Actual finance blog

Berkshire Hathaway now has four internal candidates to eventually replace Warren Buffett as chief executive.

That new tidbit about the plan to replace the revered 80-year-old investor someday was revealed Monday in documents filed with the Securities and Exchange Commission. Previously, Buffett had said Berkshire had three internal candidates for the CEO job but refused to name them.

Buffett remains in good health and has no plans to retire.

The revelation about a fourth candidate reinforces speculation that Burlington Northern Santa Fe CEO Matt Rose became a contender after Berkshire acquired the railroad last year guaranteed payday loan.

The other Berkshire managers believed to be on the short list are David Sokol, chairman of NetJets and MidAmerican Energy; Ajit Jain, who runs Berkshire’s reinsurance division; and Tony Nicely, chief executive of Geico.

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Don Davidson left Rosary High School in 1975 and became a truck driver.

Today, he works at a desk surrounded by the stuffed heads of large animals he’s shot around the world. The walls are also lined with Cardinals memorabilia

Bank of England policy maker Andrew Sentance said officials must start raising interest rates from a record low “gradually” to prevent being forced to tighten policy too aggressively later.

“We should increase them gradually and slowly if we can,” Sentance said in a speech in London late yesterday called “Ten Good Reasons to Tighten.” “But the risk of delaying interest- rate rises too long is that this gradual approach may cease to be an option in the future.”

Sentance sought this month to raise the key interest rate by a half-point, which would have been the biggest single increase since the bank gained independence in setting monetary policy in 1997. His comments come as a divide among officials deepens over the risks to inflation and growth. Data today from the Office for National Statistics showed the U.K. economy shrank more than initially estimated in the fourth quarter.

Sentance’s reasons for raising rates include the “persistence” of U.K. inflation above the bank’s 2 percent target, global price pressures, the recovery in U.K. demand and signs that companies are passing on costs to customers. A report from the Confederation of British Industry yesterday showed that retail prices are rising at the fastest pace since 1991.

‘Cannot Be Confident’

“If we could be confident that global inflationary pressures would quickly subside, then we might be more comfortable about not adjusting policy in response,” he said. “But we cannot be confident that the current drivers of global inflation will quickly fall back. The upward pressure on global energy and commodity prices shows little sign of abating.”

The pound fell as much as 0.4 percent against the dollar after data showed British gross domestic product dropped 0.6 percent in the fourth quarter from the previous three months, compared with an initial estimate of a 0.5 percent drop.

Sterling was trading at $1.6096, down 0.3 percent, as of 11:57 a.m. in London. The yield on the benchmark 10-year U.K. government bond was up 1 basis point at 3.64 percent.

The fourth-quarter contraction was partly due to the impact of the coldest December in a century, and recent surveys suggest the GDP decline may have been a temporary setback to the recovery. Services returned to growth in January, manufacturing expansion accelerated and retail sales rose more than economists forecast, reports in the past month have shown.

The threat of inflation prompted two others on the Bank of England’s nine-member policy committee to vote for a rate increase, of 25 basis points, this month, minutes of the meeting showed. The majority opted to keep the benchmark unchanged at a record low of 0 low fee payday loans.5 percent.

‘Sense of Urgency’

Societe Generale SA yesterday brought forward its forecast for the first rate increase to May from August, saying the minutes “reveal a greater sense of urgency.” Brian Hilliard, an economist at SocGen in London, now sees a 25 basis-point increase in May rather than a 50 basis-point move in August.

Sentance is among six U.K. policy makers speaking this week, with Deputy Governor Charles Bean addressing the U.S. Monetary Policy Forum in New York later today.

The bank’s officials have expressed opposing views, with Adam Posen saying on Feb. 22 that price expectations remain “anchored” and the bank must “not be tyrannized by popular fears.” He voted to add 50 billion pounds ($81 billion) to the bank’s 200 billion-pound bond-purchase program this month.

Posen said at an event in Mumbai today he hasn’t changed his view on quantitative easing.

“I don’t see inflation pressure in the U.K.” because wage growth is “going to be very low over the next couple of years,” Posen said.

‘Very Gradual’

David Miles said two days ago that the level of inflation is “deeply worrying.” Nevertheless, he said he agrees with the bank’s forecast for it to slow to the 2 percent goal in 2012 and the outlook warrants a “very gradual” tightening.

U.K. inflation accelerated to 4 percent in January and the central bank forecasts that the rate will rise to about 4.5 percent this year before easing to its target. The projections are based on the market’s view for the key interest rate to rise to 1 percent by the end of this year and 2 percent by end-2012.

