Actual finance blog

SWBC’s LendingXpress subsidiary has teamed up with Equity National to offer home valuation and analytic products to lenders to process real estate loans.

LendingXpress focuses on helping financial institutions order all of the products necessary to close a real estate loan, including property valuations and lien position. Equity National is a East Providence, R.I.-based company that provides lenders with a full range of valuation services to process mortgages.

“There are a lot of appraisal management companies fighting for business today, and after exhaustive due diligence, we chose Equity National to be our strategic partner based on their focus on the customer, (Home Valuation Code of Conduct) orientation, and their management team, which is unmatched in the industry,” says Ted Robinson, senior vice president and general manager of LendingXpress.

San Antonio-based SWBC is a financial services company that provides insurance, mortgage and investment services to financial institutions, businesses and individuals nationwide.

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A online cash advance is a service provided by most credit card and charge card issuers.

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

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

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

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

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

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

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

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

Not everyone’s completely sold on TIPS right now.

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

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

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

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

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

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

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

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

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

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

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

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

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Apply for a payday loans today and as a first time customer, you can get up to $1000 directly to your account overnight.

The road for another stimulus bill just got tougher following Tuesday’s election of Republican Scott Brown to the Senate in Democratic stronghold Massachusetts.

After health care, Congress’ next big priority is to pass something that shows voters in an election year that they’re on top of the nation’s unemployment scourge.

But the Democrats’ loss of a filibuster-proof super-majority in the Senate throws hurdles onto an already rocky path toward a new stimulus bill aimed at saving jobs.

Given how controversial the first stimulus package remains, passing a new jobs bill, or "second stimulus," was never going to be easy. Republicans have especially targeted the first stimulus package as a prime example of the kind of big government spending they aim to end.

"There is a reason the nation was focused on this race," said Senate Minority Leader Mitch McConnell, R-Ky. "The American people have made it abundantly clear that they are more interested in shrinking unemployment than expanding government. They are tired of bailouts."

Experts and policy analysts say the Republican win in Massachusetts will shore up Republican opposition to anything that looks like big spending.

"I think it’ll be very hard," said Julian Zelizer, a professor of history and public affairs at Princeton University. "Democrats will be under more pressure to pass a jobs bill, because if they don’t do something about the economy, voter dissatisfaction will increase. But Republicans are going to be more emboldened not to vote for it." (Democrats scramble on health care - CNN.com.)

The bills: The House passed a $154 billion jobs bill in December, but Senate Democrats are planning to debut their own jobs-creation bill in coming weeks.

The two bills were developed independently but share some components, like infrastructure spending to build roads and bridges, as well as state aid to plug budget holes and keep teachers and police officers employed.

Senate Democrats have been brainstorming in backrooms since last summer to come up with a package that incorporates ideas from all parts of their caucus, according to congressional aides. Party leaders Dick Durbin of Illinois and Byron Dorgan of North Dakota have been running the negotiations.

The final package will offer something for the left, like spending for green sector jobs, and something for the right, like tax breaks for small businesses that hire new workers.

On the tax breaks, Senate leadership is considering a proposal that Sen. Robert Casey, D-Pa., plans to introduce this week incorporating ideas Republicans have touted.

Casey wants to give a one-year payroll tax break to companies that create new jobs offering wages up to $50,300. Small companies would qualify for a 20% tax break and larger companies with more than 100 employees would qualify for a 15% break fast cash loans.

Another way to make a jobs bill more palatable to both fiscally conservative Democrats and Republicans is to craft a bill that pays for itself and doesn’t add to the deficit. That’s a big goal of the jobs proposal, Democratic aides say. But they wouldn’t spell out how.

The bill may try to take advantage of money freed up in the budget by the fact that the Troubled Asset Relief Program is coming in under budget.

Wooing Republicans: Will such fiscal carrots be enough to woo any Republicans?

