Financial thoughts

The Federal Reserve said Tuesday it has auctioned $50 billion in short-term loans to cash-strapped banks at an interest rate of 2.8%.

The Fed has been auctioning loans to banks since December with the hope that it will help them get over credit problems and keep lending to customers. Last week, the Fed announced it would increase the size of the two auctions in March to $50 billion a piece, up from $30 billion initially planned. 

Source

The U.K. housing slump deepened in February, becoming the worst since the eve of the nation's last recession in 1990, a survey of real-estate professionals showed.

The number of residential property agents and surveyors saying prices fell exceeded those reporting gains by 64.1 percentage points in February, the most since June 1990, the Royal Institution of Chartered Surveyors said today. In London, the balance was the worst since May 2003. A separate report showed annual retail sales growth slowed in February.

Bovis Homes Group Plc, the U.K.'s most profitable homebuilder, yesterday urged the Bank of England to take “decisive action'' and cut its benchmark interest rate further from the current 5.25 percent. Policy makers are assessing the need to shore up economic growth after the end of a decade-long housing boom against the threat of inflation.

“The credit squeeze has really begun to eat away at demand and that's contributing to the sharp downturn,'' Simon Rubinsohn, chief economist at RICS, said in an interview on Bloomberg Television. “It's a pretty stark message to policy makers and those participating in the residential market.''

The survey's result was the lowest since the advent of the U.K.'s last recession. In the second half of 1990, the economy started a contraction which lasted five quarters.

Every region apart from Scotland showed price declines in February, with the worst result in Northern Ireland, where a net 95 percent of respondents reported a drop in home values. Across the U.K., stocks of unsold property rose more than 8.5 percent to the highest since October 1998, RICS said.

Bank Losses

Banks, with losses and writedowns totaling almost $190 billion, have curbed lending and avoided passing on the bank's two quarter-point interest-rate cuts since December in full. They lowered the cost of a mortgage in January by less than half of the previous month's benchmark rate reduction.

Bovis had a record slide in London trading yesterday after second-half profit declined 17 percent and the company said prices won't improve this year free instant credit score estimator.

Retailers have also called for rate cuts. The bank “needs to take action sooner rather than later,'' Stephen Robertson, director general of the British Retail Consortium, which represents 80 percent of U.K. stores, said after policy makers kept the benchmark rate unchanged on March 6.

Revenue at outlets open at least a year climbed in February by 1.5 percent from the same month in 2007, compared with 2.6 percent in January and 3.3 percent in February 2007, the BRC said today. The group's survey of stores was conducted from Feb. 3 to March 1.

Kingfisher Plc, Europe's largest home-improvement retailer, said Feb. 21 that fourth-quarter sales dropped after the U.K.'s housing market slump discouraged spending.

Slowing Growth

The economy expanded 0.5 percent in the quarter through February, down from 0.6 percent in the previous three months through November, the National Institute of Economic and Social Research said today.

The London-based group, whose clients include the central bank and the Treasury, said the slower pace of growth “is to be welcomed'' and is not a sharp enough deterioration to warrant a faster pace of interest-rate cuts.

“The bank is known to be concerned about inflationary risks and it obviously also understands that the growth rate is not a major concern,'' the group said in a statement.

RICS's Rubinsohn also said that the bank should pause before cutting rates further as it assesses the threat of inflation to the economy.

“If one looks at the wider economy the case for an immediate rate cut isn't compelling,'' Rubinsohn said. “I'm not sure it's wise for the bank to respond immediately to these figures.''

Source

Billionaire investor Carl Icahn may have lost his bid to break up Time Warner Inc., but he will tell "60 Minutes," how he walked away with $300 million, CBS Corp. said Thursday.

In an interview scheduled to air on Sunday, Icahn will tell how he made the money after wrangling with shareholders in 2006 over the media company’s future, said CBS.

Icahn, along with a group of investors who owned about 3 percent of Time Warner (TWX, Fortune 500), fought to break the company up into four separate units. He was opposed and beaten by other shareholders who supported chief executive Richard Parsons’ effort to keep the company whole.

"Maybe I made a mistake, but I made $300 million on it. So, is that too bad?" Icahn told Stahl, according to CBS absolutely free credit report.

CBS (CBS, Fortune 500) also said Icahn will address critics and tell how his aggressive investment strategies pressure companies to make changes that in turn boost their stock prices.

