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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If you thought the "SUV craze" was over, you’re wrong. Very wrong. Market share for SUVs in recent months is the largest it has ever been.

During the height of the so-called "SUV craze" in the late 1990s and early 2000s, about one in five vehicles sold in America was an SUV. Today, in an era of near $4 gasoline and heightened environmental awareness, nearly one in three vehicles sold is an SUV.

Far from becoming forgotten relics of our misguided past, SUVs have survived and prospered by adapting to changing consumer tastes.

A decade ago, SUV buyers climbed up into huge vehicles that were, essentially, heavily modified trucks designed to excel in off-road driving and for hauling heavy trailers. They got terrible fuel economy and, with their tendency to tip over, they were dangerous, as well.

Today, big truck-based vehicles make up a tiny sliver of the SUV market. Ninety percent of the SUVs sold are mid-sized or smaller and the vast majority have nothing to do with trucks. These are high-riding cars. Most are front-wheel-drive, or if they’re not, they’re all-wheel-drive.

Electronic stability control, now required by law on all vehicles, has greatly reduced rollover risk in SUVs. ESC systems can help prevent a vehicle from skidding or tipping over during abrupt maneuvers.

Many of these new SUVs get fuel economy that’s as good or better than passenger cars sold just a few years ago. General Motors’ (, Fortune 500) new Chevrolet Equinox SUV, for instance, gets better combined city and highway mileage than a 4-cylinder 2010 Honda Accord.

Finally, on-road handling and performance is actually a selling point for many of these new, smaller vehicles. That’s made possible by lighter weight construction, more sophisticated suspension systems, and some serious compromises. Any notion drivers of these vehicles may have of serious off-road use must be put aside.

7 beautiful spring car deals

When Ford Motor Co (, Fortune 500). was creating its new Explorer SUV, the automaker decided to use a car-based design shared with the Taurus sedan rather than the truck-based engineering used in previous generations. Ford’s customer research showed that, despite the old Explorer’s vaunted off-road capabilities, very few Explorer owners ever ventured far from paved streets.

Once the new car-based design was introduced, Explorer sales nearly tripled, according to data from J.D. Power and Associates.

As the downsides of SUV ownership dwindle with improved fuel economy, ride quality and handling, more consumers are switching out minivans and cars, said Jeff Schuster, an industry analyst with the consulting firm LMC Automotive. The attraction, as it has always been, is that SUVs offer the cargo space and flexibility of minivans and wagons but with an added dash of excitement.

"It’s rejuvenated the image of the multi-purpose vehicle," he said.

The biggest growth, however, has been among small SUVs like the Ford Escape, Honda CR-V and the new Mazda CX-5.

"For all intents and purposes, we’re sold out," Mazda spokesman Jeremy Barnes said of the CX-5.

Overall marketshare for small SUVs has more than doubled over the past seven years, said Ford sales analyst Erich Merkle. Today, they represent 45% of all SUVs sold. One reason is just that there are so many more small SUVs to choose from.

Besides providing more options, that variety actually generates more interest from consumers, said Schuster. Buyers who would have never considered an SUV before are looking now because they’re confident they’ll find something they like.

Small and mid-sized SUVs are attracting both the older and younger buyers for different reasons.

Older buyers are trading down into smaller SUVs as their kids leave home and they no longer need the space the larger vehicles offered, said Schuster.

Also, older drivers like having vehicles that they can get in and out of easily, said Merkle. SUVs, with their high seating, are easier to gracefully enter and exit than ordinary cars with seats down near ground level.

Younger buyers like the new smaller SUVs’ cool looks and the fact they’re clearly distinct from anything Mom and Dad ever drove.

"Nobody wants to drive what their parents drove," said Mazda’s Barnes. 

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Slightly fewer Americans filed for new unemployment benefits last week, a reassuring sign about the labor market in the closely watched economic reading.

The Labor Department reported Thursday that 367,000 filed new jobless claims in the week ended May 5, down from 368,000 the week before. The previous week reading was revised up by 3,000.

Economists surveyed by Briefing.com had forecast 365,000 would file for help.

There have been growing worries about a weakening of the recovery in the jobs market, especially after a disappointing April jobs report that showed employers adding far fewer jobs than expected.

