Finance Blog number 1

Like all greedy vultures, I’m looking to prey on the fear and misfortune of others. With stocks riding a yo-yo, jobs scarce and worries about a new recession, there’s a lot of fear and misfortune around.

So, I asked some fellow carrion-pickers to suggest a few investment morsels to chew on in these scary times. Their answers ranged from high-dividend stocks to master limited partnerships to certain technology stocks and, surprisingly, beaten-down banks.

This just might be the moment to swoop in on the St. Louis housing market. Some sellers are anxious, others are desperate, and mortgage rates are skimpy. More important, a local economist who specializes in housing thinks prices are about at bottom around here. More on that at the bottom of this column.

First, you have to decide if you have the stomach to do anything with your money but sit on it.

We’re in the midst of ocean-spanning angst. At home, we worry over a possible new recession. Manufacturing, a main driver of the recovery so far, has apparently stopped growing, and confidence is in a deep funk.

Then again, consumers are spending moderately after a disturbing pause in May. Slipping food and gasoline prices are giving people a little lift. Employers are still hiring, although modestly.

In all, most economists see mopey, disappointing growth for the rest of the year, but no recession.

We can still wring our hands over Europe, where the sovereign debt mess simmers on. The danger is that it could boil over into a full-blown financial panic.

Because of all that, stocks are on a roller coaster.

“It seems silly when one day a company goes up 10 percent and the next day it goes down 10 percent,” says Ken Crawford, portfolio manager at Argent Capital in Clayton. That silliness prompts Argent to sit on the sidelines until reason returns.

Others argue that the stock market has already priced in a recession. Stocks are off 13 percent from their high of July. That makes them look cheap.

“Stocks are very attractively priced these days at 12 times operating earnings. That’s something we have not seen in 20 years,” says Joe Williams, chief investment strategist at Commerce Bank.

Stocks would still be cheap even if earnings estimates for next year are lowered, as they probably will be. They’re now at only 10 times next year’s expected profits. The historical average for trailing earnings is about 16.

Williams and Joe Terril sing the same tune: a love song for dividends.

“Over the next couple of years, you’ll see more and more investors looking around for income. The time to buy is now,” says Terril, who manages $430 million at Terril & Co. in Sunset Hills.

The Fed says it expects to keep short-term interest rates stable into 2013, which eases part of the risk for investors.

Williams likes giant companies with high dividends and a tendency to raise them, such as oil company Conoco, drugmaker Pfizer and goods company Procter & Gamble. All yield 3 or 4 percent, along with AT&T, which yields nearly 6 percent.

Terril likes master limited partnerships, which own pipelines and other energy infrastructure. He likes Kinder Morgan, yielding 6.8 percent, and Sunoco Logistics yielding 5.8 percent.

Terril is buying Bank of America and Citigroup preferred stock, yielding over 7.5 percent. Terril was buying Bank of America before Warren Buffett agreed to pump $5 billion of his company’s cash into the bank on Thursday. Other investors had spent the week running away from the nation’s biggest bank, worried over its mortgage woes and the chance it will have to scrounge up more capital.

But the bank is dubbed “too big to fail,” meaning that the government can’t let it go broke for fear of sparking a panic. “I don’t think it will fail at all,” says Terril.

Terril is also picking up a couple of tech stocks: Agilent, the testing equipment firm, and Coherent, which makes laser-based components.

Consumer confidence is in the pits - the lowest in 31 years, according to the University of Michigan’s survey. That might actually be positive for stocks. Stocks have gained an average of 26 percent in the year after confidence hits bottom, according to J.P. Morgan.

At J.P. Morgan in Clayton, managing director Hans Fredrikson thinks junk bonds are a buy again. They’ve been beaten down for weeks. Intermediate-term junk will yield 6 to 8 percent.

Now on to that new feeding ground for vultures, housing. The rate on 30-year mortgages averaged 4.15 percent last week, the lowest rate since at least 1971, according to Freddie Mac.

But housing prices in St. Louis have been falling since 2008.

In June, single-family homes sold for 8.6 percent cheaper than a year earlier, according to the tracking service CoreLogic.

Now there are signs that the slump may be over, says Bill Rogers, economist at the University of Missouri-St. Louis. Rogers says his own index of St. Louis County home prices has shown a leveling off in recent months. “We’re about at the bottom,” he says, while acknowledging that he might be mistaken.

If this is the bottom, it’s a really good time to buy a house.

Remember the biggest lesson learned over the past four years: A house is a place to live, not an investment. Don’t expect rising home values anytime in the future, says Rogers. St. Louis won’t have the population growth needed to drive up prices swiftly.

