Business life: My finance news blog

NEW YORK — Gift cards, the convenient catchall of holiday giving, lost their luster this year.

Price-conscious shoppers became savvy bargain hunters, realizing they could give bigger and better gifts by taking advantage of unprecedented discounts rather than by spending a set amount on gift cards, which had been steadily gaining popularity over the last few years. Practically everything took a backseat to price.

Another big concern for shoppers — whether retailers from which they got cards would follow the many others that have filed for bankruptcy this year, jeopardizing the value of their gifts.

Shoppers like Julie Brown stretched their money further by finding holiday bargains. Brown, who was shopping at Macy’s flagship store on 34th Street last week during a visit to New York, said big sales lured her to buy more actual presents this year instead of gift cards.

"It seemed like there were after-Christmas prices beforehand," said Brown, who lives in Kansas City.

People focused on getting more "bang for their buck" rather than paying $75 or $100 for a gift card, said Kathy Grannis, a spokeswoman for the National Retail Federation trade group, calling it "the year of the bargain hunter."

Consumers figured out that for the $100 they would ordinarily spend, they could get far more merchandise than before. Or get something far more expensive that had been deeply discounted. And for those really watching their spending, they could give a $100 gift marked down to $25 and pocket the savings.

That behavior could be bad news for retailers well into the new year, because they don’t record gift cards as sales until they are actually redeemed. Fewer people redeeming the cards also could hurt future sales because people usually spend more than the gift card total.

Store gift cards are expected to generate $61 billion in sales in the fourth quarter, down from $70 billion in 2007, said Brian Riley, senior analyst at research firm Tower Group. Those from financial institutions, like Visa, are expected to edge up to $28 billion in sales from $27 billion in last year’s fourth quarter.

Consumers snapped up gift cards in prior years. Last December, market research firm NPD Group said about 61 percent of Americans bought at least one holiday gift card in 2007, up from 31 percent the year before and just 16 percent in 2005 no teletrak payday loan.

SHOPPING

 GALLERY: Shopping, the day after Christmas

 VIDEO: Shoppers talk about the economy

 SAVVY CONSUMER: Returning presents may be harder this year

Most gift cards are redeemed in January or February, Riley said, but around a third of them are used six months to a year after being purchased. In previous years, this has helped retailers by boosting sales throughout the year. Furthermore, Riley said, about 40 percent of gift card holders spend at least 35 percent more than the value of the cards.

In 2009, however, Riley said more consumers may redeem gift cards as soon as possible, fearing retailers may follow in the footsteps of Circuit City, KB Toys and Linens ‘n Things, which have already sought bankruptcy protection. Circuit City plans to keep operating, but KB Toys has started liquidating its stores and will shutter operations completely.

Still, gift cards haven’t fallen off a cliff completely, as demand has remained relatively strong at some discounters. Wal-Mart, one of the few bright spots in retailing, has recorded healthy card sales, Riley said.

Gift cards also remain popular with shoppers who do not want to give cash or risk the chance of buying an unwanted present.

Lisa Gillespie of Manhattan said she bought a gift card from Target for her 16-year-old nephew. "I didn’t want to get the wrong thing. It’s just easier to let him get what he wants."

Source

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. 

Read more

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. 

Source

Massachusetts is the state best positioned for growth when the current economic turmoil recedes, according to the 2008 State New Economy Index released Tuesday.

Washington, Maryland, Delaware, New Jersey, Connecticut, Virginia, California, New York and Colorado rounded out the top ten.

The study, issued by the nonpartisan think tank Information Technology & Innovation Foundation (ITIF),measures how effectively states operate in order to compete nationally and globally. It notes that states should be focused on whether their economies are well positioned for robust growth in the next decade, pointing out that innovation is central to state economic success.

"We had to go back a full year to get data, but I do think these results will, to some extent, be able to predict how each state will do in the current economic turmoil," said Dr. Rob Atkinson, president of the foundation.

"In recessions, there are higher levels of entrepreneurship because people who are laid off will use that opportunity to start a business," he said. "We won’t be in this predicament forever. States that foster risk-taking and treat this time as an opportunity will be in a better position when they emerge - they’ll be growing, instead of replacing the investments they slashed."

Funded by entrepreneurship boosters the Ewing Marion Kauffman Foundation, ITIF considers 29 factors in determining which states are the most - and least - "New Economy." These indicators included, among other things, start-up activity, education, venture capital investment, IPOs, patents and alternative-energy cash loan in one hour.

Those data points were then grouped into five meta categories that the ITIF says embodies the New Economy: knowledge jobs, globalization, transformation into a digital economy, technological innovation capacity and economic dynamism.

