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Thursday, August 13, 2009

Saturday, July 18, 2009

GE Q2 profit falls, scales down industrial outlook

GE Q2 profit falls, scales down industrial outlook
General Electric's 2Q profit tumbles 49 pct on finance unit struggles, weak demand for goods

General Electric Co.'s second-quarter profit was sliced nearly in half, the company said Friday, as the recession drove down earnings at its finance unit and smothered demand for its wide-ranging industrial goods.
Although earnings beat Wall Street forecasts by a penny, GE's revenue fell $3 billion short of expectations, helping push down shares 6 percent. Quarterly sales fell across its divisions, from health care to broadcasting, suggesting that the recession is still sapping demand for goods and services.

That appeared to be troubling news for the nation's economic health since GE's businesses touch nearly all facets of the economy and investors were hoping sales would show flashes of strength.

The Fairfield, Conn.-based company is also retreating from a more optimistic outlook for its industrial businesses that make everything from microwaves to wind turbines. It's now saying those divisions could break even rather than show a profit this year.

GE 's second-quarter net income totaled $2.6 billion, or 24 cents per share, after paying preferred dividends. That fell 49 percent from $5.1 billion, or 51 cents per share, a year earlier. Revenue declined 17 percent to $39.1 billion.

Analysts polled by Thomson Reuters expected GE to earn 23 cents per share on revenue of $42.16 billion.

The first half of 2009 has been a difficult one for GE, one of the world's largest companies. It cut its dividend sharply to preserve cash, lost its vaunted Triple-A credit rating, and saw its share price plummet on fears that things could get worse for its lending unit.

GE Capital, which lends money on everything from credit cards to commercial real estate, posted a modest profit of $590 million in the second quarter. But those results were 80 percent lower than a year earlier, further proof that GE Capital is struggling with losses on bad loans. GE boosted reserves for loan losses to $6.6 billion during the quarter.

Still, GE Capital "remains on track to be profitable for the full year," Jeff Immelt, GE's chief executive, said.

GE Capital has tried to compensate for its weaknesses by scaling back its reliance on riskier debt and lowering costs through steps like cutting staff. It has also been helped by tax credits that helped it dodge a loss during the first three months of the year.

But GE Capital's second-quarter earnings show that the unit continues to face serious challenges. For example, GE's real estate unit, which owns office buildings and makes loans for commercial properties, posted a $237 million loss compared with $484 million in profits a year earlier.

"We are still very cautious about the real estate outlook," said Keith Sherin, GE's chief financial officer.

The company plans to give a detailed review of GE Capital later this month, the second time this year it will open its books as it tries to convince investors that there are no big losses lurking.

As GE Capital founders, the company has looked to its industrial divisions for stability. But those businesses, which make products like home appliances, train locomotives, diagnostic equipment for hospitals and jet engines, have also struggled during the recession.

GE said Friday that its industrial units should just break even this year. Previously, the company had said earnings could reach $5 billion. Read Article...

Comment Trendsbridge: Of all the troubling signs the Economy is not back on track and the crisis is not over yet this is one of the worst.
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Tuesday, July 7, 2009

Optimism fading

Optimism fading
(01:53) Report

Jul 2 - The Dow closed lower for the third consecutive week as larger-than-expected job cuts added to signs a U.S. economic recovery could be sluggish.
Conway Gittens reports.

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Cycle of rising unemployment, foreclosures and bankruptcies raising economic stress

AP analysis: Economic stress up in much of nation
Cycle of rising unemployment, foreclosures and bankruptcies raising economic stress

(Source AP) California, Michigan and South Carolina suffered the most financial pain in May as unemployment, home foreclosures and bankruptcies rose, according to The Associated Press' monthly analysis of economic stress in more than 3,100 U.S. counties.