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Today, answers to some of your questions:

Q: I will soon have to begin repaying my student loans for undergraduate and graduate degrees. Because the total is about $82,000, I fear that I will never be able to pay it off. The statements I have received in the mail recommend I pay $900 per month. I love my job at a young Web company, but I don’t make much, and there is no chance I can pay $900 a month. Is there anything I can do?

A. If you have federal loans, you can make use of new government rules that give people a break on student loan payments they cannot afford.

Under the relatively new “income-based repayment” plan, you get relief if the regular payments you would have to make over 10 years will exceed about 15 percent of your discretionary income. That’s calculated based on a formula related to the U.S. poverty line. Besides income, the calculation involves the size of your family.

Simply put, most borrowers will be required to pay less than 10 percent of their adjusted gross income, said Finaid.org publisher Mark Kantrowitz.

For a quick assessment, typically, if you owe more on your loans than you earn annually, you are a likely candidate for some relief. For married couples, both spouses can be eligible, depending on income. And the income requirements apply to Stafford, PLUS and consolidated federal student loans.

To see how you stand, try this calculator: http://www.tinyurl.com/l3ktdx.

Based on the calculator, if you are single and earning $70,000 a year, you would be expected to pay $670 a month.

Of course, you don’t escape your obligations indefinitely. If you are getting relief and not paying all your interest each month, it gets tacked on to the end of the loan.

Thus, you might end up paying off your loan for longer than the 10 years. But if after 25 years you still have not paid off all you owe, the government will forgive what’s left. Also, if you happen to take a public service government job, you can get your loan forgiven.

For more information, visit http://www.tinyurl.com/mjvuue.

Keep in mind that this program applies to federal student loans, not to private loans that you may get from a bank or other lender. So for people who have not yet finished college, this is one reason, before borrowing, to carefully consider who is giving you your loans and the rules that apply.

Also, it is wise to consider your likely salary before taking on significant debt. Look up your profession at Salary.com.

It’s painful to finish college and wonder how you will pay your loans. And paying interest for more than 10 years is expensive, even if your monthly payments are manageable.

To see if you might qualify for relief after graduating, call your lender and ask about the options for alternative payment plans, Kantrowitz said.

If your lender doesn’t offer any options based on your income, Kantrowitz said, you can go through a process called “consolidation.”

Make sure you use the government’s “direct loan program.” This means you combine all your old student loans into a new federal loan, and once your loans are consolidated in the government program, you can then qualify for the income-based repayment plan.

For information on consolidation, see http://loanconsolidation.ed.gov.

Q. Is our money safe in the bank if the government can’t pay its debt?

A. You are one of many people who have asked me this, and it is sad that Americans find themselves worrying again

Jen McGowan found out she lost her job at IQT Solutions through Facebook.

She was about to share the good news about her newborn niece when she saw that a co-worker had posted an angry message about being terminated.

“We should have at least had some notice so we could’ve pre-planned,” said McGowan, who has worked as a senior support representative with the call centre for five years.

The 34-year-old single mother of two is one of 400 IQT Solutions employees in Oshawa scrambling to make ends meet after being unexpectedly terminated last Friday without pay.

On Monday morning, McGowan along with more than 100 of her former co-workers marched through Oshawa carrying signs saying “Give Us Our Money” and “IQT=No Job, No Food, No Shelter.”

“I’m hoping that IQT will pay us what we’re owed,” said McGowan, noting that some employees are waiting for up to six weeks worth of pay.

IQT Solutions, the U.S.-based call centre, declared bankruptcy last week in Canada and terminated 400 jobs in Oshawa, 100 jobs in Trois-Rivières, Que., and 375 jobs in Laval, Que.

The rally began around 8 a.m. at the Midtown Mall and ended shortly after 10:30 a.m. at city hall in Oshawa.

McGowan said the City of Oshawa and the Ontario Federation of Labour have offered their support as workers continue to fight for their pay.

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In a stunning retreat, Rupert Murdoch’s News Corp. media empire dropped its bid Wednesday to take over full control of British Sky Broadcasting amid a political and legal firestorm over phone hacking at one of its British newspapers.

Murdoch was forced to step back from the biggest battle of his career over a lucrative prize, accepting that he could not win government acceptance of the takeover as Britain’s major political parties had united against it.

“It has become clear that it is too difficult to progress in this climate,” News Corp. deputy chairman and president Chase Carey said in a brief statement to the London Stock Exchange.

