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My OfficeMax Inc. shares have done better lately. What does the future hold?

The No. 3 U.S. office products firm is continuing its cost-cutting efforts in an attempt to improve its profitability and sales in a highly competitive business hampered by the weak economy.

It isn’t, for example, opening any new stores this year. It is increasing the number of private-label products bearing its name to lure shoppers with lower prices while expanding profit margins. About one-fourth of its sales are currently private-label.

It expects sales to decline in the second half due to cutbacks in corporate America, the economy and what is projected to be a lackluster back-to-school season.
Shares are up 31 percent this year following drops of 61 percent last year and 57 percent in 2007. While the company lost $17.7 million in the second quarter, the fact that Wall Street had expected far worse provided a boost to its stock.

OfficeMax sells through a direct sales force, the Internet and catalogs. It has improved its profitability but still lacks the economies of scale of its larger rivals and must compete with numerous retailers that have begun to sell office products.

No. 1 Staples, whose profits were down 33 percent in the past quarter, has more than 1,500 stores and is taking market share away from OfficeMax’s main Chicago sales area. It bought the Dutch office-supply firm Corporate Express NV last year. In comparison, No. 2 Office Depot has more than 1,200 stores and OfficeMax fewer than 1,000.

The consensus recommendation on OfficeMax shares is "hold," according to Thomson Reuters, which consists of one "strong buy," three "buys" and seven "holds."

Yet OfficeMax remains aggressive. It recently signed a multiyear deal that will allow it to use some FedEx Corp. services in about 900 U.S. retail locations. It is offering domestic FedEx Express and ground shipping, while it will accept drop-off packages from FedEx customers at its in-store print and document services center car loans for bad credit.

The company has also forged an alliance with Lyreco, a global distributor of office products in 36 countries, and has a partnership to distribute co-branded office products through 1,600 Safeway grocery stores.

Earnings are expected to decline 75 percent this year compared with a 6 percent gain projected for the office supplies industry. The forecast is for a 50 percent gain next year versus a 13 percent rise industrywide.

Is there any advantage to having my various individual retirement accounts with the same investment firm, or does it make no difference?

It can make things easier having your investments with one firm because you can check them online in the same place and will have fewer statements to contend with.

Too often investors with funds at several firms also own similar funds, just in different places.

You can find an array of choices in most any investment style at larger fund firms. In addition, for mutual funds sold with "loads," or sales charges, there can also be discounts for those who invest certain amounts of money with them.

"You’re picking the investments, so you’re not giving up that control to the investment firm," said Marilyn Capelli Dimitroff, certified financial planner and president of Capelli Financial Services Inc. in Bloomfield Hills, Mich.

"Within your account, however, you want to make sure that you have diversified investments."

Still, there’s nothing that should tie you to keeping investments with one firm if you feel that you can find some better funds at an additional firm and keeping everything together won’t meet your goals.

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Barnes-Jewish Hospital is getting a new leader next month at a time when health care facilities are feeling the pinch of the troubled economy and facing the uncertainties of health care reform.

But Richard Liekweg, who will become president of Barnes-Jewish and Barnes-Jewish West County Hospital on Sept. 14, believes BJC HealthCare is on solid footing and doesn’t anticipate major cutbacks.

However, Liekweg, who is leaving his position as chief executive and associate vice chancellor of the University of California, San Diego Medical Center, is concerned that health care reform may result in lower reimbursements, including those for research and medical education.

Barnes-Jewish Hospital is St. Louis’ largest employer with more than 9,300 employees and a 1,832-member medical staff. It is also the largest hospital in Missouri.

Liekweg will report to Steven Lipstein, president and chief executive of BJC HealthCare, the parent company of Barnes-Jewish Hospital. Liekweg spoke to the Post-Dispatch from San Diego.

The economy has forced many U.S. hospitals to reduce capital expenditures and their work force. Do you foresee any major cutbacks at Barnes?

I’ve been very impressed that BJC is on very sound financial footing. There is significant discipline in the way it’s allocated limited resources. I don’t anticipate a cutback. I think it will be steady as we go as we look toward the future.

What’s occurred in other markets and in other hospitals around the country, in good times they expanded more than they have taken in. That’s not what BJC has done, and that is serving them very well.

