Actual finance blog

A California “social lending” company will offer to return $461,000 to at least 175 Missouri investors under an agreement with Missouri Secretary of State Robin Carnahan.

Lending Club, based in San Francisco, sells notes to individual investors, and uses the money to fund loans to individuals.  The loans back the notes.  The company seeks both borrowers and investors over the Internet.

Carnahan’s office said the company violated state law by failing to renew its state registration.  The law requires that most securities be registered before they can be sold to investors.

Lending Club registered its investments with the state in 2008, but let the registration lapse in 2010.

In a settlement with Carnahan, the company agreed to offer refunds, along with interest calculated at 8 percent annually, to investors who want them.  The firm also will pay $100,000 to the state’s Investor Education and Protection Fund and $5,000 to the Secretary of State’s office.

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

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

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

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

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

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

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

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

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

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

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

For the stock market, it was a triumphant first quarter. But for earnings growth, the past three months were just ho-hum.

Analysts are expecting earnings for companies in the Standard & Poor’s 500 index to decline 0.1 percent compared to a year ago, according to FactSet. It’s a tiny number but a significant turning point. Earnings growth was on a winning streak for the previous nine quarters. Year-over-year earnings growth has been at least 10 percent for all but the most recent period, when it was 6 percent.

The reasons for the expected slowdown range from global (a weak Europe hurts everybody) to mathematical (it’s hard to top double-digit quarters). Whatever the cause, the stagnation in earnings growth is a stark reminder that the economy’s problems are far from solved. Just three months ago, analysts were predicting 3 percent earnings growth for the first quarter.

We’ll soon see if the expectations are on target. Earnings season gets under way Tuesday when the aluminum producer Alcoa becomes the first major U.S. company to release its first-quarter results.

Should this batch of earnings contain a lot of bad surprises, it could upend a stock market rally that pushed the S&P 500 index up 12 percent in the first three months of the year.

Here’s what you need to know:

_Are earnings really that bad?

It depends on how you look at it. People are blaming the slowdown on several factors including higher oil prices and Europe’s debt crisis. Those are legitimate concerns. High prices for oil and gas make it more expensive for companies to ship their products and leave people with less money to spend on other things. Europe’s debt crisis means that the U.S. can’t sell as many products there. It also hurts fast-growing economies like China and India that export to Europe. That, in turn, affects U.S. companies that count on growth in emerging markets to boost their own sales.

Keep in mind that this deceleration follows an extended period of big gains. Earnings surged 19 percent in the first quarter of 2011, and that was on top of 53 percent growth the year before as companies bounced back from a dismal first quarter of 2009. Aggregate earnings of companies in the S&P 500 were $96 per share last year, a record, according to FactSet senior earnings analyst John Butters. Investors realize that companies can’t sustain warp speed indefinitely.

“It’s supposed to be a very weak quarter,” says Sam Stovall, chief equity strategist at S&P Capital IQ, “but Wall Street is not freaking out because they understand why.”

_Does the market care about earnings?

Sure, to an extent. More often than not, a company’s stock moves in the same direction as its earnings.

Investors tend to trade on what they expect to happen in the coming months. By the time a company actually announces its quarterly results, chances are they’ve already been baked into the stock price and won’t have much of an immediate effect unless there’s a big surprise. A company’s predictions about the future are what investors really listen to.

“A lot of what we’re going to get now,” Butters says, “is already in the rear-view mirror.”

Butters also notes the outsized impact of Apple’s earnings on the overall figure for the S&P 500. Strip out Apple, Butters says, and the prediction for the first quarter falls from minus 0.1 percent to minus 1.6 percent.

Besides, one quarter of earnings growth hardly means a company is solid. Earnings can be a deceptive measurement, and will rise even when revenue falls if a company slashes jobs and other expenses. Share buybacks and accounting charges can also inflate profits and mask a company’s struggles.

“You can always juggle earnings,” says Stovall. “It’s a lot harder to fudge sales.”

_What’s the big picture?

Despite all the hubbub about The End of Earnings Growth, analysts are expecting only a short-term decline. Earnings growth is expected to return to 7 percent in the second quarter and 5 percent in the third quarter, according to FactSet. Bigger jumps of 16 percent, 14 percent and 13 percent are predicted for the three quarters after that, through the middle of 2013. Analysts also expect per-share earnings in the S&P to rise to more than $105 in 2012, another record, according to Butters.

That reflects investors’ belief that Europe will stabilize by the end of the year. Even if it doesn’t, the thinking goes, companies will have adjusted to turmoil in Europe as a new normal that they can function under, rather than something that sets off constant fears of another cataclysm.

Machinery company Caterpillar said in its last earnings call that the company expects its sales in Europe to continue to rise despite the problems there.

“It’s been going on a long time and hasn’t tanked the place yet,” said chief financial officer Edward Rapp. “We don’t think it will.”

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Asian stock markets rose Monday after a Chinese survey showed that manufacturers in the world’s No. 2 economy boosted production for a fourth straight month.

Japan’s Nikkei 225 index gained 0.8 percent to 10,163.59 despite businesses remaining pessimistic in the central bank’s latest “tankan” survey.