Jobless claims, which had been falling steadily earlier this spring, also had climbed again in recent weeks before a drop two weeks ago.

The 86 million invisible unemployed

"The fact that claims continue to drift back toward pre-Easter levels provides important evidence that the level of activity in the labor market did not stall in recent weeks," said Joseph LaVorgna, chief economist at Deutsche Bank, in a note Thursday.

Hiring in a hurry picks up

Economist Michael Gapen of Barclays Capital said the latest reading shows that the improvement in the labor market seen earlier this year has not vanished, despite the temporary jump in new claims filings in April.

"The fact that initial claims held their decline last week is supportive of the idea that the recent softness in initial claims has reversed," Gapen said.

Initial claims can be a volatile reading, which is why economists prefer to look at the four-week average for claims. And that reading also improved slightly to 379,000 from 384,250.

Behind the jobs recovery

There were also 61,000 fewer people receiving continuing unemployment benefits, as that reading for the week ended April 28 — the most recent week available — fell to 3.23 million from 3.29 million.

"Continuing claims never altered their downward trend, even while initial claims were moving higher in previous weeks," Gapen said. "Normally, initial and continuing claims will exhibit similar movements when underlying trends in the labor market are shifting." 

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

Shoppers in Latin America, the Asia Pacific and the Middle East powered a 25 percent increase in MasterCard’s profit for the first three months of the year.

The Purchase, N.Y.-based payments processor reported income of $682 million Wednesday, or $5.36 per share, on revenue of $1.8 billion. That exceeded Wall Street’s expectations of $5.29 per share on revenue of $1.73 billion.

Ajay Banga, MasterCard’s chief executive officer, said the amount of purchases the company processed jumped 29 percent, the highest growth rate since the company went public.

MasterCard usage in the U.S. grew 14 percent as people spent more in restaurants and on apparel, hardware and electronics. Ajay Banga, MasterCard’s chief executive officer, told analysts on a conference call that the U.S. economy would have to do better for that growth to continue.

“For this trend to continue for a sustained period of time, we’re going to look for additional improvement in unemployment and a positive turn in housing prices,” Banga said.

In the last couple of years, MasterCard Inc. has focused on expanding its international business by acquiring an international card processing system called DataCash and a global prepaid travel card manager called Access Prepaid Worldwide.

Both of those acquisitions have paid off in the quarter, contributing to 25 percent profit growth, said Banga.

In the Asia Pacific, Latin America, Middle East and Africa, usage of its cards grew 23 percent.

During the first quarter of 2012, MasterCard repurchased 652,500 shares at a cost of approximately $248 million. The company said it is authorized to repurchase another $556 million worth of stock.

MasterCard increased rebates and incentives, a common practice in the industry where processors offer banks and other issuers breaks to persuade them to switch the logos on the cards they offer their customers.

In the quarter costs related to such incentives grew 24 percent, taking a bite out of the company’s revenue. Analysts don’t like to see too much of an increase in these costs because it weakens results.

MasterCard’s stock fell 2 percent to $446 in early trading.

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Treasury 10-year note yields fell for the sixth week in a row, matching the longest streak since June, as slowing growth and concern Europe

From oil fields to wind turbines to coal mines, size and scale rule the economics of energy.

But the nuclear industry is thinking small these days.

The latest evidence came last week when Ameren Missouri and Westinghouse Electric Co. announced plans to pursue a $452 million federal subsidy to advance development of small modular reactors that could be built alongside the utility’s much larger Callaway nuclear plant near Fulton, Mo.

While some utilities are still pursuing full-scale plants, there is a parallel push for smaller reactors that could be easier for utilities to finance and minimize sticker shock for regulators and consumers. But despite a lower total cost, there’s no evidence yet that tiny fission factories would be able to produce electricity at a competitive cost in an era of abundant, cheap natural gas.

“There just isn’t any proof that small reactors are going to be any more economic than larger ones,” said Peter Bradford, an adjunct law professor at Vermont Law School and a former Nuclear Regulatory Commission member. “At this point, it’s all about hype and hope.”

The so-called small nuclear reactors promise the same benefits as larger ones: namely, an option for around-the-clock, low-carbon electric generation that could be a key in replacing aging coal plants.