“Because there are a number of factors contributing to the recent surge in inflation, it is perhaps not surprising that there is some disagreement about how to respond to it,” Sentance said. Still, it’s “time to change tack and adapt our monetary policy settings to the changed economic climate.”

The BOE minutes hinted at a growing concern within the panel about inflation risks, noting that “of those members not favoring a rise in bank rate, some thought that the case for an increase had nevertheless grown in strength.”

“Since last summer, I have been arguing that we should be raising interest rates to help to limit the rise in inflation and bring it back to target,” Sentance said. “I am pleased to see this view gaining ground in the committee.”

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A judge has set bail for a former consultant for a securities research firm after she pleaded not guilty to insider trading charges in New York.

Federal Judge Robert Patterson said Winifred Jiau (jow) can go home to San Francisco with electronic monitoring once she satisfies bail of more than $500,000 set Wednesday. The government had argued no bail was sufficient to keep her from fleeing to her native Taiwan.

Jiau is a U.S. citizen who worked for Primary Global Research. She was arrested in December in a probe that has resulted in the arrests of a dozen people. The investigation has targeted those who mask insider trading information as legitimate research.

She is charged with conspiracy to commit securities fraud and wire fraud, and securities fraud.

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(Corrects growth in headline and second paragraph.)

South Africa’s economic growth accelerated in the fourth quarter as manufacturing rebounded following the end of a strike by auto workers and interest rates at a 30-year low spurred consumer spending.

Gross domestic product expanded an annualized 4.4 percent from the third quarter, when it grew a revised 2.7 percent, the statistics office said in a report released in Pretoria today. The median estimate of 21 economists surveyed by Bloomberg was for growth of 4.2 percent.

Manufacturing, which accounts for 15 percent of the economy, returned to growth in the final three months of last year as carmakers boosted output after strikes disrupted production in August and September. The Reserve Bank cut its benchmark interest rate three times to 5.5 percent last year to support consumer spending in Africa’s biggest economy.

“Improving consumption expenditure has supported the strong growth in retail and vehicle sales,” Kgotso Radira, an economist at Investec Ltd personal loans for people with bad credit. in Johannesburg, said before today’s data. “Going forward, growth in exporting sectors, such as mining and manufacturing, will depend on the pace of global growth and the rand exchange rate.”

The growth rate is still short of the 7 percent the government says it needs in order to create 5 million jobs by 2020 and slash the unemployment rate to 15 percent. South Africa’s jobless rate of 24 percent is the highest of 61 countries tracked by Bloomberg.

“The South African recovery has been relatively hesitant,” central bank Governor Gill Marcus said on Feb. 4. “However, recent indicators are more positive and suggest that the recovery will be sustained, and we can look forward to more vibrant growth in the coming years. But significant challenges remain.”

The bank expects growth to average 3.4 percent in 2011 and 3.6 percent in 2012.

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A leading Democrat says Senate officials are working behind the scenes on a budget proposal to keep the government running.

Even with the budget crisis looming, both houses of Congress are in recess this week.

But Democratic Sen. Chuck Schumer of New York says that lawmakers and aides are poring over the massive budget document passed by the House in the wee hours of Saturday morning. It proposes cutting $61 billion from hundreds of federal programs.

Congressional Democrats and President Barack Obama oppose the House proposal. For its part, the Senate is expected to propose holding spending at current levels.

Time is short. If no compromise over the budget is reached by March 4, parts of the government could shut down.

Schumer spoke Sunday on CNN’s “State of the Union.”

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Drivers, check your mailboxes.

Toronto will be mailing out refund cheques to anyone who paid the now-scrapped personal vehicle tax in advance for 2011.

The first batch of cheques will be sent out Friday, the city says.

The much-hated tax was axed by city council Dec. 16, 2010, after Ford promised to do away with the fee during his campaign. But the end of the tax didn

Borders Group has filed for Chapter 11 bankruptcy, and plans to close 200 of its stores and reduce its staff, the nation’s second-largest book retailer said Wednesday.

"It has become increasingly clear that in light of the environment of curtailed customer spending, our ongoing discussions with publishers and other vendor related parties, and the company’s lack of liquidity, Borders Group does not have the capital resources it needs to be a viable competitor," the company said in a statement.

"As we do close down the stores, ultimately there will be a reduction in employees," said Borders spokesman Donald Cutler. But he didn’t say how many workers would lose their jobs.

Borders ranks just behind Barnes & Noble (BKS, Fortune 500) among the nation’s book store chains. It currently has 659 stores and employs nearly 20,000 workers, including 5,842 full-time employees, both regular and temporary, and 13,661 part-time employees, said Cutler.

The company said it is closing 200 stores in 35 states, Washington, D.C., and Puerto Rico.,

Wall Street has been expecting the filing from the struggling company.

