Actual finance blog

Forestview Senior Village, the last phase of Woodlands Residential Village, has been completed and residents are moving into the three-story building.

Forestview, developed by Wheatfield-based Calamar, features 92 independent-living senior apartments. Calamar has developed more than 300 units in the 26-acre Woodlands complex, located off of Forest Parkway in Wheatfield.

Since starting Woodlands Residential Village five years ago, Calamar has seen virtually all of its apartments leased. Some 27 units of the 92 apartments in Forestview have been leased, officials said.

Calamar invested more than $30 million to develop Woodlands Residential Village, including $8.9 million on Forestview. The project was aided by incentives from the Niagara County Industrial Development Agency.

Forestview units offer one- and two-bedroom models, with monthly rents ranging from $1,095 to $1,295 and amenities such as private patios, central air conditioning and kitchen appliances payday loans. The units are smoke-free and pet-friendly. Rents also include heat and a Time Warner package that includes cable, telephone and Internet services.

The complex was designed with a central game room, 15-seat theater/media room, billiards room and fitness center.

The entire Woodlands Residential Village helps anchor the Woodlands Corporate Center East, which features a number of offices.

Woodlands Corporate Center East is expected to see more than 1,500 jobs retained or created, with an annual payroll of more than $28 million.

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Watching interest rates may be about as exciting as a snail race this year.

As the economy eases out of its doldrums, some upward rate movement by the Federal Reserve can be expected. But it will likely be a very modest move some months down the road during a relatively flat year for rates, say most experts.

The fixed-income investor is therefore left to handicap a rather unexciting field of choices. Locking in long-term rates doesn’t make sense with prospects for higher future rates, while short-term rates are extremely low.

Investors are, however, increasingly deciding to put money in a safe investment backed by the full faith and trust of the U.S. government: Treasury Inflation-Protected Securities, known as TIPS, that provide protection against inflation.
The principal of TIPS increases with inflation and decreases with deflation as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted or original principal, whichever is greater. TIPS are issued in terms of five, 10 and 30 years with a minimum purchase of $100. They pay interest twice a year at a fixed rate and can be held until maturity or sold before maturity.

"One of the trends we’re definitely seeing is investors shifting some of their portfolios into the TIPS market," said Michael Pond, interest rate strategist at Barclays Capital in New York. "TIPS yields are low, but they add some safety to a portfolio by adding an inflation hedge at a very cheap price."

Investors should look at TIPS as a structural shift in their portfolio for diversification, Pond believes. While no one will make a lot of money in TIPS the next three months, that’s not their role right now, he said.

"TIPS are attractive for the five- to 10-year horizon in which you’re concerned about conserving your buying power," added Greg McBride, financial analyst with Bankrate.com. "They’re free from default risk, and the interest rate risk is minimized by the fact there’s an inflation adjustment."

Demand was strong at the government’s recent sale of 10-year TIPS despite their low 1.430 percent yield. That auction was more than 2½ times subscribed, with large institutional investors taking more than 40 percent of the new notes.

Not everyone’s completely sold on TIPS right now.

"TIPS are wonderful, wonderful, but I’m not buying them now because their yields are so low," said Evelyn Zohlen, certified financial planner and president of Inspired Financial, Huntington Beach, Calif. "Instead, I’m buying two-year bonds as a placeholder as I wait for interest rates to come back up, and then I will use the money to buy TIPS."

TIPS can be purchased directly from the Treasury or through a broker. They’re also available in a number of mutual funds and exchange-traded funds that invest in a portfolio of different durations.

Vanguard Inflation-Protected Securities Fund, holding TIPS with an average maturity of nine years, had a 12 percent total return for the last 12 months and a three-year annualized return of 7 percent. Total return represents yield plus value of underlying securities.

That "no-load" (no sales charge) fund’s goal is to provide inexpensive entry into the inflation-protected bond market. Its initial purchase requirement is $3,000 and it has an extremely low 0.20 percent annual expense ratio.

Meanwhile, the iShares Barclays TIPS Bond Fund ETF, which is traded like a stock and therefore requires broker commissions when bought or sold, also had a 12 percent rise in net asset value the past 12 months and a 7 percent three-year annualized gain. It, too, has a low annual expense ratio of 0.20 percent.

With a fund, you needn’t keep track of maturities of individual TIPS and can automatically buy more shares with their earnings. You have annual taxable income with either funds or direct ownership, but if you own individual TIPS, you face a tax bill on appreciation from the inflation adjustment, a noncash "phantom" event.

Most advisers consider TIPS for only a portion of a personal portfolio, primarily to hedge against inflation. TIPS also make most sense in tax-sheltered accounts.

Other current choices in fixed-income investments mostly represent biding your time for the future.

