Money world

SHILOH — What recession?

If Kevin Bollman is to be believed, tough economic times have had only a minimal effect on plans for the Villages at Wingate. That’s an ambitious 172-acre residential and commercial development now partly under construction at Shiloh — not far from Scott Air Force Base.

Bollman owns J2K, a major developer of the Villages at Wingate. The project, with an estimated cost of more than $140 million, was announced in the summer of 2007. The developers have plans for 270 houses and villas, 96 apartments for older residents, 75,000 square feet of retail space and 60,000 square feet of office space.

The site is just off Green Mount Road, about half a mile north of Carlyle Avenue and four miles south of Interstate 64.

"We never stopped going forward with our plans" despite the recession, Bollman said. "And now it’s good to see the housing market recovering, at least here."

He predicted the development could be built within five years.

Many people are interested in the project, said Bollman, who touted it as the first master-planned community that has come to fruition in Metro East.

The first of two independent living apartment buildings for older residents has been completed and will be ready for occupancy within a few weeks.

Three new houses already are occupied, and about 15 more are under construction, Bollman said. The houses range in price from slightly more than $160,000 to almost $300,000.

Six homebuilders have been involved in the project, and a seventh builder — Dettmer Homes — signed on this month and announced it would build on 82 of Wingate’s 221 single-family sites.

Scott Dettmer, general manager of Dettmer Homes, said his company, which already started building a display house at Wingate, has plans to build houses worth a total of nearly $22 million there.

Other builders with houses either under construction or planned at Wingate are J2K, JLP Homes, McFadden Homes, DF Contracting, New Tradition Homes and Carda Construction.

The architect on the Villages at Wingate is TRi architects. TWM Inc. of Swansea provided the civil engineering for the project. The contractor on the proposed commercial and retail part of the project is Grubb & Ellis Gundaker Commercial.

Developers also are working with the Mascoutah School District for a new elementary school on the project site that could be built in three to five years.

Mascoutah Superintendent Sam McGowen said the school could cost more than $8 million and have space for up to 600 pupils. He said a site for the proposed school already has been graded, near the entrance along Wingate Boulevard.

"I think that area is going to grow soon, and the developers have been great in working with us," McGowen said. "But the school is sometime in the future. The development has to generate revenues … in order to sell the bonds for the school."

Near the center of the Wingate project is a graded site for a 2,000-square-foot clubhouse and adjoining playground.

Bollman said another distinctive feature is a planned section of multi-family row houses, designed in a style echoing a century ago, "kind of like what you’d see at Lafayette Square." Carda Construction is the contractor for those homes.

The project also includes about 30 acres of green space and a planned walking trail.

"When we were putting this whole project together, I was adamant that we had to be unique," Bollman said.

And what’s with the name, Villages at Wingate?

Bollman said he read something a few years ago about an eccentric British Army general named Orde Wingate, who died in a plane crash during World War II. Bollman said he remembered that name and just decided it had a nice ring to it.

That also explains the British influence on the project’s street names, including London Lane, Welsh Drive and Downing Court.

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Target Corp. on Friday announced a new national TV delivery and installation service.

Target (NYSE: TGT) customers who purchase TVs in-store can have the products shipped to their home and installed staring at $99.

The nationwide service is part of a growing partnership with Minneapolis-based Zip Express. The two firms joined up in 2008 to deliver and install TVs that customers purchased over Target.com.

According to the firm’s web site, Zip Express has 16,000 installers from coast to coast and delivers to every U guaranteed online personal loans.S. ZIP code.

Some prices for Minneapolis-based Target’s services include:

• Any size TV delivery and setup - $99
• TV in-wall installation - $199
• Delivery and wall mount - $249
• TV recycling - $50
• Video game counsel set-up - $99

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Consumer credit in the U.S. dropped a record $17.5 billion in November as unemployment close to a 26- year high discouraged borrowing and banks limited access to loans.

The slump in credit to $2.46 trillion was more than anticipated and followed a revised $4.2 billion drop in October, Federal Reserve figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease of $5 billion. The figures track credit card debt and non-revolving loans, such as those to buy autos.

A labor market that’s shed 7.2 million jobs since the recession started in December 2007 is restraining consumer spending that accounts for about 70 percent of the economy. Fed policy makers have said tighter bank lending standards and reductions in credit lines are hampering the recovery.

“Double-digit unemployment is eroding consumer confidence and the uncertainty is prompting consumers to pay down their credit card debts,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We have not seen such a wholesale reduction in consumer credit since the last time we had double-digit unemployment rate following the early ‘80s recessions.”

