Actual finance blog

BOSTON • The Federal Reserve is making it increasingly hard for investors to earn anything, unless they’re willing to accept plenty of risk. Ben Bernanke and his Fed are playing the role of adviser, encouraging Americans to get a little more adventurous by shifting savings out of low-yielding bonds and putting it to work in stocks.

The latest nudge came last month when the Fed said it doesn’t expect to raise its benchmark rate until late 2014, at the earliest. Rates have been near zero since December 2008. The latest extension means borrowers can expect another three years of low-cost loans and mortgages.

It’s more bad news for savers and retirees depending on investment income, particularly when there’s 3 percent inflation. Investors who value earning stable returns from Treasury bonds end up with little more than satisfaction that they’re faring better than people keeping money in savings accounts.

Consider that investors committing to lock up their money for a full decade were only being paid 1.8 percent for buying U.S. Treasurys last week. And yields have turned negative for investors trading 10-year Treasury Inflation-Protected Securities, or TIPS. On Wednesday, the yield was negative 0.28 percent. In essence, investors are willing to pay Uncle Sam to borrow their dollars for 10 years, because the opportunity to minimize losses is attractive compared with other options.

Here’s a look at three relatively low-risk alternatives to generate some income in this environment:

DIVIDEND STOCKS

Dick Bristol, 74, a retired Air Force major from Biloxi, Miss., counts on dividend-paying stocks for his retirement security. His investment portfolio is nearly 100 percent in stocks that make regular payouts, and he and his wife count on a few hundred dollars of dividends coming in each month quick payday loans.

Of course, dividend-paying stocks are not immune from market drops. And companies often cut dividends when the economy skids. But Bristol is convinced the potential returns are worth the risks.

“Keep in mind that if you invest in something that’s earning 1 to 2 percent, you’re losing out to the 3 inflation we’ve got now,” Bristol says. “Over the long run, nothing pays like dividend stocks.”

HIGH-YIELD BONDS

These bonds are issued by companies with credit problems. High-yield investors expect higher returns because there’s a greater risk of default. And they’ve gotten them recently. Mutual funds specializing in high-yield bonds have produced an average annualized return of 19 percent over the last three years.

Anne Lester, lead manager of JPMorgan Income Builder, has recently been adding to the fund’s holdings in high-yield bonds. They now make up 44 percent of a portfolio. Corporate default rates remain low and high-yields are attractively priced compared with Treasurys and other bonds, Lester says.

MUNICIPAL BONDS

Investments in the bonds of state and local governments won’t make you rich because returns are generally low. But muni bond interest payments are exempt from federal taxes. That protection may extend to state taxes if the munis are issued by the state in which the investor lives. Investors can pocket attractive returns even after taxes, because the tax hit can be sizeable for those in higher income brackets.

“Munis give an investor opportunity,” said Jim Colby, a muni bond analyst with Van Eck Associates.

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President Barack Obama planted his political flag in Florida on Thursday ahead of the state’s Jan. 31 Republican presidential primary, promising a fresh boost to the economy by making it easier for foreign tourists to travel to the U.S.

Obama sought his piece of Florida’s political spotlight with a high-profile appearance at Walt Disney World, where he announced initiatives aimed at making it easier for citizens of China and Brazil to visit the United States.

“America is open for business,” Obama declared against the backdrop of Disney’s Cinderella castle and picture-perfect blue skies. “We want to welcome you.”

From Florida, Obama headed to New York City for four glitzy campaign fundraisers, including an event at the famed Apollo Theater featuring performances by Al Green and India.Arie. Tickets to that fundraiser start at $100.

The president also was to attend a $35,800 per ticket fundraiser at the home of film director Spike Lee, and two small fundraisers at Daniel, an exclusive Manhattan restaurant. Tickets start at $5,000 for the first restaurant fundraiser and $15,000 for the second. Obama raised more than $220 million for his campaign and the Democratic National Committee through the end of 2011.

Beyond offering an opportunity to talk about the economy, Obama’s trip to Florida marked an attempt by the White House and his campaign to steal attention from Republicans vying for the GOP presidential nomination. In recent weeks Obama held a live video conference with Iowa voters during the Republican caucus, Vice President Joe Biden held a similar event with voters in New Hampshire on the night of the state’s first-in-the-nation primary and next week Obama will travel to Nevada, which follows Florida on the primary calendar.

