Consumer confidence soars
Sentiment reading increased to 54.1 in August, well above economists’ expectations.
NEW YORK (CNNMoney.com) — A key measure of consumer confidence jumped much more than predicted in August, as the job market outlook and business expectations improved, said a report released Tuesday.
The Conference Board, a New York-based business research group, said Tuesday that its Consumer Confidence Index rose to 54.1 in August from an upwardly-revised 47.4 in July.
Economists were expecting the index to increase to 48, according to a Briefing.com consensus survey. The measure is closely watched because consumer spending makes up two-thirds of the nation’s economic activity.
The index posted declines in June and July, but the reading “appears to be back on the mend,” said Lynn Franco, a director at The Conference Board, in a prepared statement.
“Consumers were more upbeat in their short-term outlook for both the economy and the job market in August,” Franco added. But the reading for income expectations rose only slightly.
Despite August’s increase, the index remains at historically low levels. An overall reading above 90 indicates the economy is solid, and 100 or above signals strong growth.
The report is based on a survey mailed to a representative sample of 5,000 U.S. households. The questionnaire asks whether respondents think current business conditions are good, bad or normal, about employment conditions, as well as if they expect employment or income levels to improve or deteriorate over the next six months.
Job market outlook. The percentage of respondents expecting more jobs in the next six months rose to 18.4% from 15.5%.
Similarly, those saying jobs are “hard to get” slipped to 45.1% from 48.5% in August, while responses that jobs are “plentiful” ticked up to 4.2% from 3.7%.
Earlier this month the Labor Department reported that 247,000 jobs were lost in July and the unemployment rate fell to 9.4% from 9.5% in June — the first decline in more than a year.
According to government figures, 237,000 fewer people were unemployed last month. That decline could be due to discouraged job seekers who have stopped looking, people who have now retired, or those have gone back to school. But the rate does include people who have exhausted their unemployment benefits or do not collect them.
Income expectations. Consumers were only slightly more positive in their income expectations, Franco noted. Those expecting an increase in their incomes jumped to 10.6% from 10.1%.
“As long as earnings continue to weigh heavily on consumers’ minds, spending is likely to remain constrained,” Franco said.
Business conditions. Consumers anticipating business conditions to improve over the next six months increased to 22.4% from 18.4% in July, the report said.
Conversely, respondents expecting conditions to worsen in the months ahead slipped to 15.8% from 19%. 
http://money.cnn.com/2009/08/25/news/economy/consumer_confidence_august/index.htm
(NECN: Scot Yount, Newton, Mass.) – The man who exposed the largest Ponzi scheme in history is making a rare appearance tonight.
In the financial world he is a kind of geeky hero. Yet Harry Markopolos shuns the worldwide fame he has garnered by blowing the whistle on Bernie Madoff and the largest Ponzi scheme in the world.
Markopolos spoke at the Center For Asset Management’s annual conference at Boston College.
Markopolos and his team began their inquiry into Madoff in 1999. Markopolos was asked to try to reverse engineer Madoff’s investments, so that their Boston based firm could duplicate his results.
Markopolos-loves numbers, and it was enormously simple he says to use formulas to figure out that Madoff’s investment scheme was fraudulent. But what Markopolos found difficult–was convincing the Securities and Exchange Commission to investigate.
For nine years he kept up the quixotic fight-but the SEC wouldn’t take up the case. Now with Madoff having pleaded guilty-and thousands of investors bilked out of billions, the shy man who makes Whitman, Massachusetts his home says he still can’t sleep nights, even though he proved he wasn’t jousting at windmills.
He had done his best-even fearing for his life in the process, but it was not until the worst recession the county has seen in decades took hold–that Madoff was exposed.
Today Markopolos still shuns the cameras and fame. He testified before congress-but told legislators
The credit card company everybody hates
Facing soaring losses, small business credit card lender Advanta is shutting down accounts and tells investors it will try to wait out the downturn.
NEW YORK (Fortune) — The credit card business has grown so wretched that one major issuer is clipping its customers’ cards and giving its investors a haircut.
