Intel SP

Regulators: Much to do on Wall Street reform

2010-09-30T09:09:00.001-07:00

The Federal Reserve has 50 new rules to write, the Federal Deposit Insurance Corp. has 44 new rules to write. The Securities and Exchange Commission has 100 rules and 20 studies on its plate. And Treasury has two new agencies and an oversight council to set up.

A panel of top U.S. financial regulators updated a Senate Banking panel Thursday on the progress their agencies have made attacking a long to-do list to enact new laws ushered in with Wall Street reforms, at a hearing on the Dodd-Frank Act.

"The Dodd-Frank Act is an important step forward for financial regulation in the United States, and it is essential that the act be carried out expeditiously and effectively," said Federal Reserve Chair Ben Bernanke at the hearing.

Bernanke explained that the Fed was ensuring that their rule-making is transparent and that they are posting on a website all correspondence on rules. He also talked about the Fed's advisory role helping the Treasury set up various panels and agencies -- for example, as the Fed hands over its consumer regulatory duties to the new consumer financial protection bureau.

"The Federal Reserve will work closely with our fellow regulators, the Congress, and the Administration to ensure that the law is implemented in a manner that best protects the stability of our financial system and strengthens the U.S. economy."

Deputy Treasury Secretary Neal Wolin explained that Treasury had created a bunch of different teams, each with a different task, ranging from setting up the new Financial Stability Oversight Council, a panel of regulators in charge of keeping an eye out for risk in the financial system, to launching the Consumer Financial Protection Bureau, which is charged with regulating financial products like mortgages and credit cards.

"Implementing the Dodd-Frank Act is a complex undertaking," Wolin said.
0:00 /4:03Risks of financial reform

Federal Deposit Insurance Corp. (FDIC) Chair Sheila Bair said that her agency is working on releasing a draft of new rules about the new liquidation process for large complex financial firms. The FDIC was expected to release those new rules earlier this week, but delayed the release for further review, the FDIC's board said Monday.

"We are well on our way to putting this badly needed Dodd-Frank Act into effect," Bair said.

The Securities and Exchange Commission is one of the few financial regulators that has gone beyond fact-finding and actually implemented a rule required by the Wall Street reform. The SEC's new rule allows shareholders who own 3% of company stock for at least three years to nominate candidates for director on the annual proxy ballot, which gets sent to shareholders for a vote.

That rule has also been challenged, in a lawsuit filed by the U.S. Chamber of Commerce and the Business Roundtable.

Gold hits record high ... again

2010-09-16T13:30:00.001-07:00

Gold prices surged to new record highs on Thursday, continuing a rally started earlier in the week.

Gold futures for December delivery rose $5.10 to close at a record high of $1,273.80 an ounce in New York. That topped the previous all-time high closing price of $1,271.70, which came on Tuesday. Earlier in the day, contracts were trading even higher, at $1,279.50 an ounce.

Typically seen as a safe haven, gold is the ultimate currency for many investors. It involves the lowest risk because it is a tangible asset, and shows the highest upward price potential during times of stock and currency volatility.

Uncertain financial markets, weak economic conditions and the stressful political conditions of the mid-term elections are the main causes for rising prices, said Carlos Sanchez, a precious metals analyst with CPM Group.

And today's record might just be the beginning, with no sign of any of these worries easing up. Sanchez said gold prices will likely keep rising through the first quarter of next year. "The next level is $1,300 -- possibly by the end of this month. And I would not be surprised if it heads up to $1,400 by the end of this year."

Additionally, with the flood of U.S. dollars in the market and serious concerns over European countries' ability to back up debt obligations -- not only investors, but countries such as China, Russia and Egypt are buying gold.

Secrets Of Maintaining A Glowing Skin

2010-06-27T19:14:00.000-07:00

Having young looking, glowing and radiant skin is the dream of every individual and for getting the same they do not shy away from using a wide range of cosmetics and lotions etc. However, many people are unaware of the fact that natural methods are more affective in getting a healthier skin. Some natural methods of gaining healthy skin include washing your face twice or thrice in a day, eating a balanced diet, performing regular detoxification and following regular exercise routine can prove extremely helpful in maintaining radiant skin. In addition, drinking plenty of water, having ample sleep and avoiding stress and overexertion will also prove beneficial.

Structured Settlements

2010-06-27T19:11:00.000-07:00

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At Annuity transfers one can expect great hospitality and honesty with finest customer service. Business people will directly come by person and they will explain this process. Also, it offers best price for the settlement payments in the market. Please share this piece of information to all your friends. Thank you.

Learning About The Different Forms Of Arthritis

2010-06-26T18:03:00.000-07:00

Arthritis is one of the most common diseases that affect the bones and joints in the human body. Millions of elderly people across the globe are victimized by more than 100 forms of the disease. The most common forms of this disease are known as rheumatoid arthritis and psoriatic arthritis. Then there is the septic arthritis which is a form of joint infective arthritis. Another most common form of arthritis is the osteoarthritis which is a form of degenerative joint disease. Even though arthritis is known to generally affect people after a certain age, it is not uncommon for younger people also to suffer from the ailment.

Stocks stage advance

2010-05-21T18:23:00.001-07:00

Stocks ended higher Friday, finding momentum at the end of a very choppy session in which concerns about global growth vied with investor willingness to scoop up shares beaten down in the recent sell-off.

But selling earlier in the week left the major gauges lower for the week, with the Dow and S&P 500 both down around 4% and the Nasdaq off around 5%.

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The Dow Jones industrial average (INDU) rose 125 points or 1.3%, after having fallen as much as 150 points earlier in the session.

The S&P 500 index (SPX) gained 16 points or 1.5% and the Nasdaq (COMP) composite gained 25 points or 1.1% after having been on both sides of breakeven throughout the session.

The CBOE Volatility index, the VIX (VIX), Wall Street's fear gauge, fell 12% to 39.88 as investor anxiety lessened. However, the VIX had fallen more substantially in the early afternoon. On Thursday, the VIX spiked to a 14-month high of 45.48.

Stocks were volatile through the session as worries about the European economy and the weak euro were countered by some buying interest now that the market is more than 10% off 2010 highs. A decline of more than 10% on a closing basis is technically considered to be a correction.

Since peaking at roughly 18-month highs in late April, the Dow had lost 10.2% and the S&P 500 had lost 12%. The Nasdaq was at a 22-month high at its peak and is down 12.9% as of Thursday's close.

Thursday's session intensified the recent wave of selling, with the three major gauges losing between 3.6% and 4.1%, making for the worst day on Wall Street since February 2009 at the height of the financial crisis. The sell-off also pushed the S&P 500 below the 200-day moving average, a key technical level traders watch.

Stocks fell again in the morning Friday, dropping below the lows from the early-May "flash crash" -- in which erroneous computer trading sent the Dow down by almost 1,000 points, before it recovered near the close.

Hitting those lows again Friday seemed to bring in some new buyers, with market pros using those earlier lows as a good point to tiptoe back into the market. But the advance Friday was never especially robust, with stocks seesawing through the session.

"We went to the flash crash intraday lows and bounced back, which is good, but I think the mindset has changed and people are going to be selling into rallies," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.

He said that the S&P 500 needs to close above the 200-day moving average within the next few sessions -- otherwise that level, around 1102, or 3% above Thursday's close, is going to become hard for the market to surpass.

What's moving: Big bank stocks sustained gains through the afternoon, with Dow components JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and American Express (AXP, Fortune 500) all rising.

A broad financial sector rally propelled the KBW Bank (BKX) sector index by 4%. Passage of the long-in-the-works Wall Street reform bill may have sparked the buying, as it removed an uncertainty hanging over the sector.

But gains on the day were broad based, with 28 of 30 Dow components ending higher. In addition to the financial shares, gainers included Boeing (BA, Fortune 500), Caterpillar (CAT, Fortune 500), Chevron (CVX, Fortune 500), IBM (IBM, Fortune 500), 3M (MMM, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

In company news, Google (GOOG, Fortune 500) got the regulatory OK for its $750 million purchase of mobile advertising firm AdMob, following a six-month antitrust investigation. The Federal Trade Commission approved the deal since rival Apple (AAPL, Fortune 500) recently purchased a mobile advertising service, Quattro Wireless.

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one on volume of 2.3 billion shares. On the Nasdaq, advancers topped decliners by two to one on volume of 3.36 billion shares.
What's in the Wall Street bill?

Wall Street reform: On Thursday night, the Senate passed a far-reaching Wall Street reform bill that is part of legislation that aims to prevent another financial crisis.

The nearly 1,600-page bill establishes a new consumer regulatory agency, sheds light on complex financial products and provides a new way for the government to deal with so-called too big to fail financial firms.

The bill has to be reconciled with a similar measure the House of Representatives passed in December before it can be sent to President Obama to sign.

Company news: Dell (DELL, Fortune 500) reported higher quarterly earnings and revenue that topped expectations, after the close of trading Thursday. Strong business spending fueled the sales gain. However, the company's gross margins, a key measure of profitability, were lower than what many analysts were expecting. Dell shares fell 6.8% Friday.

Job market: More than half of all states saw lower unemployment rates last month, according to state-by-state figures released Friday morning.

Euro/dollar: The euro gained 0.7% versus the dollar, rising for the third day in a row, although investors don't seem to be taking any comfort from the modest recovery in the European currency. The euro has seesawed over the last few days after plunging to a four-year low of $1.2234 on Monday.

The dollar rose 0.4% versus the yen.

World markets: Markets in Europe cut bigger losses to close with modest declines. The British FTSE 100 fell 0.2%, the German DAX lost 0.7% and the French CAC 40 ended barely lower.

Asian markets were mixed. The Japanese Nikkei fell 2.5%, but China's Shanghai Composite turned higher, gaining 1%. Hong Kong markets were closed.

Commodities: U.S. light crude oil for July delivery fell 76 cents to settle at $70.04 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $12.50 to settle at $1,176.10 an ounce.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.20% from 3.26% late Thursday. Treasury prices and yields move in opposite directions.

Auto Repair

2010-05-21T18:18:00.001-07:00

It is always better to look up your car like a child. How can we do it? This is done by frequent service, oil change and car wash. And not many recognize the importance of it and fail to do their car service which often leads them in disastrous situation.

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Their service is very quick and all kinds of services and auto repairs are done here at an affordable cost. One can also find various good tips in cars and models like Acura Integra which they like to view. So, if you are looking for a perfect and genuine auto repair shop just visit repairpal.com who is the best in delivering our needs perfectly.

Shoppers slow down in April

2010-05-06T20:10:00.001-07:00

Retail sales posted the eighth straight monthly gain in April, but increases were weak after March's data posted the biggest jump on record.

Sales tracker Thomson Reuters, which looks at monthly same-store sales for 28 chains, said Thursday that April sales increased 0.5% over last year. Thomson had expected a 1.7% increase.

Of the 28 retailers, 69% missed Thomson's expectations; 27% beat; and 4% matched.

Same-store sales, or sales at stores open at least a year, are a key indicator of retailers' performance. The data are also important to the overall recovery, since consumer spending fuels two-thirds of the economy.

The weakness in April data was in sharp contrast to the previous month. March's report showed sales increased 9.1% over last year, the biggest monthly gain since Thomson began keeping records in 2000.
0:00 /2:26Time-lapse: A day at a Walmart store

The March data got a boost from unusually warm weather, Easter shopping and improved consumer confidence, Thomson said in its report. The calendar shifted the Easter holiday to March this year.

"For year-over-year comp[arisons], it's essential to average the results of [March and April] to get a smoother representation of how the Easter months fared," the Thomson report said, noting the two-month average is a "robust" 4.8% gain.

Teen apparel stores posted the biggest misses in April. That included alternative clothing store Hot Topic (HOTT), which reported sales were down 12.5%, while Thomson expected only a 7.9% drop. The Buckle (BKE) posted a 5.7% decline, while expectations were for a 1.7% jump.

Membership warehouse club Costco (COST, Fortune 500) was among the bright spots, with an 11% gain, but it missed estimates for an increase of 11.2%.

Jobless claims down for 3rd straight week

2010-05-06T20:09:00.002-07:00

The number of Americans filing initial claims for unemployment insurance fell for the third straight week, according to weekly government data released Thursday.

There were 444,000 initial jobless claims filed in the week ended May 1, down 7,000 from a revised 451,000 the previous week, according to the Labor Department's weekly report.

Economists surveyed by Briefing.com had expected new claims to fall to 440,000 in the latest week. The number of new claims was the lowest since the 442,000 reported in the week ended March 27.

The Labor Department also tracks the four-week moving average of initial claims, which smoothes out volatility in the measure. That number was 458,500 for the week, down 4,750 from the previous week's revised average of 463,250.

"Things are lining up for recovery, but it's slower in its evolution than we expected," said Carl Riccadonna, U.S. economist for Deutsche Bank in New York.

A lack of economic confidence could be keeping hiring managers on the sidelines, according to Riccadonna. Jobless claims at or below 400,000 could help to boost morale.

"It's not helped when you look on TV and see developments in Europe and people worried about the impact of trans-Atlantic contagion," he said.

The number of people filing continuing claims totaled 4,594,000 in the week ended April 24, the most recent data available. That figure was down 59,000 from the preceding week's revised 4,653,000 claims, and slightly below the 4,600,000 economists expected, according to Briefing.com. Continuing claims were down for the fifth straight week.

The four-week moving average for continuing claims totaled 4,649,000, up 8,000 from the preceding week's revised average of 4,641,000.

Continuing claims data exclude people whose benefits expired or those who have moved to state or federal extensions. It reflects those filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.

In April, lawmakers in the House and Senate approved an extension of unemployment insurance until June 2. The move followed a number of tax breaks andother measures designed to spur job growth and help push the current 9.7% unemployment rate lower.
0:00 /4:50Don't ask for a state job

Although many economists say the measures are slowly working, states are still feeling the pinch and jobless claims would have to fall further, faster, before the national unemployment rate ticks lower.

There has been increasing debate over whether the decline in continuing claims is due to real job creation or people exhausting their benefits. Riccadonna says there's no easy way to tell, but that "if the pace of job creation continues to accelerate, we can be increasingly confident that the drop in continuing claims is people finding jobs and not just rolling off the books."

Jobless claims fell the most in Florida, with a dip of 2,766 in the week ended April 24, primarily due to fewer layoffs in the construction, service, and manufacturing industries.

North Carolina and New York also saw dips in the 2,600 range. California, Massachusetts and Oregon topped the list of states with the largest increases in initial claims.
Job reports paint a brighter picture

The report follows a spate of upbeat economic data in recent weeks. But that has been overshadowed by fears that Greece's debt crisis could spread throughout Europe.

Riccadonna said that he is not overly concerned about the impact on the United States in the short term, beyond some "exchange rate effect." However, a significant decline in the euro to $1.15 could hurt the competitiveness of U.S. exports, which he says has been a key driver in the recovery so far.

Three separate reports on Wednesday pointed to strong signs of jobs growth when the Bureau of Labor Statistics releases its official read of the unemployment situation on Friday. Economists surveyed by Briefing.com forecast that the U.S. added 187,000 jobs in April, compared to a gain of 162,000 in the prior month.

Still, total hiring would need to be 200,000 or more a month to push the rate down significantly, he said. Given recent economic data, he thinks the "big one" could come as early as May.

Although the nation is expected to have added jobs last month, many economists forecast the unemployment rate, also due Friday, to remain unchanged at 9.7%. Riccadonna is a bit more optimistic, forecasting a slight tick down to 9.6%.

"Really substantial gains in excess of 300,000 should be sufficiently jarring enough to wake up hiring managers and also the financial markets," said Riccadonna. "We're turning the corner. The question is how fast?"

House approves $6 billion 'cash for caulkers'

2010-05-06T20:09:00.001-07:00

House lawmakers on Thursday approved a $6 billion measure that aims to provide rebates to homeowners who invest in energy efficiency improvements -- but not without a fight from Republicans.

The bill, officially known as the Home Star Energy Retrofit Act but better known as "cash for caulkers," has been touted by President Obama since December as one of the signature pieces of his administration's larger job-creation strategy.

The act "is a common-sense bill that will create jobs, save consumers money, and strengthen our economy," President Obama said after the House passed the measure. "We have workers eager to do new installations and renovations, and factories ready to produce new energy-efficient building supplies."

House Speaker Nancy Pelosi, D-Calif., estimates that the legislation will create nearly 168,000 jobs in construction, manufacturing, and retail.

The House vote of 246-161 went through with support from the Democrats and overwhelming rejection from the Republicans. The vote simply authorizes the creation of the program; it does not appropriate the funds needed to run it.

The Senate is expected to take up the legislation this summer and determine how to pay for the program, which is likely to be controversial.

How will homeowners cash in?

The bill would fund rebates of as much as 50%, up to $3,000, for energy-saving efforts such as insulation improvements and the replacement of windows, doors, heating and cooling systems. The installations will have to be completed by qualified contractors.

Homeowners that choose to make improvements on their own will receive rebates of up to 50%, to a maximum of $250, on air sealing and insulation products.

The bill also includes reimbursements for those who conduct comprehensive energy audits and reduce their home's total consumption. Homeowners who trim their energy usage by at least 20% can receive up to $8,000 in rebates.

Pelosi said that the bill will cut energy bills by up to $500 a year for some 3 million families.

The bill will also distribute $600 million to states for grants to help mobile homeowners replace pre-1976 models with energy-efficient ones.

Political wrangling

Through a motion to recommit, a political maneuver used by lawmakers to send a bill back to the committee that drafted it, House Republicans added their own conditions to the legislation.

They incorporated language that forbids the program's financing from expanding the federal deficit and bars the bill's funds from being allocated to contractors who have sex offenders as employees.

The Republican stipulations also disqualify from the program homeowners with an annual income of more than $250,000 from the program and require that the rebates be sent directly to homeowners instead of being provided through stores, contractors or other parties.

House Energy and Commerce committee Chairman Henry Waxman, D-Calif., accepted the changes so that the bill can move forward for a vote in the Senate.

Pelosi called the Republican changes a "poison pill" and said House members would "work with the Senate to fix this flawed language."

Higher taxes threaten stock rally

2010-04-04T10:32:00.000-07:00

Between the new Medicare tax on investment income and a rise in capital gains and dividend taxes, investors will face higher costs. But the overall effect on stock returns is not as cut and dry.

"It's hard to quantify the impact when stimulus, global expansion and so many other factors also drive growth," said Kelli Hill, portfolio manager at Ashfield Capital Partners.

By 2013, investment taxes for the wealthiest Americans will rise to roughly 24% from the current level of 15% -- the highest level since the Reagan era. The tax applies to roughly 1 million individuals who earn over $200,000 and 4 million couples who rake in more than $250,000.

While this group makes up just 2% of the population, it's a far bigger driver of market activity than the other 98%. In addition, the higher rates aren't tied to inflation, meaning middle-class Americans will eventually price into the group.

On the plus side, the tax hikes are spread out over several years and are just one of many factors that influence stock values, suggesting the impact on the broad market will be moderate.

In fact, markets have been known to thrive in a higher investment tax rate environment. From 1986 until 1997, when the top capital gains tax rate was at 28%, the Dow gained in all but one year, with average returns of 15%.

But this time around, the psychological impact may play a bigger role. With the U.S. economy still reeling in the aftermath of the worst recession since the 1930s, investors have more reason to show caution in the near term.

"You'll probably see more of a sideways pattern in the stock market over the next few years, but it's a little muddy as to how the higher taxes might factor in," said Linda Duessel, equity market strategist at Federated Investors.
Bracing for the tax hikes

With some of the 2003 tax cuts expiring at the end of this year, wealthy Americans will likely see a boost in long-term capital gains taxes to 20% from 15%. Starting in 2013, they'll also pay additional Medicare taxes - an extra 0.9% of their wage income and an extra 3.8% on investment income.

Duessel said that the government was giving investors time to first absorb the end of the Bush tax cuts before the Medicare tax kicks in, which should ease the blow. Additionally, tax policy could change after the mid-term elections.

The taxes would hit those whose gross income, which comprises earnings plus investments, tops $200,000 for individuals and $250,000 for couples. Investment income, also known as unearned income, refers to capital gains, dividends, interest, annuities and rent, among other things.

"Anytime you raise taxes, you provide some incentive to sell the underlying stocks, but I don't think these will have a big impact," said Douglas Elliott, fellow at the Brookings Institute and a former investment banker at JPMorgan Chase.

He said that's partly because the tax impacts all types of investments, including both stocks and bonds, so it doesn't make one more advantageous over the other from a tax perspective.
0:00 /3:09Better alternatives to 401(k)

"I think there will be some psychological impact, just like there was when capital gains tax rates came down (in 2003), but that was a short-term impact," Elliott said. "Longer term, stock returns are still driven by fundamentals."

In 2003, investors shifted assets into big caps and high dividend paying stocks after President Bush lowered the capital gains taxes.

Following that logic, Duessel said higher taxes should theoretically hurt the higher dividend paying stocks because high-income investors tend to bail out of those areas and move into tax-free areas like municipal bonds when capital gains taxes go up. Dividends have historically accounted for nearly 40% of investors' total returns.

However, the pressure on dividend-paying blue chips could be contained this time since those stocks haven't kept up with the pace of the rally that boosted the S&P 500 73% off 12-year lows hit in March of 2009.

Frontier Communications (FTR) pays one of the largest dividends in the S&P 500 index, yielding 13.4%. Its stock price is up 38% from the March 2009 lows. Dow component AT&T (T, Fortune 500) is another of the S&P 500's biggest dividend payers, with a yield of 6.5%. But the stock price has risen just 18% off the March lows.

While tax-free municipal bonds may offer more competitive yields than cash or Treasurys, they also provide greater risks that come with lending to hard-hit city and state agencies.
Tax hikes crimp savings

Some analysts are more concerned about the impact of higher taxes on savings and corporate profits.

For many investors, the rally over the last 12 months only served to cut or erase the losses they racked up in 2008's bloodletting. Having only just recovered some or all of their holdings, investors may see the threat of higher taxes as a catalyst to bail, said Ken Grant, partner at Waterstone Private Wealth Management.

"If you're thinking of selling and you know you're going to see a tax of 20% in 2011 and 15% in 2010, you're going to sell ahead of the higher rate that's coming," Grant said.
Tussle over health care law impact on companies

But for investors with a longer-term focus, ditching stock holdings for tax reasons doesn't make a lot of sense when bonds, cash and cash equivalents offer little in the way of competitive yields, he said.

The higher tax rates are more likely to impact individual stocks, as investors demand higher price-to-earnings valuations now that their after-tax rate of return will be lower. This could put pressure on companies that are already expecting to take charges related to other requirements of the new law.

But the higher taxes are not likely to change market participants' broad investing habits or dramatically impact the way they value companies, said Ashfield Capital's Hill. "From a long-term perspective, it slows investment growth, but it doesn't cut overall investing."

No room for error on U.S. debt

2010-03-16T07:49:00.000-07:00

The United States isn't in jeopardy of losing its gold-plated credit rating, though by one measure America is closer to the ratings-downgrade danger zone than Spain.

That's according to credit rating agency Moody's. In a quarterly report about sovereign debt, Moody's analysts wrote that despite market worries about rising government debt levels, there is "no imminent rating pressure" for the United States and other big governments carrying its highest triple-A rating.

But the report added that these governments' margin for error "has in all cases substantially diminished," thanks to a weak outlook for economic growth and enormous debt loads taken on to quell the financial meltdown of 2008-2009.

Cutting back on public spending too soon risks a double-dip recession, Moody's said, while leaving stimulus measures in place too long could lead to a sharp rise in interest rates "with more abrupt rating consequences a possibility."

What's more, governments that wish to avoid credit downgrades may need to implement harsh and potentially unpopular policies. The Moody's analysts, led by London-based managing director Pierre Cailleteau, wrote that "preserving debt affordability ... will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."

Nor can big developed countries expect to export their way to health on the back of booms in emerging markets such as India and China. "Demand from the emerging world undoubtedly provides some support, but cannot on its own compensate for weak domestic demand," Moody's said.

In the case of the United States, interest payments on general government debt -- combining the federal government with the states -- could rise above 10% of revenue by 2013, according to the report.

That's the level at which the rating agency typically considers a downgrade. Moody's said debt affordability is the key factor to consider in ratings decisions, because debt costs are apt to constrain policymakers.
0:00 /4:17Greece's debt crisis

The report notes that U.S. debt service costs could rise from around 7% in 2009 to 11% in 2013 under Moody's baseline scenario, which calls for a muted economic recovery and a moderate interest-rate shock.

In this forecast, Moody's analysts expect the yield on the five-year Treasury to be above 4% by 2012, a level it hasn't reached since the end of 2007. It was around 2.4% Monday.

U.S. debt service costs are higher in 2013 under the Moody's assumptions than in any of the other major triple-A-rated governments -- the United Kingdom, Germany, France and Spain.

Moody's cautioned that debt service costs alone don't drive the decision, and noted the key role of politics in driving longer-term fiscal policies. The analysts said it would only downgrade a triple-A government's debt if analysts "concluded that the government was unable and/or unwilling to quickly reverse the deterioration it has incurred."

Accordingly, Spain continues to carry Moody's highest rating in spite of its inclusion in a Wall Street epithet for fiscally challenged countries around Europe's periphery, the PIIGS (Portugal, Italy, Ireland, Greece, Spain). Spanish government finances have been hammered by the collapse of a major housing bubble and unemployment is near 20%.

The rating agency acknowledged that "Spain's debt affordability has already deteriorated significantly and is expected to deteriorate further," to a level near the point at which Moody's might consider a downgrade to double-A.

But it said Spanish deficit-reduction plans are "already reasonably well formulated" and the ratings firm doesn't expect to downgrade Spain's debt.

States to Senate: Send more federal aid

2010-02-13T16:34:00.001-08:00

States are looking to the federal government for more help balancing their budgets, but the Senate is not heeding their call.

Federal aid to the states was among the top priorities in an early Senate job creation bill, as well as in a $154 billion measure passed by the House in December. But it has fallen off the list as Senate Democrats look to craft legislation that will attract bipartisan support.

Senate Majority Leader Harry Reid, D-Nev., on Thursday unveiled a jobs bill that does not contain state aid. A Senate Democratic aide said Reid hopes to back a state aid measure in the future. Republican support, however, remains questionable.

Experts and state officials say they need to know now whether they'll get more funds. Governors are currently crafting their budgets and, for many, it will be their third year of contending with massive deficits due to declining tax revenues.
Big budget gaps

States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody's Economy.com.

"State and local government spending is a very important driver of the national economy, especially when the private sector is faltering," said Jon Shure, deputy director of the Center on Budget and Policy Priorities' State Fiscal Project.

To close this gap, governors and lawmakers will be forced to lay off state employees, cut services and postpone capital projects, said Michael Bird, federal affairs counsel for the National Conference of State Legislators.
0:00 /4:30Ohio town rests hope on stimulus

The cutbacks will all work against an economic recovery.

Already, states laid off 44,000 workers in the 12 months ending in January, according to federal labor statistics.

In California, for instance, Gov. Arnold Schwarzenegger is proposing deep cuts to health care, education, the state workforce and social services programs. The governor is looking to Washington D.C. for $6.9 billion for its fiscal 2011 budget, on top of the $6 billion in stimulus funds it is using.

"We believe that providing funds to states will provide the flexibility critical to jumpstart our economy and create jobs," said Eric Alborg, communications director of the California Recovery Task Force.

Massachusetts, meanwhile, is counting on $600 million in federal Medicaid funds that have yet to be approved by the Senate. The state needs the money to close a $3 billion budget gap for fiscal 2011, which comes on top of the $9 billion deficit it has closed over the past two years.

Without that money, "everything has to be on the table," said Cyndi Roy, budget spokeswoman for Gov. Deval Patrick.
Mixed support on Capitol Hill

While many Democratic lawmakers on Capitol Hill back another federal bailout of the states, Republicans have said they don't think it's the best way to create jobs.

A recent Congressional Budget Office report showed that sending money to the states for needs other than infrastructure does spur hiring, but not as much as increasing aid to the unemployed or cutting employers' payroll taxes.

Still, CBO Director Douglas Elmendorf said in testimony Friday that providing aid promptly would probably have a significant effect on employment and economic output.

