BofA Joins Foreign Investors Fueling Record Ginnie-Fannie Gap

December 02, 2011, 7:05 PM EST

By Jody Shenn

Dec. 1 (Bloomberg) -- Home-loan securities guaranteed by Ginnie Mae are trading at about record premiums over Fannie Mae bonds as foreign investors target debt with the strongest backing from the U.S. and lenders including Bank of America Corp. seek notes considered the least risky by regulators.

The price difference between U.S.-owned Ginnie Mae?s 4.5 percent, 30-year securities and similar debt from government- supported Fannie Mae has almost tripled this year to about 3 cents on the dollar, exceeding 3.1 cents last month, according to data compiled by Bloomberg.

The widening signals the value of the explicit guarantee bestowed on Ginnie Mae debt by the U.S., even after Standard & Poor?s stripped the nation of its top credit grade in August and Fitch Ratings said this week it may review its AAA ranking. The government has vowed to protect holders of bonds insured by Fannie Mae and rival Freddie Mac after seizing the companies three years ago without officially guaranteeing their debt.

?If you?re an international buyer, you lean toward Ginnies because you?d rather have the full-faith-and-credit backing at any reasonable difference in spreads,? said Peter Hirsch, the New York-based head of U.S. dollar rates and agency mortgage trading at Royal Bank of Canada?s RBC Capital Markets unit.

Overseas investors own about $620 billion of the $5.3 trillion in U.S.-supported mortgage bonds. They will reinvest next year only into Ginnie Mae notes, adding about $100 billion, JPMorgan Chase & Co. analysts forecasted in a Nov. 23 report. Their Fannie Mae and Freddie Mac investments, which now are about half of the holdings, will shrink by about $75 billion, the analysts said.

Capital Standards

Banks across the world are also favoring Ginnie Mae ?more and more? as they prepare for tougher capital standards under the Basel III international accord, as well as proposed rules demanding they hold specific amounts of liquid assets, RBC?s Hirsch said.

Bank of America, the second-largest U.S. bank by assets, sold $24 billion of Fannie Mae and Freddie Mac notes last quarter and bought $26 billion of Ginnie Mae bonds, ?likely to optimize its risk-weighted assets,? Barclays Capital analysts said in a Nov. 28 report based on data released last month. The lender held $234 billion of U.S. government-tied mortgage bonds as of Sept. 30, the most among domestic banks.

Jerry Dubrowski, a spokesman for Charlotte, North Carolina- based Bank of America, declined to comment.

While lenders don?t have to hold any capital against Ginnie Mae bonds under risk-based rules, regulators assign weightings of 20 percent to Fannie Mae and Freddie Mac debt. That?s even with the U.S. promising unlimited aid to the mortgage-finance firms through 2012 and then $274 billion in extra capital.

Mortgage-Debt Returns

Ginnie Mae, which is based in Washington and formally named the Government National Mortgage Association, was created in 1968 as a U.S. government-owned corporation and issued the first mortgage-backed security two years later. Loans insured by the Federal Housing Administration, which allow down payments of as low as 3.5 percent for home purchases, account for most of the mortgages in its $1.2 trillion of bonds.

Ginnie Mae securities have returned 7.2 percent this year, with all government-supported U.S. mortgage bonds gaining 5.4 percent, compared with 3.2 percent for global corporate bonds, Bank of America Merrill Lynch index data show.

Fitch lowered its outlook of the nation?s credit grade to negative on Nov. 28 after a congressional committee failed to agree on deficit cuts.

Fannie Mae, which is headquartered in Washington, and McLean, Virginia-based Freddie Mac have drawn about $185 billion in capital from taxpayers since September 2008. Their regulator projected in October that cumulative U.S. injections will range from $220 billion to $311 billion at the end of 2014.

?Whatever is Needed?

Few U.S. investors doubt the nation will ?do whatever is needed? to ensure repayment of their debt, said Timothy Cunneen, a senior portfolio manager at Smith Breeden Associates Inc. ?Without Fannie and Freddie, clearly borrowing costs would be significantly higher and that?s just not an outcome that?s palatable to anyone.?

While many overseas investors share that view, they risk scrutiny amid ?the unresolved questions around the future of Fannie and Freddie? when buying their bonds, said Cunneen, whose firm oversees $6.1 billion from Durham, North Carolina.

The JPMorgan analysts led by Matt Jozoff, who wrote in May that Ginnie Mae-Fannie Mae price gaps had reached ?nosebleed? levels at amounts about 50 percent less than the current difference, said last month that ?growing capital considerations for banks have also played a backseat role? in the continued expansion.

Regulatory Requirements

Changes to capital requirements under Basel III begin in 2013. A bank needs to hold $475 million of capital against $25 billion of Fannie Mae bonds to achieve a risk-based ratio of 9.5 percent, the highest base required under plans for so-called systemically important financial institutions. For Ginnie Mae securities, the amount is zero.

?Ginnies do not appear to offer a lot of fundamental value at present prices but if you were a bank, what would you be doing?? said Todd Abraham, co-head of the government and mortgage-backed fixed income group at Pittsburgh-based Federated Investors Inc., which manages about $350 billion of assets.

--Editors: Pierre Paulden, Mitchell Martin

To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Source: http://www.businessweek.com/news/2011-12-02/bofa-joins-foreign-investors-fueling-record-ginnie-fannie-gap.html

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Jeno Paulucci, Duluth businessman, dies

Published: Nov. 26, 2011 at 2:57 PM

DULUTH, Minn., Nov. 26 (UPI) -- Volatile but extremely successful Duluth, Minn., businessman Jeno Paulucci died Thanksgiving Day at age 93, his family said.

The Duluth News Tribune said Paulucci was born Luigino Francesco Paolucci on July 7, 1918 in Aurora, Minn., to Italian immigrants.

