Actual finance blog

A map showing minute-by-minute online sales activity across the country was posted on Saturday by eBay Inc.

The map shows where sales were made using the San Jose company's (NASDAQ:EBAY) online marketplace throughout the big shopping day.

As could be expected, the big population centers on the East and West Coasts glow red throughout almost the entire day, while some other regions twinkle on and off in shares of yellow and orange.

EBay launched a "12 days of Deals" shopping promotion on Black Friday in which it is showcasing special deals each day. It also launched an app for Apple Inc.'s (NASDAQ:AAPL) iPhone and iPod touch, saying it believe it will sell about $500 million in merchandise via mobile devices by the end of the year.

On Friday, eBay's payment processing subsidiary PayPal Inc. said it saw a 30 percent jump in online transactions on Thanksgiving Day, compared to a last year.

Source

Retailers are praying that holiday sales will finally turn around after two hard years. Last year was terrible, with the downfall of well-known retail chains such as Circuit City and Linens ‘n Things. This year hasn’t been much better.

But the near-term outlook doesn’t appear positive to Robert Buchanan, assistant professor of finance at St. Louis University. He sees glum sales through the first half of next year. And Buchanan doesn’t expect consumers to return to their free-spending ways in the long run.

Unlike many academics, Buchanan hasn’t been confined to an ivory tower. He spent 23 years in equity research, scrutinizing the financial statements and strategies of retailers. Before turning to teaching, he was vice president and Retailing Industry Research Group leader at A.G Edwards.

Yet, he didn’t start in equity research. He had been a journalist, working for wire service United Press International.

"There is a lot of commonality between a good reporter and a good analyst," Buchanan says.

How do you project this year’s holiday season to be, compared to 2008?

I think it is going to be a slow Christmas. If you look at the industry, it is certainly not depressed, but I think the industry is in slow spirits. What we’ve been seeing is same-store sales growth in the -1, -2 percent area throughout the year. I think that trend will continue through the holiday, and certainly into the first half of next year.

There are two reasons, number one is the debt — personal, corporate and government debt. Debt has become an acute problem for individuals.

Second thing has to do with the stock market. The total returns for the stock market during the 26 years ending with 2007, they ran right around 13 percent per year (which made consumers richer). … My suspicion is that kind of super market will not apply during the next 26 years.

What would be your advice for retailers this season?

A lot of them are acting very intelligently, starting with Walmart and individual retailers like Nordstrom, Kohl’s, Target, Costco cheap payday loan. What they are doing is smart, they have cut way back on their inventory levels and their expense levels. Those retailers in particular are positioned to make decent a return even if the sales stay slow.

A number of retail companies filed for bankruptcy in the past year. How will this affect retailers in the long run?

I think the days of heady growth for American retailers are over. Moving forward, the game is going to be about the market share. … A given retailer has to punch another retailer in the nose to take their market share away in order to survive. It has become and will remain a ruthless Darwinian struggle.

Do you think the recession has marked the death of customers?

My hunch is that (for) the high end of American retailing, like Neiman Marcus, Saks Fifth Avenue and parts of Nordstrom, the customer mindset … has permanently changed.

I think the days of freewheeling spending are over, particularly at the high end. It never made a whole lot of sense for someone to spend $2,000 on a business bag, for example, and yet, people did anyway … I think now it absolutely makes no sense. Frugality is the word.

If I am wrong about the (stock) market, and the stock market goes on a sustained (strong growth) for the next 26 years, then people might go back on spending $4,500 on a handbag.

What do you think will be the state of retail business over the next 20 years?

I think strong and superior value propositions will carry the day. To me, the best retailing concept in the world … is Costco’s.

Most typical retailers are working anywhere between a 30 percent to 60 percent mark up (on) the cost of their merchandise; Costco is working anywhere between a 10 to 15 percent markup. They don’t carry everything, they only have about 4,000 items at one point in time versus 150,000 items at a Walmart super center. But what they have … is very sharply priced.

Source

The staff of Business First wishes all a very happy Thanksgiving.

Source

Federal Reserve Chairman Ben Bernanke has a tough road ahead.

Very tough.

Bernanke, whose four-year term expires in January, is certain to face a contentious Senate banking panel at his confirmation hearing, set for Dec. 3. He is also defending against the sharpest attack on Federal Reserve powers ever.