"Without further aid from the federal government, many states would have to raise taxes or cut spending by more than they would if aid was provided," Elmendorf said. "Such actions would dampen spending by those government and by households in those states, and more state and private jobs would be lost."

Not only would state workers be impacted, but government contractors and suppliers would be too, Shure said. If the states curtain their spending, the companies that do business with them will likely downsize too.

Though the most recent version of the Senate jobs bill does not contain state aid, House Speaker Nancy Pelosi, D-Calif., on Friday urged her peers on Capitol Hill to take up the issue.

"We will work to ensure that critical pieces of the House-passed Jobs for Main Street Act are enacted into law -- including investments in our roads, bridges, and public transit systems, support for job training initiatives, and funding to keep police and firefighters on the streets and teachers in the classroom," Pelosi said.

Obama: Here's $5,000. Go hire someone.

2010-01-29T07:43:00.001-08:00

When President Obama called last month for a new tax break to spur job creation, critics blasted him for offering no specifics. On Friday, Obama plans to fill in the details: He wants to give businesses a $5,000 tax credit for each net new employee they hire this year.

Job creation "must be our No. 1 focus in 2010," Obama said Wednesday night in his State of the Union address. "We should start where most new jobs do -- in small businesses."

Obama will travel Friday to Baltimore, where the local unemployment rate is nearly 11%, to unveil his tax-cut road map. The $5,000 per-worker tax credit he's calling for would be available to businesses of any size, and would be retroactive to the start of the year. Startups launched in 2010 would be eligible for half of the tax credit.

Obama is also proposing a reimbursement of the Social Security taxes businesses pay on increases in their payrolls this year. Firms could earn the credit by raising wages or increasing the hours of their current workers, as well as by hiring new employees. The tax credit would be adjusted for inflation, and would not apply to wage increases above the current taxable maximum of $106,800.

The proposal will cost $33 billion, according to estimates released by the White House, which expects 1 million businesses to benefit from it.

While any business would be eligible for the tax breaks, the refund would be capped at a total of $500,000 per firm, a move the White House hopes will steer the biggest benefits to the smallest companies. Firms eager for cash could claim the credits on a quarterly basis, sparing them the wait before they file their annual taxes.

Hiring tax credits have been proposed before, and shot down in part because of their vulnerability to abuse. Senior White House officials say Obama's plan includes a slew of safeguards to prevent companies from gaming the system.

For example, companies would have to show net increases in their staffing and payroll to qualify. Businesses that cut 20 workers and hire five wouldn't be eligible, nor would those that lay off a $50,000 worker and hire two $20,000 staffers.

Main Street's cash crunch: Several in Congress are already on board with the idea of tax credits for hiring. Senators Charles Schumer, D-N.Y., and Orrin Hatch, R-Utah, unveiled their plan, which has some similarities to Obama's, in an op-ed on Wednesday.

But some business owners say the idea puts the cart before the horse.

"I need money before I hire people, not after I hire them," said Jimmie Hughes, the owner of Grand America in Richardson, Texas. Hughes' 15-person company sells supplies for a range of businesses, including funeral homes and police departments.

The company's sales are growing, and Hughes would like to hire more people. But while his receivables ledger is at a record high, his cash flow is suffering. Hit by the recession, his customers are taking longer than ever to pay their bills. Hughes, who started the company at home as a sole proprietor in 2003, has maxed out half a dozen credit cards trying to keep pace with the growth.

"It all comes down to cash -- how much cash do I have to apply to what I owe my vendors?" Hughes said. His staffing decisions will be based on "my cash-flow situation, not a tax credit."

Jeff Moss, the owner of Pancho's Border Grill in Great Neck on Long Island, N.Y., had a similar reaction.

"In my line of work, the restaurant business, jobs are going to be created or deleted as a direct result of customer traffic," Moss said. "It is not like we are a Fortune 500 company, where we are going to be adding hundreds of jobs and those credits are going to be adding up. We are a small business. If we are adding one employee, the effect on the bottom line is going to be negligible."

What Moss really needs is for the economy to pick up so his customers will increase their discretionary spending. Two weeks ago, he shut down his second restaurant in another, less affluent area of Long Island.

"When the economy tanked, traffic dropped," Moss said. "That was 30 people who lost their jobs, and that was a bitter pill to swallow."

Global shares mixed

2010-01-18T05:38:00.001-08:00

Asian stocks kicked off the week with losses Monday as investors reacted to a selloff on Wall Street, but major stocks in Europe managed slight gains.

U.S. markets are closed Monday for Martin Luther King Jr. day.

On Friday, the blue-chip Dow Jones industrial average tumbled 100 points, or 1%, as investors remained wary about corporate earnings.

Global markets: Most stocks in Asia tracked Wall Street's losses. Japan's Nikkei lost 1.2% and the Hang Seng in Hong Kong finished the session down 0.9%.

In Europe, major indexes managed slight gains. In morning trading, the FTSE 100 in the UK was up about 0.7%. France's CAC 40 and the DAX in Germany both added about 0.5%.

Oil and dollar: Oil prices edged higher. U.S. crude for February delivery rose 20 cents to $78.20 a barrel in electronic trading.

The dollar was up just a shade against the euro and flat versus the yen.

Earnings: Friday capped a volatile week for Wall Street. Despite what were overall positive results from JPMorgan (JPM, Fortune 500) and Intel (INTC, Fortune 500), investors opted to sell shares.

Investors are likely to remain on edge as they await a slew of results this week.

Overall, 57 companies in the S&P 500 are on tap to report their quarterly results this week.

Several major financial names, including Bank of America (BAC, Fortune 500), Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500), are among the firms due to release their results. To top of page

Stocks churn at start of big week

2010-01-11T07:18:00.000-08:00

Stocks were little changed early Monday as investors mulled a report showing a jump in Chinese exports, a weaker dollar and a rise in commodities.

The Dow Jones industrial average (INDU) added a few points in the early going. The S&P 500 index (SPX) gained 2 points, or 0.2%. The Nasdaq composite (COMP) was little changed.

Philip Isherwood, equities strategist at Evolution Securities in London, said traders were ignoring last week's negative payroll report and were reacting, in part, to positive data from China about the strength of its import-export economy. Also, investors have positive expectations about the fourth-quarter corporate reports, which begin later Monday with Alcoa.

"You'd expect to have a reasonable number out of them," he said, in reference to the corporate reports. "You'd obviously want to have a bit more revenue than cost cutting in that mix."

Stocks gained slightly Friday, propelled by a tech rally, as investors shrugged off a surprisingly weak jobs report amid other recent signs that the economy appears to be stabilizing.
0:00 /2:45U.S. Autos seek smoother ride in 2010

Companies: Investors will be waiting for Alcoa (AA, Fortune 500), the first of the Dow components to report fourth-quarter figures, after the market close. Analysts surveyed by Thomson Reuters expect the aluminum maker to report a profit of 6 cents a shares, compared to a loss of 28 cents a share in the final quarter of 2008.

Later this week, Intel (INTC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) post quarterly figures.

Earnings of S&P 500 companies are expected to have jumped 213% in the fourth quarter of 2009, thanks to easy comparisons to the year-earlier period, the worst quarter in the history of earnings tracker Thomson Reuters.

World markets: Asian markets ended higher and European markets gained at midday.

Commodities and the dollar: The dollar tumbled versus the euro and the yen.

Dollar-traded gold inched higher. COMEX gold for February delivery rose $15 to $1,154.90 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery rose 50 cents to $83.25 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.80% from 3.83% late Friday. Treasury prices and yields move in opposite directions.

Jobless claims fall to 17-month low

2010-01-03T15:04:00.001-08:00

he number of Americans filing first-time claims for unemployment insurance fell sharply last week to the lowest level in 17 months, the government said Thursday. Analysts had expected an increase.

There were 432,000 initial jobless claims filed in the week ended Dec. 26, down 22,000 from the previous week's revised 454,000, the Labor Department said. The figure is the lowest since July 19, 2008, when there were 413,000 claims filed.

A consensus estimate of economists surveyed by Briefing.com expected claims to jump to 460,000.

The 4-week moving average of initial claims totaled 460,250, down 5,500 from the previous week's revised average of 465,750.

"It's encouraging to see that we're continuing to move in the right direction toward 400,000 claims," said Tim Quinlan, economic analyst at Wells Fargo. "We're certainly off the highs we saw earlier this year.

Jobless claims have been trending downward since the end of March, when they peaked at 674,000, the highest figure since 1982.

Continuing claims: The government said 4,981,000 people filed continuing claims in the week ended Dec. 19, the most recent data available. That's 57,000 down from the preceding week's revised 5,038,000 claims.

The 4-week moving average for ongoing claims fell by 122,250 to 5,101,250 from the previous week's revised 5,223,250.

But the slide may signal that more filers are dropping off those rolls into extended benefits.

Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, or people whose benefits have expired.

Congress passed legislation last month to extend federally paid benefits up to 99 weeks, depending on the state, but the law only helps those who exhaust their federal unemployment lifelines by the year's end.

Lawmakers in the House and the Senate recently passed measures to extend the filing deadline through the end of February. The President is expected to sign the legislation soon.

Both chambers initially introduced bills to push the deadline to apply for benefits through 2010 or beyond, but Democratic leaders in the House scaled back the effort in hopes of getting the bill through the Senate more quickly.

State-by-state: Jobless claims in 10 states declined by more than 1,000 for the week ended Dec. 19, the most recent data available. Claims in Tennessee dropped the most, by 2,972.

A total of 12 states said claims increased by more than 1,000. Claims in New York jumped the most by 1,155. A state-supplied comment attributed the increase to layoffs in the construction, service and real estate industries.

Outlook: The employment picture will continue to improve as jobless claims continue to fall, but Quinlan said they will need to drop near 350,000 for positive job growth.

He expects nonfram payrolls to return to positive territory by the second quarter of 2010, and for the unemployment rate to fall by the end of the year.

On the trail of Apple's 'iSlate'

2009-12-27T04:50:00.000-08:00

Is that really the name Steve Jobs has chosen for his next computing device?

MacRumors Arnold Kim and TechCrunch's Robin Wauters did some serious detective work over the Christmas holiday.

Working independently, they have made a strong — but not definitive — case that Apple (AAPL) is preparing to name its long-awaited tablet computer the "iSlate."

The evidence, should you care to follow its twists and turns, is here, here and here.

All this really means is that if Steve Jobs decides he likes the name iSlate, it's his to use. It doesn't necessarily mean he's ruled out iPad, iTab, iTablet, iPod tablet, iBook, MacBook touch, or any of the other suggestions put forward over the past year or so.

Why does anybody care? Because, as TechCrunch's MG Siegler suggested Friday in The Wonder of Apple's Tablet, what Jobs is performing is a high-wire act that you can't help watching, especially if you think he might fall. As Siegler puts it:

"Apple commands attention in the consumer space because more often than not, they nail it. Going deeper, Apple is not afraid to step outside of the traditional comfort zones to try to create a new product — even if others have failed there before, as is the case with tablets. While this stirs skepticism in some, in many more people, it creates a sense of wonder. What if Apple can do it right this time? It’s exciting partially because it’s no sure thing. It’s exciting because the payoff is potentially huge. By this time next year, we may have a whole new genre of computing. It’s an undiscovered country."

Chrysler, GM dealers ready to fight for resurrection

2009-12-14T07:14:00.001-08:00

As Chrysler and General Motors get ready to sit down and talk with owners of some of the nearly 2,000 dealerships given death sentences, dealers are rolling up their sleeves and preparing to fight for their businesses' lives.

"I was very proud -- very proud -- of what I sold and what I did for a living," said Andrew Reixinger, the owner of Barry's Auto Center in Brockport, N.Y., which sold Chrysler, Dodge and Jeep vehicles. "I would love to have my franchise back."

Reixinger lives his brand. He took the 30-year-old business over from his father, who spent decades selling Chrysler cars to residents of his rural town. The whole Reixinger family drives Dodge Ram pickup trucks, and Andrew's red 2007 model features a giant handpainted Ram's head logo. But in May, Reixinger was one of 789 dealers given termination notices. He had less than a month to wind down the business.

Without a valid dealer license, Reixinger wasn't allowed to sell his cars to customers any more. He had to unload his vehicles to other dealers, barely breaking even on the transaction. His inventory of parts went for pennies on the dollar. The Chrysler Financial credit line that financed his business vanished.

"Going from having a large floor plan line of credit to nothing changes the game," he said. Reixinger is financing his entire inventory with his own money: "Right now, I have 47 cars and I own them all."
Credit lines dry up for auto dealers

Barry's Auto Center is still open for business, but for now, it deals exclusively in used cars. None of the seven banks Reixinger has approached for a loan are willing to work with the dealership -- even though he has solid credit and a fully paid off commercial property to put up as collateral. His staff of 12 employees has dropped to 10.

Customers comment on the Ram that still festoons his truck. "People ask me, 'Aren't you going to get rid of it, since what they did to you?'" he said. "I chose not to because I love the truck."

That's why he plans to appeal. "If I could be a franchise dealer again, great," he said. "What they did to us was beyond wrong, but what are you going to do? I like the product."
Political pressures mount

GM and Chrysler's decision to introduce an appeal process came after months of intensifying backlash. Each company collected billions of taxpayer dollars through bailouts, and dealers are irate at the prospect of government-backed companies turning around and dropping a guillotine on small, locally owned businesses. Their lobbying prompted Congress to intervene.

"Profitable dealerships that were closed for possibly unfair reasons deserve the opportunity to hear why they were closed and discuss the merits of reopening with an independent arbitrator who can make a binding decision," said House Majority Leader Steny Hoyer, D-Md.

The appeal process GM and Chrysler initially mapped out this month pleased no one. "Under their plans, a car dealer would have had a better change at winning the Powerball lottery than getting back in business," the Committee to Restore Dealers Rights fired back in a statement.

The House of Representatives weighed in Thursday by passing a bill that places additional demands on the arbitration process the auto companies plan to use to field appeals. The Senate will soon take up the legislation.

Both GM and Chrysler say they need to shed dealerships to increase their profitability. The almost 800 dealers Chrysler cut represented 25% of the company's dealership network but accounted for only 14% of its sales, according to the company. Having underperforming or ill-maintained dealerships around tarnishes the brand, the auto makers contend.

Behind-the-scenes negotiations have already saved some dealerships from the scrap heap. GM warned at least 1,100 of its 6,000 dealers that their contracts would not be renewed in October 2010. Complaints and pleadings flooded in, and GM took some to heart. So far, 80 dealerships have been reinstated, a company spokesman confirmed.
Fighting for survival

The GM dealers on death watch were given a year to wind down their operations, but Chrysler's dealers suffered a particularly brutal and sudden cut. Their licenses were pulled in June, less than a month after termination notices went out.

But a surprisingly high number may choose to appeal. Neil Miller, president of is the Bell McCall Company in Hamilton, Mont., says he'll definitely give it a try. "From a dealer's standpoint, we don't understand what they gain from closing us down," Miller said.

Miller's new and used car business specialized in Ford and Chrysler brands; now, it's only licensed with Ford. Taking care of his customers has become a big challenge. "We sold to the customers with the idea that we were going to be here to deal with their warranty problems," Miller said. "Now we can't. Depending on where they live in this area, they now have to go between 50 to 80 miles to get to the nearest dealer in the area."

The warranty issue is a pervasive complaint. Jeff Duvall, who had his Chrysler dealership in Clayton, Ga., closed down, has been continuing to honor his customer's warranties, either by paying out of pocket for the repair at one of his other two car dealerships (which sell Ford and Chevrolet vehicles) or by hauling the customer's car to the closest Chrysler dealership still in operation.

"When a customer buys a car from me, I take care of them, through thick and thin," said Duvall, who has owned dealerships in the neighborhood for more than 50 years. Right now, he has a staff of 65 working at his three dealerships.

"I need to terminate around 15 people, but I am doing everything possible to keep them working, so currently I have absorbed all the excess Chrysler people into the other franchises," he said. "I will not be able to keep them very much longer unless we get reinstated."

GM dealers, too, are ready to go to the mat to stay open.

Jim Brown, the president of Classic Auto Group in Mentor, Ohio, has been selling GM cars for 44 years. His Cadillac showroom got a termination notice. It's an ironic twist: Thirty years ago, General Motors loaned him the money to open his first dealership.

"Without their program, I never could have done it," Brown said. He currently owns 20 car dealerships. "I am where I am today because of the help I got from GM." Despite getting the axe, he's not angry with the company -- his loyalty runs deep.

Loyalty is also motivating Scott Adams to fight to retain his GM license. "My first dealership was a Chevrolet dealership -- I got it on my 28th birthday," he recalls. Since then, he's run as many as 11 different car shops, three of which he currently operates. His Ray Adams Chevrolet dealership in Belton, Mo., is on the chopping block. But Adams can't imagine life without Chevy.

"I drive a Chevrolet, my family drives a Chevrolet," he said. "I would prefer to be a Chevrolet dealer for a long, long time."

Bank of America dodges a bullet

2009-12-11T04:45:00.000-08:00

The Obama administration's pay czar will outline Friday another round of curbs on executive compensation for companies that took exceptional assistance from the government, but Bank of America won't be one of them.

BofA had been one of the seven companies under the purview of Kenneth Feinberg, the Treasury Department's special master for executive compensation, who is charged with determining appropriate pay packages for the top 100 employees at the most heavily bailed out companies.

But the nation's largest lender announced Wednesday that it had sent a check to the government to repay the $45 billion in aid it had received from the Troubled Asset Relief Program (TARP).

A Treasury Department official confirmed Thursday that BofA is no longer subject to the special master's authority.

That leaves Feinberg with six other companies to oversee, including: AIG (AIG, Fortune 500), Citigroup (C, Fortune 500), General Motors, Chrysler, Chrysler Financial and GMAC.

In October, the pay czar cut total compensation for the top 25 executives at the seven firms by about half, scaling back salaries by 90% and transferring bonus payments into performance-based, longer-term stock options.

On Friday, Feinberg will present his determinations for the pay structures of the next 75.

Since most executives take home a majority of their annual pay in the form of end-of-year bonus checks, adjusting pay packages so late in the year will likely have a sizeable impact on employees' 2009 pay. And as executives get their pay trimmed, the affected companies are raising concerns that top talent will walk out the door.

Some of the firms have said they are already on the brink and can't afford to lose their key employees. That's something Feinberg says he is acutely aware of.

Citizens lay down law on U.S. debt

2009-12-08T05:08:00.001-08:00

When it comes to managing the country's purse strings, Washington gets a failing grade from several groups of citizens and experts across the country.

Those groups, part of the Concord Coalition's Fiscal Stewardship Project, went to Capitol Hill on Monday to deliver a report to their lawmakers detailing their suggestions for how best to address the long-term fiscal storm facing the United States if lawmakers do nothing.

The approaching storm is not a surprise to anyone in Washington.

Indeed, the debt issues threatening to consume the federal budget over time have been in the making for years. The economic crisis of the past year isn't the underlying problem, but it accelerated the timetable lawmakers face for dealing with the country's fiscal problems.

There are many ways to fix what's broken. What's been lacking is the political will.

Some experts believe that all will be much better once the economy recovers. A strong economy means more jobs, more taxable income and more government revenue. And when government has more money coming in, it has to borrow less to pay its bills.

That would be swell. But it's not enough.

To solve the country's fiscal problems, the gross domestic product would need to increase by double digits on average for the next 75 years, according to estimates from the Government Accountability Office. Oh, and that's on an inflation-adjusted basis.

So unless someone finds a serious stash of economic fairy dust, lawmakers are left with three unpopular choices: cut spending, raise taxes and stop making promises the country can't afford.

Instead, they've done just the opposite. They've increased spending and lowered taxes as the country's long-term obligations continue to grow - obligations both to those who buy government debt and to the Medicare and Social Security programs, from which Uncle Sam has been borrowing surplus revenue for years.
Going where politicians fear to tread

That's where the Concord Coalition's citizen-based fiscal advisory councils come in.

The Concord Coalition is a nonpartisan group, founded in 1992, that focuses on educating the public about the federal deficit. Its director, Robert Bixby, was featured in the 2008 movie "I.O.U.S.A."
0:00 /1:34Uncle Sam's got his hand out

The Concord councils hail from Atlanta, Milwaukee, Philadelphia and Northern California. They, along with a group of health experts from Iowa and a group of budget policy experts from Northern Virginia, spent the last year studying the country's fiscal challenges and what they believe are the best solutions.

Unlike politicians, the councils were able to deliberate without worrying about getting re-elected. They were outside the partisan cauldron that contorts the statements of even the most level-headed politician.

The councils were not unanimous in their suggestions. But there were some commonalities. Chief among them: disappointment with Washington, and in particular, politicians' use of budget tricks to disguise the true cost of legislation. The Milwaukee council didn't mince words, referring to "an overarching failure in the management of the nation's business."

The councils prefer sweeping reform to half-measures.

"We must examine the policy goals of all taxes and expenditures, change entitlement programs, cut all federal expenses that do not meet our goals and, if necessary, raise taxes," the Northern California council concluded.

And when it comes to facing up to fiscal challenges, they would like lawmakers to make it snappy. "The sooner policymakers get working on solutions, the better," the Philadelphia council wrote.

Here are a few of the most concrete suggestions made by one or more of the councils:

Shore up Social Security's long-term shortfalls: The range of suggestions included raising the retirement age, applying means testing to benefits, raising more revenue and ensuring by a "date certain" that projected revenue is sufficient to cover projected expenses.

Simplify the tax code: The aim should be to reduce taxpayer aggravation, increase voluntary compliance and reduce enforcement costs.

Raise taxes when necessary: The Atlanta council suggested a combination of an income tax and a federal consumption tax. The Northern California council recommended that the additional tax burden "be spread in a way that ensures everyone will contribute at least something in return for the government services they receive."

Make everyone curb growth in health spending: That includes the government, medical providers, insurance companies, lawyers and consumers

Form a bipartisan fiscal commission: The goal is to have a commission willing to make tough recommendations about how to address long-term budgetary shortfalls and put those recommendations up for a yes-or-down vote in Congress.

Think long-term: Lawmakers should consider the costs and effects of a bill beyond the 10-year window they usually use. And they should think about the consequences of their actions on younger generations.

The Atlanta council put it this way: "If Americans don't make the hard decisions now, it will have a devastating impact on the quality of life for our children a and grandchildren."

Option ARMs: Housing recovery killer?

2009-11-26T11:39:00.001-08:00

Option-ARMs: File under, "It sounded good at the time."

These exotic mortgages allowed homebuyers to come to closing with little cash and choose, monthly, how much to pay: interest and principal, interest only, or a minimum amount less than the interest due.

Of course, the last option is the one 93% of option-ARM buyers selected, according to a new report released this week by Standard & Poors.

But eventually, everyone has to pay the piper.

Nearly all of the 350,000 option-ARM borrowers owe more than when they first bought their homes thanks to the unpaid interest accumulating. And many loans written during the first big wave, which started in 2004, are getting ready for their five-year reset, when they become standard amortizing loans. Additionally, some newer loans will reset early if the accumulated interest has pushed the loan-to-value ratio above 110% to 125%.

That means borrowers are about to start paying very hefty prices for their homes. In one scenario outlined in the S&P report, the payment on a $400,000 mortgage jumps from $1,287 to $2,593.
25% default rate

But that doesn't just spell bad news for borrowers. Some industry pessimists say the looming default problem could have the power to derail the nascent housing market recovery. "The crux of the matter is that as soon as these mortgages recast, the history is that they will default," said Brian Grow, one of the S&P report's coauthors.

And the newer the loans, the worse they will perform, the report said. The last year that any option-ARMs were issued was 2007. In the first 20 months after issuance, this vintage of option-ARMs had an average default rate of just over 22%.

That includes all option-ARMs issued in 2007. But if you calculate default rates for only 2007 option-ARM borrowers who are now underwater, the default rate jumps to 25% after just 20 months, according to S&P.

So, while there may not be an awful lot of these loans out there, their high default rates will have an outsized influence on housing markets, adding to already bloated foreclosure inventories and driving prices down further.
Bubble markets

And the markets where they'll produce the most foreclosures are still among the most vulnerable in the nation.

Option ARMs were most popular in bubble markets -- California, Nevada, Florida and Arizona -- where double digit home annual price increases put the cost of buying a home out of reach.

In fact, 60% of these loans went to residents of California and other Western states, places where prices have fallen the most, according to report coauthor Diane Westerback. "The geography is negative for these products," she said.

Many borrowers in these places could only afford a home if they chose the option ARM. Many counted on continued hot market conditions to add value to their homes. The extra equity could then be tapped to pay their bills.

We all know how that worked out.

Home prices in many of the markets where option ARMs are most concentrated have fallen 30%, 40% or more. When the loans recast, most borrowers will find themselves severely underwater.

"Because borrowers of [options ARMs] are in a much worse position," said Westerback. "You'll see defaults rising very rapidly."

And most option ARM borrowers will not be good candidates for refinancing or mortgage modifications because their loan-to-value ratios will be far too high. Under the administration's Making Home Affordable program, for example, mortgages with balances that exceed 125% of the home's value are not eligible for help.
Not so white lies

There is another little problem that many option-ARM borrowers seeking refinancing would face: "Upwards of 80% of were stated-income loans," said Westerback.

These are the so-called "liar loans" in which lenders did not verify that borrowers earned as much money as they said they did. Lenders may not be able to modify mortgages because many of the borrowers' income could not stand up to the scrutiny. Borrowers may also not want to go through underwriting again because they could be held legally liable for deliberate inaccuracies on their original applications.

Add to those conditions the still fragile economy and high unemployment rates, and you have a recipe for disaster.

Senate tax hike misses the mark

2009-11-22T09:54:00.001-08:00

The health care bill that passed a crucial test vote in the Senate on Saturday is proof that getting reform passed and getting it right are two very different things.

Both are hard. But the pursuit of votes has weakened key elements with the most promise of reducing overall health spending.

Exhibit A: The eleventh-hour introduction of a Medicare tax hike as a way to help pay for reform.

Health care reform, to succeed, must not only help more people get coverage but also slow the growth in health costs and spending.

The latest balancing act has been led by Senate Majority Leader Harry Reid, D-Nev.

Reid crafted a Senate bill that blends elements from bills passed by two Senate committees and adds some new measures. The hybrid bill must garner support not only in the Senate, but also in the House, which passed a different version earlier this month.

To that end, Reid included an increase in the Medicare tax on high-income workers to help pay for the cost of reform. Under the bill, individuals making more than $200,000 ($250,000 for joint filers) would pay a 1.95% Medicare tax on their wages, up from the current 1.45%.

The tax certainly would raise revenue. The Congressional Budget Office estimates $54 billion over 10 years. But experts say it would not curtail spending as the tax proposal approved in October by the Senate Finance Committee.

The problem is the Senate Finance proposal, known as the Cadillac tax, has drawn political opposition.

Under the Senate Finance bill, a 40% excise tax would be imposed on insurers that offer benefits in employer health plans for which the cost of individual coverage exceeds $8,000 and the cost of family coverage exceeds $21,000.

Opponents say the excise tax would effectively get passed down to workers.

But supporters say it holds the promise of reducing the growth in health spending over time. Why? As more and more plans become subject to the tax, employers will instead opt for lower-cost options to avoid the tax.

A hike in the Medicare tax, on the other hand, holds no such promise, experts said.

"A higher Medicare payroll tax rate for upper-income people would provide no incentive at all to reduce costs or spending on health care," said Stuart Butler, vice president of economic policy at the conservative Heritage Foundation.

Nor for that matter would a surtax on the wealthy - which is a major revenue raiser in the House-passed reform bill.

Reid didn't get rid of the Cadillac tax altogether. But he raised the thresholds that determine whether a plan is subject to the tax to $8,500 for individual coverage and $23,000 for family coverage. That means the tax would not reduce health spending as quickly because fewer employers would be subject to it initially.

"It sort of just delays things a little bit," said Paul Fronstin, director of the health research program of the Employee Benefit Research Institute.
Excise tax a shadow of original proposal

Of course, as with most elements of the health reform effort, there's plenty of uncertainty about how well the excise tax would work in reducing health spending over time.
0:00 /3:59A new and improved Medicare

But what is certain is that the excise tax is a far weaker version of what health policy experts and some lawmakers originally proposed: To eliminate or at least limit the tax-free nature of the health care subsidies that workers get from their companies.

