You can’t walk within shouting distance of the Pepsi Center here without sighting Ben Affleck, Eva Longoria, Stephen Spielberg or Melissa Etheridge creditscore.
After Hillary Clinton’s speech Tuesday, reporters lurched after passed canap
Federal Reserve Chairman Ben Bernanke said Friday that the problems in the nation’s financial markets persist and still threaten the economy.
Bernanke said that the financial woes, coupled with record oil prices and the weakening economy, had created "one of the most challenging economic and policy environments in memory."
In prepared remarks at a conference in Jackson Hole, Wyo., Bernanke also said he is encouraged by the recent oil price decline, which may signal that inflationary pressures are on the wane.
"Although we have seen improved functioning in some markets, the financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided," Bernanke said.
"Its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," he added.
Bernanke’s comments seem to signal that the central bank will keep its key interest rate at 2%, rather than raise it an attempt to keep prices in check.
"The commentary tells me that rates are on hold until they see some blue skies through this financial storm," said John Silvia, chief economist for Wachovia.
The Fed cut interest rates seven times from September through April, but left them unchanged at its last two meetings.
Earlier this summer, investors and economists were widely expecting the Fed to start raising rates as early as this fall. But there is now widespread agreement that rates will remain on hold at its next two meetings in September and October and some economists are predicting rates will stay at current levels into next year.
Silvia said the Fed had little choice but to focus on upheaval in the credit markets rather than on inflation as it cut rates. And while he agreed that financial market woes are not behind us, he said the Fed faces a risk of inflation getting out of hand the longer it keeps rates on hold.
"Inflation is not out of control, but it’s clearly drifting away," he said.
Bernanke’s remarks come more than a week after the Consumer Price Index, the government’s key inflation measure, rose to a 17-year high, gaining 5.6% over the previous 12 months. The Producer Price Index, a measure of wholesale inflation, also rose this week to a 27-year high.
Still, Bernanke reiterated that the Fed expects an economic slowdown to cause "inflation to moderate later this year and next year." And while he added that the "inflation outlook remains highly uncertain," Bernanke appeared to downplay inflation risks relative to other challenges facing the economy and global credit markets.
The discussion of inflation pressure was only a brief part of the speech, which focused on the need for stability in financial markets absolutely free credit report. Bernanke defended actions by the Fed over the past year. And he said that the Fed and regulators needed to be on the lookout for other threats to financial markets.
Bernanke offered one of the most detailed and strongest public defenses of the Fed’s role in preventing a bankruptcy at Bear Stearns in March. He argued that while Bear Stearns was not that large in comparison to other Wall Street firms, its failure would have had severe ripples throughout the financial system that the Fed could not risk.
"With financial conditions already quite fragile, the sudden, unanticipated failure of Bear Stearns would have led to a sharp unwinding of positions in those markets that could have severely shaken the confidence of market participants," he said. "The broader economy could hardly have remained immune from such severe financial disruptions."
His speech did not make any reference to Fannie Mae (FNM, Fortune 500) or Freddie Mac (FRE, Fortune 500), the two troubled mortgage finance firms who have seen their shares battered this month on fears that the government will be forced to take them over.
But his defense of the Bear Stearns action and his discussion of a doctrine of rescuing firms deemed too big to fail seemed to signal his approval of the Treasury Department taking action if either firm were to face problems covering rising losses from the trillions in mortgages they own or guarantee.
In another comment that could be read as addressing the problems facing Fannie and Freddie, he said that regulators of financial institutions had to be careful not to force troubled firms to cut back on their lending at times of economic stress.
He said mandating tighter lending standards might help the "safety and soundness of a particular institution" that such "excessively conservative lending policies could prove counterproductive if they contribute to a weaker economic and credit environment."
He also said that it is important that Congress take steps to spell out more explicitly what steps could be taken by the government to help rescue other financial institutions whose failure would pose a risk to the broader economy. He said that the Treasury Department is probably the agency best suited to perform those rescues.
Just because consumer stocks are staging the biggest rally in five years doesn't mean the economy is about to recover.
