Finance Blog number 1

As the prospect of a disastrous debt default hung over Greece, the government faced more strikes and protests against its new austerity measures needed to appease the country’s rescue creditors.

Athens commuters faced more misery as metro, tram and suburban rail workers were on a 24-hour strike, while buses and trolleys were to stop operating for several hours in the middle of the day. Airline passengers also faced delays as air traffic controllers implemented work-to-rule action, refusing to work overtime. A 48-hour strike by all transport workers is expected later this week.

Greek police held their own protest, with the force’s Special Guards unit hanging a giant black banner from the top of Lycabettus Hill in the capital reading “Pay day, day of mourning.”

Faced with mounting anger from the country’s international creditors, the government recently announced a raft of new austerity measures in an effort to secure the next euro8 billion ($10.7 billion) installment of bailout loans from the euro110 billion rescue package it has been dependent on since last year. Without the funds, Greece only has enough funds to see it through mid-October, when it faces the prospect of a messy default.

In July, when it became clear that Athens needed more help, eurozone leaders agreed on a second, euro109 billion bailout, although several aspects of that deal still need to be finalized guaranteed fast personal loans.

The government’s new measures include a new property tax to be paid through electricity bills to make it easier for the state to collect, as well as pension cuts and more tax hikes. Greeks have been outraged by the new steps, as they come on top of previous austerity measures which failed to sufficiently reduce the country’s budget deficit.

Hundreds of protesters gathered in the capital’s central Syntagma Square on Sunday night, scuffling briefly with police who pushed them back with truncheons and small amounts of tear gas.

Debt inspectors from the International Monetary Fund, European Commission and European Central Bank, known collectively as the troika, are expected to return to Athens this week to resume a review suspended earlier this month amid talk of delayed implementation of reforms. No specific date has been set for their return, however.

Prime Minister George Papandreou heads to Berlin on Tuesday, where he will meet with German Chancellor Angela Merkel ahead of a parliamentary vote there on approving plans to beef up the eurozone rescue fund. German lawmakers vote on Thursday on expanding the powers of the euro440 billion ($595 billion) the European Financial Stability Facility.

Source

With NATO jets roaring overhead, revolutionary forces fought their way into Moammar Gadhafi’s hometown Saturday in the first significant push into the stubborn stronghold in about a week.

Libya’s new leaders also tried to move on the political front, promising to announce in the coming week a new interim government that it hopes will help unite the country. However, disagreements remain about what the Cabinet should look like.

The National Transitional Council led the rebellion that forced Gadhafi into hiding and has taken over the leadership of the oil-rich North African nation even as it continues to fight forces still loyal to the fugitive leader.

The NTC-appointed prime minister, Mahmoud Jibril, sought support from leaders at the United Nations on Saturday, telling them that “a new Libya is coming to life” as a nation committed to democracy, equality and reintegration into the international community. He said the council was committed to drafting a constitution that would be put to the Libyans for a referendum.

More than a month after seizing Tripoli and effectively ending Gadhafi’s rule, revolutionary forces have been unable to rout well-armed Gadhafi loyalists from strongholds in his hometown of Sirte, Bani Walid and some southern enclaves. Taking the cities is key for Libya’s new leaders to extend their control over the large desert nation.

Explosions rocked Sirte throughout the day as fighters pushing in on four roads came under heavy fire from loyalist snipers and artillery guns. Along the city’s main thoroughfare, they faced close-range gunfights with loyalists hiding in apartment buildings and throwing hand grenades at them from windows.

Moftah Mohammed, 28, said snipers shot two of his friends as they advanced to fire a rocket-propelled grenade on a loyalist truck. When others approached to help the wounded, Gadhafi supporters opened fire and hurled hand grenades, injuring two more.

By evening, however, the fighters had pushed east along the city’s main thoroughfare into its urban center, overrunning a TV station and pushing loyalists farther back. NATO warplanes patrolled overhead during the fighting, and revolutionary commanders said airstrikes took out some loyalist tanks, although that could not be confirmed immediately.

Walls along the town’s main boulevard were pockmarked from heavy caliber machine-gun rounds, and the charred metal hulks of cars lined the streets in front of shuttered shops, some of which had been torched.