"The index is a composite of variables," said Atkinson. "But economic dynamism, which measures factors such as the number of fast-growing gazelle companies and value of IPOs, is more important than, say, globalization or a digital economy at influencing the new economy leadership."

Based on past observation, states that foster startups, particularly fast-track tech ventures, are also those that adapt best in economic downturns and emerge from them with higher standards of living, according to the the survey, which was also released in 1999, 2002 and 2007.

Utah, Massachusetts, Colorado, Georgia and New York placed at the top of the ITIF’s list in the economic dynamism category, while Alabama, West Virginia, Hawaii, South Carolina and Kentucky ranked lowest.

Mississippi, West Virginia, Arkansas, Alabama, Wyoming, Kentucky, South Dakota, Oklahoma, Iowa and Louisiana were seen by the foundation as the least prepared to rejuvinate themselves. 

Source

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. 

Source

Diversified manufacturer Tyco International Ltd. said Tuesday that per-share profit for fiscal 2009 will fall short of Wall Street estimates.

In releasing its fiscal fourth-quarter earnings,Tyco (TYC) said it expects earnings per share for the new year to be $2.20 to $2.50.

Analysts surveyed by Thomson Reuters expect per-share earnings for 2009 to be $3.01.

Shares tumbled $3.36, or 13%, to $21.98 in early afternoon trading.

Edward D. Breen, chairman and chief executive officer, told analysts in a conference call that currency translation could cut per-share earnings about 38 cents and that per-share earnings at the electrical and metal products business could drop by 35 cents.

"While this estimate may be too harsh, we think it’s prudent to be conservative in this environment," he said.

Tyco said its electrical and metal products business that manufactures steel tubes and pipes, electrical conduit, armored wire and cable, metal framing systems and building components, will feel an impact from declining steel prices short term cash loans.

More than 50% of Tyco’s revenue is generated outside the United States, the company said. At current exchange rates, Tyco said it has seen about a 20% devaluation in non-US currencies, which it said will cut revenue by about 10 percentage points in 2009.

However, Tyco said it will benefit next year from improved operating performance, additional restructuring and a lower tax rate, Breen said.

Tyco said per-share earnings in 2008 were $3.06, above the $2.99 expected by analysts, according to Thomson Reuters. 

Source

Google Inc canceled plans for a search advertising partnership with Yahoo Inc amid opposition from antitrust regulators and advertisers, Google’s chief legal officer said in a blog posting on Wednesday.

Yahoo expressed dismay at Google’s decision, saying it was “disappointed that Google has elected to withdraw from the agreement rather than defend it in court.”

The U.S. Justice Department, in a statement issued on Wednesday, said it had told Google that it planned to file a lawsuit to block the deal on antitrust grounds.

“Had the companies implemented their arrangement, Yahoo’s competition likely would have been blunted immediately with respect to the search pages that Yahoo chose to fill with ads sold by Google rather than its own ads,” the Justice Department said.

Google shares were down 2.05 percent in late-morning trade at $359.30, while Yahoo was up 4.34 percent at $13.93. Both are traded on the Nasdaq market.

Google and Yahoo, Nos. 1 and 2 in the Internet search market, announced the planned partnership in June but delayed implementation to allow the Justice Department to scrutinize it for antitrust issues.

Google said it pulled out of the deal rather than face a protracted legal fight.

“After four months of review, including discussions of various possible changes to the agreement, it’s clear that government regulators and some advertisers continue to have concerns about the agreement,” the Google legal officer, David Drummond, said in his Internet posting bad credit pay day loans.

“We’re of course disappointed that this deal won’t be moving ahead,” he said.

Between them, Google and Yahoo had more than 80 percent of the web search market in August, according to comScore Inc.

In some ways, Google’s decision to scrap the deal comes as a surprise. In August, Google Chief Executive Eric Schmidt said the company would move forward with the partnership in October, with or without approval from the Justice Department.

Advertisers — who apparently had the ear of regulators — hotly opposed the deal, arguing that Google and Yahoo’s dominance of the market could mean they would rise prices.

Part of the impetus for Google’s decision could be Yahoo’s talks on buying the content and advertising operations of Time Warner Inc’s AOL unit. Yahoo initially struck a deal with Google as a way to fend off an unsolicited takeover bid from Microsoft Corp.

There had been hints that the Justice Department was prepared to challenge the Google-Yahoo deal: The department hired litigator Sandy Litvack to work on its probe of the agreement.

Litvack was the department’s antitrust chief under President Jimmy Carter. 

Read more

The Group of Seven warned the surging yen posed a threat to financial and economic stability on Monday in the latest coordinated effort by the world’s richest nations to contain worst financial crisis in 80 years.

The yen was the only currency mentioned in a brief G7 statement issued as it rallied to 13-year high against the dollar, threatening Japanese exports as world’s second-largest economy tumbles toward recession.