Obama was greeted in the Orlando area by ads from GOP frontrunner Mitt Romney blaming the president for the state’s struggling economy. Romney, the former Massachusetts governor, could take a major step toward securing the Republican nomination with a win in Florida’s Jan. 31 primary contest.

“I have a simple question for you: Where are the jobs?” Romney wrote in an open letter to the president on Thursday running as an ad in the Tampa Bay Times. In a conference call with reporters, Romney said Obama was “speaking from Fantasyland.”

While Obama carried Florida in 2008, the state is a top target for Republicans in the November elections. Florida twice backed Republican George W. Bush, providing the decisive electoral votes in the cliffhanger 2000 election that was decided after a 36-day recount payday loan lenders.

Tourism is a key component to the economy in Florida, which has been battered by 10 percent unemployment and rampant home foreclosures.

The White House said more than 1 million U.S. jobs could be created over the next decade, according to industry projections, if the U.S. increases its share of the international travel market.

The tourism initiative is part of an executive order Obama signed. Its goal is to boost nonimmigrant visa processing capacity in China and Brazil by 40 percent this year; expand a Visa Waiver Program that allows participating nationals to travel to the U.S. for stays of 90 days or less without a visa; appoint a new group of chief executives to the U.S. Travel and Tourism Advisory Board; and direct an interagency task force to develop recommendations for a National Travel and Tourism Strategy, including promoting national parks and other sites.

The efforts to boost tourism were praised by travel and tourism groups, but one lawmaker said the decision to relax tourist visas could undermine national security. Sen. Charles Grassley, R-Iowa, said the administration was “pushing the envelope and using their authority beyond congressional intent,” noting that only two of the 19 hijackers in the 9/11 terrorist attacks were interviewed by consular offices. He said Congress moved to require visa applicants to be interviewed as a result.

The White House says the travel and tourism industry represented 2.7 percent of gross domestic product and 7.5 million jobs in 2010. But the U.S. share of spending by international travelers fell from 17 percent to 11 percent between 2000 and 2010, due to increased competition and changes in global development, as well as security measures imposed after Sept. 11, 2001, according to the White House.

The approach was welcomed by Brazilian tourists Lilian Lara and Lindbergh Souza, who shopped along the resort’s streets hours before the president’s speech. Souza said the visa process was expensive, at $500, and time-consuming for Brazilians who don’t live close to consuls in Rio de Janiero and Sao Paulo. “The whole process took me six months,” Souza said.

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Associated Press writer Mike Schneider contributed to this report.

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Asian stock markets rose Wednesday as expectations that China will loosen its monetary policy to boost growth overcame nervousness sparked by mixed earnings reports from big U.S. banks.

Benchmark oil rose above $101 per barrel while the dollar fell against the euro and the yen.

Japan’s Nikkei 225 index rose 1.4 percent to 8,579.80. Hong Kong’s Hang Seng added 0.3 percent to 19,685.87. South Korea’s Kospi was down 0.2 percent at 1,888.88 while Australia’s S&P/ASX 200 was up 0.2 percent at 4,223.60.

Benchmarks in Singapore, Indonesia and Malaysia rose while mainland China and Taiwan fell.

Investors cheered news out of China on Tuesday when the government said its economy slowed less dramatically in the fourth quarter than feared _ but still enough of a slowdown to persuade investors that Beijing will pursue a pro-growth monetary policy, analysts said.

“People have been buying stocks in anticipation of a relaxation in monetary policy by the Chinese government,” said Derek Cheung, chief investment officer at Neutron INV Partners Ltd. in Hong Kong. “The market expects this around Chinese New Year. If China doesn’t loosen around the new year, the market may come under pressure.” The holiday begins Jan. 23.

China is one of the biggest importers and slower growth could have global repercussions if it cuts demand for iron ore, industrial components and other goods from Australia, Brazil, Southeast Asia and elsewhere.

It would also mean less demand for U.S. and European capital goods for Chinese factories and construction sites, and smaller profits for U.S. and European companies that do business here. The luxury goods industry would also feel a significant pinch, since China is just about the only growth market for those.

Commodities shares jumped on the growth data out of China. Australian miners Fortescue Metals Group jumped 5 percent and Rio Tinto Ltd Low fee payday loans. added 1.5 percent after both companies reported target-beating production figures Tuesday.

But some financial shares came under pressure on weak quarterly earnings from some U.S. banks, including Citigroup Inc., which said its fourth-quarter income fell 11 percent due in part to lower investment banking income and an accounting charge.