As Lowe's Cos., Wendy's International Inc. and Starwood Hotels & Resorts Worldwide Inc. led a 7.6 percent advance in consumer stocks this month, the extra yield bond investors demanded to own the industry's debt rose to 2.5 percentage points over U.S. Treasuries. Every time bondholders sought that much compensation to guard against default, shares of retailers, restaurants, and hotels slumped an average 16 percent, according to data compiled by Bloomberg.
Standard Life Investments, Harvard University's endowment and hedge fund Appaloosa Management LP, which manage almost $300 billion, are avoiding the shares as Americans rein in spending to cope with the highest unemployment rate in four years and faster inflation. Profits at consumer discretionary companies are forecast to be the worst since 2001, Bloomberg data show.
“It's a rally that we think will inevitably roll over,'' said Andrew Milligan, the Edinburgh-based head of global strategy at Standard Life Investments, which oversees about $242 billion. “Investor confidence has started to ease back and earnings numbers have generally been negative. The credit side just reinforces our downbeat views.''
Stocks Versus Bonds
Consumer shares have risen almost four times as fast as the Standard & Poor's 500 Index in August, sending the S&P 500 Consumer Discretionary Index toward its biggest monthly advance since an 8.9 percent increase in October 2003. A 22 percent drop in oil since its July peak and speculation the Federal Reserve will hold off raising interest rates after seven cuts in the past year improved prospects Americans will spend more. Consumer stocks in the MSCI World Index are up 1.8 percent this month.
Futures on the S&P 500 lost 0.4 percent at 11:14 a.m. in London as oil's climb above $115 a barrel sent retailers lower.
This month's gains in consumer stocks coincided with an increase in the difference between yields of U.S. retailers' bonds and those of government debt to 2.47 percentage points as investors demanded more protection against the likelihood of default, according to data from New York-based Merrill Lynch & Co.
When the gap exceeded 245 basis points in 2000, 2002, 2005 and March of this year, the consumer discretionary gauge lost an average of 16 percent over the same span, the data show. A basis point is equal to 0.01 percentage point.
Shares of Mooresville, North Carolina-based Lowe's, the world's second-largest home-improvement retailer, surged 22 percent this month as the extra yield investors demanded to own the company's 5.6 percent bond due in 2012 widened 23 basis points over U.S. Treasuries.
`Voting With Bondholders'
That's more than three times the average increase of A- rated corporate bonds over the same period, Merrill's data show.
The premium on Wendy's 7 percent bond due in 2025 climbed as much as 33 basis points above U.S. government debt this month, almost triple the gain in spreads of similar BB-rated debt. The Dublin, Ohio-based hamburger chain's stock added 16 percent.
The disparity between the stock and bond markets comes as analysts are forecasting the industry's biggest full-year profit decline since the last recession in 2001. Earnings at S&P 500 consumer-discretionary companies will drop 22.9 percent this year, data compiled by Bloomberg show payday loan.
“I would be inclined to vote with the bondholders,'' said Jack Ablin, who oversees $65 billion as chief investment officer at Harris Private Bank in Chicago. “They're sensing there's still credit deterioration going on in the group.''
Earnings Plummet
Lowe's, Wendy's and Starwood, the White Plains, New York- based company that runs the Westin, St. Regis and W hotels, all reported lower earnings for the second quarter. Industry profits have dropped 54 percent on average, the highest on record for Bloomberg data that started in 2001.
LPL Financial's Jeffrey Kleintop expects consumer stocks will continue to do well as profits decline less than analysts estimate. More than 91 percent of the S&P 500 retailers that have reported second-quarter results so far topped Wall Street's consensus forecast, data compiled by Bloomberg show.
“The outlook isn't rosy, but certainly better than what had been priced into those stocks,'' Kleintop, the Boston-based chief market strategist at LPL, which oversees $273 billion, said in a Bloomberg Television interview.
Fed Rate Cuts
Consumer stocks in the U.S., where the Federal Reserve cut its benchmark interest rate to 2 percent from 5.25 percent in the past year, are outperforming the rest of the world. The MSCI Brazil Consumer Discretionary Index lost 9.8 percent in August, while retailers, automakers and electronics makers in the MSCI Asia Pacific Index fell 2.3 percent.
