China added to the drip-feed of encouraging news on Monday with a top central banker saying the government’s stimulus has worked better than expected and crude imports data showing a spike in demand.
Global stock markets have rallied in recent weeks on hopes the U.S. economy will start growing again later this year and that banks were getting back on their feet after the industry was caught in the worst financial crisis in six decades.
China, for years the world’s factory floor, also plays a big part in the recovery scenario with many economies in Asia relying on Chinese demand and markets scrutinizing Beijing’s data for any signs of global demand bottoming out.
“China’s economy is expected to sustain rapid growth for some period in the future,” Deputy Central Bank Governor Su Ning told a financial conference.
Prime Minister Wen Jiabao pitched in, too, telling state radio that the government’s response to the financial crisis went far beyond its $585 billion stimulus and suggested it would be rolling out new initiatives throughout the year.
RELIEF
There were also more encouraging signs from the United States and Europe on Friday, with the world’s biggest economy shedding fewer jobs than feared and Germany’s exports rising for the first time in six months in March.
Investors around the world also greeted with relief last week’s results of stress tests of 19 biggest U.S. banks, with regulators ordering 10 of them to raise nearly $75 billion of capital — less than some analysts had estimated fast cash advance.
Su’s comments coincided with Beijing’s release of April price data that showed both consumer and producer prices kept falling last month. But markets saw the falls as a natural reaction to last year’s surge in prices rather than a symptom of weakness of demand, with analysts predicting a return to moderate inflation in the second half of the year.
For related graphic, click on: here
In yet another sign that China’s industry was pulling out of a deep slump late in 2008 and early this year, crude oil imports in April jumped 13.6 percent from a year earlier, a source said. That was the first annual gain this year and the second-highest daily rate.
Chinese officials have sounded increasingly confident in the past weeks that the economy can regain traction and meet the government’s 8 percent growth goal this year.
In a sign of growing optimism about the U.S. economy, an influential survey of private forecasters predicted it would resume growth in the third quarter and expand 1.9 percent next year after shrinking 2.8 percent in the whole of 2009.
The forecasts are more optimistic than the International Monetary Fund’s latest outlook, which saw the U.S. economy stagnating next year.
CAUTION
Warren Buffett’s Berkshire Hathaway had its worst year ever in 2008. But for the throng gathering in Omaha on Saturday for the annual shareholder meeting, that’s ancient history.
Berkshire fans are far more interested in learning how Buffett sizes up the investing opportunities arising out of the global economic slowdown, and how the downgrade earlier this month of Berkshire’s credit rating might affect the firm.
Mostly, they are wanting to hear how Berkshire (BRKA, Fortune 500) will get back on track following a year in which its net worth dropped by $11.5 billion and its shares gave back five years of gains.
"There are lots of opportunities out there right now," said Mohnish Pabrai, the managing partner at Berkshire shareholder Pabrai Investment funds in Irvine, Calif. "I’d love to see Warren give us some color on things like where they have been active in the debt markets."
There should be ample time for color this year, even with attendance at the meeting expected to reach a record 35,000. One key is a shift in the format for the question-and-answer session with Buffett and Berkshire Vice Chairman Charlie Munger.
The Berkshire meeting has long been a bit of a free-for-all, with Buffett and Munger fielding questions from anyone who took the microphones on the floor. In 1997, a year in which annual meeting attendance was estimated at 7,000, he dubbed the event "our capitalist’s version of Woodstock" — a label that has stuck.
But this year’s event should be a bit more orderly. The early morning rush to line up at the microphones has been replaced by a lottery, and Buffett and Munger will answer some questions that were submitted online and filtered by three journalists - including Carol Loomis of Fortune.
The idea, Buffett has said, is to cut down on the non-Berkshire-related questions that had grown more prevalent as Buffett’s profile rose.
Last year he fielded one question on whether he believes in Christ ("I am agnostic") and three on environmental issues tied to the dams that Berkshire’s Pacificorp unit operates on the Klamath River in Oregon. Buffett said regulators would have the final say there.
"In recent years, we have received only a handful of questions directly related to Berkshire and its operations. Last year there were practically none," Buffett said in the guide to this year’s annual meeting. "So we need to steer the discussion back to Berkshire’s businesses."