Currently, the portion of premiums paid by employers is treated as tax-free compensation, and there is no limit on how much employers may contribute.

A cap would mean workers might have to pay income tax on some portion of their employer's contribution to their health care.

And when that happens, the thinking goes, workers would instead choose lower-cost plans to escape the added tax.

That idea never took flight for the same reason that the excise tax isn't winning popularity contests: Workers would pay.

Hence its more contorted cousin: the excise tax on high-cost health plans.

And even the excise tax was watered down before it hit Reid's desk. Critics complained the original thresholds were too low, and thereby would catch too many plans. So the thresholds were raised before the Finance Committee voted through its health reform bill.

Of course, the reshuffling and tweaking of proposals to pay for reform is far from over. The bill still needs to move through the Senate and then, if it passes, into conference with the House.

But it's a fair bet that the end result will be a hodgepodge of pay-fors designed more to secure votes and keep the bill deficit neutral than to reduce spending.

"Finding the revenue to pay for health reform was always going to be a huge challenge," wrote tax expert Howard Gleckman, editor of the TaxVox blog. "It still is, but we are beginning to see the outlines of a deal - a little income tax surcharge here, a dollop of insurance premium excise tax there, and more than a few cats and dogs."

Stocks slip as rally cools

2009-11-12T12:04:00.000-08:00

Stocks fell in late trading Thursday, halting a six-day rally as investors questioned the runup in the face of an unclear recovery.

The Dow Jones industrial average (INDU) fell 56 points, or 0.5%, with about 1-1/2 hours left in the session.

The S&P 500 (SPX) slipped 7 points, or 0.6%, and the Nasdaq composite (COMP) dropped 10 points, or 0.5%.

The blue-chip Dow hit its third consecutive 13-month high Wednesday, but with little in the way of economic news to sway markets, gains were modest. On Thursday stocks opened lower before reversing course several times.

Mark Luschini, chief investment strategist for Jamey Montgomery Scott, said the pause was unsurprising given the consecutive gains in stocks so far this month.

Dave Shepherd, president of Retirement Financial Services, agreed, saying that underlying weakness in the labor and housing markets are leaving consumers cash-strapped.

"For this rally to be sustainable, the consumer has to bounce back," Shepherd said. "The market is acting so contrary to some of the data."
How to invest your 401(k)

The recent runup is a "relief rally, because we realize the economy isn't going to collapse," Shepherd said, and the market seems to be questioning whether the increases are based on true fundamentals.

The Dow has ended higher for the past six sessions. During that streak, the Dow has soared more than 500 points, or 5.3%, to a series of 13-month highs.

"We've had this unprecedented rally off the lows we saw in March, so a pause today [is] normal," Shepherd said. "I would tend to think a correction will come soon, but there's been so much momentum."

Shepherd said the rapid rise is cause for concern, as stocks took three years to come off a similar fall seen in 2002.

"There's a lot of money floating around, we haven't had the data to back it up," Shepherd said. "Either the data have to get better or stocks are going to retreat as the market worries it got ahead of itself."

Currencies in focus. The dollar was slightly higher against major international currencies late Thursday, and overnight gains in the greenback triggered some selloff in foreign markets -- spilling over into U.S. stocks, said D.A. Davidson & Co. analyst Fred Dickson.

"It wasn't a tidal wave of selling," Dickson said. "But with the stock market and the dollar so closely tied lately, it did have an effect."

A softer dollar encourages investors to move into higher-yielding assets like stocks; a firmer greenback tends to send the stock market lower.

With the Federal Reserve holding the key interest rate near zero and pumping money into the economy, the dollar has hovered near 15-month lows, Dickson noted. Stocks may have been more susceptible to the dollar's small rise Thursday because of the relative lull in economic news this week and the recent rally that occurred despite fragile signs of recovery, he said.

Companies: Wal-Mart (WMT, Fortune 500) announced on Thursday that it beat third-quarter earnings estimates.

The world's biggest retailer said earnings were 84 cents per share on sales of $98.7 billion. Analysts surveyed by Thomson Reuters expected 81 cents per share.

Intel (INTC, Fortune 500) and Advanced Micro Devices (AMD, Fortune 500) announced an agreement to end all legal arguments between the companies, including antitrust litigation and patent disputes. Among other provisions, the agreement stipulates that Intel will pay AMD $1.25 billion and AMD will drop all pending litigation worldwide.

HP (HPQ, Fortune 500) said late Wednesday that it was buying networking company 3Com (COMS) for $2.7 billion.

Economy: The Labor Department released its weekly report on initial jobless claims, which said there were 502,000 new filers last week. That's the lowest level since Jan. 3. Economists were expecting 510,000 claims.

The Treasury Department said the federal deficit hit $176.4 billion in October -- the 13th monthly deficit in a row and the first one of the fiscal year.

President Obama said Thursday he will hold a jobs forum at the White House in December, as the country faces a 10.2% unemployment rate.

Other markets: Stocks in Japan and Hong Kong finished the session lower. Major European indexes ended mixed.

Oil prices dropped 3% after a report from the Energy Information Administration showed crude supplies jumped more than expected.

Gold prices slipped, halting a runup that has driven the metal almost 6% higher this month. December gold fell $8 to settle at to $1,106.60 an ounce.

Maclaren recalls 1 million strollers

2009-11-09T13:00:00.001-08:00

Stroller maker Maclaren announced a recall on Monday that affects about 1 million umbrella strollers that can reportedly amputate or lacerate children's fingertips.

So far, the company said there have been 12 amputations across the country. This happens when children get their fingers stuck in between the stroller's side hinges while it is being opened or closed.

The South Norwalk, Conn.-based company announced the voluntary recall in cooperation with the U.S. Consumer Product Safety Commission and advises customers to stop using the products manufactured in China sold since 1999 at stores including Babies R Us and Target.

Consumers can contact Maclaren at 877-688-2326 or visit www.maclaren.us/recall to receive a free repair kit.

Maclaren said the kit includes hinge covers designed to fit all Maclaren strollers.

The recall affects the following models, which range in price from $100 to $400: Volo, Triumph, Quest Sport, Quest Mod, Techno XT, TechnoXLR, Twin Triumph, Twin Techno, and Easy Traveller. To top of page

Buffett's firm to buy Burlington Northern

2009-11-03T07:00:00.000-08:00

Warren Buffett's Berkshire Hathaway said Tuesday it will buy railroad operator Burlington Northern Santa Fe for $44 billion.

Berkshire (BRKA, Fortune 500), which already has major stake in the company, said it would acquire the remaining 77.4% of the company in a cash-and-stock offer worth $100 per share.

Widely regarded as both one of the world's richest men and the investment community's more brilliant minds, Buffett called his firm's investment an "all-in wager on the economic future of the United States."

"Our country's future prosperity depends on its having an efficient and well-maintained rail system," Buffett said in a statement.

Burlington Northern (BNI, Fortune 500) shares soared 29% in pre-market trading on the news.

Separately, Berkshire said it was announcing a 50-for-1 split of its Class B common stock. The majority of stock issued by the company in its purchase of Burlington Northern will be its pricier Class A shares, the company said.
0:00 /6:47Buffett's read on the recession

The deal, which would rank as the largest acquisition in Berkshire Hathaway's history, would also include $10 billion of Burlington Northern debt.

It would also expand the already massive portfolio of companies Berkshire already owns. Brand-name businesses such as auto insurer Geico, See's Candy and Fruit of the Loom are all subsidiaries of the Omaha, Neb.-based firm.

The deal is expected to close sometime in early 2010, pending approval by Burlington Northern shareholders and following a review by the Justice Department.

White House fights back on Cash for Clunkers

2009-10-30T08:18:00.000-07:00

The Obama administration on Thursday lashed out at a prominent critic of its Cash for Clunkers program, arguing that the popular trade-in initiative helped give the auto industry and the economy a much needed boost in the past few months.

In a blog post on whitehouse.gov, the administration argued that a report on Clunkers by automotive Web site Edmunds.com "doesn't withstand even basic scrutiny" and is based on "implausible assumptions."

On Wednesday, Edmunds.com released a study that argued Cash for Clunkers did not have a great impact on the auto industry. The report said that 690,000 new vehicles were sold under the program last summer, but that only 125,000 of them would not have been sold without the Clunkers rebates.

As a result, the report said, the administration's economic claims for the program "have been rendered quite weak."

The Clunkers program gave car buyers rebates of up to $4,500 if they traded in less fuel-efficient vehicles for new vehicles that met certain fuel economy requirements. A total of $3 billion was allotted for those rebates.

The Edmunds report also said that taxpayers shelled out an average of $24,000 per car sold as a result of the program.
Edmunds.com says Cash for Clunkers is a clunker

But the White House fired back, saying Thursday's Commerce Department report that showed auto sales contributed 1.7 percentage points to the economy's 3.5% growth rate in the third quarter is proof that Cash for Clunkers had a meaningful impact on both auto sales and the broad economy.

"Edmunds.com has released a faulty analysis," the blog post said. "This is the latest of several critical analyses of the Cash for Clunkers program from Edmunds.com, which appear designed to grab headlines and get coverage on cable TV."

The administration argued that Edmunds' conclusions were incorrect because the study assumes that the market for cars that didn't qualify for Clunkers was unaffected by the program.

"In other words, all the other cars were being sold on Mars," said the administration.
0:00 /3:06Better days ahead for autos

The administration's blog post argued that Clunkers helped to lower auto prices on the rest of the vehicle market as well, a fact the administration said Edmunds ignored. The White House also said that people were drawn into dealerships because of the program and ended up purchasing cars even if their trade-in didn't qualify for the program.

Cash for Clunkers will have a long-term impact on the overall economy, since automakers increased their production through the end of the year to meet demand created by the program, the administration said.

Finally, the administration said the Edmunds' report flies in the face of independent analyses, and the administration's Council of Economic Advisers. The blog urged readers to "put on your space suit and compare the two approaches yourself."

Edmunds stands by its report: In response, Edmunds.com said Thursday that its figures were correct, and that the growth in GDP had more to do with naturally recovering auto sales and not with incentive programs.

The company also said that there was no hard evidence of consumers buying cars after discovering they didn't qualify for the rebate.

"It does, after all, seem a bit odd that masses of consumers would elect to buy a vehicle because of a program for which they don't qualify -- doubly so when you add in the fact that prices shot up during Cash for Clunkers, creating a disincentive to buy," Edmunds said in a statement.

In the end, Edmunds said the report actually shows that there is some good news about the auto industry -- the recovering economy is helping boost auto sales even without the help of Clunkers.

"With all respect to the White House, Edmunds.com thinks that instead of shooting the messenger, government officials should take heart from the core message of the analysis: the fundamentals of the auto marketplace are improving faster than the current sales numbers suggest."

Stocks set to jump on GDP

2009-10-29T06:48:00.000-07:00

U.S. stocks looked set for a strong open Thursday, following a report that domestic product growth jumped higher than expected in the third quarter.

S&P 500, Nasdaq-100 and Dow Jones industrial average futures were higher, with their gains increasing after the GDP report.

Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.

"Really good news," said Dan Cook, senior market analyst at IG Markets, in an e-mail to CNNMoney.com. "After putting trillions into quantitative easing and stimulus we had to see a number like this. I am very glad it came out positive and I think the markets should really be optimistic today and could reverse some of the losses we have seen lately."

Investors appeared ready to dip back into the market after Wednesday's slump. The Dow finished the session down 1.2% and the Nasdaq tumbled 2.7% amid worries about the strength of the economic recovery.

Economy: Thursday's GDP report showed a third-quarter annual gain of 3.5%.

GDP was expected to have grown at a 3.2% annualized rate in the third quarter after shrinking at an 0.7% annualized rate in the second quarter.

While a bounce seems impressive, it wouldn't necessarily signal a robust recovery for the economy.

The government also released its weekly figures on initial jobless claims.

For the week ended Oct. 24, jobless claims totaled 530,000, down 1,000 from the prior week's unrevised 531,000.
0:00 /3:44GDP turnaround unstable

Earnings: Exxon Mobil (XOM, Fortune 500) said its earnings plunged to 98 cents per share in the third quarter, compared to the year-ago EPS of $2.85 per share. Revenues totaled $82.26 billion in the third quarter, the oil company said.

Procter & Gamble (PG, Fortune 500) reported a 3% gain in third-quarter diluted net earnings per share, to $1.06, but a 6% decline in net revenue, to $19.8 billion, compared to the year-ago quarter. The company stock edged up in pre-market trading.

Companies on tap to report results include Sprint Nextel (S, Fortune 500).

World markets: Economic worries weighed on stocks in Asia and Europe. Japan's Nikkei shed 1.8% and major European indexes were lower in midday trading.

Money and oil: The dollar was lower versus the euro and the pound, but rose against the yen. The price of oil rose 14 cents to $77.60 a barrel.

Housing starts miss expectations

2009-10-20T07:04:00.001-07:00

Initial construction of U.S. homes rose far less than predicted in September, according to a government report released Tuesday.

Housing starts increased to a seasonally-adjusted annual rate of 590,000 last month, up 0.5% above a revised 587,000 in October, the Commerce Department said.

Economists were expecting housing starts to jump to 610,000, according to consensus estimates compiled by Briefing.com. Starts are down 28.2% from September 2008.
0:00 /2:24'Beautiful' homes for under $20K

New construction of single-family homes, the key sector of the housing market, increased 3.9% to an annual rate of 501,000 versus 482,000 in August.

"The rebound following the post-Lehman panic seems to be over," wrote Ian Shepherdson, analyst at High-Frequency Economics, in a research note.

Shepherdson added that uncertainty about a possible extension and expansion of the $8,000 tax credit for first-time homebuyers "is making builders understandably nervous about the near-term outlook."

The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30. Congress is considering extending the deadline and expanding it to all but the wealthiest homebuyers.

Despite the overall housing starts drop, multi-family homes increased. New construction of buildings with 5 or more units increased to an annual rate of 104,000, up 7.2% from 97,000 in August.

Applications for building permits, which are a gauge of future construction activity, also missed predictions. Permit applications fell 1.2% to a seasonally adjusted annual rate of 573,000. Economists were expecting permits to rise to 595,000.

"Permits were weaker than starts, suggesting the latter will dip in October," Shepherdson wrote. "We remain optimistic for 2010 but the next couple of months will be tricky."

Regional: New home construction was flat in the Northeast, holding at a 62,000 unit rate, and in the Midwest at 100,000 units. Starts fell by 1.7% in both the South and the West.

Jobless flock to sign up for the military

2009-10-17T09:15:00.001-07:00

The nation's armed services wrapped up a record year for recruiting as a withering job market and bigger bonuses trumped two unpopular wars.

The Department of Defense said it met or exceeded recruitment goals for all branches of the armed services for fiscal year 2009, which ended Sept. 30, for the first time since 1973, when the draft ended and U.S. forces withdrew from Vietnam.

"We're pleased to report that for the first time since the advent of the all-volunteer force, all of the military components, active and reserve, meet their number as well as their quality goals," said Bill Carr, deputy undersecretary of Defense for Military Personnel Policy, at a Pentagon press conference on Tuesday.

The active-duty Air Force, Marine Corps and Navy all met their goals, as measured by the number of fresh recruits, while the Army achieved 108% of its recruitment goals, the DOD said. The Reserves for each branch exceeded their goals for recruitment numbers, and the National Guard matched its goal.
0:00 /3:11Average Bob sees no jobs

The Pentagon also exceeded its quality goals, as 96% of the active-duty recruits were high-school graduates, surpassing a 90% benchmark.

Carr acknowledged that the high level of unemployment in the civilian job market was helping the military draw recruits, and the earning power of recruits puts them in the top 10% of workers of commensurate age, education and experience.

Recruits typically earn $1,399.50 a month as they undergo basic training during their first few months in the military, according to the DOD. Most enlisted personnel can expect to earn $1,568.70 a month by the end of their first year, which translates into an annual salary of $18,824.40.

Carr also attributed recruiting success to new attitudes among young adults that make them more eager to serve, regardless of the state of economy. He said the generation born between 1978 and 1996 "witnessed 9/11" and is "more inclined toward service to society" than other generations.

The only real disadvantage to recent recruiting, said Carr, is a decline in medical eligibility from the growing prevalence of obesity in the U.S. population. One in 20 Americans aged 17 to 24 were considered obese in the 1980s, he said, compared to one in four today.
An Army of One, and a bonus of $18,000

According to Beth Asch, military recruiting expert for the Rand Corporation, a non-profit think tank based in Santa Monica, Calif., economic incentives are the most important factor in drawing recruits. She said the Army dramatically increased its recruitment bonuses since the start of the Iraq war, to an average of $18,000 for the 70% who are eligible.

"The effect of Iraq has had a negative impact on recruiting," said Asch. "[The military] responded with a dramatic increase in recruiting resources. In the case of the Army, the average bonuses tripled."

For the military overall, 40% of recruits in 2009 received a sign-on bonus that averaged $14,000, according to the DOD. Bonuses are provided to recruits for a variety of factors, including $5,000 for having a college degree. Military personnel also received a 3.9% pay raise in fiscal year 2009, following a rise of 3.5% the prior year.

Members of the military also receive free healthcare. Once the recruits move out of the barracks, they become eligible for a monthly food allowance of $323.87 and a monthly housing allowance that averages $952 nationwide -- or more, if they have dependents. In addition, they are not required to pay taxes while serving in a combat zone.

Asch said the pay, bonuses and other benefits are strong enticements to young people trying to make their way in a civilian job market where unemployment is at a 26-year high of 9.8%.

"Had there been no change in recruiting resources, had there been no change in the economy, there would have been a significant drop off in recruiting," she said. "All our research show that recruits respond to recruiting resources. The military got lucky in the sense that when the economy worsens, recruitment improves."

Pentagon spokesman Lt. Col. Les' Melnyk of the Army said the ongoing wars in Iraq and Afghanistan have not dissuaded people from joining the military.

"A lot of people say the wars are hurting recruiting, but the numbers don't back that up," he said. "The expectation there is that you're going to go to war. This is not a surprise to anybody, and it has not affected recruitment."

Stimulus: Creating jobs or not?

2009-10-13T08:07:00.000-07:00

Is the largest one-time economic recovery effort in U.S. history creating jobs?

According to new reports from governors across the country, it is. Republicans in Congress say it's not, and the debate is getting louder.

States and other recipients of stimulus funding have handed in their first assessments of the $787 billion recovery act in recent days. While the Obama administration plans to make these reports public by month's end, some governors have released their initial evaluations.

In California, stimulus funds have created or saved more than 100,000 jobs through the end of September, according to Gov. Arnold Schwarzenegger. The nation's most populous state -- the world's eighth largest economy -- has been awarded $12.7 billion in recovery money and has spent $5.3 billion so far.

"The funding will not only save and create jobs, but it will also help stimulate our overall economy, improve our transportation infrastructure and help us reach our environmental goals," said Schwarzenegger, adding that the state submitted 5,747 reports from agencies and others who received funds from the state.

Minnesota said that 11,800 jobs -- including 5,900 in education, 1,200 in public safety and 900 in transportation -- were created or saved. The state has spent more than $1.6 billion in stimulus funds so far.

In Tennessee, which has spent $215 million, the tally is more than 7,700 jobs.

And in Oregon, more than 8,000 jobs have been saved or created. The recovery act provided the state "a much needed parachute for what was a free falling economy," said Gov. Ted Kulongoski, adding that the state has spent $1 billion of its stimulus funds.

Overall, the federal government has so far made available $256.3 billion, while $110.7 billion has been spent.
Exact job creation numbers elusive

Exactly how many jobs are being created or saved with stimulus funds is a difficult figure to pin down, however.

The White House last month said the recovery act is responsible for more than 1 million jobs. This estimate includes jobs funded directly with stimulus money, as well as those that exist indirectly, such as the deli workers who supply lunch to contractors on stimulus construction jobs.

The states' reports, however, include only direct jobs, so the figures are likely to be even smaller.

On top of that, governors are required to report jobs by hours of employment rather than by the number of people working. So someone hired for a short-term gig might only be counted as a fraction of a job.

Pennsylvania officials, meanwhile, say that more than 7,000 people are working on transportation and water infrastructure projects funded by stimulus dollars. But under the federal rules, the state will report that 1,000 jobs were created, said Gov. Edward Rendell.

Also, the impact of tax incentives, increased unemployment benefits and funding for programs such as Medicaid are not included in the assessments.

Still, the recently filed reports -- which also include data from companies, organizations, cities and counties -- will offer the first hard figures of jobs created. They will likely be scrutinized by both sides of the political aisle.
'Where are the jobs?'

House Republican leaders last week stepped up their attacks on the administration, claiming its stimulus initiative has been a failure. Instead of creating jobs, they contend, the nation has lost nearly 3 million private-sector positions and the unemployment rate is nearing 10%.
0:00 /2:46Saving classroom jobs

"It is now evident that the massive 'stimulus' spending bill enacted months ago has been unsuccessful," GOP leaders wrote to the White House. "The American people are right to ask: Where are the jobs?"

The rising unemployment rate has prompted calls for the Obama administration to do more to encourage businesses to step up their hiring. The Republicans want to stimulate small business job creation with a variety of measures, including allowing firms to take a tax deduction equal to 20% of their income.

Republicans are not alone in their call to do more to promote job creation. The Economic Policy Institute, a labor-oriented research group, last week called on the administration to institute a refundable tax credit for employers of up to 15% of wages for each new hire over the next two years. The organization also called for pumping more money into states to create jobs.

The White House, however, maintains that the stimulus package has stopped the hemorrhaging of jobs and has turned around the economy's direction.

Last month, the president's top economic advisers said the recovery act helped turn around the economy. They pointed to the fact that the number of jobs lost in the third quarter averaged 256,000 per month, two-thirds less than the country sustained at the beginning of the year.

"Thanks largely to the Recovery Act ... we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery," Larry Summers, director of the National Economic Council, wrote Monday in response to the Republican leaders' letter. "Most importantly, we have seen a substantial change in the trend of job loss."

Services expand -- 1st time in more than a year

2009-10-05T14:14:00.001-07:00

The nation's service sector expanded in September for the first time in more than a year, according to a report from a purchasing managers' group released Monday.

The Institute for Supply Management's non-manufacturing index rose to 50.9 last month from 48.4 in August. Economists surveyed by Briefing.com had expected a reading of 50, which is the point at which the index reflects expansion.

It was the second consecutive month of improvement in the index, which last indicated expansion in August 2008.

The services sector, which includes businesses such as banks, airlines and restaurants, makes up the bulk of economic activity in the United States.

The ISM's new orders index, which measures requests for services such as construction labor, rose 4.3 points to 54.2. The business activity index added 3.8 points to 55.1 last month.

Both measures are now at their highest levels since before the recession began, according to Tim Quinlan, an economic analyst at Wells Fargo.

Those gains "suggest that businesses outside of manufacturing are transitioning from recession to recovery," Quinlan wrote in a research report.

The index that measures employment in the sector edged up less than one point to 44.3, but it remains well below the level indicating job growth in the sector.

"Jobs are still a major concern," said Ryan Sweet, senior economist at Moody's Economy.com. "The employment index is weak and points toward a very slow improvement in the labor market."

Still, the larger-than-expected rise in the overall number could mean that U.S. gross domestic product will come in at a 3% annual rate of growth during the third quarter, according to Sweet.

Prices paid by service sector firms fell sharply in September. The prices index sank 14.3 points to 48.8, indicating a significant reversal and decrease in prices paid from August, according to the report.

The ISM said 15 of the 18 service sectors in the survey expect to derive some benefit from the government's economic stabilization program.

Americans tame their wanderlust

2009-09-25T18:56:00.000-07:00

Americans have tamed their wanderlust during this recession, according to the latest data released by the U.S. Census Bureau. Only about 2.4% of Americans moved from state to state in 2008, down from 2.5% the previous year.

"The mobility rate is lower than it has been in years," said Robert Lang, a demographer with Virginia Tech University. "There's a recession and a housing bust. People can't sell their homes in California and move to Las Vegas or sell their condo in Florida and move to North Carolina."

"People are hunkering down, trying to hold on to what they have," added Andy Beveridge, a demographer and sociology professor at Queens College in New York. "It's a depression, recession mentality."

Plus, a good portion of the population has reached the age where the charm of a new place is more than offset by the fetters of life and responsibilities. "A large share of the population is at the age where they're settled," Lang said. "The baby boomers have good jobs and most are not ready to retire."
Shunning the lands of sun and surf

Perpetually booming Florida may actually have fewer people than in 2007.

During 2008, 2.8% of the Sunshine State's population hadn't lived there the year before, and the net domestic migration -- the difference between Americans moving into a state and those moving out -- was negative for the first time in recent history.

Nearly 10,000 more Americans fled the land of the Dolphins and the Devil Rays than moved in, according to the Census. That followed average gains of more than 200,000 a year from 2001 through 2006.
0:00 /2:15Pittsburgh's renaissance

"It looks like the first time in recorded history that Florida lost population," Beveridge said.

(That's slight hyperbole: Florida's population did drop in 1946, in the aftermath of World War II.)

California also saw a decline in the number of people coming to partake of its sand and sea. A mere 1.3% of California residents moved in from out of state in 2008. That's off from 1.4% in 2007.

For years, Americans have been fleeing the Golden State. The population kept growing only because of foreign immigration and births. All through the 2000s there has been a net loss in domestic migration, with 800,000 more Americans leaving than moving in during the three years ended in 2007. As it became more difficult to sell homes, that out-flow eased. That, combined with the newcomers, meant the population fell by only 144,000 in 2008.

The housing bust, and the harm it did to employment, seems to have pushed more people to leave bubble markets like California and Florida than have been drawn in by more affordable home prices.

"The Florida economy is based on growth and home construction," said Lang. With building projects dying on the vine, unemployment soared to 7.6% for the state in 2008. It's now up to 10.7%.

The same job problems plague many California cities, especially Central Valley towns like Stockton, Fresno and Merced. Construction-related job losses helped send state unemployment to 8.7% by December 2008 from 5.9% a year earlier. Today, some cities report breathtakingly high unemployment rates: 30.2% in El Centro; 17.6% in Merced; and 17.2% in Yuba City.
So, where are they moving?

So, if people aren't heading for the good life in California and Florida, where are they going?

D.C., Alaska and Wyoming. (Seriously.)

The nation's capital saw 7.6% of its residents arrive in 2008; Alaska attracted 6% more people to the Last Frontier (up a full percent from 2007); and 5.2% more people wanted to be Wyoming cowboys.
0:00 /02:57'I love and hate Detroit'

To be fair, however, small populations in these places convert modest in-migration increases into large percentage gains. They're each among the smallest states (or district) in the Union. That's just the opposite of California and Florida where each percentage point represents hundreds of thousands of people.
Don't mess with Texas

In terms of net migration -- those moving in minus those leaving -- Texas was the star performer in 2008, with the population growing by 140,000.

That meshes with what moving company Allied Van Lines experienced. "We moved more people here than anywhere in the U.S. in the last several years," said David King, general manager of Berger Transfer and Storage in Houston, Texas, and Allied Van Lines' largest booking and hauling agent.

The moving company recorded 5,891 inbound shipments and 3,988 outbound shipments in 2008, a net gain of 1,903. That was just slightly lower than last year's net gain of 2,041.

That influx may be due to the state's employment picture, which has remained rosier than most other places thanks to the energy industry and a welcoming business climate. Plus, home prices never cycled through a boom-bust period: They've remained affordable, which facilitates mobility.

In contrast, battered Michigan, with its housing and job woes, was the least-popular place to move to. The state experienced a net loss of 109,000 people, or 1.1%, in 2008, according to the Census. Allied said its outbound shipments totaled 2,388, more than double its inbound shipments of 1,181.

New York State lost even more people than Michigan -- 126,000 people -- but because it has a larger population to begin with, the percentage drop is just 0.7%, almost identical to New Jersey's.
Moving down the block

The Census Bureau also reported that fewer residents were moving within their home states.

The percentage of people who lived in different homes within the same state dropped to 12.6% during 2008. It was 12.8% in 2007 and 13% in 2005, when housing markets were hopping.

The decline came despite a boost in the number of people forced to move. More than 860,000 delinquent mortgage borrowers lost homes to foreclosure in 2008, about three times as many as in 2005.