To maintain the advantage, U.S. retailers will have to defy an unemployment rate that rose to 5.7 percent last month and the fastest inflation in 17 years. The economy, buffeted by the biggest U.S. housing slump since the Great Depression and more than $500 billion in bank losses, may grow 0.45 percent next quarter, or about a third the annual rate of 1.2 percent forecast this quarter, according to data compiled by Bloomberg.
“You only have so many dollars or francs or euros in your pocket,'' said Robert Weissenstein, who helps oversee $1.3 trillion as chief investment officer at Credit Suisse Private Bank. It's difficult to turn bullish “as long as you get mixed to negatively biased jobs data,'' he said from Tucson, Arizona.
Harvard Endowment
Harvard's $34.9 billion endowment, the biggest of any university, sold its holdings in 79 of 92 consumer companies including Lowe's, Wendy's and Starwood, during the second quarter, the Boston-based college fund's filing with the U.S. Securities and Exchange Commission compiled by Bloomberg show.
Appaloosa, the Chatham, New Jersey-based hedge-fund firm run by former Goldman Sachs Group Inc. bond trader David Tepper, held 10.4 percent less in consumer stocks at the end of the second quarter, partly after selling its 175,000 share stake in Starwood, filings compiled by Bloomberg show. Appaloosa, which owned equities valued at $3.1 billion as of June 30 and also invests in bonds, has posted average annual returns of about 25 percent in its Palomino Fund since the beginning of 1995.
“The corporate bond market has sold off first, fastest, and then equities follow after,'' said Standard Life's Milligan. “What the credit markets are telling us is that we need to still be cautious.''
Eddy Hartenstein, a former head of DirecTV, will become publisher of the Los Angeles Times, the newspaper reported Saturday.
Hartenstein, a pioneering satellite television executive with no newspaper experience, will take over Monday. His job will be to invigorate a newspaper that has cut back hundreds of jobs as it struggles with plunging circulation and ad revenue in the Internet age.
Hartenstein will be the fourth Times publisher since the newspaper was acquired in 2000 by the Chicago-based Tribune Co. The post has been vacant since David Hiller resigned July 14, the same day that Tribune began implementing more staff cutbacks.
Hartenstein, 57, said he was approached for the job about a month ago by Tribune chief Sam Zell, who did not demand any more cuts.
"I wanted to know that I would have the ability . . . to call the shots," Hartenstein said Friday.
Zell "basically said ‘You’re the publisher and CEO. It’s yours to run,"’ Hartenstein said.
Hartenstein, a Caltech-educated engineer, is considered one of the founding fathers of satellite television faxless online payday advances. He was working for Hughes Electronics Corp., which was later acquired by General Motors Corp (GM, Fortune 500)., when he began considering the use of satellites to deliver TV programming.
In the 1990s, he persuaded GM to finance a venture that would become DirecTV Group Inc. He became the company’s president and was chairman and CEO from 2001 to 2004.
DirecTV (DTV, Fortune 500) introduced small satellite dishes that could be mounted on practically any roof, wall or balcony, in comparison to the large backyard dishes then in general use by satellite TV subscribers.
Hartenstein went on to serve on the boards of SanDisk Corp., XM Satellite Radio Holdings Inc., Broadcom Corp. and the City of Hope hospital in Duarte.
He was inducted into the Broadcasting and Cable Hall of Fame in 2002 and received an Emmy Award for lifetime achievement from the National Academy of Television Arts and Sciences in 2007.
Oil traders have long been accustomed to reading the tea leaves for clues to the true state of fuel consumption in China, but even the savviest analysts are being tested this year by a befuddling mix of signals.
An unexpected second month of weak crude oil imports reported on Monday gave fresh vigor to the bears, who read it as a signal that refiners had overestimated demand; bulls are still enraptured by surging diesel and gasoline imports, which they say may continue as industries resume operations after the Olympics.
Both could be wrong.
With major new refiners being started toward the end of this year, China’s crude oil import growth should accelerate but its massive products stockpiling will slow, cutting fuel imports.