Shares in BSkyB dived 4 percent lower after the announcement.

Hours earlier, Prime Minister David Cameron announced he was putting a senior judge in charge of an inquiry into phone hacking and alleged bribery by a tabloid newspaper, and vowed to investigate an allegation that a U.K. reporter may have sought the phone numbers of 9/11 victims in a quest for sensational scoops.

“There is a firestorm, if you like, that is engulfing parts of the media, parts of the police, and indeed our political system’s ability to respond,” Cameron said in the House of Commons. He said the focus must now be on the victims, and make sure that the guilty are prosecuted.

The hacking and police bribery scandal also claimed another victim. News International, the British unit of News Corp., said its legal director, Tom Crone, had left the company. Crone had led an internal inquiry that concluded only two people at the News of the World tabloid had been involved in phone hacking _ a stance that collapsed as numerous revelations tumbled out this year.

“This is a victory for people up and down this country who have been appalled by the revelations of the phone hacking scandal and the failure of News International to take responsibility,” said Labour Party leader Ed Miliband, who had mobilized an all-party agreement to vote on a motion urging Murdoch to back off.

“People thought it was beyond belief that Mr. Murdoch could continue with his takeover after these revelations,” Miliband said.

Outrage has grown and Murdoch’s News Corp.’s share price has fallen since a report last week that his News of the World tabloid hacked into the phone of teenage murder victim Milly Dowler in 2002 and may have impeded a police investigation into her disappearance. That was followed by claims of intrusion into private records by Murdoch’s other U.K. papers, The Sun and The Sunday Times.

Murdoch shut down the 168-year-old News of the World on Sunday and came to London to direct the company’s efforts to get on top of its problems.

Dowler’s family was meeting with Cameron at 10 Downing Street later Wednesday.

Police have arrested eight people so far in their investigation, including Cameron’s former communications director Andy Coulson, a former editor of News of the World. No one has been charged.

Cameron appointed Lord Justice Brian Leveson to lead the inquiry, which will be able to compel witnesses _ including government figures _ to give evidence under oath.

Leveson will first investigate the culture, practices and ethics of the press, its relationship with police and the failure of the current system of self-regulation. That inquiry is expected to last up to one year. Only then will the inquiry focus shift to what went wrong at the News of the World and other papers, Cameron said.

The suggestion that 9/11 victims may have been targeted surfaced Monday in the Mirror, a British competitor of The Sun. It quoted an anonymous source as saying an unidentified American investigator had rejected approaches from unidentified journalists who showed a particular interest in British victims of the terror attacks. It cited no evidence that any phone had actually been hacked.

In Washington, Sen. Jay Rockefeller, a Democrat from West Virginia, urged an investigation into whether Murdoch’s News Corp. had violated U.S. law because of the British paper’s activities.

If there was any hacking of phones belonging to 9/11 victims or other Americans, “the consequences will be severe,” said Rockefeller, chairman of the Senate Committee on Commerce, Science and Transportation.

Murdoch had hoped to gain control of the 61 percent of BSkyB shares that his News Corp. doesn’t yet own, but the bid was delayed for several months even before he withdrew while the British government’s Competition Commission reviewed monopoly concerns.

A report Wednesday in The Wall Street Journal, which is part of News Corp., said Murdoch has met with advisers over recent weeks to discuss possible options including the sale of the remaining British newspapers _ The Sun, The Times and The Sunday Times.

The Journal, citing unidentified people familiar with the situation, said there didn’t appear to be any buyers given the poor economics of the newspaper division.

Still, a defiant mood was evident at one News International paper, The Sun tabloid, which slapped the headline “Brown Wrong” across its front page in response to claims by former Prime Minister Gordon Brown that the paper had obtained confidential medical records of his younger son.

Brown accused Murdoch’s papers, including The Sun and The Sunday Times, of obtaining his confidential bank accounts, tax records and even health information about his son, Fraser, who suffers from cystic fibrosis, using fraudulent, criminal means. But, the newspaper insisted it learned of the boy’s ailment from the father of another child with the same condition, and that it contacted the Browns, who consented to the story.

“We are not aware of Mr. Brown, nor any of his colleagues to whom we spoke, making any complaint about it at the time,” The Sun said.

Murdoch’s News International responded to his accusations by asking Brown for any information that would help to investigate them.

London Mayor Boris Johnson said Wednesday that he had been informed that his telephone had been hacked, but he decided not to take legal action.

“Quite frankly, why on earth should I go through some court case in which it would have inevitably involved going over all the pathetic so-called revelations that the News of the World had dug up?” Johnson said.