Are you expecting growth in certain areas?

The success Barnes-Jewish has had in cancer care will continue to be an opportunity for future growth and development.

Likewise there will probably be opportunities to grow our cardiovascular program as well.

What concerns do you have about health care reform?

We want to make sure that whatever reform looks like in the end that there is access to affordable coverage for all citizens of the country. At the same time, coverage needs to reimburse hospitals fairly for the investments we make in providing access and delivery of first-class care.

I’m confident in the end … that we will find a way to a system that does ensure that access at a reasonable cost and fair reimbursement.

Are there other provisions you would like in a reform package?

Within health care reform, there needs to be funding to support our academic mission. As an academic medical center, we incur extra costs to train the health care providers of tomorrow.

In addition, from a research point of view, we also have responsibility to make sure we provide our faculty with an environment that is innovative and supports clinical trials. … It would be unfortunate if those two pools of dollars were reduced to fund whatever health care reform model takes hold.

Why would you want to leave San Diego for the humidity of St. Louis?

We’re not moving because of the weather, I’ll put that right out on the table. We really are moving because of the opportunity to join a world-class organization, that’s Barnes, BJC and the partnership with Washington University and its School of Medicine.

I really do believe Barnes-Jewish Hospital has the ability to become the top academic medical center in the country.

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It’s that time again.

Home price season.

In the last few days, real estate watchers have been treated to a feast of new numbers, the very latest data on where the housing market is heading.

It comes in a flurry every month about now, reports from the National Association of Realtors, the Federal Housing Finance Agency, something called the S&P Case-Shiller Index, and a host of lesser known outfits like First American CoreLogic, Trulia and Zillow.

And it can be enough to make your head spin.

Tuesday, for instance, Case-Shiller reported that home prices nationwide were up in the second quarter by the most in three years, but they’re still down 14.9 percent from last year. FHFA, however, said prices fell in the second quarter versus the first quarter, but were down just 6.1 percent year-over-year. Earlier this month the National Association of Realtors reported median prices down 15.6 percent from last year, to $174,100.

"There are lots of different indicators," said Richard DeKaser, president of Woodley Park Research in Washington and former chief economist at National City Corp. "And they’re not always in harmony."

These numbers matter because they influence what we think our home is worth, how much we’ll sell for and how much we’ll pay to buy one. And they matter because they’re the closest thing we have to a real-time readout on the housing market, which many say must show signs of life if the broader economy is to recover.

So how will we recognize those signs?

Actually, housing economists say, the various reports will start to look like they’re looking now, with the arrows pointing more or less upward, or at least less down.

"The housing market probably hit bottom this spring and is now in the early stages of a recovery," DeKaser said. "With each month we’ll get more data to either confirm or refute it. I’d say within a couple of months we ought to have a more firm picture."

Still, the reports all say slightly different things. Because they’re all asking slightly different questions.

The Realtors, for instance, track the median price of homes sold by their members nationwide. The median is the point at which half of homes are sold for more, and half for less, and it can be skewed by what’s on the market.

Right now, there’s a lot of homes being sold at bargain prices because of foreclosures, and a lot to first-time home buyers, who tend to spend less. Higher-end homes are moving slowly. Since cheaper homes make up more of the market, they’re pulling that median down — in the St. Louis region it’s off 10.1 percent over the last year.

The FHFA index tries to count repeat sales — how much a home that sold for, say, $250,000 in 2004 would sell for today. But it’s based on data collected from lending giants Fannie Mae and Freddie Mac, and doesn’t count so-called "jumbo loans" — anything above $417,000 in St. Louis. So, experts say, it can underestimate market shifts.

Case-Shiller also measures repeat sales, but it can have the opposite effect, overestimating swings at the high end. That’s because it weights sales by the price of the home. In its formula, a $500,000 house counts significantly more than a $250,000 one. And its 20-city index, which doesn’t include St. Louis, is skewed toward pricier coastal markets.

"In a sense they’re apples and oranges," said Kevin Kliesen, an economist at the Federal Reserve Bank of St. Louis.

Most economists recommend splitting the difference, and tracking other indicators like building permits, inventories of unsold homes and foreclosure rates.