With Tokyo’s Nikkei share average hitting a 26-year low and share of Japan’s biggest banks tumbling on fears that they would have replenish capital, Finance Minister Shoichi Nakagawa said the G7 was worried about volatility in the yen.

“We continue to monitor markets closely and cooperate as appropriate,” Nakagawa said, reading from the G7 statement.

South Korea resorted to a record interest rate cut and Australia’s central bank said it had intervened to support its currency in another sign that policymakers are reaching beyond troubled banks now that the financial crisis has shattered investor confidence, and threatens jobs and corporate sales.

Japanese Prime Minister Taro Aso asked ministers to consider emergency measures to stabilize the stock market, including government purchases of shares and relaxing rules on recapitalization of banks. Three banks were looking to raise cash to offset stock market losses, Japanese media reported.

The Nikkei clawed 0.7 percent higher but Asia-Pacific shares outside of Japan fell 2.6 percent to a four-year low, according to an MSCI index. Safer assets such as government bonds and gold traded higher on the day, suggesting investors would need to see more than just rhetoric before acting.

“Whether what we’re seeing right now from policymakers is sufficient is difficult to tell faxless pay advances. The price action alone in markets tells me not,” said Dwyfor Evans, currency strategist with State Street Global Markets in Hong Kong.

Developing nations have been turning to the International Monetary Fund for help to stave off the worst global financial crisis since the Great Depression in the 1930s. Hungary had reached an agreement to get a “substantial financing package” in the next few days that will include financing by the European Union and some individual European governments, the IMF said.

The IMF agreed on a $16.5 billion loan package for Ukraine on Sunday.

STERNEST TEST

South Korean policymakers took their most dramatic measures yet in a months long battle to buttress confidence in an economy facing its sternest test since the Asian financial crisis a decade ago.

The Bank of Korea cut its main interest rate by 75 basis points to 4.25 percent in an unscheduled meeting. The rate cut was the biggest on record and only the second emergency move since the bank adopted its current monetary policy system; the first was after the September 11, 2001 attacks on the United States.

“Their priority is to minimize the impact of the crisis on growth and on volatility. Eventually this could also help the markets,” said Sebastien Barbe, senior economist and foreign exchange strategist with Calyon in Hong Kong.

President Lee Myung-bak pledged to increase government spending and to cut taxes to support Asia’s fourth largest economy, which grew at the slowest quarterly pace in four years during the last quarter. 

Read more

The cost of borrowing in euros for three months fell to the lowest level since before Lehman Brothers Holdings Inc. collapsed as governments stepped up efforts to boost bank balance sheets and policy makers offered cash to revive lending.

The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 3 basis points to 4.96 percent today, the British Bankers' Association said. That's the lowest level since Sept. 12, the Friday before Lehman failed. The overnight dollar rate slid 23 basis points to 1.28 percent, below the Federal Reserve's target for the first time since Oct. 3.

“The initiatives that governments have taken are beginning to work,'' said Laurence Mutkin, the London-based head of European fixed-income strategy at Morgan Stanley. “We're seeing a lot of improvement.''

Governments worldwide have introduced measures to shore up bank balance sheets after money markets seized up following the Lehman bankruptcy on Sept. 15. The French government will inject 10.5 billion euros ($14 billion) into BNP Paribas SA, Societe Generale SA and four other domestic banks as they tap for the first time the 360 billion-euro rescue package unveiled this month.

Interbank rates have tumbled in the past week after policy makers in Europe offered lenders unlimited dollar funding. The European Central Bank and the Bank of England today made available as much U.S. currency as required. The ECB allotted $101.93 billion of 28-day cash at a fixed rate of 2.11 percent, while U.K. policy makers loaned $26 billion.

Libor-OIS

The Libor-OIS spread, which measures the difference between the three-month dollar rate and the overnight indexed swap rate, was at 274 basis points, down from 290 basis points yesterday and 364 basis points on Oct. 10.

Overnight indexed swaps are over-the-counter traded derivatives in which one party agrees to pay a fixed rate in exchange for the average of a floating central-bank rate during the life of the swap. For dollar swaps, the floating rate is the daily effective federal funds rate.

Treasury three-month bills fell for a fourth day, the longest sequence of declines in 10 weeks, as investor appetite for the safest assets dwindled on speculation concerted global action will ease the turmoil in the credit markets. The yield rose 14 basis points to 1.22 percent, the highest in about a month.

The three-month dollar Libor slid 23 basis points to 3.83 percent today. That's still 233 basis points more than the Fed's target rate for overnight loans of 1.5 percent, up from 120 basis points about a month ago. At the start of the year, the spread was 43 basis points. A basis point is 0.01 percentage point.