More Alaskans moved within the state during 2008 than any other place; 16.3% of them occupied a different house. That increased from 14.6% in 2007.

Oklahoma (15.8%), Nevada (15.7%) and Texas (15.2%) residents also moved around a lot.

New Jersey residents, if they weren't leaving the state altogether, stayed put: 8.2% of them moved within the state during 2008.

There must be something about the Northeast: Only 9.1% of New Yorkers moved within the state, while Rhode Islanders and New Hampshire residents moved at a rate of 9.2%.

Peek inside Madoff's homes and boats

2009-09-09T09:43:00.000-07:00

In an age when the rich and famous often indulge themselves with huge, expensive mansions, Bernie Madoff played it relatively conservatively.

Based on his real estate holdings, you wouldn't have guessed that the felonious financier had victimized his investors by as much as $65 billion. His oceanfront cottage in Montauk is notable more for its vistas than its opulence.

That theme continues as we get closer looks at both his Manhattan penthouse and his Palm Beach property, thanks to publicity videos hosted by U.S. marshals, who are preparing the homes for sale and determining which brokers will get the listings. Both residences go on the market this week and will probably eventually sell for $7 million each. And they're not exactly palatial estates.

The Manhattan penthouse is nice, of course, but it isn't awe inspiring. It occupies the entire top two floors of an Upper East Side apartment building and features wraparound terraces with extraordinary views. The residence is about 4,000 square feet, which is large by Manhattan standards but still distinctly sub-McMansion.

"From what I've seen, I'd call it a fairly modest place," said expert New York appraiser Jonathan Miller, president of Miller Samuel.

But a true penthouse carries a special cachet and puts Madoff's house in a vaunted category. Miller compared it to the Montauk home, which while modest has the distinction of sitting right on the beach. There are buyers who only want ocean-front property and will accept nothing less. Similarly, there are discerning buyers who only want penthouses.

Because these types of houses are rare, when they come on the market, they sell for premiums. The marshal in charge of the Manhattan sale, Roland Ubaldo, said his office was letting the brokers set he price, but he anticipates between $8 million and $10 million for the home where "Madoff spent the last days of his life as a free man."

The penthouse has attractive fanlights over many of the windows, parquet floors, four working fireplaces and a gorgeous curving staircase to go from the 11th to the 12th floor. Bernie's study is floor-to-ceiling cherry-wood paneled walls and bookcases. The kitchen is state of the art with stainless steel counters, custom cabinets and high-end appliances.

The home will be sold as a three bedroom, though that's not the current configuration. There's only one bedroom now. Bernie and his wife, Ruth, tended to have separate facilities, so the other two bedrooms were converted to his-and-her studies. Separate walk-in closets have cedar cabinets and housed the 45 to 50 custom made suits Bernie owned, as well as dozens of pairs of shoes.
Southern comfort

At 6,500 square feet, the Palm Beach home is much larger than the other Madoff homes, but it is still comparatively modest and mostly, well, homey.

"There was nothing really extravagant, nothing over the top about it," said Barry Golden, of the U.S. Marshals Southern District Florida office, which is preparing the property for sale.

The Palm Beach County's property appraiser values the house itself, minus the lot it sits on, at only about $778,000. The land is what's really valuable: The half acre is appraised at close to $7 million.

"It's a beautiful home, don't get me wrong," said John Thomas, Palm Beach County's Director of Residential Appraisal. "But it's just another $8 million or $9 million property in the town of Palm Beach. In terms of the neighborhood, they're all spectacular."
0:00 /3:54More Madoff homes on display

It is, however, larger than either of its next-door neighbors, and it has an 80-foot dock on the Intracoastal Waterway, right behind the house. That's where Madoff kept his yacht. "We're hoping that will keep the price up," said Thomas.

From the street it is hard to see much of the property because dense plantings screen the building from prying eyes. But glimpses reveal a two-story wood-frame home with ground-floor and second-story verandas.

Inside, it's casual chic with uneven terra cotta tile floors, lots of windows and French doors, unpainted vaulted ceilings and exposed beams. The finishes here are a bit finer than that of the Montauk residence, which is more rustic. There is elaborate and extensive woodwork with beautiful moldings and built-in bookshelves.

The upstairs consists of a master suite with bedchamber, dual walk-in closets, an exercise room, a study and two baths.

Decor wise, the home features two recurring themes: fish and bulls.

"You can't help but notice all the bull reference in the house," said Golden.

There are what look like old English paintings of different breeds of bulls, as well as bull statues and figurines. Mounted on a wall is the 1969 blueprints for Bull, the Madoff yacht, a 55-foot, custom-made craft that the marshals also seized.

On Wall Street, the bull means optimism concerning the direction of the market. In everyday life, it has an alternative meaning, one Madoff's victims probably find more appropriate as a motif in his house.

Victims may also find the fish theme -- figurines, display cases of lures and tied flies, and wall-mounted antique angling gear -- equally apt considering how he angled for investors, reeled them in and then gutted and filleted them.

All the furniture and objets d'arte will stay in the house until it's sold, according to Golden. After that, they'll be auctioned off and the proceeds, like those from the home sale, will go into the fund to repay investors.

The most valuable of all the personal property is undoubtedly Bull the yacht. It was kept shrink-wrapped after it was seized in April until opened up for video display this month.

The Bull boasts a flying bridge that sits so high up that an elevator was needed to carry people up. Yes, you read that right: Bernie's boat has an elevator.
0:00 /3:44Selling Madoff's Montauk home

There's also a 38-foot Shelter Island runabout, a 1930's rumrunner-style boat with a high bow and an aggressive profile called Sitting Bull. Last, there's the little Maverick, a small open cabin boat with an outboard motor. It's name? You guessed it: Little Bull.

Golden is particularly interested to see whether the Madoff connection will bring out more boat buyers for the auction, which should take place soon. "We hope to keep the prices up so we can return the maximum amount of money to the victims," he said.

It's September. The real test for stocks begins

2009-09-07T06:50:00.000-07:00

Sunburned and barbecued out, Wall Streeters returning to work next week face the first big challenge to the six-month-old rally.

Even after a down week on Wall Street, punctuated by a mixed August jobs report, the S&P 500 remains 50% above the 12-year lows hit in March.

Stocks churned in a narrow range for most of August, ending the month higher. But with fewer people around and trading in August, the market rally didn't really face much of a challenge. That won't be the case in September.

"The fall campaigns begin next week for Wall Street, Congress and students," said Scott Armiger, portfolio manager at Christiana Bank & Trust Company. "Everyone has to conduct business, pass laws or study."

Armiger said he doesn't put much stock in the markets' seesawing over the last two weeks. Trading volume has been low, as is typical of late summer when many market pros on the sidelines.

"The week ahead will tell us more about where we stand," he said.

The week is fairly light on economic reports, with readings on the trade gap, weekly jobless claims and consumer sentiment being the standouts. Congress reconvenes on Tuesday. Wednesday night, President Obama will speak to the nation and the Congress on health care reform.

"We've had some artificial demand created by all the stimulus, but when you take that away, will there be enough fuel for real demand to take its place?" said Dave Hinnenkamp, CEO at KDV Wealth Management. "The market is looking at the data and trying to figure it out."

Hinnenkamp said that stocks are likely to seesaw or even slide five or ten percent over the next month or two, until the next batch of earnings come out and the initial readings on third-quarter GDP growth are released.
0:00 /2:04Atlanta Fed sees turnaround

Month of meltdowns: September is typically a tough one for Wall Street, with the Dow industrials, Nasdaq composite and S&P 500 all posting their biggest percentage losses for the year, according to the Stock Trader's Almanac.

The month tends to be weak as the "back to work" mentality also tends to bring in a certain "cleaning house" momentum.

This particular September also ushers in a series of dubious anniversaries for Wall Street.

This Monday, Labor Day, is the one-year anniversary of the government's takeover of mortgage lenders Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

On Sept. 8, 2008, the Bush Administration put the companies under a government conservatorship and replaced both chief executives. The two companies owned or backed half a billion in mortgage debt and had lost billions in the housing collapse.

One week later brings the anniversary of what many consider to be the accelerant that pushed the recession into full-blown crisis: the collapse of Lehman Bros. and 11th-hour buyout of Merrill Lynch by Bank of America (BAC, Fortune 500). On Sept. 15, 2008, the Dow slumped 504 points, as financial shares tumbled, credit seized up and investors went into panic mode.

Stocks lurched dramatically all week, but managed to end just modestly lower that Friday after a series of government interventions. They included the Federal Reserve jumping in to save AIG (AIG, Fortune 500) from bankruptcy and the establishment of an early version of the TARP bank bailout plan.

One volatile year later, the Dow is still down 13.5%, the S&P is down 15% and the Nasdaq composite is down just over 7%.
On the docket

Monday: All financial markets are closed for Labor Day.

Tuesday: The July Consumer Credit report from the Federal Reserve is due in the afternoon. Credit is expected to have fallen for the sixth consecutive month as the recession continues to nip borrowing. Credit likely dipped a seasonally adjusted $4 billion after falling $10.3 billion in June, according to a Briefing.com survey of economists.

Wednesday: The weekly crude oil inventories report is due in the morning, from the Energy Information Administration.

In the afternoon, the Federal Reserve releases its periodic "beige book" survey of the economy, which tracks 12 districts.

The stream of reports showing improvements in housing and manufacturing and continued weakness in the labor market have given investors a picture of the economy in the first half of the third quarter. But the beige book will put that in a broader perspective.

Apple (AAPL, Fortune 500) is expected to introduce iPod Nano and iPod Touch models that include digital cameras, as well as other new updates, at its media event Wednesday. Apple watchers are also eager to see if CEO Steve Jobs will make an appearance now that he is back to work after a six-month medical leave.

Thursday: The July trade gap from the Commerce Department is expected to hold steady at $27 billion. Last month, imports rose for the first time in nearly a year due to higher oil prices, but that was partially offset by stronger global demand for U.S. goods and services. Investors will be looking to see if the trend continues this month.

Also in the morning, the Labor Department releases the weekly jobless claims report. Approximately 556,000 Americans are expected to have filed new claims for unemployment in the previous week versus 570,000 in the previous week.

Continuing claims, a measure of those receiving benefits for a week or more, are expected to continue to rise from the 6.234 million level hit last week.

RealtyTrac releases its monthly report on foreclosures.

Treasury Secretary Timothy Geithner speaks before the Congressional Oversight Panel.

Friday: The initial reading on consumer sentiment from the University of Michigan is due shortly after the start of trading. The index is expected to have risen to 67.3 in September from 65.7 in August.

The Commerce Department is expected to report a drop in wholesale inventories for the 11th straight month, when the July report is released in the morning. Stocks at U.S. wholesalers likely fell 1% in July, according to forecasts, after falling 1.7% in June.

August import and export prices are also due in the morning, while the August Treasury budget is due in the afternoon.

Stocks set for higher open

2009-09-04T06:46:00.001-07:00

U.S. stocks were poised to open higher Friday, getting a lift from the better-than-expected government release on the monthly jobs report.

At 8:45 a.m. ET, Dow Jones industrial average, Nasdaq 100 and Standard & Poor's 500 futures were up.

Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.

Futures appeared to get a lift from the wave of optimism that swept markets in the previous session. Wall Street staged a late-session rally Thursday after three straight days of losses.

Peter Cardillo, chief market economist for Avalon Partners, said that Friday's volume will be light ahead of the Labor Day weekend - and that the monthly employment report will be the prime market mover.

Economy: The Labor Department reported that the economy shed 216,000 jobs in the month of August, which was less than expected.
0:00 /2:16Job cuts expected to slow

Employers were expected to have cut 230,000 jobs from their payrolls last month, according to economists surveyed by Briefing.com.

The payroll figure for July was revised to a decline of 276,000 jobs.

The unemployment rate rose to 9.7% in August, this highest rate since 1983. This was higher than the 9.5% rate expected by Briefing.com consensus. It was also an increase from 9.4% in July.

World markets: Stocks around the world were mostly upbeat ahead of the jobs report. In Asia, Hong Kong's Hang Seng added nearly 3%, although Japan's Nikkei posted modest losses. Major European markets were higher in midday trading.

Money and oil: The dollar slipped versus the euro and the British pound but edged up against the yen.

The price of oil rose 51 cents a barrel to $68.47.

BP drills 'giant' oil well

2009-09-02T10:02:00.001-07:00

BP has drilled one of the deepest oil wells ever discovered, the company said Wednesday.

The Tiber well, located about 250 miles southeast of Houston in the Gulf of Mexico, was drilled about 35,055 feet deep, BP (BP) said. The energy giant is the largest producer of oil and gas in the Gulf, at 400,000 barrels per day.

Further evaluation is needed in order to determine the value of the well, BP said.

The well is BP's second significant discovery in the so-called "lower tertiary" area in the Gulf of Mexico, and it found oil in multiple reservoirs, said Andy Inglis, a BP chief executive, in a written statement.

"These material discoveries together with our industry leading acreage position support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade, Inglis said.

Tiber is operated by BP in partnership with co-owners Petrobras (PBR) and ConocoPhillips (COP, Fortune 500).

Oil prices: Crude climbed early Wednesday, snapping a three-day losing streak. After oil settled Tuesday, the American Petroleum Institute said crude stockpiles fell by 3.19 million barrels last week.

Oil was trading up 55 cents to $68.60 by 7:25 a.m. ET Wednesday.

Investors were waiting to see whether API's data would be confirmed by the weekly Energy Information Administration inventory report, released at 10:30 a.m. ET. Analysts expect oil stocks to fall by 1.9 million barrels.

Act fast! Homebuyer tax credit ends soon

2009-08-31T07:19:00.001-07:00

Use any metaphor you want: the ticking clock, sands running through the hourglass or pages falling away from the calendar. The fact is, time is running out to claim the $8,000 first-time homebuyers tax credit.

Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.

The bad part: It ends on Dec. 1.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.

"Buyers have to get a home under contract very, very soon," said Tom Kunz, CEO of Century 21. "They probably should get out looking."
Sense of urgency

What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range. (Check prices in your city.)

In Whittier, Calif., for example, there are few repossessed homes for sale. Those are easy to buy because there isn't a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe.

"That's why there's such a sense of urgency now," said Irma Tapper, a Century 21 real estate agent in Whittier. "The banks have to approve short sales, and they're taking three to six months to do that."

That means a first timer putting a bid on a short-sale might not get an answer form the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy.

Chuck Whitehead, who runs the Coldwell Banker agency in Temecula, Calif., said one recent listing hit the market on a Friday and by Monday there were 57 bids.

The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn't have been able to buy without it.

"It makes a big difference because most of these clients are in a lower price range," said Michelle Edmunds, an agent with Coldwell Banker in Temecula, Calf., who has closed sales for six first-time buyers. "The houses they buy need work and normally they wouldn't want to move in because of the [less than perfect] conditions the homes are in."

That is true for Wesley Forsythe. This June, the 30-year-old computer consultant and his girlfriend bought a row house in the Fishtown section of Philadelphia. Since he paid just $80,000 for the three-bedroom, two-bath place, the credit acted like a 10% discount.

"It allowed us to expand our price range and plan additional renovations," he said. "My mortgage is several hundred dollars less than what my new rent would have been."

Forsythe applied for the credit immediately after closing, filing an amended 2008 tax return. The IRS cut him a check in less than seven weeks. He's spending it now on new hardwood floors, repainting most of the interior and renovating a bathroom. He's stretching the cash by doing much of the work himself.
Cash for Clunkers effect

Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.

In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program.

"It's just like Cash for Clunkers," said Robert Dye, a senior economist for PNC Financial Services Group. "It runs the risk of a let-down as the program runs its course."

Johnny Isakson, R-Ga., who is a former real estate broker, is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions.

The effort has drawn strong industry support.

"We need to stimulate the move-up buyer," said Century 21's Kunz, "so it works its way up the pricing food chain. That's what we need to get inventory moving again."

Hedge funds: The tide is turning

2009-08-24T06:53:00.000-07:00

Investors have been putting money back into hedge funds over the last three months as the worst of the credit crisis appears to have passed, but analysts say a return to the industry's heyday is not likely.

For the first time since December 2007, more money has flowed into hedge funds than has been redeemed for three months in a row, data from HedgeFund.net showed Friday.

In July, investors put $6.7 billion into the risky investment vehicles. That came after a more robust $19 billion inflow in June and $16 billion in May.

The slowdown in July came as investors took "more of a wait and see attitude," said Peter Laurelli, head of hedge fund industry research at Channel Capital Group Inc., which operates HedgeFund.net.

"However, I suspect the July performance may have influenced some of those sitting on the sidelines, and I would expect to see modest positive inflows again in August," he said.

Assets managed by the 7,100 funds in HedgeFund.net's database rose 2.6% in July to $1.84 trillion, driven by strong gains in stock and commodity markets.
Off the lows

The renewed interest comes as the financial markets have rallied broadly from the lows hit in March and the most dire economic scenarios have been largely ruled out.

"Investors in general are becoming more optimistic," said Nadia Papagiannis, a hedge fund analyst at Morningstar. "That's part of why we're seeing inflows now."

May was the first month in which Investors put more money into hedge funds than they pulled out since September 2008, when the collapse of Lehman Brothers sparked a mass exodus from the hedge fund industry.

Still, the amount of money flowing back into hedge funds pales in comparison to the amount pulled out earlier this year.

In April, nearly $60 billion flowed out of hedge funds, which eclipsed the inflows in the following months and contributed to a net outflow of $25 billion for the whole second quarter.

A total of $255.5 billion flowed out of hedge funds during the first three months of the year.
0:00 /2:44The danger of asset bubbles

Looking ahead, investors are expected to continue putting money back into hedge funds, although on a small scale.

"The trend is going to be money flowing into hedge funds," Papagiannis said. "But it's not going to be as strong as it was before the credit crisis."

That's because many hedge funds were stuck holding illiquid assets during the credit crisis, and investors, including large institutional funds, could not access their money when they needed it most.

Now, investors are looking for investment vehicles that offer more liquidity and are shying away from strategies that involve a high degree of leverage, which hedge funds are known for, according to Papaginnis.

Leverage involves using borrowed capital to maximize the return of an investment. But the financial crisis showed that leverage can result in spectacular losses when markets unexpectedly turn.

Still, hedge funds remain a viable option for investors looking for strategies that other vehicles don't offer, Papagiannis said.

Execs: Recession has hit bottom

2009-08-21T17:19:00.000-07:00

An index of economic indicators rose in July for a fourth straight month, in another sign that the recession is bottoming, said a report released Thursday.

The Leading Economic Index rose 0.6% in July, after a 0.8% increase the previous month, according to a report from the Conference Board, which has a membership of executives from around the world.

"The indicators suggest that the recession is bottoming out, and that economic activity will likely begin recovering soon," said Ken Goldstein, economist at The Conference Board, in a prepared statement.

The Leading Economic Index is based on 10 components, six of which increased in July: interest rate spread, average weekly initial jobless claims, average weekly manufacturing hours, index of supplier deliveries, stock prices, and new orders for nondefense capital goods. Meanwhile, readings fell for consumer expectations, real money supply and building permits.

This index reading is the latest sign of a nascent recovery. Earlier this month, the Federal Reserve released a statement that said the economy is "leveling out." The central bank cautioned that activity will remain weak in the near term, but it marked the Fed's most bullish assessment of the economy in more than a year.

And this week the International Monetary Fund's chief economist said the global economic recovery has begun, but cautioned that in order to see sustained economic gains the U.S. needs to focus on exports.

While the battered labor market remains weak, the unemployment picture showed some signs of improvement in July. The Labor Department reported the fewest job losses since August 2008, and the unemployment rate fell for the first time since April 2008.

However, no single indicator marks an official recovery. Only the National Bureau of Economic Research can declare when the recession is over. Because it takes so long to crunch the economic data, the NBER generally doesn't announce the date that a downturn ended until at least several months after the fact.

Oil falls on supply build

2009-08-05T09:10:00.001-07:00

Oil fell towards $70 a barrel on Wednesday after U.S. government inventory data showed a build in crude stocks and weak economic data raised doubts about oil demand recovery in the world's largest energy consumer.

U.S. light, sweet crude fell 81 cents to $70.61 a barrel, giving away some of the gains that helped oil rise 13% since late last week.

U.S. crude inventories rose more than expected last week as refinery runs eased, while distillate stocks showed a surprise draw, according to weekly data from the U.S. Energy Information Administration (EIA) released on Wednesday.

Crude stockpiles in the world's top consumer rose by 1.7 million barrels in the week to July 31, against forecasts for an 800,000-barrel build as refinery utilization fell by 0.1 percentage point to 84.5%.

"The big build on crude caught some people by surprise and shows overall weakness in the economy and the unwinding of economic optimism. Nothing in the numbers was very bullish," said Phil Flynn, analyst at PFGBest Research in Chicago.

The EIA data followed inventory numbers on Tuesday from the American Petroleum Institute, which showed crude stocks fell 1.5 million barrels last week but gasoline stocks rose by a further 2.1 million barrels.

Oil was already lower before the release of inventory figures as doubts over economic recovery and demand for fuel resurfaced after weak U.S. services sector data depressed stock markets both sides of the Atlantic.

Expectations that a turnaround in the global economy could lift sagging oil demand has helped send crude up from lows below $33 a barrel in December, with energy traders keeping an eye on equities markets for signs of an economic rebound.

Investors were awaiting news from a meeting between trade representatives and Britain's financial powers, the UK Financial Services Authority (FSA) and the UK Treasury, which comes before a third Commodity Futures Trading Commission (CFTC) hearing in Washington over how to rein in speculation.

The UK meeting will discuss market transparency and efficiency, according to the FSA invitation to oil market participants, a copy of which has been seen by Reuters.

Energy traders also were watching an area of thunderstorms in the Atlantic Ocean several hundred miles southwest of the Cape Verde Islands associated with a tropical wave. The U.S. National Hurricane Center said it had less than a 30% chance of becoming a tropical storm.

Nasdaq rallies, Dow drifts

2009-06-09T16:46:00.001-07:00

The Nasdaq rallied Tuesday, while the broader market was little changed, after the government said 10 of the largest banks could pay back loans and after a positive Treasury auction cooled worries about rising borrowing costs.

The Dow Jones industrial average (INDU) lost 1 point. The S&P 500 (SPX) index added 3 points, or 0.4%.

The Nasdaq composite (COMP) added 18 points, or 1%, with technology shares rising after chipmaker Texas Instruments (TXN, Fortune 500) boosted its quarterly sales and earnings outlook late Monday.

Stocks were mixed after the government said 10 banks were well-enough capitalized to pay back a collective $68 billion in loans. But stocks moved to the highs of the session after a strong response to the government's auction of $35 billion in three-year securities.

The combination of the auction results and the boost from Texas Instruments was helping stocks Tuesday, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

"TI really increased their guidance, which was good, but we're going to need to see more fundamental news like that to keep us moving higher after a big thee-month rally," he said.

Stocks have been on the rise since early March, with the Dow having jumped more than 32%, the S&P gaining 39% and the Nasdaq surging 46%, as of Monday's close.

That marked the Dow's best 3-month run since 1982 and the S&P 500's best run since the 1930s.

The gains have been sparked by a series of not-as-bad-as-expected economic reports and growing investor sentiment.

Although stocks have been drifting a bit and could see more of a pullback over the next few weeks, the tone remains positive, said Steven Goldman, market strategist at Weeden & Co.

"Overall, I think stocks will continue to find buyers on pullbacks and the trend will remain up," he said.

Goldman said that historically, stocks tend to gain six months ahead of the end of a recession and for the first three months after a recession is over. Using data that goes back to 1901, he found that the S&P was always higher in the three months after a recession ended.

The April trade balance from the Census Bureau is due Wednesday morning before the start of trade. About an hour into the session, the weekly oil inventories report is due, from the Energy Information Administration.

Wednesday afternoon brings a report on the May treasury budget and also the Federal Reserve's "Beige Book" reading on economic activity.

Banks: The U.S. government said Tuesday morning that 10 banks that received TARP loans last fall can repay a total of $68 billion to the government.

The news shows that the fear of an implosion has subsided and that the risk factor in financial markets has diminished, Goldman said.

Morgan Stanley (MS, Fortune 500), American Express (AXP, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500), Bank of New York Mellon (BK, Fortune 500), BB&T (BBT, Fortune 500), Capital One (COF, Fortune 500), Northern Trust (NTRS, Fortune 500), State Street (STT, Fortune 500) and US Bancorp (USB, Fortune 500) have confirmed that they are allowed to repay loans.

But only AmEx, BB&T and Capital One shares posted solid gains.

Banks that were stress-tested earlier this year should undergo another round of tests, a U.S. watchdog group said Tuesday.

The Congressional Oversight Panel said that recent signs that the recession could be worsening show the tests did not go far enough. In particular, the group pointed to the May employment report, which showed a slower pace of job losses but also that the unemployment rate rose to a 26-year high of 9.4%.

On the move: The gains in Texas Instruments spread to other large chip makers, including Intel (INTC, Fortune 500) and Advanced Micro Devices (AMD, Fortune 500).

The Philadelphia Semiconductor (SOX) index rose 4.5%.

General Motors (GMGMQ) rallied 24% after it said that the former chairman and CEO of AT&T will be its new chairman when it emerges from bankruptcy later this summer.

The Dow ended near unchanged, as strength in tech and commodity shares was tempered by weakness in aerospace and defense names Boeing (BA, Fortune 500) and United Technologies (UTX, Fortune 500).

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to two on volume of 1.06 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.17 billion shares.

Chrysler: The Supreme Court delayed the sale of Chrysler's assets to Italian automaker Fiat, in a late-Monday move that threw a wrench into the automaker's plans for a quick exit from bankruptcy.

Under terms of the agreement, Fiat can ditch the deal if it is not finished by June 15. However, the company said Tuesday that it won't walk away from Chrysler.

In addition, Chrysler returned to bankruptcy court Tuesday to try to get a judge to approve the closing of 789 of its dealerships.
0:00 /5:11Getting tough on Treasury

Economy: Wholesale inventories fell 1.4% in April, the Census Bureau reported, after falling 1.8% in the previous month. Economists surveyed by Briefing.com expected a decline of 1.1%, on average.

Bonds: Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.86% from 3.88% late Monday. Treasury bond prices and yields move in opposite directions.

Treasury sells $19 billion of 10-year debt tomorrow and $11 billion of 30-year bonds on Thursday.

The recent rise in the 2-year note has left the security nearly 1 percentage point above the fed funds rate, raising bets that the Federal Reserve will have to raise interest rates before the end of the year, something stock investors don't like.

And the spike in the 10-year has caused worries that it may stunt a burgeoning recovery, as the longer-term bond yields are tied to mortgage rates. Higher mortgage rates could dissuade homebuyers at a time when the housing market is just starting to stabilize in some areas.

Other markets: In global trading, Asian markets ended lower and European markets ended mixed.

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

U.S. light crude oil for July delivery rose $1.92 to settle at $70.01 a barrel on the New York Mercantile Exchange, settling above $70 a barrel for the first time since November.

COMEX gold for August delivery rose $2.20 to settle at $954.70 an ounce.

Stocks whacked by economy, Britain

2009-05-21T09:46:00.001-07:00

Stocks fell sharply Thursday as enthusiasm about signs of economic improvement faded and investors were taken aback by a downgrade of the U.K. credit outlook.

The Dow Jones industrial average (INDU) and the S&P 500 (SPX) index were both down about 1.5% at midday. The Nasdaq composite (COMP) fell 1.8%.

Energy stocks slumped as oil prices fell more than 2% but remained at a 6-month high. Shares of financial services companies, which have lead the market in recent sessions, also tumbled.

"I think the market will be choppy for the next few months," said Ron Kiddoo, chief investment officer at Cozad Asset Management. He said Thursday's "malaise" could be a reflection of low volume, with many market participants absent ahead of the holiday weekend.

Stocks finished Wednesday's session lower after the Federal Reserve trimmed its 2009 economic growth targets and raised its forecast for unemployment. The central bank's dour outlook called into question the economic optimism that had lifted the market over the last few months.

"We're starting to see numbers that aren't quite as damaging," Kiddoo said. "But I don't think the market will trade to the upside until you start to see real growth."