But, real estate agents note, most homeowners don’t have that kind of time, or a Ph.D. in economics. Often, they’ll just catch a headline. Or maybe check out one of the many websites, like Realtor.com or Zillow, that try to estimate what a house is worth.

"That can set a false expectation," said Shawn Kelsey, general manager of the Kelsey Group Realtors in Chesterfield.

Indeed, Kelsey occasionally plugs his Ballwin three-bedroom into a half-dozen of those sites, just to see what they say.

Earlier this month, Realtor.com told him the house was worth $203,252. Home Gain came in nearly twice as high: $402,030. When he compared those numbers to February, three websites said his house had gained value. Three said it had lost.

"Who does the buyer choose to believe?" Kelsey said. "Who does the seller choose to believe?

"Whichever one benefits them the most."

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The Bank of Israel raised the benchmark interest rate by a quarter of a percentage point, the first central bank to lift rates since signs of an easing in the global recession started in the second quarter.

Governor Stanley Fischer increased the lending rate to 0.75 percent, the Jerusalem-based central bank said Monday, after keeping it at a record low since March. Two of 12 economists surveyed by Bloomberg forecast the increase, while the rest expected Fischer to hold the rate steady.

The decision "strikes a balance between the need to moderate inflation and the need to continue to support the recent recovery in economic activity," the bank said. "Setting the interest rate at the low level of 0.75 percent continues to represent an expansionary monetary policy."

Fischer has been backing away from economic stimulus measures since July 27, after the inflation rate slid into the target range for only one month before rebounding back out. The Israeli, French, German and Japanese economies all returned to growth in the second quarter, prompting Fischer to say on Friday at a meeting of bank governors at Jackson Hole, Wyo., that "the first signs of global growth have appeared."

"You can read this as the first hike in the recovery cycle," said Shahin Vallee, an emerging-markets currency strategist at BNP Paribas SA in London. "Poland could be next."

Israel posted inflation rates of 3.5 percent in July and 3.6 percent in June, above the 1 percent to 3 percent target range.

"We have a picture of economic recovery right now, which you see elsewhere in the world," said Jonathan Katz, an economist at HSBC Securities who predicted the increase. At the same time, "Israel is one of the few countries in the world where inflation is running above target at three and half percent, and Fischer’s mandate is to try and bring it down between 1 and 3 percent."

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If Air Canada has its way, it soon will see fewer travellers lined up at the airport, clutching printouts of their boarding passes, in addition to suitcases and carry-on luggage.

The country’s largest airline yesterday introduced an application for the Apple Inc. iPhone and iPod Touch devices that lets travellers retrieve electronic boarding passes, track flight data and receive notifications about delayed and cancelled flights.

An application designed for BlackBerry devices is also in the works, said Patrice Ouellette, director of customer service platforms.

Ouellette said web check-in is increasingly popular but only a fraction of passengers check in with mobile devices to have an electronic boarding pass emailed to them.

The problem now is those emailed barcodes can get lost in a mountain of other correspondence; the iPhone and iPod application, by contrast, consolidates all of Air Canada’s flight data in one place.

Also, the airline is expanding programs that allow passengers to print baggage tags from airport kiosks. Research suggests that could shave 15 to 30 minutes off the time air passengers spend in lineups.

"To be honest, I wasn’t sure if it would be picked up or not by the customer," Ouellette said of self-tagging. But the practice is catching on – about 90,000 people tagged their own bags last week – a number he expects will rise once the service expands from Toronto, Montreal and Vancouver to major airports across the country.

Such do-it-yourself approaches promise eventually to reduce relatively high costs for the money-losing airline, but for now, Ouellette said the focus is on increasing customer convenience.

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The Internal Revenue Service wants radio personality McGraw Milhaven to pay a $500,000 fine. His offense: avoiding less than $1,000 in taxes.

Milhaven, the morning show host on KTRS, has been caught up in the government’s war against abusive tax shelters. He, and others in the same position, say the IRS is levying giant fines meant to punish millionaires and big corporations on people who aren’t rich and didn’t intend to break the law.

"I don’t have it. I could sell everything I own, and I doubt that I’m worth $500,000. It depends on how much I could get for my Sandy Koufax signed baseball," said Milhaven, 42.

