Actual finance blog

BNP Paribas SA (BNP) economist Ryutaro Kono, rejected by lawmakers as a nominee for the Bank of Japan (8301)

Did you ever wonder how people in Japan connect to websites hosted in San Francisco? Or how a New Yorker can Skype with a friend in Sydney?

It sounds crazy, but Earth’s continents are physically linked to one another through a vast network of subsea, fiber-optic cables that circumnavigate the globe. Cords no thicker than your home’s broadband connection stretch along the bottom of the Pacific, Atlantic, and Indian Oceans; through the Suez canal; across the Mediterranean Sea and around the coasts of Africa and South America.

Indian telecom giant Tata, one of the world’s largest subsea cable providers, manages 130,500 miles of fiber sitting at the bottom of the ocean floor. That’s enough to circle the planet five times. It takes a ship six weeks just to load the cable for a cross-ocean voyage.

Why is all that underwater cable necessary? It’s a matter of speed, and laying in enough safeguards to ensure that the Internet won’t suddenly go down.

Subsea fiber-optic cables can tie two giant centers of commerce together, reducing data traffic delays. Three companies are in the process of building cable networks that link London directly to Tokyo — through the polar ice cap — with cables capable of 10 gigabit-per-second speeds. (That’s 2,000 times faster than your home Internet connection).

Those cables could reduce the Internet’s latency by about 60 milliseconds between those two points.

That’s an imperceptible lag for the average Internet user, but it’s an eternity for high-speed stock traders. They can make or lose millions of dollars in that span of time.

It’s not just financial institutions, which make up a very small portion of total Internet usage, that are interested in faster speeds. Internet service providers like Comcast (, Fortune 500) and Time Warner Cable (, Fortune 500) like to go zoom as well, because it gives them capacity to meet the growing demands on their networks.

Subsea cables have the added benefit of being shielded from wind, trees, storms and other destructive forces. They don’t require massive towers to carry them, like over-the-land cables do.

They’re literally just laid on the bottom of the sea, and once placed there, they can more or less be left untouched for a quarter century.

But sometimes cables get cut, particularly in shallow water. They get accidentally clipped by ship anchors about twice a year.

It happened most recently a month ago, when a ship dropped anchor off the coast of Kenya and cut Internet service for much of the country. Google noticed a steep drop in availability of its services in Kenya on Feb. 25.

That’s why cables are outfitted with GPS, so ships can find and patch them when they break. There are outsourced companies on the clock 24/7 to do repairs at a moment’s notice.

Having multiple cables connecting continents from many different locations means the Internet is less likely to be massively disrupted when a cable is snapped.

That’s why Tata says it was critical to build the final leg in the world’s first round-the-planet network, which it completed last week. The final cable connects Mumbai to Marseille, France. Tata’s other links tie the United Kingdom to New Jersey, Spain to Africa and Japan to Australia.

Together, those pipes handle 25% of the world’s Internet traffic. Tata wouldn’t put a price tag on the project, but an under-construction arctic cable linking Asia, North America and Europe has an estimated cost of $1.5 billion.

The upshot of all that investment is that if one cable snaps, you’ll still be able to play "Words with Friends" with a partner 10,000 miles away.  

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U.S. sales of previously occupied home dipped last month but the sales pace for the winter was the best in five years.

The National Association of Realtors said Wednesday that home sales fell 0.9 percent last month to a seasonally adjusted annual rate of 4.59 million. That’s down from a revised 4.63 million sold in January _ the highest level since May 2010.

The last three months have been the best for winter sales in five years. A mild winter and a stronger job market have helped boost sales ahead of the all-important spring buying season.

Even with the gains, sales remain below the 6 million that economists equate with healthy markets. And the makeup of those sales still signals a troubled market.

Sales among first-time buyers, who are critical to a housing recovery, fell slightly to 32 percent of all purchases. That’s down from 33 percent in January. In healthy markets, first-time buyers make up at least 40 percent.

And homes at risk of foreclosure made up 34 percent of sales, down only slightly from 35 percent in January. In more stable markets, foreclosures make up less than 10 percent of sales.

