German and French leaders meet this week to map out a revised plan for the euro as the Group of Eight exposed disagreement on a rescue strategy, Greece lurched toward a possible exit and Spain
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Treasuries fell for a second day on speculation record-low yields will curb demand when the U.S. auctions $99 billion of coupon-bearing debt beginning tomorrow.
The government plans to start the sales with $35 billion of two-year notes, followed by the same amount of five-year debt on May 23 and $29 billion of seven-year securities on May 24. Seven-year yields slid to 1.135 percent May 18, the least ever, raising concern U.S. bonds are becoming too costly. German and French finance ministers plan to meet today on the euro, after Europe
Payday loans no faxing fall on the less risky side simply because the money loaned to you is a percentage of your next paycheck.
Greek President Karolos Papoulias will today take on the task of trying to persuade political leaders to form a government and avert a new election amid mounting concern the country may leave the euro area.
Evangelos Venizelos, the socialist Pasok leader, will return the third, and final, mandate to form a government to Papoulias at a meeting in Athens today, after Alexis Tsipras, the leader of the biggest anti-bailout party, Syriza, turned down an appeal to join a unity government.
Tsipras
JPMorgan’s surprise $2 billion trading loss prompted a sell-off in financial stocks Friday, but the broader market rose as investors decided this was a problem for investment banks and not other industries.
The Dow Jones industrial average rose 31 points in morning trading after bouncing back from a 76-point decline. The Standard & Poor’s 500 index rose four points to 1,362. The Nasdaq composite index, which is heavily weighted with technology stocks, was up 20 points at 2,954.
Financial stocks in the S&P fell 1 percent, while the other nine industry groups rose. For that, the other investment banks could thank JPMorgan, America’s biggest bank. The stock plunged 8 percent, dragging other banks with big Wall Street operations down with it. Morgan Stanley fell 4.3 percent and Goldman Sachs fell 3 percent.
Retail-focused banks fared better. Bank of America and Wells Fargo each declined just 0.3 percent.
JPMorgan’s blunder comes in the midst of a political battle over how closely to regulate banks, though JP Morgan’s CEO Jamie Dimon said the trades would not have been affected by the so-called Volcker rule, expected to take effect this summer. Still, the $2 billion loss is sure to be used as ammunition by those pushing for tighter regulation of investment banks.
Tech stocks did well. Intel rose 1.8 percent after it told analysts that it is on track to meet sales expectations. Tech investors were relieved to hear that one day after Cisco Systems prompted selling in tech shares by being pessimistic about sales. Microsoft shares rose 2 percent. Semiconductor maker Nvidia jumped 8.6 percent, the most in the S&P 500, after reporting revenue that was higher than analysts were expecting.
Consumer discretionary stocks were also up. Retailer Bed Bath & Beyond jumped 4.5 percent, one of the biggest gains in the S&P 500 index, and video streaming and DVD-by-mail company Netflix rose 6.6 percent.
Also Friday, the Labor Department said that the producer price index, which measures price changes before they reach the consumer, dropped 0.2 percent last month. It was the first decline since December and the biggest drop since October. Declines were driven by gas and energy prices. That’s good news for consumer spending.
Separately, a closely watched measure of consumer confidence from the University of Michigan released Friday morning was better than analysts had expected. The index was at its highest level since January 2008.
Crude and gasoline futures slid again. Oil fell 44 cents to $96.64 per barrel. Gold prices fell a half-percent to $1,587.70 per ounce.
European stocks were mixed. France’s CAC 40 index fell 0.3 percent, but Britain’s FTSE 100 rose by the same percentage and Germany’s DAX rose 0.7 percent. Borrowing costs for Germany and France fell, while costs for Italy and Spain rose as investors remain focused on Greece, where another general election is expected for next month following the failure of attempts to form a government.
The Empire State Building is on an energy diet.
The hulking building, a symbol of American power and, to some, excess, has cut its energy use by 20%.
And that’s just due to changes to the building’s exterior. Once retrofits are made to tenant spaces on the inside, the second tallest building in Manhattan will be nearly 40% more efficient.