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| Delinquencies soared over the past year as the economy slowed and the company raised rates. |
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| Advanta shares recently fetched less than a dollar each in Nasdaq trading. |
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| Rep. Carolyn Maloney is among the legislators proposing credit card reform. |
Advanta (ADVNA), the nation’s No. 14 card issuer and a top lender to small businesses, said last week it will shut down its card business to stem losses. The move is a momentous one, because credit cards bring in nearly all Advanta’s revenue.
The company will close customer accounts next month, leaving a million borrowers looking for credit at a time when lenders are pulling back. And Advanta’s small-business customers aren’t the only ones in limbo: So are the investors whose bond purchases financed Advanta’s expansion over the past decade.
The firm says notes due to mature next month won’t be repaid in full on schedule. Advanta is offering to buy some bondholders out at a roughly 30% discount.
The news comes as Advanta, which last month reported a $76 million first-quarter loss, struggles to stanch the bleeding as more customers fall behind on payments.
“The stress rises as you get more delinquencies,” said Steven Mann, a professor at the University of South Carolina’s Moore School of Business. “Then you see these companies start to break the glass in case of fire.”
Delinquencies, measuring accounts a month or more past due, hit 11.5% in April, Advanta said — down slightly from its March level, but more than double the year-ago tally.
Advanta isn’t the only bank struggling to deal with late payments. Delinquencies have risen sharply at bigger issuers as well, ranging from Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Citigroup (C, Fortune 500) to Capital One and American Express.
But those companies are much bigger and have deeper pockets, after years of consolidation at the top of the U.S. banking industry.
BofA, JPMorgan and Citi — the three big diversified issuers – together accounted for more than half of 2008 U.S. credit card lending. Advanta sold most of its consumer credit card portfolio to Fleet Financial in 1997. Fleet was later acquired by BofA.
What’s more, none of the bigger issuers has posted numbers as dire as Advanta’s. Capital One (COF, Fortune 500) and American Express (AXP, Fortune 500) both passed the government’s stress tests without having to raise new capital.
Advanta may have made its problems worse by jacking up some customers’ interest rates, prompting them to cancel.
John Dykstra, a computer consultant in Kenmore, Wash., was spending between $2,000 and $3,000 a month on an Advanta rewards card before the company gave notice in August of a plan to boost his rate to 26% from 8%.
“It just ticked me off that they would triple my rate,” he said. “It seems like they made some bad business choices.”
The latest steps Advanta has proposed aren’t ones credit card issuers take lightly. Closing accounts makes outstanding balances harder to collect and eliminates income from the fees issuers charge merchants.
“Advanta’s stated intention to terminate cardholders’ charging privileges is likely to cause an acceleration of losses measured as a percentage of the pool, as the trust portfolio reduces in size due to charge-offs and payments,” analysts at Moody’s wrote Friday in downgrading 23 classes of Advanta credit card-backed securities.
The Moody analysts added they expect charge-offs to increase to a range of between 40% and 50%, from 17.3% in March.
In turn, investors in the securities issued by the credit card trust can expect smaller payouts, as the trust unwinds in a process known as early amortization. Advanta plans to offer to buy back $1.4 billion in outstanding bonds issued by the credit card trust, at between 65 and 75 cents on the dollar.
Advanta says that rate is in line with the recent trading in the Advanta Business Card Master Trust Class A senior notes, but investors aren’t likely to look fondly on the decision.
Indeed, Advanta spent months claiming it wouldn’t come to this. The company said in January that “early amortization for our business credit card master trust is avoidable and the company does not expect it to occur.”
But credit card defaults continued to surge, prompting Advanta to shift its focus to cutting its losses. Under the new approach, the company said last week, Advanta “will be free to do new business in the future to the extent it chooses, but it does not expect to do so in a significant way until implementation of the plan is well under way.”
Though all the credit card-issuing banks are dealing with rising delinquencies, Advanta is the first in recent years to allow outside investors to take losses on its credit card-backed securities.
This spring, both Bank of America and Citigroup bought bonds from their credit card securitization trusts to make sure bondholders wouldn’t suffer losses even if the downturn steepens. In those moves, BofA contributed $6 billion and Citi $3 billion to cushion against future losses that could threaten the trusts’ income streams.