Milhaven has been a fixture on St. Louis radio for a decade and formerly worked at KMOX. He revealed his tax problems on his KTRS show this week. "I’m being persecuted," he adds.

The IRS publishes a list of suspected tax shelters. A taxpayer with such a shelter, or something "substantially similar," must report it at tax time. If not, the tax law makes big fines almost automatic: $200,000 per year for a corporation and $100,000 per year for an individual.

It doesn’t matter how much money was sheltered or whether the taxpayer knew about the IRS list.

Milhaven says he had no idea the IRS frowned on his tax maneuver. "My accountant tells me it’s legal," he said. "I wasn’t taking a midnight flight to the Cayman Islands."

An IRS spokesman declined to comment, saying the agency can’t comment on an individual taxpayer’s situation.

Milhaven says his trouble began when his accountant, Douglas Mueller of MPP&W PC, recommended a way to lessen his taxes. The plan went like this:

Milhaven would create a corporation. Into that corporation would go the money he makes from speeches, appearances and endorsements outside of his KTRS pay.

He would also open a Roth Individual Retirement Account. Money in a Roth IRA can grow tax free, and its owner can spend it without penalty once he turns 59 1/2. That makes it a popular — and legal — way to avoid taxes. However, a taxpayer Milhaven’s age can only contribute $5,000 a year to a Roth.

Milhaven’s IRA would invest in Milhaven’s corporation. The corporation could then pay out its profits into the IRA, avoiding the $5,000 contribution limit.

The IRS has been going after Roth IRA tax shelters since at least 2003, when the Grant Thornton accounting firm in Kansas City drew the tax agency’s ire over shelters marketed to its clients get a free credit report. That year, the agency added to its prohibited list the practice of using a Roth to invest in a taxpayer-owned company unless the Roth pays a fair price.

In papers given to Milhaven, the IRS argues that his shelter violated that warning. The tax agency proposed $400,000 in fines for Milhaven’s corporation, and $100,000 against Milhaven himself. The case is now in the IRS appeals process.

Cases like this have been popping up around the country, said Alex Brucker, an employee benefits lawyer and director of the Small Business Council of America, which is campaigning to change the law.

There are roughly one thousand cases involving the Roth IRA scheme and other tax shelters that fall under the severe penalties, he estimates.

"Of course it’s not fair," Brucker said. "The penalty is disproportionate to the crime."

Last month, the Los Angeles Times reported that the owners of a local commercial printer faced $1.3 million in penalties for a tax-shelter scheme that helped them avoid only $8,385 in taxes.

The large fines were designed to punish big corporations and major tax cheats, not small fries like Milhaven, Brucker said.

Sen. Ben Nelson, D-Nebraska, has proposed a bill that would let the IRS lower the fines if a taxpayer had an acceptable excuse and make fines proportionate to the amount of taxes evaded.

Others are less sympathetic. "The IRS is especially looking at Roths because they are a breeding ground for hanky panky," says Ed Slott, a certified public accountant and publisher of Irahelp.com. "Once money is in a Roth it’s tax-free forever, so people find all kinds of schemes and scams to put money in Roths."

Milhaven says his tax shelter, which was created in 2004, never really worked. After a couple of years, his accountant discovered that one of Milhaven’s largest employers was making out checks to Milhaven, not his new corporation. So, Milhaven dismantled the corporation and filed in 2007 amended tax returns — in effect reversing the whole effort — before the IRS learned of it.

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Koenigsegg Automotive AB, the Swedish maker of $1.2 million sports cars, agreed to buy Saab Automobile from General Motors Co. by the end of the year to become a mass-market manufacturer.

Completion of Saab’s sale to Koenigsegg and investment partners is tied to the unit getting funding from the European Investment Bank backed by Swedish state guarantees, as well as transitional assistance from Detroit-based GM, the U.S. automaker said Tuesday. Sweden said the transaction still requires "several steps" before winning its backing car insurance quotes.

Koenigsegg still must secure about $300 million in funding to complete Saab’s purchase, two people familiar with the situation said Monday. Sweden’s government has reaffirmed a commitment to guarantee the proposed $600 million EIB loan, while Koenigsegg and GM together would contribute about $500 million in capital, one of the people said.

