Actual finance blog

The credit rating on Greece’s government debt was downgraded deeper into junk bond territory on Thursday.

Fitch Ratings cited the increased risk that Greece, operating now with a caretaker government, could be forced to leave the eurozone following more elections next month.

An exit from the eurozone would be "probable" if the elections fail to produce a government willing to stand by earlier austerity agreements reached with eurozone leaders, Fitch said.

In turn, the country’s departure from the eurozone would "result in widespread default on private sector as well as sovereign euro-denominated obligations," the ratings agency said. (Moody’s downgrades Spanish regions)

And all 16 other countries in the eurozone could be dinged.

"Fitch would place all eurozone sovereign ratings on Rating Watch Negative following the Greek elections if Fitch assesses that the risk of a Greek exit from [the eurozone] is probable in the near term," the agency said.

Fitch said the other nations’ economies would be hurt if Greece dropped the common currency, and that a continuation of the euro is a basic tenet of its debt ratings on of all the countries using the euro.

The bailout and debt restructuring for Greece approved by the so-called troika — the European Union, European Central Bank and International Monetary Fund — required the Greek parliament to approve an austerity program of cuts in government spending and benefits.

But the austerity plan sparked backlash, and on May 6 Greek voters denied a majority in Parliament to the two-party ruling coalition that had agreed to the bailout deal.

Polls show that an anti-austerity party is poised to be the top vote getter in the next round of voting, although it is not as clear it will be able to form a ruling coalition of its own. A deadlock could leave Greece without a working parliament able to pass the additional cuts required by the troika.

European leaders said Wednesday they want Greece to remain in the eurozone, but that it must move ahead with its agreed upon austerity plan.

The increased risk that Greece might leave the euro has driven many Greeks to withdraw money from the banks this week. The weakened state of the nation’s banks prompted the ECB to halt some loans to some of the Greek banks, forcing the banks to turn to more expensive assistance from the National Bank of Greece. 

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Federal Reserve plans for rules on credit risk may hamper monetary policy in Japan and have an

There’s a rumble brewing over how you get your beer. And the newest front has opened right in the backyard of America’s biggest brewer.

Beer wholesalers — the people who truck the suds from brewery to store shelf — are pushing a bill in the Missouri Legislature that would protect their role as middlemen, by banning brewers from owning wholesalers and codifying the industry’s vaunted three-tier distribution system into state law.

It’s a pre-emptive strike against Anheuser-Busch InBev, which wants to streamline its complex distribution network, and a sign of increased tension between the big brewer and the people who deliver its product. The fallout from that dispute could eventually affect everything from the price of beer to what brands are on the shelf.

While state laws vary, the three-tier system — in which separate companies make beer, ship it, and sell it to consumers — has been in place since the end of Prohibition, when it was designed to rein in aggressive sales tactics and streamline regulation. The system is in sharp contrast to other consumer goods — Procter & Gamble, for instance, sells toothpaste and detergent straight to Walmart — and unique in the global beer industry.

Anheuser-Busch has more than 500 distributors across the country — five in the St. Louis area — nearly all of which are independent companies with an exclusive contract to sell A-B beer in a certain geographical area. It’s a lucrative franchise; distributors typically take about $4 per case, according to calculations by Beer Business Daily. And in recent years, the so-called “red network” of A-B wholesalers has won extra profits by shedding exclusivity agreements and carrying more craft beer, with higher margins and few extra costs.

But Anheuser-Busch InBev has started to push back, encouraging wholesalers to consolidate, urging tighter “alignment” with the brewery and blasting those who sell non-A-B products against A-B in neighboring markets.

“I’m loyal to my wholesalers,” A-B InBev North American president Luiz Edmond told the Wall Street Journal in March. “Why would I not expect the same loyalty to me?”

At stake is a lot of money.

Matter of efficiency

Wall Street analysts say more efficient distribution could play a big role in A-B InBev’s target of $1 billion in U.S. cost savings. By buying out the middleman and self-distributing, the brewery could tap wholesaler profits estimated at about $1 a case, and centralize functions such as phone operations and truck maintenance.

“It’s a good way to squeeze out costs,” said Harry Schuhmacher, editor of Beer Business Daily.