"Small business tax breaks are great," said Brian Darling, director of Senate relations at the conservative Heritage Foundation. "But when they’re basically being used just to get some Republican support and the balance of the proposal is just federal spending, this sounds very similar to the first stimulus plan."

Douglas Holtz-Eakin, a former Congressional Budget Office director, said that the Massachusetts win should send a signal to Democrats to start from scratch on the jobs bill and start working with Republicans. He said Republicans would prefer a bill that focuses more on bigger and more effective tax cuts, like blanket breaks on payroll taxes and capital dividend taxes.

"The landscape has changed," said Holtz-Eakin, who advised 2008 presidential candidate Sen. John McCain. "They’re going to have to go back and think about what policies are going to get the Republicans on board."

Indeed, a couple of Republican senators’ offices said they can’t imagine a Democratic proposal on jobs that could win them over.

"A second stimulus bill, packed with more spending, is the wrong way to approach this," said Jeff Sadosky, spokesman for Sen. Kay Bailey Hutchinson, R-Texas. "Obama’s budget has already ballooned the debt. More spending is not the answer."

But Democrats may be able to peel off someone like Sen. Susan Collins, R-Maine, one of three Republicans who last February voted with Democrats to pass the original stimulus package. But she’d only be game if the jobs bill really didn’t add to the deficit, a spokesman said.

"Senator Collins has said that she is open to considering the possibility of a jobs bill but her main concern is how it would be paid for?" said Collins spokesman Kevin Kelley. "She believes that the debt levels we are accumulating now, and that are projected, are simply not sustainable and pose a considerable threat to the health of our economy." 

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For car buyers, four words mean the difference between going home in a new sedan or their old clunker: Your loan is approved.

They are being uttered more often these days, spurred by a government program that provides guarantees when those loans are sold to investors. That is helping banks, credit unions and auto finance companies make auto loans at a quickening pace. And consumers are paying less to borrow. Interest rates have been at record lows since December 2008.

It’s bit of good news for the auto industry in the U.S., where 2009 sales are expected to hit a 30-year low of around 10 million when figures are announced today. Partly because of loosening credit, analysts expect more than 1 million cars and light trucks to be sold in December, the best monthly performance since Cash for Clunkers in August.

Financial firms wrote 5.5 percent more car loans in the third quarter compared with the prior three months, Experian Automotive says. Fourth-quarter figures aren’t yet available, but Jesse Toprak, vice president of auto pricing tracker TrueCar Inc., says December saw an uptick in auto loan approvals for consumers with average or above-average credit as auto finance companies tried to clear out inventory.

Paul Taylor, chief economist for the National Auto Dealers Association, said used-car prices also have stabilized due to limited supply, making used-car loans more attractive to banks.

Still, Toprak said it could take another year or even longer for financial firms to trust consumers enough to return to normal levels for auto lending cheap business cards. It’s also far from the freewheeling days of the credit boom. Third-quarter auto lending was down 30 percent from the same period in 2006, a year when U.S. car and light truck sales reached 16.5 million.

In the meantime, only those with good credit need apply.

A top-tier borrower — someone with a credit score between 720 and 850 — can get a 36-month auto loan with an average monthly rate of 5.74 percent, down from 6.65 percent a year ago, according to Informa Research Services, a financial research firm in Calabasas, Calif. On a $20,000 car loan, that’s a savings of nearly $300 over three years.

But the cost of borrowing has risen for people in the bottom tier. A person with a score of 500 to 589 has seen the average rate climb to 18.56 percent from 16.47 percent a year ago. That translates to an extra $751.68 over three years. Banks are still nervous about lending money to risky borrowers given high rates of unemployment, foreclosures and late payments since the financial crisis began.

"We used to have a subprime auto lending industry," says Dan Alpert, managing partner at Westwood Capital, an investment bank involved in the securitization business.

"We don’t have that anymore."