British downgrade: Ratings agency Standard & Poor's lowered its outlook for the U.K. to "negative" from "stable."

S&P said its revision was based on the possibility that the country's debt burden could reach 100% of its gross domestic product, despite the U.K. government's "further fiscal tightening."

"The downgrade of Great Britain by S&P certainly damped enthusiasm," said Peter Cardillo, chief market economist at Avalon Partners.

Economy: The Labor Department reported that initial jobless claims declined by 12,000 in the week ending May 16.

The number of people filing for first-time jobless benefits totaled 631,000 last week, slightly more than expected. But those filing claims on an ongoing basis rose to 6.6 million, an all-time high.

Separately, the Conference Board's reading of leading economic indicators, which predicts economic conditions six to nine months in the future, rose 1% in April -- slightly better than the 0.8% analysts' expected.

The Federal Reserve Bank of Philadelphia said its index of manufacturing activity in the mid-Atlantic region improved to negative 22.6 in May from negative 24.4 in April. Economists surveyed by Briefing.com had expected the index to improve to negative 18.

World markets: Investors around the world were in a downbeat mood. In Asia, most shares finished lower. European stocks tumbled in morning trading, following S&P's downgrade of the U.K. outlook.
0:00 /03:50Banks still key to recovery

Companies: Auto finance firm GMAC is poised to receive a second bailout from the Treasury, according to the Detroit News. The newspaper said the company is due to receive $7.5 billion more in aid.

In one of the first Nasdaq initial public offerings of the year, OpenTable, which operates a restaurant reservation system, raised $60 million, one of the deal's underwriters told Reuters. The company priced its shares at $20 each, which was higher than expected, and nearly 40% to $27.90 in late morning trading.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.26% from 3.19% Wednesday. Treasury prices and yields move in opposite directions.

Other markets: Oil slipped from its Wednesday high, but still continued to trade above $60 a barrel. The price of oil dropped $1.46 a barrel to $60.58

In currency trading, the dollar rose versus major international currencies, including the euro, the yen and the British pound.

COMEX gold for June delivery rose $7.60 to $945 an ounce.

Help finding that job

2009-04-30T17:23:00.001-07:00

This morning a new jobs report showed that the number of people collecting unemployment benefits for one week or more hit a new record high at 6,271,000. That means it's taking more people longer to find jobs. If you're one of the many people out there looking to land a job, how do you get an edge on the competition?

Start with your resume.

Just applying on a company's Web site isn't going to get you anywhere: the percentage of online applications viewed by an actual human being ranges from 5% to 25%.

A lot of companies use software programs to screen candidates, so, when you're writing your resume and cover letter, use the same phrases or keywords found in the job description, or reference a particular project that company has done to get it over that first hurdle.

You can also pump up your online resume to catch a potential employer's eye. Check out VisualCV.com, where you can create an online resume filled out with videos, pictures, and audio. And the best part: it's for free.

If you're using online social networking sites to get noticed, make sure you're using all the tools at your disposal.

Don't just create a Linked-in profile: join groups, post comments, and actively update. On Facebook, diligently search for job listings in the Facebook Marketplace, and message hiring managers directly.

And if you do score that interview, go in prepared.

Glassdoor.com is a great resource where you can get interview tips from people who have actually sat in the hot seat. You can also check out Liveperson.com, a paid service to connect with professionals in a multitude of fields, for more interviewing tips.

Warning: The bear isn't hibernating yet

2009-04-01T17:26:00.001-07:00

March came in like a bear and out like a bull on Wall Street. But will the bull stick around or will the bear return to try and prove T.S. Eliot right about April being the cruelest month?

The S&P 500 fell nearly 8% during the first six trading days of the month but surged nearly 18% after that to finish the month up 8.5%. The stunning rally in the latter part of the month came despite more bad news about the economy and Corporate America.

That's led some investing experts to question whether the recent rally has legs. There are growing fears that the Tilt-A-Whirl otherwise known as the stock market is ready to start spinning madly out of control once again.
Talkback: Is the bear market over or will stocks fall back to their March lows?

John Lynch, chief market analyst with Evergreen Investments, predicts that the markets will test the early March lows once again before stocks finally hit bottom.

Simply put, he said there's still the potential for more grim economic and corporate news out there that hasn't gone away just because the markets popped at the end of last month. He thinks the rebound, once it unfolds, will be gradual, and not steep.

"GM (GM, Fortune 500) and Chrysler are still in trouble and we've got the bank stress tests coming," Lynch said, referring to the Treasury Department's plan to determine how well-capitalized struggling big banks like Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) are to withstand a longer recession. Those tests are expected to be completed by the end of April.

"The worst is probably over for the economy but investors need to be prepared for a couple of quarters that are simply less bad. This recovery is going to be shaped like a short, fat lowercase u and not a capital V," Lynch added.
0:00 /4:28Urging investors into equities

Bill Stone, chief Investment Strategist with PNC Wealth Management in Philadelphia, said it's looking like the economy probably shrunk by at least 5% in the first quarter, following a more than 6% drop in the fourth quarter of 2008. He added that the job market is still in bad shape as well.

So with that in mind, Stone agreed with Lynch that it would not be a major surprise if stocks retreated back toward this year's lows. "It's never safe to say we've hit bottom," he said.
Earnings are going to 'stink'

The upcoming onslaught of corporate earnings reports this month could also weigh on the markets.

According to John Butters, director of U.S. earnings research for Thomson Reuters, analysts are predicting that first-quarter profits for the S&P 500 will fall 36% from a year ago. That would be the seventh consecutive quarter of declining earnings.

What's more, profits in all ten sectors of the economy are expected to fall during the quarter. Butters said that this has never happened in the more than ten years that Thomson Reuters has been tracking profit growth by sector.

"At the start of this downturn, most of the problems had been concentrated in the financials sector and, to a lesser extent, consumer discretionary companies like autos, retailers and homebuilders," Butters said. "Now, there is weakness across the board."

Stone said most investors realize that first quarter results for most companies will be short on good news. So it will be more important to hear what executives have to say about the future. Unfortunately, he thinks most CEOs will clam up and not take the risk of sounding too optimistic.

"Nobody's buying stocks today for first quarter earnings. They're going to stink," he said. "If we get some sort of guidance about when things are picking up, that could be good news, but my suspicion is more and more companies will just say times are rough and that they have no visibility."

Still, Lynch is worried that investors, particularly in bank stocks, may be underestimating just how bad results will be for the quarter. Several bank CEOs, including the heads of Citi, BofA and JPMorgan Chase (JPM, Fortune 500), helped spark a rally in bank stocks by saying they were profitable in January and February.

But Lynch pointed out the CEOs were careful to say they were profitable on an operating basis. Since banks still are likely to be forced to book massive losses on soured loans and securities in their portfolios, he thinks "more writedowns are looming" and that "earnings are not going to be as rosy as Wall Street is anticipating."
Recovery may be closer, but the road to it is full of potholes

Despite their pessimism though, neither Stone nor Lynch consider themselves to be overly bearish. They just simply think investors need a reality check after the big runup in stocks.

Stone said that it's encouraging that the government has taken many bold actions to try and get the economy back on track -- such as the stimulus package, the Treasury Department's new public-private partnership to buy banks' toxic assets and the Federal Reserve's plan to jumpstart lending to consumers and small businesses with its Term Asset-Backed Securities Loan Facility, or TALF.

Stone thinks many of these initiatives will eventually work. And he adds that many stocks are attractively valued for the long-haul.

But the climb out of this recession is going to take some time. It won't be a smooth process, and at times, investors may show their frustration.

"Is the market going to be patient? There are so many moving pieces to the recovery plan and it opens itself up to things going wrong along the way," Stone said. "So for the short-term, the easiest forecast to make right now is for more volatility."

Lynch shared that assessment.

"There is light at the end of the tunnel. The economy and markets always find a way to adapt and innovate. But it's never pretty though," he said.

And that's exactly why Lynch is hoping that there is a sell-off sooner rather than later. The S&P 500 is currently hovering around 800, up from its early March closing low of about 677. If the markets continue to surge without evidence that the economy or earnings are finally ready to rebound, the eventual pullback would be much worse.

"I'd rather the market test the lows after the S&P 500 hits 800 than 1000. A euphoric rally without fundamentals justifying it would put too much air back into the market," he said.

How to get a job

2009-03-30T09:07:00.001-07:00

Rob Sparno recently did something that 12.5 million Americans would kill to do. He did something that has never been attempted by this many people at once in the 60 years the government has been keeping records. He did something that's getting only more difficult with every day.

He got a job. A really good job. A 'pay the mortgage and still be able to pay your kid's private college tuition' kind of job.

When Sparno, 55, a longtime salesman, lost his position at Oracle (ORCL, Fortune 500), he knew the search wasn't going to be easy. He had friends who were out of work and struggling to find jobs. He knew that getting back in the game would require every skill he'd spent his career honing. Methodical by nature, Sparno made a trip to Staples, where he bought a black hardcover lined notebook. He vowed to record every day what he did, whom he talked to, how he felt, how many miles he ran. He even wrote down what he ate.

To keep his spirits up (another must if you're in the persuasion business), he organized a group of seven other executives - including a former COO and CFO - who also lived in his community of Princeton, N.J. They got together every few weeks on Saturday morning in the back corner of a local diner and shared tips, like what to do in a second-round interview and how to gather job leads. And by 9 a.m. each morning Sparno and another jobless friend would call each other and check: Okay, what are we going to do with this day?
Talkback: Tell your recession story

Rather than blast out resumes, Sparno drew up a list of about 15 former colleagues who were now in leadership positions - his prospect list, in sales parlance. Then he sat down to write them e-mails. One note was to someone he hadn't talked to in years, an old colleague from Netscape who now worked at Salesforce.com. In his e-mail Sparno wrote that he was looking for the "next new thing." Minutes later he got a text message from his contact's BlackBerry with two words: "Call me."

As every salesperson knows, getting prospective buyers to meet with you is just the first step. The key is figuring out, What do they want? What keeps them up at night? Sparno read every story he could find on Salesforce.com (CRM). He watched YouTube videos of CEO Marc Benioff being interviewed by reporters, all the while taking notes. ("It was just like cramming for an exam.") To organize his thoughts, he assembled a five-slide PowerPoint presentation going through exactly how he would approach the job and what he would accomplish in the first 30, 60, and 90 days.

By the time he went for the final interview - his seventh - he had his pitch down perfectly. Halfway through the meeting, Sparno and the manager started discussing how to target a client Sparno had worked with before. The manager went up to the whiteboard to throw out some ideas, and Sparno leaped up to join him, until the two were standing shoulder to shoulder, markers in hand, batting strategies back and forth.

Two-and-a-half months after leaving Oracle, Sparno got the job. All it took was a scheduled daily pep talk, a fraternity of out-of-work neighbors, voluminous research, seven rounds of interviews, a bout of inspiration at the whiteboard, and, of course, a food diary.

You may have heard - it's rough out there. Not only is the unemployment rate the highest it's been in 25 years, but the situation is deteriorating fast. This is not your run-of-the-mill recessionary job market. If unemployment hits 10% next year, as some economists expect, the country will have seen the fastest rise in joblessness since the 1930s. What's more, as you've no doubt noticed from talking to neighbors and friends, the phenomenon is hitting a broad swath of the population: The unemployment rate of college graduates, 4.1%, is the highest on record since the government started keeping track in 1992. At this pace, economists at the left-leaning Economic Policy Institute estimate that in 2010 fully one-third of the U.S. population will at some point in the year be unemployed, or working part-time when they'd rather be full-time.

It's enough to drive the average job seeker to distraction. Like just about every unemployed twentysomething, Jamie Varon, 23, had her heart set on working at Twitter. She had already applied for a position through the company's website. And asked a contact at Google to put in a good word for her. And showed up at the company's headquarters with a bag of cookies in an attempt to charm a recruiter into talking to her. But she still hadn't landed an interview.

What Varon did next made her feel a little crazy. But then, it's a crazy time to be looking for a job. She created a website called twittershouldhireme.com, including her resume, recommendations, and a blog tracking her quest. Within 24 hours the company contacted her. She had a lunch meeting set up at Twitter, and in the meantime got two job offers from tech companies that had noticed her site, which has even spawned imitators: googleshouldhireme.com and facebookshouldhireme.com.

Getting noticed is a big accomplishment: Many companies have so many applicants that they're leery of advertising open positions. Just four hours after the Phoenix Coyotes of the National Hockey League posted a position for an assistant on Jobing.com, a manager called the site pleading for the ad to be taken down; the company had already received 180 resumes. UnitedHealthcare, for instance, asked Fortune not to disclose the number of jobs it has open. The spokesperson said he feared an onslaught of job seekers, citing a recent incident he had heard about where 700 people applied for a janitorial position at an Ohio school.

Still, hiring has not stalled entirely. According to the Bureau of Labor Statistics, while 2.5 million people were laid off in January, 4.4 million new workers were hired (bet that's a number you missed amid all the depressing news). But with the ratio of job seekers to openings at 3.9, vs. 1.7 at the start of the recession, the tactics that might have worked when the economy stalled in 1991 or 2001 simply won't cut it anymore. Just finding openings is a project in and of itself. "When you're in a recession and employers are all going stealth, you're probably looking at 90% or more [positions] being in the hidden job market," says David Perry of executive search firm Perry-Martel International and co-author of Guerrilla Marketing for Job Hunters.

Meaning a job seeker must be part detective, part consultant, part salesperson. Rob Sparno and Jamie Varon were willing to do whatever it took. Are you?
WHERE THE JOBS AREN'T

It's hot inside the National Capital Region Job Fair in Falls Church, Va., and it smells like sweat. Hundreds of nervous job seekers are navigating narrow hallways and waiting to talk with recruiters. You know it's bad when even the line for Freddie Mac is long.

Lisa Hamm, a recruiter for consulting firm Booz Allen Hamilton, takes a swig from her Aquafina bottle. It's all she has time for between talks with job hunters. People are waiting as long as an hour for just a few minutes of her time. The more impatient give up and simply plop their resumes onto a pile and walk away. You get the sense they're just buying an extra lottery ticket.

When Fortune called Hamm after the job fair, she reported that Booz Allen had received 250 resumes that day, but only four people were immediately asked in for interviews. In other words, those fair attendees might as well have played the lottery. "The thing to avoid is thinking that by sending out a ton of resumes, you're looking for a job. You're not," says Steven J. Greenberg, publisher of Jobs4point0.com, a website targeted at job seekers over 40.

That was a lesson Alfred Garcia, 43, learned fast. At the end of last year he found himself job hunting for the first time in his professional life when he had to shutter his Internet startup after funding fell through. "I came out of law school in '89, '90. You didn't so much look for a job as a job found you," he says.

The jobs he saw online were far below his experience and pay grade. So he hit the phones, calling about 40 former colleagues. A month into his search he reached a contact from his days at AOL who had started his own firm, Perfect Sense Digital, which helps companies manage their online strategy. As they chatted, it emerged that the CEO did know of some opportunities - at his own company. He hired Garcia as a contract consultant and a month later brought him in full-time.

Garcia had an enviable contact list at the ready. That's the best-case scenario. But what if you don't know a soul?

Jonathan Kooker, 31, graduated last spring from Georgetown's law school, and by his own admission he wasn't the glad-handing type. While his fellow students schmoozed at bars with big-firm recruiters, to Kooker "it felt like a hazing ritual."

So instead of embarking on a job search, Kooker went on a mentor search. He found the website of an immigration-lawyers group and started cold e-mailing. Kooker explains, "I'd e-mail, 'I'm interested in how you developed your career because I'd like to have that position in 20 years. Would you let me come interview you?'"

Before a meeting, Kooker would smooth out his curly dark hair and put on a suit, and he always arrived with ideas on how firms could attract more clients. He once walked into a meeting with the head of a firm's immigration department, and the woman said she would have to cancel because she was inundated with clients dealing with a new compliance rule. Kooker immediately responded, "Well, it's my opinion that this is a good thing, because I see it as an area to home in on for business." The attorney agreed to give him 15 minutes while she ate a sandwich at her desk. They ended up talking for 45 minutes, and by the end she basically said, "You're incredible. We're going to have to find you a job."

She referred him, and the next day Kooker received a call from another firm, which turned into his first offer. Another lawyer with 13 years' experience proposed a joint venture with Kooker. He even got an offer from a firm in Israel for some of its caseload - a job that Kooker took on. After contacting 60 lawyers and talking with 25, Kooker found it difficult to stop networking because he was learning so much. "They're all potential mentors, and although they may not have a job now, in four years they might. And they'll remember me," he says.

If you need to fill out your network quickly, one of the easiest moves is to join a professional association. David Stevens sensed he was on the verge of losing his job selling ads for two radio stations, so he joined his local chamber of commerce in Santa Clara, Calif. In the span of three months, while still working, Stevens forced himself to attend as many events as possible. Anytime he met someone at an event, Stevens would add him as a contact on LinkedIn, the social-networking site aimed at professionals. "When the time came, he says, I updated my [LinkedIn] status to 'I'm up for grabs - who wants me?'" Soon after, the CEO of the Santa Clara Chamber of Commerce called. There was an opening at the Mountain View Chamber of Commerce. Within a week Stevens, 28, was at his new desk.

Another way to build new contacts is to volunteer. Robin Palchus lost her job as a senior HR director at a national accounting firm last March, so she started spending more time working with a career-networking support group at her church. One evening she was paired with a man who needed help tweaking his resume and preparing for an interview. She gave him some tips, and within two weeks he sent her an e-mail saying he had a job. He thanked her, then offered to refer her to his new company, Booz Allen Hamilton. A few days later Palchus received a call from a recruiter there, and after 11 interviews she joined the company as a senior associate.

Now a caveat: Nobody has a free hour to hear your sob story. You have to make a compelling case for busy people to clear time for you. "Just meeting people to network in the industry broadly - no one has time for that now," says Lisa Rutherford, president of tech startup Twofish, which supports transactions in online games and social networks. You're best off coming with a referral and having a very specific request. "For example, if someone said to me, 'I'm looking at all the different mobile payment gateway providers, and I'd love to understand your perspective on these competitors,' obviously I can help with that," explains Rutherford.

One surefire way to grab people's attention is to offer intel on their competitors. David Perry, the headhunter, advises gathering such tidbits whenever you go on an interview. When the hiring manager asks whether you have any questions, Perry recommends saying, "Yes, as a matter of fact I do. I understand your five competitors are such and such. What is it about ABC Company that makes you guys nervous?" Take notes, and when you get to your car, pick up the phone and call those competitors: 'I just left an interview at XYZ Corp. Apparently you're doing this and this, and it's keeping them up at night. Do you have time for coffee?'"

It's hard to know how aggressive to be these days. Allen Wright and his son were just digging into their pancakes at an IHOP restaurant in Gainesville, Texas - they were coming back from the annual Texas-Oklahoma football game - when Wright spotted Larry Nichols, the CEO of Devon Energy, walking through the door with his wife. Wright was looking for a job after leaving Koch Industries to move to Oklahoma City, and Nichols was on his list of people to contact. Despite being unshaven and wearing a T-shirt and shorts, Wright caught Nichols and set up a meeting for the next week. After several more follow-up phone calls (about one a week), he eventually got the job as director of public affairs and employee engagement at Devon, the country's largest independent natural gas and oil producer. So being a bit of a noodge worked for Wright.

But Sara Laschever, co-author of "Women Don't Ask" with Linda C. Babcock, an economics professor at Carnegie Mellon, points out that for women especially, the pushiness required in this job market may be tough to pull off. "When men are being aggressive or being forthright or focused, we think, 'He's very goal-oriented,'" she says. "And when a woman does it, it's 'God, who does she think she is?'" Like it or not, says Laschever, their research shows that "for women to be persuasive, they need to be perceived as likable. Men just need to be perceived as confident."
WILL YOUR RÉSUMÉ EVEN BE READ?

On a recent morning in Columbus, Ga., 19 Aflac employees were seated around a table in a building next door, discussing some IT positions they needed to fill. Aflac has never had layoffs in its 54-year history and is now in the enviable position of attracting more talent than it has room for.

The recruiters are doing a status check on several open positions. An IT manager, Octavio Herrera, who's wearing a yellow tie with white Aflac ducks, says he's found some candidates on LinkedIn for a systems security administration position. For another opening, LaShena Smith, the senior technical recruiter at Aflac, reports that she interviewed someone whose manner she found too aggressive for the position. The candidate was dinged. As Herrera later notes, "Technology can always be taught. [I want] great communication skills and someone who works well with others."

Like many large companies, Aflac keeps a huge database of job applicants it can search for certain key words like "supervised staff" if the company wants someone with management experience. Anyone who applies online is funneled through this system.

Typically a recruiter will present four or five candidates to the manager, so perfecting your resume is critical. "The reality is we have a 'no' pile and a 'maybe' pile, and it takes four seconds to know where it winds up," says Glenn Fox, AOL's former head of recruiting and the CEO of BusinessElite, an invitation-only website for senior executives and those who hire them.

Always include metrics that describe your work: How many direct reports did you have? What was your budget? And be sure to mirror your resume to the description of the job you want. If the position is "product marketer" and you've done that kind of work before, actually use the words "product marketing" to describe your experience.

As for cover letters, recruiters and managers are split on how much weight they carry. Some advocate writing only a few compelling sentences, because no one has time to read a drawn-out letter. Others still recommend the traditional format of three or four paragraphs to show off your writing prowess. Kevin Donlin, president of Guaranteed resumes, advises clients to add a PS note at the bottom of a cover letter with a punchy sentence on why you'd be great for the job. People tend to read those out of curiosity.

Clever packaging can only take you so far, though. Peter Cappelli, a professor of management at the Wharton School, argues that since the 1980s there's been a fundamental shift in the way companies hire. As with just-in-time manufacturing, in which companies lower inventory to reduce carrying costs, Cappelli says employers are adjusting to changing markets by plugging in perfectly suited workers from the outside when they're needed, then dropping them when they're done. He calls it the "just-in-time workforce."

That is bad news for job seekers who are hoping to reinvent themselves in this recession. "You're not going to change your career in this downturn," he says. "Nobody's going to hire you and say, 'I know you were in finance, but we're going to retrain you to be in marketing.'" Adds Neil Davies, a Microsoft staffing manager. "If we need five things, in the current market we're not really moving forward on people who have four out of the five."

Sometimes, though, even when you're not perfect on paper, you can make a great case for yourself.
GETTING TO YES

"I have no reason to hire you," said the hiring manager at SAS, the software company, when Pat Bennett walked in for an interview. Bennett, 52, had no background selling technology software. But she pitched herself as a perfect fit in a unit targeting financial services clients. Her last job had been at LexisNexis, handling high-strung attorneys every day. Surely she could deal with hedge fund managers too. In her second-round interview, Bennett gave a presentation showing how she'd approach the business in her first 30 days. She got the job.

In this environment, companies simply can't afford to hope you'll be able to do the job. You need to demonstrate it. "Gone is the time when you could have the first year to prove yourself," says Juliet Flint, a partner at Kleiner Perkins Caufield Byers who advises the firm's portfolio companies on talent and recruiting. "You need to have immediate impact in the first 30 days."

Well before you're hired, there are ways to show off your strengths. The CEO of tech startup AdaptiveBlue said the company just hired an engineer who found three problems in the software he'd be testing before he even came in for an interview.

Michael J.A. Ehrlich, laid off from his job in research equity sales at Oppenheimer, found another clever way to show prospective employers he would bring in new business. He persuaded one former client, a hedge fund, to let him use its office to conduct his job search. The boutique research shop JNK Securities Corp. was so impressed that it hired him less than three weeks later.

If you dazzle a company enough, it might even create a position to make use of your talents. After Chris DeBrusk sold his consulting firm, he started kicking around an idea for a product to help financial services catch any ethical lapses by doing surveillance on their own trading activity. He took his idea to half-a-dozen companies, including Sapient in Boston, where he had worked eight years earlier. His presentations laid out the business opportunity, what kind of revenue upside it could bring, and when. Sapient brought him on in February. "In my experience most firms have open requirements," says DeBrusk. "It's about building the relationship first and then finding the job."

So when you're following up on an interview, don't just send a pat thank-you note. Think about what you learned from the interview and show how it sparked some new ideas about the job. If you're reading an article that seems relevant, send it along with some commentary. "Every so often I would send an article to a vice president to let him know I was thinking about the market," says Sparno. "I'd write, 'Hey, John, interesting article on market dynamics,' just to show him this is a guy who's thinking not just about a job - I'm someone who can think strategically."

Even though the market is brutal right now, the worst thing you can do for your career is to take a job that doesn't fit you. Not only will you not do your best work, but when the recession ends (and it will), you'll be moving in the wrong direction.

"I didn't want any job just to have a job," says Jonathan Kooker, the law school grad, "because then, when people start hiring again in two years, I'd be stuck with experience I didn't want." Sure, he's only 31. He doesn't have kids or a mortgage. But he does have something 12.5 million people desperately want: an employer.

Gas prices rise above $2

2009-03-26T09:18:00.001-07:00

Gas prices rose above the $2 mark for the first time in four months, according to a motorist group's daily survey Thursday.

The national average price for a gallon of regular unleaded gasoline increased to $2.009, up 2.3 cents from the previous day, motorist group AAA reported.

That's the ninth consecutive daily increase. In that time, prices at the pump have increased 9.9 cents on average, or 5.2%.

The last time gas was over $2 was Nov. 20, 2008, when the national average was $2.02.

The average price per gallon is down 51.1% from the record-high price of $4.114 that AAA reported on July 17, 2008.

Alaska has the highest prices, at $2.496 per gallon, while Wyoming is lowest at $1.798. Average prices are $2 and above in 22 states and the District of Columbia, AAA said.

Oil: In early trading on Thursday, oil prices jumped $1.23, or 2.3%, to $54.

The Energy Information Administration released a mixed inventory report Wednesday, showing soaring oil supplies but lower-than-expected gasoline stockpiles.

Oil prices remained lower but recovered from earlier losses on Wednesday as news of the Treasury Department's bad-bank plan, which pleased investors, outweighed the supply report. Crude prices settled down 2.2% to $52.77.

AIG dominates Obama's 9th week

2009-03-20T18:39:00.000-07:00

Outrage over $165 million in bonuses AIG paid to top executives after having received more than $170 billion in taxpayer-funded assistance eclipsed President Obama's ninth week in office.

"I understand how mad everybody is about this AIG bonus business," Obama said Thursday at a town hall meeting in Los Angeles. "And even though I didn't draw up these AIG contracts...it's my responsibility to fix the system."

The scandal fueled the anger many Americans already feel over the government's handling of the financial crisis. But the president maintained that aggressive action is key to the nation's economic recovery.

"We can be as mad as we want, but the fact of the matter is, we've got to work through this huge mess that was made in the financial system," he said.
The week that was

Bonus backlash: Obama bluntly criticized AIG on Monday, calling the bonuses an "outrage," and directed Treasury Secretary Tim Geithner to explore ways to block them.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said before unveiling a plan to help boost lending to small businesses. "It's hard to understand how derivative traders at AIG warranted any bonuses."

But the controversy came to a head Wednesday when Edward Liddy, AIG's chief executive, testified before Congress that paying the bonuses was "distasteful" but necessary because the company was contractually obligated to do so.

Liddy said he had asked some employees to give part of the money back, and that some had already complied. But lawmakers said they remained concerned about how AIG is being managed.

House lawmakers went one step further Thursday passing legislation aimed at recouping the bonuses by taxing individuals at companies that have received taxpayer-funded assistance.

Meanwhile, differing accounts of when officials learned of the bonuses resulted in a bout of finger pointing between Liddy and Geithner.

The Treasury Secretary was also scrutinized for a provision in the recently passed economic stimulus bill, included at his department's behest, that allowed AIG to pay out the bonuses.

AIG's woes stem from losses on insurance contracts it sold to holders of complex derivatives that have plummeted in value. The company also took massive writedowns on bad bets tied to the mortgage market made predominately by its financial products unit.

Fed: On Wednesday, the Federal Reserve announced plans to buy more than $1 trillion in assets, including $300 billion in U.S. bonds, in an effort to ease the flow of credit.

By purchasing government bonds, the central bank hopes to drive down interest rates on other types of loans, such as home loans and corporate debt, which would help boost the overall economy.