Gaping holes marred the walls of the TV building, and two of the Gadhafi regime’s green flags still flew from the roof. Two tanks sat nearby, and rebel trucks with mounted machine guns raced forward while blasting at loyalist positions. In front of a convenience store, a group of men fired a half dozen mortars, yelling “God is great!” after each one flew into the distance.

Most of the fighters came from the western city of Misrata, which saw some of the fiercest fighting in the civil war that erupted after Libyans rose up against Gadhafi in mid-February. For the assault on Sirte, they have used many of the urban battle tactics developed in the defense of their own city, including blocking the road with shipping containers and filling them with sand so they couldn’t be moved.

“When we fought in Misrata it was all new to us,” said Adnan al-Zredi, 25, a former clothing store clerk who manned an anti-aircraft gun on the back of a truck. “Now we’re fine in war. We know exactly what to do.”

Some fighters said Gadhafi forces in the city had adopted similar tactics, building a similar barricade of shipping containers and sand elsewhere in the city. “They got some ideas from us,” fighter Abdel-Aziz Salim said proudly.

He spoke from an elementary school on the city’s edge that had been transformed into a military staging ground. Nearby, fighters pounded huge bullets into ammunition belts and armed rocket-propelled grenades before heading back to the front.

Sirte is the Libyan city most associated with Gadhafi. Revolutionary fighters tried to push into the city last weekend but were driven back in fighting that killed at least 25 and wounded dozens. They pulled back to regroup and let civilians leave the area, although the two sides exchanged fire daily.

In the meantime, more than 1,300 families have left the city, fighters said. A few dozen waiting at a checkpoint outside the city on Saturday described rapidly deteriorating conditions. Many had been clustered in basements, eating once a day and drinking water from nearby wells or water tanks. Some said their children had gotten diarrhea from the water.

Over the last week, fighters said they wouldn’t attack until all the city’s civilians were out. In the end, they decided to advance Saturday because they feared many families from Misrata that were stuck in the city were in danger, said a brigade commander, Mohammed al-Sugatri.

“There are lots of people from Misrata who are stuck in the city living in basements. They have no food or water and many of their children are sick so we had no choice but to attack,” he said.

It remains unclear how many civilians remain in the city and how many of them remain loyal to Gadhafi and his forces.

At a small mosque outside town that has been converted into a field hospital, Dr. Mahmoud Khlef said six revolutionary fighters were killed Saturday and close to 80 wounded, most of them by shrapnel from rocket-propelled grenades.

Members of the National Transitional Council have been struggling to form a new interim government amid political infighting over everything from which cities should be represented and how many Cabinet ministers there should be. That has raised concerns that the former rebels will splinter into rival factions now that they no longer have the ouster of Gadhafi as a common cause.

NTC chief Mustafa Abdul-Jalil, speaking to reporters in Benghazi after attending the U.N. General Assembly in New York, acknowledged differences but said a new government would be named next week to guide the country until formal elections can be held.

“This is the crisis management phase and it should be led by people who are efficient, even if they have to be from the same city, until the liberation of the country and until the constitution is established,” he said. “Then they can choose a government that they want.”

In the capital, Tripoli, a series of explosions went off at a military storage warehouse on a Libyan naval base near the harbor Saturday afternoon and heavy black smoke poured out of the facility, although no injuries were reported. A revolutionary command spokesman, Abdel-Rahman Busin, said it was an accident caused by either an electrical problem or the improper storage of ammunition.

Source

A tentative thumbs-up.

That was the assessment Thursday night from economists who offered mainly positive reviews of President Barack Obama’s $450 billion plan to stimulate job creation.

Some predicted it would put hundreds of thousands of people back to work next year, mainly because a Social Security tax cut for workers would be deepened and extended to small businesses.

“Payroll tax cuts are very powerful,” said Allen Sinai, chief economist of Decision Economics. “They provide a boost to direct income and, in turn, spending, which is important to growth.”

Mark Zandi, chief economist at Moody’s Analytics, estimated that the president’s plan would boost economic growth by 2 percentage points, add 2 million jobs and reduce unemployment by a full percentage point next year compared with existing law.