The latest blow came last week, when a House panel overwhelmingly agreed to tack on to must-pass regulatory reform a proposal to dig into the Fed’s books, despite attempts by Rep. Barney Frank, D-Mass., to make it less intrusive.

Fed watchers say they expect that Bernanke will be confirmed for a second term as chairman. But he may get the fewest favorable votes on record - and end up at the helm of a vastly changed Federal Reserve.

"It’s going to wind up to be a very different institution," said American Enterprise Institute scholar Vincent Reinhart, a former director of the Fed’s division of monetary affairs. "At least on the Federal Reserve part, Congress is going to converge on something that’s tougher on the Fed. It’s a way to vent anger. And fundamentally people are angry."

While many credit Bernanke for saving the economy from falling into the next Great Depression, some in Congress blame the Fed - and Bernanke - for having failed to restrain the housing bubble. Others say he has gone too far in the financial system bailouts.

"We’re in a very populist era and that populism is manifesting itself in a dislike and distrust in large institutions," said Washington policy analyst Brian Gardner of investment firm Keefe Bruyette & Woods. "That means the Fed is one of those targets."

But the proposal to allow for congressional audits of the Fed is taking that anger one step further.

Since the 1980s, Fed antagonist Rep. Ron Paul, R-Texas, whose recently published book is entitled "End the Fed," has been trying to pass bills to curb Fed powers.

Paul won approval for his audit proposal from a key House committee last week.

"I agreed with him that some increase in openness about the Fed was important," Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee, told CNNMoney.

The audit measure scares the Fed and many of its defenders.

Bernanke has said on several occasions that Paul’s proposal, which would allow members of Congress to have the Government Accountability Office audit Fed activities, is more than a simple "look at the book." He warns it would interfere with the central bank’s ability to carry out independent monetary policy.

Last week, Rep. Mel Watt, D-N.C., who offered an alternative version of the audit proposal that did not go as far, pleaded with his colleagues to moderate their anger.

"I recognize the Fed currently has no political capital. Everyone would like to beat up on the Fed and call them the bad guys," Watt said cash advance loan no fax. "If we make this decision on a political basis, I know what the result will be."

Politics won out. With 15 Democrats and all Republicans, the panel passed Paul’s more controversial audit.

Still, the measure may meet resistance in the Senate. Sen. Judd Gregg, R-N.H., released a statement Friday calling the audit amendment "a dangerous move … to pander to the populist anger" at the Fed.

"Make no mistake; this move to bring the Fed’s conduct of monetary policy under the control of Congress is a grave threat to our economy," Gregg said.

Tension on the Hill

Bernanke, 55, was first appointed to the top job in 2006 by former President George W. Bush, after serving as head of the Council of Economic Advisers.

Considered an expert on the Great Depression, Bernanke previously chaired the economics department at Princeton University. He also did a three-year stint on the Fed’s board of governors ending in 2005.

Congress and the Fed have always had a complicated relationship. The Fed is designed to be independent and non-political, although it regularly reports to Congress.

The financial crisis and its aftermath have made things awkward for Bernanke on Capitol Hill. Congress didn’t like that the Fed initially refused lawmakers’ requests to reveal which major financial firms received billions in bailout dollars through the rescue of AIG (AIG, Fortune 500). The Fed later released the information.

Earlier this spring, when public rage boiled over about bonuses paid to the same unit of AIG responsible for the company’s demise, lawmakers were irked to discover that the Fed had known for months about the bonuses.

For the past several months, a House oversight panel has been investigating whether the Fed, among other regulatory agencies, overstepped its authority in negotiating the Bank of America (BAC, Fortune 500) take over of Merrill Lynch.

Lawmakers have also accused the Fed of moving slowly on consumer protection. The Fed has lately stepped up in this area, crafting rules that crack down on credit card issuers and on banks’ practice of automatically enrolling customers in overdraft protection programs with hefty fees.

Meanwhile, behind the scenes, Bernanke continues to make efforts to be more accessible than past Fed chairmen, according to lawmakers and congressional aides. He regularly answers questions, by phone or in person, aides say.

While Fed watchers expect Bernanke to be confirmed, they also expect that the hearing could turn into one of the more politically explosive confirmations the Obama administration has faced.

