Financial thoughts

Anheuser-Busch Cos Inc’s (BUD.N: Quote, Profile, Research, Stock Buzz) board is in the hot seat after spurning a $46.3 billion takeover bid, facing questions over whether it is fulfilling its obligations to shareholders and not just the wishes of the brewer’s founding family.

The company’s suitor, InBev NV (INTB.BR: Quote, Profile, Research, Stock Buzz), has laid the groundwork to try to unseat the board — though Anheuser told investors on Friday that it would challenge the Belgian-Brazilian conglomerate’s claims that it could remove all 13 Anheuser directors without cause.

For sure, the board — which rejected InBev’s $65-a-share, all-cash offer — is facing pressure on multiple fronts.

The board, including members of the family that’s run the brewer for generations, has been grappling with the future of an iconic U.S. brand that is a large employer in its home base of St. Louis, Missouri.

Politicians have spoken out, with Missouri Gov online payday advance. Matt Blunt saying he was deeply troubled by a possible InBev deal though he had no power to stop it.

At the same time, some investors have favored the InBev offer as good for stockholders. While Anheuser said on Thursday that the InBev proposal was inadequate and it was moving forward with an internal growth plan, it did leave open the possibility of entertaining a bid at a higher price.

“The board probably feels strongly about keeping the company independent,” said Shirley Westcott, managing director of policy at shareholder adviser Proxy Governance Inc. “An investor is really looking for a good return on his investment, whether it’s a good offer from InBev or whether the company’s plan would provide comparable value.”

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Hawaiian Airlines will begin charging customers $17 for a second checked bag on interisland flights.

The new fee, announced late Friday afternoon, goes into effect for tickets purchased on or after July 8 for travel on or after July 15.

The move by Hawaiian (owned by Hawaiian Holdings; Amex: HA) follows another interisland carrier, go!, which on Wednesday announced a $25 fee for a second checked bag.

Go! is operated by Phoenix-based Mesa Air Group (Nasdaq: MESA).

Hawaiian, like go!, said the baggage charge was due to the impact of fuel prices on operating expenses quick payday loan.

Some Hawaiian customers will be exempt from the fee, including first-class travelers; those with child car seats, strollers and carriers; and those needing wheelchairs, walkers, canes or crutches.

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General Mills says commodity hedging costs drove fiscal fourth-quarter profit down 17%, but strong sales of its yogurt, cookie mixes and Cheerios boosted revenue above Wall Street expectations.

The Minneapolis-based food producer’s net income fell to $185.2 million, or 53 cents per share, from $224.1 million, or 62 cents, a year ago. Excluding losses on commodity positions, General Mills Inc. would have earned 73 cents per share.

Sales increased 13% to $3.47 billion from $3.06 billion paydayloans.com.

Analysts surveyed by Thomson Financial expected adjusted profit of 73 cents per share on revenue of $3.37 billion.

General Mills (GIS, Fortune 500) said profits should be between $3.78 and $3.83 per share for the year, representing growth of 7% to 9%. 

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Two prominent Democratic senators on Tuesday demanded that the Bush administration stop the Iraqi government from signing no-bid contracts with several U.S. and European energy companies to ramp-up the battered nation’s oil fields.

But a bigger question remains: Just how much extra oil could a ramped-up Iraqi energy industry produce?

Production could be increased to between 3 million and 3.5 million barrels a day if fields are modernized, which would take at least a year, say some experts. Iraq’s current oil production, according to the published number from the U.S. Energy Information Administration, is 2.25 million barrels a day.

Experts differ on how additional oil production by Iraq could stem rising gas prices. By one bullish estimate, it could lower prices at the pump by up to 50 cents a gallon. Another estimates that it would have virtually no impact at all. Analysts note that modernization of the Iraqi oil industry would take years, and that the oil market and the situation in Iraq are volatile.

"There’s so much stuff going on in the oil industry every day, that it’s kind of hard to guess what would happen in a vacuum," said Erik Kreil, an international oil analyst for the EIA who believes that the fields are already operating close to their maximum output.

Sens. Charles Schumer, D-N.Y., and John Kerry, D-Mass., in asking the Bush administration to stop the Iraqi government from contracting with oil companies, expressed concern about the distribution of royalties from the deal.