The series of 10 straight declines in consumer credit was the longest since record-keeping began in 1943.

Treasury two-year notes gained the most in three weeks after the Labor Department said today that companies reduced payrolls in December by 85,000 workers after adding 4,000 a month earlier. The unemployment rate held at 10 percent.

Stocks, Yields

Two-year Treasury yields dropped below 1 percent, to 0.97 percent at 4:52 p.m. in New York, from 1.02 percent late yesterday.

Consumer credit in October was revised from a previously reported $3.5 billion decline, and the forecast for November was based on the median of 32 estimates in a Bloomberg News survey. Projections ranged from decreases of $2 billion to $10 billion. Credit dropped at an 8.5 percent annual rate in November.

Revolving debt, such as credit cards, plunged by a record $13.7 billion in November, the Fed’s statistics showed. Non- revolving debt, including loans for autos and mobile homes, declined by $3.8 billion. The Fed’s report doesn’t cover borrowing secured by real estate.

Auto sales in the U.S. climbed in November to a seasonally adjusted annual rate of 10.92 million, up from 10.45 million in October. The pace increased to 11.23 million in December, the strongest since 14.09 million in August, when Americans took advantage of government incentives.

Consumer Spending

Consumer spending increased in November for the sixth time in seven months as Americans took advantage of discounts during the holidays, Commerce Department figures showed Dec fast payday loans. 23. Faster growth in sales and improvement in households’ balance sheets depends on job creation.

“U.S. consumer credit quality remains under considerable stress due to persistently weak labor market conditions,” said Michael Dean, managing director at Fitch Ratings. A report from Fitch on Jan. 5 showed delinquent balances on credit cards at a record level.

At American Express Co., defaults and delinquencies fell to 2009 lows. AmEx was the only one of the “Big 6” credit-card issuers to post November declines in write-offs and delinquencies, the New York-based lender said in a Dec. 15 regulatory filing.

Bank of America Corp. Chief Executive Officer Brian T. Moynihan has said the largest U.S. lender needs to reduce the loss rate on credit cards, which ranked highest among the nation’s six biggest card companies in November. Bank of America’s card defaults are “still very high,” Moynihan, 50, said.

‘Significant Bubble’

“As an industry, we over-lent and customers over-borrowed, and that led to a fairly significant bubble,” Moynihan said Jan. 4 in an interview on Bloomberg Television in Raleigh, North Carolina. “We have to help lead the economic recovery. At the same time, we have to be responsible lenders.”

Banks have responded by tightening credit standards, for consumers and companies. Fed Governor Elizabeth Duke said in a Jan. 4 speech that total loans on banks’ books fell at an annual rate of more than 11 percent in the third quarter. While banks are reducing lines of credit and tightening lending standards, small businesses are also losing their business relationships with banks as firms fail, merge or reduce their loan portfolios, Duke said.

Broken Relationships

“When existing lending relationships are broken, time may be required for other banks to establish and build such relationships, allowing lending to resume,” Duke said.

Britt Beemer, chairman of consumer polling firm America’s Research Group, said in a Dec. 21 interview that if lenders weren’t cutting customer spending limits and rejecting more credit-card applications, holiday sales would have been stronger.

December same-store sales climbed 3 percent, the biggest gain since April 2008, Retail Metrics Inc. said yesterday in an e-mailed statement.

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DETROIT–General Motors Co. chairman Ed Whitacre Jr. urged the troubled automaker’s employees to forget their old bureaucratic culture, telling them Friday not to fear being fired for taking risks.

Whitacre, who also announced key management changes, wants to speed up the automaker’s shift to an entrepreneurial culture where decisions are made quickly.

"We want you to step up. We don’t want any bureaucracy,” Whitacre told employees, strolling back and forth across a stage at the company’s headquarters.

"We’re not going to make it if you won’t take a risk," he told the audience of 800.

In a 45-minute presentation that was broadcast to employees on internal television networks and over the Internet, Whitacre also unveiled a mission statement to design, build and sell the world’s best vehicles.

Whitacre, who peppered his address with self-deprecating humour, named vice-chairman Bob Lutz, who has long advocated for a more risk-taking culture, as his adviser for product development.

Whitacre also said he is recombining sales and marketing, placing them under Susan Docherty no faxing payday loans.

She became head of sales when former CEO Fritz Henderson separated the roles of sales and marketing. Henderson left the company earlier this week.

Lutz, 77, who had been in charge of marketing, will help Whitacre learn about the business, he said.

In another key move, the chairman, who joined GM in June, promoted engineering chief Mark Reuss to run North American operations. Reuss recently was named head of engineering, and before that ran the company’s Holden operations in Australia.

