Robert Cartwright drives a company car. He has a laptop, iPhone and video camera paid for by this employer, and rarely spends time in the Bridgeton headquarters of Vantage Credit Union.
Instead, Cartwright is often online where he chats with
Even by Pentagon standards, it’s an eye-popping prize: a $35 billion contract to build nearly 200 giant airborne refueling tankers. And the decade-long brawl by two defense industry titans to win it has been just as epic.
In a matter of weeks
Shanghai, China’s financial center, will this year prepare for a trial property tax, becoming one of the first cities in the nation to introduce the measure aimed at curbing “speculative” investment.
Mayor Han Zheng announced the move in a speech to the Municipal People’s Congress yesterday, without giving details of how much the tax would be or when it would be implemented. Shanghai and southwestern Chongqing are the two cities that will begin trials of a property tax, according to a Jan. 10 report by Nomura Holdings Inc., which expects China to selectively introduce a tax rate of about 0.8 percent.
“We will step up macro-control measures, prioritize the supply of non-luxury residential units to be owned and occupied by ordinary citizens, and prepare for the trial reform on property tax as required by the central government,” Han said.
China has pledged to speed up property tax trials to rein in surging prices that have made housing too expensive for an increasing proportion of the population. Premier Wen Jiabao said on Dec. 26 that measures control housing costs weren’t well implemented and that he would introduce more policies to crack down on speculation. China has tightened rules on down payments, suspended mortgages for third homes last year.
“A property tax will definitely come but it’s not the best way to control prices,” Fu Qi, an analyst at China Real Estate Information Corp, said. “One of the major challenges in curbing prices is that incomes are on the rise and people have nowhere to invest their money.”
Shanghai will begin building 220,000 units of subsidized housing as it pushes plans to create affordable homes, Han said in a report to the congress in Shanghai. The municipality aims to add 1 million units of subsidized housing from this year to 2015, he said.
Ordinary Citizens
Shanghai and Chongqing are expected to be the first cities to roll out property taxes in China, according to the official Xinhua News Agency and Shanghai Securities Newspaper in reports on Jan. 10. Shanghai may introduce a tax on new homes in the first quarter while the southwestern city of Chongqing may impose a luxury-property tax at the same time, they reported.
Beijing won’t join the property tax trial, the Beijing News reported today, citing Deputy Mayor Ji Lin. The Chinese capital will try to finish 100,000 units of subsidized housing this year, acting “firmly” to curb rising property prices, Xinhua said, citing Mayor Guo Jinlong.
Price Jump
Home prices in Shanghai jumped 26.1 percent in 2010 and those in Chongqing surged 29.4 percent, according to Soufun Holdings Ltd., the country’s biggest real estate website owner.
The property tax for Shanghai this year will have a minimal impact because the levy is expected to be low, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc., the world’s second-biggest publicly traded commercial-property broker. He estimates China’s home prices will rise 5 percent to 7 percent this year.
The Century Weekly magazine reported earlier this month that the tax may be delayed following disputes between government departments.
Chongqing plans to introduce the tax for both new and existing homes, Mayor Huang Qifan said in an interview with state television CCTV aired on Jan. 12, without providing further details.
Shanghai’s property tax plan is “different” from that in Chongqing, the China Business News reported today, citing Liu Haisheng, director of Shanghai’s Housing Guarantee and Administration Bureau. The city has submitted the draft for property tax to the relevant government department, the report cited Liu as saying.
–Stephanie Wong and Bonnie Cao, with assistance from Tian Ying in Beijing. Editors: Neil Western, Paul Tighe.
To contact Bloomberg News staff for this story: Bloomberg News at +86-21-6104-3042 or swong139@bloomberg.net
The government and AIG, the giant insurer rescued with $182 billion at the depths of the 2008 financial meltdown, announced a plan Friday to end taxpayer involvement in the company over the next two years.
As part of the plan, AIG paid back its $21 billion outstanding balance to the New York branch of the Federal Reserve. The Treasury Department will now own a 92 percent stake in the company and begin unloading stock on the open market in March.
“Treasury remains optimistic that taxpayers will get back every dollar of their investment in AIG,” Treasury Secretary Timothy Geithner said in a statement.
