Finance Blog number 1

Wall Street analysts have abandoned all expectations for a rebound in U.S. company earnings in the fourth quarter, all but ensuring the corporate profit recession that began in the third quarter of 2007 will continue without interruption into next year.

Earnings for Standard & Poor’s 500 companies are now forecast to decline in the final three months of 2008 by 0.6% from a year earlier, according to Wednesday’s Thomson Reuters Director’s Report, a daily analysis of earnings trends for the companies comprising the benchmark U.S. equity index.

As recently as Tuesday, the report indicated fourth-quarter earnings could eke out a small gain of 0.2%. The report compiles the forecasts of individual Wall Street stock analysts into an aggregate view of the earnings trend for the index.

Now, the report points to earnings extending their slump without respite through at least the second quarter of 2009, which would mark eight straight quarters of falling profits. S&P profits first turned negative, on a year-over-year basis, in the third quarter of 2007.

The dismal earnings outlook is one of the chief factors contributing to the near-record drop in U.S. stocks this year. With just four trading days remaining in 2008, the S&P 500 index is down more than 40% year-to-date, a drop exceeded only by the 47.1% fall in 1931, when the Great Depression was in full swing.

The profit picture detailed in the Director’s Report has been deteriorating rapidly over the course of this quarter.

On Oct. 1, analysts’ forecasts suggested companies could post an impressive 46.7% rebound in earnings from the 2007 fourth quarter, according to the report.

Analysts had presumed for much of this year that the fourth quarter’s comparisons with the final quarter of last year would be relatively easy. That’s because it was one year ago that the first major wave of losses hit the key financial sector as a result of the U no teletrak payday loan.S. housing market’s crash.

But the overall economic picture has crumbled since September, when Lehman Brothers collapsed and sent the global credit crisis into high gear. Fourth-quarter economic output currently is forecast to be the weakest yet in the yearlong U.S. recession.

The median forecast among economists in a Reuters poll published Dec. 11 calls for U.S. gross domestic product to contract at a 4.3% annual rate in the fourth quarter, after contracting 0.5% in the third quarter.

Consumer spending, which accounts for more than 70% of U.S. GDP, has been particularly hard hit by job losses, dropping home prices and tightening credit conditions. As a result, profits in the consumer discretionary sector, which includes retailers of nonessential goods and even the ailing auto makers, are forecast to fall 54% from a year earlier.

By contrast, companies that produce or sell the staples of day-to-day living - everything from food to toothpaste - are estimated to show a 5% increase in earnings from last year, according to the report. Other groups expected to see modest profit increases are health care companies, up 6%, and utility companies, up 4%.

Most other sectors - energy, industrials, materials, technology and telecommunications - are expected to post double-digit declines from the 2007 fourth quarter. The biggest forecast drop, down 65%, is for the materials group, which has been slammed by the falloff in commodity prices and demand.

A big question mark continues to hang over the financial sector, given ongoing constrictions in credit markets and all the related government efforts to prop up the group. Financials on the whole posted a loss a year ago, and the report shows analysts are unclear whether the outlook has improved at all from then. 

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Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts are likely as the recession deepens.

Exports fell 26.7 percent from a year earlier, the Finance Ministry said today in Tokyo. That was more than the 22.3 percent decline estimated by economists and the sharpest since comparable data were made available in 1980.

Shipments to the U.S. slid an unprecedented 34 percent and sales to China slumped the most in 13 years, underscoring why the Bank of Japan lowered its key interest rate to 0.1 percent last week. The yen’s surge to a 13-year high is amplifying the woes of exporters including Toyota Motor Corp., which may announce a lower earnings forecast at a press briefing today.

“Japan’s export crash is finally upon us, and this is the worst thing that could happen,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The recession will be very severe as companies adjust investment, production and labor.”

The yen weakened and stocks rose on speculation emergency loans to General Motors Corp. and Chrysler LLC will stem a deeper U.S. downturn.

Japan’s currency fell to 90.02 per dollar as of 1:16 p.m. in Tokyo from 89.50 before the trade report was published and 87.14 on Dec. 17, the strongest since 1995. The Nikkei 225 Stock Average climbed 1 percent.

Getting Worse

The government today lowered its assessment of the world’s second-largest economy, saying it’s “worsening” for the first time since 2002. Gross domestic product shrank in the past two quarters, sending Japan into its first recession since 2001.