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The U.S. Federal Reserve moved on Monday to boost credit to the ailing market for commercial real estate by extending to mid-2010 an emergency lending program.

The step is seen as crucial by the industry since lending on office, retail and apartment buildings has been chilled since the onset of the credit crunch in 2007, and as the recession curbs revenue. The sector has hurt bank earnings, and is seen by Fed officials as a danger to economic recovery if borrowers with maturing loans find no other outlet than default.

The Fed said its Term Asset-Backed Securities Loan Facility (TALF) for newly issued commercial mortgage-backed securities, a program that has yet to get off the ground, will be extended to June 30, 2010 from December 31

Also extended through March 31, 2010 are TALF programs credited for lowering borrowing costs on new securities backed by auto, credit card, and small business loans. The three-month extension includes TALF for existing CMBS.

“It seems to me that the Fed realizes that this program has had a positive impact on the markets and also that the markets are not yet healthy enough to walk on their own at this point,” said Scott Buchta, a strategist who follows ABS and CMBS at Guggenheim Capital Markets in Chicago.

While financial conditions have improved recently, markets for ABS backed by consumer and business loans and for CMBS are still under strain and seem likely to remain so for some time, the Fed and Treasury said in a joint statement.

Under TALF, investors apply for non-recourse loans whose proceeds are earmarked for designated securities. The Fed has lent $41 billion for ABS over six months, and $669 million for legacy CMBS in one round. There have been no new CMBS issues but Developers Diversified Realty in June told Reuters it was working on issues worth about $550 million.

Increased demand for ABS using Fed financing has pushed yields so low that that investors are increasingly buying bonds independent of the federal program paydayloan.

Buying of CMBS has halved risk premiums on CMBS since March, but yields have risen in the past week as investors balked at low returns amid a deteriorating real estate picture. Renewed selling may have surprised dealers who bought CMBS in anticipation that the Treasury’s toxic asset clean-up plan would spark demand, said Chris Sullivan, chief investment officer at the United Nations Federal Credit Union in New York.

Michael Feroli, an economist at JPMorgan Chase & Co., in a research note said the extension for new issue CMBS was likely short of some expectations.

Risk premiums on an index of AAA rated CMBS rose about 0.28 percentage point on Monday to near 4 percentage points above a benchmark interest rate. The premium earlier this month dipped to near 3 percentage points, from nearly 8 points in March.

The issuance window for new issue CMBS was extended to June since those deals take more time to arrange, the Fed said. Five or six issues from real estate investment trusts are expected, said Brian Lancaster, head of mortgage and other asset-backed strategy at RBS Securities in Stamford, Connecticut.

“It’s encouraging (for CMBS) but we are not quite there,” Lancaster said.

Lenders are reluctant to refinance billions of dollars in loans made under easy terms and aggressive expectations that rents and property values would rise. But revenues are falling and prices nationally are now off 35 percent since October 2007, forcing borrowers to either put more equity in their properties or plead for extensions of current loan terms.

General Growth Properties Inc, the second largest U.S, mall-owner, in April blamed its bankruptcy on investors of its loans in CMBS. 

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Pickups, SUVs and passenger cars that have been orphaned under the federal government’s cash for clunkers program have started to trickle in to St. Louis-area auto salvage yards.

And operators are preparing for a bigger wave of castoffs.

"We are actually getting an influx of cars," said Joe Heiman, president of Al’s Foreign Auto Salvage and Sales in Pagedale,

While the cash for clunkers program will send thousands of used cars to salvage and recycling operators, visions of huge profits for such companies are being kept in check.

Some vehicles will yield usable parts, but others will fetch only what someone will pay for scrap metal.

For salvage companies, clunkers have limited value compared to vehicles from other sources. The engines in clunkers must be disabled almost immediately — a process that involves replacing the engine oil with a sodium silicate solution and running the engine until it seizes.

The car itself must be crushed within six months, then shredded.

Those vehicles going directly to scrap generate little cash, however, likely $100 to $125 per unit, Heiman said.

Steel mills are paying about $245 to $250 a ton for recycled car metals, said Bruce Savage, vice president of communications for the Institute of Scrap Recycling Industries. Last summer, the metals were going for about $550 a ton.

"The question is: Is there domestic demand for these materials?" Savage said.