In a separate statement, AIG President and CEO Robert H. Benmosche said: “Today, AIG, with the support of countless people, has accomplished a huge goal that many people once thought impossible: completely repaying the Federal Reserve Bank of New York.”
The rescue package for American International Group Inc., which included loans and guarantees, was the largest of any U.S. company that accepted government help during the September 2008 financial crisis.
At the time, federal officials worried that a collapse of AIG, which worked with hundreds of financial institutions around the world, would be a death blow to already fragile credit markets and potentially bring down the financial system itself.
The insurer became a touchstone for public outrage over excessive risk on Wall Street.
Under the plan announced Friday, the government will sell its stock over two years as market conditions allow.
The government holds roughly 1.67 billion shares of AIG now. Those shares were handed over to taxpayers at a value of just less than $30 apiece and were trading Friday at about $54.
The two-year unwinding of the federal stake in the company is similar to an arrangement to end government involvement in Citigroup and in General Motors, which returned to the stock market this year after going through bankruptcy.
AIG’s repayment plan is being paid for with proceeds from a series of asset sales. On Thursday it agreed to sell its nearly full ownership in the third-largest insurance company in Taiwan for about $2.2 billion.
Last year, it sold an Asia-based life insurer to Britain’s Prudential PLC for $35.5 billion.
U.S. health-insurance costs are rising more quickly than the ability of U.S. families to pay and the gap is widening, according to the Commonwealth Fund.
The CHART OF THE DAY shows that private-insurance premiums for families rose three times faster than median household income over six years, the New York-based non-profit fund said in a report. Deductibles, the amount that policy holders have to pay before insurance coverage kicks in, rose almost five times faster, the fund said.
“Families are being priced out of the market,” said Cathy Schoen, an economist with the fund, in an interview. “The consequences are less adequate insurance coverage, costlier insurance coverage, higher rates of no coverage and growing stress on the family.”
In 15 states, health-insurance premiums are the equivalent of at least 20 percent of median household income for people under 65, according to the report payday loan lenders in states. The data comes from the government’s Medical Expenditure Panel Survey.
The proportion of U.S. gross domestic product devoted to health care doubled to 18 percent between 1980 and 2009, Schoen said. The federal Patient Protection and Affordable Care Act, passed this year, has the potential to benefit families by reducing pressure on wages and spending, she said.
“Holding onto health insurance is a very expensive proposition,” she said. “The rapid increase has pulled resources out of the economy.”
Hundreds of travelers in Europe got their own special Christmas present _ an actual plane flight Saturday after spending the night curled up on hard airport floors in Brussels and Paris.
Air traffic returned to nearly normal Saturday at Paris’ main airport, where hundreds were stuck overnight and personnel handed out Christmas puppets and chocolates to stranded families.
Snowfall and severe shortages of deicing fluid meant hundreds of flights were canceled at Paris’ Charles de Gaulle airport and other European airports Friday. But sunny skies and two shipments of deicing fluid from the United States helped Charles de Gaulle rebound.
“There were a couple of people screaming and shouting and fighting, but we all handle stress and problems differently,” said Gigi Zagora, a 27-year-old from Johannesburg, South Africa, stuck overnight at the Paris airport. “(I sought a) certain type of peace to say, `OK, well, there is nothing I can do.’”
Flight screens showed only a few delays Christmas Day in Paris. Children who slept in terminals overnight clutched their new puppets and with other weary travelers eagerly lined up to board.
In Brussels, about 500 stranded passengers spent Christmas Eve at the airport after 10 inches (25 centimeters) of snow fell early Friday, the heaviest snowstorm in the Belgian capital since 1964.
“I’ve never had such Christmas before,” said Ron Van Kooe, who slept in the terminal payday loans lenders. “It’s one not to forget, actually. But also a lesson for the future to never book a flight on this date.”
A Brussels airport spokesman said all stranded passengers should be gone by Saturday afternoon.
In Germany, the situation in the skies and on the rails improved Saturday, after Duesseldorf airport was closed for several hours Friday and many trains saw delays.
France’s top transport officials went to the airport Friday and Saturday to try to calm tensions and defuse criticism that Paris was not well prepared enough for the wintry weather.