The retrofits will cost $20 million once they’re complete, and are expected to save the owners $4.4 million in annual energy costs.
"After one year, we have proven that investing in energy efficiency gives building owners a dollars-and-cents advantage," said Dave Myers, a president at Johnson Controls, which conducted the retrofit.
The renovations are part of a $500 million rehab plan for the building. The building’s owners, Malkin Holdings LLC, filed for an initial public offering back in February which valued the building at $2.5 billion.
The changes to the Empire State include:
–Filling the existing windows with an energy saving gas and adding an additional plastic pane.
–Upgrading the building’s cooling system.
–Using computerized "smart" energy management technology that can adjust temperatures floor by floor.
–Provide tenants with detailed energy use in their space.
–Automatically shut off lights in unused areas.
Greenest states to own an electric car
The move to make the Empire State Building more efficient was announced three years ago amid much fanfare — Bill Clinton and New York Mayor Michael Bloomberg were in attendance at a press conference from the building’s 80th floor.
Energy efficiency often gets less attention than oil drilling, wind turbines or solar panels when it comes to tackling America’s energy challenge.
Yet efficiency often offers the biggest energy saving opportunity, and at a fraction of the cost of new sources.
Buildings account for 40% of the country’s energy use, and an average home emits twice as much carbon dioxide as the average car.
But the country has made some impressive gains in the efficiency arena, both since the energy crisis of the 1970s and more recently amid high oil prices.
The average refrigerator today uses a quarter of the energy it did in the 1970s, said Lowell Ungar, policy director at the Alliance to Save Energy.
In the last couple of years the government has taken steps to make furnaces, air conditioners and refrigerators even more efficient, said Ungar. It has also begun the phase-out of the notoriously inefficient incandescent light bulb.
On the building front, recommended building codes for both commercial and residential structures are 30% more efficient today than they were in 2006, said William Fay, executive director of the Energy Efficient Codes Coalition. By 2015, building codes are expected to be 50% more efficient.
Not all the all states have adopted these stricter codes, said Fay, and that’s one of the challenges in saving even more energy.
Auto efficiency has made major strides in the last few years. George W. Bush famously raised fuel efficiency standards for the first time in decades during the last days of his administration, and Obama has accelerated the trend.
Fuel efficiency standards have gone from 27 miles per gallon in 2006 to a target of 35.5 miles per gallon in 2016. By 2025 vehicles are supposed to average nearly 55 miles per gallon.
That’s a doubling of fuel efficiency.
"We are twice as energy efficient as a county today as were were 20 or 30 years ago," Daniel Yergin, Chairman of the consultancy IHS CERA and one of the world’s foremost energy analysts, said in recent Senate testimony. "And we ought to become twice as efficient again."
U.S. job growth slumped in April for a second straight month. It pointed to a steadily growing but still sluggish economy that could tighten the presidential race.
A drop in the unemployment rate wasn’t a necessarily a healthy sign for the job market. The rate fell from 8.2 percent in March to 8.1 percent in April. But that was mainly because more people gave up looking for work.
People who aren’t looking for jobs aren’t counted as unemployed.
The 115,000 jobs added in April were fewer than the 154,000 jobs created in March, a number the government revised up from its first report a month ago of 120,000. It also marked a sharp decline from December through February, when the economy averaged 252,000 jobs per month.
The percentage of adults working or looking for work has fallen to its lowest level in more than 30 years. Many have become discouraged about their prospects.
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Here’s what The Associated Press’ reporters are finding:
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TEPID ECONOMY, TEPID HIRING
Over time, strong economic growth is vital for strong job growth.
But early this year, hiring accelerated much faster than economic growth did. Job gains averaged a strong 229,000 in the first three months. But the economy grew at a sluggish annual rate of 2.2 percent.
Economists began to wonder: Would growth catch up with hiring? Or would hiring slow to match economic growth (as measured by gross domestic product, or GDP)?