His father was an iron miner who was injured and could not work during Paulucci's childhood, leading Paulucci to start work at age 12.

He picked up coal along the railroad tracks to help heat the family home, which included an illegal drinking establishment, the News Tribune said.

At 12, he worked at the Daylight Economy Market in Hibbing, Minn. He then sold groceries for C.A. Pearson Wholesale.

He graduated from high school in 1935, spent some time as a traveling salesman, then began his own line of canned Chinese food called Chun King.

He sold that business in 1966 to R.J. Reynolds Foods Inc. for $63 million. He sold the next business he built from scratch, a pizza roll and snack business called Jeno's Inc., to Pillsbury for $135 million. He then built up a real estate business in Florida, which he eventually sold for $50 million in 1992.

At that point, a non-compete clause in his contract had expired, so he went back into the food business and built up Luigino's Inc., which makes frozen snacks for microwave cooking. By 2004, that business was estimated to be worth $300 million.

Along the way, Paulucci established a reputation for being kind, generous and temperamental. He helped or initiated several community projects but "had a reputation as a very tough man," former Duluth Mayor Gary Doty said.

He took many adversaries to court, including, once, one of his daughters, fired employees on the spot and bought newspaper ads blasting people and policies he did not like, the newspaper said.

"I've never gone through life worrying about what people think of me," he said.

Friends saw two sides.

"If there were people in need, I could call Jeno, and he never turned it down," Doty said.

Paulucci died only four days after the death of his wife, Lois, with whom he was married for 64 years.

"Once my mother passed, my father was determined to be with her. That was his wish, to be with Lois," said a daughter, Cindy Paulucci Selton.

Source: http://www.upi.com/Business_News/2011/11/26/Jeno-Paulucci-Duluth-businessman-dies/UPI-28411322337463/

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Blue chips drop 4 percent on recession fears (Reuters)

NEW YORK (Reuters) ? Stocks fell further on Thursday, with the Dow industrials briefly down 4 percent, as a bleak outlook from the Federal Reserve and weak data from China heightened fears of a global recession.

The Dow Jones industrial average dropped 413.38 points, or 3.72 percent, to 10,711.46. The S&P 500 dropped 38.84 points, or 3.33 percent, to 1,127.92. The Nasdaq Composite dropped 81.79 points, or 3.22 percent, to 2,456.40.

(Editing by James Dalgleish)

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20110922/bs_nm/us_markets_stocks

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Stocks nosedive amid fears of new global recession (AP)

PARIS ? Mounting evidence that the world economy is slowing down sharply sent global stock markets spiraling down Thursday as investors brushed off the U.S. Federal Reserve's efforts to spur growth and focused instead on the central bank's gloomy outlook.

Oil and other commodities tumbled, too, in the face of several signs that economies are shifting into reverse: the Fed's assessment of the U.S. economy is gloomier than a month ago, while figures from Europe hinted that a recession is looming and a Chinese manufacturing survey suggested a sharp slowdown.

These concerns heap more misery on markets already skittish about Europe's debt crisis. France's CAC-40 led the retreat, diving over 5 percent.

The losses began Wednesday afternoon in the U.S. after the Fed announced a highly anticipated program to trade in $400 billion worth of short-term bonds for the same amount of longer-term bonds. The goal is to ensure low borrowing rates for a long period, thereby helping to stimulate the housing market and other economic activity.

The program ? known as Operation Twist ? was bigger than expected, but that seemed to work against the Fed: Investors took it as a signal that the central bank was growing more concerned about the economy. In its statement, the Fed noted "significant downside risks to the economic outlook, including strains in global financial markets."

"Confidence was already shaky, at best, and the Fed's words only heightened worries about the outlook," said Benjamin Reitzes, an analyst at BMO Capital Markets.

At the close, France's CAC-40 was down a hefty 5.3 percent at 2,781.68 while Germany's DAX slid 5 percent to 5,164.21. The FTSE index of Britain's leading shares ended down 4.7 percent at 5,041.46.

U.S. stocks took a battering too ? the Dow Jones industrial average was down 3.1 percent at 10,670 while the broader Standard & Poor's 500 index fell 2.9 percent to 1,132.

The euro was also under severe pressure, trading 0.9 percent lower at $1.3457 as the dollar garnered support through its widely-percieved status as a a safe haven in times of financial turbulence.

Europe's single currency, which is used by 17 countries, is also being dragged down by concerns over Greece, which is currently in talks with its creditors about whether it has done enough to get the next slice of its bailout. If Athens doesn't get the euro8 billion ($11 billion) by mid-October, it will run out of money.

A Greek default would be disastrous for an already suffering eurozone.

Concerns about Greece have hit European banks, especially those in France, hard in recent weeks since the institutions hold a substantial amount of Greek debt.

On Thursday, the CEO of BNP Paribas was the latest to try to calm markets by declaring that his bank had a sufficient cushion of cash on hand. There had been reports that the bank was shopping around for investors in the Middle East.

"I formally deny it. We have no specific contact because we have no need for a capital increase," Baudouin Prot told BFM Business television. "With BNP Paribas, there is no particular problem. It's at the eurozone level that the concern rests and it's at that level that it needs to be solved."

The day also brought more bad news about the state of the eurozone economy there, with a closely watched survey from financial information company Markit indicating a recession could be on the way.

Markit's monthly purchasing managers index ? a gauge of business activity ? fell to 49.2 in September, its lowest level since July 2009, from 50.7 the previous month.

"The fall in the eurozone composite PMI below the theoretical 50 'no-change' barrier provides the strongest sign yet that the region is on the cusp of a recession," said Ben May of Capital Economics.

Eurostat, the EU's statistics office, also revealed that eurozone industrial orders plunged 2.1 percent in July alone, while the European Commission said its main measure of consumer confidence slid to a two-year low of minus 18.9 in September from -16.5 in August 2011.