In Paris’ Charles de Gaulle overnight, parents covered babies on cots with airport-issued blankets and jackets. The airport turned up the heat and installed all-night police and ambulance patrols for the unusual holiday vigil.
Unusually large amounts of snow in some western European cities have caused sweeping shutdowns and delays. London and Paris, not as accustomed to flying planes in below-freezing temperatures, buckled under the snow.
Shortages of deicing fluid hit airports in Ireland and Belgium as well, leading to a domino effect of delays around the continent.
Americans increased spending in November for a fifth straight month and companies stepped up orders for equipment, more evidence the U.S. economy is gaining momentum heading into 2011.
Household purchases rose 0.4 percent after a 0.7 percent increase in October that was almost twice as large as previously estimated, figures from the Commerce Department showed today in Washington. The agency also reported a 2.6 percent gain in bookings for capital goods like computers and electronics.
Rising incomes and stock prices are giving consumers the wherewithal to boost the purchases that account for 70 percent of the world’s largest economy, improving earnings prospects for companies including Bed Bath & Beyond Inc. A drop in claims for jobless benefits reported today indicates employers are slowing the pace of firings, a step toward cutting unemployment from close to a 26-year high.
“The recovery is moving into higher gear,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “The unemployment rate will gradually come down, which in turn should reduce the downward pressure on inflation.”
First-time filings for jobless insurance declined by 3,000 to 420,000 in the week ended Dec. 18, matching the median forecast in a Bloomberg News survey, according to Labor Department figures released today.
Confidence Climbs
Another report today showed a measure of consumer confidence climbed to a six-month high in December. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 74.5, matching the median estimate in a Bloomberg survey, from 71.6 in November. The preliminary December reading was 74.2.
Stocks fell after a five-day rally sent the Standard & Poor’s 500 Index to a two-year high yesterday. The index fell 0.2 percent to 1,256.77 at the 4 p.m. close in New York. It has climbed 13 percent this year on prospects for economic growth. Treasury securities fell, sending the yield on the benchmark 10- year note up to 3.39 percent from 3.35 percent late yesterday.
Today’s reports add to a run of better-than-forecast data that have prompted economists to raise their estimates for economic growth. Retail sales increased more than forecast in November, the trade deficit shrank as exports jumped to a two- year high in October, and regional as well as nationwide figures showed factories are ramping up production.
Raising Forecasts
Economists at Morgan Stanley in New York today raised their tracking estimate for consumer spending this quarter to 4.1 percent from 3.5 percent. They project the economy will expand at a 4.5 percent pace in the October-December period, up from a prior estimate of 4.3 percent.
The extension of Bush-era income-tax cuts for two years, a reduction in the payroll tax next year and the Federal Reserve’s plan to buy $600 billion of Treasury securities are adding to the optimism.
Housing remains a weak spot for the economy as an overhang of unsold properties weighs on the market. Purchases of existing homes increased 5.5 percent to a 290,000 annual rate from a 275,000 pace in October that was slower than previously estimated, the Commerce Department said today. The median forecast of economists surveyed by Bloomberg projected a 300,000 pace.
“While the economic environment appears to have stabilized and is perhaps improving, it looks as if the consumer continues to face challenges resulting from the macroeconomic environment such as historically high unemployment rates,” Leonard Feinstein, co-chairman of Bed Bath & Beyond, said on a conference call yesterday.
Earnings Forecast
Union, New Jersey-based Bed Bath & Beyond yesterday increased its fiscal year earnings forecast to as much as $2.90 a share from a previous forecast of as much as $2.76.
Economists forecast consumer spending would rise 0.5 percent, according to the median of 75 projections in a Bloomberg survey. Estimates ranged from increases of 0.1 percent to 0.8 percent. The revisions made October’s gain in spending the biggest since August 2009.
Inflation remained below the Fed’s comfort zone. The central bank’s preferred price measure, which excludes food and fuel, rose 0.1 percent from the prior month and was up 0.8 percent from a year earlier, matching October’s 12-month gain as the smallest on record.
The economy grew at a 2.6 percent annual pace in the third quarter, the government reported yesterday. Consumer spending rose at a 2.4 percent pace, the fastest since the first three months of 2007.
