Money world

As investors exchange their beach wear for business suits at the end of summer every year, they usually prepare for a rally in technology stocks in the run-up to the December gadget spending spree.

But this year, with high energy and food prices, the housing slump and credit market crisis muting consumer demand, Wall Street is bracing for a subdued performance from the technology industry even during its busiest manufacturing season.

Dell Inc (DELL.O: Quote, Profile, Research, Stock Buzz), the world’s No. 2 maker of personal computers, sounded a warning bell on Thursday when it reported a sharper-than-expected drop in quarterly profit and said cutbacks in U.S. spending were spreading to other countries.

While analysts say the results reflect weaknesses in Dell as much as in the broader industry, even the most bullish forecasts call for only a 10 percent to 15 percent rise in technology stocks this fall — which would barely take the sector back to where it was at the start of 2008 savings account payday advance.

“The tech rally into the back half of the year will probably be more muted than other years,” said Jim Grossman, an analyst for Thrivent Asset Management, which manages $73.2 billion of investments.

However, if holiday sales outpace the worst expectations, investors would revisit the sector since the shares already reflect deep pessimism, he said.

The S&P Information Technology 45 index has fallen about 13 percent so far this year and the Merrill Lynch Technology 100 index has lost about 14 percent.

Tech stocks in the S&P 500 index are trading at about 16 times estimates of earnings for the next 12 months, compared with almost a multiple of 19 this time last year, according to Thomson Reuters Proprietary Research. 

Read more

The catastrophe looming in the documentary "I.O.U.S.A." isn’t romantic like the doomed young love in "Titanic," but billionaires Warren Buffett and Pete Peterson warn it could break many more hearts.

The disaster they warn of could be bigger than any we’ve ever seen - bigger than an iceberg, bigger even than the current mortgage crisis.

If the U.S. doesn’t do something, and fast, to tame the federal government’s debts - now more than $50 trillion - the two Nebraska natives warn we will saddle coming generations with economic problems that will make this year’s financial turbulence look like a trip to the debt counselor’s office.

Premiering Thursday at 358 theaters nationwide, "I.O.U.S.A." is part of Peterson’s campaign to give the ballooning debt a central role in the presidential campaign.

A live panel discussion after the first showings - tape delayed for moviegoers in the West - will include Buffett, Peterson and other experts. Despite ticket prices much higher than for a feature, at $11.50 to $20, Thursday’s showings had sold out at some theaters by Wednesday, organizers said.

The two prominent investors don’t share a political philosophy: Peterson endorses Republican John McCain for president while Buffett favors Democrat Barack Obama. But they say the nation’s budget and trade deficits aren’t really partisan issues.

"Our situation is a lot worse than advertised, and we need to start making some tough choices if we want our future to be better than our past," former U.S. Comptroller David Walker, one of the movie’s stars, said Wednesday.

Peterson - who co-founded the Blackstone Group LP (BX) private equity firm and served as commerce secretary under President Nixon - is financing the movie and the discussion in Omaha to advance the goals of his foundation, created in February, which Walker runs.

Peterson pledged $1 billion to help raise the alarm about the nation’s budget deficit, the projected shortfalls in Medicare and Social Security funding, the trade deficit and the meager savings rate for most Americans.

Peterson and Walker both talk about the substantial debt burden that could be left for future generations if changes aren’t made.

"We’re mortgaging the future of people who can’t vote and might not even be born yet," Walker said.

The "I.O.U.S.A." filmmakers followed Walker as he toured the country speaking to college groups, newspaper editorial boards and community groups about the nation’s financial problems.

Most of the talks in the movie took place while Walker still ran the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Walker and the movie cite GAO figures that show the U.S bad credit payday loans. government owed roughly $53 trillion more than it had at the end of the 2007 fiscal year, which is the most recent figure available.

About $11 trillion of that covers the publicly traded government debt, the amount the federal government owes to employee pensions and the cost of environmental cleanup of federal land. The rest of the $53 trillion figure accounts for projected shortfalls in Medicare and Social Security.

The cost of covering those obligations is expected to spiral as more and more baby boomers become eligible for the two programs.

The film also features interviews with prominent businessmen and officials from both major political parties, such as former Federal Reserve chairman Alan Greenspan and Paul Volcker and former U.S. Treasury secretaries Paul O’Neill and Robert Rubin.

Buffett did not respond to a request for an interview for this story, but he has said the United States is essentially selling off chunks of the country to foreign investors to finance the nation’s overconsumption.

"We’ve got a super-subprime crisis brewing - namely, the federal government’s finances," Walker said. "The factors that caused the mortgage-based subprime (crisis) to explode exist for the government’s finances. The difference is it’s 25 times - at least - bigger."