The latest results of the AP's Economic Stress Index show the worst financial crisis since the 1930s causing lingering damage even as other signs suggest the recession is winding down.
The average county's Stress score, fueled by worsening unemployment, foreclosures and bankruptcies, rose to 10 in May, from 9.7 in April.

In May 2008, the average Stress score was 6.2. The pain was lower then because the economy was still expanding. In fact, the second quarter of 2008 was the last time the economy grew.

The AP calculates a score from 1 to 100 based on each county's unemployment, foreclosure and bankruptcy rates. The higher the score, the higher the economic stress.

Under a rough rule of thumb, a county is considered stressed when its score zooms past 11. In May, 36 percent of the counties scored 11 or higher, up from 34 percent in April. But the latest reading was slightly better than February and March, when nearly 40 percent of counties were at or above that threshold.

Federal Reserve Chairman Ben Bernanke and many other economists predict the recession will end later this year. Even if it does, unemployment, foreclosures and bankruptcies are likely to keep climbing and cause further harm in many communities, economists predicted.

"The pain will linger well after the recession is over, making for a subdued economic recovery," said Richard Yamarone, economist at Argus Research.

Many economists say the recession eased from April to June and that the economy might start growing again as soon as the current July-to-September quarter.

Among states, California, Michigan and South Carolina showed the most economic stress in May, with their counties' scores averaging 16, 15.9 and 15, respectively, the AP analysis shows.
California has been battered by the housing bust, and Michigan has absorbed the brunt of the auto industry crisis.
"And South Carolina is a little bit of everything," said Sean Snaith, economics professor at the University of Central Florida. "Manufacturing and construction jobs have been hard hit in the state."
One common thread running through all three states is heavy jobs losses. Rising unemployment, in turn, is escalating foreclosures and bankruptcies.
The rising economic stress comes as California, saddled with a whopping $24.3 billion budget deficit, and other states are scrambling to cope with fiscal crises. Read More...
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Tuesday, June 30, 2009

"Extraordinarily Evil": Judge Brings 150-Year Hammer Down on Madoff

"Extraordinarily Evil": Judge Brings 150-Year Hammer Down on Madoff

In sentencing Bernie Madoff to the maximum 150-year prison term Monday, U.S. District Judge Denny Chin cited the "extraordinarily evil" nature of his crimes.

"Here the message must be sent that...this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll," Judge Chin said.

The ruling provided some solace to Madoff's victims who cheered the sentencing. Several Madoff investors spoke at the hearing and "without exception, attacked Madoff as an unfeeling, horrible, relentless pursuer of their money and souls," says Allan Dodds Frank, a veteran journalist and correspondent.

In the accompanying video, Frank recounts the "intensity" of the courtroom, how Madoff "pretty impassively" reacted to the sentence, and how quickly he moved when facing his victims. "If you blinked, you missed it," he says.

A specialist in white-collar crime, Frank said the 150-year sentence almost certainly means Madoff isn't going to any "country club" prison, although that's up the Bureau of Prisons to ultimately decide.

"A sentence of more than 30 years generally means you go to high security if not a super-maximum," Frank says. "150 years? It's hard to say he doesn't go to one of those facilities. They are not a picnic. Even medium-security Federal prison, you're still in with a lot of dangerous people."

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Asia Currencies Head for Best Quarter Since 2004, Led by Rupiah

Asia Currencies Head for Best Quarter Since 2004, Led by Rupiah

June 30 (Bloomberg) -- Asian currencies headed for their biggest quarterly gain since 2004, led by Indonesia’s rupiah and South Korea’s won, as optimism the global economic slump is easing fueled demand for emerging-market assets.

The rupiah extended a quarterly winning streak that started in April 2008 on optimism President Susilo Bambang Yudhoyono will win re-election next month and introduce policies to support growth in Southeast Asia’s largest economy. The won gained as the Kospi Index of equities headed for its best quarter in two years. Crude and palm oil prices rose, boosting the outlook for commodity exporters including Malaysia.