Unemployment Rate
Growth hasn’t been fast enough to bring down the unemployment rate, which rose last month to 9.8 percent. Fed policy makers last week maintained their program to buy up to an additional $600 billion in Treasury securities through June to try to bolster the economy and support prices.
“Consumer spending has moved into a period of healthy growth and we do think even if we don’t maintain the extremely strong fourth quarter pace consumer spending will grow solidly into 2011,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York.
Today’s durable goods report from the Commerce Department showed that total orders dropped 1.3 percent, depressed by volatile demand for aircraft, and bookings excluding transportation equipment rose more than forecast.
Capital spending has been a source of strength for the world’s largest economy at the same time that household purchases are starting to accelerate. Manufacturing, the industry that helped pull the U.S. out of the worst recession since the 1930s, has been resilient throughout the recovery, bolstered in part by overseas demand for American-made goods.
Higher Profits
Some manufacturers are projecting higher profits as orders increase. Joy Global Inc., the maker of P&H and Joy mining equipment, last week announced a fiscal 2011 profit forecast that topped analysts’ estimates in a Bloomberg survey.
“The improving bookings rate supports our view that our mining customers will continue to increase their capital expenditure plans,” Mike Sutherlin, chief executive officer of the Milwaukee-based company, said in a Dec. 15 statement. “We continue to ramp up our production to meet this expected growth in demand.”
China’s property prices rose at the slowest pace in a year in November after the government raised the reserve-ratio requirement for banks twice and expanded measures to limit the risk of asset bubbles.
Home prices in 70 cities climbed 7.7 percent from a year earlier and increased 0.3 percent from October, the statistics bureau said on its website today. The year-on-year advance was slower than the 8.6 percent gain in October and the 8 percent median estimate in a Bloomberg survey of seven economists. Sales volume increased 14.5 percent from a year earlier and transaction values surged 18.6 percent, the report said.
“Beijing will be pleased that house price inflation is continuing to ease,” said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. “But the pick-up in volumes suggest that conditions are still buoyant in the property sector and that more policy measures are required.”
An index of real-estate stocks was the only group that fell among the five of the benchmark Shanghai Composite Index, showing China’s measures including suspending mortgages for third-home buyers and pledging to speed up trials of property taxes nationwide might not be enough. The central bank raised interest rates in October for the first time in three years on concerns of inflation and increases in asset prices.
The index tracking 34 listed property companies dropped 0.1 percent at the 3 p.m. local time close, while the benchmark rose 1.1 percent. China Vanke Co., the country’s biggest public traded developer, lost 0.9 percent in Shenzhen, while rival Poly Real Estate Group Co. slipped 0.5 percent in Shanghai.
‘Further Tightening’
“It will take more time for the effect to be more obvious,” said Sun Mingchun, chief economist at Daiwa Securities Capital Markets in Hong Kong, who expects prices to fall within a 10 percent range next year. “Clearly there are further tightening policies in the pipeline.”
China’s sales volume climbed to 101.1 million square meters (1.09 billion square feet), the most in 11 months, based on Bloomberg calculations of data from the statistics bureau.
Home price growth has slowed for a seventh month since the peak in April, when property values climbed 12.8 percent, a record based on data that goes back to 2005. The 0.3 percent gain in prices from October extends a 0.2 percent advance last month and a 0.5 percent increase in September.
The month-on-month data “is more relevant and appears quite modest,” said Nicole Wong, a Hong Kong-based analyst at CLSA Asia Pacific Markets. The 0.3 percent gain implies a 3.6 percent annual increase, which is lower than inflation, she said. China’s consumer prices climbed 4.4 percent in October.
Beijing, Shanghai Prices
Beijing’s property prices rose 0.2 percent from the previous month, Shanghai added 0.1 percent and those in Yueyang, a medium-sized city in central China, climbed 2 percent. Only six out of the 70 major cities monitored by the government posted a drop in property prices.
Sales volume rose 9 percent in November from October, while transaction values gained 4.1 percent, the government said. In October, volume declined 11 percent and values dropped 7.7 percent drop from September.
China’s property investment rose 36.7 percent to 462.8 billion yuan ($69 billion) in November from a year earlier, and increased 36.5 percent for the first 11 months of the year to 4.27 trillion yuan.