Toyota, Honda Motor Co. and Sony Corp. are among the companies that are shedding thousands of workers and closing production lines as profits dwindle. Car exports slid 32 percent last month, the most ever, and semiconductors slumped 29 percent, the ministry said.

Today’s report showed the global recession is spreading to the emerging markets that propped up exports as demand from the U.S. and Europe evaporated. Exports to Asia fell 27 percent, the most in 22 years. Shipments to China, Japan’s largest trading partner, tumbled 25 percent, the steepest decline since 1995.

“There are no markets that can make up for the drop in demand for Japanese-made goods,” Dai-Ichi Life’s Shinke said affordable health insurance.

Exports to Europe slid 31 percent, the second-most ever.

Another Deficit

Imports fell 14.4 percent, the first decline in 14 months, as oil costs eased and the yen gained. That wasn’t enough to prevent a trade deficit of 223.4 billion yen ($2.5 billion), the third shortfall in four months.

The yen strengthened 25 percent against the dollar this year as the global financial crisis prompted investors to sell riskier assets purchased with money borrowed in the currency.

Honda President Takeo Fukui said last week that the carmaker may shift more manufacturing overseas if the yen strengthens further and urged government action to halt its ascent. Every 1 yen gain against the dollar cuts Honda’s annual operating profit by 18 billion yen, according to the company.

Finance Minister Shoichi Nakagawa said last week that he has “the means” to sell yen to stem its appreciation. Japan hasn’t intervened in the foreign-exchange market since 2004.

Companies are also struggling to obtain funding as the market turmoil dissuades investors from buying corporate debt. To help businesses get financing, the Bank of Japan last week decided to buy commercial paper for the first time.

Gloomy Households

Sales at home are unlikely to make up for the collapse in demand from abroad. Households, whose confidence is at a record low, pared spending in each of the eight months to October as wage growth stagnated and job prospects worsened.

The Finance Ministry last week submitted an extra budget for the year ending March that includes 2 trillion yen in cash handouts for households as Prime Minister Taro Aso tries to spur spending. That may be too little, too late, economists say.

“Japan’s economy has never weaned itself off of the overbearing reliance on exports, and especially to the U.S.,” said Kirby Daley, senior strategist and head of capital introductions at Newedge Group. “Japan did nothing to prepare itself” for the collapse in demand from abroad.

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East Asian economies will probably expand at the slowest pace in eight years in 2009 as easing export demand and declining investment and consumer spending portend “hard times” for the region, the World Bank said.

East Asia, which excludes Japan and the Indian subcontinent, will expand 5.3 percent next year, slower than the 7.4 percent rate the World Bank predicted in April. Growth will probably be 7 percent this year, the Washington-based lender said its semi- annual report today.

Fiscal stimulus and coordinated interest-rate cuts by governments and central banks around the world have failed to reverse a worldwide economic slump and the worst credit crunch in seven decades. The World Bank yesterday lowered its global growth projections, and predicted international trade will shrink in 2009 for the first time in more than 25 years.

“The contraction of output in the developed economies may well last longer and run deeper, delaying a recovery in growth in East Asia,” the bank said. “In the near term, downside risks are substantial.”

The World Bank in April said inflation will pose a greater threat to the East Asia region than the global slowdown this year. As crude oil and commodity prices fall from record levels, and consumer price gains peaked, it is now pointing to a worsening economic outlook.

Weaker Exports

“Prospects for weaker exports, together with a projected decline in capital inflows, will constrain investment spending,” it said. “Private consumption is likely to be hit by more sluggish earnings, higher levels of unemployment, the reduction in household and corporate wealth, and an increased desire to save in uncertain times.”

Asian governments and their counterparts around the world are spending hundreds of billions of dollars to protect their economies from the global financial crisis. Slowing inflation will allow the governments to boost growth through expansionary fiscal measures, the World Bank said affordable car insurance.

China last month announced a $582 billion economic stimulus plan, while South Korea unveiled a 14 trillion won ($9.7 billion) package of extra spending and corporate tax breaks, adding to almost $20 billion in income-tax reductions announced in September.

“A number of countries in East Asia have some room to loosen policy, as fiscal positions have generally improved in recent years,” it said. “To ensure fiscal stimulus packages achieve their objective of generating demand and jobs in the domestic economy, such packages will need to be well-targeted and temporary in duration.”