‘Tailwinds’ in insurance
The story there, Berkshire shareholders say, is largely upbeat, despite the downgrades earlier this month that stripped Berkshire of its triple-A credit rating fast online cash advance. One of the downgrades came from Moody’s (MCO) - the New York-based bond rater of which Berkshire owns 20%.
Many investors brushed off the downgrades, coming as they did from ratings agencies that failed to warn investors of the credit meltdown. Still, some will be paying attention to any comments Buffett might make on the subject.
"I’d be interested to hear how the ratings actions could affect the business," said Glenn Tongue, managing partner at Berkshire shareholder T2 Partners.
Meanwhile, there’s little doubt that the third of Berkshire’s industrial portfolio that focuses on economically sensitive businesses like retail and homebuilding will be hit hard by the recession.
But as Buffett pointed out in February’s release of his 2008 letter to shareholders, two-thirds of the company’s businesses are in utilities and insurance — which are less apt to suffer in an economic downturn.
Berkshire holders such as Pabrai say the insurance business, which has been strong in recent years, could be in for even bigger gains as capital-impaired rivals raise prices to restore their financial health.
"There could be some real tailwinds in some of the insurance lines," said Pabrai.
Others note the regular income Berkshire shareholders stand to reap from the flurry of investments Buffett has made in blue-chip companies such as Goldman Sachs (GS, Fortune 500), General Electric (GE, Fortune 500) and Tiffany (TIF).
They also see room for a substantial rise in Berkshire shares. At a recent $94,000 each, the class A shares have jumped more than 30% since the financial sector hit a recent low in early March — but remain 38% below their all-time high from December 2007.
The company’s less-expensive Class B shares, which have far fewer voting rights, have also bounced back lately. But at about $3,100 a share, they are also well below their peak from December 2007.
At last month’s low, Tongue says investors in the A shares were essentially paying for the value of Berkshire’s investment portfolio and getting the company’s operating businesses — such as insurer Geico and ice cream chain Dairy Queen — for free.
"Would you pay $70,000 for an envelope that contained $70,000 in cash and $50,000 worth of businesses?" he asked. "I think you would."
This weekend in Omaha, it may be difficult to find anyone who wouldn’t.
T-Mobile USA plans to double its high-speed wireless network coverage to reach a potential 200 million wireless users by the end of 2009 as it looks to catch up with rival services.
The unit of Deutsche Telekom, which has trailed far behind rivals such as Verizon Wireless, AT&T Inc and Sprint Nextel Corp in this service, said it currently offers high-speed services in about 130 U.S. cities.
The third-generation (3G) network expansion will cover another 100 cities, the company said on Wednesday.
It also said it will sell a high-speed data device made from China’s Huawei Technologies Co to connect laptop computers to its wireless network, the first supply agreement between the two companies payday advance.
The device, which it called a WebConnect Laptop Stick, will connect to its 3G network and Wi-Fi, a short-range high-speed wireless network often found in cafes or other public places.
T-Mobile USA offers Wi-Fi in about 10,000 U.S. locations.
(Reporting by Sinead Carew; Editing by Derek Caney)
Ford Motor Co said on Wednesday that it expected operating savings of $500 million per year from an agreement with the United Auto Workers that will push hourly wage rates into the “ballpark” of foreign-based rivals.
Ford said the agreement would trim its all-in average wages for the 42,000 workers covered under the contract to about $55 per hour this year, while the U.S. operations of foreign-based automakers pay workers on average $48 to $49 per hour.
The agreement with the UAW, which workers ratified earlier in March, allows Ford to suspend some performance and bonus payments, reduce overtime costs and cut a paid holiday, as well as restructure funding of a union retiree healthcare trust.
Joe Hinrichs, Ford’s global head of manufacturing, said the savings from the operating agreement and restructuring of the funding of the trust, a Voluntary Employee Beneficiary Association, was “critical to our future competitiveness guaranteed payday loans.”
The annual savings could exceed $500 million if industry conditions allow Ford to exercise all of the changes in the agreement, Hinrichs said in a conference call with analysts and reporters.
