Finance news

Russia aims to extend its control over energy deliveries to the West and it is important that European countries push forward on efforts to diversify routes for oil and gas supplies, a senior U.S. official said on Monday.

As Vice President Dick Cheney visited Italy to seek support for Georgia after its brief war with Russia, the official, said: “The fact is Russia has worked hard to try to corner the market, so to speak, and is working to foreclose options to transit for those energy products across Russia.

“They want everything to come out through Russia and a lot of us think it’s more important that there be diverse means of gaining access to those resources,” he said, speaking on condition of anonymity.

“No one country ought to be able to totally dominate those deliveries.”

Italy was the last stop on a weeklong trip for Cheney that began with Azerbaijan, Georgia and Ukraine to reinforce U.S. support for the former Soviet states after the conflict between Tbilisi and Moscow.

The crisis erupted in early August when Georgia tried to retake the breakaway region of South Ossetia and Russia responded with overwhelming force. Cheney, in a weekend speech in Cernobbio, Italy, called Moscow’s actions “brutality against a neighbor”.

In those remarks, he also accused Russia, the world’s second largest oil producer, of using “energy as a tool of force and manipulation” in Central Asia, the Caucasus and elsewhere by threatening to interrupt the flow of oil or natural gas.

NABUCCO PROJECT 

Read more

Filed under: legal by Finance Boss
Comments Off

Gasoline prices eased for the fifth straight day, even as Tropical Storm Hanna bears down on the Carolinas, according to a nationwide survey of gas station credit card swipes.

The average price of regular unleaded gasoline fell 0.4 cents to $3.674 a gallon from $3.678 a day earlier, motorist group AAA said Thursday.

Gas prices were mixed in the three states that lie in Hanna’s direct path. Prices were slightly lower in Georgia, slightly higher in North Carolina and unchanged in South Carolina. Nationwide, Alaska and Hawaii remained the two states with gas prices still tracking above $4 a gallon. The cheapest gas was found in Delaware, where prices averaged $3.451 a gallon.

Declining oil prices have helped keep gas prices in check. Also, Americans cut back on driving during the typically heavy traffic summer months. In fact, demand for gas dropped off by 3% to 4% during the June-to-August period and driving decreased during the same time frame. It remains to be seen whether the trend will hold.

Crude prices have trended lower amid heightened concern about weakening demand. Crude futures for October deliver fell below $108 a barrel on Thursday as investors appeared to shrug off a surprise drop in the nation’s crude supplies. Oil prices were down $1.44 a barrel to $106.45 early Friday.

Meanwhile, Gas has fallen about 44 cents from the record high average of $4.114 that AAA reported on July 17, but they are still 87 cents above last year’s Sept. 4 prices. 

Sourse

Filed under: marketing by Finance Boss
Comments Off

It’s been almost a year since the Federal Reserve issued the first of what turned out to be seven rate-cuts to deal with the credit crisis.

So why does the economy still seem like it’s in a big funk, with banks continuing to suffer?

One of the biggest proponents of the Fed’s aggressive rate-cutting spree has an explanation.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech Wednesday that the low federal funds rate of 2% is providing "much less stimulus…than it otherwise would" because of the credit crunch.

The federal funds rate is an overnight bank lending rate that banks charge each other to borrow money. But Rosengren argues that just because banks are charging each other a relatively low rate, this does "not necessarily translate into lower costs to the vast majority of borrowers."

In other words, even though the Fed has slashed the federal funds rate from 5.25% to 2%, many beaten-up banks have nevertheless substantially tightened credit standards for businesses and consumers.

Rosengren said that the rate cuts have "merely offset the tightening in credit conditions created by the financial turmoil that began last summer."

Rosengren is not currently a member of the Fed’s policy-making Federal Open Market Committee. But he was a voting member last year for three of the cuts, and also voted in favor of the surprise three-quarters-of-a-point rate cut at an unscheduled meeting this past January.

In fact, Rosengren could be considered one of the more dovish (i.e. in favor of lower rates) of the Fed presidents. He actually dissented with the Fed’s decision to cut rates by just a quarter-point last December because he wanted a bigger reduction.