"Voting against him is a way of showing your discomfort with the current system and a lot of them are uncomfortable with the current system," Reinhart said. 

Source

Stocks fell Friday, capping a mostly down week, as investors remained jittery about the economy and the outlook for the technology sector.

The Dow Jones industrial average (INDU) fell 14 points, or 0.1%, to close at 10,318.16. The S&P 500 (SPX) slipped 0.3% to end at 1091.38. The tech-heavy Nasdaq composite (COMP) dropped 0.5% to 2146.04.

Despite Friday’s decline, the Dow ended the week with a 0.5% gain. The S&P 500 fell 0.2% and the Nasdaq slid 1% over the last five days. The mixed performance came after all three major gauges posted two consecutive weekly gains.

The dollar rose against rival currencies for the second day in a row, helped by increased demand for safe-haven assets and supportive comments from Federal Reserve officials.

The stronger greenback weighed on the oil market, with crude prices closing below $77 a barrel. Gold prices recovered from early losses to close at another record high.

Wall Street started the week on a high note, closing at 13-month highs on Monday and Tuesday. A softer dollar and bets that U.S. interest rates will remain low for a prolonged period helped boost the S&P 500 above the key 1,100 level early in the week.

But the tone turned more cautious Wednesday after government data showed a surprise drop in new home construction and a pair of software makers issued bearish profit forecasts.

Housing and tech woes continued to plague the market Thursday after a report showed that nearly 10% of all mortgage loans were delinquent in the third quarter and analysts at Bank of America Merrill Lynch downgraded the semiconductor industry.

On Friday, tech shares remained under pressure after PC giant Dell reported weak third-quarter results late Thursday. Homebuilder stocks fell after D.R. Horton posted a larger-than-expected quarterly loss and said conditions in the industry remain challenging.

"The market is suffering from mixed economic news this week," said John Wilson, chief technical strategist at Morgan Keegan. However, the declines were surprisingly small considering the market’s recent strength, he added.

"I think the market has to work-off a fairly overbought position," he said.

Analysts said the market was ripe for a move lower given growing concerns that stocks have come too far, too fast. After bottoming at 12-year lows in March, stocks have been on a near-continuous rally fueled by signs of economic stabilization.

"There’s a lot of concern that the stock market has gotten ahead of expectations," said Jack Ablin, chief investment officer at Harris Private Bank. "There’s not much room to advance without a concurrent improvement in economic news."

Looking ahead, trading is expected to be volatile next week with a busy economic calendar, quarterly results from Hewlett Packard (HPQ, Fortune 500) and thin trading volume.

Economic reports due next week include data on home sales and prices, a revised reading on gross domestic product and a monthly read on consumer confidence.

Dow component H-P reports quarterly financial results after the closing bell Monday.

U.S. markets will be closed on Thursday for the Thanksgiving holiday, and trading will end early on Friday. With many traders taking next week off, analyst said the number of shares trading hands will be small, which could exaggerate swings in the market.

Companies: D.R. Horton (DHI, Fortune 500), the nation’s second-largest homebuilder, said its quarterly loss narrowed to $231.9 million, or 73 cents a share, in the fourth quarter ended Sept. 30. Shares fell 15%.

Analysts surveyed by Thomson Reuters were expecting a loss of 30 cents per share.

After the closing bell Thursday,Dell (DELL, Fortune 500) reported a sharp drop in quarterly profit that fell short of Wall Street’s estimates. The stock tumbled 10%.

Also on Thursday, analysts at Bank of America Merrill Lynch downgraded the semiconductor industry. That came one day after two key software companies issued cautious profit outlooks.

But in other earnings news, retailer Gap (GPS, Fortune 500) said its quarterly profit surged 25%.

Economy: A government report showed more U.S. states suffered rising unemployment rates, though fewer reported joblessness above the national average in October.

World markets: Asian shares retreated. The Nikkei in Japan lost 0.5% while the Hang Seng fell 0.8%. Major European indexes also closed lower, with the CAC-40 in Paris falling 0.8%.

Money, gold and oil: The dollar rose versus major international currencies, including the euro, the yen and the pound.

Gold rose $4.90 to settle at a record $1,146.80 an ounce.

The price of oil fell 74 cents to close at $76.72 a barrel.