Late last year Icahn helped boost the share price of struggling software company BEA Systems (BEAS) by pressuring it to hold out for more when rival Oracle (ORCL, Fortune 500) offered to buy.

According to CBS, Icahn said he made another $300 million on that deal.

Time Warner, which is the parent company of CNNMoney.com, had no comment. 

Source

Top executives of BP and General Motors Corp., two of the world’s largest corporations, outlined on Tuesday their visions for the future of renewable energy.

They came to the same bottom line: Hydrogen will likely fuel the cars of the future, although it could take 50 years to get there. Until then, each company will pursue different strategies for developing new energy sources.

Their comments kicked off the Washington International Renewable Energy Conference, a global meeting of energy officials organized by the U.S. State Department, and an adjoining trade show with over 300 vendors and energy industry luminaries.

Speakers ranged from BP head Tony Hayward to U.S. Energy Secretary Samuel Bodman to venture capitalist Vinod Khosla.

The meeting, scheduled to last several days, frames one of the greatest challenges facing the world economy today: The need to cut greenhouse gas emissions in half by 2050 to avoid the worst effects of global warming, while fueling a worldwide economic boom expected to use 50 percent more power by 2030.

"Relying on the internal combustion alone is probably not going to get us there," said Robert Babik, director of emissions, environment, energy and safety policy at General Motors (GM, Fortune 500). "The key is to let electrification of the vehicle play a critical role."

To that end, Babik said GM is rolling out its all-electric Chevy Volt hopefully by late 2009 and is pushing its "E-Flex" design concept.

The E-Flex is a vehicle with an electric motor that also has an on-board electricity generator to charge the batteries on long trips or other times when the vehicle can’t be plugged into an electric outlet. The generator could either be a conventional gasoline engine, an engine that runs on biofuel or, eventually, a bank of hydrogen fuel cells that Babik said could be the fuel of choice 50 years from now.

"We’re trying to make this a very consumer friendly vehicle," Babik said of the Volt. The all-electric vehicle will be able to travel 40 miles on electricity before the motor kicks in and is expected to cost about the same as a typical Chevy compact sedan.

The long view: Expensive alternative

One analyst said GM is right to be developing a variety of cars - from hybrids and diesels to electric and hydrogen.

"The game has barely started, and GM is in the forefront," said Jim Hossack, a consultant at the auto research firm AutoPacific.

But, citing hydrogen’s costs and lack of infrastructure, he said it will be a long time before it’s commercially viable. "You won’t see it in mine or your lifetime," he said.

Oil giant BP is also eying hydrogen for its long-term potential, although in the short run the company plans on sticking with its investments in wind and solar technology.

To spur those investments, which total about $1 billion a year, BP’s Hayward called on governments around the world to enact regulations limiting the amount of carbon dioxide that can be emitted each year, and called for subsidies to help fledging technologies get off the ground.

He said developed nations should go ahead and enact carbon controls regardless of what China or India does.

"A global trading system should be our ultimate goal, but we shouldn’t be deterred from starting on a regional basis now," he said.

The United States has resisted signing international treaties like the Kyoto partly because India, China and other developing countries refuse to join.

Hayward said BP is looking to develop advanced biofuels that don’t require food crops to make pay day loans. Corn-based ethanol, a gasoline substitute, has recently attracted lots of negative attention in the United States and elsewhere because it’s being blamed for driving up the price of food.

He recently said he might spin off the firm’s renewable energy division because he thinks its value is not being fairly reflected in the company’s share price. Still, BP is one of the larger investors in renewable energy.

"They will continue to invest more, it’s one of the fastest growing parts of the division," said Fadel Gheit, an energy analyst at Oppenheimer.

Cleaning up: $2 billion investment

In other events at the conference, Energy Secretary Bodman applauded the private sector’s investment in clean technology, which he said has gone from $500 million in 2005 to over $2 billion in 2007.

And Vinod Khosla, a well known venture capitalist and ethanol advocate, cautioned the audience against placing too much faith in statistics - like the ones showing the world will use 50% more power in 2030 or that renewables will still only make up a small percentage of the world’s energy usage by then.

"Forecasts are important, but most of these forecasts are wrong," he said.

Khosla cited a host of historical forecasts that proved incorrect, from oil prices trading at $20 a barrel to a study he said AT&T commissioned in 1980 showing 1 million cell phone users by 2000. Of course, the actual number of cell phones in 2000 had exceeded 100 million.