For utilities considering nuclear technology, the smaller size means a smaller price. Even using the most generous cost estimates, a new nuclear plant the size of Ameren Missouri’s existing Callaway plant could rival or exceed the $7.5 billion market value of the utility’s entire parent company.

But the differences go beyond size. For one, the small reactors envisioned would be modular, able to be manufactured at a central factory, shipped by rail, ships or truck and assembled on site. That means a potentially larger market for vendors like Westinghouse.

“This (small) plant will appeal to a very broad market,” Kate Jackson, a Westinghouse senior vice president and chief technology officer said last week.

SEARCH FOR ALTERNATIVES

The pursuit of small reactors represents a new path to the oft-referenced nuclear renaissance.

It was only a few years ago that the industry focused strategy on certification of a few large reactor designs that would, in theory, eliminate the risk and uncertainty, cost overruns and construction delays that tainted the last nuclear plant boom.

While new reactors are going forward in Georgia and South Carolina, a full-tilt nuclear revival hit a wall for several reasons. Among them: the inability of utilities to finance projects that cost multiple billions of dollars.

In fact, more than half of the new reactors for which construction and operating licenses were sought have been deferred or cancelled, including Ameren Missouri’s proposed 1,600-megawatt Callaway 2 plant.

Andrew Klein, a nuclear engineering professor at Oregon State University, sees small reactors as part of a new strategy that could help utilities get over the hump by adding new capacity in small bites. They could then use revenue from the first small reactors to help finance subsequent units as more generating capacity is needed.

“It’s an entirely different business model,” he said.

The Obama administration, which is pushing for development of low-carbon energy technologies, sees potential, too. And the president wants the United States to take the lead in developing the industry.

Last month, Obama proposed $452 million to help speed up development of small modular reactors. The funding availability would come on top of $8 billion in loan guarantees for the Vogtle twin-reactor nuclear project in Georgia low fee payday loans.

The federal funding, which has yet to be appropriated by Congress, would support engineering, design certification and licensing of up to two plant designs that have the potential to be licensed and in commercial operation in a decade.

Westinghouse says it believes it has an advantage because the 225-megawatt reactor it’s developing is an offshoot of the company’s full-size AP1000 reactor that has already been certified by the Nuclear Regulatory Commission.

“The path from here to the end is shorter for us than anyone else,” Jackson said. No other vendor has been through the new licensing process and has technology that’s already been licensed.”

PIECE OF THE PIE

At least two other groups have indicated they will seek a share of the federal grant. Both are eyeing the Department of Energy-owned Savannah River site in South Carolina, and are being backed by NuHub, an economic development initiative in South Carolina.

Holtec International Inc. on Tuesday said it intends to seek a share of the federal funding to speed up development of its 160-megawatt small modular reactor. Two weeks ago, NuScale Power, based in Corvalis, Ore., announced plans to seek funding to accelerate development of its 45-megawatt nuclear modules at Savannah River site.

Other nuclear industry players are pursuing modular designs. And at least one other utility has publicly expressed interest in small reactors.

The Tennessee Valley Authority has said it is looking at Babcock & Wilcox’s small reactor design for a project on a utility-owned site near the Energy Department’s Oak Ridge National Laboratory.

For all the hype, small reactors, are still at least a decade away. And that’s if design, licensing and commercial development go at the pace hoped for by the nuclear industry.

And even then, the potential for small reactors hinges on how they compete in the energy marketplace. More than concerns about nuclear safety in the wake of Fukushima disaster in Japan or the dilemma of where to dispose of highly radioactive spent nuclear fuel, the technology’s future will be dictated by economics.

Jackson said Westinghouse aspires to make small reactors whose costs are equal to or less than full-size reactors.

For now, there’s no cost data for small reactors, and no firm evidence they will produce electricity at a lower price than larger plants.

“It’s too early to determine that,” Klein said. “We’re going to have to see some built.”

Ameren Corp. CEO Thomas Voss said at Tuesday’s shareholder meeting that if a new power plant was needed today, the lowest cost option would be a natural gas-fired power plant, not nuclear.

But gas prices have been especially volatile over the past several years. After spiking to more than $14 per thousand cubic feet in mid-2008, prices have plunged to less than $2 — the lowest level in about a decade.

That kind of volatility makes utilities hesitant to commit to natural gas-fueled power over the long haul, so Ameren continues to pursue nuclear development in Missouri to keep the option available in years to come, Voss said.