Ford, which posted a record $14.7 billion net loss for 2008, has said it believes it has adequate liquidity to operate through the economic downturn without seeking emergency U.S. government loans.
(Reporting by David Bailey; Editing by Lisa Von Ahn)
Russia accused Ukraine of stealing gas destined for the rest of Europe on Friday, a day after cutting supplies to its neighbor in a contract dispute.
The volumes Russian export monopoly Gazprom said Ukraine was off siphoning were small, but the accusation suggested Moscow was in no mood for compromise in a re-run of a 2006 argument that led to supply shortages across the E.U.
Gazprom said it was responding to Ukraine’s actions by increasing exports via alternative routes, including Belarus. Energy companies in Europe said they had not felt any disruptions to their supplies since the cut-off.
"The Ukrainian side openly admits it is stealing gas and is not ashamed of this," Gazprom spokesman Sergei Kupriyanov said.
The European Union - which receives a fifth of its gas via pipelines through Ukraine - said it considered the dispute between Moscow and Kiev to be a bilateral issue and would not step in unless supplies to Europe started to suffer.
The dispute could raise new doubts about Moscow’s reliability as an energy supplier and fuel suspicions in the West - already running high since Russia’s war with Georgia last August - that the Kremlin bullies its pro-Western neighbors.
Russia denies politics are behind the dispute and says it is about prices and debts, but the two ex-Soviet neighbors have clashed over a drive by Ukrainian President Viktor Yushchenko to take his country into the NATO alliance.
If talks do resume between Ukrainian state energy company Naftogaz and Gazprom, the gulf between their negotiating positions is wide.
Gazprom spokesman Kupriyanov said Ukraine had agreed to ship 296 million cubic meters to Europe on Jan. 3, not the 303 million cubic meters that Russia had requested.
Ukraine had earlier said it was diverting 21 million cubic meters a day of supplies destined for Europe so that it could maintain pressure in its pipeline system and keep transit supplies flowing.
Energy firms in Hungary, Poland, Bulgaria and Turkey said on Friday their supplies were unaffected, echoing importers in most European countries who earlier reported they had not seen any drop in deliveries no fax cash advance.
Europe, where temperatures fell below freezing overnight, has enough gas stockpiled to manage without Russian supplies for several days but could face difficulties if any disruption stretched into weeks, analysts said.
"We are not going to interfere until the moment when the pressure of gas reaches some low limits," Czech E.U. presidency spokesman Jiri Potuznik said.
Alexei Miller, CEO of Gazprom, said on Thursday he wanted Ukraine to pay $418 per 1,000 cubic meters of gas, compared with the $179.5 Kiev paid in 2008. Ukraine says the most it can afford to pay is $235.
Gazprom charges about $500 per 1,000 cubic to customers in the European Union, though that is likely to fall by up to half this year. Gas prices track oil and crude has plummeted in value.
The E.U. is keen to avoid a repeat of a January 2006 dispute when Moscow cut off supplies to Ukraine, causing a brief reduction in gas deliveries to other parts of Europe in mid-winter.
Hungary’s Natural Gas Transmission Company, owned by energy firm MOL said it was keeping a close watch on supplies from Russia. "We have not seen a decline in pressure, it is in line with the contracted level," said spokeswoman Edina Lakatos.
Ukraine’s Naftogaz said it guaranteed uninterrupted supplies of Russian gas to Europe and that it was drawing the fuel from underground stockpiles to meet its own needs. Temperatures in Kiev were about 8 degrees Celsius below zero.
Russia says its dispute with Kiev is purely commercial. Squeezing more money from Ukraine is particularly pressing for Gazprom now as its finances have been hurt by the global financial crisis and gas prices are on the way down.
A protracted dispute is likely to hurt the Ukrainian economy, already reeling from a drop-off in investor confidence and steep falls in the hryvnia currency that have not been stemmed by an International Monetary Fund loan.
A record number of hedge funds went bust during the third quarter, a report showed Thursday, as shaky markets and tight credit drove investors away from risky investments.
Hedge Fund Research, a Chicago-based information company, said the number of hedge funds liquidated in the third quarter rose to 344, which is more than three times the 105 liquidations in the third quarter of 2007. It’s also 77 more than the previous record of 267 liquidations in the fourth quarter of 2006.