The heart of Obama’s plan is an expansion of the Social Security tax cut, which took effect this year and is scheduled to expire by year’s end. The tax cut now applies only to workers; it reduces their Social Security tax from 6.2 percent to 4.2 percent. Employers still pay the 6.2 percent rate.

Obama would renew the tax cut for a year and deepen it: He would drop workers’ Social Security tax to 3.1 percent.

Under his bigger tax cut, an extra $1,550 would go to taxpayers earning $50,000 a year. The Social Security tax is imposed on the first $106,800 of taxable income. That means the maximum savings would be about $3,300 for an individual and $6,600 for a couple.

Obama would also halve Social Security taxes for businesses whose payrolls are $5 million or less. The White House says that would include 98 percent of U.S. businesses.

Zandi calls this a “creative” way to help small companies, which have struggled more than larger ones to recover from the Great Recession of 2007-2009. During recoveries, small businesses normally drive job creation.

“Something like this is much needed” for an economy grappling with 9.1 percent unemployment, Zandi said. “The economy is on the edge of recession.”

Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, figures that the Social Security tax cuts alone would add 1 percentage point to economic growth and create 1 million jobs next year.

The president’s plan also takes a shot at long-term unemployment: Companies would get a $4,000 tax break for hiring people who have been unemployed for more than six months. As of August, the government says, 43 percent of unemployed Americans have been out of work for six months or more.

The plan would also extend emergency unemployment benefits; ramp up spending on public works projects; and provide aid to keep state and local governments from laying off teachers. Obama would pay for his program with future budget cuts.

Consumer spending accounts for about 70 percent of the economy.

Some economists cautioned, though, that some factors might blunt the impact of Obama’s enlarged Social Security tax cut. For one thing, the tax cut would deliver only a temporary boost. It would expire at the end of 2012. Most economists foresee unemployment remaining high well after next year.

And Michael Mandel, chief economic strategist for the Progressive Policy Institute, suggested that the link between consumer spending and job creation is weaker in an economy like America’s that’s highly open to foreign goods.

“If the payroll tax cut encourages consumers to buy more (imported) clothing, that’s likely to create more jobs overseas than in the U.S.,” Mandel said.

In addition, Paul Ashworth, chief U.S. economist at Capital Economics, said many taxpayers might save the extra money from the tax cut rather than spend it.

“In an environment where economic confidence has been almost completely destroyed, there is a risk that both households and small businesses will save a greater proportion of any windfall, particularly if they know the reduction is only temporary,” Ashworth said.

The White House plan would also extend emergency unemployment benefits for another year. Economists note that unemployment checks put money in the hands of people who are most likely to spend it immediately.

That spending tends to boost demand for goods and services and give companies more reason to hire. The forecasting firm Macroeconomic Advisers has estimated that an additional year of emergency unemployment benefits would support 200,000 jobs in 2012.

Obama also wants $30 billion to modernize schools, $50 billion for road and bridge projects and a bank that would finance more public works projects.

The president’s plan will likely face resistance in Congress. Republicans have opposed further spending and have pushed to reduce the budget and shrink the government.

Still, the Wharton School’s Wachter called Obama’s plan a serious proposal that should be politically acceptable “across the board.”

Menzie Chinn, an economist at the University of Wisconsin, would favor an even bigger jobs package for an economy that grew at an annual rate of just 0.7 percent in the first six months of the year and created zero net jobs in August.

He said he fears that Obama’s plan merely makes up for the expiration of the president’s earlier $862 billion economic stimulus plan.

Even so, Chinn said, the measures Obama proposed Thursday night “might prevent the economy from dropping below stall speed” _ at which point it would be vulnerable to another recession.

Source

European Central Bank head Jean-Claude Trichet warned there are increasing risks for the eurozone’s waning economic recovery and less chance of inflation _ clear signals the bank is done raising interest rates for some time.

At a news conference, Trichet offered new, gloomier economic projections after the bank’s 23-member governing council left the benchmark refinancing rate unchanged at 1.5 percent.