`Slight Improvement'

“We see a slight improvement on the interbank market, but no breakthrough yet,'' European Central Bank Executive Board member Juergen Stark said in an interview with German radio station Deutschlandfunk payday loan cash advance loan. “There's a high risk that we'll see another incident'' in the banking sector.

The Libor is used to determine rates on $360 trillion of financial products worldwide, from mortgages to company loans and derivatives.

Barclays Plc, the U.K.'s second-biggest bank, confirmed a report by Cazenove that the lender's ability to issue unsecured funding has improved since Oct. 8, when the government announced a rescue package for financial institutions.

Rates for one-month asset-backed commercial paper fell to the lowest level in a month today. Yields on the highest-rated ABCP placed by dealers and due in 30 days dropped 30 basis points, the fourth-straight decline, to 3.45 percent, the lowest since Sept. 22, according to data compiled by Bloomberg.

TED Spread

Commercial paper is used by companies to meet short-term financing requirements.

The Fed invoked emergency authority today to purchase assets from money-market mutual funds that are having difficulty meeting redemptions from their investors. The central bank will lend to a series of special units that will buy certificates of deposit, bank notes and commercial paper with a remaining maturity of 90 days or less.

“There's plenty of cash on the table and there's plenty of money coming into the banking sector,'' said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking arm of Credit Agricole SA. “What we're finding is that confidence has been improving.''

The difference between what banks and the U.S. Treasury pay to borrow for three months, the so-called TED spread, was 261 basis points today, down from 298 basis points yesterday.

The demise of Lehman deepened a global credit crisis that froze the commercial paper and money markets, led to Goldman Sachs Group Inc. and Morgan Stanley turning themselves into commercial banks and sent the TED spread on Oct. 10 to 464 basis points, the highest level since Bloomberg began compiling the data in 1984.

The overnight Libor for dollars doubled to 6.44 percent on Sept. 16, a day after the Lehman bankruptcy filing, as banks balked at lending to each other on speculation more would fail.

In Asia, the three-month interbank lending rate for Hong Kong dollars, or Hibor, dropped for a third day, sliding 31 basis points to 3.35 percent, its longest run of declines in more than a month. Singapore's three-month rate for U.S. dollar loans slid for a sixth day, to 3.92 percent.

Source

Internet advertising giant Google reported a strong increase in sales and a bigger profit than expected despite the current economic slump.

The Mountain View, Calif.-based company reported revenue of $5.54 billion in the quarter ended Sept. 30, an increase of 31% from $4.23 billion a year ago.

Excluding commissions paid to advertising partners, Google posted sales of $4.04 billion, roughly in line with the $4.06 billion in sales analysts polled by Thomson Reuters expected on this basis.

Google reported net income for the third quarter of $1.35 billion, up 26% from $1.07 billion a year ago. Excluding certain charges, such as the cost of employee stock options, the company earned $4.92 a share, better than consensus estimates of $4.75 per share.

"While we are realistic about the poor state of the global economy, we will continue to manage Google for the long term, driving improvements to search and ads, while also investing in future growth areas such as enterprise, mobile, and display," said Google chief executive Eric Schmidt in a statement.

Shares of Google (GOOG, Fortune 500) jumped more than 7% in after-hours trading.

But for the past three months, investors have been concerned about Google’s performance, since its business relies heavily on advertising.

Google’s shares have fallen more than 36% over that time period as investors worried that cash-strapped businesses simply might pull back on spending on search advertising.

However, the number of paid clicks registered by Google on its sites and through its AdSense advertising network grew 4% compared to the second quarter and rose 18% compared to the same period a year ago electronic check payday advance.

Tighter wallets may play to Google’s strengths and drive up web traffic however, according to Schmidt.

"As marketing budgets are squeezed, targeted measurable ads are becoming more valuable to advertisers, and as consumer budgets are squeezed, people use the web for comparison shopping to hunt for bargains online and in stores," he said in a conference call to analysts.

"The number of search queries is actually going up," said Jeffrey Lindsay, analyst with Sanford C. Bernstein & Co.

When economic times are tough, people don’t stop searching for things online, according to Lindsay; they just search for different things.

"Even if someone loses their job, they’re going to look on the Internet for a new job," he said.

Investors have also been frustrated by the fact that a potential ad-sharing deal with rival Yahoo! (YHOO, Fortune 500) has been put on hold due to scrutiny from antitrust regulators.

The deal would give Google a gigantic new ad partner and help it widen its lead over Microsoft (MSFT, Fortune 500), which tried unsuccessfully to buy Yahoo earlier this year, in the lucrative online advertising market. But the government is concerned that a Google-Yahoo alliance would produce an online advertising monopoly. 

Source