A recession will only make it harder for Europe's heavily indebted countries to pay down their debts since it effectively means their governments are taking in less income.

Fears of a recession have driven down oil prices, which typically rise when economies are humming and their energy demands are increasing.

Benchmark oil fell a whopping $4.34 in electronic trading on the New York Mercantile Exchange to $81.60. Brent crude was down $4.19 to $106.16. Several metals were dragged down multiple percentage points as well, including silver, which tanked nearly 9 percent.

Earlier in Asia, stocks also fell. Japan's Nikkei 225 dropped 2.1 percent to close at 8,560.26. South Korea's Kospi slid 2.9 percent to 1,800.55. Australia's S&P/ASX 200 was 2.6 percent down at 3,964.90.

Hong Kong's Hang Seng saw the biggest fall, diving over 900 points, or 4.9 percent, to close at 17,911.90.

In mainland China, the Shanghai Composite Index closed down 2.8 percent at 2,443.06.

___

AP Business Writer Pamela Sampson contributed to this report from Bangkok.

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20110922/ap_on_bi_ge/world_markets

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Obama stumps for jobs bill in GOP leaders' turf (AP)

CINCINNATI ? President Barack Obama was marketing his massive jobs proposal Thursday from an outdated bridge that links the home states of his two chief congressional Republican rivals, a symbolic and cheeky maneuver designed to pressure the GOP and convey resolve in the face of a sputtering economy.

Obama was making his pitch for $447 billion in tax cuts, jobless aid and public works projects at the Brent Spence Bridge south of Cincinnati, an aging span that connects House Speaker John Boehner's state of Ohio with Kentucky, home of Senate Republican leader Mitch McConnell.

The politics are clear. White House press secretary Jay Carney gladly conceded that the trip was a symbolic one designed to heap pressure on Boehner and McConnell to rally behind his plan

"We have never suggested that ground would be broken on this project immediately," Carney said. "We're very transparent about why we're going to this bridge: We're going to this bridge because it spans the river that divides two states that are represented by the speaker of the House and the Senate minority leader."

The bridge itself, deemed "functionally obsolete" by the federal government, is already scheduled to be replaced starting in 2015, although Carney argued that passage of the president's jobs bill could speed up that timeline.

McConnell and Boehner, both of whom have supported the bridge project, dismissed the visit as a ploy.

"I would suggest, Mr. President, that you think about ways to actually help the people of Kentucky and Ohio, instead of how you can use their roads and bridges as a backdrop for making a political point," McConnell said on the Senate floor Thursday morning. "If you really want to help our state then come back to Washington and work with Republicans on legislation that will actually do something to revive our economy and create jobs. And forget the political theater."

Added Boehner spokesman Brendan Buck, "We want to work with the president to support job creation, but political stunts and empty promises bring us no closer to finding common ground."

In the very short term, Obama's visit was making traffic on the overloaded 1963 bridge worse, not better. Ohio and Kentucky transportation officials warned motorists to expect long delays around the time of the president's appearance Thursday afternoon because of lane closures and a ramp shutdown. Boehner joked that stopping bridge traffic won't win any votes.

Both Boehner and McConnell declined a White House invitation to attend Thursday's event, because Congress is in session.

Public opinion polls show only about 1 person in 4 approves of Obama's economic performance. The president is seeking to put his differences with Republicans into sharper focus and to shift to his political rivals some of the responsibility for the nation's high unemployment and feeble growth rate.

The president's defiant approach to Boehner and McConnell represents a shift from his outreach to Boehner this summer, when the two men tried to work out a deal that would extend the nation's borrowing authority and cut long-term deficits as well.

Then, the president took Boehner golfing. Now he's taking him to task.

Obama on Monday announced a $3 trillion deficit-reduction package, half of which consists of tax increases. It was a direct challenge to Republicans and Boehner in particular, who last week flatly ruled out tax increases as way to lower long-term deficits.

Obama's visit will be his second to Ohio in two weeks. It's not the first time the president has taken on Boehner in his home state. A year ago, Obama went to Parma, Ohio, just days after Boehner had delivered an economic speech to the City Club of Cleveland. Obama criticized the speaker by name for his policy proposals.

Source: http://us.rd.yahoo.com/dailynews/rss/economy/*http%3A//news.yahoo.com/s/ap/20110922/ap_on_go_pr_wh/us_obama

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Stocks nosedive amid fears of new global recession (AP)

PARIS ? Mounting evidence that the world economy is slowing down sharply sent global stock markets spiraling down Thursday as investors brushed off the U.S. Federal Reserve's efforts to spur growth and focused instead on the central bank's gloomy outlook.

Oil and other commodities tumbled, too, in the face of several signs that economies are shifting into reverse: the Fed's assessment of the U.S. economy is gloomier than a month ago, while figures from Europe hinted that a recession is looming and a Chinese manufacturing survey suggested a sharp slowdown.

These concerns heap more misery on markets already skittish about Europe's debt crisis. France's CAC-40 led the retreat, diving over 5 percent.

The losses began Wednesday afternoon in the U.S. after the Fed announced a highly anticipated program to trade in $400 billion worth of short-term bonds for the same amount of longer-term bonds. The goal is to ensure low borrowing rates for a long period, thereby helping to stimulate the housing market and other economic activity.

The program ? known as Operation Twist ? was bigger than expected, but that seemed to work against the Fed: Investors took it as a signal that the central bank was growing more concerned about the economy. In its statement, the Fed noted "significant downside risks to the economic outlook, including strains in global financial markets."

"Confidence was already shaky, at best, and the Fed's words only heightened worries about the outlook," said Benjamin Reitzes, an analyst at BMO Capital Markets.