Australia & New Zealand Banking Group fell 1.1 percent and Hong Kong-listed Agricultural Bank of China also lost 1.1 percent.

South Korean high-tech shares also slumped. Samsung Electronics Co., the top global manufacturer of flat screen televisions, memory chips and liquid crystal displays, fell 0.9 percent. LG Electronics shed 1.8 percent, and Hynix Semiconductor was 1.2 percent lower.

European shares ended mostly higher Tuesday on the heels of short-term debt auctions by Spain, Greece and Europe’s bailout fund that drew strong investor demand, despite recent credit rating downgrades by Standard & Poor’s.

Many had feared the downgrades would prevent them from obtaining funds and worsen a sovereign debt crisis in Europe.

On Tuesday, the Dow Jones industrial average rose 0.5 percent to close at 12,482.07. The Standard & Poor’s 500 index gained 0.4 percent to 1,293.67. The Nasdaq composite index added 0.6 percent to 2,728.08.

Benchmark crude for February delivery was up 66 cents to $101.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract finished at $100.71 per barrel in New York on Tuesday.

In currency trading, the euro rose to $1.2779 from $1.2722 late Tuesday in New York. The dollar fell to 76.65 yen from 76.82 yen.

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French President Nicolas Sarkozy on Monday shrugged off his country’s loss of its prized AAA debt rating, saying the downgrade by rating agency Standard & Poor’s would change nothing.

The comments, his first since S&P lowered its score on France and eight European other countries on Friday, followed a successful auction by France of euro8.6 billion ($10.9 billion) in short-term debt Monday. The yields, the interest rates charged by investors on the debt, fell _ a sign investors still see the country as a good bet.

France won a further small reprieve Monday, when the Moody’s agency confirmed that it would keep its top rating. However, the S&P decision could seriously impair Sarkozy’s bid for re-election this spring.

Sarkozy told reporters he was unconcerned with the opinions of ratings agencies.

“We have to react to this (the downgrade) with calm, by taking a step back,” he said at a news conference with the new Spanish Prime Minister Mariano Rajoy. “At the core, my conviction is that it changes nothing.”

Sarkozy won support from Rajoy for a new European tax on financial transactions being pushed by France and Germany. Rajoy’s center-right government took power last month, and had not previously stated its position on the tax.

The French president said the ratings agencies’ decisions would not affect his policies, though he did acknowledge that France has work to do, saying that its deficits and spending were too high and that its growth was too slow.

He also noted that two of the three major agencies still rate France at triple-A, the highest rating. Fitch confirmed the rating last week. The S&P move was especially brutal for France, one of the world’s biggest economies and a financier of bailouts for smaller, poorer eurozone countries.

There are more government auctions in Europe this week, including longer-term offerings from France on Thursday, so the European debt crisis will never be too far from investors’ minds.

The news conference began combatively when Sarkozy refused to answer a question about whether France’s downgrade would affect its ability to lead Europe out of the crisis and if it had any connection with the meeting between the French, Italian and German leaders scheduled for next week being postponed.

Sarkozy and German Chancellor Angela Merkel have taken the lead in proposing solutions to the crisis and major decisions are often hashed out at their meetings ahead of European summits.

“You don’t have the latest information,” Sarkozy blithely told the reporter, apparently referring to Moody’s decision on Monday. The reporter rephrased the question two more times, but Sarkozy again refused to answer totally free credit score.

Later on, in response to other questions, he confirmed that the three-way summit would take place in February and spoke about the S&P downgrade.

Earlier, Sarkozy met with Spanish King Juan Carlos, who said he’s confident France and Spain would help Europe find a way out of the crisis.

The king said the two nations were “struggling together for the advance of a unified and prosperous Europe in solidarity that confronts the crisis with strength.”

Rajoy’s Socialist predecessor also supported the financial tax championed by Sarkozy, but was ousted from office by Spaniards angry about the country’s hurting economy and high unemployment.

The European Commission has estimated that the tax could raise as much as euro57 billion ($72.2 billion) a year, funds that could be used to help reduce the substantial budget deficits crippling European economies.

For the tax to be successful, however, it needs to be adopted by as many countries as possible. Sarkozy has said it might be enough to enact it among the 17-nation euro countries. Italian Prime Minister Mario Monti prefers applying it across the full 27-nation European Union, but that would be more difficult because of U.K. opposition.

Part of the reason for the tax would be to raise funds at a time when governments are struggling with high debts.