Between the rapidly shifting trade flows and the lack of transparency around inventory levels, which were built up substantially ahead of the Olympic games this month, traders will be hard pressed to determine whether a U.S.-spawned economic slowdown is finally taking the wind out of China’s sails.
That’s a key question for oil markets that have risen sixfold in as many years, driven in large part by burgeoning Asian demand.
Some closest to the pump say the day has already arrived, nearly two months after Beijing surprised the nation with a near 18 percent rise in subsidized gasoline and diesel prices.
“Demand is definitely coming off after the price hike bad credit payday loans. Among the worst hit is the transportation sector, which had been operating on razor-thin margins even before the increase,” said Qi Fang, a long-time independent dealer who owns a dozen petrol stations in Hebei province, near Beijing.
China’s wholesale inflation in July accelerated to its highest rate in 12 years, adding to the government’s headaches as it tries to rein in surging consumer prices, according to data reported Monday.
The producer price index was up 10% in July over the same month last year, the highest rate since 1996, the Xinhua News Agency said, citing the government’s statistics bureau. The index measures the price of goods as they leave the factory.
Analysts have warned that rising costs for energy and raw materials would push up Chinese wholesale prices, squeezing thin profit margins for companies and adding to pressure for retailers to raise consumer prices. The government is due to announce July consumer inflation on Tuesday.
The July rise in the producer price index, or PPI, exceeded analysts’ expectations and was a sharp jump over June’s 8.8% rate.
"It is perhaps still too early to conclude that PPI growth has peaked," Sherman Chan, an economist for Moody’s Economy.com, said in a report to clients.
"The sharp acceleration in producer price inflation seen in recent months is a concern to policymakers, as this poses a strong upside risk to CPI (consumer price index) growth," Chan said faxless payday loans. "In the next few months, the authorities will likely further tighten monetary policy and impose price curbs to deal with this inflation risk."
Beijing has been trying for a year to control surging consumer inflation. It is trying to raise farm output to bring down food costs and imposed price controls on basic goods. Consumer inflation eased in June to 7.1%, a decline from a peak of 8.7% in February but well above the official target of 4.8% for the year.
The price rises initially were blamed on shortages of grain and pork, but costs for labor, energy and a wide range of goods also are climbing. The government boosted state-set fuel prices in June to curb rising demand, adding to producer costs.
Producer prices for raw materials, fuel and power rose 15.4% in July over the same month last year, up from June’s 13.5% rate, Xinhua said.
Connecticut sued Countrywide Financial Corp. on Wednesday, becoming the latest state to take the mortgage lender to court over its lending practices.
State Attorney General Richard Blumenthal alleges that Countrywide (CFC, Fortune 500) misled borrowers into taking on risky home loans they could not afford. California, Illinois, Florida and the city of San Diego have made similar claims in their own lawsuits against the company.
Countrywide, once the nation’s largest mortgage originator before a jump in bad loans ravished its business, has been blamed for helping to cause the nation’s mortgage meltdown.
The lawsuit was filed in Hartford Superior Court on Wednesday, and the company was served with the legal papers earlier in the day, Blumenthal said.
Blumenthal’s office and Connecticut’s departments of Banking and Consumer Protection are the plaintiffs in the lawsuit. They’re alleging that the company violated state consumer protection and banking laws and charged unjustified fees to homeowners who defaulted.
"Countrywide conned homeowners into mortgages they simply could not afford," Blumenthal said, adding that hundreds, possibly thousands, of Connecticut homeowners were affected.
Countrywide, based in Calabasas, Calif., said in a statement Wednesday that it cannot comment on pending litigation.
But the company noted that it had previously announced its commitment to responsible lending practices, including an effort to keep an estimated 265,000 customers in their homes by modifying at least $40 billion in troubled mortgages.
"We will respond to the AG in due course," the company said, referring to Blumenthal.
Countrywide’s shareholders approved a takeover by Charlotte, N.C.-based Bank of America (BAC, Fortune 500) in June.