"This decisive action will give Borders the opportunity to achieve a proper infusion of capital in order to have the opportunity to have the time to reorganize in order to reposition itself to be a successful business for the long term," said Borders Group president Mike Edwards, in a press release.

Borders said it has received a commitment for $505 million in "debtor-in-possession financing" from GE Capital’s Restructuring Finance division.

Borders said it will close its most under performing stores in the next several weeks, a decision based on "economic conditions, cost structures and vitality of locations."

The company said the remaining stores "will continue to run in normal course." 

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President Obama’s 2012 budget proposal reduces the deficit by $1.1 trillion over the next decade partly through hundreds of billions of dollars in increased taxes for wealthy individuals, oil and gas companies, and big banks.

Overall, the administration envisions generating $39 trillion in revenue from 2012 through 2021.

The White House would raise some $350 billion by getting rid of tax breaks in the coal, oil and gas sectors, resurrecting an environmental corporate tax, and targeting "loopholes" in the international tax system.

It would also raise another $320 billion by capping tax deductions on things such as charitable donations and mortgage interest paid by the wealthiest Americans. They’d use that money to help middle class families avoid the Alternative Minimum Tax for another three years.

Those tax moves would be in addition to allowing Bush-era tax cuts to lapse for families making $250,000 or more starting in 2013, which would avoid a $1 trillion increase in the deficit over ten years, according to the Treasury Department.

Many of these Obama proposals to hike taxes have been offered — and spurned — in the past. They could again fall on deaf ears, especially with Republicans having far more power in Congress.

For example, there’s a proposed tax on the largest financial firms and banks that caused the financial crisis that would raise $30 billion over 10 years to "discourage leverage" in the financial system, said a Treasury official business cards.

But a conference committee had to strip an identical fee out of last year’s Wall Street reform law to assure the bill could pass both chambers of Congress and become law.

Here are some other tax hikes that are being offered:

* Oil, gas and fossil fuel companies would lose tax breaks and subsidies and have to pay more taxes on profits, raising $46 billion over the next decade.

* All companies would face new "Superfund" taxes that would go toward environmental clean-up, raising $20 billion over the next decade.

* Financial partnerships, including some hedge funds, would be subject to higher taxes on profits, raising $15 billion over the next decade.

* Companies that do business or transfer profits overseas would lose tax breaks, raising $129 billion over the next decade.

* Companies that purchase life insurance contracts, including companies that take out policies on their own employees, would lose some tax breaks, raising $14 billion over the next decade.

The White House also wants to pass some sort of package changing the way corporations pay taxes. But officials offered no specifics, saying they’d rather wait to work with Congress.

"That sort of fundamental reform can’t be done without everyone on board," a senior Treasury official said Monday. 

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China’s exports surged in January in a sign of rebounding global demand and its politically sensitive trade surplus fell to a nine-month low, possibly easing pressure on Beijing to allow its currency to rise.

China’s global trade surplus fell 55 percent from a year earlier to $6.5 billion, customs data showed Monday. Exports soared 37.7 percent _ more than double December’s growth rate _ to $150.7 billion, while China’s strong domestic demand drove explosive import growth of 53.5 percent to $144.3 billion.

“Strength of exports, and even more so imports, points to solid demand _ globally and domestically. The former bodes well for global recovery,” said Dariusz Kowalczyk, senior economist for Credit Agricole CIB in Hong Kong, in a report.

China’s trade surplus has narrowed in recent months as its rapid growth drives demand for foreign goods, while demand for its exports has weakened. But economists say China’s global trade gap should rebound this year to about $200 billion.

China’s demand for imports has been driven by robust economic growth that hit 9.8 percent in the final quarter of last year. Growth is expected to moderate this year but remain strong as Beijing tries to steer the expansion to a more sustainable pace personal loans for bad credit.

Beijing faces complaints that its rapid rebound from the global crisis has come partly at the expense of its trading partners, which are struggling to support economic growth.

Critics say China’s currency controls keep its yuan undervalued, giving its exporters an unfair price advantage and hurting foreign competitors by making their goods more expensive in the Chinese market.

The January trade data “will go some way to alleviate foreign pressure on China” to let the yuan rise faster against the U.S. dollar, Kowalczyk said.

Beijing promised more exchange rate flexibility in June and the yuan has risen by about 3.5 percent against the U.S. dollar since then. Analysts expect the currency to rise by about 5 percent this year, but that is too little for critics who say the yuan is undervalued by up to 40 percent.

Beijing also faces criticism that it is hampering access to its finance industries and is improperly supporting its producers of solar, wind and other renewable energy technology by shutting foreign suppliers out of government-financed projects.

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