The data also showed that 693 hedge funds were closed in the first nine months of the year versus 409 in the same period last year. That’s an increase of 70% and represents nearly 7% of all hedge funds, according to HFR.
"The hedge fund industry is currently experiencing a structural consolidation that mirrors broader trends across the entire financial industry," HFR President Kenneth Heinz said in a statement. Stock market volatility and a lack of available credit "increased the challenges for both funds and investors," he added.
Indeed, in the third quarter, the number of hedge funds closing shop exceeded the number of funds launched for the first time since HFR started tracking this data in 1996 health insurance plans.
At this rate, hedge fund liquidations are on track to reach 920 for the full year, the report said. That would outpace the 563 liquidations last year, and could top the previous record of 848 in 2005.
This year has been brutal for many fund managers as the financial crisis has unfolded and investors have fled risky investments.
Hedge funds have been flooded with redemption requests in recent months as the crisis has exploded and investors have asked for their money back to cut losses or pay back debt.
The third-quarter was a particularly brutal, with the Dow Jones industrial average plummeting nearly 25% from October to November.
"Risk tolerance is at a historical low," Heinz said. "Investors are not even distinguishing between a fund that’s up 10% and one that’s down 10%. Both facing redemptions."
A government bailout for automakers was being assembled as quickly and carefully as possible, Treasury Secretary Henry Paulson said on Tuesday as a new ratings report showed that bankruptcy was the most likely restructuring scenario for the industry.
The Bush administration came under renewed pressure from fellow Republicans who urged the government extract stiffer concessions from labor and other groups than Democrats and the White House previously agreed were needed to qualify for aid.
“The automakers will get the money as quickly as we can prudently do it,” Paulson said in interview on CNBC television. “We need to do this but we need to do it right.
President George W. Bush said earlier in a CNN interview the United States was in “a huge recession” and that he did not want to worsen the economy with an automaker collapse.
“On the other hand, I’m mindful of not putting good money after bad,” Bush said. “So we’re working through options.”
The Bush administration has said it may use part of the $700 billion fund established in October to stabilize the financial services sector to help automakers.
General Motors Corp and Chrysler LLC say they need billions of dollars in immediate bridge loans to avert near-term collapse. Ford Motor Co is seeking a line of credit but cannot afford to see its rivals fail due to the threatened disruption of supplier and other networks if GM or Chrysler collapsed.
GM shares continued to rise on bailout expectations, closing 4.2 percent up at $4 wired payday loan.25 on the New York Stock Exchange on Tuesday. Ford shares closed down 1.6 percent at $3.13. Chrysler is privately held by Cerberus Capital Management.
Senior Democratic lawmakers said on Monday they expected action from the Bush administration as early as Wednesday on financing that would likely take the stricken companies through early 2009. Larger restructuring issues would then be addressed by the next Congress and the Obama administration.
The Senate failed last week to approve a $14 billion bailout package for Detroit, leaving the Bush administration as the only option for immediate help.
CONDITIONS FOR FINANCING
The administration said a decision was not imminent.
Democrats expect the administration to preserve conditions for financing that were negotiated last week and included in legislation approved by the House of Representatives. A majority of Senators also supported that approach in a procedural vote, but the backing was not sufficient to push the measure through Congress.
The House-approved text included requirements such as the appointment of a trustee, or “car czar” to oversee disbursement of funds and compliance with loan terms.
The companies would be required to file restructuring plans by March 31 to qualify for further help and demonstrate their commercial prospects. The “car czar” could recommend bankruptcy if the plans were unsatisfactory.
President-elect Barack Obama selected New Mexico Gov. Bill Richardson for the position of secretary of Commerce in a news conference Wednesday morning.
"With his breadth and depth of experience in public life, Gov. Richardson is uniquely suited for this role as a leading economic diplomat for America," Obama said.
Richardson, one of the best-known Hispanics in the Democratic Party, also served as energy secretary during the Clinton administration, as well as ambassador to the United Nations.
Referencing the country’s deteriorating economic situation, Obama said that it is "time to not just address our immediate economic threats, but to start laying the groundwork for long-term economic prosperity cash advance loans."