They sent a letter to Secretary of State Condoleezza Rice expressing concerns about a contract that the Iraqi government is preparing to sign with Exxon Mobil Corp., (XOM, Fortune 500) Royal Dutch Shell (RDSA), Total SA (TOT), Chevron Corp (CVX, Fortune 500)., BP (BP) and other companies. The contract would let those companies develop Iraq’s largest oil fields.

The senators said they are worried that unfair distribution of oil revenue could inflame the violence between the warring religious and political groups of Iraq.

"At this time, the [Iraqi government] currently does not have in place a revenue sharing law that could fairly allocate any revenue gained from Iraq’s lucrative hydrocarbon fields between the three major ethnic groups in Iraq," according to the letter. "We fear that any such agreements signed by Iraq’s Hydrocarbon Ministry without an equitable revenue sharing agreement in place would simply add more fuel to Iraq’s civil war."

Iraq has among the largest oil reserves in the world, with an estimated 115 billion barrels - tying Iran for No cash advance. 2 status behind Saudi Arabia’s 264 billion barrels, according to EIA estimates.

Iraq’s current daily output of 2.25 million barrels is close to what it produced before the U.S.-led war that toppled Saddam Hussein in 2003. But that’s still below Iraq’s production levels prior to the first Persian Gulf War in 1991. In comparison, Russia produces 9.4 million barrels of crude oil a day, while the Saudis produce 9.2 million and the U.S. produces 5.1 million.

In the current system, royalties on existing fields are paid to the central Iraqi government, while royalties on undiscovered and undeveloped fields go to the regions where they’re located. Sunnis tend to have a greater presence in regions without oil and to support royalties going to the central government. Kurds, who dwell predominantly in the oil-rich north, and Shiites, who are mostly in the oil-rich south, tend to favor distribution based on the regions.

Experts believe that Iraq has undiscovered fields that could yield up to 6 million barrels a day, but it would take up to 10 years to develop the infrastructure to support the increased production.

In their letter, the senators said that Iraq’s oil revenue during 2007 and 2008 will total $100 billion, "most of which will not be spent on reconstruction due to bureaucratic incompetence."

In theory, the immediate release of an additional 1.25 million barrels a day from modernized fields could lower gasoline prices by 40 to 50 cents per gallon of gasoline in the United States, according to Doug MacIntyre, senior oil analyst with the EIA. MacIntyre based this estimate on 100,000 barrels of oil equaling 4 to 5 cents per gallon of gas in today’s market. But he said these numbers might not apply in the future, when or if the fields are modernized.

Peter Beutel, oil analyst and president of energy market data firm Cameron Hanover, said the additional oil could lower gas prices by 20 cents a gallon, which is lower than MacIntyre’s estimate but still bullish. But Beutel said any increase would be at least a year away, assuming that it happens at all. Also, he said the oil industry and the situation in Iraq are notoriously unpredictable.

"There is no supply available anywhere that is going to be coming on line in the next three months that would turn this market around," said Beutel. 

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Former Federal Reserve Chairman Alan Greenspan said the credit seizure that has roiled the securities industry since August may persist into next year even as the Fed has reduced the instability of financial markets.

“Things do at this particular stage look a little better. But I would caution that we have seen false starts before,'' Greenspan said via satellite today to a conference sponsored by 702 Talk Radio in Johannesburg. Still, “this crisis I fear is going to be with us for a while,'' either for a “good number of months or into next year,'' he said.

Greenspan's successor, Chairman Ben S. Bernanke, today convenes a two-day meeting of the Federal Open Market Committee, which economists expect will leave the benchmark interest rate unchanged at 2 percent after seven cuts since September. Fed officials are trying to revive economic growth as inflationary pressure rises because of surging commodity prices.

“Data suggests we are on the brink'' of a recession in the U.S., Greenspan said. The next year will be “a very sluggish period,'' with a “highly volatile oil market.''

Greenspan, who served as U.S. central bank chief from 1987 to 2006, said earlier this month that financial markets have shown a “pronounced turnaround'' since March. That's when the Fed rescued Bear Stearns Cos. from bankruptcy and opened lending to investment banks.

In general, governments and central banks can't just “guarantee liabilities without consequences,'' Greenspan said $1500 payday loan. “You have to make it a very special case. Otherwise you create distortions.''

`Severe Recession'

The actions in March have reduced the threat of a “severe recession,'' he said. Yet an economic rebound in the U.S. “isn't in the immediate outlook,'' he said.