These kind of acquisitions are legal in about 20 states, and A-B InBev already owns 14 distributorships — which it calls “branches” — including some in big, if not especially profitable, markets such as New York and Los Angeles. It has bought two just since December, with a third deal pending in Seattle.

A-B InBev is likely to keep buying wholesalers where it can, and to encourage consolidation where it can’t, wrote Tony Bucalo, an analyst with the Spanish bank Santander, in a research note last month. All in a bid to drive down costs.

“We estimate that ABI could hypothetically control nearly 50 percent of its distribution, compared to 8 percent today,” Bucalo wrote. “We believe it will continue to move in that direction.”

But A-B’s “costs” are distributors’ profits, and distributors are pushing back.

Even as the brewer has talked of consolidation, wholesaler groups are resisting. They warn of job cuts and short-term profit-taking. They argue that the big brewer could restrict sales of other brands at its branches, making it harder for craft beers and imports to find a market.

Those arguments have gained traction in state legislatures no fax needed payday loans. In the past two years, laws banning self-distribution have been passed in Louisiana, Wisconsin, Nebraska and Illinois — where lawmakers acted after A-B InBev’s attempt to buy a majority stake in its Chicago distributorship prompted a federal lawsuit.

In Missouri, though, the idea has been a tougher sell. The big brewer’s clout in Jefferson City has long been the stuff of legend. Even today it wields considerable influence, employing nine lobbyists and doling out more than $340,000 in political donations statewide in 2011, according to the Missouri Ethics Commission.

Last year, a bill blocking brewery ownership of distributors went nowhere. So far this spring, it has received a hearing and the blessing of a committee in the Senate, but not in the House.

The bill’s sponsor, Sen. Mike Kehoe, R-Jefferson City, did not return calls seeking comment, nor did local Anheuser-Busch distributors, who have been silent on the matter. But Brian Gelner, vice president of Premium Beverage, a MillerCoors distributor in Springfield, and legislative chairman of the Missouri Beer Wholesalers Association, said he was hopeful that the bill would at least get to a full floor vote.

“The three-tier system has been a really good system,” Gelner said. “Anything that changes that by taking one tier out hurts the whole industry.”

Flexing muscles

A-B says it agrees on the value of three tiers, and insists it has no plans to buy Missouri wholesalers. But the brewery says it wants the option to do so if necessary, and is lobbying against the bill.

“We support keeping the existing system in place because it works and fosters competition,” said Mark Bordas, A-B’s regional vice president for state affairs, in a statement. “This system for many years has allowed for brewers to own a wholesaler in Missouri. If a wholesaler decides to sell, and if it makes sense for us to buy, our ability to own a wholesaler assures that our products are able to strongly compete.”

Some say this is a lot of fuss about very little.

Joe Thompson is president of Georgia-based Independent Beverage Group, which helps broker wholesaler acquisitions. When the owner of an A-B house wants to sell, he said, A-B is always a potential buyer — in the states where it’s allowed — but just one of many. And while the big brewer usually has right of first refusal in its network, distributors are free to take the best offer.

The real reason for all this push-back, Thompson said, is that many wholesalers don’t want to go up against the deep pockets of the brewery, which could easily undercut them on price.

“They’d rather compete against you or me than Anheuser-Busch,” said Thompson, who is representing Seattle-based K&L Distributors in its sale to A-B. “Fundamentally, it’s just that they don’t want a giant in their neighborhood.”

But others who have been watching this unfold say the distributors’ worries are well-founded.

From Chief Executive Carlos Brito on down, A-B InBev executives have made clear they have plans to save money on wholesaling, said John Conlin, a distribution consultant in Denver. And the more states where A-B owns wholesalers, the less leverage the stand-alone outfits will have.

Whatever happens in Jefferson City and elsewhere, Conlin said, the long-cozy relationship between the people who make Budweiser and the people who ship it is changing, perhaps for good.

“A-B has been flexing its muscles lately,” he said. “And there’s a lot of fear out there right now.”

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Starbucks Corp., the world

China

Hosni Mubarak’s former vice president said he decided to run for president to prevent Islamists from turning Egypt into a “religious state.”

