-down on exposure to bond insurers, who themselves have come under tremendous pressure for insuring securities that are defaulting a record rates. Other areas for write downs include $900 million in Alt-A and residential mortgages outside the United States and $230 million related to its $18 billion commercial real estate portfolio.

Mr. Thain made it clear that he did not think that so-called asset-backed collateralized debt obligations — instruments that have leveled Citigroup, Morgan Stanley and UBS — would rebound in any way. “I don’t think we’re likely to get back much on these,” he said.

Citigroup wrote down $23.2 billion in mortgage-related losses and provisions for future bad loans while also reporting a $9.83 billion fourth-quarter loss. The firm has raised $19.1 billion from sovereign wealth funds and investors.