“We continue to believe nuclear power will to play a role in meeting Missouri’s energy needs,” he said.

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ST. LOUIS •Two Israeli citizens pleaded guilty Monday and were sentenced for sending more than 9,000 shipments of unapproved prescription drugs worth more than $1.4 million to the U.S., the U.S. Attorney’s office said Tuesday morning.

Benny Carmi, 58, was sentenced Monday afternoon to 10 months in prison, fined $30,000 and agreed to forfeit $50,000 for introducing misbranded prescription drugs into interstate commerce, smuggling prescription drugs into the United States, and selling counterfeit prescription drugs, prosecutors said..

Moshe Dahan, 37, was sentenced to a year of probation, fined $15,000 and agreed to forfeit $15,000 for smuggling prescription drugs.

Carmi and Dahan ran an online prescription drug business that operated under a number of names, including “allpillsrx.com,” “newpharm.net,” “pharmacy-online.com,” “pricepills.com,” and “pharmacy-pal.com,” prosecutors said. They have agreed to forfeit those names.

The websites sold popular drugs including those used to aid weight loss or treat erectile dysfunction, and did not require a prescription, prosecutors said.

But they were also selling drugs that were manufactured in unapproved plants and were not approved for sale in the U.S., prosecutors said, including some that were not of the full potency advertised, according to lab tests of drugs obtained through undercover purchases guaranteed unsecured personal loan.

They also hid the shipments from authorities by labeling them “gifts” and claiming that they had no value.

Dahan, also known as Mark Young, and Carmi sent just over 9,000 shipments of pharmaceuticals to customers, including almost 100 in Missouri.

After investigators traveled to Israel and executed search warrants related to the companies, Carmi and Dahan agreed to waive extradition and appear in U.S. District Court in St. Louis Monday to plead guilty and be sentenced with the help of a Hebrew interpreter.

“Counterfeit pharmaceuticals pose a very serious threat to our public health and safety,” said Gary Hartwig, head of Immigration and Customs Enforcement’s Homeland Security Investigations office in Chicago, which worked the case with the U.S. Food and Drug Administration’s Office of Criminal Investigations and Israeli police. “People shouldn’t have to put their health in jeopardy because they bought a prescription drug online that is fake, substandard, tainted or untested,” Hartwig’s prepared statement said.

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General Electric Co.

A Japanese utility sought government approval Monday to restart two nuclear reactors even though some key upgrades to prevent another nuclear crisis will take three years.

All but one of Japan’s 54 reactors are offline for regular safety checks, and the last will be shut down in May. Residents fear another disaster like the Fukushima crisis, but Japan faces a severe power shortage if reactors are not restarted.

The government issued new safety guidelines to address residents’ worries, but it gave no deadline for when the improvements must be finished. Utility officials say the full upgrades will take three years.

Kansai Electric Power Co. submitted its safety plans for two reactors in Fukui prefecture, and the government’s final decision on whether to restart the reactors is reportedly expected later this week.

“We’ll aim to achieve the world’s top-class safety at our plants,” said Kansai Electric President Makoto Yagi as he handed the safety improvement roadmap to Economy and Industry Minister Yukio Edano.

However, more than one third of the necessary upgrades on the list are still incomplete, utility officials said.

Filtered vents that could substantially reduce radiation leaks in case of an accident threatening an explosion, a radiation-free crisis management building, and fences to block debris washed up by a tsunami won’t be ready until 2015 faxless pay day loans. This means the plant, as well as plant workers and residents won’t be fully protected from radiation leaks if a Fukushima-class accident occurs while the measures are being taken.

Currently, the crisis management headquarters at the Ohi plant is in the basement. The plant is relocating the function to a room next to the control room for the two reactors. None of Japan’s 54 nuclear reactors are equipped with filtered vents, although their operators are moving to install them in coming years.

“The operators are expected to take initiative to improve safety and reliability, and never dwell on the safety myth,” Edano told Yagi, urging the utility to expedite the process.

The startup guidelines are based on recommendations adopted last month by the Nuclear and Industrial Safety Agency. The most crucial measures to secure cooling functions and prevent meltdowns as in Fukushima were incorporated in the government’s guidelines, but the rest were not.

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