So it’s interesting that he’s now acknowledging that the cuts haven’t worked. Still, Rosengren defended the Fed’s strategy, saying that "credit conditions would likely be much worse" if the Fed had not acted.

But Rosengren’s comments highlight a big problem facing the Fed right now.

Sure, the recent slide in the price of oil and other commodities - and the rally in the dollar - may give the Fed reason to relax a bit about inflation fears. The global economic slowdown that now appears to be taking place means that the Fed is highly unlikely to raise interest rates any time soon.

Yet, the Fed doesn’t appear to have much wiggle-room to lower rates further if the economy weakens further or if more banks get into trouble.

Few expect that the Fed would want to inch closer to the historic lows of 1% reached in 2003 - especially since many blame the low rate for the housing bubble.

In addition, with inflation as high as it is, further reductions to interest rates would hurt savers even more. Rate cuts tend to lead to lower yields on money-market accounts, precisely the type of investments that people might want to flock to in an economic environment as uncertain as this.

That’s all the more reason to expect the Fed to keep rates on hold for the next few months, and instead continue to rely on more creative ways to end the credit crunch, such as opening up the so-called "discount window" of funding to investment banks and creating the Term Auction Facility short-term lending program to provide even more liquidity to banks.

So, simply put, investors and consumers probably have to sit tight and wait a while longer before lower interest rates will have an effect. Rosengren said that "as financial headwinds subside…we will see the rates available to businesses and consumers decline, helping to stimulate demand."

But it’s anybody’s guess as to when those headwinds will finally subside to a large enough degree to allow the Fed’s rate cuts to work as they should. 

Sourse

Filed under: business by Finance Boss
Comments Off

More than 100 Pittsburgh-area civic leaders will convene Sept. 8 in a coordinated effort to step up efforts to combat home foreclosures.

The Pennsylvania Housing Finance Agency and Federal Home Loan Bank of Pittsburgh are co-sponsoring an hour-long summit where detailed action kits will be presented to participants to help them understand which families may be at risk of foreclosure, how they might react to the situation and what can be done to de-stigmatize the process of seeking help in a timely fashion.

Speakers include Allegheny County Executive Dan Onorato, Pittsburgh Mayor Luke Ravenstahl and PHFA Executive Director Brian Hudson.

Sourse

Filed under: finance by Finance Boss
Comments Off

Representatives of Native Hawaiian programs urged the Hawaii Tourism Authority Thursday not to divert HTA money that supports them to use in marketing the state.

At the same time, visitor industry executives warned that Hawaii must do more to bring tourists to the islands as hotel occupancy and visitor spending continue to fall this year.

The HTA could decide as early as later Thursday how it will reallocate funds in its estimated 76 million budget. The original budget for fiscal 2009 was $88 million but has since been revised downward based on declining transient accommodations tax revenue.

The HTA currently spends $54 million on marketing, with another $4 million budgeted for airline industry access and $2 million allocated for enhancing Hawaii tourism's online presence.

The remainder goes to support a variety of programs and administrative overhead. It includes $2.5 million for Hawaiian culture, $5 million for natural resources preservation, $1.8 million for safety and security, $6 million for tourism product development, and $1.1 million for work-force development.

Hawaii Gov. Linda Lingle suggested last week that the HTA spend an additional $10 million on marketing but did not specify where the money should come from.

But Native Hawaiian groups and others who receive grant money from the HTA made it clear Thursday that, when it comes to promoting tourism, their programs are as valuable as marketing money.

“It is the Hawaiian culture that is the attraction for visitors,” said Wayne Panoke, who works with groups that sponsor festivals honoring Prince Kuhio and King Kamehameha. “Product development is a form of marketing.”

Panoke’s comments were similar to those of several dozen people who provided either oral or written testimony at the HTA’s board room at the Hawaii Convention Center.

“We know that you are in a tough spot, and that everybody is hurting,” said Peter Apo, board member of the Native Hawaiian Hospitality Association and chairman of Pacific Islanders in Communications. “But we must be careful how we reallocate.”