Omar Suleiman, who was also Mubarak’s long-serving intelligence chief, said in an interview published Thursday that the Muslim Brotherhood’s fielding of a presidential candidate”horrified” Egyptians. The Islamic fundamentalist Brotherhood, which has emerged as Egypt’s most powerful political bloc after last year’s uprising, reversed an earlier decision not to field a candidate.

Suleiman told the weekly El-Fagr that the Brotherhood would control all state institutions if it wins the presidency and warned Egypt would be isolated internationally if that happened. The Brotherhood already controls just under half of parliament’s seats and is the single largest bloc. Together with other Islamists, they have a 70 percent majority in the chamber.

“It is my belief that those who demand that I run, like a majority of this nation’s citizens, are in a predicament and indeed the whole state is in a predicament, especially after the Brotherhood decided to field one of its leaders for the presidency after it pledged not to,” Suleiman, 75, said in the interview.

“That change struck horror in the souls of members of the Egyptians society. If the Brotherhood’s candidate wins the presidential election, Egypt will be turned into a religious state. All state institutions will be controlled by the Brotherhood.”

Suleiman’s comments came as the Islamist-dominated parliament debated a draft bill to strip top figures from the Mubarak regime of their political rights, including voting and running for office, for 10 years. If adopted, the law would disqualify Suleiman from running in the May 23-24 presidential election along with another candidate, Ahmed Shafiq, who was Mubarak’s last prime minister.

During Mubarak’s three-decade secular presidency, the Muslim Brotherhood was repressed with thousands of its members jailed payday loan companies.

Government representatives told the legislature on Thursday that the draft law violated the constitution, with the Justice Minister Mohammed Attiyah saying that no one should be stripped of their political rights without a court order.

Lawmakers countered that the nation remains in a “revolutionary state” that empowers the legislature to make such a law.

Others warned that a Suleiman presidency would mean the imprisonment of lawmakers and what one lawmaker described as the return of Israel’s influence in Egypt. Suleiman was a frequent visitor to Israel while Egypt maintained the Arab world’s first and longest standing peace treaty with the Jewish state.

“We are in a state of self-defense, we are defending Egypt and ourselves,” said independent Islamist lawmaker Mahmoud Khodeiri, one of the country’s top legal experts. “Omar Suleiman means Mubarak returns to the palace, and we all go to prison, and these are the lucky ones because others will be sent to the gallows.”

Mubarak is on trial for his life, charged with complicity in the killing of protesters in the uprising that toppled his regime. He was arrested in April last year, but has since been detained in hospital.

Other presidential candidates are also facing legal challenges, including the Brotherhood’s Khairat el-Shater. Some have challenged el-Shater’s candidacy on the grounds he served time in prison in connection to his political activity under Mubarak. He was pardoned by the military generals who succeeded Mubarak, but his detractors argue that more time must pass before he can run, according to the law.

The election of a president is the last stage of Egypt’s turbulent transition to democratic rule. The ruling generals who took over from Mubarak have promised to step down by July 1.

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Apple’s decision to keep the new iPad’s size nearly identical to the iPad 2 is giving case makers some wiggle room — literally.

The third-generation iPad, set to hit stores March 16, will be less than a millimeter thicker than the last one. It doesn’t sound like much, but for makers of plastic, wood or metal tablet cases, it means manufacturing changes that can keep their products from store shelves during the pivotal first few weeks after a release.

Apple doesn’t announce its product specs in advance, so manufacturers find out about changes at the same time as everyone else. The best prepared are the ones that gambled and started making a tablet case with enough space inside to house either the iPad 2 or a slightly modified version.

The moment of truth for BodyGuardz came when Apple (, Fortune 500) CEO Tim Cook unveiled the new iPad’s dimensions on Wednesday.

Dain Hodson, BodyGuardz’s chief operating officer, was following tech blog Engadget’s live coverage of the event. When news came that the new model would be "9.4 millimeters thin," Hodson immediately reached for the tape measure in his drawer.

New 4G iPad marks the beginning of the end for 3G

Cradling the phone on his shoulder, he carefully measured the plastic production sample case that had just arrived from China.

"Looks like we’re good," he announced with relief. "That’s everything. That’s the starting gun for us."

BodyGuardz will now ramp up production, but in reality, its manufacturing cycle started weeks ago. The Bluffdale, Utah company decided to roll the dice after a mysterious e-mail arrived two months ago. The message came from an unknown Chinese manufacturing company that claimed it had the secret iPad 3 specs everyone desired.