“Most countries are moving along with a refreshing recovery trend that should be good for markets,” said Yeo Chin Tiong, head of treasury at OSK Investmnent Bank Bhd. in Kuala Lumpur. “The economies are chugging along, not fantastic, but stock and currency markets are trading on feel-good sentiment.”

The rupiah strengthened 0.6 percent to 10,210 per dollar as of 9 a.m. in Jakarta, taking its three-month rally to 14.6 percent, according to data compiled by Bloomberg. The won rose 0.5 percent 1,279.60 for an 8.1 percent gain since March 31. The ringgit added 3.5 percent in the quarter to 3.5220, and Taiwan’s dollar climbed 3.3 percent to NT$32.857.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active regional currencies, rose almost 2.8 percent this quarter, the most since 2004. Investors ploughed a net $17.8 billion this year into eight Asian stock markets outside Japan, according Bloomberg data. The MSCI Asia Pacific index of regional stocks rallied 29 percent since the end of March.

Korean Confidence

The dollar weakened 0.2 percent to 95.89 yen and fell for a fourth day against the euro to $1.4115 as investors sought higher-yielding assets. The ICE’s Dollar Index, which tracks the currency against its six major rivals, declined 6.7 percent this quarter as demand for higher yields erodes the dollar’s safe- haven appeal.

The won was poised for its biggest quarterly gain in four years as local manufacturers turned less bearish in their business outlook.

An index measuring expectations for July advanced to 78 from 76 in June, based on a survey of 1,445 producers. The index reached 44 in January, the lowest since the series began in 1991. A score of less than 100 means pessimists outnumber optimists.

“Confidence numbers have picked up certainly, but they’re not yet being matched by real activity,” said Patrick Bennett, Hong Kong-based currency strategist at Societe Generale SA. “Some of the confidence priced into equities is prone to be unwound.”

Commodity Prices

The ringgit strengthened by the most in almost three weeks as stocks rallied and commodity prices extended gains, brightening the outlook for exports.

Higher prices for palm and crude oil, which together account for 10 percent of Malaysia’s exports, may help bring an end to a seven-month drop in overseas sales. Prime Minister Najib Razak may unveil incentives to attract funds from abroad when he opens a two-day investment conference in Kuala Lumpur today, according to a report from HwangDBS Vickers Research Sdn. yesterday. Read Article...
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Sunday, June 28, 2009

The End of a Rally for Asian Stocks?

The End of a Rally for Asian Stocks?

The eight-month sprint for this sector is due for a pause or even a little backtracking. Barron's Leslie Norton reports.

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Facebook, Twitter and peers for sale - privately

Facebook, Twitter and peers for sale - privately
No acquisition, no IPO, no problem: Private exchanges springing up to combat lack of liquidity

NEW YORK (AP) -- Scott Painter makes his living betting on startup companies, having played a role in launching 29 of them over the years. But with the bad economy choking initial public offerings and acquisitions, Painter is now backing an idea that makes it easier for insiders like him to sell shares in their companies even before they go public.

SharesPost, which was founded by Painter's business partner, Greg Brogger, launched publicly in June. Through SharesPost's Web site, Painter is trying to sell shares in several companies he helped found, including car pricing startup He also wants to buy shares in companies that are far from an IPO, like short-messaging site Twitter and business-networking site LinkedIn.

SharesPost is one of a few private stock exchanges that are emerging to fight what venture capitalists call a liquidity crisis. These exchanges give stakeholders an alternative way to trade their shares in hot startups like Facebook for cold, hard cash -- without having to wait years for an IPO.

Employees at startup employees often put in long hours but get salaries that can be 20 percent less than their peers at public companies. In return, they get stock or options that they hope will be a path to sports cars and summer homes after their company goes public or is bought out.

Given this, services like SharesPost could help startup workers get some cash while awaiting a distant IPO that might never even get off the ground. Most people won't be in on the action, though, since these exchanges are only open to a small pool of buyers.