Buffett also has warned for years that the nation’s trade deficit - the difference between how much the country imports and exports - was going to devalue the dollar and create other problems.

"Our trade equation guarantees massive foreign investment in the U.S. When we force-feed $2 billion daily to the rest of the world, they must invest in something here," Buffett said in his annual letter to shareholders earlier this year.

Thursday’s panel discussion will also feature Bill Novelli, AARP’s chief executive, and William Niskanen, chairman of the libertarian-leaning CATO Institute.

With showings in 358 theaters, the movie’s premiere likely will be bigger than its planned 12-city theatrical run, which begins Friday.

The main reason the movie is being distributed in theaters is that its makers think it could contend for an Academy Award, Walker said. More people will likely see the movie after it leaves theaters because the foundation hopes to air it on television early next year, he said.

Clips from the movie and panel discussion will be available online. 

Source

The FDIC, six weeks after taking over mortgage lender IndyMac Bank, said Wednesday that it will start systematically modifying some of the bank’s most troubled loans to keep borrowers in their homes.

The Federal Deposit Insurance Corp. said it has started to send out the first of what will be an estimated 25,000 letters to borrowers most seriously delinquent on their loans.

The goal of the modifications: to provide borrowers with affordable payments so they can stay current on their mortgages and remain in their homes, while at the same time minimizing losses to investors in securities backed by the loans.

"Foreclosure is often a lengthy, costly and destructive process. Avoiding foreclosure not only strengthens local neighborhoods where foreclosures are already driving down property values, it makes good business sense," FDIC Chairman Sheila Bair said in a statement. "This is a ‘win-win’ program all around."

Equally important, by making delinquent loans current, the FDIC hopes to maximize the value of IndyMac to potential buyers of the bank and its assets. That would be good news for IndyMac customers who had uninsured deposits at the bank when it was taken over. A higher purchase price would also mean fewer costs for the FDIC and its insurance fund.

"By turning troubled loans into performing ones, we enhance their overall value," Bair said in a press call Wednesday afternoon.

Bair, who has pressed lenders for the past year to streamline the way they modify troubled mortgages, inherited $200 billion in loans owned or serviced by IndyMac when the bank was taken over by regulators in July.

She said she hopes this new FDIC program will serve as a model for other loan servicers.

"It’s my hope that it will provide further catalyst to provide more loan modifications for borrowers across the country," Bair said.

The FDIC is defining "affordable" loans as those in which the mortgage payment (including principal, interest, taxes and insurance) does not exceed 38% of a borrower’s income http://payday-faxless.com.

That debt-to-income ratio may be achieved in a number of ways, according to the FDIC: by reducing the interest owed on the loan, by stretching out the number of years over which the loan may be paid back or by principal forbearance, which defers payment on a portion of the original principal until the home is sold or the loan is refinanced.

The new interest rate on the modified loans may not exceed the Freddie Mac survey rate for so-called conforming loans, which is currently around 6.5%.

For IndyMac borrowers to qualify for an FDIC modification, they would have to show verification of income - most IndyMac loans are so-called Alt-A loans, which were given to borrowers with good credit but no proof of income. Borrowers would also have to verify that the home at issue is their principal residence. And they would need to sign the letter sent to them by the FDIC and send it back with the first payment due on the modified loan.

The FDIC said borrowers who haven’t received a letter also may call (800) 781-7399 to talk with an IndyMac Federal representative to see if they qualify for the new program.

Bair stressed that the FDIC would work on a case-by-case basis with struggling IndyMac borrowers who don’t qualify for the program to see if an alternative option could help keep them in their home.

One possible alternative is a new Federal Housing Administration (FHA) program passed by Congress in July. That program, slated to start on Oct. 1, would let the FHA insure new 30-year fixed-rate mortgages for at-risk borrowers if their lenders agree to write down loan balances to 90% of the homes’ current appraised value. 

Source

Chip maker Vishay Intertechnology says it offered to buy power management chip maker International Rectifier Corp. for $1.6 billion in cash.

Malvern, Pa.-based Vishay Intertechnology Inc (VSH). says the offer would be for $21.22 per share, which is about a 13% premium over International Rectifier’s (IRF) Thursday closing price of $18.82 check cash advance.

International Rectifier is based El Segundo, Calif. 

Source

Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) became the latest Wall Street investment bank to offer to reimburse buyers of auction-rate securities, as New York’s attorney general sought settlement talks with it and two other banks.

Morgan Stanley said it would offer to buy back at face value some $4.5 billion in auction-rate securities held by individuals, charities and small to medium-sized businesses and provide liquidity to institutional investors in the securities.

State and federal regulators have been investigating whether brokerages and banks falsely told clients that auction-rate securities — a $330 billion market of long-term debt instruments that pay yields reset through weekly or monthly auctions — were as safe and liquid as cash.

