Finance Blog number 1

BlackRock president Robert Kapito is walking the firm’s talk.

Kapito, who helped found the world’s largest asset management firm, now has about 70% of his investment assets in dividend-paying global companies, and 30% in high-yield corporate bonds.

Those are both cornerstones of BlackRock’s new "Investing in a New World" initiative, which encourages investors to get out of idle cash and find assets that generate income in a slow-growth, low-rate environment.

Americans had a record $10 trillion deposited in their bank accounts at the end of 2011, noted Kapito. And with the Federal Reserve holding interest rates near historic lows, that cash is earning virtually nothing.

"People need to rethink the cost of cash, and think about income," said Kapito. "They’re worried they don’t earn enough and won’t have enough to retire on, but the longer they sit in cash, the longer they’ll have to work and they won’t be able to retire when they want to."

Century-old IBM hits fresh all-time high

Kapito said investors are much better off investing in dividend-paying stocks, which return between 3% and 5% a year, and so-called junk bonds, which yield between 5% and 6%. Both offer better returns than Treasuries, he added. The 10-year government note currently pays only about 2%.

High-yield bonds have been extremely popular among income-hungry investors this year. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF () has raked in more than $3 billion so far in 2012, almost as much at the total amount of assets it brought in during all of 2011.

For dividend-paying stocks, Kapito said investors can gain exposure through individual companies, like AT&T (, Fortune 500), Pfizer (, Fortune 500), Verizon (, Fortune 500) and Johnson & Johnson (, Fortune 500), or buy shares of an ETF like the iShares High Dividend Equity Fund (), which launched last year and includes all of those companies and others like Procter & Gamble (, Fortune 500), Merck (, Fortune 500) and Intel (, Fortune 500).

Kapito said he also likes to invest in municipal bonds, particularly those issued in his current hometown of New York City, since those yield about 4% and are exempt from income taxes.  

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Oil prices hovered below $107 a barrel Tuesday in Asia after U.S. and Israel leaders met to discuss growing tensions over Iran’s nuclear program.

Benchmark oil for April delivery was down 2 cents to $106.70 at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 2 cents to settle at $106.72 per barrel in New York on Monday.

Brent crude was steady at $123.80 per barrel in London.

After a meeting Monday in Washington, President Barack Obama and Israeli Prime Minister Benjamin Netanyahu showed no sign of give on competing ways to resolve the crisis. Obama urged pressure and diplomacy to prevent Iran from getting a nuclear bomb while Netanyahu emphasized his nation’s right to a pre-emptive attack.

The U.S., Europe, Israel and other nations fear that Iran may be building a nuclear weapon. Iran, the world’s third-largest oil exporter, denies the charge.

“The Iranian fear premium didn’t change in our view,” energy consultant Ritterbusch and Associates said in a report.

Crude has risen from $96 last month amid investor concern that a military conflict aimed at destroying Iran’s nuclear capabilities would disrupt global oil supplies. Analysts say Saudi Arabia and other oil producers do not have enough spare capacity to quickly make up for Iran’s 4 million barrels a day of crude.

Analysts estimate crude would jump to $150 in the wake of an attack by Israel on Iran’s nuclear operations.

“The risk of a supply disruption due to geopolitical factors is uncomfortably high and increasing,” said Richard Soultanian of NUS Consulting.

In other energy trading, heating oil fell 0.6 cent to $3.21 per gallon and gasoline futures were steady at $3.26 per gallon. Natural gas fell 0.5 cent at $2.35 per 1,000 cubic feet.

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Sweden

Chancellor Angela Merkel won a parliamentary vote on Greek aid after warning German lawmakers that pushing Greece out of the euro would risk

U.K. house prices held their value for a second month in February, boosted by a seasonal increase in demand and a rush to beat the expiration of a property-tax exemption, Hometrack Ltd. said.

The average cost of a home in England and Wales was unchanged from January and 1.4 percent lower than a year earlier, the London-based property research company said in a report today. The number of potential buyers registering with estate agents rose 18 percent over the month, the largest gain for five years.