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Stocks gained Monday, with the three leading indexes closing at 14-month highs, after Citigroup said it will pay back government bailout funds and Dubai received $10 billion to cover its debt, easing worries the emirate might default on billions it owes.

The weak dollar also helped, lifting commodity shares and the stocks of companies that do a lot of business overseas.

The Dow Jones industrial average (INDU) rose 30 points, or 0.3%, closing at the highest point since Oct. 1, 2008.

The S&P 500 index (SPX) gained 8 points, or 0.7%, closing at the highest point since Oct. 2, 2008. The Nasdaq composite (COMP) rose 22 points, or 1%, closing at the highest point since Sept. 19, 2008.

After propelling the market off of 12-year lows hit in March, the S&P 500 has risen 64% as of Friday’s close.

"The market has shown some extraordinary strength here, but I think we’re moving into a period of greater volatility," said Don DeWaay, CEO at DeWaay Capital Management.

"This market is running a lot more on emotion now, rather than fundamentals," he said.

The Dow closed at a 14-month high Friday after better-than-expected reports on retail sales and consumer sentiment, but broader gains were limited by tech weakness and a strong dollar.

Citigroup: Citigroup said Monday that it will return $20 billion in bailout money to the government through a combination of stock and debt offerings.

Citigroup (C, Fortune 500) said the bulk of the payment will be funded through a $17 billion common stock offering. The company also said Treasury will sell up to $5 billion of the $25 billion in Citigroup common stock it holds shortly, and sell the rest of it over the next year.

Obama: President Obama met Monday with top executives of some of the nation’s biggest banks, including JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500).

He said his main message to bankers was that banks received extraordinary assistance during the crisis, and now that the industry is back on its feet, it needs to reciprocate. He is expected to urge bankers to provide greater lending, cut back on bonuses and support financial reform efforts.

Exxon-XTO deal: Dow component Exxon Mobil (XOM, Fortune 500) said it will buy XTO Energy (XTO, Fortune 500) in a $41 billion stock and debt deal that values XTO shares at a 25% premium to its Friday closing price cash till payday. The deal also includes the assumption of $10 billion in debt.

Exxon shares fell 4% and limited any gains on the Dow. XTO shares rallied 17%.

Dubai: Worries that Dubai might default on billions of dollars in debt rattled world markets at the end of last month. But some of those fears have eased over the last few weeks on signs that any fallout will be limited.

Fears were further soothed Monday after the city-state received $10 billion in financing from Abu Dhabi, another of the United Arab Emirates.

World markets: Overseas markets gained. In Europe, London’s FTSE 100 rose 1%, the German DAX rose 0.8% and France’s CAC 40 rose 0.7%. Asian markets rose, with the exception of Japan’s Nikkei, which was little changed.

Dollar: The dollar slipped versus the euro and the yen, turning lower after the recent rally.

A weak dollar has added to the more than nine-month-old stock rally over the past nine months, giving a boost to dollar-traded commodities, as well as commodity shares and the stocks of companies that do business overseas. But so far in December, the dollar has been mixed or stronger, putting some pressure on stocks.

Commodities: The weak dollar gave a lift to dollar-traded commodities. COMEX gold for February delivery rose $3.90 to settle at $1,123.80 an ounce. Gold closed at an all-time high of $1,218.30 an ounce earlier this month.

U.S. light crude oil for January delivery fell 36 cents to settle at $69.51 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices were little changed, with the yield on the 10-year note standing at 3.55%, unchanged from late Friday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners topped losers roughly three to one on volume of 1.08 billion shares. On the Nasdaq, advancers beat decliners two to one on volume of 1.86 billion shares. 

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Greek Prime Minister George Papandreou pledged “radical” action to bring the country’s budget deficit within European Union limits by 2013 as the two- month old government struggles to convince investors it can get to grips with public finances.

“In the next three months we will take those decisions which weren’t taken for decades,” he said in a speech in Athens today, attended by union and employer-group representatives, and politicians. Papandreou, who came to power in October, said many choices will be “painful,” though he pledged to protect poorer and middle-income Greeks.

