World The Economy of Fail - The Latest Financial Crisis News Thread

[The Helper]

Magazine Ad Revenues down 21.5 percent in first quarter

MAGAZINES are generally seen as good early warning signs for economic downturns. The thinking is that corporations would rather cut back on ads before they actually have to start cutting back on people.

If that thinking holds, we're in for a long and deep recession.

Tomorrow, Media Industry Newsletter is releasing its report on the first quarter of 2009 and it will show ad pages have tumbled a numbing 21.5 percent for monthlies in the period compared with the first quarter of 2008. (MIN gets early numbers because the March issues are starting to hit newsstands.)

In comparison, in the first quarter of 2008 magazines had just gone negative, dropping 4.6 percent after racking up small gains for most of 2007. Ad pages have now been falling for five straight quarters, MIN reports.

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[The Helper]

Wal-Mart profit beats Wall St view

NEW YORK (Reuters) - Wal-Mart Stores Inc posted a profit that beat Wall Street forecasts, fueled by sales at its namesake U.S. discount stores, and said it expects to outperform rivals as a global downturn forces shoppers to seek low prices.

Shares in the world's largest retailer rose 3 percent on the results, as investors shrugged off fears of a deeper global recession that prompted stock declines in the wider U.S. market.

"They kind of did everything right," said Joseph Feldman, a retail analyst with Telsey Advisory Group. "They're going to start buying back stock, they continue to control inventory well, February is off to a good start, and guidance for next year is as good as you could have hoped."

Wal-Mart said U.S. sales rose 6 percent in the quarter as it attracted more shoppers trying to save money. International sales slid 8.4 percent due to a stronger U.S. dollar, while sales at its Sam's Club warehouse clubs were flat.

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[The Helper]

Trump Entertainment files for bankruptcy

CHICAGO (Reuters) - Trump Entertainment Resorts Inc, the casino operator named for Donald Trump, filed for bankruptcy protection on Tuesday as recession and declining gambling revenues battered the company and its rivals.

The Chapter 11 filing marks the third plunge into bankruptcy for the company, which was created out of a restructuring in 2005. It also underscores the struggles facing the casino business as recession squeezes casino gambling.

Trump Entertainment owns and operates three casino hotels in hard-hit Atlantic City, New Jersey, including the Trump Taj Mahal, Trump Plaza and Trump Marina.

The company did not request debtor-in-possession financing to operate during its restructuring and said it would continue to run as normal.

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[The Helper]

With no budget, California to cut 20,000 state jobs

LOS ANGELES (Reuters) - California, which is on the brink of running out of cash, will notify 20,000 state workers on Tuesday their jobs may be eliminated, a spokesman for Governor Arnold Schwarzenegger said on Monday.

The announcement came a day after California lawmakers narrowly failed to pass a $40 billion budget that would have plugged the state's deficit with a mix of tax hikes and spending cuts.

"In the absence of a budget, the governor has a responsibility to realize state savings any way he can," said Aaron McLear, a spokesman for the Republican governor. "This is unfortunately a necessary decision."

The layoff notices will affect about 20 percent of state workers, McLear said, adding the cuts would extend to every part of state government.

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[The Helper]

GM, Chrysler seek nearly $22 billion more U.S. loans

DETROIT (Reuters) - General Motors Corp and Chrysler LLC requested nearly $22 billion in additional U.S. government loans and said they had reached tentative deals with the United Auto Workers union to reduce labor costs.

The two automakers, which have so far received $17.4 billion in loans from the U.S. Treasury, also detailed plans to cut jobs and idle plants as part of sweeping restructuring plans submitted under the terms of their federal bailout.

GM said it was making progress on complex deals to reduce some $48 billion in debt owed to bondholders and the United Auto Workers union but had fallen short of an initial requirement to complete those agreements by Tuesday's deadline for submitting the plans to U.S. officials.

"The president's team will be reviewing these reports closely in the days ahead," White House spokesman Robert Gibbs said in a statement. "It is clear that going forward, more will be required from everyone involved."

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[The Helper]

Bank of England Asks For Authority to Create Money

Feb. 18 (Bloomberg) -- Bank of England policy makers unanimously agreed to ask the government for authority to create money in an effort to kick start the economy, saying further interest rate cuts may hurt the profitability of banks.

The Monetary Policy Committee, led by Governor Mervyn King, voted 8-1 to cut the main rate to 1 percent, the lowest since the central bank was founded in 1694, minutes of the Feb. 5 decision published in London today show. David Blanchflower, argued for a deeper reduction so rates go as low as possible “without delay.”

The minutes suggest rates cuts are becoming less potent, pushing the central bank to use unprecedented means to revive the economy from its worst slump since 1980. King and Chancellor of the Exchequer Alistair Darling will exchange letters about the next steps within a few days, a spokesman for the Treasury said.

“To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy measures,” the minutes said. “Therefore the committee unanimously agree that the governor should write on its behalf to the chancellor to seek authority to conduct purchases of government and other securities, financed by the creation of central bank money.”

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I bet it looked like a good idea to do this in Zimbabwe. Those who fail to learn from history are doomed to repeat it.