At the close, France's CAC-40 was down a hefty 5.3 percent at 2,781.68 while Germany's DAX slid 5 percent to 5,164.21. The FTSE index of Britain's leading shares ended down 4.7 percent at 5,041.46.

U.S. stocks took a battering too ? the Dow Jones industrial average was down 3.1 percent at 10,670 while the broader Standard & Poor's 500 index fell 2.9 percent to 1,132.

The euro was also under severe pressure, trading 0.9 percent lower at $1.3457 as the dollar garnered support through its widely-percieved status as a a safe haven in times of financial turbulence.

Europe's single currency, which is used by 17 countries, is also being dragged down by concerns over Greece, which is currently in talks with its creditors about whether it has done enough to get the next slice of its bailout. If Athens doesn't get the euro8 billion ($11 billion) by mid-October, it will run out of money.

A Greek default would be disastrous for an already suffering eurozone.

Concerns about Greece have hit European banks, especially those in France, hard in recent weeks since the institutions hold a substantial amount of Greek debt.

On Thursday, the CEO of BNP Paribas was the latest to try to calm markets by declaring that his bank had a sufficient cushion of cash on hand. There had been reports that the bank was shopping around for investors in the Middle East.

"I formally deny it. We have no specific contact because we have no need for a capital increase," Baudouin Prot told BFM Business television. "With BNP Paribas, there is no particular problem. It's at the eurozone level that the concern rests and it's at that level that it needs to be solved."

The day also brought more bad news about the state of the eurozone economy there, with a closely watched survey from financial information company Markit indicating a recession could be on the way.

Markit's monthly purchasing managers index ? a gauge of business activity ? fell to 49.2 in September, its lowest level since July 2009, from 50.7 the previous month.

"The fall in the eurozone composite PMI below the theoretical 50 'no-change' barrier provides the strongest sign yet that the region is on the cusp of a recession," said Ben May of Capital Economics.

Eurostat, the EU's statistics office, also revealed that eurozone industrial orders plunged 2.1 percent in July alone, while the European Commission said its main measure of consumer confidence slid to a two-year low of minus 18.9 in September from -16.5 in August 2011.

A recession will only make it harder for Europe's heavily indebted countries to pay down their debts since it effectively means their governments are taking in less income.

Fears of a recession have driven down oil prices, which typically rise when economies are humming and their energy demands are increasing.

Benchmark oil fell a whopping $4.34 in electronic trading on the New York Mercantile Exchange to $81.60. Brent crude was down $4.19 to $106.16. Several metals were dragged down multiple percentage points as well, including silver, which tanked nearly 9 percent.

Earlier in Asia, stocks also fell. Japan's Nikkei 225 dropped 2.1 percent to close at 8,560.26. South Korea's Kospi slid 2.9 percent to 1,800.55. Australia's S&P/ASX 200 was 2.6 percent down at 3,964.90.

Hong Kong's Hang Seng saw the biggest fall, diving over 900 points, or 4.9 percent, to close at 17,911.90.

In mainland China, the Shanghai Composite Index closed down 2.8 percent at 2,443.06.

___

AP Business Writer Pamela Sampson contributed to this report from Bangkok.

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20110922/ap_on_bi_ge/world_markets

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FedEx pares 2012 outlook, shares hit 2-year low (Reuters)

(Reuters) ? FedEx Corp (FDX.N), the world's No. 2 package delivery company, cut its full-year profit outlook, citing fuel prices and weak global economic growth, sending its shares down as much as 11 percent to a two-year low.

Chief Executive Fred Smith said he did not expect economic conditions to improve much any time soon, although he did not expect the United States to dip back into recession.

"We expect sluggish economic growth will continue, largely due to a lack of confidence that U.S. and European policy makers will effectively address current economic challenges," Smith said on a conference call to discuss quarterly results.

The sour mood of the consumer, which is compelling companies around the world to squeeze costs and hold down inventories, remains the biggest drag on the economic growth that FedEx needs to give its business a boost, company executives said on the call on Thursday.

With inventories low, FedEx expects to benefit if there is an uptick in demand in the run-up to the holiday shopping season and retailers needed fast delivery. Much is also riding on robust online orders. But for now, things remain subdued.

"Our customers' hair is not on fire," said FedEx Chief Financial Officer Alan Graf. "They're just saying, you know, we're going to be steady as she goes, so it just feels completely different than it did back in 2008."

The sheer volume of goods moved by FedEx makes its shipment trends a bellwether for consumer demand and economic growth. The value of packages handled by FedEx's trucks and planes every year is equivalent to about 4 percent of U.S. gross domestic product and 1.5 percent of global GDP.

FedEx, which is also being hurt by a slowdown in international trade, reported earnings of $1.46 per share, just beating the average analyst estimate of $1.45, according to Thomson Reuters I/B/E/S/.

FedEx shares were down 8.9 percent at $66.04 in afternoon trading, well below their year-high of $98.66 in July.

"It's a cheap stock, and if this is a slowdown it's probably an opportunity to buy. But if it's more an indication of recession then I would say you wouldn't want to own it," said Donald Porter at Dalton, Greiner, Hartman, Maher & Co, which holds shares in rival United Parcel Service (UPS.N).

To help counter falling volumes in the Express division, its biggest, FedEx said it would raise shipping rates by a net 3.9 percent on average for U.S. domestic, U.S. export and U.S. import services from January 2.

The company so far has had little resistance to rate increases, the latest of which went into effect this month.

Memphis, Tennessee-based FedEx reiterated its $4.2 billion capital expenditure plan for the year ending next May. The company is considering buying about 50 wide-body freighters from Boeing Co (BA.N) and Airbus (EAD.PA) to update its fleet to more fuel-efficient models.