Instead, auction-rate securities have been impossible to sell since late January, when investment banks stopped propping up auctions that were being abandoned by investors.

New York Attorney General Andrew Cuomo, one of the most aggressive regulators pursuing the issue, on Monday told JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley and Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) that it wants to begin settlement talks immediately.

JPMorgan was the third-largest auction-rate municipal bond underwriter since 2000 after Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), according to ThomsonReuters data, while Morgan Stanley was the fourth.

New York, the Securities and Exchange Commission and other states announced settlements last week with Citi and UBS no checking account payday advance. Combined, the banks agreed to pay $250 million in fines and repurchase about $27 billion of the debt from their clients.

‘CASH-LIKE’ SECURITIES 

Read more

It may be no coincidence that Swiss bank UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) chose John Cryan — a veteran dealmaker — as its next finance chief, just as it is splitting its business in three separate units.

The world’s biggest bank to the rich ushered the 47-year old Briton in as it made a bigger-than-expected quarterly loss, something that may yet come in useful if the bank chose to hive off assets such as its embattled investment bank.

“(Cryan) is a clear, bright thinker and because he is a corporate financier he might like to do deals,” said a former senior investment banker who has worked with Cryan.

“And that in the context of UBS probably means disinvestments of certain business parts,” he added.

UBS said on Tuesday it would transform its business into three autonomous units, saying disposals were possible in the future, although none were planned for now.

Cryan’s track record shows he knows how to split up a bank.

Last year he helped Dutch bank ABN Amro sell itself to a consortium led by the Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), in what remains the biggest ever takeover of a bank.

Cryan currently heads up the financial institutions group at UBS’s investment bank http://payday-nofax.com. He will replace Marco Suter — an ally of former chairman and UBS architect Marcel Ospel who was toppled in the crisis — on Sept 1. 

Read more

Google Inc’s 5 percent stake in Time Warner Inc’s AOL unit may be worth less than the $1 billion the Web company paid for it in 2006, Google warned in a regulatory filing on Thursday.

“We believe our investment in AOL may be impaired,” Google said in its latest quarterly financial filing with the U.S. Securities and Exchange Commission.

Google said it would continue to review its investment for impairment, and financial write-downs could be required in the future.

In a deal announced in December 2005 and which closed the following year, Google paid $1 billion in cash for a 5 percent indirect equity stake in AOL.

The deal by the Mountain View, California-based company gave AOL a theoretical valuation of $20 billion at the time.

In return, Google secured renewal of its search advertising deal with AOL, its largest ad partner, at least until Google’s recent partnership with Yahoo takes effect in coming months, analysts say no teletrack payday loans. Google’s original pact with AOL in 2002 was the landmark deal that legitimized Google’s advertising services.

PREPARING TO SPLIT

The formal admission by the Silicon Valley Internet giant that the value of its investment may have fallen follows recent moves by Time Warner to shape up AOL for a possible sale. 

Read more

Claims for U.S. jobless aid rose last week and big retailers had disappointing sales in July, reports showed on Thursday, but a gauge of future home sales rose in a hopeful sign for the battered housing sector.

The higher-than-expected June signings of home sale contracts offered some hope the housing market may be stabilizing. But the jobless claims and Wal-Mart’s missing July sales forecasts boosted concerns about consumer spending and the corporate profit outlook, sending Wall Street stocks lower and U.S. government bond prices higher.

Initial claims for state unemployment benefits rose 7,000 last week to 455,000, the highest in six years, the Labor Department said. But it said a new federal program to extend benefits was partly to blame for the elevated level.

Still, the four-week moving average of claims, designed to iron out weekly fluctuations and provide a better view of the underlying trend, also showed that jobs were tough to find as the economy copes with the worst housing downturn since the Great Depression.

“Look past the choppiness and bias in the data and what you’ll see is a fundamental weakness in the labor market,” said Michelle Meyer, an economist at Lehman Brothers in New York.

“We’ll see the unemployment rate peaking at 6.3 percent next year,” she said same day payday loans. The jobless rate hit 5.7 percent in July.

The four-week average of new claims jumped to 419,500 from 392,750 the previous week. This was the highest since July 2003 and the first time since that year that the four-week moving average had pushed above 400,000 — a threshold linked with recession.

CONSUMERS LOSING SUPPORT 

Read more

The nation’s top automakers reported sharp drops in July sales that were much worse than expected, as high gas prices and a weak economy continue to bite the battered auto industry.

Overall, U.S. auto sales plunged 13% from year-ago levels, falling 4% from what had been a very weak June. That made July the worst month for the industry in 16 years, according to sales tracker Autodata.