The figures partly reflect people looking to take advantage of a two-year stamp-duty exemption for first-time buyers purchasing a home for less than 250,000 pounds ($396,000) before it ends next month. Hometrack said the supply-demand balance suggests property prices will resume their decline in the coming months as banks restrict lending and Britons are squeezed by government budget cuts and rising unemployment.

Purchases of new homes in the U.S. probably rose in January to a nine-month high, more evidence the housing market is improving, economists said before a report today.

Sales, tabulated when contracts are signed, climbed 2.6 percent to a 315,000 annual pace, according to the median estimate in a Bloomberg News survey of 77 economists. Consumer confidence declined in February from a month earlier, separate data may show.

Beazer Homes USA Inc. (BZH) and D.R. Horton Inc. (DHI) are among builders benefiting from job gains as well as cheaper properties and lower mortgage rates that have driven affordability to a record high. At the same time, foreclosures that depress prices are a risk, one reason policy makers including Federal Reserve officials are seeking ways to bolster the industry.

Two St. Louis-area organizations, and a third group with a large office in Clayton, received a combined $230 million in federal New Markets Tax Credits, the U.S. Department of Treasury said Thursday.

The credits are designed to draw investment in businesses and real estate projects in low-income neighborhoods. Recipients - typically banks and community development groups - offer the credits as an incentive to investors in projects in qualifying Census tracts. They are worth 39 cents on the dollar, so the $230 million equates to $89.7 million.

In past years in St. Louis, these credits have been used to help fund everything from downtown office projects to equity investments in local businesses.

Recipients with local ties include:

U.S. Bancorp Community Development Corp., which is based in St. Louis but works on tax-credit financing nationwide, received a $100 million award. St. Louis Development Corp., the city-run development agency, received $50 million. Advantage Capital Community Development Fund, which is based in New Orleans but has a large office in Clayton, received $80 million.

The funds to not have to be used in a recipient’s home region - though they likely will be in the case of SLDC - and projects here have drawn New Markets credits from national lenders in the past.

This year, the awards include a set-aside to finance “healthy food” projects in so-called “food deserts” - areas with little access to quality groceries. One-fourth of SLDC’s award must go towards healthy food financing, and one-fifth of U.S. Bancorp’s.

All told, the Treasury Department awarded $3.6 billion in New Markets credits on Thursday. It received $26.7 billion worth of applications. President Obama is seeking $5 billion for New Markets Tax Credits in his 2013 budget.

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Inflation picked up slightly last month, as rising gas prices took a bigger bite out of consumers’ wallets.

The government’s key measure of inflation, the Consumer Price Index, showed prices rose 0.2% from December to January, slightly weaker than the 0.3% increase economists had predicted.

Rising prices at the gas pump were a key factor, increasing 0.9% during the month, the Labor Department said. Improving U.S. economic data, including stronger job growth, and tension with Iran have been driving the price of oil and gasoline higher.

Gas prices ended last month at a national average of $3.443 a gallon, according to the AAA Fuel Gauge Report.

Tom Kloza, chief analyst at the Oil Price Information Service, recently forecast gas prices will hit a $4 national average by Memorial Day. They could even near $5 a gallon in certain regions.

Check gas prices in your state

Could this mark a repeat of early 2011?

Amid revolutions in North Africa and the Middle East, gas prices spiked 3.5% In January 2011 alone, and kept rising, nearing $4 a gallon in May. Those higher prices trickled through to other goods and dragged on consumer spending. Economic growth slowed and job growth eventually slumped.

So far, the 2012 price hikes at the gas pump aren’t as severe, but that’s not to say employers aren’t concerned.

About 68% of executives surveyed by the Corporate Executive Board expect cost pressures to increase in 2012 — and not just on energy. On Thursday, the Labor Department’s Producer Price Index showed a modest 0.2% increase in the cost of raw materials in January, after commodity prices fell the month before.

But higher costs won’t necessarily lead to higher prices for consumers.