Bonds: Prices for U.S. Treasurys were mixed. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell to 3.36% from 3.50% late Thursday. The yield on the 3-month Treasury bill, which is seen as a temporary shelter from market volatility, stood at 0.015%.  

Source

Consumer spending probably rebounded in October, showing that mounting unemployment is restraining, not derailing, the biggest part of the U.S. economy, analysts said before reports this week.

Purchases increased 0.5 percent after dropping by the same amount in September, according to the median estimate of 61 economists surveyed by Bloomberg News before a Commerce Department report due Nov. 25. Other figures may show orders for durable goods and home sales climbed.

Consumers added to their wardrobes, frequented restaurants and bought more automobiles last month even after the government’s trade-in incentive expired. A jobless rate that is projected to remain above 10 percent through the first half of next year means households will still be hard-pressed to boost spending further, limiting their contribution to growth.

“A business recovery has taken root, notably in output and sales, although not yet in employment,” said Neal Soss, chief economist at Credit Suisse in New York. “The recovery will likely be mediocre relative to previous recoveries following severe recessions.”

The labor market and reduced bank lending are some of the “headwinds” facing the economy, Federal Reserve Chairman Ben S. Bernanke said last week. To help ensure the economy doesn’t falter, Bernanke and his fellow U.S. central bankers will probably keep monetary policy unchanged well into 2010.

Vehicle Sales Rise

Auto industry data show sales of cars and light trucks rose to a 10.5 million unit annual pace in October, up 14 percent from the previous month. Purchases were still short of the 14.1 million rate reached in August when the government’s cash-for- clunkers plan, which expired near the end of that month, revived demand.

U.S. retailers last month increased sales 1.4 percent after a decline of 2.3 percent in September, according to Commerce Department figures released Nov. 16. Sales rose at department stores, restaurants and Internet-based businesses such as Amazon.com.

Most retailers have boosted profits by trimming costs and inventories. Saks Inc., the New York-based U.S. luxury retail chain, last week reported an unexpected profit, its first in more than a year, for the period ended Oct. 31.

“The current economic and retail environment remain uncertain,” Saks Chairman and Chief Executive Officer Stephen Sadove said on a Nov. 17 conference call with investors and analysts. “It’s a fragile period for everyone in this industry.”

Incomes Rise

The Commerce Department spending report on Nov. 25 may also show incomes grew 0 payday loan.2 percent in October, the biggest gain in five months, after no change the previous month.

Even with that gain, a weak labor market continues to weigh on consumers’ ability to boost purchases. Payrolls fell by 190,000 last month, bringing total job losses to 7.3 million since the recession began in December 2007, the most of any contraction since the Great Depression.

President Barack Obama, seeking to halve job losses since the recession began, announced on Nov. 12 that he plans to hold a White House jobs summit. He said he’ll convene business executives and experts to seek solutions to spur job creation.

The job cuts are causing measures of consumers’ outlooks to weaken this month. The Conference Board’s confidence index, due Nov. 24, is forecast to fall, and the Reuters/University of Michigan gauge the next day is projected to drop from the previous month.

The S&P 500 rose as much as 64 percent from a 12-year low in March, closing at a 13-month high on Nov. 17.

Durable Goods

The increase in demand for automobiles likely contributed to a gain in bookings at factories. Orders for durable goods, those meant to last at least three years, probably rose 0.5 percent in October after a 1.4 percent surge, the first back-to- back increase since May, according to the median estimate ahead of a Nov. 25 report from the Commerce Department.

Excluding demand for transportation equipment, which tends to be volatile, orders probably increased 0.6 percent, the survey median showed.

The government’s revised figures for third-quarter gross domestic product, due on Nov. 24, may show the economy expanded at a 2.9 percent annual rate, compared with the 3.5 percent estimated last month, according to the survey median. The revision will reflect a bigger trade gap and weaker retail sales in September, economists said.

The worst housing slump in more than 70 years is showing signs of improvement, with government support in the form of a tax credit for homebuyers.

Existing Home Sales

The National Association of Realtors is expected to report tomorrow that purchases of existing homes rose 2.3 percent in October to an annual pace of 5.7 million, the highest level since July 2007, according to the survey median.