"If you lock in a five-year certificate of deposit at 3.5 percent, it won’t take much of a rebound in interest rates or inflation to be losing," cautioned McBride, whose www.bankrate.com site lists free of charge the best bank savings account and money-market account rates. "You want to bide your time in short-term investments so that as interest rates rise, you can lock into a longer-term CD."

He warns against high-yield bonds because adding risk to find yield isn’t the right move now.

"We do think there will be better buying opportunities in bonds later this year, particularly for bonds longer out on the curve," advised Pond. "Interest rates are historically low, but we do expect them to head higher in 2010."

Zohlen, who recommends only AAA or AA rated bonds for her clients, is convinced that this is no time to be taking on risks. To her way of thinking, avoiding long bonds of eight or nine years in duration altogether will be a smart decision this year.

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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. 

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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.

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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)

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CIT Group has met at least one of the hurdles necessary to file for a prepackaged bankruptcy, sources said, bringing the commercial lender one step closer to the fast bankruptcy process it is seeking to lower its liabilities and get back to health.

Holders of about 90 percent of its unsecured bonds have approved the prepackaged bankruptcy, two sources familiar with the matter said late Friday. The company needed two-thirds approval.

But the company is still counting ballots to see if half of the voting bondholders have approved the deal, a necessary condition, according to a person familiar with the matter.

The 101-year old company is widely expected to clear that hurdle, and could file for bankruptcy as soon as this weekend.

CIT had been working hard to win bondholder support for its plan to restructure, and earlier Friday announced key agreements with creditors, including support from Carl Icahn, who had previously been the main opponent to the company’s plans.

CIT also announced an agreement with Goldman Sachs Group that would reduce a $3 billion credit line to $2.125 billion but, critically, keep the line open during a bankruptcy.

“It looks like everything is pointing to a prepack,” said Adam Steer, an analyst at CreditSights in New York. “Their best option is to turn off the lights and work their balance sheet down. It’s pretty clear at this point.”

The prepackaged bankruptcy plan involves giving most bondholders new debt worth 70 percent of the face value of their old debt, plus giving them new CIT shares fast payday loan no faxing.

Current preferred shareholders, including the government’s $2.33 billion paid to CIT under the Troubled Asset Relief Program, will only receive money if there are funds left over after repaying debtholders. Common shareholders will be wiped out.

CIT warned last week that if investors did not support its restructuring efforts, it could end up filing for bankruptcy without a plan for how to fix itself. Exiting bankruptcy could take a long time and destroy much of the company, CIT’s management said in a presentation.

“We’re all glad this is behind us and that we can now consummate this transaction and hopefully make bondholders some more money,” said Jeff Werbalowsky, chief executive of Houlihan Lokey, the adviser to CIT bondholders.

“The company did the right thing in putting this behind us, and that’s where this needs to be for a quick and successful restructuring.”

CIT had sought to get support from bondholders to exchange their old debt for new securities, or to agree to a pre-packaged bankruptcy. The votes were due by the end of Thursday, October 29.

The debt exchange was widely seen as doomed to fail, given the number of competing interests involved. 

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The Obama administration’s pay czar said on Wednesday that renegotiating guaranteed bonus contracts at American International Group’s AIG Financial Products unit was a top priority for him in 2010.

Kenneth Feinberg, the U.S. Treasury bailout program’s “special master” for compensation practices, told the U.S. House of Representatives Oversight and Government Reform Committee that he believes renegotiation of such contracts will not cause large numbers of executives to leave the seven bailed out firms under his purview.

Feinberg said he took pains to retain key employees in his rulings on pay at the seven firms, and added that the lure of giving up cash for company stock that has a potentially higher value in the future would keep many top earners on the job no fax payday advances.

“I think that if you look at at the levels of total compensation that we established in our determination, we figured — I made this recommendation from my conclusion — they won’t jump ship,” Feinberg told the committee.

(Reporting by David Lawder, Editing by Chizu Nomiyama)

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The U.S. government’s “pay czar” played a critical role in Citigroup’s decision to sell off its lucrative commodities trading business, Phibro, a source familiar with the matter said Friday.

The sale of the unit to Occidental Petroleum Corp relieves beleaguered Citigroup of a massive political headache– what to do with Phibro trader Andrew Hall and his paycheck of up to $100 million.

Hall has become the poster child of Wall Street’s top earners; and while pay czar Kenneth Feinberg would have limited power over his pay this year, he would undoubtedly have dramatically restructured Hall’s pay in future years.

Feinberg made it clear to Citigroup that Hall would not be able to keep earning his eye-popping paychecks, leaving Citigroup with the decision of selling off Phibro and parting with Hall or keeping Phibro but losing the unit’s moneymaker, according to the source.