Pressure had risen on the bank to freeze its rate hike campaign after a turbulent summer in which worries grew that the 17-nation currency bloc’s debt crisis was hurting consumers and businesses and global growth was stalling.

Trichet said the eurozone economy was expected “to grow moderately” but that that assessment was “subject to particularly high uncertainty and intensified downside risk.”

Meanwhile, the risk of excessive inflation, which he had previously described as leaning to the upside, was now “broadly balance” with an equal chance of inflation below forecasts.

Trichet turned aside questions about whether rates are on hold, saying “we are never pre-committed, and we stand ready to do whatever is necessary.”

But economists say the lower inflation estimate and reduced growth expectations are signs that the bank will not raise rates soon. It controversially raised rates a quarter point in April and July, based on earlier expectations for more inflation and stronger growth.

Shadows over Europe’s recovery have gathered quickly since the bank last made a rate decision on Aug. 4. Indicators of business and consumer optimism have sagged and second quarter growth came in at a bare 0.2 percent. The continent’s debt crisis has led to dizzying ups and down on stock and bond markets, which is now weighing on consumption and production.

The uncertainty over growth also pushed Britain’s Bank of England to leave rates unchanged on Thursday, at a record low of 0.5 percent, although in Britain’s case inflation remains stubbornly high at 4.4 percent.

Eurozone officials are trying to contain a crisis triggered by market concerns that governments cannot handle their high debt loads. Fears of default have raised borrowing rates for financially troubled countries, to the point where Greece, Ireland and Portugal have need bailouts from other eurozone countries and the International Monetary Fund.

With prospects for the economy worsening, some experts even think the bank may have to cut rates if Europe’s debt crisis takes a turn for the worse. Economists at the Royal Bank of Scotland see a 40 percent chance that the bank will have to slash rates by a half percent by the end of this year.

Source

Asia-Pacific markets rebounded in early trading Wednesday, as traders looked past some bleak U.S. jobs data and Europe’s debt crisis to scoop up bargains following a steep selloff of equities.

Japan’s Nikkei 225 index, which on Tuesday fell to its lowest level since April 2009, rose 1.4 percent to 8,714.59. A slightly lower yen helped Japan’s powerhouse export sector recover from the beating it took earlier this week.

Mazda Motor Corp. jumped 3.4 percent, and Sony Corp. gained 2.8 percent. Toyota Motor Corp. rose 2.3 percent.

Markets received further good news when the Australian government said the economy expanded 1.2 percent in the quarter through June, rebounding from a 0.9 percent contraction in the previous three months. Australia’s S&P ASX 200 index gained 1.9 percent at 4,153. New Zealand’s NZX 50 was 0.7 percent higher at 3,294.42.

South Korea’s Kospi clawed back the prior day’s losses to rise 2.4 percent at 1,809.35, with blue chip high-tech stocks among those leading the way. Hynix Semiconductor, the world’s second-largest memory chip maker, soared 7.4 percent. LG Electronics Inc., which ranks No. 2 globally in flat screen televisions, was 5.8 percent higher.

Softening gold prices, which recently have hit all-time highs, caused gold-related shares to decline. Newcrest Mining Ltd., Australia’s top gold miner, lost 1 percent.

A wave of negative sentiment slammed global stock markets last Friday, when a government report said the U instant payday loan.S. economy failed to add any new jobs in August. It was the worst reading on jobs since September 2010.

But signs of growth in the U.S. service sector helped tame concerns about another U.S. recession. The Institute for Supply Management said Tuesday that the service sector grew more than analysts had expected in August.

Growth in that part of the economy, which employs nearly 90 percent of America’s work force, fell the three previous months.

The Dow Jones industrial average fell 0.9 percent to 11,139.30. The Standard and Poor’s 500 index dropped 0.7 percent to 1,165.24. The Nasdaq composite fell 0.2 percent to 2,473.83.

Separately on Tuesday, the Swiss franc dropped sharply after the country’s central bank pegged it against the euro in an attempt to rein in the export-sapping appreciation of the currency.

The franc has been hugely in demand in recent weeks due to its widely perceived status as a safe haven during times of market volatility.