‘Do Better’

The World Bank said developing East Asian economies will be more resilient during the slowdown compared with other emerging- market regions such as Latin America, which it projects will grow 2.1 percent next year.

“East Asia is expected to do better than the other developing regions in the world” by growing 4 percent to 5 percent in the next year, Vikram Nehru, the World Bank’s chief economist for East Asia, said in an interview with Bloomberg Television on Dec. 8. “That’s not spectacular, but still reasonably good.”

East Asia probably contributed to a quarter of global growth this year, and that may rise to a third next year, the World Bank said.

“The countries in the region will be better positioned to deal with the crisis to the extent that they are able to maintain macroeconomic stability, shift exports to faster growing regions in the world, substitute external with domestic demand, and continue with their structural reforms to strengthen competitiveness,” the report said.

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The one thing that isn’t shrinking in the U.S. economy these days is the size of the stimulus package that financial experts say is needed to turn it around.

With automobile sales dropping, payrolls plunging and manufacturing contracting, economists from across the political spectrum are raising the ante on how much the government should lay out. Some are now calling for at least a $1 trillion boost.

Kenneth Rogoff, a Harvard University professor who was an adviser to Republican presidential candidate John McCain, and Joseph Stiglitz, a Nobel Prize winner who served in President Bill Clinton’s White House, are among those who say President- elect Barack Obama should push for a package of that size.

“They need a stimulus of $500-to-$600 billion a year for at least two years to counter what is going to be a collapse in consumption,” said Rogoff, a former chief economist at the International Monetary Fund.

That number may grow. This week brought news that the economy has been in recession for a year. Tomorrow the government will release November employment data, which economists say will show another 330,000 jobs lost, the most in seven years.

“Every day it looks like the stimulus package needs to be bigger,” said Bill Samuel, the lead lobbyist for the AFL-CIO, the largest U.S. labor federation. “You’re talking $500, $600, $700 billion or even more” for a year.

‘Things Are Evolving’

Obama, who has said that enacting a stimulus plan will be his top priority once he takes office on Jan. 20, has himself been steadily increasing the amount he thinks is needed.

Earlier in the presidential campaign, he proposed a package worth $50 billion, then raised that to $175 billion as the election approached. Advisers have since said the program may total as much as $700 billion, although that number, too, may rise.

“Congress should think in terms of $900 billion in 2009, with possibly more in 2010,” said James Galbraith, a self-styled liberal economics professor at the University of Texas in Austin who has talked with the Obama transition team about the issue. “I may be higher than they are at this point,” he said, “but things are evolving.”

Whatever its size, the package is likely to include tax cuts, aid to the states, higher unemployment benefits and increased spending on infrastructure such as roads and bridges.

‘Liquidity Trap’

New Jersey Governor Jon Corzine said Washington needs to step in because the U.S. is caught in a “liquidity trap,” where repeated interest-rate cuts by the Federal Reserve fail to boost the economy because banks don’t want to lend and skittish consumers and companies don’t want to borrow.

“If the government doesn’t operate to fill that gap, we are going to see not only rising unemployment but a shockingly high level of unemployment over the next 12 to 24 months,” Corzine said in Bloomberg Television interview yesterday. He called for a stimulus of “overwhelming force.”

Adam Posen, a former New York Fed official, agreed that’s the lesson to take from Japan’s experience during the 1990s, when it faced a similar situation cash advance loan.

“The stimulus has to come through the fiscal side,” said Posen, who has written about Japan and who’s now deputy director at the Peterson Institute for International Economics in Washington. “A package of 4 percent of GDP, even 5 percent of GDP is not unreasonable over one year.” That would equate to about $500 billion to $700 billion.

Posen said Japan’s economic-recovery packages at times didn’t seem to work because they turned out to be smaller than first announced and were slow in coming.

All About Speed

The Obama team is aware of that problem. “We hear that Japan invested over a trillion dollars in infrastructure and nothing happened,” Vice President-elect Joe Biden told a meeting of state governors on Dec. 2. “Well, it’s all about how rapidly we can get these projects up and running.”

While some conservative economists agree that a big stimulus package is needed, they argue that it should focus on tax cuts, not on increased government spending on infrastructure.