Moody’s cited France’s economic strength as a reason for affirming its top rating but said bleak growth prospects in France and the region present “risks to the French government’s fiscal consolidation plans.”

“France, like other eurozone sovereigns, may face a number of challenges in the coming months. The need to provide additional support to other European sovereigns or to its own banking system cannot be excluded,” Moody’s warned.

Moody’s said Monday it “will update the market during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU.”

Sarkozy’s challengers for the presidency have seized on the S&P downgrade as evidence that his policies are wrong-headed and ineffective.

It will be a bruising election battle for Sarkozy, a dynamic leader who has a strong international profile but is widely disliked at home. Leftists say he has coddled the rich, while many of those who supported him in his 2007 campaign say he hasn’t fulfilled his promises.

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President Barack Obama

The job market is looking a little brighter at the start of the new year.

Weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Holiday sales were solid. Service companies grew a little faster in December. And many small businesses say they plan to add jobs over the next three months.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

The mostly positive reports had little impact on financial markets. Traders seemed more focused on the debt crisis in Europe, which could slow U.S. growth later this year. The Dow Jones industrial average dropped 37 points in midday trading. Broader indexes were mixed.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday. That’s 11 percent lower than the same time last year.

The four-week average, which smooths fluctuations, fell to 373,250 _ the lowest level since June 2008.

When applications drop below 375,000 _ consistently _ they generally signal that hiring is strong enough to reduce the unemployment rate.

Steven Wood, an economist at Insight Economics, said applications last year averaged 411,000 per week, down from 459,000 per week in 2010.

That’s “a clear indication that the pace of layoffs has slowed,” Wood said.

U.S. service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.

The trade group of purchasing managers said its index of non-manufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 _ the lowest in nearly two years _ but well below last year’s high of 59.7 recorded in February.

Any reading above 50 indicates expansion.

An increase in new orders and stronger imports drove last month’s modest expansion. But a gauge of hiring showed many service firms were hesitant to add workers no fax payday advance.

Retailers, meanwhile, reported solid but not spectacular sales gains last month. And much of the increase stemmed from heavy discounting that will likely cut into profits.

Sales rose 3.5 percent in December for a group of 25 retail chains tracked by the International Council of Shopping Centers. Holiday sales, which cover the last two months of the year, rose 3.3 percent, a decent rise but less than last year’s gain.

Small businesses remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business says the proportion of those firms that expect to add workers is slightly off from the three-year high hit last month.

Economists are predicting that overall hiring increased in December and will strengthen this year.

John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.

Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

In November, the unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

The pickup in hiring reflects some modest improvement in the economy. Growth will likely top 3 percent at an annual rate in the final three months of this year, economists expect. That would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, many economists forecast that growth could slow to roughly 2 percent this year. Europe is almost certain to fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012.

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AP Economics Writer Martin Crutsinger contributed to this report.

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Stocks rose early Friday as spending cuts by Italy lifted traders’ hopes about Europe’s progress toward taming its debt crisis. A flat reading on U.S. inflation sent bond yields lower.

World markets rose Friday after Italy’s lower house of parliament approved an austerity package in hopes of lowering the country’s escalating borrowing costs.

The Dow Jones industrial average is up 58 points, or 0.5 percent, at 11,926 in the first half-hour of trading. The Standard & Poor’s 500 index is up 8, or 0.7 percent, at 1,224. The Nasdaq composite index is up 22, or 0.9 percent, at 2,563.

The gains were broad. Nine of the 10 industry groups in the S&P 500 index rose, led by industrial and technology companies. Telecommunications was the only sector to fall, by 0.3 percent.

The yield on the 10-year Treasury note plunged to 1.88 percent from 1.93 percent earlier Friday after the government said consumer prices were unchanged last month, suggesting that inflation remains low. Low inflation makes bonds more attractive because it doesn’t diminish the buying power of the fixed return a bond provides over time.

BlackBerry maker Research In Motion Ltd. plunged 12 percent after the company said late Thursday that new phones seen as critical to the company’s future will be delayed until late next year. The company is also taking a big loss on unsold tablet computers and predicted that its BlackBerry sales will fall sharply during the holiday period.

If stocks hold their gains, it will be only be the second up day this week. Indexes rose Thursday after positive economic news brought relief to choppy markets. The Dow rose 45 points after separate reports showed sharply fewer layoffs and better business conditions for factories on the Eastern seaboard.

