Marketplace

Singing the Big Box blues

We got some numbers from Wal-Mart and Home Depot this morning that say a lot about the U.S. economy. Wal-Mart turned in smaller-than-expected profits for the second quarter — and cut its profit forecast for the year. CEO Lee Scott blamed economic pressure on his customer base, saying it's no secret people are running out of money toward the end of each month. And Home Depot reported a 15 percent drop in quarterly profits. Just two words explain that one: housing market.

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Latest Tinseltown deal: Terminated

Yet another casualty of the clampdown on credit: Hollywood. Goldman Sachs and Deutsche Bank were working on a deal with MGM to finance movies — up to a billion dollars. They were talking about backing a new Terminator film and maybe the next James Bond flick, but the Financial Times reports the banks have pulled out.

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Bad job news. Very bad.

We keep hearing that the subprime lending mess probably won't bring down the broader economy, but this morning's jobs report suggests otherwise. For the first time in four years, employers fired more people than they hired in August. The net result was a loss of 4,000 jobs. This caught economists completely off guard — they'd predicted that companies had added 110,000 jobs last month — and Wall Street is reeling in early trading.

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How low will they go?

The R-word is starting to have a global ring to it. The probability that the world economy is headed for recession seems to be increasing. Friday's U.S. employment numbers were the worst in four years, and this morning there's word that Japan's economy, the world's second-biggest, shrank at almost twice the pace forecast. That has some folks saying it seems a foregone conclusion that the Fed will lower interest rates this month, but the question remains: How much? Some say a quarter point, others have their money on a half.

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Thanks for the heads-up, Greenspan

It seems like fed chair Ben Bernanke has a new friend. Alan Greenspan praised his handling of the subprime crisis in a CBS 60 Minutes interview to air this Sunday.
Some have said that Mr. Greenspan would have handled this crisis slashing interest rates without blinking an eye. But Alan says that times are different, that inflationary pressure is more significant now, you know. Oh! He also mentioned this one interesting thing: He said that he knew about the questionable subprime lending tactics that were going on, but ye "really didn't get it until very late in 2005 and 2006." Get what? Oh, just that it wasn't going to have a happy ending.
Who could have guessed, right?

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Just a little more to get by . . .

For banks, the Federal Reserve's discount window has typically been a last resort, like asking your parents for cash. But there's been no hesitation lately about going to Uncle Sam for a little extra dough. Banks have more than doubled their requests for cash at the discount rate in the last week. Primary credit borrowings totaled nearly $7.2 billion as of this past Wednesday. That's the highest level since the day after the September 11th attacks. The Fed lowered the discount rate by a half percentage point last month.

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A welcome kind of freeze

Consumer advocates are applauding this morning a decision by one of the Big Three credit bureaus. USA Today reports TransUnion will offer individuals the ability to freeze their credit histories as a tool against identity theft. A freeze prevents information about your FICO score from being issued, essentially locking out thieves trying to open accounts with stolen Social Security numbers. TransUnion, breaking ranks with Experian and Equifax on the issue, will start providing the service next month. It'll be free for victims of ID theft and cost $10 each to initiate and stop a freeze for everyone else.

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If the Fed can do it . . .

Big developing countries like China, Brazil and Mexico could be getting a break from the World Bank. The Wall Street Journal reports the bank is set to cut interest rates for those areas in a deal that would also boost aid for the world's poorest nations. The World Bank would contribute as much as $3.5 billion to provide grants and no-interest loans to 80 depressed countries around the globe. The bank's still working out the details, but a final package is expected to be ready by its annual meeting October 19.

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IMF names new . . . European

The International Monetary Fund is about to name a new leader, and it looks like a Euro-tradition will continue. The 24-member board of shareholder governments is expected to put former French finance minister Dominique Strauss-Kahn in the post. A European has led the global financial institution for six decades, since its post-World War II inception in 1945.

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How low can they go?

A new survey of economists out today chopped forecasts for 2008 economic growth for a third straight month. The Blue Chip Economic Indicators newsletter says the latest consensus is a 2.4 percent gain next year. That's down from a 2.6 projection from last month, and a 2.8 expansion in August. You get the idea. Economists blame the housing slump, saying it's going to be deeper and last longer than first expected.

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There's truth to the saying

The phrase "the rich keep getting richer" seems to be tossed around a lot.
But today, the Wall Street Journal shows it's so very true. The paper analyzed new data from the IRS and found the richest 1 percent of Americans earned a postwar record of more than 21 percent of all income in 2005. The Internal Revenue Service didn't name the source of rising cash for the affluent, but said a boom on Wall Street probably had something to do with it.