Some economists say April’s disappointing job growth suggests an answer, and it’s not a cheerful one:
“It now appears that jobs have decelerated into line with GDP, rather than GDP accelerating to catch up with jobs,” said Nigel Gault, an economist at IHS Global Insight.
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REVISING HISTORY
The job market seems to look better with hindsight.
The Labor Department has revised job growth upward for 10 straight months _ and for 18 of the past 21. Over the past 10 months, it’s added 413,000 jobs to the original estimates.
The job figures are revised twice. They’re updated in the two months after they first come out. And they’re revised again in an annual update meant to capture updated employment data from the states.
History shows that the updated totals typically follow the trend in job creation: When the economy is creating jobs consistently, the revisions tend to be positive. Months of job losses typically lead to negative revisions.
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THE POLITICAL DEBATE
A falling unemployment rate would seem to be good news for President Barack Obama’s re-election hopes. Dating to 1956, no incumbent president has lost when unemployment fell in the two years leading to an election.
On Election Day, unemployment will almost surely be less than it was two years earlier: 9.8 percent in November 2010.
But for the past two months, the rate has fallen for the wrong reason: More than 500,000 Americans have stopped looking for jobs and are no longer counted as unemployed business card. Job growth averaged a healthy 252,000 from December through February. It slowed to 135,000 in March and April.
The question is whether voters will focus more on the falling unemployment rate (good for Obama) or the modest job growth (not so good).
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A JAB FROM ROMNEY
Mitt Romney seized on the latter. He noted that the declining number of people seeking work explains the drop in the unemployment rate.
“This is way off from what should be happening in a normal recovery,” Romney said on Fox & Friends. “You have more people dropping out of the work force than you have getting jobs.”
“This is not progress,” Romney said.
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DISAPPEARING WORKERS
The percentage of Americans 16 and older working or looking for work is now 63.6 percent, the lowest since 1981. For men, the so-called “labor force participation rate” is 70 percent. That’s the lowest since the government started keeping records in 1948.
The rate peaked at 67.3 percent in early 2000 as women poured into the workplace. Since then, it’s turned south. Demographic and social trends help explain the drop: Baby boomers are aging and retiring.
And more women, especially in upper-income families, are staying at home. The drop in participation accelerated after the economy slid into recession in late 2007. The tough job market led many to give up looking for work.
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SOUR INVESTORS
The stock market didn’t take Friday’s news well.
The Dow Jones industrial average sank 132 points, or 1 percent, in late-morning trading. The broader Standard & Poor’s 500 index fell 1.4 percent.
Investors were a lot happier earlier this week. They sent the Dow to its highest close since December 2007.
Technology stocks and banks led the market lower Friday. Utility companies were the only broad category of stock in the S&P 500 index trading higher. They tend to fare well when investors grow nervous about the economy.
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NO SURPRISE TO BERNANKE
One person not likely surprised by the sluggish hiring in April: Ben Bernanke.
The Federal Reserve chairman has cautioned for months that the spike in hiring at the start of the year didn’t match the economy’s more modest growth.
His Fed colleagues probably agree. Their latest forecasts show that even under a best-case scenario, unemployment will be at least 7.3 percent in late 2013. Historically, a normal rate would range between 5 percent and 6 percent.
Most analysts expect the Fed to keep its key interest rate at a record low near zero well into 2013, if not later. But few think hiring has weakened enough to trigger a third round of bond buying to help lower long-term rates and encourage more lending.
European Central Bank officials voted Thursday to hold interest rates steady, even as the euro area economy slides towards recession. But ECB president Mario Draghi appeared to hint that there could be rate cuts in the future.
In a widely expected move, the ECB left its main overnight lending rate at 1%, a level the bank has maintained since late last year.
The Governing Council of the Frankfurt-based ECB met in Barcelona as the economic outlook in the eurozone has deteriorated.
Speaking to reporters after the meeting, Draghi said the ECB’s policies remain "accommodative" in light of the economic data from the first quarter. But he acknowledged that more recent economic indicators highlight the uncertain outlook for the eurozone.