Businesses don’t expect to see a major increase in consumer confidence this year, according to Michael Griffin, executive director at CEB. It’s that slack in the economy, amid high unemployment and slow wage growth, that is likely to keep companies from trying to pass higher costs on to consumers.

"Demand is still fairly weak out there so it’s difficult for firms to raise prices," said Gus Faucher, senior economist at PNC Financial Services Group. "Consumers are shopping around and still watching their costs."

Year over year, the inflation report showed consumer prices were up 2.9% in January, barely changed from a 3% annual inflation rate in December.

The CPI report also showed food prices rose 0.2% in January, mainly driven by higher prices at restaurants. Prices at grocery stores barely changed. Overall, food prices up 4.4% over a year ago.

Core CPI, which strips out volatile food and energy, showed consumer prices rose 0.2% in January, and 2.3% year-over-year.

Core inflation is at its highest level since September 2008, when the rate was 2.5%. 

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President Obama’s plan to reform the corporate tax system will come out in the next few weeks, Treasury Secretary Tim Geithner told a Senate panel Tuesday.

But don’t get too excited. It won’t be detailed legislation. In fact, it’ll be vague on purpose in an effort to find "common ground" on broad principles between Republicans and Democrats on Capitol Hill, Geithner said.

"We want to maximize the chance we can take advantage of that (common ground) to build consensus on something that’s going to work," Geithner told the Senate Finance Committee.

The Obama administration has been talking about unveiling a plan to fix corporate tax system for well over a year. Last year, the pressure for a corporate tax system fix heated up with news of General Electric’s zero tax rate in 2010 due to profits overseas and losses at its financial unit. General Electric (, Fortune 500) CEO Jeffrey Immelt is the chief of President Obama’s Council for Jobs and Competitiveness.

The top corporate tax rate of 35%, among the highest in the world, has long been bemoaned by business leaders and tax experts. They say it discourages foreign investment in the United States and hinders the ability of U.S. companies to compete internationally.

The Obama administration is expected to talk about lowering the top rate while axing some of the more than 130 business corporate tax breaks currently on the books and limiting companies’ ability to shift profits to nations where tax rates are lower.

"In short, it will help level the playing field for businesses and allow the government to collect needed revenue while promoting economic growth," Geithner said in his written statement.

Obama budget fails to tackle entitlements

However, cutting the top rate to below 30% will require some serious slash-and-burn action. And details are key to moving corporate tax reform forward, said Clint Stretch, managing principal of federal tax policy at Deloitte Tax.

For example, a lot of publicly traded companies will want to know what they would pay in a tax year versus what they can defer. And cash-sensitive companies are going to want to know if they can depreciate the value of capital equipment.

"At some point people have to step up and say here are the details — here are the winners and losers," Stretch said. "Folks want to know where they are on that spectrum."

- CNNMoney senior writer Jeanne Sahadi contributed to this report. 

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Stocks fell in morning trading Tuesday as investors once again turned their eyes to Greece, where talks dragged on over terms of new spending cuts.

The Dow Jones industrial average lost 44 points to 12,800 shortly after 10 a.m. Eastern. The Standard & Poor’s 500 gave up 5 points to 1,339. The Nasdaq composite fell 10 points to 2,891.

Investors are monitoring talks in Athens over new cost-cutting measures being demanded by Greece’s lenders. They’re worried that the measures may not get passed in time to release the latest installment of emergency loans for the struggling country.

Markets in Europe and Asia also fell.

In the U.S., these stocks were among those making big moves:

_ Yum Brands, which owns Taco Bell and KFC, jumped 4 percent. The company’s income surged 30 percent in the fourth quarter on strong growth overseas and a turnaround in its Pizza Hut business in the U.S.

_ Emerson Electric Co. lost 4 percent after the manufacturing and technology company said its first-quarter net income fell 23 percent as costs rose and sales took a hit from flooding in Thailand.

_ Becton, Dickinson & Co., a medical technology company, fell 4 percent. The company’s income fell 17 percent in the latest quarter on higher costs for raw materials and other expenses. The company also cut its 2012 earnings forecast.

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