GM board member Stephen Girsky, a former auto analyst with Morgan Stanley, will also be an adviser to Whitacre.

During his speech, Whitacre set a tone of humility and encouraged employees to give him ideas.

"I’m on the 39th floor of the RenCen. You’re all welcome," he said.

"You’re a terrific bunch of employees. You have our support. Let’s go hit it and make this thing big."

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A key House committee, culminating months of debate over how to reform bank rules, voted Wednesday in favor of legislation that aims to prevent firms from growing too big and threatening the financial system.

The House Financial Services Committee passed the bill by a margin of 31-27 along strict party lines, with all Democrats voting in favor and all Republicans voting against. The bill, which proponents consider key to preventing the kinds of problems that caused last year’s crisis, will now move to the full House of Representatives for debate and a vote.

Rep. Barney Frank, D-Mass., chairman of the committee, said Wednesday that he believes the full House will consider and vote on the package next week.

The bill would impose stronger supervision of Wall Street and impose tougher capital requirements for banks, while proposing a new way to take over big firms such as American International Group (AIG, Fortune 500). It also includes legislation to regulate derivatives and create a consumer financial protection agency.

But on the Senate side of Capitol Hill, the bill is moving much more slowly and final passage is likely months away.

Also, the bill faces a potential hangup in the House, as the Congressional Black Congress (CBC) on Wednesday announced its displeasure with the lack of support for minority communities in prior financial sector bailout legislation. The CBC said its support for such bills that do not support minority communities, which were hit particularly hard during the recession, "stops today."

"This particular moment provides an opportunity," said Rep. Maxine Waters, D-Calif., a member of the Financial Services Committee and the CBC. "If we’re going to support this bill, which gives regulators extraordinary powers, we have to make sure those powers will benefit small and minority owned businesses as well."

The House bill creates a new kind of unwinding process for big firms, and forces them adhere to stronger supervision mostly by the Federal Reserve working with an oversight council.

Most observers, including those in the financial industry, agree that government officials didn’t have the right tools to properly manage the failures of insurer AIG and investment bank Lehman Brothers.

The bill would also tax big banks to create a $10 billion fund to pay for government takeovers.

One of the most controversial parts of the House bill is a provision to allow the Government Accountability Office to audit Fed activities. Some fear the proposal would interfere with the central bank’s ability to carry out independent monetary policy online payday loans.

Fed Chairman Ben Bernanke, in an opinion piece in the Washington Post, decried the proposal and one in the Senate bill that aims to strip the Fed of its regulatory powers over banks.

"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote.

House Republicans have generally opposed the "too big to fail" package, because they say it gives government too much power. They would prefer that Congress establish a special bankruptcy process to allow big firms to be liquidated through the court system.

Senate moving slower

The Senate, led by Banking Committee Chairman Chris Dodd, D-Conn, lags the House in trying to reform financial regulation.

Dodd’s bill, only recently unveiled, includes several far-reaching proposals, such as the creation of a super-regulator for all banks — a move the Fed opposes.

Dodd had also said he wants the Senate Banking committee to start working on his bill next week. But myriad objections to the legislation, coming from both Republicans and fellow Democrats on his committee, has pushed the bill into closed-door negotiations that could last a few weeks.

"Barney Frank will get a bill out of committee and through the House, and it will look pretty similar to what he’s been proposing," said Brookings Institution economist Douglas Elliott, a former J.P. Morgan investment banker. "The bigger wild card is the Senate. It’s not clear whether Sen. Dodd has sufficient level of his support for his ideas."

Additionally, the creation of a consumer financial protection agency, already passed by the House committee, could be a deal-breaker for Senate Republicans. The proposed agency would be charged with ensuring that personal financial products, such as mortgages and credit cards, are fair to consumers.

While the new consumer agency is a White House priority, ranking Republicans in the Senate really don’t like it and could filibuster to prevent it from coming to the floor if their demands aren’t met, Elliott said.

– CNNMoney.com staff writer David Goldman contributed to this story 

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Crude oil prices rose over $77 a barrel Wednesday, supported by lower-than-expected builds in U.S. oil inventories last week, a weak U.S. dollar and gains on Wall Street.

Crude stocks rose 1.0 million barrels, the Energy Information Administration said, less than the 1.2 million barrel increase forecast.

U.S. crude for January rose $1.94 to settle at $77.96 a barrel.

"The EIA report prompted some modest price support as the 1 million barrel crude stock build was slightly smaller than expectations and well below yesterday’s API guidance," said Jim Ritterbusch, president, Ritterbusch & Associates in Galena, Illinois.