The Commerce Department on Nov. 25 may report that purchases of new houses rose 0.8 percent last month to a 405,000 annual pace, according to the Bloomberg survey median.

Source

Major League Baseball still faces an uncertain U.S. economy that led to lower attendance and financial losses at some clubs this year, the commissioner of the U.S. sports league said on Thursday.

“I’ve said this all year and I’ll say it again, we’re living in the most difficult economic environment since the Great Depression,” Bud Selig said to reporters at a meeting of owners in a hotel here.

“We don’t live in a bubble,” he said, acknowledging that some clubs he would not identify lost money this season.

The league’s regular-season attendance fell 6.6 percent to 73.4 million in its recently completed season as consumers dialed back spending in the weak economy. The teams with the biggest declines were in markets that suffered from high unemployment, including Detroit, Cincinnati, San Diego, Oakland and the Florida Marlins in Miami.

Over the past year, most sports have been hurt as corporate backers also cut spending on tickets and sponsorships.

Selig did not say where league revenue would finish compared with last year’s $6.5 billion, saying some areas of the business were down and others were flat. Helping baseball was the January launch of its TV channel, MLB Network.

However, a source familiar with league finances, who asked not to be identified, said revenue would likely finish about flat cash advance flexible payments.

Selig said it was too early to say what demand was like for next year’s tickets, but said his concerns about the economy have not eased.

“I haven’t talked to an economist yet … who would tell me why I shouldn’t be as concerned,” he said when asked to compare his feelings with last year at this time.

When asked about the sales process of the Texas Rangers, Selig said he is awaiting bids, which are due on Friday. He declined to discuss whether baseball would support owner Tom Hicks reconstituting his ownership group to maintain control of the team.

Three groups are interested in buying the team and analysts expect bids in the range of $500 million to $550 million.

Billionaire sports tycoon Hicks is working to satisfy creditors who in April declared his sports group, which also owns the Dallas Stars National Hockey League team, in default on $525 million in loans. Hicks separately owns half of the English Premier League’s Liverpool soccer club.

(Reporting by Ben Klayman, editing by Matthew Lewis)

Read more

The Ferrero family’s round Rocher chocolates are recognized worldwide but Italy’s richest man, Michele Ferrero, and his two sons, have shunned publicity and kept their company very private — up until now.

Ferrero, and its home base in this northwestern Italian town, is in the spotlight after it said it was considering a multi-billion euro bid for Cadbury, the world’s second-largest confectionery company.

In more than 60 years of history Ferrero has not made a single acquisition as it built up a confectionery empire it says ranks fourth in the world.

Michele Ferrero, 84, who took the reins in 1957, lives in Monte Carlo and has a villa in exclusive Cap Ferrat. Forbes magazine this month estimated his and his family’s wealth at $9.5 billion, putting them at 40th place among the world’s richest people.

Michele Ferrero’s two sons, Pietro and Giovanni, are chief executives and run day-to-day operations.

Ferrero has kept to a philosophy of “better to speak through the products than show in public,” according to a source close to the company. It has stuck to that policy with its workers as well.

“The company doesn’t tell us anything, total reserve reigns. Up until a few years ago, there wasn’t even a sign saying Ferrero on the Alba factory,” said one employee in the factory car park emergency cash loans.

The company sits at the heart of Alba, employing more than 4,000 people. Michele Ferrero still regularly visits the original factory there.

Ferrero remains a key presence for Alba, a town of some 30,000 residents in Piedmont, one of Italy’s richest gastronomic regions.

COMPANY TOWN

“In every family of Alba, there has been or still is someone working for the group,” Mayor Maurizio Marello said.

“This potential acquisition … is a sign of the group’s state of health … it is obviously an advantage for us,” he added.

Globally, Ferrero employs some 21,600 with 18 factories and operations in more than 36 countries.

Ferrero also makes Nutella hazelnut spread, Kinder chocolate eggs for children and Tic-Tac mints.

It prides itself on doing its own research — not just into products but also packaging, which lengthens the shelf-life of products and protects against temperature changes. The protection helps make its goods regular items in small grocery stores worldwide. 

Read more

An Indian Ocean airline is planning the first regular flights for more than 800 passengers after buying a budget version of the Airbus A380, the world’s largest airliner, with economy seating throughout.