There have been other signs of improvement in the depressed housing market.

Homebuilders have grown more confident in the past six months after seeing more people express interest in buying a home. In February, they requested the most permits to build homes since October 2008.

Mortgage rates are near record lows. And the supply of homes has fallen to its lowest level in seven years.

A lower supply helps push up prices, which lures more sellers onto the market and generally improves the quality of homes for sale. Rising prices also boost sales because buyers want to invest in homes that are appreciating in value.

For the past few years, the market has been saturated for years with foreclosures. That has put downward pressure on prices and driven away buyers.

A key reason for the brighter housing outlook is the job market has strengthened. From December through February, employers added an average of 245,000 jobs a month. The unemployment rate has fallen to 8.3 percent, the lowest in three years.

Still, economists caution that the damage from the housing bust is deep and the industry is years away from fully recovering.

Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. They made up roughly one-third of sales last year. In healthy markets, the percentage is at least 40 percent.

Many can’t qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling.

Sales are measured when buyers close on homes. Some deals have been scuttled before the closing after banks declined mortgage applications, home inspectors found problems, appraisals showed a home was worth less than the bid, or a buyer lost a job.

The high rate of foreclosures has made resold homes cheaper than new ones. The median price of a new home is roughly 30 percent above the price of one that’s been occupied before _ twice the normal markup. Investors are taking advantage of the discounts.

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Lawmakers on Friday were handed the official score card on President Obama’s proposed budget for 2013.

The Congressional Budget Office concluded that the president’s budget would add less to the country’s debt than if lawmakers simply extend a number of favored policies, such as the Bush-era tax cuts. It would also shrink annual deficits to the point where they no longer are growing faster than the economy.

And yet debt levels at the end of the decade under Obama’s budget would still remain too high for comfort.

The president’s budget would add $6.4 trillion in deficits between 2013 and 2022, the CBO said.

Under the so-called alternative fiscal scenario, where Congress simply extends a number of favored policies, cumulative deficits would reach nearly $11 trillion.

The president’s proposals would bring debt held by the public to 76% of GDP at the end of the period measured, up from 68% last year.

Debt held by the public includes U.S. bonds bought by investors, but excludes money owed to government trust funds, such as Social Security and Medicare.

Independent deficit watchdogs have been urging lawmakers to put in place a debt-reduction plan to lower public debt to at least 60% by the end of the decade.

Obama’s unveil’s $3.8 trillion budget

One reason why Obama’s budget fails to do so is because it doesn’t adequately address entitlement costs, such as Medicare.

The president has publicly advocated striking a "grand bargain" — which would involve entitlement and other spending cuts as well as tax increases — to reduce the country’s long-term debt burden. But fraught negotiations with House Republicans fell apart over the summer.

The CBO analysis shows that the president’s budget would end up stabilizing the debt — meaning the country’s deficits stop growing faster than the economy. The annual deficit in his proposal would fall to 2.5% of GDP by 2017 — well below the 8.1% projected for this year. But they would climb back to 3% by 2022. And barring any more significant debt-reduction plans, deficits thereafter would continue on a northward trek.

Obama: Slash corporate tax rates and breaks

Annual spending levels in Obama’s fiscal blueprint average 22.5% of GDP, above the 20.7% historical average. But his budget would put discretionary spending on a downward trajectory, from 8.4% of GDP this year to 5.2% at the end of the decade.

Under the president’s budget, the government’s revenue intake would climb to an average of 19.4%, above the 18.1% historical norm and well above the 60-year lows reached during the recession.

Part of the reason for the increase is due to a strengthening economy. But partly it’s due to the estimated $950 billion in new revenue he’d raise from a host of proposals, the largest of which is his call to limit the value of itemized deductions for high-income households, which alone is estimated to raise $520 billion over a decade.

At the same time, he puts forth a number of measures that would shrink tax receipts significantly relative to where they would otherwise be. The most costly is his oft-repeated proposal to make permanent the Bush-era tax cuts for the majority of Americans, followed by a proposal to index the Alternative Minimum Tax to inflation, and expanding stimulus measures and creating new tax cuts for families.