 

[The Helper]

Wholesale inflation takes biggest jump in 6 months

WASHINGTON (AP) -- Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.

The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected.

The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months.

Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation.

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So many people are so out of touch with reality this is actually shocking to them.

 

[The Helper]

California Legislature approves new Budget

The deal is done.

The California Legislature voted early today to approve a massive budget package of tax increases, spending cuts and borrowing to close a $40 billion deficit after granting major concessions to one holdout Republican senator.

Lawmakers had been at a five-day impasse until Gov. Arnold Schwarzenegger and legislative leaders today agreed to give Sen. Abel Maldonado, R-Santa Maria, major changes he demanded in exchange for providing a crucial 27th vote for the state budget.

The votes came after what Senate President Pro Tem Darrell Steinberg said was, at 45 1/2 hours, the single longest Senate floor session in California history.

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[The Helper]

Shares of BofA, Citi fall on nationalization fears

NEW YORK/FRANKFURT (Reuters) - Shares of Bank of America Corp and Citigroup Inc plummeted for the sixth straight day on Friday, hammered by increasing fears that the U.S. government could take the control of the banks, wiping out shareholders.

Bank of America shares were down 6.6 percent to $3.66 in premarket trading, their lowest level since 1984, while Citigroup fell 12.3 percent to $2.20, their lowest price since 1991. The Frankfurt-listed shares of the banks also fell.

"It's a clear sign that the markets are expecting a high probability of them being nationalized," said Mike Holland, founder of Holland & Co. "The clear expectation is that shareholders would effectively be wiped out."

Citigroup spokesman Jon Diat said in an emailed statement that the bank's capital base is "very strong" and its Tier-1 capital ratio is "among the highest in the industry."

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[The Helper]

U.S. gold rises above $1,000/oz on flight to safety

NEW YORK (Reuters) - U.S. gold futures climbed above $1,000 an ounce on Friday as jittery investors turned to the yellow metal as a safe haven amid tumbling stocks and economic uncertainties.

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[The Helper]

GM unit Saab files for protection from creditors

STOCKHOLM – General Motors Corp.'s Swedish-based subsidiary Saab went into court protection from creditors Friday so the unit can be spun off or sold by its struggling U.S. parent, officials said.

The move is a last-ditch effort to get Saab in order for sale, but the danger of a collapse still hovers over the ailing brand because neither GM nor the Swedish government appears ready to provide enough money to keep it going as a freestanding entity.

An application to reorganize the brand was filed at a district court in Vanersborg, in southwestern Sweden, Saab spokeswoman Margareta Hogstrom said. It was approved later Friday.

GM, which is seeking help from the U.S. government to avoid bankruptcy at home, hopes the three-month reorganization process will put the Swedish brand into shape for a sale, GM spokesman Chris Preuss said. "We fully intend to be out of Saab by the end of the year," he said.

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[The Helper]

Predatory Legislators - Peter Schiff on the Mortgage Bailout

With millions of homeowners now struggling to repay money they clearly never should have borrowed, our leaders have been righteously wagging fingers at predatory lenders who allegedly enticed innocent borrowers, and the country, into a financial snake pit. While the mortgage industry clearly deserves a good share of the blame, unindicted co-conspirators abound. The ringleaders are still at-large and are, in fact, busy hatching a plan to dwarf the earlier mistakes.

Contrary to the message bouncing off the marble walls of the Capitol, most borrowers in the inflating housing bubble clearly understood the terms of their loans. Most knew that they could not afford their mortgage payments once their teaser rates expired, but enthusiastically jumped into the debt pool anyway believing that guaranteed real estate appreciation, or a quick and profitable sale, would keep them afloat.

Although both lenders and borrowers were acting in their own perceived self-interest, what can we say of our economic policymakers who are expected to protect the good of all? Their actions encouraged the whole sad circus. Were it not for the excessively low interest rates provided by the Fed, the lax lending standards and moral hazards supplied by Congress courtesy of Freddie, Fannie, and the FHA, and the many real estate subsidies built into the tax code, none of these predatory loans would have been possible.

Had lenders exercised better judgment and had borrowers avoided overly burdensome debt loads, both parties would clearly be in better financial positions today. Instead, as borrowers were demanding the credit to fuel their dreams of instant real estate riches, lenders were being ordered to accommodate them.

Whole article here.

 

[The Helper]

Retailers face off with name brands in recession

BOCA RATON, Fla./NEW YORK (Reuters) - U.S. retailers are increasingly pitting their own products against national brands to win sales and that battle will only get fiercer in a prolonged recession.

From Wal-Mart Stores Inc to Target Corp to drugstore chains, retailers are trying to boost profits by introducing or revamping their own branded products, such as food, tissues and detergent.

While none have talked about abandoning national brands, retailers are taking over more of the shelf space in their stores and promoting their own lower-priced private brands. They are also cutting back on how much they keep in stock as shoppers buy less.

That means branded product makers must show consumers their brands are worth paying for. Some, like Procter & Gamble Co, are using more coupons and highlighting value in their advertising.