ASIAN VOLUMES DOWN

At FedEx Express, which represents more than 60 percent of total revenue, domestic revenue per package rose 13 percent in the three months ended August 31, mainly due to higher fuel surcharges and increased weight per package. Average daily package volume dropped 3 percent.

Volume fell 4 percent in the division's international unit, mainly due to a decline in traffic from Asia. Revenue per package grew 16 percent, helped by favorable exchange rates.

FedEx is the world's biggest air cargo carrier, a fact that Fred Labatt, director of equity research at South Texas Money Management, said made it more vulnerable than UPS to weakness in international trade.

"The stock is going to be more sensitive than UPS, which has a lot more ground and less air," he said. "On the other hand, the yields were better pretty much across the board in all the segments, which means they're getting pricing and the company's doing a really good job of managing their costs," said Labatt, whose firm holds FedEx shares.

FedEx said fiscal first-quarter profit, which slightly beat forecasts, rose to $464 million, or $1.46 per share, from $380 million, or $1.20 per share, a year ago. Analysts, on average, had expected a profit of $1.45 per share.

The company cut its forecast for earnings for the year to May 2012 to $6.25 to $6.75 per share from its June estimate of between $6.35 and $6.85.

Revenue rose 11 percent to $10.52 billion from $9.46 billion a year earlier. That was above the average forecast of $10.32 billion.

With the stock down about 30 percent this year, FedEx said it planned to buy back 5.7 million shares under its existing repurchase authorization.

The Dow Jones Transportation average (.DJT) has dropped about 19 percent this year while UPS shares have fallen about 14 percent.

UPS, the world's biggest package delivery company, last week affirmed its call for record earnings in 2011, downplaying the likelihood of a double-dip recession.

Its shares were down 3.7 percent at $61.97 at midday.

(Reporting by Lynn Adler in New York, editing by Dave Zimmerman, Maureen Bavdek and Matthew Lewis and Ted Kerr)

Source: http://us.rd.yahoo.com/dailynews/rss/economy/*http%3A//news.yahoo.com/s/nm/20110922/bs_nm/us_fedex

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EU crisis, U.S. politics threats to economy: Geithner (Reuters)

WASHINGTON (Reuters) ? Treasury Secretary Timothy Geithner on Thursday said that the European debt crisis and the political divisions in the United States were the biggest threats to the global economy.

Earlier this year, soaring oil prices and the Japan earthquake slowed economic growth substantially, but Geithner said those two "shocks" have started to fade.

"The two other clouds still over us are the European crisis and the deep concern that you can see across the world and around the country about whether the political system in the United States is up to the challenges we face," Geithner said before weekend meetings of the International Monetary Fund and the World Bank in Washington.

"Not just the near term challenges of supporting an economy still healing from crisis, but long-term challenges of growth and competitiveness and fiscal sustainability," he told an event sponsored by the National Journal news publication.

Geithner will meet with his counterparts from the Group of 20 economies on Thursday evening where discussions about the European crisis and its impact on market confidence will be the focus.

Finance ministers from around the world are pressuring Europe to do more to contain the escalating debt crisis that has rattled global markets and the European financial system.

Geithner, who has traveled to Europe twice in the last two weeks to deal with the crisis, voiced confidence in the European Union's ability to do so.

"They recognize that if you let, as the United States did in the early part of 2008, the momentum of these concerns build, they're very hard to arrest, much more expensive to arrest," Geithner said. "So you're going to see them act with more force in the coming weeks and months," he said.

The IMF has warned that the crisis has increased European banks' exposure by 300 billion euros and has been pushing for a recapitalization so that they can weather any potential losses.

Geithner has privately urged euro zone finance ministers to leverage the European bailout fund to give it greater capacity to handle the bloc's problems.

"I am very confident they're going to move in the direction of expanding the effective financial capacity of that set of financial ring fences because they have no alternative and they recognize that and they're going to do it," he said.

"They're just trying to figure out how to get there in a way that is politically attractive."

(Reporting by Rachelle Younglai; Editing by Theodore d'Afflisio)

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20110922/bs_nm/us_usa_geithner_global

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Protesters vow to camp near Wall St. indefinitely (AP)

NEW YORK ? In a small granite plaza a block from the New York Stock Exchange, a group of 20-somethings in flannel pajama pants and tie-dyed T-shirts are plotting the demise of Wall Street as we know it.

They have been there since Saturday, sleeping on cardboard boxes, eating pizza and take-out dinners that were paid for by donations to their cause. There are only about 200 of them left now, though they started out 1,500 strong.

Welcome to the headquarters of "Occupy Wall Street," a place where topless women stood Wednesday morning on the corner shouting "I can't afford a shirt!" while construction workers eagerly snapped photos on their phones. A small group of the protesters wound their way through the streets of lower Manhattan escorted by police officers, blaring bullhorns and chanting "Resist! Stand Up! There comes a time when the people rise up!"

What, exactly, they are protesting is somewhat unclear. When asked what they are fighting, they gave a variety of responses ranging from Wall Street to global warming. On its website, the group proclaims: "We, the people of the United States of America, considering the crisis at hand, now reassert our sovereign control of our land."

Sam Wood, an unemployed 21-year-old, said he was there because he doesn't think it's fair "the way that the rich get more breaks than the poor."

"What I really want to achieve is to educate people about what's going on with the economy right now," he said as he bumped into another protester waving an American flag. "A couple of the ways that we might be able to fix it, you know?"

A barricade was set up to protect the NYSE building as they marched past it. Some people in suits stopped in the street to gaze curiously at the scene in the plaza ? a strange jumble of people carrying signs, playing snare drums and openly smoking marijuana on benches.

Police watched the proceedings carefully after a scuffle Tuesday that led to seven arrests and one injured protester. Most of those arrested were given disorderly conduct summonses and released.

Four more protesters were arrested Wednesday for disorderly conduct and released.