Papandreou is trying to shore up confidence in Greece after its bonds tumbled last week amid concern about its commitment to cutting the European Union’s largest budget deficit, set to reach almost 13 percent of economic output this year. Fitch Rating cut Greece one step to BBB+ and the yield on the Greek 10-year government bond has risen more than a percentage point to 5.465 percent since Oct. 8.

“It does not appear that he has provided much insight into how he will reduce Greece’s heavy debt burden,” Brown Brothers analysts led by New York-based Marc Chandler wrote in a research note. “The most important take-away point is that key decisions will be made over the next three months and the pain will be distributed.”

European Central Bank Vice President Lucas Papademos on Dec. 12 said Greece’s fiscal situation is “extremely serious.”

Papandreou, who said he will forge a “new national” agreement, today pledged to cut the deficit, to under 7 percent from 2011 and begin reducing the debt, set to exceed 100 percent of gross domestic product this year, from 2012 Payday advance. That will be achieved through taming the deficit and selling more state asset beginning next year.

The premier said revenue to reduce debt would come from exploiting the state’s real estate holdings, a real estate investment fund, as well as securitization of income from the state’s tax on major property holdings.

Under pressure from the EU to move quickly, Papandreou said he would step up talks on an overhaul of the tax system, one of his election pledges. The new system will be in place in the first quarter of 2010, he said.

The audience applauded when Papandreou announced executives of banks under state control wouldn’t get any bonuses and those paid at private banks would carry a 90 percent tax rate.

The government will set up a new economic police department to stamp out contraband, tax evasion and corruption, a key plank in the Socialists’s agenda to boost revenue.

“Today our biggest deficit is that of credibility,” Papandreou said. “In the last years Greece lost all traces of credibility, which is why international institutions, partners want to see actions.”

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Options traders are growing less bullish on the yen after efforts by Japanese officials to boost the world’s second-biggest economy and a U.S. jobs report led to the currency’s biggest weekly decline in a decade.

Japan’s currency plunged 2.5 percent against the dollar and 1.3 percent versus the euro on Dec. 4 after America’s Labor Department said employers cut the fewest jobs since the recession began. The yen sank 4.5 percent versus the greenback for the week, the most since February 1999 and retreating from a 14-year high. Traders sold yen and bought dollars on speculation interest rates in the U.S. will increase before June.

“The improving U.S. jobs market suggests the Federal Reserve won’t stand pat on interest rates longer than the Bank of Japan,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a unit of Itochu Corp. Increased U.S. borrowing costs would lead traders to favor using yen to finance higher-yielding investments, leading to more losses for the Japanese currency, he said.

Options showed declining bets that the yen will rise. The odds for a gain to 84.5 yen per dollar by the end of March from 90.56 last week fell to 38 percent from 80 percent on Nov. 30, data compiled by Bloomberg show. Chances of a decline to 92 versus the dollar by Dec. 31 reached 63 percent. Options grant buyers the right to purchase or sell an asset at a predetermined price.

Weekly Tumble

The yen tumbled 3.6 percent versus the euro to 134.54 last week, the sharpest slide since the week ended April 3. The yen’s biggest drop during the week came after the U.S. Labor Department said payrolls dropped by 11,000 last month, the smallest decrease since the recession began in December 2007.

“What the job numbers do is firm up expectations that the Fed interest-rate hike is coming,” said Camilla Sutton, a strategist in Toronto at Bank of Nova Scotia, the nation’s third-largest lender. “That should be a strong-dollar story.”

Federal-funds futures contracts on the Chicago Board of Trade show a 43.3 percent probability that the U.S. central bank will lift its target rate for overnight bank borrowing to 0.5 percent by June from a range of zero to 0.25 percent now, up from 12.6 percent a month ago.

