A judge on Monday blocked a federal requirement that would have begun forcing tobacco companies next year to put graphic images on their cigarette packages to show the dangers of smoking.
U.S. District Judge Richard Leon ruled that it’s likely the cigarette makers will succeed in a lawsuit claiming the images violate the free speech amendment to the Constitution. He stopped the requirement until the lawsuit is resolved, which could take years.
Leon held a hearing on the case in September and questioned the Justice Department about whether the nine graphic images approved by the Food and Drug Administration in June convey just the facts about the health risks of smoking or go beyond that into advocacy _ a critical distinction in a case over free speech.
The images include a cloud of cigarette smoke within inches of a baby’s face; a pair of healthy lungs next to the diseased lungs of a smoker and a warning that smoking causes fatal lung disease; a smoker’s stained teeth and a lip diseased by cigarettes; and a dead smoker on an autopsy table with surgical stitches in his chest and the words “Smoking can kill you.”
The FDA requirement said the labels were to cover the entire top half of cigarette packs, front and back and include a number for a stop-smoking hotline. The labels were to constitute 20 percent of cigarette advertising, and marketers were to rotate use of the images.
The Justice Department argued the images coupled with written warnings were designed to communicate the dangers to youngsters and adults. The FDA declined to comment on the judge’s ruling.
Tobacco companies are increasingly relying on their packaging to build brand loyalty and grab consumers. It’s one of few advertising levers left to them after the government curbed their presence in magazines, billboards and TV, and the graphic labels could cost them millions in lost sales and increased packaging costs.
The cigarette makers that sued the FDA are R.J. Reynolds Tobacco Co. of Winston-Salem, N.C., Lorillard Tobacco Co. of Greensboro, N.C., Commonwealth Brands Inc. of Bowling Green, Ky., Liggett Group of Mebane, N.C., and Santa Fe Natural Tobacco Co. of Santa Fe, N.M.
Federal Reserve Chairman Ben Bernanke acknowledges the pace of economic growth is likely to be “frustratingly slow,” after the Fed downgraded its forecast for the next two years.
Bernanke says the central bank is looking for economic activity and labor market conditions to improve gradually over the next two years, but at a sluggish pace.
Bernanke cited the debt crisis in Europe as a particular concern. He says that could have adverse effects on confidence and growth. He says the Fed is closely monitoring the situation.
It was Bernanke’s third news conference this year, a practice he started in April in an effort to provide more background on the Fed’s actions and its thinking behind its latest economic forecast.
If you’ve been confused about how to invest your money lately, you are not alone.
Some of the stars of Wall Street, such as Pimco bond fund king Bill Gross and hedge fund manager John Paulson, got it wrong recently. Even the professionals acknowledge that typical investing disciplines don’t fit this unprecedented era in the markets.
Getting it right depends on looking behind a veil of secrecy in China as investors try to figure out whether they can count on emerging markets to propel growth. And it means anticipating political actions that could help or harm the economy in Europe and the U.S.
This is new terrain for fund managers, who are typically evaluating businesses rather than political strategy sessions. And it comes at a time when risks are extraordinary. The U.S. economy is in a malaise, and investors are worried that a failure to solve Europe’s debt issues could infect the financial system and unleash a global recession.
With the situation in Europe unlikely to provide clarity, and U.S. corporate leaders voicing caution as they announce recent earnings, I asked four Chicago-based fund managers how they are navigating this difficult environment. All think the U.S. will avoid another recession. But they agree their crystal balls are cloudy.
Chris Shipley, manager of the Northern Trust Large Cap Fund, has used the convulsions in the stock market to add solid companies to his portfolio while cutting exposure to weaker ones.
“You need to be cautious how you position,” he said. “I do not expect an easy or quick resolution” to the threats in the economy.
Yet, despite that, he thinks investors have been overly nervous, selling stocks so aggressively that they have become overly cheap. Prices are attractive, he said, assuming that European bank problems do not lead to a credit crisis in Europe that infects U.S. banks and the global economy. He believes the chances of that are remote.
He has been selling weaker financial stocks and deploying money instead in those he considers the strongest: companies with good balance sheets, modest debt and consistent earnings.
Investors can look at how companies reacted in the 2007 and 2008 economic slowdown to identify those where earnings held up best, he said.