Draghi noted that economic activity was "stabilizing" in the first quarter but that more recent data shows "uncertainty prevailing."
While he stressed that interest rates are very low and liquidity is abundant, Draghi said several times that "any exit strategy remains premature." ECB policymakers will be "clearer in our assessment" at the council’s next policy meeting in June, he added.
"The ECB does appear to be leaving the door open to an eventual further interest rate cut," said Howard Archer, chief UK and European economist at IHS Global Insight.
But monetary policymakers will probably not act until economic conditions have deteriorated further, according to Archer. "Unfortunately that could very well happen," he added.
Europe: ‘Dark clouds on the horizon’
Meanwhile, the ECB is under pressure to intervene in financial markets as investors have been rattled by renewed concerns about the euro debt crisis.
In response to a question on the ECB’s controversial bond buying program, Draghi simply said the so-called securities market program, under which the ECB purchased billions of euros worth of government debt last year, is "an important instrument."
But he stressed that eurozone governments still need to reduce debt and take steps to increase economic competitiveness.
"These mechanisms are useful, but they cannot replace either fiscal consolidation or structural reforms as the way to go back to stability," said Draghi guaranteed personal loan approval.
The ECB has taken unprecedented steps to support the economy.
In two separate operations, the ECB funneled more than 1 trillion euros worth of ultra low-cost loans into the banking system starting late last year. The two long-term refinancing operations, or LTROs, helped prevent a credit crunch in the banking system.
The LTROs also appeared to drive down borrowing costs for troubled euro area governments including Italy and Spain. But the effects of the lending program have waned and some investors are now calling for the ECB to do more.
Spain, for example, confirmed earlier this week that it officially slipped back into recession in the first quarter. Meanwhile, unemployment in the 17-nations that use the euro edged up to 10.9% in March — the highest level since the common currency was introduced in 1999.
In addition to Spain, several other eurozone economies already struggling with recession including Italy, Ireland, Greece and Portugal.
Eurozone unemployment hits record 10.9%
Overall, the eurozone economy is widely expected to suffer a mild recession this year as austerity — budget cuts and tax hikes — take a toll on growth.
The bleak economic climate has raised concerns that austerity is doing more harm than good, and a growing number of policymakers have been calling for reforms to boost economic growth.
For his part, Draghi seemed to suggest that policymakers need to do both.
"We have to put growth back at center of agenda without any contradiction to the need to preserver in fiscal consolidation," said Draghi.
He supported calls for a "growth pact" to compliment the "fiscal pact" that euro area leaders signed late last year.
Draghi said the growth pact should emphasize polices aimed at opening up eurozone labor and product markets to increased competition. At the same time, Draghi said targeted spending on infrastructure projects will help create jobs in the public sector.
"We need a common European discipline in doing these reforms," he said.
President Barack Obama is returning to his familiar agenda of righting the U.S. economy and winning a second term, wrapping up three days of Latin American summitry that yielded mixed results and were clouded by a Secret Service scandal.
Domestic issues are immediately on tap, with the Senate scheduled to vote Monday on Obama’s proposal to increase taxes on millionaires. The proposal stands little chance of passing Congress, but Obama has cast it as an election-year theme as he seeks to paint sharp contrasts between himself and his likely Republican challenger, Mitt Romney.
Obama returned to Washington late Sunday with a key free trade deal with Colombia ready to be fully enforced next month and with important face time with Latin American leaders that cannot hurt his diplomatic outreach.
But the weekend trip to Cartagena, Colombia, for the sixth Summit of the Americas also underscored old and new fissures that exist between the United States and its southern neighbors, from the U.S. isolation of Cuba to calls by some Latin American leaders to defang the violent drug cartels by legalizing drugs.
The trip was clouded by unseemly allegations against Secret Service personnel and military service members working on security in Cartagena ahead of Obama’s arrival. Obama, at a press conference in Cartagena, said that if the accusations, proved true “of course I’ll be angry.”