On Tuesday, the American Petroleum Institute released a report showing a 3.3 million-barrel rise in stocks.

Prices were also buoyed when the U.S. dollar fell to a 15-month low after U.S. data on jobless claims, personal consumption and new home sales fed economic optimism.

Consumer spending rose more than expected in the world’s largest economy, while new jobless benefits claims dropped. New U.S. home sales in October rose to their highest level in a year.

Wall Street stocks rose after the data, boosting crude, which has more than doubled from below $33 in December, though far below its record of more than $147 hit in July 2008.

Soft fundamentals

Analysts noted that the EIA data showed demand for crude oil is still weak.

"Fundamentals remain soft … there’s no reason to open the champagne here. Refinery runs are nothing to write home about, under 14 million barrels a day," said Antoine Halff, first vice president, deputy head of research, Newedge Group, New York.

Refinery utilization rates, while up 0.9% from the prior week, were still 5.9% below year-ago levels, according to the EIA data.

Gasoline inventories rose 1 million barrels to 210.1 million barrels, above analyst expectations for a 300,000 barrel rise.

Distillate stockpiles, which includes heating oil and diesel, dropped 500,000 barrels to 166.9 million barrels.

"The (distillate) draw was slightly larger than consensus expectations, but puts only a small dent in the major surplus," said Timothy Evans, energy analyst at Citi Futures Perspective in New York.

U.S. crude was expected to average $75.40 a barrel in 2010, a Reuters poll showed on Wednesday, but analysts said ample supplies would keep short-term price growth in check. 

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Plummeting advertising sales have severely wounded media companies, but CBS is scoring big with the broadcast of this season’s Super Bowl XLIV.

Months away from the biggest football game of the year, CBS (CBS, Fortune 500) is already nearing a 90% sellout for advertising spots during the game. The network expects to close enough deals to hit that mark before Thanksgiving, said John Bogusz, CBS’s vice president of sports sales and marketing.

CBS hasn’t yet topped the $3 million rival NBC charged for each 30-second spot during the 2009 telecast, according to reports.

So far, CBS’s sales have hovered in the range of $2.5 and $3 million per spot. But with more than two months to go before kickoff, CBS still has time to reel in the big buyers.

Networks typically sell 62 commercials of 30 seconds each for the game. That math means CBS only has a half-dozen or so spots left to sell for the game that airs Feb. 7, 2010. Anheauser-Busch (BUD), Coca-Cola (KO, Fortune 500), PepsiCo (PEP, Fortune 500), and several movie studios and car companies have reportedly already purchased their ad packages for the 2010 game.

For last season’s big match, NBC didn’t reach the 90% benchmark for sales until January, just a month ahead of the telecast.

Bogusz said the pace of sales is ahead of that for the 2007 Super Bowl telecast, the last time CBS televised the event. A majority of the remaining slots are in the second half of the game, he said.

Super Bowl sales can pay off big for the broadcasters that air the game. In 2007, CBS said some advertisers paid more than $2.6 million for their 30-second commercials. The network’s advertising revenue jumped 9% in the first quarter that year thanks to its telecasts of the Super Bowl and the semifinals of the NCAA men’s basketball tournament. 

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UBS boss Oswald Gruebel set an ambitious target for annual pretax profit of $15 billion, vowing to rebuild the loss-making bank and win back clients after the subprime crisis and a bitter U.S. tax row.

Chief executive Gruebel told investors on Tuesday his new strategic plan was a “revolution” and reaffirmed his commitment to an integrated banking model twinning traditional wealth management strength with a broad investment banking offering.

But, true to the 65-year-old German’s straight-talking reputation, he did not promise overnight miracles for the Swiss bank.

“A transformation like this is not easy. If it was easy I would not be here,” banking veteran Gruebel, seen as a turnaround guru for reviving Swiss rival Credit Suisse, told UBS’s first strategic presentation since his appointment.

The mid-term target would bring UBS slightly above its pre-crisis performance in 2006, and Gruebel said this would be achieved through a new culture of disciplined risk-taking, strict cost and capital control and adherence to regulation.

“There will be three guiding principles: reputation, integration, execution: this is what we will stand for in the market,” Gruebel told a packed Zurich auditorium. “We want to ensure that what has happened to UBS should not happen again.”

Gruebel’s new targets for the next three to five years also include a cost-to-income ratio of 65 to 70 percent compared to 110 percent now, and return on equity of 15 to 20 percent, compared to negative 16 percent.