John Makin, a visiting scholar at the American Enterprise Institute in Washington, has advocated a temporary cut in the payroll taxes that help finance Social Security. So, too, has Stanford University Professor Robert Hall, the chairman of the National Bureau of Economic Research committee that calls the beginnings and ends of recessions.

Love That Pork

“Politicians love pork, but maybe they can be pushed toward something better,” Hall said in an e-mail message.

Because the payroll tax is paid by employees and businesses, reducing it would both give consumers more money to spend and businesses more incentive to retain staff, said Mark Bils of the University of Rochester.

Not all economists think fiscal stimulus is the answer to the economy’s ills. “There are other choices,” said Greg Mankiw, a Harvard professor who served as President George W. Bush’s chief economic adviser. Foremost among the alternatives is monetary policy, said Mankiw. The Fed can act to bring down long- term interest rates as well as short-term ones, he said.

Some bond-market investors are also worried about the swelling stimulus and the impact it will have on the budget deficit and ultimately the economy.

“A stimulus of this magnitude helps push government debt as a percentage of GDP closer to dangerous levels, when inflation and interest rates start to rise,” said Thomas Atteberry, who manages $3.5 billion in fixed-income assets at First Pacific Advisors in Los Angeles.

‘Enormous Amounts’

Regardless of the risks, that’s where policy makers are heading, said David Rubenstein, co-founder of the Carlyle Group.

“Congress is going to spend enormous amounts of money,” he told reporters in Washington on Dec. 2. “Initially, people were talking about $150 billion, then $300 billion, then $500 billion then $800 billion. Now people are talking about a trillion-dollar stimulus package.”

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Australia’s economy grew last quarter at the weakest pace in eight years as household spending stalled, increasing pressure on the central bank to add to the biggest round of interest-rate cuts since a recession in 1991.

Gross domestic product rose just 0.1 percent from the second quarter, when it gained a revised 0.4 percent, the Bureau of Statistics said in Sydney today. The median estimate of 22 economists surveyed by Bloomberg was for a 0.2 percent gain. The economy grew 1.9 percent from a year earlier.

The threat of Australia’s first recession in 17 years has prompted central bank Governor Glenn Stevens to slash borrowing costs by three percentage points since early September. Consumers and businesses are reeling from a 44 percent slump in the benchmark Australian S&P/ASX 200 stock index and the biggest decline in home prices since 1978.

“A recession shouldn’t be discounted by policy makers or the general public,” said Joshua Williamson, a senior strategist at TD Securities Ltd. in Sydney. “The outlook is more negative than positive.”

Exports and household spending neither added or subtracted to the change in GDP, while an increase in imports detracted 0.4 percentage point from growth in the quarter, today’s report said.

The Australian dollar traded at 64.28 U.S. cents at 12:35 p.m. in Sydney from 64.25 cents before the report was released. The two-year government bond yield was unchanged at 3.14 percent.

Interest Rates

Reserve Bank of Australia Governor Stevens cut borrowing costs to a six-year low of 4.25 percent yesterday and said monetary policy is now “expansionary.”

While Australia has been more resilient than “other advanced economies,” recent evidence indicates “a significant moderation in demand and activity has been occurring,” Stevens said.

Retail sales growth has slumped as turmoil on global financial markets deepens consumer pessimism. Sales have gained an average of 0.1 percent a month this year, according to government trend figures, down from 0.6 percent monthly growth last year.

Mark McInnes, chief executive officer of David Jones Ltd., Australia’s second-biggest department store chain, said last week the outlook for the rest of fiscal 2009 is worse than that experienced by the company in the last recession of 1990 to 1991.

‘Better Placed’

Waning domestic demand is being partially offset by exports of commodities including iron ore and coal that have stoked profits at companies including BHP Billiton Ltd free credit score. and pushed unemployment close to the lowest in more than three decades. The jobless rate was 4.3 percent in October.

“Today’s figures show we can’t completely resist the pull of international forces, but we are better placed” than other countries, Treasurer Wayne Swan told reporters in Canberra today. “This will be a long protracted global crisis.” the U.S., U.K., Europe and Japan have all slipped into recessions, he said.

Exports may slow in coming months as the global economic recession deepens. China’s central bank cut its key interest rate by the most in 11 years last week and the government said “forceful” measures were needed to arrest a faster-than- expected economic decline. China is Australia’s largest trading partner.