The bigger problem for major issuers stems from their own poor behavior during the boom, said Myron Glucksman, a structured finance consultant.
He said the public has grown exasperated with huge rate increases, excessive fees and unclear disclosure.
That’s why the Federal Reserve last year proposed new limits on fees and other restrictions, in a move that is to take effect next year. And that’s why Congress is currently considering a credit card bill that would further restrict the banks’ leeway to change pricing — not to mention where you can carry a gun.
“There has to be some understanding that the industry has made a mistake,” said Glucksman, who was a managing director in Citi’s corporate and investment bank and owns Citi shares. “They’re facing a situation where not only are delinquencies rising, but everybody hates them.”
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| Find this article at:
http://money.cnn.com/2009/05/18/news/cards.advanta.fortune/index.htm |
Microsoft unveils Bing search engine
New search engine will replace Live Search on June 3, and will offer search by groups and categories rather than straight links.
NEW YORK (CNNMoney.com) — Microsoft Corp. on Thursday offered Internet users a first glimpse at Bing, its fresh attempt to gain ground in the online search market.
Bing is a search engine to replace its current Live Search product. Microsoft hopes it will provide users with a more streamlined, focused approach to search. Bing is set to launch on June 3.
Microsoft’s search market share has been slipping for more than two years, and it has struggled to make its online advertising unit profitable. The company maintains just an 8.2% share of the market for core searches, according to comScore, compared to 64.2% for Google (GOOG, Fortune 500) and 20.4% for Yahoo (YHOO, Fortune 500).
Microsoft CEO Steve Ballmer demonstrated Bing Thursday at the All Things Digital conference in Carlsbad, Calif. The new search engine will help users refine their queries and initially offer four different categories of search: purchases, travel, health and local businesses.
“Today, search engines do a decent job of helping people navigate the Web and find information, but they don’t do a very good job of enabling people to use the information they find,” said Ballmer in a statement. “Bing [will] enable people to find information quickly and use the information they’ve found to accomplish tasks and make smart decisions.”
In addition to offering search by category, Bing will offer more relevant search results, snapshots of search results’ Web pages, color-coded search results and search tools on the left side of the page, according to Microsoft.
Bing is also set up to organize search results in relevant groups rather than as a series of links. For instance, a search for “fly to New York,” may yield New York destinations like hotels, restaurants and museums as almost a guidebook page. The same search on Live.com generates straight individual links that users have to go through one by one.
Sandeep Aggarwal, senior Internet research analyst with Collins Stewart LLC, said Bing may have chance at becoming a “destination” Web site like Google, because the site’s technology has been better tested.
“Live wasn’t ready for prime time because the technology was too premature” and users weren’t repeat customers, he said. “Now Microsoft thinks they’re ready.”
Microsoft has looked for ways to improve its search advertising revenue for years, including offering rival Yahoo a more than $47 billion takeover bid early last year.
Though that deal fell through, the companies have been in and out of discussions about a potential search tie-up since last May.
On Wednesday, Yahoo Chief Executive Carol Bartz told attendees at the All Things Digital conference that talks between the two companies have continued “a little bit,” but no agreement has been reached.
Aggarwal said he expects a Microsoft-Yahoo search deal to be reached by the time the companies report their quarterly results in late July.
Shares of Microsoft (MSFT, Fortune 500) rose 2% in afternoon trading.
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Emergency small business loans coming in June
To kick off National Small Business Week, the government announced its timetable for a hotly awaited assistance program.
The news came during a speech by SBA head Karen Mills kicking off the SBA’s annual National Small Business Week program of publicity and networking activities. Known as America’s Recovery Capital (ARC), the emergency loans were authorized in February’s stimulus bill. The SBA has been working since then to pull together guidance for the new program, which will back short-term loans of up to $35,000 that business owners can use to temporarily cover their payments on existing debt. No repayment on the ARC loans will be due for 12 months, and owners will have up to five years to repay them.