UBS AG expects the Fed to set its key rate at the top end of its 0.25 percent range in April and follow with a quarter- point increase in June. The jobs report and last week’s gains “suggest the greenback is finally turning,” Mansoor Mohi-uddin, the Zurich-based bank’s global head of currency strategy, wrote in a note to clients.

Best Performer

The yen was the best performer against the dollar among the 16 most-traded currencies the past four years, Bloomberg data show. It surged to 84.83 on Nov. 27, the strongest since July 1995, from 124.13 in June 2007. The yen tends to advance amid financial turmoil because Japan’s trade surplus reduces reliance on foreign capital.

Record low U.S. interest rates have kept the dollar under pressure at the expense of the yen, making the greenback the favorite for so-called carry trades, where investors raise funds in countries with low borrowing costs and use the proceeds to invest in countries with higher returns.

Benchmark rates of as low as zero in the U.S. and 0.1 percent in Japan compare with 3.75 in Australia and 2.5 percent in New Zealand.

The London interbank offered rate, or Libor, for three- month loans in the U.S. currency has been below the equivalent yen rate since Aug. 24. In the decade before then, the dollar rate averaged 2.94 percentage points more than the yen rate.

‘Extreme’ Positioning

Contracts betting the yen would climb against the dollar rose to 51,710 on Nov. 27, the most since May 2008, according to data from the Commodities Futures Trading Commission in Washington based on contracts at the Chicago Mercantile Exchange. As recently as June, there more contracts betting on a decline in the yen than a gain.

Such “extreme” positioning may suggest that the decline in the yen represents traders unwinding “long” positions rather than an outright bet on the currency’s depreciation, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients on Dec. 4.

The median estimate of more than 30 strategists surveyed by Bloomberg is for the yen to end March at 92 to the dollar and 136 to the euro.

‘Urgent Steps’

Fujio Mitarai, head of Japan’s largest business lobby, called on the government to take “urgent steps” on Nov. 27 to curb gains in the yen, which make Japanese exports less competitive and threaten corporate profits. The same day, Finance Minister Hirohisa Fujii said in Tokyo the nation will “do what is necessary” and he may contact U.S. and European officials to act.

Exports make up about 12 percent of Japan’s economy, compared with 6 percent in the U.S. The nation’s gross domestic product is forecast to shrink 5.7 percent this year, according to the median estimate of 14 economists surveyed by Bloomberg. That compares with a contraction of 2.4 percent in the U.S.

The Bank of Japan announced an emergency 10 trillion yen ($113 billion) credit program on Dec. 1 to combat falling prices and the stronger yen. The spread between dollar- and yen-based Libor narrowed to 2.72 basis points on Dec. 4 from as much as 7.25 basis points on Sept. 8.

Stimulus Plan

“The BOJ’s action worked,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp. “Stopping the yen’s advance will require additional spending from the government.”

A stimulus plan worth as much as 4 trillion yen ($45.4 billion) may be agreed upon today, Chief Cabinet Secretary Hirofumi Hirano said last week. The government planned to announce the measures on Dec. 4 before disagreements between Prime Minister Yukio Hatoyama’s ruling Democratic Party of Japan and coalition partners, who want a larger package, caused a delay.

Bonds to be issued in the fiscal year starting April 1 may reach 146.2 trillion yen compared with a revised 132.3 trillion yen this year, according to Citigroup Global Markets Japan Inc.

“There is probably enough in the policy action in Japan by the government and the BOJ to argue for further upside on cross- yen currencies near term,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney.

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European consumer prices increased for the first time in seven months in November led by energy costs as the economy recovered from the worst slump since World War II.

Prices in the 16-nation euro region rose 0.6 percent from a year earlier after falling 0.1 percent in October, the European Union statistics office in Luxembourg said today. Economists had projected a gain of 0.4 percent, the median of 30 forecasts in a Bloomberg News survey showed.