"As governor of New Mexico, Bill showed how government can act as a partner to support our businesses, helping create 80,000 new jobs," Obama noted. "And under his leadership, New Mexico saw the lowest unemployment rate in decades.
Richardson, 61, is the third former presidential rival to join Obama’s team. Vice President-elect Joe Biden and Sen. Hillary Clinton, Obama’s pick for secretary of state, also competed for the Democratic presidential nomination.
Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.
They sought help with the pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.
The mayors - Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix - made their request in a letter to Treasury Secretary Henry Paulson.
Nutter said cities are facing an economic crisis not seen since the Depression and need help just like financial institutions.
"I want to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief," Nutter said.
President-elect Barack Obama has also called for some sort of aid to state and local governments so they don’t have to raise taxes or lay off workers while the federal government is trying to revive the economy, but he hasn’t proposed or endorsed a specific aid plan.
On Thursday, groups representing the nation’s mayors and governors asked Congress to jump-start the economy by increasing food stamp payments, extending unemployment insurance and boosting funding for Medicaid.
Chris Hoene, director of policy and research at the National League of Cities, said Friday that revenue is down 4.3% from last year in American cities. He said cities are in what looks like the first wave of a three- to four-year financial decline. He said revenue from property, income and sales taxes are all down at the same time for the first time in a survey taken since 1985, and widespread cuts in services are likely.
"What we’re seeing happening right now in the economy is going to be playing itself out for the next several years," Hoene said.
The three mayors proposed providing loans to help cities pay pension costs creditscores. They also want $50 billion in loans for investment in infrastructure, and additional one-year loans to cities unable to borrow cash because of the tight credit markets.
Nutter said he met with Phillip Swagel, Treasury’s assistant secretary for economic policy. He said Swagel "completely understood that we have major problems, in big and small and medium-size cities all across America and they want to be helpful. It’s just a matter of figuring out what’s the best way to do it and what works best."
Asked about the request, a Treasury spokeswoman referred to Paulson’s statement Wednesday that assistance to local and state governments wasn’t the purpose of the bailout funding.
"The focus … is to stabilize financial institutions and strengthen the financial system, promote lending and so on," Paulson said then.
The Philadelphia pension system lost more than $650 million in the first nine months of the year. Last week, Nutter announced Philadelphia would be laying off city employees, cutting salaries, closing most of its swimming pools and shutting nearly a dozen library branches to cope with a $108 million shortfall this year caused by lower business and real estate tax revenue. The deficit could grow to a total of $1 billion over five years.
Phoenix’s budget deficit is at least $200 million and could reach $250 million by June if tax revenues keep sliding. The figure represents up to 22% of the city’s $1.2 billion general fund, which pays for most city services.
Franklin said this week that city employees in Atlanta will have their hours and pay cut by 10% each week. The cuts are being made to help the city weather an expected budget shortfall of $50 million to $60 million.
NEW YORK — Stocks fell Wednesday as a report showed manufacturing contracted more than forecast and analysts cut earnings estimates on industrial companies, overshadowing Warren Buffett’s $3 billion investment in General Electric Co.
Ingersoll-Rand Co. and Parker Hannifin Corp. slid more than 3.6 percent on Citigroup Inc. analysts’ prediction that credit losses will delay spending on equipment. GE dropped as much as 9.8 percent as Deutsche Bank AG said profit will be hurt by "deterioration" at its financial unit, then trimmed losses on plans to raise $15 billion from Buffett and others.
Benchmark indexes pared their declines as Bank of America and Citigroup climbed more than 8 percent on speculation Congress will approve the $700 billion financial-rescue plan.
The Standard & Poor’s 500 index retreated 5.3 points to 1,161.06, extending its biggest monthly drop in six years. The Dow Jones industrial average slipped 19.59 to 10,831.07. The Nasdaq composite index fell 22.48 to 2,069.4.
The benchmark index for U.S. equities jumped the most in six years yesterday as expectations grew that lawmakers will salvage the proposal to buy bad loans from banks. Even with Tuesday’s advance, the S&P 500 had its worst month since 2002 in September, declining 9.1 percent, and tumbled 8.9 percent for the third quarter.