"Since taking ownership of Countrywide in July, Bank of America has been involved in a detailed review of Countrywide’s operations," Countrywide’s statement said cash advance now. "Practices that established Bank of America’s positive reputation and record in home lending are an illustration of how we will operate the combined company."
Like Connecticut, the other states suing Countrywide want the company to pay restitution to borrowers who lost their homes or paid excessive fees.
Blumenthal said Wednesday that when homeowners defaulted on their Countrywide loans, the company "bullied" them into repayment plans known as "workouts" with excessive fees that made it nearly impossible for consumers to dig out of the debt.
"Countrywide stacked the deck and the deal against its customers," Blumenthal said. "Our goal is to unstack the deck and undo the deals, restoring fairness and fiscal sense to mortgages."
Countrywide, which faces numerous other lawsuits related to its lending practices, has also been under scrutiny by federal authorities.
A federal grand jury has been investigating Countrywide, New Century Financial Corp. and IndyMac Bancorp Inc. — a sign that prosecutors are looking into whether fraud and other crimes might have contributed to the mortgage crisis that led to the demise of all three California-based lenders.
Washington state Gov. Chris Gregoire also has accused Countrywide of discriminatory and predatory lending practices that targeted minority borrowers, and of cheating Washington state out of $5 million in fees.
That state’s Department of Financial Institutions is seeking to revoke Countrywide’s license and impose a $1 million penalty for predatory lending practices.
French bank Societe Generale SA said Tuesday net profit fell 63% in the second quarter, after its investment banking unit posted a loss.
Net profit dropped to $1 billion in the second quarter from $2.71 billion a year ago, SocGen said in a statement.
Continued turmoil in global financial markets led SocGen’s corporate and investment banking unit to a $290 million loss, compared with a $1.12 billion profit a year earlier, the bank said.
SocGen is still managing the fallout from $7.18 billion hit it took closing what it calls unauthorized positions by former trader Jerome Kerviel cash advance loan. The loss was announced in January but included in the bank’s 2007 results.
France’s second-largest bank has tightened security and changed its top management this year, splitting the posts of CEO and chairman.
CEO Frederic Oudea, promoted from CFO in May, said the second quarter result "reflects the robustness" of the bank’s portfolio of activities, despite what he calls "a crisis on an exceptional scale."
Nissan Motor Co. will soon sell cars that push back when drivers try to put the pedal to the metal.
The Japanese carmaker Monday announced its new "ECO Pedal" system, which makes the gas pedal press upward when it senses motorists are speeding up too quickly.
Nissan (NSANY) said in a press release the system, which will be available next year, can help drivers improve fuel efficiency 5% to 10%.
It calculates the most efficient rate of acceleration in a vehicle based on how fast fuel is being burned and other factors, and causes the gas pedal to push back to alert overzealous drivers no fax payday loans. A special meter on the dashboard flashes and changes colors to help drive the message home.
Nissan says the system is designed to help drivers become more fuel efficient behind the wheel. Part of the company’s strategy for reducing carbon dioxide emissions is modifying driving behavior.
Drivers can also opt to switch the system off.
Marvel Entertainment Inc is expected to post a 26 percent rise in second-quarter profit on the strength of its licensing business, which is expected to benefit from merchandising related to its successful “Iron Man” movie.
Tuesday’s second-quarter report will be the first quarter after the comic-book publisher started releasing its first self-produced films.
But analysts are really tuned to the third and fourth quarters, when most expect Marvel to reap the rewards from its first movie titles, and will be looking for potential outlook comments.
Marvel is expected to possibly increase its outlook for the year and give more clarity about when revenue from its films will be reflected on its income statement.
“The story really is about the film business cheap payday loans. Everything else is the same old Marvel,” Wedbush Morgan Securities analyst Michael Pachter said.
In April, Marvel entered Hollywood film-making with “Iron Man,” its first self-produced film, that had the second-biggest non-sequel box office opening in history.
“Iron Man,” which was distributed by Viacom Inc’s Paramount Pictures, has made $315.7 million in domestic box office so far, according to Box Office Mojo.
The movie was followed by “The Incredible Hulk,” far-less successful, but still expected to bring in a moderate profit.
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