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Report: Mortgage crisis won't top out til 2010

The numbers on defaulted home mortgages this year have been staggering -- $46 billion worth through August. Treasury Secretary Henry Paulson told the Wall Street Journal next year's number will be significantly bigger. The firm Credit Suisse says the mortgage crisis won't top out until 2010, with about $270 billion in defaulted loans. Mayors from the cities hardest hit by home foreclosures will meet next week. They need strategies to keep falling properties values from dragging down the quality of life. Communities in Arizona, California, Florida, Indiana, Michigan, Nevada and Ohio have been hit the hardest.

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Subprime says hello from Japan

In case you had any doubts of how the subprime crisis in the U.S. is affecting other countries, here's what Japan's financial regulator said today: Japan's large banks had about $11 billion invested in products related to the U.S. subprime mortgage market as of the end of September.

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Airbus 'threatened' by dollar's decline

If there is a worst-case scenario for a company in these days of a really weak dollar, that would be Airbus' scenario. The European plane maker sells its jets in dollars, so their making less money these days. But their expenses are not lowering a bit -- they are in euros. So bad is the situation that yesterday, Airbus' chief executive said that the dollar rapid decline is life-threatening for the company.

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A more flexible Yuan

At a summit with European leaders today, China's Premier says the country will keep improving its exchange rate regime by letting market forces play a greater role. E.U. officials are dismayed by the yuan's steady slide against the euro, which they say is exacerbating global imbalances and fuelling protectionism in Europe.

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Did he mean to say rate cut?

Federal Reserve Chairman Ben Bernanke talked to a group of business people in Charlotte, North Carolina last night. He said the central bank needs to be "exceptionally alert and flexible" given the credit crunch, housing slump, and rising energy prices. Investors are counting on that translating into another rate cut at the Fed's final meeting of the year on December 11.

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Retail snailing through holiday

The holiday season is not a good time for retail sales to go soft. But they are. This morning, Target said it'll probably fall short of its sales forecast for December. And November wasn't so hot either.
A bunch of stores reported their November figures this morning and mostly, they were disappointing, even with a big Thanksgiving weekend -- 19 out of 26 retailers came up short. Among those that did fare OK: Wal-mart and Costco, Macy's and Nordstrom.

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Most severe housing recession since WWII

If that doesn't tell you just how bad things are, maybe this will drive it home: Moody's Economy.com reports today housing markets across the country will crash and suffer price drops of more than 30 percent before the crisis is over. And it's going to be a while before the end is in sight. Moody's chief economist Mark Zandi says the housing recession will continue through early 2009. But he says it won't be until 2010 before we see any decent improvement in sales, construction and pricing.

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Swiss bank on Singapore

This morning, the Swiss bank UBS announced $10 billion in write-downs. That's one of the biggest losses for a major bank so far. UBS also cancelled plans for a cash dividend to investors. Some good news for the bank: UBS will be getting some emergency funding from the Singapore government and an unnamed Middle East investor.

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Wheat eating into your wallet

A new high in wheat prices this morning is feeding inflation worries. U.S. wheat futures topped $10 dollars a bushel for the first time. Wheat prices have almost doubled since the start of the year.
The price of the grain surged this morning because there's concern dry weather in Argentina will shrink global supplies. India's harvest could suffer too without more rainfall.

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Summers on recession

Former Treasury Secretary Lawrence Summers is the latest voice to chime in with recommendations for the government on how to avoid a recession. He said the administration needs to think about a $50 billion to $75 billion tax cut and spending package. Summers also wants to see more aggressive action from the Fed. He made the comments to the Wall Street Journal ahead of a speech today to the Brookings Institution.

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Art is making money

The financial markets might be struggling, but the art market is doing quite all right. The fall auction season in New York broke records: $71 million for an Andy Warhol, $33 million for a Matisse.
One November sale took in almost $400 million.

The weak dollar is partially responsible for this. In the last years, more wealthy buyers from Russia, China, India and the Middle East have decided to spend their millions in art.

One thing to be cautious about: Generally, the art market trails the financial markets by about six months. So the party might be over soon.

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How many CEOs heading for the door?

A lot of executives have left their jobs because of problems tied to the credit crunch. Bear Stearns CEO James Cayne is the latest to cave to shareholder pressure. But in 2007, there were actually fewer CEOs heading for the door than the previous year. Consulting firm Challenger, Gray, and Christmas says 1,356 chief execs left their positions in '07. That's a drop of more than 8 percent from '06. But for the third straight year, the number of departures a month averaged more than a hundred.

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The economy killed the radio star

The Buggles sang "Video Killed The Radio Star," but it might be the economy that really does radio in. Station operators are already suffering from a deteriorating listener base. And analysts say a recession could really hurt local advertising, the lifeblood of most radio stations. Some estimates say local ads account for about 80 percent of radio broadcasters' revenue.