The SBA plans to release guidance to banks by June 8 and will be ready to accept lender loan packages by June 15. Business owners will need to apply directly to banks for the loans, but the SBA will offer those banks a 100% guarantee on the ARC loans they make. If the business owner defaults, the SBA will pay off the loan.
SBA Administrator Mills called the ARC loans “risky” and very different than the loans her agency typically backs. Aimed at businesses with “immediate financial hardship” but a past track record of financial success, the loans are intended to aid companies that “are in a situation where they just need a little extra help to bridge the troubled waters,” she said.
Right now, many small businesses find themselves struggling against the economic tides. Mills acknowledged that her constituents are in trouble and looking to the government for help.
“I have started to think of the SBA not just as a backbone for small business, but as an entire bone structure,” she said before a crowded audience at the Mandarin Oriental hotel in Washington.
Sworn in last month as the SBA’s leader, Mills’ talk on Monday marked one of her first public speeches in her new role. In her remarks, she said that the top three priorities for her agency are more progress on fulfilling the small business provisions of the American Recovery Act, revitalizing the agency, and “making the SBA the strongest possible voice for small businesses in the U.S.”
The Recovery Act, better known as the stimulus bill, allocated $730 million for initiatives aimed at shoring up the country’s small business. So far, “the results are good,” Mills said. Since one stimulus provision took effect in mid-March, offering banks higher guarantees and waived fees on SBA-backed loans, the average weekly loan volume is up more than 25%, she said.
But that increase comes against a dismal backdrop for small business lending. In the quarter ended March 31, the number of loans made through agency’s popular 7(a) loan program dropped 57% compared to the prior year, and several major lenders have sharply reduced their activity.
Senator Mary Landrieu, D-La., the chair of the Senate’s small business committee, joined Mills in a small press conference after the public speech. Landrieu told reporters that it’s a top priority for the committee and the agency to determine why 50% of the nation’s banks aren’t partnering with the SBA. The SBA itself does not directly loan money, but works with partner banks to offer government-backed loans.
“I would love to see any small business owner just walk around the corner to their local bank and say they’re looking to expand their business,” she said. “That bank should ask the SBA – would you be a partner with me?”
Landrieu also said that finding a better health care solution for small businesses is a top priority for her.
As for the agency, which employs 2,000 full-time workers, Mills said she plans to invest in “training, planning and better communication across the SBA … and for repeated calls to break down silos, to give up sacred turf.”
Internal reform was also a priority for Mills’ predecessor, Steven Preston, who served as SBA chief from July 2006 to April 2008. After a 2005 government survey found that the SBA had the lowest employee morale of any major government agency, Preston devoted much of his energy to streamlining the agency and improving morale. To top of page
First Published: May 18, 2009: 4:33 PM ET
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New York vs. Boston: Now it’s personal
The Times’ ultimatum to the Globe is ‘taking a shot at the community’
By David Whitford, editor at large
Last Updated: April 9, 2009: 12:17 PM ET
BOSTON (Fortune) — One of the saddest ironies about the possible demise of the Boston Globe is that most of us in Boston got the news when we woke up last Saturday morning and read about it in the Globe. “Times Co. threatens to shut Globe, seeks $20m in cuts from unions,” was the front-page headline.
Wow, great story! I read the whole thing from start to finish before I even thought about putting the kettle on for coffee. I showed it to my wife as soon as she came downstairs. Everybody I ran into that day, wherever I went, that’s the first thing we talked about.
That’s what newspapers do. They put big topics on the civic agenda, they set up the common conversation. And in Boston, no newspaper does that like the Globe.
Not the Herald, which is great for sports and gossip but it’s a sideshow, frankly; and not the alt-weekly Phoenix (even if it did scoop the Globe Friday night when it broke the news on its Web site).
“The Globe helped build our city,” Boston Mayor Thomas Menino told Fortune. “The Globe holds people accountable on the issues, and that’s important. You might not like it sometimes. Sometimes we don’t agree. But they ask tough questions and back it up with data, real data. That’s what’s important. They’re out there doing their work. It would be a real travesty if they weren’t around.”