The Secret Service sent 11 agents home and placed them on leave for misconduct as the agency investigates what happened. Five members of the military working with the Secret Service were confined to quarters, pending an investigation into an alleged prostitution scandal.
“I expect that investigation to be thorough, and I expect it to be rigorous,” Obama said. “We are representing the people of the United States, and when we travel to another country, I expect us to observe the highest standards.”
The story could also be kept alive in Congress where at least one Republican committee chairman suggested the scandal may not be an isolated incident.
Obama began moving forward to domestic issues even as he was still wrapping up business in Cartagena. At the news conference, with Colombian President Juan Manuel Santos at his side, Obama mounted a vigorous defense of his tax proposals.
“I want everybody to remember, I’m going to say this repeatedly: This is not an argument about taking from A to give to B. This is not a redistributionist argument that we’re making. We’re making an argument about how do we grow the economy so that it’s going to be prospering in this competitive 21st century environment,” Obama said.
UPDATED throughout at 7 p.m.
ST. CHARLES • The former president of US Fidelis, once one of the nation’s largest sellers of auto service contracts, admitted in court here Thursday that he bilked consumers and looted his own company of millions of dollars.
Darain Atkinson pleaded guilty to state charges of insurance fraud, stealing and unlawful merchandising practices. It was part of a deal negotiated without the knowledge of his co-defendant and brother, Cory Atkinson, the latter’s lawyers said.
After that agreement in St. Charles County Circuit Court was announced, federal prosecutors in St. Louis unsealed an indictment accusing both men of defrauding consumers, failing to pay taxes and using more than $71 million from the company to fund a lavish lifestyle of luxury boats, cars and mansions here and overseas.
Prosecutors recommended a sentence of eight years for Darain Atkinson on the state charges. Sentencing was set for July 16, but won’t happen until after the federal case is resolved, his attorney, Scott Rosenblum, said in court.
Later, Rosenblum said the prison term and any penalty in the federal case likely would run concurrently, resulting in no more than eight years total.
It marked one more step in a dramatic fall for the Atkinsons. Just three years ago, the brothers were self-made millionaires with palatial homes, fleets of exotic cars and more than 1,100 employees working at the Wentzville headquarters of the auto service contract company they founded.
Bill Margulis, one of the lawyers representing Cory Atkinson, the former company vice president, reacted to the plea agreement by saying, “Whatever allegations in there pertain to Cory, Cory denies.” Margulis declined to comment on the tax charges, saying another lawyer was handling those.
Asked about Darain Atkinson’s motivation to plead guilty, Margulis responded, “I can only speculate that he made a decision … that eight years was a lot better than whatever the alternative might be.”
Lawyers on both sides said that Darain Atkinson did not agree to testify against his brother or provide information against him.
Cory Atkinson’s state case is pending, with a trial set for September.
Darain Atkinson has prior convictions — in 1986 for theft, burglary and forgery, and in 1987 for making counterfeit federal reserve notes. Cory Atkinson has a 1987 felony conviction for trespassing.
As part of Thursday’s plea, 11 state charges against Darain Atkinson were dropped.
“He’s done everything he can not only to accept his responsibility, he’s surrendered everything he’s owned to make things good,” said Rosenblum.
Appearing in court in a black suit, blue shirt and striped tie, Darain Atkinson provided polite and brief answers Thursday to questions from Circuit Judge Jon Cunningham and attorneys. He remained free on bail and walked away from the courthouse without speaking to reporters.
The federal indictment makes many of the same allegations outlined in Darain Atkinson’s plea, using similar language.
It also accuses both brothers of failing to declare or pay taxes on more than $40 million received from the company for the tax years 2006 and 2007. On his 2007 tax return, Darain Atkinson reported $73,378 in taxable income when he’d received $8.1 million from Fidelis, the indictment says. That return was the only one for those years on which either brother reported a positive taxable income, it says.
The federal charges also say the brothers’ lavish spending drained an escrow account that was supposed to pay taxes.