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Greenspan's recession more and more likely

First it was 30 percent chance of recession. Then it was 50 percent. Now, it's still close to 50 percent, but "more likely higher than lower."

Former Federal Reserve chair Alan Greenspan keeps making his predictions. In a Wall Street journal interview, he said that signs like the December unemployment numbers make him think that a recession might be looming.

Today, hedge-fund firm Paulson & Co is expected to announce they've hired Alan Greenspan. Paulson & Co. was one of the hedge fund industry's big winners in 2007, after it bet against subprime mortgages.

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Hard to see a slowdown from a yacht...

So the economy seems to be slowing down. Markets around the world are lower again today, and consumers are probably beginning to be a little cautious when they take out their wallet.

...but not when it comes to buying a yacht. Dutch yacht maker Imtech said today they don't know anything about the economic slowdown. Orders from around the world keep growing. As they put it: There are more and more billionaires, and every billionaire has one or two luxury yachts.

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Who better to forecast on the economy than a pig?

Instead of reports on jobless numbers, perhaps investors should look elsewhere for the state of the economy. Maybe Greenville, Ohio? Darke County Dave will be delivering his economic forecast this morning. What qualifies him? He's a pig. In an event sponsored by the Darke County Realtor's Association, the pig will be presented with two troughs: one filled with sawdust. The other with sugar. If he dips his nose in the sugar, America will surely pull out of this financial slowdown. If he choose sawdust . . . well, just pray he doesn't.

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The economy: Not at your service

If we needed an unmistakable signal the economy is shrinking, here it is: Activity in the service sector fell big time in January. We get this number every month from the Institute of Supply Management. December's reading was 54. January's was 42. Any reading below 50 means contraction. And to put this in perspective, that reading hasn't been below 50 since March of 2003.

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New York stores accepting Euros

If you weren't convinced the dollar just isn't what it used to be, listen to this. Some stores in New York are putting up signs that read: "Euros accepted here." An owner of a wine shop in the East Village says, "money is money."European tourists are travelling to the city looking to take advantage of the exchange rates.

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An unhealthy amount of money

Here's a number that might give you a headache: In less than a decade health care will account for $1 of every $5 the nation spends. New numbers from the Centers for Medicare and Medicaid Services project healthcare spending will nearly double by 2017. That adds up to more than $4 trillion a year. Another way to put it? About 20 percent of U.S. GDP.

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Even Greenspan says it's bad

When Alan Greenspan says it's bad, run for the hills. For months, the former Fed chairman has been issuing his predictions -- first it was a less-than-50 percent chance of recession, then it was about 50-50, and now it could be the worst financial crisis since the end of World War II. In an editorial in the Financial Times, Greenspan says the crisis will end only when home prices stabilize. When that happens, he says, financial institutions will either need to recapitalize or go out of business.

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Cleveland bank looking to sell itself rival

A battered bank in the midwest is thinking about being picked up by its rival. Cleveland-based National City Corp. operates in nine states. The bank's been hit hard by the housing downturn. The Wall Street Journal reports this morning National City is looking at selling itself to Key Corp., also based in Cleveland. Earlier this week National City hired Goldman Sachs as its adviser. If the deal goes through, sources say private equity firm KKR would step in with a capital infusion.

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Deal near to help struggling WaMu

The private equity firm TPG and other investors are nearing a deal to invest $5 billion in Washington Mutual, according to a report in the Wall Street Journal.

The Journal says an agreement has not been finalized.

Washington Mutual, the country's biggest savings and loan, has lost billions in the
national mortgage crisis. Investors have lost more than 74 per cent of their investment in the past year.

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Rice prices continue to rise

Look for the price of rice to go up -- again.

Thailand, the world's biggest rice exporter, announced the cost per ton surged to $1,000 today. That's almost triple the price per ton at the start of the year. And some Thai traders say it might reach $1,300 hundred before long. This may be good news for Bangkok rice dealers, but not it's so good for poorer nations. Even in the U.S. this week, retailers such as Sam's Club and Costco were starting to see signs of panic buying.

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Upscale airline joins those filing for bankruptcy

If you have a ticket for a flight on Eos Airlines, you'd better call your travel agent. The upscale carrier is filing for bankruptcy. Eos tried to fill a niche by offering luxury service to business travelers flying from New York to London. A roundtrip ticket included champagne, gourmet food and plenty of leg room. The credit crunch and high fuel costs are to blame for grounding Eos. It's the fourth U.S. airline to close in the past few weeks. The others are Hawaii's Aloha Airgroup, ATA Airlines and Skybus Airlines.