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[The Helper]

BankAtlantic halts dividend, defers debt payment

NEW YORK (Reuters) - BankAtlantic Bancorp Inc (BBX.N), which last year sued a prominent banking analyst over a report that referred to its financial condition, said it is halting its common stock dividend and share repurchases, and will defer interest payments on $294.2 million of debt.

In a statement on Friday evening, the Fort Lauderdale, Florida-based company said documents governing its junior subordinated debt allow the deferral of interest payments for up to 20 straight quarters without default or penalty.

It said that during the deferral period, dividend payouts will also be suspended on related trust preferred securities. The quarterly dividend was 2.5 cents per share.

Chief Executive Alan Levan in a statement cited the "current challenging economic environment" for the deferrals, which he said "will allow the company to preserve liquidity." He said the company remains "well-capitalized."

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[The Helper]

British jobs to be supported by US taxpayer with U.S. govt set to buy 40% of Citi

American taxpayers could soon own 40 per cent of what was once the country's most valuable bank.

Citigroup Inc is in talks that could see the U.S. government boost its ownership stake to 40 per cent, according to media reports.

The bank employs some 11,000 people in the UK.

The news came as governments and financial firms in Japan, France and elsewhere announced fresh capital raising today.

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[The Helper]

Bankruptcy Funding Solicited for Car Makers

Outside advisers to the U.S. Treasury have started lining up the largest bankruptcy loan ever, talking with banks and other lenders about at least $40 billion in financing for General Motors Corp. and Chrysler LLC, in case the two auto makers need it, said several people familiar with the matter.

While acknowledging the grimness of the task, administration officials involved in the auto talks said they are trying to find a way to restructure the two companies without resorting to bankruptcy proceedings. They stressed the latest efforts were "due diligence" on the part of the government advisers, and that bankruptcy financing may not be necessary.

Still, people involved in talks with senior Obama administration officials said that the administration believes that the option of Chapter 11 filings by the two auto makers needs to be seriously considered.

"Everything is on the table right now," one person involved in the matter said, adding that President Barack Obama doesn't want to see more massive job losses in the auto industry. His administration also doesn't want to anger the United Auto Workers by appearing to push for bankruptcy, this person added.

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[The Helper]

Philadelphia Newspapers Seeking Bankruptcy

The owners of The Philadelphia Inquirer and The Philadelphia Daily News filed for bankruptcy late Sunday night after talks aimed at restructuring their heavy debt load broke down, executives said.

The papers will continue to operate and will remain under local control, said Brian Tierney, publisher of The Inquirer and the leader of a group of local investors who bought the papers in 2006, one of several newspaper deals from that era that have gone bad as the industry’s revenues have plunged.

Philadelphia Newspapers, a subsidiary of Philadelphia Media Holdings, is the entity filed for bankruptcy protection. In a brief interview late on Sunday night, Mr. Tierney said the company would negotiate with its creditors to rework its debt burden.

“Philadelphia Newspapers’ goal is to bring its debt in line with the reality of current economic conditions,” he said.

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[The Helper]

Target 4Q profit falls 41 percent amid downturn

MINNEAPOLIS (AP) -- Target Corp. said Tuesday that its fourth-quarter profit fell 41 percent as consumer spending suffered amid high unemployment and other economic woes.

The discount retailer earned $609 million, or 81 cents per share, in the quarter ended Jan. 31. That compares to $1.03 billion, or $1.23 per share, a year earlier.

Revenue in the quarter fell 1.6 percent to $19.02 billion. Sales at stores open at least a year fell 5.9 percent, the company said. Sales at new stores partially offset that.

Analysts polled by Thomson Reuters, who typically exclude one-time items, had expected Target to earn 83 cents per share on revenue of $19.5 billion.

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[The Helper]

Macy's reports 59 percent drop in 4Q profit

NEW YORK (AP) -- Macy's Inc. reported an almost 59 percent drop in fourth-quarter earnings Tuesday as its results were dragged down by weak sales and one-time costs associated with the consolidations of regional divisions and store closings.

The Cincinnati-based company said Tuesday that in the three months ended Jan. 31, it earned $310 million, or 73 cents per share. That compares with $750 million, or $1.73 per share, a year earlier.

Sales fell 7.7 percent to $7.93 billion from $8.59 billion a year ago. Same-store sales, or sales at stores opened at least a year, fell 7 percent. Same-store sales are considered a key indicator of a retailer's health.

The fourth-quarter results included $17 million in expenses associated with the consolidation measures announced last year, $30 million in costs tied to further such moves announced this month and $11 million related to 11 store closings announced last month.

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[The Helper]

Office Depot posts 4Q $1.54 billion loss

BOCA RATON, Fla. (AP) -- Office Depot says it lost $1.54 billion in the fourth quarter, as hefty charges and sharply lower sales in North America and abroad weighed on the office supply chain.

Office Depot on Tuesday reported a loss of $5.64 per share, after a profit of $18.77 billion, or 7 cents per share, a year ago.

Results were hurt by impairment charges and expenses for the company's strategic business review. The company is closing stores and cutting jobs to try and lower costs.

Adjusted for charges, Office Depot posted a loss of 73 cents.

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