The stock market’s recent harshness on weak and strong companies produced an opportunity to add strong financial companies such as JPMorgan and technology companies at good prices, he said. He has not been eager to buy companies that make consumer staples. Necessities are considered a defensive move, one preferred by investors amid nervousness, and Shipley said they were relatively expensive now.
According to Morningstar, the most resilient companies in the third quarter were growth companies, especially those in consumer services and utilities, which declined less than 5 percent. Industrial, energy, and basic material stocks declined more than 16 percent, and financial services dropped 19.3 percent.
Besides financial companies, Shipley noted, energy and industrial companies and those that make basic materials have been hammered, but he has not been anxious to buy those stocks yet.
Those cyclical stocks do well in growing rather than slowing economies. He said it was still too difficult to forecast how much China would slow. Some have argued that too much speculation there could end badly, and the government has been trying to tame inflation without slowing growth too much.
“My base case is that growth (in the U.S.) will be positive,” about 2 to 2.5 percent over the next 12 months.
The nation’s second-largest cable company, Time Warner Cable, says its third-quarter earnings slipped 1 percent even as its revenue rose.
Time Warner Cable Inc. said Thursday that its net income fell to $356 million, or $1.08 per share. That’s down from $360 million, or $1 per share, in the same period a year earlier.
Revenue grew 4 percent to $4.91 billion from $4.73 billion.
Analysts polled by FactSet were expecting earnings of $1.13 per share on revenue of $4.95 billion.
Time Warner Cable says its residential services revenue climbed 2 percent to $4.3 billion. Business services revenue jumped 35 percent to $387 million. A growth in the number of high-speed data subscribers helped boost results.
Advertising revenue fell 3 percent to $216 million.
The Italian government and a broad European plan to save the euro were at risk on Tuesday, with Premier Silvio Berlusconi locked in a high-stakes battle with coalition partners to muster support for emergency growth measures demanded by the EU.
Markets are looking to the EU’s grand plan _ promised in time for a leaders’ summit on Wednesday _ for a turnaround in the debt crisis that will avert a potential global recession.
But it risked being delayed, yet again, as governments failed to agree on details. Berlusconi’s government, meanwhile, showed little sign of meeting the EU’s demands for reforms, a prerequisite for the grand plan to go ahead.
The summit of EU leaders, meant to be a confidence-building day, risked going down as another failure in Europe’s fight to stem its two-year-long debt crisis.
EU officials say they will not present their comprehensive plan if Italy doesn’t agree to new economic measures they demanded Sunday. But Berlusconi has so far been unable to get his key ally in parliament, the Northern League, to swallow an increase in pension age. The Northern League says it will alienate their constituency of workers in the productive north.
Northern League leader Umberto Bossi conceded the government is at risk.
“Let’s say the situation is difficult, very dangerous,” he told reporters in Rome.
Berlusconi has survived scandals, court cases and dozens of confidence votes, but experts say the economic plan he needs to get approved will be one of the most critical tests yet of his grasp on the country’s leadership.
“Berlusconi has an immovable object at home which is Bossi and the Northern League, and an unstoppable force abroad which is the European Union, so he’s in a very, very difficult position,” said James Walston, a political science professor at American University in Rome.
A Cabinet meeting to draft the emergency growth measures ended Monday evening in silence _ a clear indication of discord within the government majority.
The European Union wants Italy to raise its standard pension age from 65 to 67, change the legal system to encourage investment and pass other reforms to improve growth. All are measures that have been talked about for years in successive governments, but there has been little political will to see through the unpopular decisions.
Bossi has said the Northern League will not support any increase in the pension age.
But it’s a move that partners like Germany view as critical. Germany is raising its pension age to 67 for anyone born after 1964 and Chancellor Angela Merkel will have a hard time explaining to voters at home why Europe’s largest economy should be ready to help countries whose workers retire earlier.
A policy impasse this time could cost Berlusconi his power.
The failure of Berlusconi’s majority in parliament to pass a routine measure earlier this month shows just how tenuous his hold on power has become. Berlusconi survived with a vote of confidence, but the impression remained that his government is weaker than ever _ and could fall on any test.