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The No. 1 concern among Americans: the price of gas

A new survey shows more Americans are worried about the price of gas than any other economic issue. The Kaiser Family foundation polled more than 2,000 adults earlier this month, and almost half said paying for gas was a serious problem -- and that cuts across all income levels. In second place: getting a good job or a raise. Paying for health care and health insurance came in third. And finally, about 20 percent said their biggest concern was paying the rent or the mortgage.

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Bringing home less bacon

These are lean times for the U.S. pork industry. Rising energy prices are hitting pig farmers as hard as everyone else, but they have a much bigger problem: the rocketing price of corn. That's what pigs eat and it's double the cost from a year ago. The industry hasn't turned a profit in months, and analysts don't expect that to change for at least a year. For the consumer, that means the cost of pork chops, ham and bacon will be on the rise very soon.

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Tropicana files for Chapter 11 protection

Missing a loan payment can get you in trouble. But if the loan is for $1.32 billion, that can push your company into bankruptcy. Casino operator Tropicana applied for Chapter 11 protection on Monday. That missed interest payment broke an agreement the company had with bondholders. Tropicana has 11,000 employees. It owns the renowned resort and casino in Las Vegas and another 12 casinos in the U.S. and the Caribbean.

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Cisco reports increase in sales

Tech investors got a boost today. Cisco Systems says it's sales increased over 10 percent between February and April over the same period in 2007. Cisco makes the switches and routers that direct traffic on the Internet. The firm is seen by many analysts as an indicator of the health of the world's technology companies. In response to the news, shares in Cisco rose 3 percent in after hours trading.

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A prediction on oil from the guys who make money off it

Oil is trading around $124 a barrel today. But don't worry. A new survey by KPMG is out today, and it says that 55 percent of oil executives out there think that the price of oil will drop below $100 a barrel by the end of the year. Twenty-five percent said oil would fall below $110 a barrel by year's end. One little catch though: The survey was conducted last month. So who knows what these guys are thinking now that we are passed the $120 mark.

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Airlines tack on another fee

Planning a weekend getaway anytime soon? You might want to add another 20 bucks to the budget. The three biggest U.S. airlines just increased their roundtrip ticket prices by $20.
American, United and Delta are upping the fares to pay rising jet fuel costs. This will be an increase to the fuel surcharge you're already paying every time you buy a round trip ticket. That fuel fee is now well over $100 for domestic flights.

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No surprise, but retail is slowing

With all the recession talk, it should come as no surprise that consumers are spending less these days. That's what a new report out today from SpendingPulse, a unit of MasterCard says. Retail sales in April barely rose compared to March. A 0.1 percent increase. And if you take out gasoline and cars, retail sales actually fell 0.7 percent.

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Americans to Gov't: Do something

A new poll by Bloomberg and the Los Angeles Times found that 76 percent of Americans think the government should do something to stop the fall of the dollar. The U.S. currency has gone down 13 percent against the Euro in the past year alone, and that helps push oil and commodity prices even higher.

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Bush disapproval rating reaches 75 percent

Three out of four Americans say the country is worse off economically than it was eight years ago and they're blaming President Bush. That's according to a new poll from Los Angeles Times and Bloomberg. Both Republicans and Democrats say the president's policies have messed up the country's economy. The numbers also show the president's approval rating has slipped again to 23 percent. That's an all-time low. The poll shows a sharp increase in pessimism. Half of those who responded said the economy was doing "very badly."

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A horse of a different mileage

In Arlington, Washington the lowest price for a gallon of gas is $4.30. That's at the 7-11 on Smokey Point Boulevard.

Not bad compared to what we're paying in Los Angeles, but still too much for Doctor Keith Leonard. He's a local dentist. Doc Leonard and more than half his staff have decided it's time to trade the car for the saddle. He and his crew got a special permit from the city to ride their horses to work. Although, a couple of them ride those new-fangled bicycle contraptions.

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Small bits of gas relief from Visa

Believe it or not, gas station owners are also paying the price for the high cost of fuel, and Visa wants to help out. When you use your credit card to pay for gas, there's a built-in transaction fee the station owner has to pay. Usually, it's a little less than 2 percent of your total purchase. Every time the price of gas goes up, so does the amount of that charge. Gas station retailers say it's taking a big bite out of their profits. Now, Visa says it will lower it's transaction fees for gas stations. The company will also cap it's charge for debit card payments at 95 cents.

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This probably isn't what they meant by 'stimulus package'

The porn industry has gotten a nice boost from all those checks the government sent out to revive the economy. A company that tracks the online adult entertainment market says many sites report a 20 to 30 percent increase in membership since May. About a third of these members said the stimulus checks were a factor in their decision to join or renew. Proving perhaps that size, of wallet, does matter.

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