Ingersoll-Rand, the maker of Thermo King and Hussmann refrigeration equipment, dropped $1.71, or 5.5 percent, to $29.46. Parker Hannifin, the world’s largest maker of hydraulic equipment, lost $1.91, or 3.6 percent, to $51.09. Citigroup cut the companies to "hold" from "buy," citing a business slowdown.
"More important than the bailout plan will be next year’s economy," said Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report "I would rather sell on strength."
GE lost $1, or 3.9 percent, to $24.50, leading industrial companies in the S&P 500 to a decline of 2.6 percent, the biggest retreat among 10 groups. Deutsche Bank analysts cut their 2008 earnings estimate 9 percent to $2 a share and their 2009 profit projection to $1.95 a share. The worsening conditions at GE Capital is "driven by tighter credit markets, asset shrinkage and debt pay-down," analyst Nigel Coe wrote in a research note.
"We also eased back our industrial assumptions," Coe said.
Credit default swaps, contracts to protect against a default by GE Capital, which has a AAA rating, jumped to a record.
"We see no reason for the defaults widening," GE said in a statement. The company said its commercial-paper funding "has gone smoothly," and "we have over-funded every day."
Life insurers fell on concern declines in stocks and bonds will cause increased investment losses. MetLife Inc. dropped 14 percent to $48.15. Hartford Financial Services Group Inc. slipped 7 percent to $38.11. Principal Financial Group Inc. retreated 13 percent to $37.64 no fax payday advance cash till payday. Phoenix Cos. slumped 18 percent to $7.59.
Berkshire Hathaway Inc. climbed 4.9 percent to $137,000 after GE said Buffett’s company will buy a $3 billion stake in preferred shares that pay an annual dividend of 10 percent and can be purchased back by the company at a 10 percent premium after three years.
"If you’re an entity with cash available, and not cash you have to borrow, there are some real opportunities in this market," said Mark Freeman, a money manager at Westwood Management Corp. in Dallas, which oversees $8 billion. "However, the number of participants that have that ability is fairly limited. There’s no shortage of sellers and very few buyers."
SLM Corp., the biggest U.S. student lender, fell the most in the S&P 500, losing $3.99 to $8.35. The cost to protect against the company’s default reached a record Tuesday as short-term corporate borrowing rates soared amid the worst financial crisis since the Great Depression.
IBM Corp. fell $6.83, or 5.8 percent, to $110.13, the steepest decline in the Dow average. Sanford C. Bernstein analysts said the increased risk of customers failing to pay their bills could hurt profit at the world’s second-largest software maker.
Ford Motor Co. dropped 65 cents, or 13 percent, to $4.55. The second-largest U.S. automaker said second-half profit at its European unit will decline on sagging demand for new vehicles and rising raw-material costs.
Peabody Energy Corp. tumbled 8.8 percent to $41.05. Cabot Oil & Gas slid $2.31 to $33.83 as the S&P 500 energy index tumbled 1.7 percent. Crude for November delivery fell $2.11, or 2.1 percent, to $98.53 a barrel. Prices are down 33 percent from the record $147.27 a barrel reached on July 11.
Citigroup climbed $2.49, or 12 percent, to $23 and Bank of America added $3.13, or 8.9 percent, to $38.13.
The paralysis in credit markets is changing how U.S. companies do business as banks pull back on loans or make them prohibitively expensive. Some companies are closing plants and stores, postponing takeovers and grabbing any available credit in a fight for survival.
Carmike Cinemas Inc., the third-largest U.S. theater chain by screens, suspended its dividend, while Duke Energy Corp., owner of utilities in five U.S. states, tapped $1 billion from a credit agreement and RC2 Corp., the maker of infant and preschool products, canceled an acquisition.
National City Corp. gained the most in the S&P 500, rising $1.14, or 65 percent, to $2.89 on speculation Ohio’s biggest bank may be acquired. Huntington Bancshares Inc. rose $1.81, or 23 percent, to $9.80. Sovereign Bancorp Inc., the second-largest U.S. savings and loan, increased 22 percent to $4.82. First Horizon National Corp., Tennessee’s biggest bank, rose 20 percent to $11.24.
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