Apo said the HTA’s strategic plan of supporting Hawaiians is a critical “trust document” that supports Hawaiian culture and product and work-force development.

Others testified that HTA funds help visitors during emergencies and support cultural enrichment and education programs throughout the state.

But David Carey, president and CEO of hotel chain Outrigger Enterprises, told the HTA “the world and the rules have changed” since the HTA formulated its fiscal 2009 budget.

“We are facing a 15 percent decline in our business, which means a 15 percent drop in revenue, which means a 15 percent cut in jobs,” Carey said. “It won’t just be in hotels —- it’s restaurants, attractions, all the way around.”

Carey, who agreed that cultural programs are valued, said the HTA must “strike a balance” in its funding approach.

“We need much more marketing money,” said Rick Egged, president of the Waikiki Improvement Association. “In tough times we look to the HTA for leadership.”

What is not likely to happen in the short term, however, is an increase in the transient accommodations tax that is levied on visitors and used to finance the HTA.

The T.A.T. percentage is determined by the state Legislature, which does not return to session until January.

Panoke said a higher T.A.T. should be an option, but Egged suggested that the Legislature return HTA's portion of the T.A.T. to its 2002 level.

Approximately 3.7 percent of total annual T.A.T., or between $6 and $8 million, that formerly went to the HTA now goes to the state’s general fund.

Sourse

Filed under: business by Finance Boss
Comments Off

One of the most compelling dramas in New York’s theater district this summer hinges on Lehman Brothers’ courtship of a Korean bank.

Just over a week after early enthusiasm over the reported talks dissipated, South Korea’s largest newspaper reported Wednesday that a group led by Korea Development Bank is offering to buy a 25% stake in Lehman for up to $5.3 billion (more on that head-scratching price later).

The report came a day after the bank’s head, Min Euoo Sung, confirmed that the state-owned institution was holding talks about investing in the troubled investment bank. Meanwhile, Tokyo Mitsubishi Bank may offer to buy a substantial investment in Lehman, according to the U.K.’s The Times on Wednesday.

The deal chatter offers a bit of good news for Lehman (LEH, Fortune 500), because management has been scouring the world for a partner that can help bolster the firm’s equity base, which is straining under the weight of almost $65 billion of commercial and residential real estate securities and loans.

The market values for most of Lehman’s mortgage-related assets, especially the commercial real estate paper, have been dropping steadily. In turn, this has fueled speculation of yet another quarter of writedowns for the firm, with estimates putting a likely charge anywhere from $2.8 billion to $4 billion. Over the past year, Lehman has taken some $6 billion in writedowns.

At varying points in recent weeks, Lehman’s management has sought to sell a stake in the profitable Neuberger Berman money management unit. Alternatively, management has sought a direct equity investment and, according to the Wall Street Journal, is contemplating a spinoff to shareholders of its real estate portfolio, though it’s not clear how such a deal would be financed.

Lehman shareholders, who have seen their investment drop 75% this year, were granted a temporary reprieve on news of the talks with the Korean bank. Shares were flat at $16.75 Wednesday, after a modest gain Tuesday. At one point early last week the stock dropped below $14 as rumors about impending writedowns gained strength.

According to news reports Wednesday, KDB has approached Lehman with an offer to buy, as part of a consortium of South Korean banks, a 25% stake. The additional bank partners were not identified. KDB and Lehman declined comment on the reports, according to the Associated Press.

One question about the reports centers on the quoted price. Were the Korea Development group to pay $5.3 billion for a quarter of Lehman, it would be paying an 88% premium based on Lehman’s $11.3 market capitalization. Perhaps this is why on Tuesday, KDB chief Sung - himself former head of Lehman’s South Korean operations - told Bloomberg that negotiations were held up over "differences over price."

Even so, the prospect of a deal at any price must have Lehman pinching itself, given the likelihood of near-term pain in its future combined with management’s proclivity for risky deployment of its balance sheet (examples: the $13.5 billion 2007 buyout of real estate investment trust Archstone-Smith, a large owner of apartments, and a disastrous foray into Southern California real estate development with Sun-Cal.).