Ryan Reed, 21, a senior at Rutgers University, was missing class to attend the protest, but his professors are letting him make up the work by writing papers about the experience.

"The enemy is the big business leaders of Wall Street, the big oil company leaders, the coal company leaders, the big military industrial leaders," he said. "I came out here because what I see ? and what I feel most people in this country see ? is an economy and a system that's collapsing."

Kaitlyn Leigh, a 21-year-old from Rochester, N.Y., said she is going to move out of her apartment and stay here indefinitely because she's been so inspired by what she's seen.

"It's about creating a community in this liberated space," she said. "It's about having the ability to have people's needs met, whether it be food, clothing, shelter."

Every afternoon, the group convenes at the center of the plaza for what they call a "General Assembly," a meeting during which they map out their tactics for the next day. Forbidden from using a microphone ? they don't have the proper permits ? the group got creative.

"What we do is a people's microphone," Reed said. "So the person who's speaking says a couple of words and then the whole crowd repeats it so everyone can hear. It's actually beautiful."

For Reed, at least, an ideal outcome for the situation would be a near-shutdown of Wall Street, with protesters descending upon Wall Street and preventing bankers from getting to their desks. But he realizes that may not happen anytime soon ? particularly not before he returns to class next week.

"So far we haven't had the numbers to clog the kind of traffic we need to clog," he admitted.

Though the crowd has thinned as the days pass, the group is vowing to stick it out as long as possible. Bill Csapo, an unofficial spokesman for the protesters, said they've gained access to a commercial kitchen and plan to start cooking meals for the group in the next day or two. On Saturday night, people donated $10,000 worth of pizzas.

Csapo, of Cleveland, Tenn., hasn't actually traveled to Manhattan for the event. He got involved by meeting some of the organizers on Internet forums, which is how the whole thing got started. But he said the occupiers ? a term he prefers instead of "protesters" ? aren't leaving anytime soon.

"I'm currently unemployed and loving what I'm doing," Leigh said. "I'm going to stay here until the end."

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20110921/ap_on_re_us/us_wall_street_protest

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Stocks nosedive amid fears of new global recession (AP)

PARIS ? Mounting evidence that the world economy is slowing down sharply sent global stock markets spiraling down Thursday as investors brushed off the U.S. Federal Reserve's efforts to spur growth and focused instead on the central bank's gloomy outlook.

Oil and other commodities tumbled, too, in the face of several signs that economies are shifting into reverse: the Fed's assessment of the U.S. economy is gloomier than a month ago, while figures from Europe hinted that a recession is looming and a Chinese manufacturing survey suggested a sharp slowdown.

These concerns heap more misery on markets already skittish about Europe's debt crisis. France's CAC-40 led the retreat, diving over 5 percent.

The losses began Wednesday afternoon in the U.S. after the Fed announced a highly anticipated program to trade in $400 billion worth of short-term bonds for the same amount of longer-term bonds. The goal is to ensure low borrowing rates for a long period, thereby helping to stimulate the housing market and other economic activity.

The program ? known as Operation Twist ? was bigger than expected, but that seemed to work against the Fed: Investors took it as a signal that the central bank was growing more concerned about the economy. In its statement, the Fed noted "significant downside risks to the economic outlook, including strains in global financial markets."

"Confidence was already shaky, at best, and the Fed's words only heightened worries about the outlook," said Benjamin Reitzes, an analyst at BMO Capital Markets.

At the close, France's CAC-40 was down a hefty 5.3 percent at 2,781.68 while Germany's DAX slid 5 percent to 5,164.21. The FTSE index of Britain's leading shares ended down 4.7 percent at 5,041.46.

U.S. stocks took a battering too ? the Dow Jones industrial average was down 3.1 percent at 10,670 while the broader Standard & Poor's 500 index fell 2.9 percent to 1,132.

The euro was also under severe pressure, trading 0.9 percent lower at $1.3457 as the dollar garnered support through its widely-percieved status as a a safe haven in times of financial turbulence.

Europe's single currency, which is used by 17 countries, is also being dragged down by concerns over Greece, which is currently in talks with its creditors about whether it has done enough to get the next slice of its bailout. If Athens doesn't get the euro8 billion ($11 billion) by mid-October, it will run out of money.

A Greek default would be disastrous for an already suffering eurozone.

Concerns about Greece have hit European banks, especially those in France, hard in recent weeks since the institutions hold a substantial amount of Greek debt.

On Thursday, the CEO of BNP Paribas was the latest to try to calm markets by declaring that his bank had a sufficient cushion of cash on hand. There had been reports that the bank was shopping around for investors in the Middle East.

"I formally deny it. We have no specific contact because we have no need for a capital increase," Baudouin Prot told BFM Business television. "With BNP Paribas, there is no particular problem. It's at the eurozone level that the concern rests and it's at that level that it needs to be solved."

The day also brought more bad news about the state of the eurozone economy there, with a closely watched survey from financial information company Markit indicating a recession could be on the way.

Markit's monthly purchasing managers index ? a gauge of business activity ? fell to 49.2 in September, its lowest level since July 2009, from 50.7 the previous month.

"The fall in the eurozone composite PMI below the theoretical 50 'no-change' barrier provides the strongest sign yet that the region is on the cusp of a recession," said Ben May of Capital Economics.

Eurostat, the EU's statistics office, also revealed that eurozone industrial orders plunged 2.1 percent in July alone, while the European Commission said its main measure of consumer confidence slid to a two-year low of minus 18.9 in September from -16.5 in August 2011.

A recession will only make it harder for Europe's heavily indebted countries to pay down their debts since it effectively means their governments are taking in less income.

Fears of a recession have driven down oil prices, which typically rise when economies are humming and their energy demands are increasing.