Ratings agencies have cited the government’s inaction and failure to draft growth measures as reasons for downgrading Italy’s growing debt, now euro1 easy payday loans.9 trillion ($2.64 trillion), nearly 120 percent of GDP and the second highest in the eurozone after Greece.
Despite the ratings agencies’ lack of faith in Berlusconi, analysts in Italy caution that his ouster could bring months of political deadlock until a new parliament is elected. It would be up to Italy’s President Giorgio Napolitano to decide to retain Berlusconi in power pending new elections, or install a technical government, which also would require the cooperation of parliament.
“I believe at this moment, a government crisis would be a disaster, because in the next months we have a huge quantity of debt that needs to be refinanced. A government crisis would destroy the market trust,” said Francesco Giavazzi, an economist at Milan’s Bocconi University.
The outgoing governor of Italy’s central bank, Mario Draghi, has already expressed concern that rising borrowing costs are threatening to eat up a chunk of the euro54 billion in austerity measures approved by parliament last month.
Italy’s fate is crucial to the eurozone because it is the bloc’s third-largest economy and would be too expensive to rescue.
To avoid that scenario, the EU is working on a three-part plan _ writing off more of Greece’s debt, raising ailing European banks’ capital levels so they can deal with those losses on Greek bonds, and boosting the bailout fund’s powers.
All three measures need to be agreed together in order to work, but it appeared that agreeing on the Greek writedowns and the bailout fund would take longer than expected.
The 10 EU countries that do not use they euro won’t sign off on the move to force banks to raise new capital without the other two parts of the plan in place. They insisted to call off a meeting of finance ministers, which was to iron out the technical details of the plan ahead of the leaders’ summit later in the day, according to European officials said. The spoke on condition of anonymity because the talks were confidential.
Without the finance ministers’ meeting, it is likely that the summit’s conclusions will remain vague.
“It’s a real mess once again,” one of the officials said.
The negotiations over easing Greece’s debt load center on talks with banks and other private investors to take losses of as much as 60 percent on their Greek bond holdings. Negotiators for the banks, however, have indicated that they will not accept losses of that magnitude.
Forcing losses onto banks could trigger big payouts of credit insurance and cause huge turbulence in global markets, analysts warn.
At the same time, two schemes to give the euro440 billion ($612 billion) European Financial Stability Facility more firepower _ by using it to guarantee bond issues from shaky countries like Italy and Spain and attract private sector capital _ also still lack detail and broad agreement.
____
Gabriele Steinhauser in Brussels and Eugenio Montesano in Rome contributed to this report.
With stock markets around the world taking a bath this year, your RRSP has probably shrunk dramatically. Thanks to some foresight by former prime minister Paul Martin and some rare cooperation by provincial premiers during the mid-1990s, you’ll at least have a solid Canada Pension Plan to fall back on.
The CPP was founded in 1966 as a way to give all working Canadians some financial security in retirement. Over the years, the plan’s obligations have grown, leading to worries over whether there will be enough in it to pay out as baby boomers retire.
In 1997, then finance minister Martin and provincial premiers did something about it, boosting premiums and allowing the excess to be invested in the stock market by the newly created CPP Investment Board. Last year, the CPP Fund managed by the CPP IB grew by 16 per cent to $153 billion. In the last six months, in contrast, the TSX S&P Composite Index has fallen almost 15 per cent. According to the Chief Actuary of Canada, that means there will be enough money in the fund to pay out CPP benefits for at least the next 75 years.
The cash in the fund comes from premiums deducted from your pay cheque, and income from investments made by the investment board.
Without that investment income, we’d all have to be digging a lot deeper to pay for our grandparents’ and parents’ pensions (the average retiree gets $512 a month from the CPP, but it can go as high as $960; Old Age Security and Guaranteed Income Supplements, paid out of general government revenues, can add another $900). And that’s just what Martin was hoping to avoid when, as federal finance minister, he pushed for reforms to the Canada Pension Plan in 1997.
“We had a bit of a magic moment here,” he said of the reforms, which were implemented following a rare degree of cooperation between the provincial governments. “To be quite honest, the provinces rose to the occasion.”
“My generation was going to be getting a good pension plan, and it was going to be paid for by my children and their generation.”