Newspapers are struggling everywhere, we get that in New England. Denver’s Rocky Mountain News died earlier this year. The Seattle Post-Intelligencer and the Christian Science Monitor switched to online only. In Detroit, the Free Press and the News quit making home deliveries all but three days a week.
All were victims of what Ben Taylor, former publisher of the Globe and a descendent of Charles H. Taylor, the Globe’s first publisher in 1873, describes as the “secular slide that’s taking place in the newspaper business.”
And we get that the Globe is not immune. Weekday circulation, which stood at 323,983 for the six months ending Sept. 30, 2008, has been sinking steadily over the last decade, along with ad revenues. Five hundred union jobs have disappeared at the Globe since 2000. Losses are mounting: $50 million last year, according to published reports, and likely much more in 2010.
“I’m in the same business of trying to make budgets work,” Mayor Menino points out, reasonably, “and it’s very difficult these days when you don’t have the revenues to match your need.”
He’s right, of course. But there’s another factor here that might make us yearn for a little more righteous indignation on the part of our mayor. I’m referring to the involvement of a certain newspaper from a certain city. The New York Times Company (NYT) bought the Globe for $1.1 billion in 1993, and later added a 17% stake in two other Boston heirlooms, the Red Sox and Fenway Park.
While the Times recently put its piece of the Red Sox up for sale, so far, at least, it’s not talking about shutting down the team. That would get us roiled up, for sure. But is the Globe any less precious?
Former General Electric (GE, Fortune 500) CEO Jack Welch approached the Times a few years ago and asked if the Globe was for sale. Welch says he never made an actual offer. Whatever price he had in mind for the Globe plus the Times’ stake in the Red Sox, Fenway Park and New England Sports Network, he insists it wasn’t anywhere near the $600 million figure that was tossed around back then.
“I think the New York Times is being unfairly battered for the price they turned down from us because they never had that price,” says Welch. “That was the fictitious newspaper price. We sent a letter to [Times CEO] Janet Robinson. They wrote back and said they weren’t interested.” They might be now, but Welch has no interest any more in the Globe. “Oh no,” he says. “God no. We’ve moved on.”
So we’re left with the possibility that someone from the one city we hate more than any other might shut down our biggest, most important newspaper.
Bruce Mohl, who worked as a Globe reporter for 30 years and now edits Commonwealth, a Boston-based quarterly, says, “It is easy to see this as a negotiating ploy. Because if I was the New York Times and I was really serious about shutting it down, I think I would come out and say something to the public about why I’m even raising this issue, as opposed to just sort of sitting on my hands and not saying anything.”
“It’s offensive that they don’t even explain themselves,” says Mohl. “It’s not just taking a stance on the Globe, it’s taking a shot at the community, I think, and you’ve got to explain yourself if you’re going to do something like that.” So far, the Times isn’t saying anything.
Taylor, too, has a hard time imagining it would come to that, but, “I wouldn’t want to test it,” he says. “The players involved shouldn’t try to test that question, in my view. I don’t mean just the union players. I mean management and everybody else who’s got a stake in making this thing work.”
The last guy I talked to was Jim O’Shea, former managing editor of the Chicago Tribune and former editor of the Los Angeles Times. O’Shea was forced out of his job at the L.A. Times last year when he wouldn’t agree to carry out newsroom cuts ordered by his publisher. O’Shea is at Harvard on a fellowship this year, so he reads the Globe now. The Times’ “threat is just that,” he says, “a threat. I think they’re trying to get more money out of the place and that’s what every newspaper is doing these days.”
On the other hand, says O’Shea, this is “a company that is in New York, has a national newspaper, and it’s basically fighting to preserve quality journalism. And their back is against the wall because of the debt they took on and the downturn in the economy. So I’m sure they are going around to all their properties, including the one in New York, and asking for cost savings.”