World markets followed U cash advance.S. markets higher Friday as the European debt crisis failed to produce any worrying headlines. Bad news out of Europe has overshadowed positive economic news for months.

Italy’s austerity measures are seen as a crucial step toward soothing fears about Europe. The nations’ borrowing costs have risen in recent weeks to levels at which other nations, such as Greece, were forced to take bailouts.

The cuts are aimed at persuading bond traders that Italy can emerge from the widening crisis without defaulting on its debts. The nation still sits on a $2.5 trillion powder keg of debt that could cause a global economic recession if it defaults.

Stocks mostly rose in Europe following gains in Asia. Britain’s FTSE added 0.5 percent and Italy’s benchmark index rose 0.4 percent.

Online game developer Zynga Inc. begins trading later Friday on the Nasdaq. The San Francisco company, which specializes in Facebook games, priced its initial public offering late Thursday at $10 per share, raising $1 billion. It’s the largest Internet IPO since Google Inc. went public in 2004.

Among companies making big moves:

_ New York-area cable TV provider Cablevision Systems Corp. plunged 14 percent, the most in the S&P 500, following the sudden departure of its chief operating officer, Tom Rutledge.

_ Adobe Systems Inc. jumped 8.4 percent, the most in the S&P 500, after the software maker reported earnings and revenues that were far ahead of what analysts were expecting. Analyst Walter Pritchard at Citigroup said the quarter was a “blow-out when most expected weakness.”

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COLUMBIA, Mo.

Premier Mario Monti convened a Cabinet meeting in Rome on Sunday to discuss emergency austerity and growth measures aimed at saving the euro currency from collapse.

Monti is under extreme pressure to come up with speedy and credible measures that will persuade markets to stop betting against the common currency.

The Cabinet was originally scheduled to meet Monday, but was moved up following Monti’s weekend of meetings with political parties, unions, business groups and consumer lobbies.

The premier hasn’t disclosed details of his rescue plan, but has said it includes both austerity cuts and measures to boost growth in Italy’s anemic economy. He has promised it would be socially equitable, and that it would go after those who hadn’t paid their share of taxes before.

With the meeting still under way, Monti’s office issued a statement saying the package was still under discussion.

The various parties briefed have said the package likely includes reinstating an unpopular home property tax abolished by Berlusconi, raising the sales tax and the income tax at the highest brackets by a few percentage points, and requiring Italians to work more than the 40 years now needed to receive a pension.

The head of Italy’s industrial lobby said Sunday that the survival of the common euro currency depends on Italy’s coming up with very strong austerity and growth measures _ followed by a concerted effort at the European level so that Italian sacrifices are not in vain.

Confindustria President Emma Marcegaglia told reporters after meeting with Monti that the measures are “very heavy.”

The coming days “will decided if the euro will survive or not no fax payday loans. The first move to save the euro is in Italian hands, with a very strong measures,” Marcegaglia said. The measures will be “fundamental to saving Italy and to saving the euro.”

Italian borrowing costs have spiked, which could spell disaster if Italy is unable to keep up on payments to service its enormous debt of euro1.9 trillion ($2.57 trillion), or 120 percent of its GDP.

Unlike Greece, Portugal and Ireland, which got bailouts after their borrowing rates skyrocketed, the eurozone’s third-largest economy is considered to be too big to bail out. An Italian default would be disastrous for the 17-member eurozone and reverberate throughout the global economy.

Union head Raffaele Bonnani, however, urged Monti to reconsider raising the pension age across the board, saying that workers in hard labor should be allowed to retire without added requirements, and that women who join the work force after raising children might have to work well into old age if the 40-year seniority requirement were raised.

But he said he was against calling a general strike at this sensitive moment, and would instead pursue a policy of negotiation with the government.

Marcegaglia said the measures were concentrated on raising taxes _ and to balance that she called for an immediate look at ways to cut political and bureaucratic spending. “This kind of fiscal pressure is not sustainable,” she said.

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Shops in India have closed their doors in observance of a nationwide strike to protest the government’s decision to allow big-box retailers in the country.

Hundreds of traders marched on New Delhi streets Thursday demanding the Cabinet revoke its decision. The strike was only partially observed in New Delhi, Mumbai and other cities.

The government provoked furor last week by deciding foreign retailers could own up to 51 percent of supermarkets and 100 percent of single-brand stores. Shopowners fear that the entry of companies such as Wal-Mart and Tesco will crush local mom-and-pop stores.

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