And it's not clear how much -- or how little -- stock has changed hands through them. In its short life, Santa Monica, Calif.-based SharesPost said it has executed one $25,000 transaction, while another service, New York-based SecondMarket, said it has completed about 40 transactions in the past year worth about $150 million.
Still, if they manage to thrive, these exchanges could help the economy. By selling shares on a private exchange, an investor can free up funds to put into other startups. And institutional investors could use these services to broaden their holdings to include fast-growing companies that have yet to go public.

The methods of these private exchanges vary. SharesPost uses an online bulletin board to introduce buyers and sellers. SecondMarket links the parties and lets companies set up their own mini-markets that they control, while Redwood City, Calif.-based XChange is rolling out an online system that will allow buyers and sellers to connect and directly trade shares for cash.

All are open just to institutional investors -- organizations like venture capital firms or pension funds that manage at least $100 million in assets -- and individual accredited investors. That category includes people with a net worth of at least $1 million, or salary of at least $200,000 for the last two years.

The concept is not entirely new. Nyppex, formed in 1998, facilitates private-company stock trades, and a few companies with similar offerings emerged during the last economic downturn but failed to gather much steam. Among the problems: Determining a fair price for a private company's stock is tough without much public information.

This time, however, employees and investors are more aggressively looking for a way to get a return on their dedication and funding. More than a dozen companies have priced IPOs in the U.S. this year, down from 35 in the first half of 2008, according to research firm Renaissance Capital. In the same period of dot-com-crazy 2000, there were 219 IPOs in the U.S.
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Saturday, June 27, 2009

Madoff ruined lives, victims say. Madoff ordered to forfeit over $170 billion

Madoff ordered to forfeit over $170 billion
NY prosecutors: Judge orders disgraced financier Bernard Madoff to forfeit over $170 billion

NEW YORK (AP) -- Disgraced financier Bernard Madoff must forfeit $170 billion, a federal judge ordered Friday.

U.S. District Judge Denny Chin entered a preliminary order of forfeiture, and Acting U.S. Attorney Lev Dassin released a copy of the order Friday night. Madoff was ordered to give up his interests in all property, including real estate, investments, cars and boats.

According to earlier court documents, prosecutors reserved the right to pursue more than $170 billion in criminal forfeiture. That represents the total amount of money that could be connected to the fraud, not the amount stolen or lost.

The government also settled claims against Madoff's wife, according to Friday's order. Under the arrangement, the government obtained Ruth Madoff's interest in all property, including more than $80 million of property to which she had claimed was hers, prosecutors said.

The order makes it clear, though, that nothing precludes other departments or entities from seeking to recover additional funds.

A call to Madoff's lawyer, Ira Sorkin, after hours Friday was not immediately returned.

In his own court filing in March, Sorkin said the government's forfeiture demand of $177 billion was "grossly overstated -- and misleading -- even for a case of this magnitude."
The agreements strip the Madoffs of all their interest in properties belonging to them, including homes in Manhattan, Montauk, and Palm Beach, Fla., worth a total of nearly $22 million. The Madoff's must also forfeit all insured or salable personal property contained in the homes.

Other seized assets include accounts at Cohmad Securities Corp., valued at almost $50 million, and at Wachovia Bank, valued at just over $13 million, and tens of millions of dollars in loans extended by Madoff to family, employees and friends.
The judge's order also authorized the U.S. Marshals Service to sell the Manhattan co-op, properties in Montauk and Palm Beach and certain cars and boats.

Madoff, 71, is due to be sentenced Monday after pleading guilty in March to charges that his exclusive investment advisory business was actually a massive Ponzi scheme.
Federal prosecutors want Madoff to be sentenced to 150 years in prison for orchestrating perhaps the largest financial swindle in history.