The traditional Big Three Detroit automakers saw their share of sales in their home market plunge to a record low of 43%, well behind the 49% share of Asian brands. But even the Asian automakers had trouble providing U.S. consumers with the fuel efficient vehicles there were looking for, as most of those overseas brands also saw sales drop from year-earlier levels.

Record-high gas prices during the month - gas hit $4.114 a gallon on July 17 - and general fears about the economy weighed on auto sales.

"Right now consumers would rather postpone the decision than make a decision on a car purchase," said Jesse Toprak, chief industry analyst for sales tracker Edmunds.com. "They’re suspicious about what’s happening in the economy and they don’t want to make a big ticket purchase."

General Motor’s car and light truck sales plummeted 26% in July - more bad news for the troubled company. Earlier in the day, GM (GM, Fortune 500) reported a $15.5 billion loss in the second quarter.

Sales tracker Edmunds.com had forecast a 16% decline in GM sales.

Sales of light trucks, which include pickups, SUVs and so-called crossover vehicles, tumbled 35% as buyers turned to more fuel efficient cars. But GM cars also suffered, falling 12% from year-earlier levels.

U.S. sales for Ford Motor (F, Fortune 500) tumbled 14.9% in July. Sales tracker Edmunds.com was forecasting a 7.4% drop.

Sales of pickups and SUVs at its Ford, Lincoln and Mercury brands fell 26% in the month, while sales of so-called crossovers - a utility vehicle with a more car-like ride - fell 8%.

The only bright spot for Ford was that car models at those brands rose 8%.

But the Toyota Motor (TM) report showed that it’s not only the truck-heavy U.S. automakers that are struggling. Toyota’s sales were down 12% from a year earlier, far worse than the 3.3% decline forecast by Edmunds.

Toyota has had an unusual sales slump in the United States, which has become the largest market for its vehicles worldwide http://paydayloans-on.com. July marked the tenth time in the last year it’s seen a U.S. sales decline from year-earlier levels. Before last April it had been nearly two years since Toyota had seen even a modest decline in U.S. sales.

Like its Detroit rivals, Toyota was hit by a 24% drop in SUV sales and a 32% plunge in pickup sales. Sales of its car models were essentially flat, declining 0.6%. But it was hit by limited supplies of some of its fuel-efficient models most in demand.

For example, sales of the Toyota Prius, a symbol of fuel efficiency and the nation’s best selling gas-electric hybrid, fell 8% because of those supply constraints.

"We might see some improvement when the ‘09 models start hitting showrooms, but it’s not going to make up for these losses. It’s not going to be until 2010 models start arriving more than a year from now that we’re likely to start seeing any significant recovery in the market," Toprak said.

Honda Motor (HMC), one of the few companies to report an increase in June sales, posted a sales decline in July.

While its 1.6% drop in sales was far more modest than most of its rivals, Edmunds had been looking for a 13% increase.

And sales plunged 29% at Chrysler LLC, which includes the Chrysler, Dodge and Jeep brands. That was far worse than the 15% drop forecast by Edmunds. Light truck sales tumbled 30% while car models fell 25%. Only a handful of models posted even modest sales gains.

The sales decline was severe enough that the company, which had long been the nation’s No. 3 automaker until a few years ago, only narrowly stayed ahead of Nissan, the No. 6 automaker in terms of U.S. sales.

In fact, Nissan (NSANY) was the only major automaker able to buck the downward trend. Nissan posted an 8% increase in sales, considerably better than the estimate of flat sales.

A few luxury brands, such as Mercedes and BMW, also weathered the storm to post modest gains. But sales fell for makers of low-priced cars, such as Mitsubishi and Hyundai. 

Source

Wall Street widely expects the U.S. Federal Reserve to keep short-term benchmark interest rates unchanged on Tuesday as the central bank grapples with a faltering economy, shaky financial system and higher prices.

While the federal funds rate will likely stay at 2 percent, more than one voting member of the rate-setting Federal Open Market Committee policy-makers may dissent and call for higher rates.

The Fed held rates steady when the panel last met in June. It last eased in April, bringing the fed funds rate down by a cumulative 3.25 percentage points from mid-September last year.

A Reuters poll on Friday showed most primary dealers expected the Fed to hold rates steady through the end of the year, with the next move likely to be a rate increase sometime next year.

Following are some factors policy-makers are considering:

ECONOMY

The U.S paydayloans. unemployment rate rose to 5.7 percent in July, its highest in more than four years, as employers cut payrolls by 51,000 nonfarm jobs, the seventh straight month of declines.

The U.S. economy grew 1.9 percent in the second quarter, as consumer spending was bolstered by the government’s tax rebate checks. Gross domestic product for the final quarter of 2007 was revised to show contraction of 0.2 percent. 

Read more