Oil prices have risen 9 percent in the past three months as the economy has gathered strength. While the euro-area economy returned to growth in the third quarter, companies continue to cut costs and eliminate jobs to bolster earnings. The European Central Bank has signaled it sees “moderate” inflation and is in no rush to withdraw stimulus measures.

“The medium-term outlook for euro-zone inflation remains very subdued,” said Martin van Vliet, a senior economist at ING Bank in Amsterdam. ING anticipates the ECB will “adopt a very gradual approach to withdrawing its emergency liquidity measures, and to keep interest rates on hold for an extended period,” he said.

The euro was higher against the dollar after the inflation report, trading at $1.5050 at 10:52 a.m. in London, up 0.4 percent on the day. The yield on the German 10-year benchmark bond dropped 0.1 basis point to 3.15 percent.

Latest Forecasts

The ECB said on Nov. 12 that professional forecasters project European inflation will average 0.3 percent this year and 1.2 percent in 2010. The Frankfurt-based central bank, which aims to keep annual gains in consumer prices just below 2 percent, will release its latest forecasts for economic developments and inflation on Dec. 3.

For now, a recovery may remain too fragile for companies to start adding workers. European unemployment probably rose to 9.8 percent in October from 9.7 percent in the previous month, according to the median estimate in a Bloomberg survey of economists. The statistics office will release the unemployment report tomorrow at 11 a.m.

Remy Cointreau SA, France’s second-largest liquor company, on Nov. 25 forecast “modest” third-quarter sales after profit dropped 18 percent in the year’s first six months. Hugo Boss AG, Germany’s largest clothing maker, said earlier this month that it projects sales will remain “challenging” in the first half of 2010.

Coming Months

European households anticipate prices will decline further in coming months. A gauge of consumers’ price expectations over the next 12 months rose to minus 11 in November from minus 14 in the previous month, the European Commission said on Nov. 27.

“Economic activity is unlikely to be strong enough to generate significant inflationary pressures for some considerable time to come,” said Howard Archer, chief European economist at IHS Global Insight in London. “There remains a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures.”

The ECB has cut borrowing costs to a record low, purchased covered bonds and injected billions of euros into markets to encourage lending. Policy makers meeting in Frankfurt on Dec. 3 may keep the key rate at 1 percent, a Bloomberg survey shows.

“We still don’t know to what extent the incipient global recovery has enough support on its own to allow for exceptional stimulus to be withdrawn without the danger of a relapse in activity,” ECB council member Miguel Angel Fernandez Ordonez said on Nov. 23. Inflation “although positive, will remain at moderate levels in the near future.”

The statistics office will release a breakdown of November inflation data on Dec. 16.

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Retailers are praying that holiday sales will finally turn around after two hard years. Last year was terrible, with the downfall of well-known retail chains such as Circuit City and Linens ‘n Things. This year hasn’t been much better.

But the near-term outlook doesn’t appear positive to Robert Buchanan, assistant professor of finance at St. Louis University. He sees glum sales through the first half of next year. And Buchanan doesn’t expect consumers to return to their free-spending ways in the long run.

Unlike many academics, Buchanan hasn’t been confined to an ivory tower. He spent 23 years in equity research, scrutinizing the financial statements and strategies of retailers. Before turning to teaching, he was vice president and Retailing Industry Research Group leader at A.G Edwards.

Yet, he didn’t start in equity research. He had been a journalist, working for wire service United Press International.

"There is a lot of commonality between a good reporter and a good analyst," Buchanan says.

How do you project this year’s holiday season to be, compared to 2008?

I think it is going to be a slow Christmas. If you look at the industry, it is certainly not depressed, but I think the industry is in slow spirits. What we’ve been seeing is same-store sales growth in the -1, -2 percent area throughout the year. I think that trend will continue through the holiday, and certainly into the first half of next year.

There are two reasons, number one is the debt — personal, corporate and government debt. Debt has become an acute problem for individuals.