“The risk of weaker activity over the next 12 months is ever-present,” said Ben Dinte, an associate economist at Macquarie Group Ltd. in Sydney. “Business investment is clearly looking like slowing over coming quarters,” which will erode growth in 2009 and 2010.

Government Action

To buttress the economy, Prime Minister Kevin Rudd said last week he may allow the government’s budget to slip into deficit for the first time since 2002.

The government agreed with state leaders on Nov. 29 to spend A$15.1 billion ($9.7 billion), mainly on health and education, to generate 133,000 jobs. Rudd is also giving A$10.4 billion in cash grants to the elderly, first-home buyers and families, much of which will be paid this month.

Stevens and his board will probably cut the overnight cash rate target by the end of March to 3.5 percent, a rate last seen in the 1960s, according to Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.

“While skirting dangerously close to a recession, there is considerable stimulus in the pipeline,” Ong added.

The chain price index, a measure of retail prices, climbed 8.8 percent in the third quarter from a year earlier, today’s report showed.

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The U.S. government’s emergency rescue of Citigroup Inc. offers a new model for bank bailouts: explicitly insuring against losses on toxic assets, with taxpayers footing the bill.

The Citigroup plan extends the federal commitment beyond the previous framework of capital injections from the Treasury and credit from the Federal Reserve. Now, the U.S. is a partner in the performance of $306 billion in real-estate loans and securities, sharing losses beyond $29 billion on what are likely to be some of Citigroup’s worst holdings.

“Everybody and his brother has got to have their hand out now,” said Eric Hovde, chief investment officer at Hovde Capital Advisors, which manages $1 billion in financial-services stocks. “The whole problem is so much bigger and deeper than the Fed and Treasury ever understood.”

Taxpayers are likely to be at greater risk from the new template, which may be used to help more companies as debt writedowns continue to climb, analysts said.

“Every situation will need to be evaluated on a case by case basis, but obviously we are able to draw from our experiences as we work through these issues in the financial system,” Treasury spokeswoman Brookly McLaughlin said.

Citigroup’s crisis escalated as it was forced to take on its balance sheet a number of special units created to invest in riskier securities. The New York-based bank’s shares lost 60 percent last week, and then recouped some of those losses yesterday after the government’s rescue. Other lenders remain vulnerable.

Weakened Banks

Wells Fargo & Co. is absorbing Wachovia Corp., the bank that regulators pushed in September to merge amid mounting losses from $120 billion in a portfolio of home loans. Bank of America Corp. has taken on both Countrywide Financial Corp., once the biggest independent mortgage lender, and Merrill Lynch & Co., the securities dealer hobbled by $24 billion of losses. Morgan Stanley slumped almost one third in the past three months.

Other banks “are going to show up” and ask for the Citigroup deal, predicted Joseph Mason, a professor at Louisiana State University in Baton Rouge who previously worked at the Treasury’s Office of the Comptroller of the Currency.

The loss-sharing plan is another twist in the saga of Treasury Secretary Henry Paulson’s management of the $700 billion Troubled Asset Relief Program. Since the rescue fund was approved by Congress and enacted last month, Paulson has been criticized by lawmakers and others for not having a clear design for using the money. President-elect Barack Obama joined the chorus yesterday.

‘Confusion’ on Strategy

There has been “confusion on what the overall direction might be” of the Bush administration’s plans, Obama said in a press conference in Chicago. At the same time, he pledged to “honor the commitments” of the outgoing team.

“The model is that there is no model,” said V business cards. Gerard Comizio, senior partner in the banking practice at the Paul, Hastings, Janofsky & Walker law firm in Washington. “It is an improvisation battle plan.”

Under the terms of the agreement, Citigroup will cover the first $29 billion of pretax losses from the $306 billion asset pool, in addition to reserves it already set aside.

Citigroup will accept 10 percent of losses above that amount, with the government responsible for 90 percent. The Treasury is second in line, taking $5 billion in losses, and the Federal Deposit Insurance Corp. is third, absorbing up to $10 billion. If the portfolio plummets through those triggers, the Fed steps in with a loan for the remaining assets.

Initial $25 Billion

U.S. authorities acted after the second-biggest U.S. bank by assets touched $3.05, the lowest level since 1992, threatening confidence among its depositors and counterparties. Citigroup had already received a $25 billion infusion under Paulson’s $250 billion capital-injection program.