The dollar strengthened to 77.38 yen from 77.67 yen in late trading Tuesday in New York. The euro rose to $1.4027 from $1.3991. It was the first time the euro has fallen below $1.40 since July 13.

Source

The government on Friday sued 17 financial firms, including the largest U.S. banks, for selling Fannie Mae and Freddie Mac billions of dollars worth of mortgage-backed securities that turned toxic when the housing market collapsed.

Among those targeted by the lawsuits were Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., and Goldman Sachs Group Inc. Large European banks including The Royal Bank of Scotland, Barclays Bank and Credit Suisse were also sued.

The lawsuits were filed by the Federal Housing Finance Agency. It oversees Fannie and Freddie, the two agencies that buy mortgages loans and mortgage securities issued by the lenders.

The total price tag for the mortgage-backed securities sold to Fannie and Freddie by the firms named in the lawsuits: $196 billion.

The government didn’t say how much it is seeking in damages. It said it wants to have the securities sales canceled and wants to be compensated for lost principal, interest payments as well as for attorney fees.

The government action is a big blow to the banks, many of which have seen their stock prices fall to levels not seen since the financial crisis in 2008 and 2009. Until now, the stocks have been undermined mostly by unrelated worries about the U.S. and European economies.

It is particularly damaging to Bank of America, which bought Countrywide Financial Corp. in 2008 and Merrill Lynch in 2009. All three are being separately sued by the government for mortgage-backed security sales totaling $57.5 billion.

After Bank of America, JPMorgan Chase was listed in the lawsuits with the second-highest total at $33 billion. Royal Bank of Scotland followed at $30.4 billion.

Bank of America has already paid $12.7 billion this year to settle similar claims. Last month insurer American International Group Inc. sued the bank for more than $10 billion for allegedly selling it faulty mortgage investments.

In a statement Friday, Bank of America rejected the claims in the government’s lawsuits.

Fannie and Freddie invested heavily in the mortgage-backed securities even after their regulator said they didn’t have the needed risk-management capabilities, the bank said. “Despite this, (Fannie and Freddie) are now seeking to hold other market participants responsible for their losses,” it said.

Bank stocks fell sharply on Friday as news of the government’s lawsuits emerged. Bank of America tumbled 8.3 percent, JP Morgan Chase fell 4.6 percent, Citigroup lost 5.3 percent, Goldman shed off 4.5 percent and Morgan Stanley’s ended down 5.7 percent.

Residential mortgage-backed securities bundled pools of mortgages into complex investments. They collapsed after the real-estate bust and helped fuel the financial crisis in late 2008.

The FHFA said the mortgage-backed securities were sold to Fannie and Freddie based on documents that “contained misstatements and omissions of material facts concerning the quality of the underlying mortgage loans, the creditworthiness of the borrowers, and the practices used to originate such loans.”

The FHFA filed a similar lawsuit in July against Swiss bank UBS AG, seeking to recoup more than $900 million in losses from mortgage-backed securities.

Also sued Friday were are Ally Financial Inc., formerly known GMAC LLC, Deutsche Bank AG, First Horizon National Corp., General Electric Co., HSBC North America Holdings Inc., Morgan Stanley, Nomura Holding America Inc., and Societe Generale.

JPMorgan, Goldman, Citigroup and Morgan Stanley declined to comment on the lawsuits. Ally Financial said in a statement said the government’s “claims are meritless, and the company intends to defend its position aggressively.” A spokeswoman for First Horizon said the bank intends to “vigorously defend” itself.

Ken Thomas, a Miami-based banking consultant and economist, said he expects the banks to settle soon with the government.

“This will be nothing but a distraction to them and the quicker you settle something like this the better,” he said.

Source

MONTREAL

What to do?

The stock market has proved again that it’s capable of making vicious attacks on your money. But just when you think all is lost, the market also can transform into its gentler self.

The past few weeks have been enough to make you crazy, especially if you are among the great majority of people who don’t follow the stock market day in and day out and imagine, incorrectly, that someone actually knows what’s going to happen.

Let’s start there. If you have been following the news, you know that there is talk again of a possible recession, and there are worries that debt problems in Europe could cause problems in banks pay day loans.