That’s because until that time, the CPP was what’s known as “pay as you go,” meaning benefits for existing retirees were paid for almost exclusively out of the premiums being taken off the paycheques of active workers. (Any small excess in premiums was invested in low-return government bonds). With more pensioners being supported by fewer active workers, it was a formula for rapidly rising premiums, shrinking benefits and inter-generational resentment.
“Young people felt that there was no savings or pension plan that would be available to them,” said Martin. “There would have been a public outcry against a plan that was essentially a chimera. . . Public pressure would have forced radical change that wouldn’t necessarily have been good.”
What Martin proposed, and what eight out of 10 provinces accepted, was an increase in premiums to 9.9 per cent of a person’s income, and a small cut in benefits. The resulting excess in premiums was allowed to be invested in the stock market, with the goal of boosting the CPP’s money to the point where it didn’t need to rely as much on current premiums to pay out benefits Business Card Holders.
By and large, the strategy has worked, says professor James MacKinnon, head of the economics department at Queen’s University.
“What they did at that time greatly strengthened the CPP. . . The higher contribution rates and more market-oriented investments were a substantial move away from pay as you go,” said MacKinnon. “I don’t see any reason to use the world insolvency and the CPP in the same sentence.”
Having a 75-year investment horizon is a built-in advantage over other investors, says Don Raymond, the CPP IB’s chief investment strategist. For one thing, it allows them to ignore quarterly blips in a company’s performance, even though their long-term business is still solid.
“We tend to think in quarter centuries, not quarters,” said Raymond, a former investment strategist at Goldman Sachs.
The CPP IB has invested your money in everything from Canadian corporate titans like Royal Bank and international giants like Anheuser-Busch/InBev, all the way down to an airport in Auckland, New Zealand, and a holding company that owns hotels and casinos in Macau.
Just over half of the money controlled by the CPP IB is in equities (both public and private), while almost a third is in fixed income (including some government bonds it has owned since the 1997 reforms). The remainder is in a mix of real estate and infrastructure holdings.
And it would be logistically next to impossible, never mind politically suicidal, for any federal government to get its hands on money in the fund in the event of debt woes like those in Greece. For any government to try and get at the money, the Pension Benefits Standards Act would need to be changed, something that requires the approval of at least two thirds of the provinces and territories, representing two thirds of the Canadian population.
While some critics at the time suggested it was reckless to have a national pension plan subject to the vagaries of the stock market, Martin still insists that the decision was the right one.
“Look at the alternatives. The status quo had brought the CPP almost to its knees. The second alternative was to individually invest in pension plans, and that would be even more vulnerable to the market,” Martin said.
Besides, says the former prime minister, the proof is in the pudding. The pudding, in this case, being a report from the Chief Actuary of Canada projecting that the CPP Fund will have enough money to pay out pensions until at least 2086.
“It’s actuarially sound for the next 75 years, which is as far out as they go,” said Martin.
Still, warns MacKinnon, there are no guarantees.
“They don’t know what their rate of return (is that) they’re going to get on their investments, and they don’t know for sure what they’re going to have to pay out . . . You can never say with 100 per cent certainty that any pension plan is fully funded.”
Also read: Why $1M in an RRSP isn’t a pension
The Libyan capital saw its first major gunbattle since Moammar Gadhafi fled Tripoli more than two months ago, as his supporters traded fire with revolutionary forces Friday after a crowd raised the ousted regime’s green flag.
Fearing more attacks, revolutionary forces set up checkpoints manned by young, armed men across the metropolis of some 2 million people, snarling traffic. They also rounded up several suspected African mercenaries, pulling them from cars and houses.
The violence in Tripoli and fierce resistance on two other fronts set back the new rulers’ stated goals of declaring total victory and establishing democracy as Gadhafi, the ruler for nearly 42 years, remains on the run.
The capital has been relatively calm since then-rebels swept into the city in late August. But Gadhafi’s loyalists have control of parts of his hometown of Sirte and the desert enclave of Bani Walid and have battled off NATO-backed revolutionary forces besieging them for weeks, perhaps encouraged by several audio recordings issued by Gadhafi from hiding.
The firefight in Tripoli began after Friday prayers. Witnesses said dozens of loyalists carrying the green flag appeared on a square in the Abu Salim neighborhood, which has long been a pro-Gadhafi stronghold and houses a notorious prison of the same name.