Reunion-based Air Austral confirmed an order for two superjumbos at the Dubai Air Show and said it would operate them between Paris and the French overseas department from 2014.

The deal will put the A380 into service as the industry’s largest people carrier and comes 80 years after the first wood and canvas plane touched down on the Indian Ocean island after making the 9,300 kilometer (5,800 mile) trip from Paris in 10 days.

The A380 entered service in 2007 and is designed to seat 525 people in ordinary three-class seating or 853 people when its two floors of cabins are filled with economy seats — giving it 8 times more capacity than Airbus’s smallest model, the A318.

So far, buyers of the plane have focused on luring premium passengers with facilities from beds and showers in first class to a stand-up bar, with total seating of around 500 people.

Air Austral said its low-cost version would seat 840 people.

“We are convinced that airplanes with good priced tickets will help explode traffic figures,” founder and president Gerard Etheve told Reuters after announcing the deal on Tuesday.

The economy end of the airline market has performed relatively better during the financial crisis, but revenues everywhere have been battered by recession this year no credit check payday loans.

The budget version of the A380 aims at tapping growth in China, India and demand from airlines flying aging Boeing 747s on high-density routes in markets like Japan, where rival Boeing dominates air travel.

Boeing’s 747-400D, a version of the jumbo jet built for the Japanese domestic market, carries up to 660 people in one class.

Etheve said the airline he founded in 1975 had paid less than the $660 million list price for two Airbus A380s.

The aircraft was tested for the ability to evacuate over 800 people in cabin emergency tests before entering service.

Air Austral’s planes will be powered by engines from the Engine Alliance, a joint venture between General Electric and Pratt & Whitney.

The A380 deal, reported by Reuters earlier this week, includes options for a further two A380s to either serve future Caribbean routes or more flights to La Reunion.

(Editing by Jon Loades-Carter)

(Reporting by John Irish, Writing by Tim Hepher, editing by Will Waterman and Jon Loades-Carter)

Read more

U.S. regulators are looking hard at banks’ expected future tax benefits and the result for some financial institutions could be more writedowns.

Any charges are much more likely to hurt regional and community banks, than the largest U.S. lenders, who have more ways to preserve the benefits, known as “deferred tax assets,” or DTAs.

The most common reason for a bank to write down these assets is an expected lack of taxable income in the future. As income becomes less likely, regulators including the Federal Deposit Insurance Corp are pressing banks to write them down, experts told Reuters.

Regulatory pressure often means that, at the margin, accountants are inclined to be much more conservative when evaluating these assets.

“As long as the FDIC is looking at this, writedowns will be much more widespread,” said Jim Goeller, a partner at tax firm Perry-Smith in San Francisco, which audits more than 60 banks in California. An FDIC spokesman said the agency looks at all assets on the balance sheets and expects banks to follow accounting rules.

Publicly traded banks have about $134 billion of deferred tax assets on their books, according to SNL Financial. In that sense, the problem is small compared with the $1.7 trillion of commercial real estate on companies books, for example.

But for some banks, valuation adjustments can be serious. Consider The South Financial Group Inc, which recently wrote down its deferred tax asset by $200 million.

The writedown, known as a valuation allowance, had little impact on its regulatory capital levels. But it did influence its tangible common equity, a measure of capital increasingly important to stock investors and debt rating agencies.

The Greenville, South Carolina-based bank said in a filing this week that it is looking to boost its common equity, potentially through issuing shares.

Issuing shares now is difficult for banks. Starkeville, Mississippi-based Cadence Financial Corp has a large deferred tax asset, but has posted quarterly losses since the third quarter of 2008.

As of September 30 this year, it had not been forced to write down any of the asset. Chief Financial Officer Richard Haston says the bank looks at its DTA every quarter. It is unclear whether an adjustment will be necessary in the fourth quarter.

“It would probably be very difficult for a bank our size to raise capital now,” Haston said.

As of September 30, the bank’s deferred tax asset was $30.6 million, or about 25 percent of Cadence Financial’s net worth as measured by its book equity.

Lawmakers gave some relief to banks last week — a new law signed last Friday will allow businesses to count accumulated losses against five years of income, compared with prior limits of two years. But those “carrybacks” apply only to banks that did not sell equity or warrants to the government under the Troubled Asset Relief Program. 

Read more