Price aside, there appear to be hurdles in Korea that must be surmounted for an investment of this scope to take place. According to a report in the New York Times, Jun Kwang-woo, head of the country’s Financial Services Commission, expressed doubts last month that public-sector funds should assume a lead role in such a venture. Another report did note, however, that the FSC would keep a neutral stance on the matter until they saw the terms of any transaction.

A Lehman spokesman declined comment. But the firm’s perceived eagerness to do a deal before mid-September, when it’s due to unveil its latest round of dour earnings news, could mean that a deal with KDB will give Fuld another chance to resuscitate Lehman - if at the cost of another hit to current shareholders. 

Sourse

Filed under: economics by Finance Boss
Comments Off

American International Industries Inc. has agreed to purchase a subsidiary of Shumate Industries Inc. for about $6.7 million.

The Kemah-based holding company will buy Shumate Machine Works Corp. which will become a wholly owned subsidiary called Shumate Energy Technologies Inc.

The deal is scheduled to close Oct. 1,

Shumate currenly operates out of a 30,000-square-foot manufacturing facility in Conroe, and will continue to manufacture select components for Hemiwedge Valve Corp. in a strategic manufacturing alliance.

Its parent, Shumate Industries (OCTBB: SHMT) is an energy field services company.

After the sale is complete, HVC will be the remaining subsidiary of Shumate Industries (OCTBB: SHMT), according to American International.

Sourse

Filed under: technology by Finance Boss
Comments Off

Transit ridership in San Francisco has increased 6.5 percent in the past year, boosted in part by rising gas prices.

The San Francisco Municipal Transportation Agency said Tuesday that ridership on MUNI rose by 13.5 million to about 220 million boardings in fiscal year 2008, which ended June 30.

MUNI attributed its increased ridership to a number of factors, including:

• Allowing riders to buy fare cards online;
• A 1.6 percent increase in jobs in San Francisco;
• The sharp rise in the cost of gasoline; and
• Increases in the toll to cross the San Francisco-Oakland Bay Bridge.

MUNI said it continues to crack down on people trying to get on busses without paying fares. Over the past two years, MUNI said it has more than doubled the number of fare inspectors and has hired 20 fare inspectors this fiscal year bringing the total to 51. Fare evasion citations issued during fiscal year 2008 jumped 44.3 percent when compared with the same time period last year.

Even as it attracts more riders, MUNI is struggling to keep up with demand. The transit agency is undergoing a Transit Efficiency Project, meant to be a thorough examination of how to increase the system’s efficiency. Once the study is completed later this year MUNI might eliminate stops, create bus-only lanes and change other aspects to speed up service.

Sourse

Filed under: economics by Finance Boss
Comments Off

South African central bank Governor Tito Mboweni said he will remain in his position next year after his term ends if he is asked to.

“I will complete my current term, '' Mboweni told reporters in Pretoria today. “If asked to serve, I will.''

The president selects the governor and his deputies for five- year terms.

Mboweni, 49, was appointed by President Thabo Mbeki in August 1999 to lead the Reserve Bank after serving as a labor minister in former President Nelson Mandela's Cabinet. Mbeki, who lost the leadership of the ruling African National Congress to Jacob Zuma in December, steps down as president after elections next year.

The governor oversaw the introduction of inflation targeting in 2000, a policy that has been criticized by the Congress of South African Trade Unions, an ally of the ANC that lobbied for Zuma's appointment as leader.

The Reserve Bank has raised its benchmark interest rate by 5 percentage points to 12 percent since June 2006 as inflation exceeded the 3 percent to 6 percent target range. The inflation rate surged to more than double the target in July, reaching 13 percent, the statistics office said on Aug. 27.

In an interview conducted by the Pretoria News three weeks before and published on Aug. 29, Mboweni said it “might not be a good idea'' to head the central bank too long.

Sourse

Filed under: technology by Finance Boss
Comments Off

The European Central Bank will probably keep interest rates at a seven-year high this week, and may even threaten to raise them, at the risk of prolonging the economic slump.