The move comes as the Fed's main tool for boosting economic activity, interest rates, has been effectively taken off the table. As expected, the Fed held its key interest rate steady near 0%.

Stock and bond prices soared immediately after the announcement. But the momentum faded as investors considered the long term effects of the plan, which would greatly expand the Fed's balance sheet and could undermine the value of the dollar.

Budget: Obama continued to push his long-term economic goals, saying that postponing investments in health care, renewable energy and education would be irresponsible.

"To kick these problems down the road for another four years or eight years would be to continue the same irresponsibility that led us to this point," he said.

Last month, the president unveiled a 10-year outline for the federal budget that calls for large investments in social services and would allow certain tax breaks for higher earning households to expire.

The plan, which projects a budget deficit of $1.75 trillion this year, has come under criticism for being overly ambitious and too expensive given the challenges already facing the nation's economy.

"There are those who say these plans are too ambitious," Obama said in Los Angeles. "Well, I say our challenges are too large to ignore."
The week ahead

Looking to the week ahead, Obama will address the nation on Tuesday in a prime-time news conference.

Also on Tuesday, the House Financial Services Committee will hear testimony from Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke on the AIG bonus payments.

100-day scorecard: Week 9 CNNMoney.com will continue to track Obama's first 100 days in office and keep score of the government's unprecedented efforts to fix the ailing economy.

Economic forecast index retreats

2009-03-19T07:55:00.000-07:00

A index forecasting economic activity fell in February, ending two months of surprise increases, after the government took action to inject money into the ailing financial system.

The index of leading economic indicators fell 0.4%, according to the Conference Board. The reading is intended to predict economic activity in the next 3-6 months.

Analysts were expecting a drop of 0.6%, according to a consensus of economists surveyed by Briefing.com.

The index rose unexpectedly in the prior two months. A jump of 0.4% in January followed an uptick of 0.2% in December.

The measure is based on 10 components, six of which increased in February: interest rate spread; index of supplier deliveries; building permits; real money supply; manufacturers' new orders for consumer goods and materials; and manufacturers' new orders for nondefense capital goods.

Some of those six indicators enjoyed surprising upticks in recent economic data.

Housing starts unexpectedly surged 22% February, after falling for eight months. It was the first time housing starts increased since June.

Declines: The remaining four components declined: average weekly initial claims for unemployment insurance; stock prices; index of consumer expectations, and average weekly manufacturing hours.

The components in decline aren't surprising after a slew of negative reports.

The number of people filing initial claims for unemployment benefits fell slightly last week, but continuing claims hit a fresh record high of more than 5.47 million.

The unemployment rate is up to 8.1%, the highest level in 25 years.

Stock prices rallied last week, but the Dow Jones industrial average is still down almost 50% from its peak in October 2007. Consumer confidence fell to a three-month low in February.

Fed takes action: The Federal Reserve in recent months has taken several steps to boost the financial system.

The Fed said Wednesday said it would spend up to $300 billion over the next six months to buy long-term Treasurys, a move designed to free up credit.

The Fed also announced plans to buy an additional $750 billion in mortgage-backed securities in an attempt to lower mortgage rates. The benchmark lending rate remained unchanged, as it was already at a record-low range of 0-0.25%.

It's hoped that these actions will inject liquidity into the credit markets and spark lending.

Laid off? Tips to keep health coverage

2009-03-18T09:07:00.001-07:00

With pink slips accelerating nationwide, health care experts say it's a good idea for everyone - even those who feel their job isn't at risk - to know about their health care rights and options.

"Being proactive about your [health care] coverage is vitally important, especially if you want to protect your family in these times," said Ankeny Minoux, president of the Foundation for Health Coverage Education.

Here are some tips to get you started:

Sign up for COBRA. If you are laid off, immediately ask the company exactly when your employer-paid coverage expires, according to Devon Herrick, health economist with the National Center for Policy Analysis.

By law, employers have to provide laid-off workers information about COBRA, a government mandate that gives workers who lose their health benefits the right to choose to continue coverage under their group plan for a limited period.

The typical monthly premium for COBRA is $300 for an individual and $1,000 for family coverage. You have to sign up for COBRA within 60 days of being laid off or you lose that option.

"People always think COBRA is too expensive," said Minou. But it's more affordable now under the stimulus bill" signed last month by President Obama. Specifically, the government will provide a 65% subsidy to businesses who continue COBRA premiums for laid-off employees for a period of 9 months. The subsidy will continue until Dec. 31, 2009.
0:00 /2:40Health care 2.0

COBRA coverage typically extends for 18 to 36 months. Once the COBRA coverage is exhausted, Minoux suggests people convert to an individual plan under HIPPA (Health Insurance Portability and Accountability Act) to avoid any gaps in their coverage.

Put the children in a CHIP plan. If you or your spouse can't afford the COBRA family premium, the parents can stay on COBRA but move the kids to the State Children's Health Insurance Program, which provides coverage for children living in families with income that is modest but too high for them to be eligible for Medicaid.

"Mix and match coverage options to keep the costs down," Minoux said.

This is also a good option to for low to mid-income families in which one or both parents are working but need to save money, Minoux said. In California, for example, families with a household income of $66,150, or 300% above the federal poverty level, can still enroll their children in a SCHIP plan.

In February, President Obama signed legislation extending the SCHIP program, expanding health coverage by an additional 3 million children, to 11 million children.

Put yourself on SCHIP. Some states offer programs that allow adults to enroll in SCHIP programs.

In Connecticut, the Health Care for Uninsured Kids and Youth program includes parents, relatives, caregivers and pregnant women in families that have household incomes between 185% to 235% above the federal poverty limit, or between $38,000 to $55,000.

Your job shipped overseas? Look into the Health Care Tax Credit (HCTC).

"If your company has moved overseas, or is outsourcing its operations, the government will pick up part of the [insurance] premium," said Minoux.

She said the "displaced" worker would pay 20% and the government would pay as much as 80% of the premium as long as the unemployed worker receives benefits under the Trade Adjustment Assistance (TAA) program.

About to retire? You have to be 65 years old before you are eligible for Medicare.

So what happens if you are 55 years old, are laid off and have a pre-existing medical condition? If you were on your employer's health plan, you will qualify for COBRA and subsequently for an individual plan.

However, if you weren't on your employer's health plan, then you won't qualify for COBRA. In that case, Minoux said people should look for "high risk pool" insurance options in their state, such as the MRMIP (Major Risk Medical Insurance Program) offered in California.

This is a 36-month program that provides coverage to people with pre-existing medical conditions.

Prescription assistance. Organizations such as non-profit Partnership for Prescription Assistance offer free programs to provide discounts of as much as 20% on prescription drugs, which can help save on drug costs, especially when there's no income coming in.

Lastly, Minoux said several of these state-funded programs have waiting lists, so it might be worth while to sign up for more than one.

"Don't be deterred," she said.

Stocks headed for a lower open

2009-03-17T06:00:00.001-07:00

Stocks were set for a mostly lower open Tuesday as investors looking to restart last week's rally await government reports on the housing market and inflation.

At 8:15 a.m. ET, the Dow Jones industrial average and the S&P futures were down modestly, while the Nasdaq futures made slight gains.

Futures measure current index values against the perceived future performance. Futures can be used as a forecast for trading activity after the bell, though they're not always accurate.
0:00 /04:02'Starting to form the bottom'

On Monday, stocks couldn't sustain earlier gains, snapping a four-session winning streak. The Dow lost 7 points, the S&P was down 0.4% and the Nasdaq fell nearly 2% as tech stocks faltered.

"The market is trying to hold on to the gains, so it needs to trade within narrow levels, unless we have some earth shattering news, one way or another," said Peter Cardillo, chief market economist for Avalon Partners.

Global markets on Tuesday were mixed. In Asia, Tokyo's Nikkei index surged 3.2%. The European markets were lower in midday trading.

Economy: The government issues key reports on housing and inflation before the markets open.

Housing starts are expected to have fallen in February to a 450,000 annual rate in February from 466,000 the previous month, according to a consensus of economists surveyed by Briefing.com. Building permits are expected to have dropped to a 500,000 annual rate from 531,000 in January.

The Producer Price Index (PPI), a measure of wholesale inflation, is forecast to have risen 0.4% in February, according to the Briefing.com consensus, after rising 0.8% in the previous month. The so-called core PPI, which strips volatile food and energy prices, is expected to be up 0.1% after climbing 0.4% in the previous month.

The Fed's policy-making body begins a two-day meeting. It's expected to hold interest rates steady near zero percent, and determine the best ways to help kick the economy out of the recession.

Companies: The aluminum company Alcoa (AA, Fortune 500) said it slashed its dividend by 82% on Monday, in an effort to reduce costs by $2.4 billion annually. This includes the ongoing plan to cut 13,500 jobs by the end of the year. Alcoa shares were down 12% in premarket trading.

Retailer Target (TGT, Fortune 500) is facing a proxy fight, as shareholder William Ackerman is pushing to nominate five board seats. Target shares rose 2% in premarket trading.

Oil and money: Oil prices edged down 3 cents a barrel to $47.32. The dollar rose versus the euro, the British pound and the yen.

Bank stocks continue their surge

2009-03-16T10:01:00.000-07:00

Bank stocks extended last week's big rally on Monday as persistent fears about the underlying health of the beleaguered sector continue to subside.

JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) gained 4% and nearly 12% respectively in early afternoon trading. Shares of Citigroup (C, Fortune 500), which slipped to a low of 97 cents a share earlier this month, enjoyed its seventh-straight gain, climbing more than 30% to about $2.32.

Bank stocks have rallied in four out the last five trading sessions after top executives at some of the biggest firms, including JPMorgan Chase and Citigroup, indicated that they were profitable during the first two months of the year.

The KBW Bank Index and S&P Banking Index, two widely-watched sector indicators, gained 37% and 46% last week.

Helping lead bank stocks higher Monday was a report that the British banking giant Barclays (BCS) was looking to sell its iShares business, a part of its asset-management division. The Wall Street Journal reported that the sale could fetch $5.6 billion.

Also providing a boost was Monday's proposal by the Financial Accounting Standards Board, the private-sector group that sets U.S. accounting rules along with the SEC, to give companies that rely on mark-to-market accounting greater leeway in valuing assets.

The proposed change could help stem the tide of painful writedowns that banks have suffered over the last year and possibly fuel investor interest in the group.

"There is a general relief that these banks are not in an endless tailspin," said Marshall Front, chairman of Chicago-based money management firm Front Barnett Associates. "People are now looking for opportunities instead of running from risk."

Stocks look to extend rally

2009-02-06T05:26:00.000-08:00

U.S. stock futures were modestly higher Friday, ahead of a key reading on employment.

At 6:42 a.m. ET, Dow Jones industrial average, Standard & Poor's 500 and Nasdaq 100 futures were up slightly.

Futures measure current index values against perceived future performance and give an indication of how markets may open when trading begins in New York.

Jobs: The mood on Wall Street is likely to be influenced by the Labor Department's monthly employment report, due out at 8:30 a.m. ET.

Employers are expected to have cut 540,000 jobs in January after dropping 524,000 jobs in December. The unemployment rate, generated by a separate survey, is expected to have risen to 7.5% from 7.2% the previous month.

Stimulus: The Senate is set to resume deliberations Friday morning over a nearly $900 billion stimulus bill. Lawmakers generally agree that an economic recovery package is required but there are concerns about the size of the bill and some of its measures.

President Obama is also expected to name members of his Economic Recovery Advisory Board Friday. The panel, which will be headed by former Federal Reserve chairman Paul Volcker and made of a mix of leaders from the business world, will advise the White House on reviving the ailing U.S. economy.

Bank bailout: Treasury Secretary Tim Geithner is expected to detail the Obama administration's strategy for reviving the banking system on Monday. Several options have been under discussion, including a government-funded "bad bank" that would remove toxic assets from bank balance sheets.

Corporate results: After the market close Thursday, News Corp. (NWS, Fortune 500) reported a quarterly loss of $8.4 billion. Excluding charges, the media conglomerate reported earnings of 12 cents per share, which was short of Wall Street's estimates.

Toyota Motor (TM) warned of a much bigger yearly loss Friday, hurt by a sharp decline in automotive sales around the globe. The Japanese firm said it expects to report an operating loss of $4.95 billion when it reports its full-year results in March.

World markets: Global stocks mostly rose, boosted by hopes that the U.S. was close to taking more steps to bolster its economy. In Asia, the Nikkei and Hang Seng rallied. Stocks in London, Paris and Frankfurt were modestly higher in early trading.

Oil prices retreated towards $40 a barrel Friday, falling $1.05 to $40.12 a barrel in NYMEX electronic trading.

In currency trading, the dollar was little changed versus both the euro and the British pound, and was slightly weaker versus the yen.

Big push for smaller stimulus

2009-02-06T05:22:00.000-08:00

Tens of billions smaller and more precisely targeted.

That's the kind of economic recovery package a bipartisan group of moderate senators has been trying to craft for the Senate's consideration.

Until late Thursday night, the chamber debated amendments to a nearly $900 billion stimulus bill. Lawmakers generally agreed that stimulus is required but nevertheless Republicans and some Democrats questioned the bill's mix of measures and its size.

But it was unclear when -- or how -- their standoff with Democratic leaders trying to expedite a vote would end. The Senate is set to resume deliberations on Friday morning.

Sen. Evan Bayh, D-Ind., said earlier on Thursday there was a "backbone" to a deal among members of the bipartisan group, but that the details were still being worked out between the 12 Democrats and five Republicans at the meeting.

After the group's second meeting Thursday afternoon, senators sounded less optimistic, noting how difficult it is to find the right balance between cutting some programs, and adding spending on infrastructure.

Sen. Susan Collins, R-Maine, who is leading the negotiations along with Sen. Ben Nelson, D-Neb., told CNN that she originally didn't want a package larger than $650 billion but that President Obama, who met with her and Nelson on Wednesday, convinced her of the need for a larger bill.

But Collins also said she could not support a bill as large as the $819.5 billion package passed by the House last week.

"We don't want a package that is too small because that will end up just wasting money. On the other hand, we're very leery of having an enormous package that would not be necessary and would just boost the federal deficit," Collins told CNN as Nelson nodded in agreement.

A spokesman for Collins told CNNMoney.com on Wednesday that ideally the senator would like a package with funding for transportation and environmental infrastructure, energy efficiency, job training for the unemployed, state fiscal relief, education, housing, and tax incentives for small businesses and low- and middle-income families.

The group's package is expected to trim tens of billions of dollars in provisions from the nearly $900 billion Senate bill being debated this week.

The excised provisions are likely to fall into the category of what Republicans have classified as "wasteful" spending or earmarks; or what lawmakers on both sides of the aisle have identified as worthwhile endeavors but not necessarily stimulating enough in the foreseeable future to justify bypassing normal legislative consideration.

"Whatever you have in there ... you want to be as robust a stimulus as you can have it so that it's not just a spending bill," Nelson said.

Sources told CNN that Obama suggested in meetings Wednesday that he would accept only minor changes to his tax cuts, but was open to pulling more of the controversial spending projects out of the bill.

The bipartisan group's proposed substitution package - if they can agree on one - is not the only substitution that will be considered by the Senate, but it's likely to influence the final package the Senate votes on.

Democrats have said they want to get a package to the president that he can sign into law by Presidents Day, Feb. 16. After the Senate votes on its version of stimulus, the Senate and House will have to reconcile the differences between their two bills.

President Obama is scheduled to hold a news conference Monday evening at 8 p.m. It will be part of his ongoing efforts to convince lawmakers and the public that the economic recovery package is needed immediately and that the framework laid out in the Democrats' bills in the House and Senate will offer near-term stimulus and long-term growth.

In a speech to Democrats Thursday night, Obama reiterated why he felt Congress needed to move quickly. "I'd love to be leisurely about this," he said, but noted that economists say that the country will fall $2 trillion short of its potential output over the next two years.

"The reason this has to be big is to fill some of that lost demand," Obama said.

Ex-Nasdaq chair arrested for securities fraud

2008-12-12T07:09:00.000-08:00

Former Nasdaq chairman Bernard Madoff was arrested Thursday and charged with a single count of securities fraud for allegedly operating a multibillion-dollar Ponzi scheme from his investment advisory business, federal authorities said.

Madoff, 70, operated the advisory business separately from his Bernard L. Madoff Investment Securities, a securities broker dealer with its principal office in New York City, the Department of Justice said.

"We are alleging a massive fraud - both in terms of scope and duration," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "We are moving quickly and decisively to stop the fraud and protect remaining assets for investors, and we are working closely with the criminal authorities to hold Mr. Madoff accountable."

A source with knowledge of the investigation told CNN that Madoff appeared in court Thursday and bail was set at $10 million bond. The bond was signed and Madoff was released.

According to the complaint filed with the U.S. District Court of Southern New York, two senior employees of the securities broker firm told investigators that Madoff ran the advisory business from a separate floor of the securities firm offices. One of the senior employees said that Madoff kept the advisory business' financial records under lock and key and was "cryptic" about its business.

A document filed by Madoff with the Securities and Exchange Commission early this year said the advisory business served between 11 and 25 clients and had about $17.1 billion in assets, the complaint said.

But on Wednesday, the complaint said, Madoff told senior employees that the advisory business was a fraud, that he was "finished," had "absolutely nothing," that "it's all just one big lie" and that it was "basically, a giant Ponzi scheme."

Madoff said the business had lost about $50 billion and that he planned to turn himself in to authorities in a week. But, the complaint said, he told the employees he wanted to distribute the $200 million to $300 million he had left to certain selected employees, family and friends.

Madoff faces a maximum penalty of 20 years in prison and a $5 million fine if he is convicted.

The SEC sued Madoff Thursday, accusing him of a "multi-billion dollar Ponzi scheme that he perpetrated on advisory clients of his firm." In the suit filed in Manhattan federal court, the SEC said it was seeking an asset freeze and appointment of a receiver for the firm as emergency relief for investors, an SEC statement said.

Madoff's attorney, Daniel J. Horwitz, said, "Bernie Madoff is a long-standing leader in the financial services industry. He intends to fight to get through this unfortunate set of events."

Ted Weisberg, president of Seaport Securities, said that Madoff "was an innovator" who, for years, offered investors a guaranteed return and that he continued to attract investors in that way.

Madoff was known as a hard-working, solid broker, Weisberg said, and the news is "inconceivable" to people who knew him.

Madoff founded his securities firm in 1960 and expanded to a worldwide client base. He served as Nasdaq's chairman in 1990, 1991 and 1993, according to Nasdaq Senior Vice President of Communications Bethany Sherman.

World leaders confront global crisis

2008-11-15T07:04:00.000-08:00

World leaders convened Saturday for a second straight day hoping to tackle a financial crisis that has ricocheted across the globe and left the United States and other countries on the brink of deep recessions.

Their goal: to prevent a similar calamity from happening again.

The historic two-day summit meeting, which brought together prime ministers and presidents from Group of 20 countries, got in full swing Saturday following an extravagant working dinner at the White House.

"We had a good frank discussion last night," President Bush said. "There's some progress being made, but there's still a lot more work to be done."

The conference participants were aiming to figure out what caused the global crisis and assess government responses to it, Bush said Friday. The summit would also identify regulatory reforms and launch a "specific action plan" to implement them, he said.

"Billions of hardworking people are counting on us to strengthen our financial systems for the long term," he added.

Bush is expected to make a statement at about 3 p.m. ET on the findings of the summit.

Still, the expectations for the talks remain low.

In the days leading up to the summit, speculation abounded that leaders would accomplish little else but narrowing the focus for future talks - likely to be held in the first few months of 2009 after U.S. President-elect Barack Obama is sworn into office.

Obama is not attending this weekend's summit. He sent as emissaries former U.S. Secretary of State Madeleine Albright and Jim Leach, a former Republican congressman from Iowa.

Bush, who offered to host the meeting nearly a month ago, echoed those exact sentiments in remarks made earlier this week. The imminent change in power at the White House has led many to believe that could also hamper any progress.

Attendees of the summit include leaders from such nations as China, Brazil, Saudi Arabia and Japan.
A world of trouble

The pace of the world's financial problems - rooted in large part in the collapse of housing prices and risky lending and borrowing - have accelerated in recent weeks.

The Organization for Economic Cooperation and Development, an international group based in Paris, said this week that the gross domestic product for its 30 members was likely to fall by 0.3% in 2009.

Major indexes around the globe have fallen off a cliff over the last two months. The Russian stock market has lost 65.5% of its value since the start of the year. Stocks in Japan and the United States have been equally hard hit, falling 42% and 33%, respectively.

Some countries have nearly collapsed under the weight the economic crisis.

In Europe, the pain spans countries of all sizes.

The 15 nations that share a common currency - the euro - said this week that their economies are in recession. Germany, Europe's largest economy, is suffering.

In Iceland, where the government intervened to save the banking system from total failure, inflation is running at a painful 12.1% while economic growth has nearly flatlined.

Central bankers and government officials, hoping to halt the contagion, have taken unprecedented steps in recent weeks.

Britain, France and the United States have bought ownership stakes in banks and pumped them full of capital in the hopes of unlocking frozen credit markets. Earlier this week, China unveiled a massive, $585 billion economic stimulus package to try to keep its once red-hot economy moving forward.
Remembering Bretton Woods

With the crisis showing no signs of abating, several leaders have been trying to advance an agenda for the talks, which some observers have referred to as "Bretton Woods II" - a nod to a similar global economic summit held in July 1944 to reverse some of the painful trade and foreign exchange policies enacted in the wake of the Great Depression.

There have been calls, for example, to create a global accounting standard to replace the current mark-to-market standard, which some have blamed for the billions of dollars of losses suffered by banks.

Credit rating agencies and hedge funds have also become a target. French President Nicholas Sarkozy, who has embraced a hard-line approach toward regulation, has publicly said he is in favor of greater oversight of both industries.

And there has also been speculation that additional countries could enact economic stimulus packages of their own in the wake of the talks.

But what is expected to remain front and center is the subject of regulation and how to best modernize the global financial system for the 21st century.

One approach could involve granting greater powers to the Financial Stability Forum, which represents central bankers and regulators, or the International Monetary Fund, which has played a large role in recent weeks helping to bail out struggling countries.

Another possibility could involve the creation of a college of regulatory supervisors that would exchange notes about some of the trends and risks they are seeing within their own borders.

FDIC's Bair pushes aggressive mortgage plan

2008-11-14T06:18:00.000-08:00

In a surprise move, FDIC Chairwoman Sheila Bair Friday unveiled details of her plan to have the government help delinquent homeowners.

The proposal would have the government share up to 50% of the losses if the homeowner re-defaulted on the modified loan.

The plan is expected to initially help 2.2 million borrowers get new loans; after some borrowers re-default, 1.5 million would ultimately keep their homes, the FDIC estimated.

It would also pay servicers $1,000 to adjust the loan so that monthly payments were as low as 31% of a borrower's income.

The plan would cost an estimated $24.4 billion, which Bair has said could come from the $700 billion bailout Congress approved last month.

"It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures," the Federal Deposit Insurance Corp. said in a statement Friday. "A loss share guarantee on re-defaults of modified mortgages can provide the necessary incentive to modify mortgages on a sufficient scale."

Bair's move Friday sets up a public power struggle not often seen within an administration.

The FDIC chairman has long pushed for the government to take a more active role in helping troubled homeowners. She initiated a similar plan at IndyMac, one of the largest mortgage lenders, after the agency took it over in mid-July.

Bush administration officials, however, have resisted her efforts, instead unveiling a plan Tuesday to streamline modifications of loans held or guaranteed by Fannie Mae and Freddie Mac.

Though he praised Bair's proposal, Treasury Secretary Henry Paulson Wednesday said it was one of several under discussion. Bair supporters took that to mean the plan was essentially dead.

Congressional Democrats, however, have continued to press for increased assistance to homeowners. They have publicly backed Bair, which could give her proposal the support needed for adoption.

"[The Fannie/Freddie plan] should not be considered a replacement for the guarantee program authorized by the recently-enacted financial rescue law which the FDIC has agreed to operate," Sen. Christopher Dodd, D-Conn. said Tuesday, after the mortgage finance plan was announced.

"We are still awaiting agreement from the Treasury Department to move this program forward, despite indications given to me weeks ago that an agreement was imminent. I have been in contact with both Secretary Paulson and Chairman Bair on this issue, and I intend to keep pushing for more aggressive and effective action."
Backstopping loan modifications

Borrowers who are at least 60 days late on payments would qualify for this program.

Servicers would have to systematically review all the loans in their portfolios to determine whether they would recover more value by modifying the mortgage rather than foreclosing on the home.

Loans would be adjusted by reducing the interest rate, extending the term or deferring part of the principal to the end of the mortgage.

But unlike some other government programs, the FDIC proposal would not reduce the principal to bring it in line with the home's current value. Some consumer advocates consider principal reduction key to assisting borrowers in areas where property values have plummeted, leaving many with mortgages greater than their home's worth.

Under the Hope for Homeowner program implemented last month, mortgages would be written down to 90% of the home's current market value and borrowers would be refinanced into 30-year fixed-rate mortgages insured by the Federal Housing Administration.

The FDIC's program, on the other hand, would not be as beneficial for so-called underwater homeowners. For situations where the mortgage is worth more than the home, the government's loss-sharing arrangement would gradually decline to 20% before ending for homes where the loan-to-value exceeds 150%. The loss-sharing arrangement would last for eight years.

Gas prices near $2.25

2008-11-10T06:44:00.001-08:00

Gasoline prices fell for the 53rd straight day, according a survey released Sunday by the motorist group AAA.

The average price of regular unleaded decreased to $2.259, a 2.3 cent drop from Saturday, according to the national survey, which is based on credit card swipes at gas stations. Before this week, the last time prices were this low was on February 24, 2007, according to AAA.

Over the last 53 days, prices have sunk $1.59, a 41.4% decrease, according to AAA.

A separate national survey found that gas prices dropped a little more than 48 cents in the last two weeks, continuing a dramatic fall.

It was the second largest drop in the six-decade history of the Lundberg Survey. The previous largest drop was just a few weeks ago, the last time the survey was conducted.

The average price of self-serve, unleaded gasoline in the United States on Friday was about $2.30 a gallon, said publisher Trilby Lundberg.

Demand for gasoline has continued to slip, despite the fall in gas prices. MasterCard's weekly survey of gas station credit card swipes showed demand down 3.9% last week, compared to the same period last year.

Prices have dropped 45%, or almost $1.86, from their record high of $4.114 a gallon set July 17, by AAA's count. The average price per gallon dropped below $3 on Oct. 18, the first time in nearly nine months.

The all-time high average was $4.11, set on July 11, according to Lundberg, and prices have been dropping ever since.

She attributed the price reductions to a drop in crude prices and demand.

By state, Alaska reported the highest average gas prices, $3.298 per gallon, while Missouri boasted the cheapest, at $1.949 a gallon, according to AAA.

Gasoline prices have fallen while average crude prices have done the same in the past four months. U.S. crude for December delivery settled at $61.04 a barrel in New York trading on Friday, down from its high of $147.27 a barrel on July 11.

Only two states, Alaska and Hawaii, have average gas prices above $3 per gallon, while 22 states now report prices below $2.25 per gallon, AAA found.

By city, Lundberg found that Tulsa, Oklahoma, posted the lowest average gas price of $1.89 Friday. The highest averages were $3.14 in Anchorage, Alaska, and $3.09 in Honolulu, Hawaii.

Average prices in some other cities, according to Lundberg:

Detroit, Michigan $2.02

Denver, Colorado $2.15

Atlanta, Georgia $2.16

Boston Massachusetts $2.38

Philadelphia, Pennsylvania $2.41

Los Angeles, California $2.61

The AAA figures are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. Many drivers have reported even lower prices across the country.

The Lundberg Survey is based on responses from more than 5,000 service stations nationwide.

Chevron's profit soars

2008-10-31T07:33:00.001-07:00

Chevron Corp. said Friday its third-quarter profit more than doubled on the back of record crude prices this summer, though worldwide production fell during the period.

The San Ramon, Calif.-based company, the second-largest U.S. oil company, said it made $7.89 billion, or $3.85 a share, in the three months ended Sept. 30, versus $3.72 billion, or $1.75 per share, at the same time last year.

Analysts were expecting average earnings of $3.25 per share based on a survey by Thomson Reuters.