Madoff's lawyer has said his client should serve only 12 years.
"The sheer scale of the fraud calls for severe punishment," the prosecutors wrote in response to a defense motion seeking lighter punishment.
Federal sentencing guidelines allow for the 150-year term, prosecutors said. Any lesser sentence, they added, should still be long enough to send a forceful message and "assure that Madoff will remain in prison for life."
The government's papers quoted from letters to U.S. District Judge Denny Chin written by victims of the scheme who are suffering severe hardships.

Madoff "ruined lives," one letter said. "He deserves no mercy."

At the time of Madoff's arrest, fictitious account statements showed thousands of clients had $65 billion. But investigators say he never traded securities, and instead used money from new investors to pay returns to existing clients.
Prosecutors said Friday that the total losses, which span decades, haven't been calculated. But 1,341 accounts opened since December 1995 alone suffered loses of $13.2 billion, they said.
Sorkin argued in court papers last week for a 12-year term. He said his client deserved credit for his voluntary surrender, full acceptance of responsibility and meaningful cooperation efforts.
"We seek neither mercy nor sympathy," Sorkin wrote. But he urged the judge to "set aside the emotion and hysteria attendant to this case" as he determines the sentence.
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Friday, June 26, 2009

Bernanke vs. Buffett: Who's Right on the Economy?

Bernanke vs. Buffett: Who's Right on the Economy?

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Deflation fears spread in Japan after consumer prices fall at record pace

Record fall in Japan prices fuel deflation fears
Deflation fears spread in Japan after consumer prices fall at record pace

TOKYO (AP) -- Deflation is clawing its way back in Japan, and that's not good news for an economy trying to recover from its worst recession since World War II.

Japan's key consumer price index tumbled at a record pace in May, the government said Friday. The core nationwide CPI, which excludes volatile fresh food prices, fell 1.1 percent from the previous year in the third straight month of decline.

The result marked the biggest fall since the government began releasing comparable data in 1971.

Japan appears to be "heading for another lengthy period of deflation," said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

Lower prices may seem like a good thing, but deflation can hamper growth by depressing company profits and causing consumers to postpone purchases, leading to production and wage cuts. It can also increase debt burdens.

The drop in underlying prices is "set to be persistent" and can lead to various problems for companies and individuals because interest rates will "be too high for prevailing economic conditions," Jerram said in a note to clients.

Japan underwent a destabilizing bout of deflation during the 1990s, and again earlier this decade, when the world's second-largest economy struggled to escape from a real estate and banking crisis.

After the results, Japan's finance minister Kaoru Yosano expressed concerns about a significant slowdown in demand.
"We continue to monitor price movements, and need to carefully implement economic management to avoid...a deflationary spiral," Yosano said at a news conference, according to Kyodo news agency.
With crude oil prices down dramatically from record highs a year earlier, energy and transportation prices fell sharply in May. Fuel, light and water charges were down 3 percent, and private transportation costs tumbled 9.2 percent.
But analysts point to the 0.5 percent decline in so-called "core-core CPI," which excludes food and energy, as a more troubling sign of weakness in underlying prices.
Prices for household durables fell 4.9 percent, and those for clothing slipped 0.5 percent.
The core CPI for Tokyo dropped 1.3 percent in June, suggesting that prices nationwide are headed further south. Prices in the nation's capital are considered a leading barometer of price trends across Japan.
"This is consistent with media reports that large supermarkets are marking such goods down as households turn increasingly defensive amid severe employment and income conditions," said Kyohei Morita, chief economist at Barclays Capital in Tokyo.
Japan's central bank predicts that prices will keep falling for at least two years. In its latest economic outlook report in May, it forecast core CPI to drop 1.5 percent this fiscal year ending March 2010 and another 1 percent the following year.

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The Challenge of Regulating Derivatives

High & Low Finance
The Challenge of Regulating Derivatives
By FLOYD NORRIS Published: June 26, 2009
The derivatives industry has started a public relations campaign arguing that it is helpful to businesses, especially smaller ones.
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