“The Treasury and the Fed are doing what they can do to hold the pieces together, and it hasn’t been easy,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce, which lobbies on behalf of 3 million businesses. “If we don’t keep the financial system going that is going to impose costs on the American public that will be real and palpable.”

The Fed’s exposure in the deal also represents a tack in the way the central bank has approached the crisis.

Since what was an effective purchase of $29 billion Bear Stearns Cos. assets in March, Fed officials have shown a preference for providing short-term credits for firms facing a cash squeeze.

Assets Swell

The central bank’s balance sheet expanded $1.3 trillion in the past year as the Fed auctioned $415 billion of cash to banks and purchased $272 billion of commercial paper.

Fed officials have pushed to keep the risks involved in future bailouts at the Treasury, which would be forced to negotiate with Congress about the use of taxpayer funds.

Now, the Fed is stepping outside the liquidity boundary once again. The central bank took a step toward risk sharing earlier this month when it opened two new facilities with up to $52.5 billion in loans to help American International Group Inc. wind down its portfolio.

“It is clear that regulators still lack a comprehensive plan to address problems in our financial markets,” Senator Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, said through his spokesman Jonathan Graffeo. “It is unclear whether they have carefully considered the implications of their continued ad-hoc approach.”

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German Chancellor Angela Merkel's Cabinet agreed on a package of measures aimed at unlocking 50 billion euros ($65 billion) of investment to shore up the economy amid a global slowdown.

The two-year program ranges from tax breaks for buyers of new cars to greater financial help for improving buildings' energy efficiency. The measures will cost 23 billion euros in the four years through 2012, of which 10.9 billion euros will come out of the federal budget, the Finance Ministry said.

The government aims to “avert a credit squeeze for small and medium-sized companies,'' Economy Minister Michael Glos told a news conference in Berlin today after the Cabinet met. “It's a tailored economic growth package, not a classic stimulus program — we want to strengthen the power of the economy to resist the impact of the crisis.''

The government program for the economy, Europe's biggest, comes two days after the European Commission forecast stagnation in Germany in 2009, an election year. The government last month slashed its own forecast for 2009 growth to 0.2 percent from 1.2 percent, citing weakening demand for exports as the financial crisis feeds into the global economy.

`Bold and Targeted'

“We will have difficulties in 2009,'' Merkel told reporters today. “We want to do something to counter this with investment incentives.'' The program, which also includes increased tax relief on household repairs, loans to small and medium-sized businesses and money for roads and railways, is “bold and targeted'' and will act as a bridge to revive economic growth in 2010, she said.

Even so, the package “is too small and is designed mainly for capital spending instead of consumer spending,'' Stefan Bielmeier, an economist with Deutsche Bank AG in Frankfurt, said in a Nov. 3 note. “We believe that the growth impulses will be smaller than expected by the government. But it could help to shorten the period of negative GDP growth in Germany.''

Germany follows the U.S. in attempting to prime the wider economy after the financial crisis triggered the collapse of Lehman Brothers Holdings Inc. in September, forcing government bank bailout programs. Germany rushed a 500 billion-euro bank- rescue plan through parliament Oct pay day loan lenders. 17.

U.S. Comparison

President George W. Bush signed a $168 billion economic stimulus package into law in February that sent tax rebates of as much as $600 to individuals and $1,200 to couples. The package is equivalent to about 1.2 percent of gross domestic product, according to Bloomberg calculations.

U.S. lawmakers are moving toward a second fiscal-stimulus bill after Federal Reserve Chairman Ben S. Bernanke endorsed the idea. Democratic President-elect Barack Obama has called for a measure worth $175 billion.

The German steps, equivalent to about 2 percent of gross domestic product, will have “double the effect of the Bush program,'' Jens Ehrhardt, who oversees $12 billion at Munich- based Dr. Jens Ehrhardt Kapital AG, told yesterday's edition of Handelsblatt newspaper.

The measures will hurt attempts to balance the federal budget by 2011, which will remain a “goal'' for the government in the next legislative period after the election, Merkel said in a speech to the BDA employers' federation yesterday.