Revenue shot up 43% to $78.87 billion from $55.2 billion.

Shares in premarket trading slipped 19 cents to $73.99.

Chevron (CVX, Fortune 500) capped off a continued string of robust quarterly profit reports from the world's major oil companies, including another U.S. corporate profit record for No. 1 Exxon Mobil Corp. (XOM, Fortune 500)

Crude prices peaked at $147 near the start of the quarter in mid-July before embarking on a dramatic slide that has continued into the fourth quarter. When the third quarter ended Sept. 30, benchmark crude prices were still around $100 a barrel. In early trading Friday, they slipped below $64 a barrel.

"Our disciplined capital spending and tight control over costs remain extremely important in today's uncertain economic climate," said Chevron chairman and chief executive Dave O'Reilly. "Our strong balance sheet enables Chevron to continue investing in attractive projects that increase the production of oil and gas and improve the efficiency of our refinery network."

Chevron said earnings from its exploration and production, or upstream, business rose about 80% in the quarter to $6.18 billion, buoyed by crude prices.

However, global production fell nearly 6% to an average of 2.44 million barrels of oil equivalent a day, hurt in part from late-summer hurricanes that shut down output in the Gulf of Mexico.

At its U.S. upstream arm, Chevron said the average sales price for a barrel of crude and natural gas liquids was $107 in the third quarter, up from $67 a year ago.

Stocks down for day, up for week

2008-10-20T07:42:00.000-07:00

Stocks ended a choppy session lower Friday - at the end of a turbulent week - as ongoing recession fears vied with Google's earnings and bullish comments from Warren Buffett.

Treasury prices advanced, lowering the corresponding yields, and the dollar gained versus other major currencies. The credit market showed some signs of loosening, as several key lending rates declined.

The Dow Jones industrial average (INDU) fell 127 points, or 1.4%. The Dow fell as much as 261 points in the morning and rose as much as 301 points in the afternoon.

The Standard & Poor's 500 (SPX) index lost 0.6% and the Nasdaq composite (COMP) lost 0.4%.

Stocks seesawed Friday as a report showing housing starts fell to a 17-year low was countered by Google's earnings and bullish comments from influential investor Warren Buffett.

Markets were also impacted by the monthly options expiration, which can cause increased volatility in the underlying equities.

Despite the extremely volatile week, stocks managed to end with gains for the five-session period, which included the Dow's biggest one-day point gain ever on Monday and the second-biggest point loss ever on Wednesday. For the week, the Dow and S&P 500 both added 4.7% and the Nasdaq added 3.6%.

The advance this week added $500 billion in market value, according to gains in the Dow Jones Wilshire 5000, the broadest measure of the stock market.

Overall, the tone of the market seems to be better this week, compared to last week, with perhaps the exception of Wednesday's big slump, said Ron Kiddoo, chief investment officer at Cozad Asset Management.

"I think we've been helped by the government not coming out with a new program every day and by people starting to accept that the credit market will improve over time," Kiddoo said.

However, the volatility isn't likely to disappear anytime soon, he said.

Looking for a bottom: Friday's session caps off an especially volatile week on Wall Street, which started with the Dow's 936-point rally on Monday - its best day ever on a point basis and best on a percentage basis since 1933. That rally was in anticipation of Tuesday's announcement that the government will inject $250 billion directly into banks.

But the announcement sparked a sell-the-news response, with equities slipping modestly Tuesday. On Wednesday, recession talk sent the Dow down 733 points. On Thursday, the Dow rallied 401 points late in the session after slumping in the morning. And Friday's market saw a 127-point Dow loss.

Although stomach churning for investors, this week was at least better than last week - Wall Street's worst ever - as the Dow capped an eight-session selloff that cut 2,400 points and 22% off the blue-chip indicator.

On the upside, many market pros are cautiously optimistic that last week's lows for the three major gauges represent a bottom for the current bear market. In this week's tilt-a-whirl, the major gauges got close to those lows, but managed to bounce back - another indication that a bottom may have been set.

"There's no doubt the selling activity was a bottom, the question going forward is whether it was the bottom," said Jim Dunigan, chief investment officer at PNC Wealth Management.

Home construction tumbles: Housing starts fell to a 17-year low in September, according to a government report released Friday before the market opened. Starts fell to a seasonally adjusted 817,000 in the month from 872,000 the previous month. Economists were expecting a smaller decline.

Applications for building permits, considered a good indicator of future activity, fell to a seasonally adjusted rate of 786,000 in September, down from a revised 857,000 in August. Economists were expecting a smaller decline. (Full story)

Another economic report, the University of Michigan's consumer sentiment index, fell to 57.5 in October from 70.3 at the end of September, the biggest month-over-month slide in the history of the report. Economists surveyed by Briefing.com thought it would slide to 65.

Company news: Google (GOOG, Fortune 500) reported higher-than-expected third-quarter earnings Thursday night, on revenue that was in line with forecasts. The search engine's shares rose 5.5% Friday. (Full story)

Also late Thursday, Advanced Micro Devices (AMD, Fortune 500) reported a narrower quarterly loss, while IBM (IBM, Fortune 500) reported higher profit that beat estimates, after pre-announcing the results last week. AMD shares rose 2% while IBM shares ended a bit lower.

In financial services news, AIG (AIG, Fortune 500) said late Thursday that it has tapped another $12 billion in emergency government funding, bringing its total to $82.9 billion as it struggles to stay afloat. AIG fell 13.6%. (Full story)

Other financial sector decliners included Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and Wachovia (WB, Fortune 500) and Wells Fargo (WFC, Fortune 500).

Dow stock Merck (MRK, Fortune 500) rose after UBS upgraded it to "neutral" from "buy," Briefing.com reported.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers by nine to seven as 1.74 billion shares changed hands. On the Nasdaq, decliners topped advancers four to three on volume of 2.77 billion shares.

Bush and Buffett: President Bush, speaking early Friday, reiterated the steps that the government has taken to try to stabilize roiling financial markets. (Full story)

While investors have welcomed many of the steps to get money flowing again, stocks have remained volatile and mostly negative. Year-to-date, the Dow, S&P and Nasdaq are all down at least 30%.

On Friday, Berkshire Hathaway (BRK.A) head honcho Warren Buffett said in a New York Times commentary that he is moving to stocks from Treasurys in his personal portfolio.

The influential investor said business activity will continue to dwindle as the economy struggles. But the fear surrounding the economic slowdown and the credit crisis has left stocks with attractive valuations. (Full story)

Credit market: Lending rates have improved this week, as the government initiatives have started to have an impact. (Full story)

Libor, the overnight bank-to-bank lending rate, fell to 1.67% from 1.94% late Thursday, according to Bloomberg.com, a more than four-year low. But longer-term rates have fallen more slowly. The three-month Libor, what banks charge each other to borrow for three months, fell to 4.42% from 4.50% Thursday.

Another indicator, the Libor-OIS spread, a measure of cash scarcity, fell to 3.31% from 3.39% Thursday.

The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed to 3.63% from 4.11% late Thursday. The spread hit a record 4.65% last week. The wider the spread, the more reluctant banks are to lend to each other.

Credit froze up in the wake of the housing market collapse, the subsequent subprime lending fallout and contraction in the bank sector. The lack of available credit has punished the already weak economy, making it difficult for businesses to function on a daily basis and for consumers to get loans.

The Federal Reserve has made potentially trillions of dollars available to banks. Earlier this week, the U.S. government said it would invest at least $250 billion in the nation's banks as part of the $750 billion bank bailout plan.

Treasury prices rose, lowering the yield on the 10-year note at 3.97%. Treasury prices and yields move in opposite directions.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, rose 0.80% from 0.48% late Tuesday, suggesting investors are still willing to take a meager return on their money rather than risk the stock market.

However, it was an improvement from last month, when the yield on the 3-month bill skidded to a 68-year low around 0%.

Other markets: U.S. light crude oil for November delivery rose $2 to settle at $71.85 a barrel on the New York Mercantile Exchange after ending the previous session at a 13-month low.

Bets that demand is slowing have sent oil prices lower since crude hit an all-time high of $147.27 a barrel on July 11. So far, instead of providing relief to investors, the decline has been seen as another indication of the global economic slowdown.

Gasoline prices fell another 4.4 cents overnight, to a national average of $3.04 a gallon, according to a survey of credit card activity by motorist group AAA. It was the 30th consecutive day that prices have decreased - in the past month alone, they're down more than 81 cents a gallon.

COMEX gold for December delivery slumped $16.80 to settle at $787.70 an ounce. A variety of other metals declined as well.

In currency trading, the dollar rose against the euro and the yen.

Record declines in hedge funds

2008-10-17T09:27:00.001-07:00

Nervous investors fled hedge funds as the market meltdown got underway, setting records for investor redemptions and asset declines in the third quarter, according to a report from an industry research firm issued Friday.

Hedge Fund Research, a Chicago-based firm, said investors took out more than $31 billion in the quarter, the largest net capital redemption in the industry history.

That contributed to a record $210 billion decline in industry assets in the quarter, most of it from investment losses, the firm said. The quarterly drop was more than last year's total record inflow of $194 billion.

For the first nine months of 2008, funds have registered a net capital decline of $2.5 billion.

The firm said September, which saw such events as the Lehman Brothers bankruptcy and government intervention in Fannie Mae, Freddie Mac and American International Group, was the second worst month in industry history. It said funds lost 5.5% last month, second only to the 8.7% drop in August 1998.

Total capital in the entire industry shrunk to $1.72 trillion at the end of the third quarter, down from $1.93 trillion at the end of the second quarter.

An index developed by Hedge Fund Research indicates that this year could result in the first annual hedge fund performance decline since 2002.

"With losses continuing through October, it appears that 2008 will be the worst year on record for both hedge fund performance and industry asset flows," said Kenneth Heinz, Hedge Fund Research's president, in a statement.

Oil ends at 13-month low

2008-10-15T20:11:00.000-07:00

Oil prices sank Wednesday as investors saw further signs of economic weakness and worried that a U.S. recession could kill demand for fuel.

U.S. crude for November delivery ended the day down $4.09 to $74.54 a barrel, the lowest settlement since Aug. 31, 2007 when the front-month contract closed at $74.04 a barrel.

Oil investors have been concerned about falling demand since crude futures peaked at a record $147.27 a barrel in mid-July.

As the economy slows energy spending is often among the first areas where consumers and businesses cut back, according to analysts.

"Indeed, the U.S. economy appears to be in a recession," San Francisco Fed president Janet Yellen told financial executives on Tuesday night.

"If you go back over the last 30 or 40 years, you see no example of a recession without lower oil prices," said James Williams, energy economist with WTRG Economics in Arkansas.

Some of that demand loss may be permanent, according to Williams.

"If you traded in your 10-year-old SUV for a Prius (hybrid), you can drive the same amount, and you're going to use less gasoline and thus less oil," he said. "Consumption is reduced for the lifetime of that Prius."

Economic worries: A report released Wednesday showed that U.S. retail sales fell 1.2% in September, nearly twice the 0.7% decline economists expected, and the largest drop in three years.

The retail sales report, which accounts for about half of all consumer spending, the other half being spending on services, will weigh heavily on the current quarter's gross domestic product (GDP), according to Robert Brusca, economist with FAO Economics in New York.

The GDP, the sum of all goods and services produced, is calculated each quarter by the Commerce Department. A recession is loosely defined as two or more consecutive quarters in which the country's GDP contracts.

"It looks like we're going to get a pretty negative GDP number in the quarter," said Brusca.

The economic slowdown is spreading to Europe and Japan as well, he added.

In her Tuesday speech, Yellen pointed to economists surveyed by the Blue Chip Economic Indicators, who predicted three consecutive quarters of negative GDP readings starting with the third quarter.

On a brighter note, U.S. and international efforts to shore up the ailing banking system and keep money flowing through the economy appear to be having an impact as credit markets continue to thaw.

However, Fed chairman Ben Bernanke warned Wednesday that even if bank confidence returns to normal, the economy will take a while to recover.

Predicted surplus: Investors were also concerned about a possible build-up in crude supplies - an indicator of lower crude demand from refineries in the U.S.

The official government report that details crude, gasoline, and distillate inventories, as well as demand, is scheduled for release Thursday at 11 a.m. ET. The report is delayed due to the Columbus Day holiday.

Analysts polled by Platts, the energy research division of McGraw-Hill, expect to see a 3.1 million barrel build-up in crude stockpiles, even though more than half of production in the Gulf of Mexico remains offline in the wake of this year's hurricane season.

Obama's small biz rescue plan: The details

2008-10-12T07:52:00.000-07:00

Democratic presidential candidate Barack Obama on Friday proposed emergency assistance for small business endangered by America's financial crisis, calling for a "small business rescue plan" of tax incentives and loans.

"Small businesses employ half of the workers in the private sector in this country, and account for the majority of the job growth. But we also know that a credit crunch has dried up capital and put these jobs at risk - shops can't finance their inventories, and small firms can't make payroll," Obama said at a rally in Chillicothe, Ohio. "If we don't act, we'll be looking at scaled back operations, shuttered shops, and laid-off workers."

Obama's campaign platform already featured pledges aimed at small businesses, including proposals for eliminating capital gains tax on gains from investments in startups and for a tax credit for businesses that offer workers health care. What's new is his call for an emergency lending facility run by the Small Business Administration to shore up struggling companies imperiled by the credit crunch.

A paper detailing Obama's proposed "Small Business Emergency Rescue Plan," released by his campaign on Friday, expands on the remarks Obama made in Chillicothe.

Obama's new plan calls for the SBA's loan guarantee programs to temporarily eliminate the fees they charge lenders, and for the agency to increase the guarantees it offers to banks that lend to qualifying small companies. Additionally, he wants the SBA to expand its facility for directly lending money to small companies through its Disaster Loan Program.

How disaster loans work

The SBA Disaster Loan Program usually assists businesses affected by natural disasters: Its recent disaster declarations have covered floods, wildfires and an earthquake. But the program does occasionally offer loans to help with nontraditional disasters. For example, it offers loans to companies unable to meet operating expenses because an essential employee who serves in the military reserves has been called up to active duty.

For companies that can't get credit anywhere else, interest rates for the SBA's disaster loans are capped at 4%, and the loan term can stretch as long as 30 years. Those are lower interest rates and longer terms than are offered through the SBA's much bigger and better known 7(a) loan program. Also, the SBA directly funds its disaster loans; under the 7(a) program, businesses need to secure loans from banks, with the SBA offering a guarantee for part of the loan.

The Disaster Loan Program is significantly smaller than the 7(a) program. Last year, the SBA backed $12.7 billion in small-business 7(a) loans, while its disaster program granted $825.8 million in loans to 15,128 applicants. However, only $289.5 million of that total went to businesses - the loans are also extended to homeowners and renters affected by disasters. Home disaster loans accounted for 65% of the total lent through the program in the 2008 fiscal year, which ended last month.

Echoes of Sept. 11

Obama compared his "rescue plan" to steps the government took after Sept. 11 to rush financial assistance to affected small companies.

"Main Street needs relief and you need it now," Obama said. "It's what we did after Sept. 11, and we were able to get low cost loans out to tens of thousands of small businesses."

The government's primary small business relief program after Sept. 11 was the Supplemental Terrorist Activity Relief (STAR) loan program enacted in January 2002. That STAR program reduced the fees paid by lenders who made SBA-backed 7(a) loans to companies adversely affected by the terrorist attacks, and set aside a special pool of cash to fund STAR loans. During its yearlong existence, the program made 7,000 loans, totaling $3.7 billion.

But the STAR program later drew widespread criticism for its flawed structure and insufficient oversight. A 2005 review found that many of the loans went to businesses with little apparent connection to the terrorist attacks in Washington, D.C. and New York City. Only 15% of the cases reviewed by the Senate Committee on Small Business & Entrepreneurship showed evidence of adverse effects from the attacks; the rest had insufficient or questionable documentation. Recipients included a Nevada tanning salon, a liquor store in Georgia and a golf course in Texas.

Auditors pinned the blame not on the companies, many of which were unaware they'd been given loans categorized as STAR loans, but on weak SBA supervision of how lenders implemented the program.

An Obama campaign spokesman said Obama's program would not be susceptible to the ills that plagued the STAR program because it would have much broader eligibility requirements. Unlike the Sept. 11 attacks, the current financial crisis is hitting small companies in all locations and industries; any business struggling for working capital has a legitimate claim of being adversely affected by the crisis.

Obama's spokesman estimated the program's price tag at $5 billion. Eliminating loan fees for the SBA's guarantee programs would cost $1 billion, he said, and $4 billion would go toward direct funding of disaster loans.

Would it work?

Obama's plan relies on lower fees and higher guarantees to entice banks to open their vaults and lend more cash. But it's unclear if those inducements would make a difference. As financial conditions worsen, banks have grown more reluctant to offer financing to small companies.

The Federal Reserve's July Senior Loan Officer Opinion Survey found that 65% of banks polled had tightened their lending standard for small-business loans within the past three months, and the SBA said last week that the number of loans made through its 7(a) program in the 2008 fiscal year dropped 30% from 2007. As global financial markets continued roiling over the past few weeks, financial institutions clamped down further on their lending.

Obama's proposal also calls for more direct lending through the SBA's Disaster Loan Program. That program has a flexible budget, and the SBA consistently gets as much money for it as it requests from Congress.

But a rash of disaster-loan requests could overwhelm the SBA; after Hurricane Katrina, the agency staggered to keep up with an onslaught of more than 400,000 disaster applications. The SBA has since drafted new plans for dealing with a major nationwide disaster, training reserve staffers and strengthening its technology systems.

So far, the SBA's new disaster readiness capacity has not been tested. If the financial crisis continues spreading and Congress heeds Obama's call, the agency and Acting Administrator Sandy Baruah, who joined the SBA three months ago, would face a dramatic test of their readiness to step in and shore up thousands of the nation's struggling small businesses.

House Dems plan second stimulus package

2008-10-10T18:02:00.000-07:00

House Democratic leaders are putting together a second economic stimulus package costing as much as $150 billion and are likely to call Congress back shortly after the election to vote on the measure, according to several Democratic leadership aides.

The details are still in flux, but one aide said the price tag would be "somewhat north of $100 billion" and would include "a heavy emphasis on help to state and local governments." One way to help states would be to fund the mandatory state match for Medicaid programs so that states would not have to slash education and other programs to cover it.

Before Congress recessed last week for the election, the House of Representatives passed economic aid measures totaling $61 billion to fund infrastructure projects, money for states' Medicaid costs, and unemployment assistance. But these bills failed to attract enough support in the Senate and the White House opposed them.

Speaker Nancy Pelosi, D-California, traveling in Denver, Colorado, on Wednesday, said, "With all that happened in the past few weeks, it probably has to be more like a $150 billion to invest in our economy, to create jobs, to help the states, to help men and women across the country."

Pelosi and other House Democratic leaders are scheduled to meet with a group of economists on Monday in Washington to discuss the size and the components of a stimulus plan, the Democratic aides said. These aides indicated that in addition to aid to states struggling with their own budgets, the package could include things similar to what the House passed before, such as infrastructure money, an extension of unemployment benefits, food stamps, and more money for low-income energy assistance.

House Republican leadership aides said that GOP members have not been consulted on the details of a second stimulus. One of these aides said, "We're not necessarily opposed to it out of hand. We would ask, is it truly stimulative? Is it really going to help stimulate the economy?"

A Senate Republican leadership aide said Republicans are skeptical of a second stimulus but did not suggest there is outright opposition to another package.

Jim Manley, a spokesman for Senate Majority Leader Harry Reid, D-Nevada, left the door open to the Senate taking up a bill.

"Senator Reid tried to pass a second economic recovery bill last month, only to be obstructed by Senate Republicans," Manley said. "Recent developments only reinforce the need for additional action to reinvigorate the economy. We will work with the House of Representatives and leave all options open to address this issue."

GM, Ford fall sharply as outlook dims

2008-10-09T11:28:00.000-07:00

How bad is it going to get for automakers? Worse, much worse.

Investors made a shocking vote of no confidence in the future of U.S. automakers Thursday. GM (GM, Fortune 500) stock was down more than 14% to $5.92 a share, while Ford (F, Fortune 500) fell 7.5% to $2.46. That gave GM a market capitalization of $4.3 billion - chump change for this industrial behemoth - while Ford stood only slightly better at $6.6 billion.

The stock selloff effectively puts these companies on death watch and it is easy to see why. A new report by Global Insight, the economic forecasting and consulting firm based outside Boston, shows U.S. auto sales hitting recession levels this year - and then sinking lower in 2009.

"We won't get back to where we were in 2006 until 2013," said George Magliano, director of forecasting for North America. Global Insight is forecasting sales of 13.8 million units this year and only 13.4 million in 2009, compared with 16.1 million last year.

The impact of oil prices at the beginning of the year was mild compared to the squeeze from the credit crunch. As Nigel Griffiths, Global Insight's managing director of global forecasting, points out, expensive oil merely meant that wealth was being transferred to oil-producing countries like Russia from oil-consuming ones like the United States. Now, the credit crunch is destroying wealth and making it impossible for customers to buy.

"The impact is worse than if the price of oil had been sustained at $200 a barrel," he said.

No help from foreign markets
It turns out that auto finance companies were as guilty as mortgage lenders in providing loans to subprime borrowers - and their generosity is coming back to haunt them. Lenders dramatically cut standards for credit worthiness at the beginning of 2008 and now delinquency rates have been shooting up to levels not seen in 30 years.

"Some 18% of sales volume came from people with bad credit scores," said Magliano. "Now the subprime buyer has been squeezed out."

There is little relief overseas. According to Global Insight, at least half a dozen countries in Western Europe experienced greater house-price appreciation over the last 10 years than did the United States. Ireland led the way with a nearly 250% rise and the United Kingdom was not far behind. With that kind of wealth accumulation unlikely to be repeated, sales experienced a "total collapse" in July and have gone into a "violent downshift."

Nor is Asia likely to provide a safety net. Sales growth in China is slowing markedly and vehicle demand in India is also ebbing. Even the much publicized $3,000 Nano car developed by India's Tata Motors is off to a slow start. Plans for an assembly plant in India have been scuttled by local opposition and Global Insight says Nano "will only see a big build-up in volumes from 2010."

"When will the credit crunch free up enough to allow consumers to finance again?" asked Griffiths. "That is the several-trillion-dollar question. It is the core assumption on which all forecasts will be based and it is unforecastable."

To combat this flood of negative news, GM has adopted the Sarah Palin approach: bypassing the media by communicating directly with customers and investors. GM executives can now be seen in videos posted on its Fast Lane Web site talking about the company.

In the first video, posted Sept. 22, chairman and CEO Rick Wagoner responds to the question "What's GM's future look like?" by saying "GM's future is actually quite bright." After ticking off progress on new models, technology and sales in developing markets," he concluded by saying, "though times are challenging, we're really making sure that we keep planting the seeds for what we think should be a very exciting future for General Motors."

Three weeks later, you have to wonder what he'd be saying today?

Oil falls after inventory report

2008-10-08T08:33:00.000-07:00

Oil prices fell below the $90-a-barrel level Wednesday after the government reported a sharp increase in the nation's supplies of crude and gasoline, in another sign that demand for energy remains weak.

Light, sweet crude for November delivery was down $3.11 to $86.95 a barrel on the New York Mercantile Exchange. Oil had traded down about 75 cents just before the government figures were released. Prices have been under pressure amid anxiety over a global slowdown in demand.

Wednesday's report "feeds into the sense that the consumer is flat on their back," said John Kilduff, energy analyst at MF Global in New York. And with the global economic outlook darkening, "demand for energy is not going be perking up any time soon."

In its weekly inventory report, the Energy Information Administration said the nation's stockpiles of crude oil surprisingly rose by 8.1 million barrels last week. Analysts were expecting crude stocks to have dropped by 1 million barrels, according to a survey of industry experts by energy research firm Platts.

Gasoline supplies also increased by a bigger-than-expected 7.2 million barrels. Estimates had called for a more modest 2-million-barrel rise.

Also missing forecsasts, supplies of distillates - used to make heating oil and diesel fuel - fell unexpectedly by 500,000 barrels. Analysts expected supplies to rise by 1 million barrels.

EIA noted in its report that demand for gas over the last four weeks dropped 5.3% from a year ago, to average nearly 8.8 million barrels per day.

Meanwhile, refineries operated at 80.9% of their operable capacity last week, up from 72.3% the week before.

The price of oil edged above $90 earlier Wednesday after the Federal Reserve lowered its benchmark interest rate to 1.5% from 2%. The surprise emergency move was part of a coordinated effort by central banks worldwide to combat the credit crisis.

Oil prices have been closely following the U.S. euqity markets recently as investors look for signs of economic recovery that could signal renewed demand for oil and gas.

Stocks seesawed in the early going, with the Dow industrials trending in a range of 180 points higher and some 200 points lower, as investors digested the rate cuts.

Manhattan real estate: Pricey but headed for a fall

2008-10-06T08:52:00.001-07:00

The crisis on Wall Street hasn't hit the high cost of Manhattan real estate, but the economic slowdown has curbed the number of deals in the Big Apple, according to reports out Friday.

Sales figures from four major New York real estate agencies showed the average price for a Manhattan apartment rose in the third quarter over last year. At the same time, the number of apartments sold in the quarter declined sharply.

"The events of the second half of September in the financial markets and Washington have not shown up in the market data for the quarter, aside from the lower level of sales activity compared to last year's record levels," said Jonathan Miller, president of New York real estate firm Miller Samuel.

The average price of a Manhattan apartment ranged from $1.4 million to $1.48 million in the third quarter of 2008, according to separate reports released Friday by Brown Harris Stevens, the Corcoran Group, Halstead Property and Prudential Douglas Elliman. That represents an increase of anywhere between 8% and 12% over average apartment prices in the third quarter of 2007.

But the rise in third quarter sale prices was skewed by a large number of deals in new luxury buildings, which went into contract as much as a year or two ago, before economic conditions deteriorated, but only closed recently, according to Corcoran Group CEO Pamela Liebman.

"The average sales price is going to trend down," Liebman said. After soaring to unprecedented heights in 2007, "we're going to get back to a more normal range," she added.

Dwindling deals
Already the number of properties sold during the quarter saw a steep decline from the record highs hit in the third quarter of last year.

Corcoran sold fewer than 3,000 properties last quarter, down 45% from the nearly 5,500 properties the agency sold in the third quarter of 2007.

At the same time, the number of properties on the market is increasing. Listing inventory rose 34% during the third quarter, according to Miller's research.

"Clearly, inventory is moving higher as sales activity has fallen," said Miller, who attributed the slowdown at least in part to the fact that mortgages have become more expensive and harder to get.

And economic turmoil in Europe has crimped the flow of overseas buyers to the city. Miller estimates that foreign buyers made up one-third of all purchases in new developments in New York last year.

While the labor market in New York has remained relatively stable, the fallout from the crisis on Wall Street, and the corresponding rise in unemployment in the financial sector, will probably further undermine the city's real estate market.

"We're going into an uncertain economic period with volume at low levels and a low likelihood of new development," Miller said.

Miller said the direction of the real estate market could hinge on Washington's proposed financial intervention, which is currently being debated in Congress and the outcome of this year's presidential election.

One of the main goals of the bailout plan is to free up the frozen credit markets, which have been a major drag on economic activity - particularly in the housing market.

"The question of housing is almost moot unless you get a handle on where credit is going," Miller said.

Bailout: Will it work?

2008-10-04T10:28:00.001-07:00

The $700 billion bailout plan signed into law Friday may get banks to start lending to each other again. But it remains to be seen how long that will take to jumpstart an ailing economy.

The goal is to unfreeze the credit markets. Financial institutions have become paralyzed with fear and though they have plenty of cash on hand, they've been hoarding it. Without this intra-bank lending, businesses are having trouble getting the financing they need even for daily operations, much less loans for longer-term projects.

"Hopefully, this will lend a calming effect to the markets," said Joe Belew, president of the Consumer Bankers Association. "We need to take a deep breath, relax and start doing business again."

Don't expect lending to ramp up overnight, however. It may take weeks for confidence to return, experts said. Or even longer.

The centerpiece of the bill allows the government to eventually buy up to $700 billion in assets tied to shaky mortgages. Getting the bad paper off banks' balance sheets hopefully will give institutions more confidence to start lending again.