Benchmark oil fell a whopping $4.34 in electronic trading on the New York Mercantile Exchange to $81.60. Brent crude was down $4.19 to $106.16. Several metals were dragged down multiple percentage points as well, including silver, which tanked nearly 9 percent.

Earlier in Asia, stocks also fell. Japan's Nikkei 225 dropped 2.1 percent to close at 8,560.26. South Korea's Kospi slid 2.9 percent to 1,800.55. Australia's S&P/ASX 200 was 2.6 percent down at 3,964.90.

Hong Kong's Hang Seng saw the biggest fall, diving over 900 points, or 4.9 percent, to close at 17,911.90.

In mainland China, the Shanghai Composite Index closed down 2.8 percent at 2,443.06.

___

AP Business Writer Pamela Sampson contributed to this report from Bangkok.

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20110922/ap_on_bi_ge/world_markets

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Something Surprising Pops Up at TiVo

TiVo (TIVO) investors can finally click the green "thumbs up" button on their shareholder remotes with confidence. The digital video recorder pioneer closed out its fiscal third quarter with 117,000 more subscribers than it started with.

This may not seem like a big deal, but keep in mind that TiVo has been shedding couch potatoes for a long time. This is actually the first time in four years that TiVo signed up more new accounts than it lost to cancellations.

It's a welcome achievement, but TiVo can't stop now.

There's Nothing Good on TV

There are just 2.04 million total TiVo subscriptions. You were probably expecting a bigger number, and that's understandable. It may seem as if most homes have TiVos, but in reality most TV buffs are recording and playing back shows on knockoff DVRs. Cable and satellite television companies often provide their own boxes to subscribers.

This doesn't mean that all pay television providers are offering generic boxes. TiVo's growth these days relies largely on these multiple service operators -- from all over the world now -- marketing TiVo to their customers. Just 1.135 million of TiVo's 2.045 million subscribers are serviced directly by TiVo, and that figured actually did go down during the quarter.

This is a pretty important distinction, since TiVo generates an average of $8.22 a month from its direct subscribers but only receives an average of $1.65 a month for users going through third-party multiple service operators.

Thinking Outside the Box

TiVo has used its valuable patents to stand up to knockoffs. It took a few years, but TiVo finally emerged with a nine-figure settlement out of DISH Network (DISH). However, the value of its DVR business and its valuable time-shifting patents face an even greater obstacle than cable companies willing to trample over TiVo's intellectual property. The very way that many of us are consuming TV is changing.

There are now several online services offering free streaming of as many as tens of thousands of titles. There's no longer a need to zap through long commercials or even record the shows in the first place. Streaming websites and the growing catalog of on-demand options from cable and satellite television providers make it easy to see that CSI or Big Bang Theory episode you missed earlier in the week.

TiVo realizes this. It was one of the first home theater hardware companies to incorporate Netflix (NFLX) streaming into its DVRs. TiVo continues to update its products regularly, trying to stay a step ahead of the competition.

The one unwelcome streak that TiVo couldn't lay to rest was its lack of profitability. TiVo has now posted deficits in 12 quarters in a row. However, it's easy overlook the red ink this time. For the first time in a long time, the number of TiVo couch potatoes is growing. That in itself is news that's good enough to pause, rewind, and hear again.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article, except for Netflix. Motley Fool newsletter services have recommended buying shares of Netflix.

Get info on stocks mentioned in this article:

Source: http://www.dailyfinance.com/2011/11/28/something-surprising-pops-up-at-tivo/

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Britain looks at possible double-dip

Published: Nov. 26, 2011 at 1:28 PM

LONDON, Nov. 26 (UPI) -- Government sources told Britain's The Daily Telegraph a highly respected economic organization is predicting a double-dip recession for the country.

The Daily Telegraph said Saturday that official said the Organization of Economic Cooperation and Development had warned the British government of its prediction, which will be released Monday a day before Chancellor George Osborne is to give a major policy address.

The OECD report, even though the next recession is expected to be mild, is said to have "sent a bolt of lightning" through Britain's Treasury and the office of Prime Minister David Cameron.

The OECD is also recommending a policy shift, saying Britain should slow down its path towards budget austerity and, should the eurozone debt crisis not be resolved soon, return to adding some stimulus to the economy.

The government is expected to unveil a plan Tuesday that aims to increase lending by banks to small and medium-sized companies. In addition, the government is expected to back $77 billion worth of infrastructure projects and $926 million in education programs.

Source: http://www.upi.com/Business_News/2011/11/26/Britain-looks-at-possible-double-dip/UPI-46561322332094/

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One Sign That the Housing Market Has Hit Bottom

If you think that it has been a rough few years to own a home, imagine what it's like to be in the business of building new ones. Real estate developers need to buy available land, build attractive housing, and then compete against vacant homes and foreclosures while still selling their properties at a profit.

Well, in a small yet encouraging sign, luxury homebuilder Toll Brothers (TOL) is entering the Seattle market by acquiring privately held homebuilder CamWest Development.

Residential developers snapping up smaller builders will be a common occurrence from now on. There will be a shakeout, and weaker companies -- after years of losses -- will surrender to stronger rivals. This is sector consolidation, and it's perfectly natural after a prolonged downturn.

Toll hasn't been immune to the malaise. It posted huge losses in fiscal 2008 and 2009. It reported a small deficit in 2010, though it was actually a long overdue profit from continuing operations. However, Toll has one of the better balance sheets in the business. Its CEO is also highly quotable as a housing industry visionary. If Toll's buying now, instead of waiting for lower prices down the road, it's a good sign that the Pennsylvania-based developer sees the market bottoming out here.

CamWest is small, but it fits right into Toll's sweet spot of high-end residential properties. CamWest doesn't sell cheap houses. Prices start in the mid $300,000s, with some McMansions fetching over $1 million. CamWest expects to deliver 180 homes in the Seattle area this year, generating $90 million in revenue. In other words, the average CamWest property this year is selling for a healthy $500,000.