Second thing has to do with the stock market. The total returns for the stock market during the 26 years ending with 2007, they ran right around 13 percent per year (which made consumers richer). … My suspicion is that kind of super market will not apply during the next 26 years.

What would be your advice for retailers this season?

A lot of them are acting very intelligently, starting with Walmart and individual retailers like Nordstrom, Kohl’s, Target, Costco cheap payday loan. What they are doing is smart, they have cut way back on their inventory levels and their expense levels. Those retailers in particular are positioned to make decent a return even if the sales stay slow.

A number of retail companies filed for bankruptcy in the past year. How will this affect retailers in the long run?

I think the days of heady growth for American retailers are over. Moving forward, the game is going to be about the market share. … A given retailer has to punch another retailer in the nose to take their market share away in order to survive. It has become and will remain a ruthless Darwinian struggle.

Do you think the recession has marked the death of customers?

My hunch is that (for) the high end of American retailing, like Neiman Marcus, Saks Fifth Avenue and parts of Nordstrom, the customer mindset … has permanently changed.

I think the days of freewheeling spending are over, particularly at the high end. It never made a whole lot of sense for someone to spend $2,000 on a business bag, for example, and yet, people did anyway … I think now it absolutely makes no sense. Frugality is the word.

If I am wrong about the (stock) market, and the stock market goes on a sustained (strong growth) for the next 26 years, then people might go back on spending $4,500 on a handbag.

What do you think will be the state of retail business over the next 20 years?

I think strong and superior value propositions will carry the day. To me, the best retailing concept in the world … is Costco’s.

Most typical retailers are working anywhere between a 30 percent to 60 percent mark up (on) the cost of their merchandise; Costco is working anywhere between a 10 to 15 percent markup. They don’t carry everything, they only have about 4,000 items at one point in time versus 150,000 items at a Walmart super center. But what they have … is very sharply priced.

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The Ferrero family’s round Rocher chocolates are recognized worldwide but Italy’s richest man, Michele Ferrero, and his two sons, have shunned publicity and kept their company very private — up until now.

Ferrero, and its home base in this northwestern Italian town, is in the spotlight after it said it was considering a multi-billion euro bid for Cadbury, the world’s second-largest confectionery company.

In more than 60 years of history Ferrero has not made a single acquisition as it built up a confectionery empire it says ranks fourth in the world.

Michele Ferrero, 84, who took the reins in 1957, lives in Monte Carlo and has a villa in exclusive Cap Ferrat. Forbes magazine this month estimated his and his family’s wealth at $9.5 billion, putting them at 40th place among the world’s richest people.

Michele Ferrero’s two sons, Pietro and Giovanni, are chief executives and run day-to-day operations.

Ferrero has kept to a philosophy of “better to speak through the products than show in public,” according to a source close to the company. It has stuck to that policy with its workers as well.

“The company doesn’t tell us anything, total reserve reigns. Up until a few years ago, there wasn’t even a sign saying Ferrero on the Alba factory,” said one employee in the factory car park emergency cash loans.

The company sits at the heart of Alba, employing more than 4,000 people. Michele Ferrero still regularly visits the original factory there.

Ferrero remains a key presence for Alba, a town of some 30,000 residents in Piedmont, one of Italy’s richest gastronomic regions.

COMPANY TOWN

“In every family of Alba, there has been or still is someone working for the group,” Mayor Maurizio Marello said.

“This potential acquisition … is a sign of the group’s state of health … it is obviously an advantage for us,” he added.

Globally, Ferrero employs some 21,600 with 18 factories and operations in more than 36 countries.

Ferrero also makes Nutella hazelnut spread, Kinder chocolate eggs for children and Tic-Tac mints.

It prides itself on doing its own research — not just into products but also packaging, which lengthens the shelf-life of products and protects against temperature changes. The protection helps make its goods regular items in small grocery stores worldwide. 

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