"It’s the power of ideas and entrepreneurship that will determine our future - not these forecasts," he said. 

Source

Despite the risk of inflation, further rate cuts may be appropriate and necessary amid a struggling economy, a Federal Reserve official said Monday.

In a speech delivered to the National Association for Business Economics in Washington, the president of the Philadelphia Federal Reserve, Charles I. Plosser, said inflationary worries can be put aside in certain unique situations.

"There will inevitably be special circumstances or shocks that fall outside the scope of our economic models that will warrant monetary policy action," Plosser said.

Plosser, a member of the key interest rate-setting Federal Open Market Committee, argued that the current economic downturn warrants further action to avoid falling into a recession.

"I believe we are in a situation where monetary policy cannot be made by focusing solely on inflation," Plosser said. "The current turmoil in financial markets has already had a significant impact on the economy and has the potential to continue to restrain economic growth going forward."

But Plosser said that once the markets turn around, significant action needs to be taken to stem the tide of inflation.

"Such deviations should be temporary and limited and promptly reversed when conditions return to normal," Plosser said.

The Federal Reserve, in its minutes released in mid-February, said that it would prepare for a "rapid reversal" of rate cuts if market conditions begin to cool, as inflation concerns mount.

The central bank has cut its key interest rate to 3% in an attempt to avoid a recession no fax payday advances. But recent inflation gauges have suggested prices have increased at an annual pace above 2%, slightly higher than the 1% to 2% range for that measure that the Fed is believed to prefer. 

Source

The Federal Reserve announced Friday that it will auction another $60 billion in March as it continues to combat the effects of a severe credit crisis. It repeated a pledge to keep holding the auctions "for as long as necessary."

The central bank said it will make $30 billion available to cash-strapped banks at each of two auctions, on March 10 and 24.

The Fed began the new auctions in December in hopes that the increased supply of cash would prompt banks to keep lending and prevent a severe credit squeeze from making the current economic slowdown even worse.

Federal Reserve Chairman Ben Bernanke told members of Congress this week that the Fed has been pleased with the results of the new procedure.

In its announcement Friday, the central bank said it intended to keep holding the auctions every two weeks "for as long as necessary to address elevated pressures" in the credit markets payday advance.

It said decisions regarding auctions in April would be announced by March 28.

The central bank has held six auctions so far, two each in December, January and February, providing $160 billion in extra reserves through short-term loans to cash-strapped banks.

The new process was adopted after the Fed had only limited success in encouraging banks to use its "discount window," where the Fed makes direct loans to commercial banks, after the credit crisis hit financial markets last August. 

Source

Patience in the midst of volatility is a challenge. Too often, mutual fund shareholders become nervous and make ill-advised changes because they can’t accept temporary declines.

Typically, investors who do best stick with the basic program through thick and thin.

The top diversified stock funds in average annual return in the last 10 years rewarded hardy souls who left money where it was, no matter what. Viewed in hindsight, a brilliant non-move.

"Hitting singles and doubles is fun and hitting home runs even better," said Tom Roseen, senior research analyst with Lipper Inc. in Denver. "But if you find a fund that hits triples all the time, you’ll always be in scoring position."
Longevity of management is key to funds that are successful and consistent long-term. The top six stock funds in the last 10-year period kept the same lead managers running the show throughout that period, Roseen said. Even the two newest managers among the 10 best-performing funds have been in their positions for five years.

Steady strategy instills understanding, trust and patience in shareholders. Of course, investment climate makes a difference, too.

"The list of top 10-year performers has mid- and small-cap funds on it, but no large caps," Roseen said. "We’ve come off a period when small- and mid-cap stocks have been very popular, while large cap has been a pariah since the 2000-2002 market decline."

The consistent characteristic of the top fund of the last 10 years is the fearless confidence of manager Kenneth Heebner, in charge since its inception in 1997. His CGM Focus Fund in Boston has a 10-year annualized return of 25 percent.

Heebner makes big bets, often owns less than 25 stock names and shifts among market caps. His short position, or a bet that a stock will decline, in subprime lender Countrywide Financial and his shares of Chinese oil firm CNOOC helped produce an 80 percent gain last year.

"I concentrate," Heebner said. "When I run this fund I’m looking at opportunities and then concentrating the fund where those opportunities are."

Focusing on a small number of stocks can be risky because of potential damage if several holdings tank. He also trades a lot, generating significant capital-gains tax liability.