“Why should I, when the police had made it clear to me when they had abundant evidence?” he added.

Police in the U.K. are pursuing two investigations of News International, one on phone hacking and the other on allegations that the News of the World bribed police officers for information.

Hugh Orde, president of the Association of Chief Police Officers, urged News International to come clean about any such payments.

“Let’s not play around with legal games here: If they have names, dates, times, places, payments to officers, we would like to see them so that we can lock these officers up and throw away the key,” Orde told the British Broadcasting radio.

Police officials have indicated the bribery investigations involve about half a dozen officers.

Source

TORONTO

Research In Motion Ltd. has avoided a vote to shake up its combined chair and chief executive management structure, agreeing instead to form a committee to consider investor complaints.

The BlackBerry maker said that after talks with Northwest & Ethical Investments L.P., Northwest will withdraw its motion demanding appointment of a fully independent chair at RIM.

In a proxy filing, the activist investor called for separation of the chief executive and chairmen roles now held by Jim Balsillie and Mike Lazaridis, arguing that RIM

European stocks were helped Friday by an easing in tensions over Greece’s debt crisis after a big Cabinet reshuffle and suggestions that Germany has softened its stance over the need for private creditors to shoulder a part of a second Greek bailout.

The centerpiece of Prime Minister George Papandreou’s wide-ranging Cabinet reshuffle was the appointment of long-time rival Evangelos Venizelos to finance minister and deputy prime minister.

Papandreou will be hoping that the move brings an end to a damaging 48-hour political crisis that raised fears that Greece could run out of money in less than a month.

The reshuffle came after a seven-hour meeting between Socialist lawmakers and Papandreou on Thursday, at which they demanded that the prime minister remove inexperienced loyalists from the Cabinet and replace them with more experienced party veterans, mostly in their late-50s.

The hope in the markets is that Papandreou has done enough to get austerity measures through Parliament, which are necessary for the country to get more bailout funds.

Further relief came from news that Germany may be backing off from its tough stance to get private creditors to take their share of any future second bailout of Greece.

In a press conference with French President Nicolas Sarkozy, Germany Chancellor Angela Merkel agreed that private investors should be part of the solution but that their participation had to be on a “voluntary” basis.

“Markets are currently taking this as a positive step,” said UBS analyst Chris Walker.

In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 5,713 while Germany’s DAX rose 0.7 percent to 7,156. The CAC-40 in France was 1.1 percent higher at 3,835.

Greek stocks were doing particularly well, with the main ATHEX index up 3.6 percent.

Wall Street was poised for a solid opening, too _ Dow futures were up 0.7 percent at 11,976 while the broader Standard & Poor’s 500 futures rose 0 personal loans for people with bad credit.8 percent to 1,273.

The euro was also a big gainer, climbing 0.5 percent on the day to $1.4284. On Thursday, it had fallen below $1.41 for the first time in three weeks as investors fretted about a possible Greek debt default.

Greece’s debt crisis has been the main driver in markets this week, but with a seemingly calmer mood Friday, investors may turn to U.S. economic data later for more direction. A run of weak U.S. economic news has weighed on stock markets over the past few years.

The University of Michigan’s monthly consumer confidence survey could well be a catalyst to how markets end the week. The consensus in the markets is that the headline index will rise modestly to 74.5 in June from the previous month’s 74.30.

“Any signs of improving demand from U.S. consumers would have wide reaching implications and the hope is that with oil prices tumbling, lower petrol costs will free up cash for discretionary spending,” said Ben Critchley, senior sales trader at IG Index.

Oil prices continued to push lower Friday, with the benchmark rate on the New York Mercantile Exchange down another $1.22 to $93.76 a barrel.

Earlier in Asia, before the reshuffle and the German comments, stocks pushed lower.

Japan’s Nikkei 225 index closed 0.6 percent lower at 9,351.40 while Hong Kong’s Hang Seng index fell 1.2 percent to 21,695.26.

Mainland Chinese shares fell to their lowest level so far this year as investors reacted to news of a rise in the rate for Chinese central bank’s three-month bills on Thursday, seen as a cue that an interest rate hike may be in the offing.

The Shanghai Composite Index fell 0.8 percent to 2,642.82, while the Shenzhen Composite Index fell 1.1 percent to 1,085.11.

____

Pamela Sampson in Bangkok contributed to this report.