Notable economist Martin Feldstein said there is a 2-1 chance of a recession within the next 12 months. Goldman Sachs says there’s only a 1-in-3 chance. So don’t trust anyone who claims they know. Crystal balls are foggy. But here’s what you can do to insulate yourself from trouble and still build the future you want:

Protect the money you will need soon

The stock market went back into a lull Friday as investors waited for the next signals on the economy _ and whether it’s headed for another recession.

The major indexes were fluctuating in a narrow range after Thursday’s 419-point plunge in the Dow Jones industrial average. But that doesn’t mean investors are finished selling. There was little economic news Friday to influence trading. Thursday’s plunge followed a stream of disappointing economic news that added to the belief in the market that the economy is falling into a recession.

The most notable news Friday came from JPMorgan Chase & Co. The bank joined other financial firms and cut its forecast for economic growth during the fourth quarter. It’s now predicting growth of 1 percent, down from an earlier forecast of 2.5 percent.

The Dow fell 42 points or 0.4 percent, to 10,947 at 12:20 p.m. in New York. The Standard & Poor’s 500 index fell 1, or 0.1 percent, to 1,139. The Nasdaq composite index rose 5, or 0.2 percent, to 2,386.

The Dow’s drop was largely due to Hewlett-Packard Co., which fell 21 percent. The company said Thursday that it will close its mobile business, sell or spin off its PC business and pay $10 billion for a business software company.

Investors weren’t, for the moment, seeking the safety of U.S. Treasurys. The yield on the benchmark 10-year Treasury note rose to 2.08 percent from late Thursday’s 2.06 percent. It fell below 2 percent Thursday for the first time as heavy demand sent its price sharply higher.

Overseas stock markets had larger drops than in the U.S. European banking stocks fell near two-and-a-half-year lows, dragged down by rumors about banks’ potential losses on bonds issued by heavily-indebted governments. The selling in the U.S. has come in part because of fears that U.S. banks would be hurt if European countries default on their debt. Another concern: weakening European economies will hurt growth in the U fast cash advance.S.

Earlier Friday, Asian shares fell sharply, with major indexes in China and Japan losing more than 2.5 percent. However, some of those losses reflected selling in response to the drop in the U.S. Thursday.

As the selling continued overseas, gold rose as high as $1,881 an ounce. Oil prices fell as traders feared a global slowdown that would cut demand for crude.

The word “recession” remains the focus of the markets.

JPMorgan analyst Michael Feroli said Friday that business sentiment, household wealth and global growth all look worse than just a few weeks earlier. That will keep economic growth nearly flat in the first quarter of 2012, he said.

On Thursday, economists with Morgan Stanley said that the U.S. and Europe are “dangerously close to recession,” adding, “it won’t take much in the form of additional shocks to tip the balance.”

Stocks also fell Thursday on news of another drop in home sales, weaker manufacturing in the mid-Atlantic states and a jump in inflation at the consumer level to its highest level since March. There also was bad news on the job market: an increase in the number of people who applied for unemployment benefits.

Thursday’s numbers joined a series of reports pointing to a slowing economy. The government reported on July 29 that growth in the first half was much weaker than expected _ and that the economy barely grew in the first quarter. Since then, the combination of disappointing numbers in the U.S. and worries about Europe’s debt problems have set off waves of selling.

The Dow is down 13.6 percent since stocks began falling on July 21. That has drained billions from American’s retirement savings and other investment accounts. And the stock market’s drop can itself help move the country toward recession.

Source

Mattel Inc. is planning to appeal a federal judge’s award of more than $309 million to rival toy maker MGA Entertainment Inc. in the fight over ownership of the popular Bratz fashion doll line.

The toy giant’s attorneys filed papers Thursday declaring their intent to appeal last week’s decision by U.S. District Court Judge David O. Carter.

Mattel said in a statement that it wants to find a resolution “that allows us to conclude this litigation on terms that are reasonable and fair.”

Carter awarded MGA $172.5 million for damages related to trade secret appropriation. He also awarded MGA and CEO Isaac Larian more than $137 million for copyright infringement, breach of contract and other issues.

MGA attorney Jennifer Keller told City News Service she’s confident her client will prevail.

Source