All but one of 47 economists surveyed by Bloomberg News predict the bank will leave the benchmark rate at 4.25 percent on Sept. 4 and only five expect a cut this year, even after the region's economy contracted in the second quarter. The ECB's refusal to lower borrowing costs after inflation hit a 16-year high risks pushing the economy into a recession, economists said.

Investors “assumed the ECB would soften its inflation- fighting stance,'' said Ulrich Katz, a Munich-based portfolio manager at Pacific Investment Management Co. which has over $800 billion under management. “Well, it clearly hasn't.''

Policy makers Axel Weber and Lucas Papademos said last week the ECB remains focused on inflation risks and may need to lift rates again if they intensify. Executive Board members Lorenzo Bini Smaghi and Juergen Stark also stepped up their inflation- fighting rhetoric, just days before they meet to decide on rates.

“The comments were a wake-up call to the markets, which had gotten ahead of themselves in light of dire economic data,'' said Katz.

Some investors started betting on a rate cut by early next year after ECB President Jean-Claude Trichet said on Aug. 7 that economic growth would be “particularly weak'' through the third quarter. Last week, a rate reduction was fully priced in by May, Eonia swap contracts showed. The yield jumped back up to 4.13 percent after Weber and Papademos spoke.

Too Early

“The discussion about declining rates in Europe is premature,'' Weber said in an interview published Aug. 27. “I don't expect inflation to come down necessarily just with weaker growth. Inflation is still the No. 1 worry for central bankers in the euro region.''

The Frankfurt-based bank raised rates in July to prevent a wage-price spiral after inflation accelerated to 4 percent, twice its 2 percent limit.

Since then, data showed Europe's economy contracted 0.2 percent in the second quarter and economic confidence has plunged. At the same time, a 20 percent drop in oil prices has slowed inflation to 3.8 percent.

“The ECB is defending its July rate increase,'' said Laurent Bilke, an economist at Lehman Brothers International in London who used to work as a forecaster at the ECB. “To admit two months after a rate increase that inflation pressures are easing would mean they were wrong to hike. The bank is confronted with a recession and will start to cut in January.''

New Forecasts

Trichet will on Sept. 4 unveil new economic forecasts that are likely to revise down the growth assessment and ratchet up the outlook for inflation, said Elga Bartsch, an economist at Morgan Stanley in London.

“If you only have one needle in the compass, which in the ECB's case is inflation, then you'll have to toughen your language,'' Bartsch said. The ECB is more likely to raise rates than cut them, she said.

In June, ECB staff projected growth would slow to about 1.8 percent this year and 1.5 percent in 2009 from 2.7 percent in 2007. Inflation was forecast to average 3.4 percent this year and 2.4 percent in 2009.

“Inflation is still high, too high,'' Bini Smaghi told Bloomberg Television on Aug. 28. “We have a 2 percent target and we must bring it back to 2 percent — below 2 percent,'' he said, adding its only tool to do so is interest rates.

Inflation Risks

Should inflation risks materialize, “we'll have to re- examine our monetary-policy stance,'' Weber said. Papademos warned that the emergence of a wage-price spiral would “require a stronger degree of monetary tightening.''

Wage inflation is accelerating across Europe as workers seek compensation for higher food and energy costs. IG Metall, Germany's biggest union whose wage accords cover 3.2 million workers, will present this year's claim on Sept. 8. It has said it will demand a bigger pay increase than the 6.5 percent it asked for last year.

The ECB is “throwing down the gauntlet to IG Metall,'' said Natacha Valla, Goldman Sachs' chief French economist who was previously a forecaster at the ECB. The fact that “a discreet member like Papademos was so explicit about wage growth possibly requiring further tightening shows how central wage negotiations are to the inflation debate.''

Even so, the ECB won't follow through on its threat, said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. Deutsche Bank expects a rate reduction in the first quarter of 2009.

“The ECB won't cut rates before inflation is under control,'' Bielmeier said. “But with the economy tanking, it won't need to hike again.''

Sourse

Filed under: economics by Finance Boss
Comments Off