“I looked out of my window and I saw men and women in a group of 50 to 80 people, carrying the green flag,” said Abadi Omar, a resident in one of the buildings in the area. “They put one of these flags at the end of our street. This is when the revolutionary forces came out and these people disappeared.”
Revolutionary forces started searching every building in the area and found weapons on some of the rooftops, many hidden under water tanks, Omar said. Then pro-Gadhafi snipers opened fire, and the gunbattle began as anti-Gadhafi fighters chased loyalists around the closely packed buildings.
In amateur video shown to The Associated Press, gunfire can be seen coming from the upper floors of apartment buildings surrounding the square, prompting revolutionary forces to scramble and begin shooting from the street below.
Shouting “God is Great,” hundreds of revolutionary fighters converged on the area in pickups mounted with weapons. They set up checkpoints as heavy gunfire echoed through the streets.
Ameena Sami, a 39-year-old resident, said her brother was shot in his waist.
“My brother was standing at the front door of our house, and we heard shooting in the streets. We don’t know where it came from, and the revolutionaries came speeding onto our street and surrounded one of the buildings across the street,” she said. “The shooting just got more intense, and we looked outside and found my brother shot.”
Tripoli military officials said 12 suspected Gadhafi supporters were detained but played down the shooting, saying no clashes occurred and that the gunfire was primarily from revolutionary forces themselves. The local military council issued a statement saying 30 people were injured in friendly fire.
U.S. State Department spokeswoman Victoria Nuland also downplayed the seriousness of the fighting, calling it an “isolated, relatively small incident, by the sound of it.”
Ahmad al-Warfly, a fighter from the revolutionary forces’ Zintan brigade, said several Gadhafi supporters apparently planned a protest but drew fire because they were armed. They then fled and were pursued by revolutionary forces, prompting fierce street battles.
Al-Warfly said one man carrying a gun was captured and identified as a suspect wanted for the killings of protesters in the nearby city of Zawiya.
“It seems like it was organized,” he said. “They were planning to have a big demonstration, then the fight started.”
Witnesses also reported fighting elsewhere in the capital, but the shooting was most intense in Abu Salim.
Interim leader Mustafa Abdul-Jalil, the head of the governing National Transitional Council, has said that he hoped to declare liberation this week after the imminent fall of the holdout city of Sirte, 250 miles (400 kilometers) southeast of Tripoli on the Mediterranean coast. That could allow the council to name a new interim government and set a timeline for holding elections within eight months.
The revolutionary forces control much of Sirte after launching a major push a week ago.
On Friday, they pounded loyalists holed up in two neighborhoods with rocket and machine-gun fire but also suffered heavy casualties themselves. Wounded men streamed into front-line medical units, then were evacuated to field hospitals on the city’s outskirts.
Tanks and weapons-mounted vehicles from the revolutionary forces have kept up a steady barrage of fire into the small enclave known as District 2, where commanders believe several hundred remaining loyalists, possibly including high-ranking figures from the former regime, are hiding.
AP Television footage on Friday showed smoke rising from a building in one part of the city, and a burning car presumably in another. Pickup trucks with mounted machine guns are seen driving through a flooded street, and elsewhere an injured revolutionary soldier is carried on a stretcher into an ambulance.
Thousands of civilians have fled the city to escape the violence.
One resident returned Friday to collect personal items from his home, which had been used as a firing position for pro-Gadhafi forces. Their uniforms and mattresses littered the front courtyard.
The owner, who would not give his name because of fear of reprisals, left carrying just a blanket, saying, “the pictures speak for themselves.” He then left the city with several of his relatives.
NATO has called the continued resistance by Gadhafi forces in Sirte “surprising,” as they appear to be losing the battle since revolutionary forces have the area surrounded.
In Geneva, meanwhile, a senior U.N. human rights official, Mona Rishmawi, expressed concern about a risk of serious abuses against suspected loyalists after Gadhafi’s last strongholds fall to revolutionary forces.
Rishmawi, who recently visited Libya as part of a U.N. delegation, said the transitional government is trying to ensure that the rights of captured Gadhafi fighters are protected but “the system that is currently in place is not adequate.”
She said “there is a lot of room for abuse” of the estimated 7,000 people detained in sometimes makeshift prisons throughout Libya.