Treasury Secretary Henry Paulson has up to 45 days to devise a plan to purchase the assets.

But one big question is what the Treasury Department will pay for those assets. Too low a price - which is good for taxpayers - and banks may find they still need to take steps to shore up their balance sheets. Some may have to raise additional capital, which has been scarce in this tumultuous market. Investors may remain on the sidelines for a while until things shake out, experts said.

The plan's passage did little to allay fears in the stock market, which sold off once the House approved the bill. Investors, who remain skittish that the bailout plan will achieve its goals, sent the Dow Jones industrial average down 1.5%.

"Thaws take time," said Diane Casey-Landry, chief operating office of the American Bankers Association, noting that the bailout plan won't instantly eliminate all concerns. "We'll be in the Ronald Reagan mode of 'Trust but verify'."

Even President Bush told Americans to have patience. "Americans should also expect that it will take some time for this legislation to have its full impact on the economy," he said. "With a smoother flow of credit, more businesses will be able to stock their shelves and meet their payrolls. More families will be able to get loans for cars and homes and college education. More state and local governments will be able to fund basic services."

Plenty of other problems
Many economists, however, say the president and other supporters of the bailout were painting too rosy a picture.

Until the tidal wave of foreclosures ends and home values stop their stomach-churning drops, banks will remain reluctant to lend and the economy won't improve, experts said.

"This bill doesn't contain any element of stability for the housing market or the real economy," said Christian Menegatti, lead analyst for economic research firm RGE Monitor. "The problems are going to come back and the lack of confidence will come back."

In fact, nearly one in three financial services executives said they expect credit standards to continue to tighten even if the bailout plan is approved, according to a Deloitte poll taken Thursday. So it will still be tough to get a mortgage or small business loan.

"We're back to more normal underwriting standards," Casey-Landry said. "People will need to have good credit to get a loan."

Consumers, business won't want to spend
As long as the constant drumbeat of bad economic reports continues, consumers and businesses may not be so eager to borrow money anyway even if banks start extending more credit. Friday's dismal jobs report, showing that 159,000 people lost their livelihoods, did little to inspire people to spend.

"You tell me I can have the credit, but I don't want it," said Amiyatosh Purnanandam, assistant professor of finance at the University of Michigan. "If people are not going to buy cars whether they can get credit or not, it's not going to help the economy."

This becomes a vicious cycle. If consumers don't spend, the economy fails to improve. The jitters may return to the financial markets, prompting another government intervention.

That's why many fear the $700 billion rescue may not be the last step.

"This is a tremendously expensive stopgap measure," said Adam Levitin, associate professor of law at Georgetown University.

Insurance stocks bounce back

2008-10-03T19:39:00.001-07:00

Big life insurance stocks finished the day higher Friday, with MetLife and Hartford Financial Services leading the way after suffering steep losses Thursday.

But the stocks pulled back from their highs along with the rest of the stock market after the House approved the bank bailout bill Friday afternoon.

Shares of Hartford (HIG, Fortune 500) rose 6%, recovering a bit from its 32% plunge on Thursday. MetLife (MET, Fortune 500) gained 2% Friday after dropping 15% Thursday.

Donald Light, senior analyst for the financial research firm Celent, said the passage of the bank bailout bill should help restore some confidence in the health of insurers going forward.

"The major hoped-for impact is that some of the knee-jerk responses that are not really based on any kind of financial reality will...become much more rare," said Light shortly after the bill passed.

Insurance stocks were hit hard Thursday, partly because of investor nervousness about finance stocks in general ahead of the House's vote but also because comments from Senate Majority Leader Harry Reid, D-Nev. about a potential bankruptcy in the industry.

On Wednesday, Reid said he had heard from someone that an unnamed "major insurance company" was "on the verge of going bankrupt."

But a spokesman for Reid backtracked Thursday and said the senator "is not personally aware of any particular company being on the verge of bankruptcy." Spokespersons for MetLife and Hartford both told CNNMoney.com that their businesses were solid and they were not in danger of going bankrupt.

In addition, an analyst upgraded MetLife Friday morning.

Jeffrey Schuman, analyst for Keefe, Bruyette & Woods, raised MetLife to "outperform" from "market perform" and said in a report that the stock, which has plummeted 32% over the past two weeks, is now attractively valued.

Schuman said MetLife has enough money to absorb impending losses. He said the company has about $3 billion in excess capital and another $1.5 billion to $2 billion at the operating level and that the company generates an additional $1 billion in excess capital annually.

"This is more than enough to absorb what we conservatively estimate at $3.9 billion of after-tax credit losses over the next two years," wrote Schuman.

The upgrade also appeared to help boost sentiment for the insurance group.

Light, the analyst for Celent, said that, on average, life insurance companies' holdings in some of the riskier mortgage-related investments may be less than investors thought.

"The amount of subprime real estate is pretty limited on the balance sheet of the industry as a whole," said Light.

Shares of Principal Financial Group (PFG, Fortune 500) and Paris-based AXA (AXA) rose 3% and 4.5% respectively Friday. Prudential Financial (PRU, Fortune 500) and Manulife Financial (MFC), which both fell sharply Thursday, each gave up gains from earlier in the day and finished Friday lower.

Also on Friday, shares of the beleaguered insurance giant AIG (AIG, Fortune 500) fell 3.5% after the company said it would sell part of its business to help pay off an $85 billion loan from the Federal Reserve. The stock was trading higher for most of the day but fell after the House passed the bailout bill.

GM closing Ohio SUV assembly plant

2008-10-03T19:38:00.002-07:00

General Motors Corp. said Friday it will shut down its SUV assembly plant in Moraine, Ohio, on Dec. 23 as the company shifts focus to smaller vehicles.

GM spokesman Chris Lee said employees gathered in the plant Friday afternoon were informed of the closing date. Some 1,100 remaining workers are affected.

The automaker earlier this year announced plans to close the Moraine plant and three others by the summer of 2010, then accelerated shutdown plans as part of companywide cost-cutting moves.

Union leaders have said they were expecting the plant in this southern suburb of Dayton to shut down by January or February. Messages seeking comment were left for the International Union of Electronic Workers-Communication Workers of America.

GM recently reduced operations at the factory to a single shift, eliminating 400 to 500 jobs.

The company had planned a production break in December, but Lee said Friday the plant will keep up operations until the closing date to make sure all remaining customer orders are filled.

A slumping U.S. auto market and a shift from pickups and SUVs to smaller, more fuel efficient vehicles led to the shutdown plans.

The Moraine plant assembles the GMC Envoy, Chevrolet Trailblazer and Saab 9-7X. All three vehicles have seen their sales fall at least 30 percent through September, compared with the same period a year earlier.

GM turned down a $56 million tax credit and grant package from the Ohio Department of Development to keep the plant open.

The other plants GM (GM, Fortune 500) has said it will close are in Janesville, Wis.; Oshawa, Ontario; and Toluca, Mexico. The four closures combined will result in the loss of about 8,350 jobs.

Congress sets stage for solar boom

2008-10-03T19:38:00.001-07:00

After months of failed attempts in Congress to extend crucial renewable energy tax credits, the end game came with lightening speed Friday afternoon: The House of Representatives passed the green incentives attached to the financial bailout package approved by the Senate Wednesday night and President Bush promptly signed the legislation into law.

There were goodies for wind, geothermal and alternative fuels, but the big winner by far was the solar industry.

“It feels like we should be popping the champagne,” said a Silicon Valley solar exec Green Wombat met for lunch minutes after Bush put pen to paper.

That it took a the biggest financial crisis since the Great Depression to save billions of dollars of renewable projects in the pipeline for the sake of political expediency does not bode well for a national alternative energy policy. But the bottom line is that the legislation passed Friday sets the stage for a potential solar boom.

The 30% solar investment tax credit has been extended to 2016, giving solar startups, utilities and financiers the certainty they need for the years’ long slog it takes to get large-scale power plants and other projects online. The extension is particularly important to those Big Solar projects that need to arrange project financing in the next year or so.
The $2,000 tax credit limit for residential solar systems has been lifted, meaning that homeowners can get a 30% tax credit on the solar panels they install after Dec. 31. That will save a bundle - especially for those who live in states with generous state rebates - and goose demand for solar panels makers and installers like SunPower (SPWRA) and First Solar (FSLR). (If you buy a a $24,000 3-kilowatt solar array in California - big enough to power the average home - you can claim a $7,200 federal tax credit. Add in the state solar rebate and the cost of the system is cut in half.)
Utilities like PG&E (PCG), Southern California Edison (EIX) and FPL (FPL) can now themselves claim the 30% investment tax credit for large-scale solar power projects. That should encourage those well-capitalized utilities to build their own solar power plants rather than just sign power purchase agreements with startups like Ausra and BrightSource Energy.
“The brakes are off,” says Danny Kennedy, co-founder of Sungevity, a Berkeley, Calif., solar installer that uses imaging technology to remotely size and design solar arrays. “In just six months since our launch we’ve sold about a hundred systems. With an uncapped tax credit for homeowners going solar, we expect business to boom.”

While elated sound bytes from solar executives have been flooding the inbox all afternoon - along with invites to celebratory after-work drinks - solar stocks took a drubbing (along with the rest of the still-spooked market) after initially soaring on the news.

SunPower ended the trading day down 5% while First Solar shares dropped 8%. The bright spot was China’s Suntech (STP), which on Thursday announced a joint venture with financier MMA Renewable Ventures to build solar power plants as well as the acquisition of California-based solar panel installer EI Solutions.

Congress didn’t treat the wind energy so generously. The production tax credit for generating renewable energy was extended by just one year, guaranteeing the industry’s will continue to live year by year (at least through 2009). But given that 30% of all new power generation built in the United States in 2007 was wind, and that the amount of wind power installed by the end of 2008 is expected to rise 60% over the record set last year, the wind biz should do just fine.

But Congress did give a break to those who buy small-scale wind turbines. Systems under 100 kilowatts qualify for a 30% tax credit up to $4,000. Homeowners get a $1,000 tax credit for each kilowatt of wind they install.

“This is a huge break through for small wind,” says Scott Weinbrandt, president of Helix Wind, a San Diego-based manufacturer of 2-and-4-kilowatt turbines.

Oil drifts down after House vote

2008-10-03T19:37:00.001-07:00

Crude prices didn't move much on Friday after the House of Representatives passed a bailout plan to shore up the nation's financial system, which could help restore demand for oil.

U.S. crude for November delivery settled down just 9 cents to $93.65 a barrel as floor trading closed in New York.

The oil market gave back modest gains after the House approved the plan. The contract was up about $1 before the vote.

The $700 billion rescue plan, designed to free banks from troubled assets and encourage them to lend, was rejected by the House in a Monday vote, but a modified version was approved by the Senate on Wednesday.

After the initial House rejection Monday, crude plummeted $10.52 a barrel, the most in dollar terms since 1991, when Operation Desert Storm was launched.

Demand and bailout: Investors hoped the sweetened bill would have a positive impact on demand, but analysts say the impact would likely be limited, and would take some time to materialize.

The bill is "only one step," said Rachel Ziemba, energy analyst with RGE Monitor, noting that the oil market also failed to react after the Senate approved its version of the bill.

"There are a lot of problems in the U.S. economy it doesn't solve," she said, and suggested the government would come up with more bailout plans to shore up other parts of the economy.

Falling demand for crude has been a major factor in oil's fall from a record high of $147.27 a barrel on July 11.

Oil prices fell more than 12% this week from $106.89 a barrel last Friday. The House's initial bailout rejection and a week of dismal economic news reinforced demand concerns.

Demand growth could take a while to materialize, since the cash released from bank coffers would need to filter down through the nation's lending apparatus in order to reach consumers and businesses, according to Neal Dingmann, senior energy analyst with Dahlman Rose & Co.

"It would take more than weeks, and even months," said Dingmann, "You're probably talking a month at the absolute soonest."

Dollar: The tighter credit markets have also led to a rise in the dollar over the past week. As banks became more and more averse to lending, the supply of dollars available to the currency market shrank, and the dollar gained against other currencies such as the 15-nation euro.

Since commodities such as oil are traded in U.S. dollars, a stronger dollar makes barrels of crude more expensive, which in turn drives down dollar-denominated oil prices.

The dollar actually slipped slightly against the euro Friday as the House debate continued.

Gasoline: As oil prices rose, the average price of gasoline in the U.S. continued to slide, falling overnight to $3.576 a gallon from $3.598 the day before, according to a daily poll from motorist group AAA.

The price of diesel fuel, which affects many businesses, especially those that rely heavily on transportation and shipping, fell to $4.065 from $4.076 a gallon.

Like crude oil, fuel prices have also trended downward since July as demand for energy dried up.

Wal-Mart cuts prices on toys

2008-10-01T08:01:00.001-07:00

In yet another sign of the economic crisis, the Mortgage Bankers Association said Wednesday that mortgage applications plunged 23% last week.

The MBA said its seasonally adjusted index of mortgage application activity dropped to 455.4 in the week ended Sept. 26, down from 591.4 the prior week.

Turmoil in the banking and finance industries has resulted in a credit freeze, making it difficult for prospective homeowners to take out loans. The market is also experiencing a glut of foreclosures.

In an unprecedented move, the U.S. government in September took over the mortgage giants Fannie Mae and Freddie Mac, with a rescue plan that could inject $100 billion into each of them just to keep them afloat.

The association also reported steep declines in other weekly indexes tracking housing finance.

The refinance index plummeted 34.7% to 1333.9 from the prior week. The seasonally adjusted purchase index fell 10.9% to 304.8.

The average interest rate for 30-year fixed-rate mortgages slipped to 6.07% from 6.08%, the association said.
Wal-Mart Stores Inc., the world's largest retailer, said Wednesday it will lower the price of several toys in 3,500 stores across the U.S. ahead of a holiday season which is expected to be subdued.

Retailers across the board are expecting consumers to rein in spending this season amid rising food and gas prices, turmoil in the financial markets and a prolonged housing slump.

Wal-Mart (WMT, Fortune 500) said it will cut prices on 10 popular toys to $10 each, including certain Barbie Dolls, Play-Doh Ice Cream Shop, some Hot Wheels toys and Bakugan by Spin Master, a game many experts cite as one of the "hot" toys this year.

It will also open Christmas shops within its stores over the next 10 days, which will offer deals such as an ornament value pack for $5.

Wal-Mart said it conducted a survey that showed consumers will start Christmas shopping earlier this year and make other changes to stretch holiday dollars.

Mortgage applications plunge

2008-10-01T08:00:00.000-07:00

Manufacturing index tumbles

2008-10-01T07:59:00.000-07:00

A key measure of the nation's manufacturing activity fell in September to a seven-year low, nearing a benchmark that indicates a recession, a purchasing manager's group said Wednesday.

The Institute for Supply Management's (ISM) manufacturing index fell to 43.5 in September, down from the August reading of 49.9. Economists were expecting a reading of 49.5, according to a consensus estimate compiled by Briefing.com.

The tipping point for the index is 50, with a reading below that indicating contraction in factory activity. A reading below 41 marks a recession. The index has hovered around the 50 mark for the past 12 months, with an average of 49.6.

One of the key components of the index, new orders, contracted sharply, falling to 38.8 from 48.3 the month before. That marked the 10th straight month of decline in that sector.

In what could be a portent of Friday's September employment report, ISM's employment indicator tumbled to 41.8 from 49.7, marking the second month of decline in the sector.

Economists from Briefing.com expect job losses to spike to 105,000 in September and for the unemployment rate to remain steady at 6.1%

ISM's production measure contracted sharply in September to 40.8 from its prior reading of 52.1.

Bush: Congress must act

2008-09-30T09:10:00.000-07:00

President Bush said Tuesday he was "disappointed" by the House's rejection of the $700 billion bailout plan and urged Congress to take action to save the economy.

"Unfortunately, the measure was defeated by a narrow margin," Bush said in a brief televised address at the White House. "I'm disappointed by the outcome, but I assure our citizens, and citizens around the world, that this is not the end of the legislative process."

Bush said he expects lawmakers to move forward with legislation. The House is adjourned for the Jewish holiday Rosh Hashanah and is not scheduled to return to session until Thursday at noon. The Senate is in session on Tuesday.

Senate Majority Leader Harry Reid, D-Nev., said that he would meet with some key Democratic senators - including Senate Banking Committee Chairman Christopher Dodd, D-Conn. - working on a bailout plan.

For his part, Bush said the nation is facing "the real prospect of economic hardship."

"Our economy is depending on decisive action from the government," Bush said. "The sooner we address the problem, the sooner we can get back on the path of growth and job creation. This is what elected leaders owe the American people, and I am confident that we'll deliver."

Bush is meeting with his team Tuesday morning to review options, a senior Bush administration official told CNN. On Monday night, White House staffers were in contact with Republican congressional leaders and Democratic staffers, the official said.

The official said that even Republicans who oppose the plan understand the seriousness of the situation and "want to get this done."

The Senate's lead Republican, Sen. Mitch McConnell, R-Ky., said Tuesday that lawmakers will pass a bill. "I want to reassure the American people that we intend to pass this legislation this week," he said.

On Tuesday, Bush spoke to Sens. Barack Obama and John McCain about the financial crisis, according White House spokesman Tony Fratto. The presidential candidates "offered ideas and reaffirmed what they have said publicly - that this is a critical issue that needs to be addressed," Fratto said.

Stock market reaction
The bailout package, a collaboration of Treasury Secretary Henry Paulson and leaders from both parties, was rejected by the House in a 228-205 vote Monday. Two-thirds of Republicans and about one-third of Democrats voted against the bill.

Following the defeat, the Dow Jones industrial average dropped 777 points, its biggest one-day point decline ever. The decline of nearly 7% was the largest percentage decline since the Black Monday crash of 1987.

The bill, if approved, would have allowed the federal government to buy troubled mortgage-related investments from finance companies, freeing them up for lending, to pull the economy out of its credit freeze. Proponents of the bill believe it would prevent the United States from sliding into a serious financial crisis, but opponents saw it as an unbearable burden to taxpayers and a rescue for Wall Street.

"That, no question, is a large amount of money," said Bush, referring to the $700 billion. "We're also dealing with a large problem. But to put that in perspective, the drop in the stock market yesterday represented more than a trillion dollars in losses."

Record 16% drop in July home prices

2008-09-30T09:09:00.000-07:00

A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing.

The Standard & Poor's/Case-Shiller 20-city housing index fell a record 16.3% in July from a year earlier, the largest drop since its inception in 2000. The 10-city index plunged 17.5%, the biggest decline in its 21-year history.

No price gains
Prices in the 20-city index have plummeted nearly 20% since peaking in July 2006. The 10-city index has fallen more than 21% since its peak in June 2006.

No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that has happened.

However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2% - less than half the cumulative rate experienced between February and April.

But there's "no evidence of a bottom," said David M. Blitzer, chairman of the index committee at S&P.

Trouble in Vegas
Las Vegas prices plunged the most at nearly 30%, with Phoenix diving 29% and Miami 28%. Prices in the seven cities in the Sunbelt all fell between 20% and 30% from a year ago.

Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June. Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.

Oil slips amid growing global woes

2008-09-29T07:32:00.001-07:00

Oil prices fell to near $103 a barrel Monday on concern that economic growth will slow across the globe despite a tentative agreement in Washington on a $700 billion bailout package to stabilize the U.S. financial system.

By midday in Europe, light, sweet crude for November delivery was down $3.50 to $103.39 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.13 Friday to settle at $106.89.

In London, November Brent crude fell $3.39 to $100.15 a barrel on the ICE Futures exchange.

Bailout plan goes to House
Congressional leaders and the White House agreed Sunday to a rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House of Representatives for a vote Monday.

"The bailout package reduces the chance of a complete meltdown," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But worries on the demand side will continue to weigh on oil prices."

The plan would give the administration broad power to use hundreds of billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.

Congress insisted on a stronger hand in controlling the money than the White House had wanted. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.

"It's still a crisis situation," Shum said. "The market is concerned about the depth and breadth of this global downturn."

JBC Energy in Vienna, Austria, also was cautious about the effects the rescue package could have on U.S. economic growth.

"The latest government reports show sales of new homes at a 17-year low in August and orders for durable goods falling stronger than expected," JBC said in a research note. "It is far from certain that (the bailout) will prevent an economic downturn."

Dollar stronger
Prices were also pushed down by a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.

While the dollar gained as details of the bailout package become known, analysts said the euro was weaker also because of growing economic problems in Europe.

"It is also a question of the euro losing ground due to a continued deterioration in the euro zone," said Olivier Jakob of Petromatrix in Switzerland. "With the rate of bank failures increasing in Europe and the economy slowing more rapidly than expected, pressure will continue to mount on the (European Central Bank) to lower (interest) rates."

The 15-nation euro fell Monday to $1.4361 from $1.4614 on Friday while the dollar rose to 106.23 yen from 106.01.

"The bailout should inject confidence in the markets in the short-term," Shum said. "Longer term, it increases money supply, inflation and likely weakens the dollar - all of which supports oil prices."

GM to build $370 million engine plant

2008-09-28T07:56:00.001-07:00

General Motors Corp. said Thursday it will build a new factory in Flint to make four-cylinder engines for the Chevrolet Volt rechargeable electric car and other models.

GM Chairman and Chief Executive Rick Wagoner said the new plant will build a 1.4-liter four-cylinder engine that will extend the range of the Volt, and a turbocharged version that will power the Chevrolet Cruze, a new compact car to be built in Lordstown, Ohio.

"This will be one of the places. You will be one of the teams that help GM lead into our second century," Wagoner told workers and government officials gathered for the announcement.

Production at the new $370 million plant will begin in 2010, and both cars are slated to go on sale in the same year.

Workers at the nearby Flint Engine North plant, which GM (GM, Fortune 500) is in the process of closing, said the announcement is good news for an area hard hit by auto job losses.

Although GM said the new plant won't create any new jobs, it will retain about 300 hourly positions, and workers said they are hopeful the new plant will create more employment in the industrial city about 50 miles northwest of Detroit.

"This also means that there's a future for our youth in this area," worker Jean Adams-Anderson said.

The state of Michigan on Tuesday approved $132.5 million in tax incentives for the automaker to spend $838 million on the new plant and to upgrade four other facilities, including the Detroit-Hamtramck assembly plant where the Volt will be built.

The Flint investment includes the 552,000-square-foot plant as well as machinery and other equipment. GM says it will invest another $21 million in tooling for its suppliers to support the new Flint factory.

The new plant will double its global production of GM's small four-cylinder engines by 2011, with more than half the increase going into North America.

The factory, GM said, will have 300 flexible work stations that will allow the company to build different four-cylinder engines without retooling.

GM's U.S. sales are down 18% so far this year due to a declining market and high gasoline prices that have caused a dramatic shift away from trucks and sport utility vehicles to smaller, more efficient cars.

The new plant will help GM roll out new models designed to adjust to the shift, which GM and other automakers say is permanent.

The struggling automaker has lost $57.5 billion in the past 18 months, including $15.5 billion in the second quarter. Its U.S. market share has fallen to about 23% this year from a peak of nearly 51% in 1962.

The company is banking on the much-ballyhooed Volt to be its car of the future, although it conceded this week that the Volt won't operate exactly as advertised.

GM initially said the Volt would be able to run 40 miles on its lithium-ion batteries, with a small internal combustion engine recharging the batteries to extend the range hundreds of miles. A top executive said the same thing as recently as last week.

But company spokesman Rob Peterson said Wednesday that engineers changed the design so the Volt engine will power a generator that would run the electric motor after the batteries are depleted. A small amount of power from the generator will recharge the batteries, but most will be used to directly run the car, he said.

He said bypassing the batteries is more efficient, and GM did not intend to deceive people by maintaining that he motor would only be used to recharge the batteries.

"At the end of the day, to the consumer, the vehicle will operate much the same way," he said.

Senate passes $634B spending bill

2008-09-27T17:09:00.000-07:00

Automakers gained $25 billion in taxpayer-subsidized loans and oil companies won elimination of a long-standing ban on drilling off the Atlantic and Pacific coasts as the Senate passed a sprawling spending bill Saturday.

The 78-12 vote sent the $634 billion measure to President Bush, who was expected to sign it even though it spends more money and contains more pet projects than he would have liked.

The measure is needed to keep the government operating beyond the current budget year, which ends Tuesday. As a result, the legislation is one of the few bills this election year that simply must pass. Bush's signature would mean Congress could avoid a lame-duck session after the Nov. 4 election.

White House spokesman Tony Fratto said the bill "stands as a reminder of the failure of the Democratic Congress to fund the government in regular order." But, he said, it "puts the United States one step closer to ending our dependence on foreign sources of energy" by lifting the offshore drilling ban and opening up huge reserves of oil shale in the West.

The Pentagon is in line for a record budget. In addition to $70 billion approved this summer for operations in Iraq and Afghanistan, the Defense Department would receive $488 billion, a 6 percent increase. The spending bill also offers aid to victims of flooding in the Midwest and recent hurricanes across the Gulf Coast.

Such a huge bill usually would dominate the end-of-session agenda on Capitol Hill. But it went below the radar screen because attention focused on the congressional bailout of Wall Street.

The measure settles dozens of battles that have brewed for months between the Democrats who run Congress and the White House and its GOP allies.

The administration won approval of the defense budget. Democrats wrested concessions from the White House on $23 billion for disaster-ravaged states, a doubling of low-income heating subsidies, and smaller spending items such as $24 million more for food shipments to the elderly.

The loan package for automakers would reward them with $25 billion in below-market loans, costing taxpayers $7.5 billion to subsidize the retooling of plants and development of technologies to help U.S. carmakers to build cleaner, more fuel efficient cars. Companies would not have to begin repaying the loans for five years, drawing objections from Sen. Jon Kyl, R-Ariz., who predicted they would return for more help when the money is due.

Republicans made ending the coastal drilling ban a central campaign issue this summer as $4-plus per gallon gasoline stoked voter anger and turned public opinion in favor of more exploration.

The action does not mean drilling is imminent and still leaves the oil-rich eastern Gulf of Mexico off limits. But it could set the stage for the government to offer leases in some Atlantic federal waters as early as 2011.

Also in the bill is money to avert a shortfall in Pell college aid grants and solve problems in the Women, Infants and Children program delivering healthy foods to the poor.

In addition to the Pentagon's budget, there is $40 billion for the Homeland Security Department and $73 billion for veterans' programs and military base construction projects. Combined with the Defense Department's spending, that amounts to about 60 percent of the budget work Congress must pass each year.

Democrats came under criticism from the GOP for short-circuiting the normal process for a spending bill after it became clear that Republicans would force difficult votes on the drilling ban.

Democrats also wanted to avoid an election-year clash with Bush that would have played in his favor. They are willing to take their chances that Democrat Barack Obama will be elected president in November and permit increases for scores of programs squeezed by Bush each year.

Bush had threatened to veto bills that did not cut the number and cost of pet projects in half or cause agency operating budgets to exceed his request. Democrats ignored the edict as they drafted the plan and the White House has apparently backed down.

Taxpayers for Common Sense, a watchdog group, discovered 2,322 pet projects totaling $6.6 billion. That included 2,025 in the defense portion alone that cost a total of $4.9 billion. Critics of such projects are likely to discover numerous examples of links to lobbyists and campaign contributions.

Gas prices fall for 10th straight day

2008-09-27T17:08:00.000-07:00

Gas prices fell for their 10th straight day, dropping almost 19 cents during the period, according to a nationwide survey of credit card swipes at gas stations.

The average price of unleaded regular fell by 1.6 cents to $3.667 a gallon on Saturday, from $3.683 a gallon, according to survey results from the motorist group AAA.

Gone are the high prices that followed Hurricanes Ike and Gustav weeks ago. But prices are slightly higher than a month ago, when the national average for a gallon of unleaded was $3.660. They are 30% higher than a year ago, when the average was $2.805.

The record high was on July 17, when the nationwide average for gas prices was $4.114 a gallon.

For now, Hawaii and Alaska are the only two states where gas costs more than $4 a gallon. In Alaska on Friday, the statewide average for unleaded was $4.284 a gallon, according to AAA, and the average was $4.262 in Hawaii.

The cheapest gas was in New Jersey, where the average was $3.394 for a gallon, and in Oklahoma, at $3.370 a gallon.