Fidelis was a broker for service contracts that promised financial protection for drivers after their vehicles’ original warranties expired. It also sold product warranties, coverage conditioned upon the purchase and use of certain auto additives.
In his plea, Darain Atkins admitted that the profit was often more than $1,200 on a contract typically priced at more than $2,000.
The company used deceptive and misleading direct mail and telemarketing campaigns designed to fool consumers into thinking they were talking to dealers or auto manufacturers, and portrayed service contracts as more comprehensive than they actually were, the plea says.
Unhappy customers canceled, sometimes at a rate as high as 60 percent.
When they did, Darain Atkinson told Fidelis staffers to arbitrarily withhold 10 to 40 percent of their money — and Cory Atkinson knew the full amounts of refunds were not being returned, the plea says.
The Atkinsons funneled millions of dollars into multi-million dollar homes in St. Charles County and elsewhere in Missouri as well as Lake Tahoe and the Cayman Islands.
Although it is not mentioned in the plea, the company paid almost $27 million to buy land and build Darain Atkinson’s Lake Saint Louis home, which featured a observation tower, bowling alley, beauty salon, a two-story walk-in closet, safe rooms, and secret doors and passageways.
Cory Atkinson’s Wentzville manse was valued at $10 million.
The founders’ spending and the customer cancellations put a strain on the company’s cash flow, and Fidelis was forced to rely on cash from new sales, the plea says. The company collapsed in 2009.
Last month, in a proposed settlement filed in bankruptcy court in St. Louis, the company agreed to pay $1.45 million to 556 former employees.
Missouri Attorney General Chris Koster, who represented the state in Thursday’s case, said after the hearing that since the Atkinson indictment in June, his office has received fewer complaints about other vehicle service contract providers.
“I think the indictment of US Fidelis sent a shock wave through this industry,” he said.
For the past two years, Muddy Waters has been the ultimate whistle blower of questionable accounting practices by Chinese companies trading on U.S. and Canadian stock exchanges. Now, the research firm says investors need to beware of Chinese companies trading in Hong Kong.
"There was a propensity for fraudulent Chinese companies to list their shares in the West, but I think that trend has slowed down quite a bit ever since short sellers like Muddy Waters have come onto the scene," Muddy Waters founder Carson Block told CNNMoney during an interview at the Council of Institutional Investors spring conference in Washington, D.C.
"Now we’re starting to hear rumblings out of Hong Kong," Block said. "Could Hong Kong be the next bastion of fraudulent revelations? It’s difficult to say. But investors need to be wary."
He noted that in the last month, Deloitte — one of the Big Four accounting firms — quit as auditor of two Hong Kong-listed Chinese companies.
Boshiwa International, a maker of children’s clothing, and milk formula producer Daqing Dairy Holdings both announced Deloitte’s resignations and said they are looking for replacement firms. Both companies’ shares have been suspended from trading in Hong Kong since mid March, when the accounting firm stepped down.
Deloitte China confirmed it resigned from both firms, but declined further comment.
Sino-Forest sues Muddy Waters for defamation
Meanwhile, Moody’s Investor Services withdrew its rating on Daqing Dairy last week, and issued a negative outlook amid concerns about the company’s financial reporting after Deloitte’s resignation paydayloans.
Block told CNNMoney that his firm will issue a report and a "sell rating" on a Chinese company within a few weeks, but declined to disclose any further details.
Block also said that Muddy Waters has been probing companies "outside the China realm" and will likely take a short position on a non-Chinese company sometime this year. A short position is essentially a bet that a stock will decline.
Muddy Waters made a name for itself last year, after the company accused Chinese timber company Sino-Forest of fraud. The scathing report triggered a massive sell-off in shares of Toronto-listed Sino-Forest before they were eventually suspended, and forced hedge fund high roller John Paulson to book deep losses.
Reports out of Muddy Waters have brought down several other companies including Rino International () and China MediaExpress ().
Muddy Waters’ most recent fraud allegations against Chinese digital market firm Focus Media () initially sparked a sharp sell of in the company’s stock. But shares of Focus Media have recovered since the November report.
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