The source spoke anonymously because the negotiations between Citigroup and the pay czar have not been made public.

Citigroup’s decision to offload both Phibro, and so Hall, demonstrates the extent of Feinberg’s power over the seven firms that have received “exceptional assistance” from the government.

The other firms are Bank of America Corp, American International Group Inc, Chrysler Group LLC, General Motors Co, Chrysler Financial and GMAC.

Alan Johnson, a Wall Street compensation consultant, said the deal helped Citigroup unload what was becoming “an embarrassment on line pay day loans.”

Occidental did not disclose the terms of the deal but said that its net investment would be about $250 million and that it was paying roughly the net asset value of the business.

Citigroup has received multiple bailouts from the government, including $45 billion from the U.S. Treasury’s Troubled Asset Relief Program.

POWER PLAY

Feinberg is in the thick of a 60-day intensive review of the pay contracts for the top 25 earners at the seven firms, in which he has the power to approve or renegotiate their compensation packages.

Citigroup’s announcement that it is shedding Phibro comes just three weeks before Feinberg’s rulings are due.

Feinberg did not have explicit authority to approve or reject Hall’s pay for this year because the contract was signed before a cut-off date of February 11, 2009.

But in a demonstration of the reach of Feinberg’s powers, he would still have a say over Hall’s future pay. He would have likely forced much more of it to be in equity that vested over a longer time horizon, crimping Hall’s ability to take home cash. 

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Federal Reserve Vice Chairman Donald Kohn said on Wednesday policymakers would raise benchmark interest rates well before consumer spending and business investment overheats, adding that obstacles to borrowing are likely to subdue the economic recovery.

“We must begin to withdraw (monetary policy) accommodation well before aggregate spending threatens to press against potential supply, and well before inflation as well as inflation expectations rise above levels consistent with price stability,” he said at a monetary policy conference at the Cato Institute.

Kohn said he could not predict how rapidly the Fed would raise rates or withdraw its massive supply of money to the financial system. He said the Fed — the U.S. central bank –would watch carefully how its extraordinary efforts to support the economy are affecting spending decisions and inflation expectations in timing its exit strategy.

The Fed has the necessary tools to pull back its help for the economy, he said. Paying interest on bank reserves is chief among these, he added.

However, the Fed will also need to drain reserves at some point, he said.

The Fed might also consider sales of longer-term assets if it believes that longer-term rates are not responding appropriately to its removal of monetary stimulus, Kohn said.

The Fed has chopped benchmark interbank lending rates to zero and pumped hundreds of billions of dollars into the economy to pull it out of a devastating financial crisis and deep recession.

Policy-makers have in recent weeks noted signs the downturn may have ended, but promised at their most recent meeting to keep rates extremely low for a long time to support the recovery, which they expect to be slowed down by high unemployment.

Kohn renewed the Fed’s cautious assessment of the economic outlook and its low-rate pledge.

“Although economic conditions have apparently begun to improve … continuing restraints on credit are likely to constrain the speed of recovery,” he said.

(Reporting by Mark Felsenthal; Editing by James Dalgleish)

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My recent column about Roth IRA conversions unleashed a flood of (so far) more than 100 reader e-mails illustrating widespread confusion and misconceptions.

I’ll try clearing them up with this primer:

Traditional and Roth IRAs are types of individual retirement accounts. Contributions to traditional IRAs may be tax deductible, but withdrawals are taxed. Roth IRA contributions are never deductible, but withdrawals can be tax-free. Converting a traditional IRA to a Roth offers the potential of future tax-free growth in exchange for being taxed on the conversion.

The conversion itself is merely a paperwork transaction. Your IRA custodian (basically, the institution where you have your account) can guide you through it. You may choose to convert all or part of the traditional IRA.
You don’t need "earned income," which is mostly income from work, to convert. You need earned income to make a direct contribution to any type of IRA, but conversions are not the same as direct contributions.

For 2009, you can convert unless your modified adjusted gross income is more than $100,000 or you are married and file separate tax returns. Beginning in 2010, anybody with a traditional IRA can convert.

To answer numerous questions, anybody means anybody, including you.

If your traditional IRA contains non-deductible contributions, they are not taxed on conversion. (If you convert a $100,000 IRA with $20,000 in non-deductible contributions, only $80,000 is taxable upon conversion.) But you cannot "cherry pick" and convert just the non-taxable amounts. Instead, you must pay your "pro-rata" share of taxes. If you convert only part of this IRA, for example, you would pay tax on 80 percent of the converted amount, the same ratio as in a full conversion.

Converted amounts can always be withdrawn from a Roth IRA without having to pay ordinary income tax (you already paid it when you converted) cash advance america. But converted amounts withdrawn before five years are subject to a 10 percent penalty if you are under 59