About 35 Chinese large and medium-sized cities are overpriced by an average of 29.5 percent, the Chinese Academy of Social Sciences, the country’s top think tank, said in a report released Dec. 8. Seven cities, including the eastern city of Hangzhou near Shanghai, are facing housing bubbles where homes are 50 percent above their assessed values, the report said.
‘Disorderly Fall’
China should raise interest rates further and impose a property tax to curb the risk of asset bubbles and a “disorderly fall” in home prices, according to a study by the International Monetary Fund in a working paper this month. Existing measures “at best only treat the symptoms of high residential real-estate inflation and not the underlying structural causes,” it said.
Today’s numbers came after private data indicated strength in sales in November. SouFun Holdings Ltd., the country’s biggest real-estate website owner, said home prices in 100 cities it monitors advanced 0.8 percent in November from October, gaining for a second month even as the central bank raised rates.
Rising Sales
China Vanke said last week its annual revenue reached 100.1 billion yuan as of Dec. 1, reaching a target it had set for 2014, after its November sales more than doubled from the same period in 2009. Agile Property Holdings Ltd., a Guangdong-based developer, said it met the year’s sales target by November after a 64 percent increase last month from the same time 2009.
“The total sales targets were met, but these developers may have been relying on growth of smaller cities rather than the large cities,” said Fu Qi, an analyst at China Real Estate Information Corp., which provides property data and consulting services, before today’s release. “The government is trying to control the home prices, but they certainly don’t want to see the death of developers.”
Home prices have risen for 18 straight months even as gains slowed. That helped to draw more investors to real estate compared with other investments, said Liu Li-Gang, a Hong Kong- based economist at Australia & New Zealand Banking Group Ltd.
‘Still Attractive’
“The return for property purchases is still attractive, compared with bank deposits rates and yields of long-term government bonds,” Liu said.
China’s inflation accelerated to the fastest pace in two years in October and the 4.4 percent increase in consumer prices exceeds the one-year bank deposit rate of 2.5 percent and the yield on China’s benchmark 10-year bonds, which reached 4.02 percent on Nov. 29, the highest level since September 2008.
The nation’s property market was given a stable outlook in a Nov. 30 report by Moody’s Investors Service, which expects developers to withstand a “moderate downward correction” in prices in the next year following government curbs.
China leaders including President Hu Jintao will decide on 2011 policies in a three-day meeting starting today to rein in inflation without hobbling expansion for the world’s fastest- growing major economy.
China ordered banks to set aside larger reserves twice last month. The reserve ratio requirement will climb to 18 percent for the nation’s biggest banks, according to Bloomberg data based on central bank statements.
–Bonnie Cao, Huang Zhe. With assistance from Li Yanping in Beijing. Editors: Linus Chua, Malcolm Scott.
To contact Bloomberg News staff for this story: Bonnie Cao in Beijing at +86-21-6104-3035 or bcao4@bloomberg.net
A top Federal Reserve official defended the Fed’s controversial bond-buying program on Tuesday, saying it could be years before pulling back easy money policies is warranted.
“This exit could be years away,” New York Federal Reserve President William Dudley said an interview on CNBC. A transcript of the interview was made public.
Dudley cautioned that it will take months of adding 200,000 to 300,000 jobs to foster a meaningful recovery, and said the Fed’s program to buy $600 billion in longer-term Treasuries is unlikely to generate a spurt of growth.
“Modest effect. It’s not a fantasy. It’s not a magic wand,” he said.
“It’s going to make the economy grow a little bit faster. It’s going to generate a little bit more employment growth. But you know, we have a long bumpy road to travel,” Dudley said.
Criticism has rained down on the Fed internationally and domestically since it announced it the program. Among those taking issue are international trading partners of the United States who have said that the weaker dollar hurts growth elsewhere by weakening their exports.
Dudley, a permanent voter on the Fed’s policy setting panel, said the U.S. central bank’s sole aim is to stimulate growth in the United States, not to devalue the currency at the expense of other economies around the world.
“What we’re doing is actually in their long-term interests,” he said. The sooner the United States recovers fully, the more quickly monetary policy authorities can pull back from extraordinary policies, he added.
“The goal of our policy is a very simple one, to ease financial conditions,” Dudley said. “We’re not trying to push the dollar to any particular level.”
Powered by WordPress