Heebner insists that he is fully aware of what could go wrong, "and I act very quickly on problems." He is constantly researching, studying global trends and trying to learn from mistakes.

"I don’t even attempt to time individual stocks because I don’t know how someone could do it," he said. "I wouldn’t begin to know what the short-term fluctuations of my fund are going to be year to year, and I know all the stocks that are in it."

Faith in Heebner’s fund requires faith in his ingenuity.

Faith in micro-cap stocks is another matter. Those smaller companies with market capitalization between $30 million and $300 million are frenetic because they represent unproven firms faxless payday loans. Buckling in for the last 10 years produced a wild ride.

"While we do have phenomenal 10-year numbers for our micro-cap fund, I wonder how many investors really got those numbers," said O. Thomas Barry III, senior portfolio manager for Bjurman, Barry Micro-Cap Growth Fund in Los Angeles, with 10-year annualized return of 16 percent. "They tend to get in at the top, sell after a sell-off and dip back in after it runs up again."

In the last 100 years, annual return of the micro-cap group has been 18.8 percent, outpacing the 11.6 percent of large caps, noted Barry, referencing data from the Center for Research in Security Prices at the University of Chicago.

Barry employs five investment screens to find firms with the fastest earnings growth selling for low price-earnings ratios relative to that growth. Big winners included Andersons Inc. in grain elevators and ethanol, Healthcare Services Group Inc. in housekeeping services and Metal Management Inc. in scrap-metal recycling.

"Micro-caps do well over time, but have periods of three to five years when they underperform," said Barry, whose fund declined by 1 percent last year. "When investors hear bad news about the economy, they gravitate toward the least-risky securities — the large caps — which are less volatile but don’t match long-term returns of micro-caps."

The top diversified stock mutual funds in 10-year annualized total return, according to Lipper:

•CGM Focus Fund, no "load" or initial sales charge; $2,500 minimum initial investment; annualized return 25 percent

•Quaker Strategic Growth Fund "A," 5.5 percent load; $2,000 minimum; 18 percent

•Bjurman, Barry Micro-Cap Growth Fund, no load; $1,000 minimum; 16 percent

•Meridian Value Fund, no load; $1,000 minimum; 15 percent

•Security Mid Cap Value Series "A," 5.75 percent load; $1,000 minimum; 15 percent

•Royce Heritage Service Fund, no load; $2,000 minimum; 14 percent

•MTB Small Cap Growth Fund "A," 5.5 percent load; $500 minimum; 14 percent

•Needham Growth Fund, no-load; $5,000 minimum; 14 percent

•Security Mid Cap Value Series "B," 5 percent deferred load; $100 minimum; 14 percent

•Royce Opportunity Fund; Investment, no-load; $2,000 minimum; 14 percent.

Funds closed to new investors or requiring high minimum initial investments were excluded. Always monitor the recent annual returns of the funds as well.

andrewinv@aol.com

2008, TRIBUNE MEDIA SERVICES, INC.

Source

MINNEAPOLIS (AP) — Northwest Airlines pilots are continuing to look for a solution to the stalled talks with Delta pilots, and they’re not under a deadline to make a deal, a person with knowledge of the situation said Thursday.

Pilots for Northwest Airlines Corp. and Delta Air Lines Inc. have not met for a week, but the person, who requested anonymity because of the sensitivity of the talks, said there’s no indication they won’t keep trying.

The person said the pieces of a merger are in place, held up only by the lack of a seniority agreement between the pilots at each carrier.

Unlike prior airline mergers, Northwest and Delta have tried to get their pilots to work out their own integration in advance of any airline combination. Seniority is a major issue for pilots because it determines who gets desirable - and higher-paying - planes, routes, and schedules.

Northwest’s pilots’ union has said seniority issues must be addressed if they’re going to agree to a merger.

Shares in Delta and Northwest continued their slide on Thursday advance america cash advance. Northwest (NWA, Fortune 500) shares dropped $1.10, or 7.3%, to close at $14. Delta (DAL, Fortune 500) shares dropped 91 cents, or 6%, to close at $14.09.

Northwest shares had traded as high as $20.12 on Feb. 1, and are off 30% since then. Delta shares have lost 24% of their value since trading as high as $18.64 on Feb. 1. Rising oil prices have hurt most airline shares. And Delta and Northwest shares have been hurt in recent days as the stall in pilot talks became apparent.

Source