"I’m very leery when I hear that, because especially for cases, there are some companies out there that will say they have five designs they’re speculating will be the right size," Hodson said. "And many times, they’re not right. You can be one millimeter off and you’re impeding somebody from using the device correctly."

Changes in the placement of buttons, cameras, speakers and USB ports are all a nightmare for companies that start early. Wednesday’s announcement gave BodyGuardz executives some relief: It looks like the Chinese source was right, and BodyGuardz’s cases will fit both the new iPad and the previous model.

Still, Hodson admits they won’t really know it’s perfect until they can buy a new iPad next week.

"That’s the danger in this game," he said.

Other case makers aren’t rushing off the blocks.

Grove, in Portland, Ore., makes all of its bamboo-and-leather cases by hand. The company’s 23 employees pride themselves on their cases’ artistic finishes, and a pristine fit is paramount. Co-founder Ken Tomita said Grove won’t start adjusting its milling machines until an employee comes back with a model from the nearby Apple store.

Until then, he’s wrestling another dilemma: Apple’s baffling name choice. It’s not the iPad 3 or iPad HD. It’s just "the new iPad."

"Apple really threw us a curve ball," Tomita said. "We had a debate today for half an hour. We can’t just call it ‘the new iPad case.’ That’s confusing."

Until Grove figures that out, its packaging and marketing plans are on hold. But Tomita is relieved that his company doesn’t have to place its big bets in advance.

"The people who are sweating bullets are the ones who use injection molds," Tomita said.

Take the cautionary tale of Hard Candy Cases. The San Francisco company paid $50,000 last year for steel moldings after several Chinese manufacturers claimed the iPhone 4S would have a different shape and a widened home button.

It didn’t. Oops.

"You move forward based on your gut feeling and experiences in the past," said A.G. Findings CEO Hank Goradesky, whose company makes the tough Ballistic line of cases. "There are times when we’ve gambled and lost inventory and tooling."

Goradesky wasn’t willing to miss out on a moment of production time, so he’s had three executives in China overseeing manufacturing for the last two weeks. Relying on the Apple rumor mill, they guessed that the new iPad’s dimensions would be almost identical to the last model.

Wednesday’s confirmation of that was a giant relief.

"God forbid that this thing doesn’t fit and it’s in a store," Goradesky said. "You can’t explain that. Those scenarios can’t exist."  

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Pressure mounted on Europe Saturday to build an even bigger financial stabilization fund to head off sovereign debt concerns, with the United States, Brazil, and the Organization for Economic Cooperation and Development all urging an increase.

While the advice coming out of a meeting of G-20 finance ministers, senior officials and central bank heads seemed overwhelming, Germany _ Europe’s main financial engine _ appeared loath to fund yet another increase to stabilization funds that already have about 500 billion euros.

Angel Gurria, the head of the Organization for Economic Cooperation and Development, set the tone at the conference, calling for about $1.5 trillion in “firewall” funds aimed at restoring confidence in European countries’ debt.

“We still have to build the mother of all firewalls,” Gurria said. “The thicker the firewall is, the less likely we’ll have to use it.”

Guido Mantega, the finance minister of Brazil, said “there is a very strongly shared opinion that first, the European countries should strengthen their firewall.”

“The emerging countries are only going to help under two conditions,” Mantega said. “First, that they reinforce their firewalls, and second that reforms are implemented in the International Monetary Fund.” Brazil wants more representation for developing nations in the U.S.-led IMF.

Many want the IMF, which is already participating in European stabilization, to do more.

U.S. Treasury Secretary Timothy Geithner added to the pressure, saying “I hope that we’ll see, I expect that we’ll see continued efforts by the Europeans … to put in place a stronger, more credible firewall,” though he didn’t mention any amount.

Geithner acknowledged the work of European leaders, saying they have “made quite a bit of progress in convincing the world that they are not going to allow a catastrophic financial failure” in their countries.

But he also noted, “It’s important not to rest on that progress, and recognize that progress is there in part based on the expectation that there are more things to come, more actions to come” on the financial firewall.

“They are not done. They know they’ve got more to do,” Geithner said. He added that leaders had moved “slower than some people would like.”