While no president’s budget is ever adopted by Congress wholesale or even in large part, this year there isn’t likely to be any real action on anyone’s budget proposal — including one expected next week from House Budget Chairman Paul Ryan — until after the presidential election in November.

That’s when Congress will face a number of fateful fiscal decisions, such as whether to extend the Bush-era tax cuts and whether to replace nearly $1 trillion in automatic spending cuts that nobody wants but which are scheduled to take effect in January 2013. 

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WASHINGTON — Beware of car dealer ads that promise to pay off the loan on your trade-in.

In a first-of-its-kind case, the Federal Trade Commission targeted five car dealers in four states that regulators say deceived consumers by promising to pay off their loans, no matter what was owed on the cars. The balance, the FTC said, was usually rolled right into the new car loan. One dealer later required customers to pay the balance out of pocket.

Settlements agreed to by the dealers would require them to stop running the ads on their webpages and other sites such as YouTube. The settlements remain subject to a final vote by the commission after a 30-day public comment period.

Wednesday’s announcement from the commission named the following companies: Billion Auto Inc. of Sioux Falls, S.D.; Frank Myers AutoMaxx LLC of Winston-Salem, N.C.; Key Hyundai of Manchester LLC in Vernon, Conn., and Hyundai of Milford LLC in Milford, Conn., which advertised jointly; and Ramey Motors Inc. of Princeton, W.Va.

The FTC has brought cases against auto dealers before, but not for this kind of advertising.

“Buying a new car or truck is a major financial commitment, and the last thing consumers need is to be tricked into thinking that a dealer will pay off what they owe on their current vehicle, when they really won’t,” said David Vladeck, head of the commission’s consumer protection bureau.

The promises might sound attractive to anyone facing tough financial times. Rosemary Shahan, president of California-based Consumers for Auto Reliability and Safety, says this kind of misleading advertising pitch is a common practice among dealers, and that people who are upside down on their loans — owing more on the old car than its actual value — are especially vulnerable.

“A huge percentage of people are upside down,” Shahan said. “What they don’t realize is that they are just getting deeper and deeper into debt.”

She says it’s usually better to keep the old car and pay off the loan before buying a new car. Despite the claims, consumers still ended up being responsible for paying the difference between the trade-in loan balance and the vehicle’s value, the commission said.

As part of the proposed settlements, the dealers would be barred from future deceptive ads. They also would not be allowed to misrepresent any other facts.

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British police made six arrests early Tuesday in the British media’s phone hacking scandal, including Rebekah Brooks, the former top executive of Rupert Murdoch’s News International, The Associated Press has learned.

Police did not identify those arrested, but a person who had been briefed on the details said Brooks and her husband, a prominent horse breeder and a friend of Prime Minister David Cameron, were arrested at their house.

The six people were arrested on suspicion of conspiracy to pervert the course of justice, police said in a statement. The charge is an indication that investigators may be focusing on a possible coverup of the scope of phone hacking.

The investigation stems from widespread wrongdoing at Rupert Murdoch’s now-closed News of the World tabloid. The victims have ranged from celebrities and major politicians to the families of crime victims.

News International, which operates Murdoch’s British newspapers, confirmed that its head of security, Mark Hanna, was also one of those arrested. A spokeswoman, speaking on condition of anonymity, said she had no information about where he was arrested.

The Metropolitan Police said five men and a woman were arrested in various locations in and around London in a series of raids conducted between 5 a.m. and 7 a.m. Tuesday.

Police said a 43-year-old woman was arrested at her home in Oxfordshire. In addition, police said a 49-year-old man was also arrested in Oxfordshire at his home. Brooks, 43, and her husband, horse trainer Charlie Brooks, live in Oxfordshire in the town of Chipping Norton.

Cameron has recently described Charlie Brooks as “a good friend” and neighbor. The two have gone riding together in the countryside outside Chipping Norton.

Police also arrested a 39-year-old man in Hampshire, a 46-year-old man in West London, a 38-year-old man in Hertforshire and a 48-year-old man in East London.