MEMC Electronic Materials Inc., based in O’Fallon, Mo., said its SunEdison unit sold 33 megawatts of solar energy projects in Spain and Italy to KGAL GmbH & Co., a German investment company.
The transaction follows the sale of 20 megawatts of solar projects to KGAL in the second quarter.
SunEdison said it will continue to monitor, maintain and operate all of the projects under long-term agreements. Other terms of the sales weren’t disclosed.
JEFFERSON CITY
Asian stock markets tumbled Monday as sentiment took a hit from a weakening economic picture in Europe and Greece’s admission it won’t meet its deficit reduction target despite austerity.
Oil prices fell to near $78 a barrel while the dollar strengthened against the euro but slipped against the yen.
In Tokyo, the Nikkei 225 slumped 2.3 percent to 8,493.24 _ well below the close of 8,605.15 on March 15 in the aftermath of a destructive earthquake and tsunami that wiped out Japan’s northeastern coast. A government survey showing an improvement in business confidence among Japanese manufacturers did little to nudge stocks back to life.
Hong Kong’s Hang Seng dived 5 percent to 16,722.46 by the end of the morning session _ its lowest level this year.
Australia’s S&P/ASX 200 fell 2.6 percent to 3,904.40. Benchmarks in Singapore, Taiwan, Indonesia, the Philippines and Thailand were all sharply lower. Markets in mainland China and South Korea are closed for national holidays.
Francis Lun, a Hong Kong-based analyst, said governments have been mishandling their economies since the 2008 financial meltdown. Greece was not given the support it needs from other countries that use the euro currency to ward off the prospect of defaulting on its debts.
Greece will run out of cash in two weeks if it does not met the criteria set down by a group of international lenders for the next installment of a financial rescue package. A default could undermine banks with significant holdings of Greece’s bonds and cause domino-style defaults in other indebted countries such as Italy.
Meanwhile, a deeper-than-expected recession prevented Greece from meeting the 2011-2012 fiscal year’s deficit target of 7.8 percent of gross domestic product, the government said. Greece’s deficit for 2011-2012 is expected to reach 8.5 percent of GDP, or euro18.69 billion ($25.2 billion).
“I think Europe really could have done it better. They should have come out much earlier and said they are going to stand by Greece no matter what,” Lun said. “Their procrastination really hurt market sentiment.”
In the U.S., too much aid went to big corporations, Lun said. The government and the central bank threw money at the economic problems but missed the main target: helping to lower the high unemployment rate and getting people back to work payday loans for bad credit.
“America spent the money incorrectly,” he said. “To save the Wall Street fat cats, people are much poorer than before. The economic malaise is really caused by unemployment and unemployment is the result of a lack of personal consumption. When you don’t have personal consumption, then your economy is going to fall into a tailspin.”
Shares were down in raw materials, industrial companies and banks, which would be hit hard if the global economic picture worsens.
Hong Kong-listed Agricultural Bank of China, the country’s largest rural lender, plunged 9.3 percent. Anhui Conch Cement Co. plunged 13 percent. Japanese heavy equipment maker Komatsu Ltd. lost 5.2 percent. Australia’s Fortescue Metals Group Ltd. lost 6.6 percent. India’s Tata Steel fell 4 percent.
Tumbling energy prices sent oil shares lower. Hong Kong-listed China National Offshore Oil Corp. dropped 7.5 percent, while PetroChina Co. slid 3.1 percent.
The U.S. is also at risk of another recession, mainly because of Europe’s struggles and signs of weakness in developing countries like China that have been driving global economic growth.
On Wall Street on Friday, stocks fell broadly. The Dow Jones industrial average dropped 2.2 percent to 10,913.38. The broader S&P 500 index shed 2.5 percent to 1,131.42. The Nasdaq composite index fell 2.6 percent to 2,415.40.
Benchmark oil for November delivery was down $1.03 to $78.19 per barrel in electronic trading on the New York Mercantile Exchange.
The contract closed down $2.94, or 3.6 percent, to $79.20 per barrel on Friday in New York. Prices haven’t finished that low since Sept. 29, 2010.
Crude peaked near $114 a barrel in May of this year but has since fallen 31 percent as worries grow about the global economy.
In currencies, the euro fell to $1.3317 from $1.3424 late Friday in New York. The dollar slipped to 77.04 from 77.08 yen.
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