Under cash for clunkers, tens of thousands of American motorists have traded in their cars for vehicles promising better gas mileage. Qualifying car owners can receive a credit worth up to $4,500 toward the purchase or lease of a new car.

The program proved so popular that Congress stepped in to authorize another $2 billion after the original $1 billion fund began to run dry two weeks ago. By Thursday morning, dealers had submitted 338,659 transactions with a combined value of $1.4 billion, according to the National Highway Traffic Safety Administration.

There is currently a backlog of vehicles that dealers are holding on to until they are sure they are getting paid for them, said Jan Daniels, contract vehicle purchasing manager for Pick-N-Pull Auto Dismantlers, which is based in Rancho Cordova, Calif payday loan lenders., and has a facility in St. Louis.

"The mass volume of the cars coming to our facilities hasn’t happened yet, but we are anticipating that the numbers should pick up," said Michael Wilson, executive vice president of the Automotive Recyclers Association.

Under the program rules, dealers have to turn the cars over to a salvage yard or to a scrap processor. Vehicles can be sent to salvage pool auctions, but ultimately must end up with a recycler.

"These are all cash for clunkers here," Heiman said recently, as he approached a batch of cars on his 4 1/2-acre lot. "We’re scrapping them as fast as we can, pulling the converter, the gas tanks (and draining) the transmission fluid."

Al’s has received about 35 clunkers from local auto dealers with an additional 70 to 80 promised. Heiman said the clunker program helped him branch into the sale of domestic car parts. Without clunkers, he would have had to pay more for the domestic vehicles he is now getting from dealers.

Salvage operators say they have been struck by the quality of some so-called clunkers.

Under the federal program, the cars must get less than 18 miles per gallon combined city and highway, must be drivable and must have been owned and insured by the same person for the previous year.

"We somewhat expected more beat-up vehicles. Rusty vehicles. Older vehicles. The term ‘clunker’ brings an image to mind," said Brad Schwartz, president of Liberty Auto Parts & Salvage in St. Louis whose clunker inventory included a Pontiac Trans Am with a T-top and even a 1990s Jaguar.

"Clunker is the wrong word to use to describe a number of these vehicles."

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U.S. mortgage rates rose in the latest week as Treasury yields climbed, according to a survey released on Thursday, a move that may dampen home loan demand.

Interest rates on U.S. 30-year fixed-rate mortgages averaged 5.29 percent for the week ending August 13, up from the previous week’s 5.22 percent, said a survey released by home funding company Freddie Mac.

Mortgage rates remained above 5 percent for an eleventh straight week. Experts say mortgage rates at 5 percent and below are what is necessary to make a significant impact on home loan demand.

Higher rates have dampened demand for home loan refinancing, a reversal from earlier this year when rates below 5 percent caused refinancing activity to surge.

The mortgage rate was significantly higher than the record low of 4.78 percent set the week ended April 2. Freddie Mac started the Primary Mortgage Market Survey in 1971.

Home buying demand, however, is not as sensitive to changes in rates as in refinancing activity.

David Adamo, CEO of Luxury Mortgage in Stamford, Connecticut, said the overriding driver of the housing market at this point is confidence and not interest rates on mortgages.

“Once the general psychology of the market place returns to normal we will see the purchase activity substantially improve which will restore our housing market and overall economy,” he said.

Treasury yields, which are linked to mortgage rates, have risen recently, with mortgage rates responding in kind fast cash loans.

“Long-term, fixed-rate mortgage rates rose slightly over the past week while initial rates on adjustable-rate mortgages (ARMs) were little changed,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

The rise in rates is a negative for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.

In fact, home prices in some regions have risen.

Thirty-year mortgage rates had been on a downward trend for most of this year after the Federal Reserve unveiled its plan to buy mortgage-backed debt in late November. But the Fed met resistance in the bond market in recent months.

The U.S. government has embarked on an aggressive plan to bring mortgage rates down to levels that will spur demand and help the hard-hit housing market begin to recover.

The Federal Reserve has set a goal to buy up to $1.25 trillion of agency MBS, $300 billion of Treasuries and $200 billion of agency debt in 2009. The purchases are more than half-way completed and are part of efforts to lower borrowing costs. 

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