The Germans, whose powerful economy represents the economic keystone of Europe, seem loath to help fund yet more stabilization efforts.

In an editorial in the El Universal newspaper on the eve of the meeting, German Finance Minister Wolfgang Schauble wrote that “should we increase even more the firewalls? The response is a resounding no.” Schauble also rejected sharing other Euro-zone country debts, or expanding the euro money supply to meet countries’ budget gaps.

“This would not only not solve the problems of debt and competitiveness that brought the affected countries to their current state of affairs, it would also discourage their governments from carrying out consolidation and reform.”

German central bank president Jens Weidmann noted Friday that Euro-area political leaders will meet in March to decide whether to further increase the current 500-billion-euro financial stabilization effort, and while he didn’t rule out increased funding, he said money alone won’t do it.

“Higher walls of money can buy time, but that time must be used to tackle the roots of the crisis,” Weidmann told a seminar prior to the ministers meeting. “Ultimately, Greece cannot be forced to comply with the program,” he said of the indebted country’s commitment to make fiscal, wage and other reforms in exchange for the European bailout.

“But it should be clear that no further disbursements will be warranted if Greece fails to keep its side of the bargain,” Weidmann said.

Mexican central bank Governor Agustin Carstens said Friday that the “IMF’s lending capacity is an issue that will be discussed” at Saturday’s meeting among finance ministers and central bankers.

But one Canadian finance official, who was not authorized to speak on the record, said that “on the issues of IMF funding, I don’t think we are near a consensus.”

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Wynn Resorts says it forcibly bought back shares from its biggest stakeholder after finding the Japanese tycoon made improper payments to gambling regulators.

The Las Vegas company says it took action against Kazuo Okada after a year-long investigation uncovered that he engaged in activities that violated U.S. anti-corruption laws. Wynn has asked Okada to resign from the board.

The company says discoveries include cash payments and gifts totaling about $110,000 to foreign gaming regulators

Okada is the founder of casino game maker Universal Entertainment. He held an almost 20 percent stake in Wynn Resorts Ltd.

An email was sent seeking comment from Okada but it generated no immediate response.

Wynn says it filed a lawsuit against Okada and Universal Entertainment in Nevada District Court for breach of fiduciary duty and related offenses.

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At first glance, there’s nothing the least bit unusual about the routine followed by Ben Griswold on any given workday.

He analyzes markets, crafts investment strategies and performs various other responsibilities assigned him by Kennedy Capital Management, a boutique Creve Coeur financial services firm.

All fairly normal in the world of finance, were it not for this:

Griswold is an intern.

The hand-wringing over the brain drain that siphons the best and brightest from St. Louis to New York, Chicago, San Francisco and other exotic locales (Minneapolis, anyone?) has gnarled a fair share of economic development knuckles in these precincts.

But there may be an antidote to St. Louis bidding farewell each Spring to newly-minted professionals that head for brighter lights the ink barely dry on diplomas from St. Louis University, Washington University and the University of Missouri-St. Louis (to name just a few).

It can be found in the paid internship programs offered by Kennedy Capital and its larger counterpart, Town & Country-based ScottTrade - two businesses that provide college students with far more than a single semester or a summer break to absorb the intricacies of the trade.

Companies that offer extended internships are the exception rather than the rule, said Peggy Gilbertson, intern coordinator at UMSL.

But the role of interns, she added, have thankfully evolved whether a college student is on the job for three months or three years.

“I’m definitely part of a team,” said UMSL student Ceri (cq.) Berble, an intern in the ScottTrade public relations department. “I don’t get coffee for anyone. I sit in team meetings and my ideas are heard. I’m not intimidated.”

The interns at both Kennedy Capital (12 currently) and ScottTrade (428 in company branches nationwide) further shatter the stereotype of college students relegated to menial tasks with zero professional value.

“I’d be embarrassed to ask our interns” to make coffee, said Caroline Dybala, the internship program manager at ScottTrade.

Basic economics guided Kennedy Capital co-founder Jerry Kennedy’s decision 20 years ago to hire interns for terms of as long as 36 months.

From a business perspective it makes little sense to show interns the exit just at the exact moment they were getting comfortable with the quotidian of institutional finance.