National Elections

Finance Minister Peer Steinbrueck, a Social Democrat, told reporters today that the budget may be balanced by the end of the next legislative period, in 2013. Merkel's Christian Democrats and her Social Democrat coalition partners will contest national elections in September next year.

In a related development, a panel of fiscal experts meeting in Hildesheim, about 140 kilometers (90 miles) south of Hamburg, gave new estimates for tax revenue showing that total revenue will hold up next year in the face of the economic slowdown.

Revenue at federal, state and municipal level next year will be 572 billion euros compared with a May estimate of 571 billion euros, the Finance Ministry said, citing the panel's findings.

“Merkel needs every cent of tax revenue she can get next year — the crisis rescue packages are a huge burden on the budget,'' Rainer Kambeck, a fiscal policy specialist at the Essen-based RWI economic institute, said in an interview. “The forecast is surely a relief.'' RWI is a member of the tax panel.

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First Citizens BancShares is asking the federal government for permission to merge its banking subsidiaries.

First Citizens (NASDAQ:FCNCA), based in Raleigh, is the parent of both First Citizens Bank and IronStone Bank. The company says it wants IronStone to become part of First Citizens Bank.

IronStone is a federally chartered thrift with branches in Georgia, Florida, Texas, New Mexico, Arizona, California, Oregon, Washington, Colorado, Oklahoma, Missouri and Kansas. First Citizens is chartered as a commercial bank under North Carolina law and has branches in North Carolina, Maryland, Virginia, Tennessee and West Virginia.

“The merger of our two banking subsidiaries, known for experienced associates and exceptional customer service and products, strengthens our national presence under a single identity in many of the nation’s top growth markets,” Lewis Holding, chairman of the board, says in a statement creditreport. “The combined bank will provide better growth opportunities to build our company for the future.”

The bank expects approval of the merger in the first quarter.

Overall, First Citizens BancShares has $16.7 billion in assets and 401 branches around the country.

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The number of e-mails containing attack attachments jumped eight-fold in the third quarter over the same period last year, according to a report released Monday by IT security firm Sophos Inc.

The research by Burlington, Mass.-based Sophos found one in every 416 e-mail messages contained an attachment that could harm one’s computer, up from one in every 3,333 messages last year.

Sophos officials say PCs running the Windows operating system are most at risk for infection.

“For Apple Mac and Unix lovers, these major spam attacks just mean a clogged-up inbox, not an infected operating system. But organized criminals are causing havoc for Windows users in the hunt for cold hard cash,” Graham Cluley, senior technology consultant at Sophos, says in a statement one hour loan. “Too many people are clicking without thinking, exposing themselves to hackers who are hell-bent on gaining access to confidential information and raiding bank accounts. The advice is simple: you should never open unsolicited attachments, however tempting they may appear.”

The United States remains the country that produces the most spam with some 18.9 percent of all unwarranted messages, followed by Russia and Turkey each producing 8 percent.

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Constellation Energy Group unveiled Tuesday changes in its top management, a month after the Baltimore energy giant agreed to acquired in a $4.7 billion deal.

Jonathan Thayer will become the chief financial officer, replacing John R. Collins, who stepped down from the post, Constellation said. Charles A. Berardesco, 50, will become the new general counsel for Constellation and replace Irving Yoskowitz.

Iowa-based MidAmerican Energy Holdings Co., a subsidiary of billionaire Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A., BRK.B), said Sept. 18 it would acquire Constellation (NYSE: CEG).

Thayer, 37, had served as the vice president and managing director for corporate strategy and development for Constellation. He was appointed treasurer in August.

Collins, 51, will take an advisory role on the Constellation and MidAmerican merger and will also remain as chairman of the board of directors for Constellation Energy Partners LLC, an affiliate of Constellation Energy Group that’s developing and acquiring oil and natural gas properties savings account payday advance.

Collins was appointed chief financial officer of Constellation in May 2007.

Berardesco had served as vice president, deputy general counsel, chief compliance officer and corporate secretary for Constellation. Yoskowitz, who joined Constellation as general counsel in 2005, will retire.

The proposed union between Constellation and MidAmerican could take nearly a year to close and would need the approval of federal and state regulators and shareholders.

Constellation filed its application for the merger with the Federal Energy Regulatory Commission Oct. 15 and filed its application with the Maryland Public Service Commission Oct. 17. The PSC plans to hold a pre-hearing conference on the merger filing Nov. 3.

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