“But I’m sure that it’s also true,” he said, “if you ask [Times publisher] Arthur Sulzberger, ‘What’s your No. 1 interest?’ he’s going to tell you, ‘It’s the New York Times.’ Because that’s the franchise. That’s the one that he’s going to want to see survive. And if others have to go in the process, they will go.” To top of page
First Published: April 8, 2009: 11:14 AM ET
Find this article at:
http://money.cnn.com/2009/04/08/news/companies/whitford_globe.fortune/index.htm
AutoNation sees car sales rebound
Crediting fiscal discipline, nation’s No. 1 auto retailer manages a profit and says it expects improvement later this year.
Tesla Roadster
NEW YORK (CNNMoney.com) — AutoNation, the country’s largest car dealer chain, posted a profit for the first quarter of 2009 despite a 43% decline in new vehicle sales, and said it expects to see improved sales in the second half of the year.
Shares of AutoNation rose 7% in Thursday trading.
“We are very pleased with the performance of AutoNation (AN, Fortune 500) as we remained solidly profitable during the first quarter,” Autonation CEO Mike Jackson in a company statement.
Jackson — who said the performance came despite a seasonally adjusted annual sales rate of nearly 9 million, the lowest in nearly 30 years — was more upbeat about the rest of 2009.
“Although first-quarter industry sales were lower than expectations, we agree with industry projections that sales rates will improve in the second half of this year,” Jackson said in the statement.
Easing of credit will help sales, Jackson told CNNMoney.com, and he expects some a “cash for clunkers” stimulus bill to pass Congress.
“The downward spiral is broken,” Jackson said.
Jackson expects second quarter sales to be equal of better than the first quarter’s, he said. Sales will be running at about a 10.5 million to 11 million unit rate by the end of the year, he said, a slight improvement from today.
The company reported first-quarter net income of $49 million, or 27 cents a share, down from $56 million, or 31 cents a share, in the first quarter of 2008.
This year’s first-quarter figure includes $9 million, 4 cents a share, in special items. Adjusting for those items, income from continuing operations was $40 million, or 23 cents a share.
Analysts had expected a profit a 16 cents this quarter, according to Thomson Reuters.
Sales for the industry overall declined by about 46% compared to the same period last year, according to figures cited by AutoNation.
AutoNation’s income from domestic vehicle sales declined 47% in the first quarter compared to last year. Import vehicle sales declined 45% and premium luxury car sales declined 31%.
Auto dealers have been hit hard by declines in auto sales driven by a poor economy and tight credit. Sales of domestic vehicles, particularly those of General Motors and Chrysler, have been effected by concerns over the automakers business prospects.
Both automakers have recieved billions of dollars government financial assistance and are weeks away from a decision on whether that support will continue.
With one week to go before a April 30 deadline to form a partnership with Fiat, Jackson said he is not fully convinced Chrysler will survive. However, based on discussions he has had with the Treasury Department’s autos task force, he said he does not see a Chrysler failure as an economic disaster.
“If there is an unwind of Chrysler, it will be done in an orderly fashion,” he said.
The fact that the autos task force is also overseeing GM’s restructuring will help them to control any damage from a possible Chrysler collapse by coordinating it with the GM restructuring, Jackson said.
For instance, valuable Chrysler assets such as its Jeep brand and its minivans could be transferred to GM, he said.
Jackson said he is fully confident that, whether through a bankruptcy process or out-of-court restructuring, GM will continue as an ongoing business for the long term.
In 2008, about 900 individual auto dealerships went out of business, according to the National Automobile Dealers Association. That’s compared to a loss of 75 to 90 dealers in a typical year of economic growth.
AutoNation operates 239 dealerships under a variety of names across the country.
The auto retailer also announced that it had reduced its debt by about $500 million during the quarter for a total debt reduction $1.25 billion since the beginning of 2008.
Jackson credited a $200 million cost reduction program for the profit performance. He also cited lower interest rates and improved profit margins on used vehicles.
American consumers will face a permanently altered auto sales environment once the current industry crisis is over, Jackson said, adding that with manufacturing capacity reduced to better match actual demand, the age of heavy rebates and deep discounts will be over.
“I don’t want to sound like an auto sales guy, but you’re never going to get a better price than you are right now,” Jackson said.
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| Find this article at:
http://money.cnn.com/2009/04/23/autos/autonation_q1 |