South Korea’s Kospi added 0.2 percent to 2,017.89 and Australia’s S&P/ASX 200 gained 0.1 percent to 4,341.20. Benchmarks in Indonesia and Singapore also rose.

Hong Kong’s Hang Seng fell 0.7 percent to 20,419.84. Markets in mainland China are closed for a public holiday.

Chinese manufacturing gained momentum for a fourth straight month in March, helped by a recovery in the auto, tobacco and electronics sectors, though analysts said conflicting data suggest lingering weakness.

The state-affiliated China Federation of Logistics and Purchasing said Sunday that its purchasing managers index, or PMI, rose 2.1 points to 53.1 in March, up from February’s 51.0 and January’s 50.5. A reading above 50 signifies expansion.

A rise in new factory orders suggests a recovery in some industries, though a second set of data, from HSBC, said that after adjusting for seasonal factors, its PMI index for China for March was 48.3, down from 49.6.

HSBC’S index, which tends to reflect trends in the export sector more strongly than the official index, has remained below 50 for five straight months, and recorded its lowest average reading in three years in the first quarter, HSBC said.

Analysts at Credit Agricole CIB in Hong Kong said called the official reading on China manufacturing “surprisingly upbeat” and said set the stage for a strong week in stock markets fast cash advance.

“Investors will watch PMI readings from other regional economies, including Korea, Taiwan and India. If they also improve, the story of Asia regaining momentum … would provide more lasting support for markets,” Credit Agricole said in a report.

The data from China boosted Australia’s raw materials sector, whose fortunes are largely tied to Chinese demand. BHP Billiton, the world’s largest mining company, jumped 2.3 percent. Fortescue Metals Group gained 1.7 percent. Rio Tinto Ltd. rose 1.6 percent.

Rising consumer spending boosted U.S. stocks on Friday, and Wall Street closed its best first quarter since 1998.

The Dow Jones industrial average rose 0.5 percent to close at 13,212.04. The Standard & Poor’s 500 index rose 0.4 percent to close at 1,408.47. The Nasdaq composite fell 0.1 percent to 3,091.57.

For the quarter, the Dow posted an 8 percent gain and the S&P a 12 percent gain, the best for those indexes in 14 years. The gain was 19 percent for the Nasdaq, its best since 1991.

Benchmark oil for May delivery was up 31 cents to $103.33 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 24 cents to settle at $103.02 per barrel in New York on Friday.

In currencies, the euro rose to $1.3341 from $1.3334 late Friday in New York. The dollar fell to 83.15 yen from 82.86 yen.

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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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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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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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China is blocking orders for at least $12 billion worth of Airbus jets to protest the European Union’s emissions trading fees, in a new challenge to the program aimed at fighting global warming, the planemaker said Thursday.

With some analysts warning of a brewing trade war, Airbus spokesman Stefan Schaffrath said his company is seeing “retaliation threats” from 26 countries, “in particular from China.”

Speaking to The Associated Press, he said 35 orders by Chinese airlines for A330 planes are on hold because China’s government is refusing to approve them. He said orders for another 10 A380 superjumbos are also under threat, and that the combined list prices of the aircraft is $12 billion.

“The economic impact is real,” he said.

Officials at the Chinese Embassy in Paris could not be reached for comment on the Airbus statements Thursday.

EU officials defended the emissions system. Asked about the Airbus complaint at the daily midday briefing, EU spokesman Isaac Valero Ladron said, “I’m not in a position to make any comments about possible trade decisions. I think it’s in everybody’s interest to reduce greenhouse gases, which affects climate change, and airplanes affect that, as well.”

The emissions trading system went into effect at the start of the year as part of European efforts to reduce global warming.

Airlines flying to or from Europe must obtain certificates for carbon dioxide emissions. They will get free credits to cover most flights this year but must buy or trade for credits to cover the rest payday advance.

The United States, China, Russia, India and many other countries are opposed and say the bloc cannot impose taxes on flights outside its own airspace.

EU officials have said they acted unilaterally because of a doubling of aviation carbon emissions in Europe between 1990 and 2006 and the inability of governments to forge a global deal on reducing emissions.

Schaffrath insisted that Airbus is working to reducing emissions but argued that a Europe-only measure creates trade imbalances.

“Our sector is committed to green aircraft,” he said. “We truly believe that the global issue of emissions does not know boundaries, and we need a global solution.”

Airbus made its warnings on the same day that its parent company EADS NV reported its annual earnings. EADS CEO Louis Gallois warned that the emissions scheme would cost Airbus and other European companies business globally. Schaffrath said the Chinese blockage could threaten Airbus’ plans to ramp up production of its popular planes.

China has said it will prohibit its airlines from paying the EU fees, and in Washington Congress has voted to exclude U.S. airlines from the emissions cap-and-trade program.

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Federal Reserve Chairman Ben S. Bernanke is trying to compensate for the damage lawmakers threaten to inflict on the U.S. economy, even as Republicans skewer his stimulus efforts for risking inflation.

The potential drag from fiscal restraint contributed to the rationale behind policy makers