“There’s a lot to learn at the start,” said Alex Mosman, the manager of the intern cooperative learning program. “And if you only had a summer or a semester you’d learn the basics and then leave.”

A fair number of the 185 sophomores and juniors hired by Kennedy Capital out of SLU, WashU, UMSL and other schools over the past two decades have in fact stuck around a lot more than three years.

In fact, 25 percent of the full-time employees at the company’s Olive Boulevard headquarters are former interns, Mosman and the firm’s chief financial officer included.

The same is true at ScottTrade which moves between 50-60 percent of its interns into permanent positions.

ScottTrade launched its extended length internship 12 years ago as a farm system to accommodate job growth at its network of branch offices, said Caroline Dybala, the internship program manager.

Dybala knows first hand the benefit of the long-term internship.

She arrived as a ScottTrade intern in 2000 with a goal of working in human resources but uncertain about where she might fit into the field following graduation from xxxx.

Her six months at ScottTrade cleared the picture and paved the way for Dybala’s current position.

By encouraging college students to stay on the job longer than standard internships, the ScottTrade and Kennedy Capital programs support to the notion that an investment in the personal and professional of young employees is an investment in the community as well.

Kennedy Capital in fact estimates that at least 60 percent of its former interns have remained in St. Louis. (The numbers for ScottTrade are more difficult to track since its interns are scattered around the country.)

The first three months former intern Alex Mosman spent at Kennedy Capital in the capacity of 20-hour-a-week intern may have been “overwhelming.”

But he attributes a big part of steep learning curve to his invaluable interaction with the top company executives.

“You’re thrown into it right away,” said Mosman, now a full-time research associate and the manager of the firm’s intern cooperative learning program. “You’re sitting in on management meetings and having conversations with (the chief financial officer).”

Research director Michael Bertz notes that Kennedy interns as full members of the team are expected to interact with clients and do their share to bump up the firm’s bottom line.

Likewise at ScottTrade where Dybala says an intern is usually the company representative greeting customers that walk through the door of its branches.

Griswold’s tenure as a Kennedy Management intern will earn him him a valuable entry for the resume he’ll send to prospective employers following graduation next year from SLU with a bachelor’s degree in finance and a graduate degree in accounting.

As the head intern charged with coordinating the schedules of seven fellow undergrads in the finance department (four other interns serve in other Kennedy Capital departments) Griswold will bring supervisory experience to his first job out of college.

“I’m not saying I was a 100 percent proficient from day one. But I communicate here constantly with professionals and I won’t miss a beat wherever I go,” Griswold said.

The reluctance of companies large and small to hire untested graduates straight of college have long-since turned real-world internships into a pre-requisite for full-time employment.

The question facing St. Louis businesses is whether to make worthwhile internships available locally or open the door for top-drawer college students to look elsewhere.

For the answer, the local business community might want to consult Alex Mosman.

“You can leave St. Louis and take an internship somewhere else,” said Mosman. “But if you do that, you may be gone for good.”

QUOTE OF THE WEEK

“Don’t just always go out to lunch with, you know, a couple of your friends, but actually go out to lunch with people from other departments, from other companies, and explicitly address questions like, how do you see the industry changing? How do you do your job effectively? Is there anything I should learn from that in terms of how do I do my job effectively? Do you see interesting opportunities? And that’s not necessarily always a question of job transition. It can be. Those kinds of talking to other people, building those relationships, are, I think, the things that everyone needs to be doing.” - Reid Hoffman, co-author of LinkedIn and author of The Start-up of You.

Source: National Public Radio’s Morning Edition

BY THE NUMBERS

43 - Percentage of hiring managers who expressed concern the top talent in their organizations will voluntarily depart for other positions in 2012.

34 - Percentage of hiring managers working for companies that experienced voluntary turnover in 2011.

Source: Harris/CareerBuilder survey

FINAL WORD

“You know, it’s funny. I bet someone is going to listen to this and say, you know, if I went in to my boss at my workplace, and said, you know, I went out to lunch with this guy from another division, or another company entirely, and came up with this interesting idea, that they would say my boss doesn’t want to hear that.” - Morning Edition co-host Steve Inskeep’s response to Reid Hoffman’s observation.

“Well, then your boss is not really adapting to the modern world.” - Reid Hoffman

Source: National Public Radio’s Morning Edition

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