A judge-led inquiry into media ethics has heard extensive testimony about wrongdoing by tabloid journalists, and Murdoch’s company has reached cash settlements with a number of victims.

There is also a simultaneous investigation into corrupt relations between the police and the press, which has yielded a number of arrests in recent weeks.

An inquiry panel appointed by Cameron is trying to determine why an initial police investigation into phone hacking in 2006 failed to reveal the scope of the problem.

At the time, Murdoch’s executives claimed the wrongdoing was limited to one scurrilous reporter and an unprincipled private detective, both of whom were jailed.

The dormant police investigation was reopened last year after reporters were found to have hacked into the voicemail of a missing schoolgirl who was later found to have been murdered.

That investigation led to the resignation of Cameron’s top media adviser, Andy Coulson, who had been the editor of the News of the World.

It also led to the arrest of Brooks, who was later released on bail. Both have denied wrongdoing.

Murdoch’s company has reached cash settlements with various hacking victims, including actress Sienna Miller and singer Charlotte Church, but many new cases are being brought against News International, the U.K. newspaper branch of Murdoch’s global media empire.

The scandal also scuttled Murdoch’s plans to purchase full control of the British broadcaster BSkyB.

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Associated Press writer Robert Barr contributed to this report.

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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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The Greek government

CVS officials say only a few children ingested pills for breast cancer treatment that they mistakenly received from a New Jersey pharmacy instead of the fluoride pills that were prescribed.

No injuries related to the mixup had been reported as of Saturday afternoon. The two pills are similar looking but have distinctively different tastes.

Investigators are still working to determine how and why the errors occurred at the CVS pharmacy in Chatham. The pharmacy has acknowledged improperly dispensing the breast cancer-fighting drug Tamoxifen instead of chewable fluoride tablets to children in as many as 50 families between Dec. 1 and Feb. 20.

Fluoride helps prevent tooth decay and is usually prescribed by dentists for children. Tamoxifen is used to treat breast cancer and blocks the female hormone estrogen.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

The state attorney general’s office has begun a preliminary investigation into a CVS pharmacy’s mistaken distribution of pills for the treatment of breast cancer to children instead of the fluoride pills that were prescribed.

The attorney general’s consumer affairs division on Friday ordered a CVS pharmacy in Chatham to explain the mistake and provide the names of all its employees along with all emails, telephone calls, complaints, and other information related to the mix-up.

The pharmacy must provide the information by Wednesday and company representatives must appear before division officials for questioning under oath, an order signed by division Director Thomas R. Calcagni said.

Meanwhile, CVS Caremark said in a statement that it was “deeply sorry for the mistake that occurred” at its pharmacy in northeastern New Jersey, although the company did not explain how the mistake happened. There has been no report of injury.

Calcagni’s administrative order said the pharmacy acknowledged it improperly dispensed the breast cancer fighting drug Tamoxifen instead of chewable fluoride tablets to children in as many as 50 families between Dec. 1, 2011, and Feb. 20. Calcagni said in the order that the division wants to look into whether any laws were violated.

Fluoride helps prevent tooth decay and is usually prescribed by dentists for children. Tamoxifen is used to treat breast cancer in men and women and blocks the female hormone estrogen.

Mike DeAngelis, CVS’s director of public relations, said in a statement that the company had contacted or left messages for every family whose child was dispensed a 0.5 mg fluoride prescription in the previous 60 days. He said that “most of the families we have spoken to did not indicate that their children received any incorrect pills.”

“The health and safety of our customers is our highest priority and we are deeply sorry for the mistake that occurred … ,” DeAngelis said.

He said the company would continue to follow up with families who believe their children may have ingested incorrect medication.

“We are actively investigating this matter to determine how the mistake occurred in order to take corrective actions to prevent this from happening again,” DeAngelis said.

CVS Caremark, based in Woonsocket, R.I., runs the second-largest chain of drugstores in the U.S., after Walgreen.

If a child has taken one Tamoxifen pill, it’s not going to have a negative impact on their health. It’s highly unlikely a child would even be able to consume multiple pills, due to the strong taste.

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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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