Toll wouldn't buy a developer toiling at the low end of the market, so the high prices shouldn't give the market sticker shock.

However, it clearly sees things picking up on the high end to make this gutsy and opportunistic purchase.

Creaky Foundations

We're not out of the woods yet.

The National Association of Realtors reported that a whopping one-third of all existing home sales fell through last month. Contract failures were at a more reasonable 8% rate a year earlier. Whether it's buyers getting cold feet or stingy lenders shaking their heads, there aren't too many buyers closing on deals despite homes fetching their lowest prices in years.

If this is what the market is doing at a time when mortgage rates are also near historic lows, what will happen to home prices once rates inch higher, making properties even less affordable for potential borrowers?

The challenge for developers is to build quality homes at a time when real estate prices are falling at a faster rate than the costs required to construct new digs. It's easy to see why so many homebuilders are calling it quits or looking to be bought out. Toll -- like any smart home buyer these days -- can afford to be picky.

However, seeing Toll dive headfirst into a new market for the company is encouraging. It may be seeing the turnaround that no else is seeing right now.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article.

Get info on stocks mentioned in this article:

Source: http://www.dailyfinance.com/2011/11/28/one-sign-that-the-housing-market-has-hit-bottom/

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Protesters vow to camp near Wall St. indefinitely (AP)

NEW YORK ? In a small granite plaza a block from the New York Stock Exchange, a group of 20-somethings in flannel pajama pants and tie-dyed T-shirts are plotting the demise of Wall Street as we know it.

They have been there since Saturday, sleeping on cardboard boxes, eating pizza and take-out dinners that were paid for by donations to their cause. There are only about 200 of them left now, though they started out 1,500 strong.

Welcome to the headquarters of "Occupy Wall Street," a place where topless women stood Wednesday morning on the corner shouting "I can't afford a shirt!" while construction workers eagerly snapped photos on their phones. A small group of the protesters wound their way through the streets of lower Manhattan escorted by police officers, blaring bullhorns and chanting "Resist! Stand Up! There comes a time when the people rise up!"

What, exactly, they are protesting is somewhat unclear. When asked what they are fighting, they gave a variety of responses ranging from Wall Street to global warming. On its website, the group proclaims: "We, the people of the United States of America, considering the crisis at hand, now reassert our sovereign control of our land."

Sam Wood, an unemployed 21-year-old, said he was there because he doesn't think it's fair "the way that the rich get more breaks than the poor."

"What I really want to achieve is to educate people about what's going on with the economy right now," he said as he bumped into another protester waving an American flag. "A couple of the ways that we might be able to fix it, you know?"

A barricade was set up to protect the NYSE building as they marched past it. Some people in suits stopped in the street to gaze curiously at the scene in the plaza ? a strange jumble of people carrying signs, playing snare drums and openly smoking marijuana on benches.

Police watched the proceedings carefully after a scuffle Tuesday that led to seven arrests and one injured protester. Most of those arrested were given disorderly conduct summonses and released.

Four more protesters were arrested Wednesday for disorderly conduct and released.

Ryan Reed, 21, a senior at Rutgers University, was missing class to attend the protest, but his professors are letting him make up the work by writing papers about the experience.

"The enemy is the big business leaders of Wall Street, the big oil company leaders, the coal company leaders, the big military industrial leaders," he said. "I came out here because what I see ? and what I feel most people in this country see ? is an economy and a system that's collapsing."

Kaitlyn Leigh, a 21-year-old from Rochester, N.Y., said she is going to move out of her apartment and stay here indefinitely because she's been so inspired by what she's seen.

"It's about creating a community in this liberated space," she said. "It's about having the ability to have people's needs met, whether it be food, clothing, shelter."

Every afternoon, the group convenes at the center of the plaza for what they call a "General Assembly," a meeting during which they map out their tactics for the next day. Forbidden from using a microphone ? they don't have the proper permits ? the group got creative.

"What we do is a people's microphone," Reed said. "So the person who's speaking says a couple of words and then the whole crowd repeats it so everyone can hear. It's actually beautiful."

For Reed, at least, an ideal outcome for the situation would be a near-shutdown of Wall Street, with protesters descending upon Wall Street and preventing bankers from getting to their desks. But he realizes that may not happen anytime soon ? particularly not before he returns to class next week.

"So far we haven't had the numbers to clog the kind of traffic we need to clog," he admitted.

Though the crowd has thinned as the days pass, the group is vowing to stick it out as long as possible. Bill Csapo, an unofficial spokesman for the protesters, said they've gained access to a commercial kitchen and plan to start cooking meals for the group in the next day or two. On Saturday night, people donated $10,000 worth of pizzas.

Csapo, of Cleveland, Tenn., hasn't actually traveled to Manhattan for the event. He got involved by meeting some of the organizers on Internet forums, which is how the whole thing got started. But he said the occupiers ? a term he prefers instead of "protesters" ? aren't leaving anytime soon.

"I'm currently unemployed and loving what I'm doing," Leigh said. "I'm going to stay here until the end."

Source: http://us.rd.yahoo.com/dailynews/rss/stocks/*http%3A//news.yahoo.com/s/ap/20110921/ap_on_re_us/us_wall_street_protest

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Here Is Why Herman Cain?s Popularity Boost Won?t Last: Davidowitz

[unable to retrieve full-text content]Former Godfather's Pizza CEO Herman Cain has taken the lead in the Republican polls for President. His popularity has jumped 22% in six short weeks, according to a new Wall Street Journal/NBC News poll "I think he is a real person and that is why he is ahead in the polls," says Howard Davidowitz, chairman [...]

Source: http:/blogs/daily-ticker/why-herman-cain-popularity-boost-won-t-last-133409732.html

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