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QUOTE OF THE WEEK

“For (American workers) you have the twin forces of technology, which means that machines can do things that people used to … and (employers can now) make stuff all over the world. You take technology, you take globalization, and for the American worker this is incredibly difficult. If you look at the state of American labor right now, you have 7 million officially unemployed payday loans. But when you add all the people who have stopped looking for work and all the people working in part-time jobs … that pay half the median wage, that’s 24 million people. And those numbers aren’t getting better anytime soon.”

France’s Axa Private Equity says it has agreed to buy a $1.7 billion private equity portfolio from Citigroup Inc. as the big U.S. bank sheds some of its non-core businesses.

Terms of the deal announced Wednesday were not disclosed.

The portfolio includes 207 limited partnership interests in private equity buyout funds and a portfolio of direct stakes in companies. It does not include funds or investments managed by Citi Capital Advisors.

Citi, and other banks hard hit by the financial meltdown in 2008 and subsequent downturn, have been selling off some assets to reduce noncore businesses.

Axa has been buying up private equity portfolios, including a $1.9 billion portfolio from Bank of America in April 2010.

Citi shares fell 24 cents to $37.34 in pre-market trading.

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New Zealand’s dollar reached its highest level since exchange-rate controls ended in 1985 after a report showed the nation’s trade surplus widened by almost twice economists’ estimates to a record in April.

The so-called kiwi has risen 8.8 percent against the greenback since Feb. 25, the second-best performer among 16 major counterparts, as Asian demand drove up prices for New Zealand’s milk, lumber and meat exports. Australia’s dollar touched a three-month low against its New Zealand counterpart amid signs the bigger nation’s economy is cooling.

“Resilience of the kiwi has been very impressive,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Credit Agricole CIB, a unit of France’s second- biggest bank. “The numbers today from New Zealand are obviously helping out as the trade data was far stronger than the market had expected.”

The kiwi rose to as high as 82.19 U.S. cents before trading at 81.78 cents as of 3:41 p.m. in Sydney. It closed at 81.92 U.S. cents in New York on May 27. The previous record of 82.14 U.S. cents was established in February 2008.

Australia’s dollar was at $1.0684 from $1.0706 on May 27 in New York, after earlier rising to $1.0737, the highest since May 11. The currency was at NZ$1.3066 from NZ$1.3058 after touching NZ$1.3019, the weakest level since Feb. 2. The Aussie fell to 86.30 yen from 86.49 yen.

Commodities Driving Surplus

The New Zealand dollar’s gain makes its exports more expensive, hampering the nation’s economic recovery from two earthquakes in the South Island city of Christchurch that killed more than 180 people and caused an estimated NZ$15 billion in reconstruction costs. Prime Minister John Key told reporters in Wellington today that the kiwi was trading at “unsustainable levels” for non-commodity exporters.

The exchange rate was “more bearable” for the commodity sector because of high export prices, he said.

Exports outpaced imports by NZ$1.11 billion ($908 million) from a revised NZ$578 million surplus in March, Statistics New Zealand said today in Wellington. The median estimate in a Bloomberg News survey of economists was for a NZ$600 million surplus.

Prices of New Zealand’s commodity exports gained for an eighth month to a record in April, according to an index calculated by ANZ National Bank Ltd. Exports to China, New Zealand’s second-biggest export market after Australia, surged 42 percent to NZ$5.39 billion in the year ended March 31, government figures showed.

‘Rising Incomes’

“Rising incomes in the Asian region will generate a long- run demand for agricultural commodities, with the New Zealand economy better placed than most” as a supplier, Richard Grace, chief currency strategist and head of international economics at Commonwealth Bank of Australia, wrote in a note to clients May 27. “These developments will be reflected in a higher New Zealand dollar.”

The Aussie halted its two-day gain against the greenback as the statistics bureau in Sydney said that gross operating profits at companies declined 2 percent in the first quarter from the previous three months, when they dropped a revised 1.7 percent.

Weaker GDP

Australia’s Treasurer Wayne Swan said before a government report on gross domestic product this week that natural disasters in the nation probably cut more than 1 percentage point from economic growth in the first quarter.

Swan’s latest estimate was higher than one he made in April that put damage to GDP in the first quarter at 0.75 percentage point. The median estimate in a Bloomberg News survey of economists is for a 0.3 percent contraction from the final three months of 2010.

Gains in New Zealand’s dollar were limited as its 10-day relative strength index versus the U.S. dollar rose to 70.23, above the level of 70 that suggests an asset’s price has risen too fast and is poised to reverse course.

“The kiwi’s recent rise was rapid,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest currency margin company. “It’s not surprising to see some correction.”

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