“The long time horizon for the turnaround could require a lot of patience and nerves of steel from investors direct lender payday loans.” said Kepler analyst Mathias Bueeler.

UBS shares, which have risen 18 percent this year while the wider DJ Stoxx European banking sector has gained nearly 60 percent, were up 0.23 percent at 17.52 Swiss francs at 1226 GMT, outperforming its peers.

The stock has consistently underperformed rivals in 2009 and fell again after UBS posted a larger-than-expected third quarter net loss on November 3 of 564 million francs, the seventh out of eight straight quarters the Swiss bank has been unprofitable.

UBS has not given any guidance for the full year, but while its investment bank has recovered at an operating level, the bank is seen heading for another loss, albeit much smaller than last year’s pretax loss of almost 28 billion francs.

According to Thomson Reuters I/B/E/S data, the bank is seen making a pretax profit of 7.7 billion francs in 2010.

RESTORING CLIENT CONFIDENCE KEY

Gruebel, credited with turning around Credit Suisse during his 2002-2007 tenure there, said he wanted UBS to boost its number one position as banker to the super rich and remain the number one bank in Switzerland, while focusing growth on Asia.

UBS, the world’s No. 2 wealth manager with $1.7 trillion in assets and the leader in the super rich space, is suffering client withdrawals across the board. 

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Sprint is betting the farm on the WiMax standard. The U.S. mobile phone carrier’s customers are melting away. Yet it has scrimped on cellular network capex to double down on wireless broadband. Putting another $1 billion into cash-burning partner Clearwire, while a rival technology is catching up, amounts to a binary bet for shareholders.

Sprint’s problem is simple — its customers are dissatisfied. It lost another 801,000 of its most profitable customers in the third quarter. More than four million have fled to other networks over the past year. Sprint’s bigger rivals scent blood and have been aggressively courting customers with advertising campaigns and handset offers.

Yet Sprint (S, Fortune 500) has slashed capital expenditure to an unsustainable level. Its current budget is equal to 7% of sales, which is less than half what rival AT&T (T, Fortune 500) spends — and AT&T’s revenues are more than 15 times as large as Sprint’s, so it has the advantage of scale as well.

Instead, Sprint is increasing its bet on Clearwire (CLWR), the company rolling out WiMax. This wireless technology could make broadband ubiquitous, even in rural areas. But it will face stiff competition. While WiMax is the only "4G" technology currently deployed, a rival technology backed by Sprint’s deeper-pocketed rivals will be available soon payday advance. This standard, called LTE, may be widely used within two years.

Moreover, Clearwire may need even more cash. It thinks it will burn up to $1.3 billion in the second half of the year. The $4 billion it has in the bank after the current round won’t last long at that rate. If it needs more, Sprint would have to pony up to keep majority control. That might be difficult, as it is already heavily indebted — its market capitalization is $9 billion, while its net debt was almost $16 billion at the end of last quarter.

Sprint’s stock has really become a highly leveraged bet on WiMax. The payoff for success would be enormous. But WiMax has fewer than half a million customers. The odds of it becoming a widespread standard are low if it can’t quickly build on its temporary advantage before a more powerful competitor gets going. If WiMax doesn’t catch on, it would exacerbate Sprint’s troubles.

Handset makers don’t like designing equipment for second-tier standards, and customers tend to flock to operators with the best phones. At worst, Sprint could even be forced to adopt LTE, which would be a heavy burden for the already indebted company. The clock is ticking on Sprint. 

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Wal-Mart Stores Inc on Monday announced its second round of price cuts on toys as the world’s biggest retailer backs up its intention to be the “price leader” this holiday shopping season.

U.S. Walmart stores are cutting prices on 100 toys, like the Buzz Lightyear talking action figure and Star Wars light sabers, by roughly 20 percent to 30 percent.

The cuts are in addition to ones the retailer implemented at the end of September, when it began selling 100 toys for $10 each.

The new prices will be available through December 25 or while supplies last.

Wal-Mart has vowed to be the “price leader” this holiday season, and announced plans on October 21 to cut prices every week until Christmas to fend off rivals and win over shoppers easy online payday loans.

After it reduced toy prices at the end of September, Target Corp responded with price cuts of as much as 50 percent on toys like Barbie and G.I. Joe.

Analysts said many of these holiday price cuts are planned in advanced, allowing retailers to protect their margins.

But such cuts can be damaging to manufacturers, because they train shoppers to expect lower prices for their goods. They can also hurt retailers’ profits if they must slash prices lower than expected to match competitors’ prices, or they can not sell enough goods to offset the lower prices.

(Reporting by Nicole Maestri, editing by Leslie Gevirtz)

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