The Fed this year has cut the benchmark interest rate at the fastest pace in two decades to sustain economic growth and avert a financial-market meltdown following the collapse of the subprime mortgage market.

The U.S. is dealing with “the most complex'' financial crisis in more than five decades, Greenspan said.

U.S. home prices may decline a total of 25 percent from their peak, he said. “It's conceivable we can go more than that if the crisis is prolonged,'' he said.

A private survey released today showed that home prices in 20 U.S. metropolitan areas fell in April by 15.3 percent from a year earlier, the most on record for the S&P/Case-Shiller home- price index. Separately, consumer confidence dropped more than forecast to the lowest in more than 16 years, according to the Conference Board.

Some market interest rates reflect a “large insolvency fear'' among investors, suggesting that there are still “considerable structural problems that exist in the financial system'' and may extend “for a while,'' Greenspan said.

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South Korea's economic growth probably will slow to less than 5 percent this year as record fuel prices restrain consumer and business spending, Vice Finance Minister Bae Kook Hwan said.

Bae's comments mark the first time a senior official has signaled that expansion in Asia's fourth-largest economy will be lower than the 5 percent pace in 2007. Finance Minister Kang Man Soo said in April that it will be “difficult'' to meet the government's 2008 economic-growth target of 6 percent.

“We're looking at economic growth of a latter 4 percent level,'' Bae said in an interview with MBN television in Seoul today. “The burden from rising oil is likely to continue through the second half, and the economy will face difficulties.''

Kang said last week that policy makers will focus on stabilizing prices, an indication the government is attempting to revive its popularity with voters who are unhappy that their spending power is being eroded by spiraling fuel and food costs. South Korea buys almost all the crude oil it uses from overseas, making it the world's fifth-largest importer of the fuel.

The government is due to release updated forecasts and policy actions for the second half in early July.

Oil prices have doubled over the past year, boosting living costs for households and hurting corporate profits. About 13,500 truck drivers stopped moving freight nationwide earlier this month to protest surging fuel costs.

South Korea's inflation accelerated to 4.9 percent in May, the fastest rate in seven years. Economic growth slowed to the weakest pace in more than a year last quarter.

The government last week approved extra budget spending of 4.9 trillion won ($4.7 billion) to help consumers and businesses cope with higher fuel costs.

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Billionaire investor Kirk Kerkorian’s Tracinda Corp. reports it has increased its ownership stake in Ford Motor Co. to 6.49% from 5.5%.

Tracinda says in a filling to the Securities and Exchange Commission that it now owns 140.8 million shares in the automaker.

The filing comes two days after Chief Executive Alan Mulally and Executive Chairman Bill Ford met with officials from Tracinda including Kerkorian to discuss the Dearborn-based automaker’s transformation plan instant cash advance.

A Ford (F, Fortune 500) spokesman didn’t have an immediate comment early Thursday on the filing.

Kerkorian has tried to leave his mark on Detroit’s auto companies during the past decade. 

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A week-long strike by South Korean truck drivers has cost Asia's fourth-largest economy about $5.92 billion in lost trade, dealing a blow to the main growth driver.

The strike disrupted $2.89 billion worth of exports and $3.03 billion worth of imports between June 12 and June 17, the Ministry of Knowledge Economy said today. That's about one percent of the value of South Korea's total trade last month.

The threat of slowing economic growth is another blow to South Korean President Lee Myung Bak, whose support plunged by more than half since he was elected in December. Anger at his decision to resume importing U.S. beef that triggered near- 80,000-strong street protests in Seoul, and strikes threaten his ability to push through the economic-growth agenda for which he campaigned.

“It's bad news for the economy and the government,'' said Chun Chong Woo, an economist at SC First Bank Korea Ltd. in Seoul. “This political headache could hurt June's economic performance.''

As many as 13,496 truck drivers, including members of the Korea Cargo Workers Union, stopped moving freight nationwide from June 11 to protest surging fuel costs, demanding higher transport fees and bigger government fuel subsidies.

Blockade

About 30 companies including LG Chem Ltd., Hanwha Chemical Corp quick payday loans. and Honam Petrochemical Corp. are having trouble operating plants in South Korea's largest petrochemical complex in Yeosu, where truckers are blocking the entrance of the complex, according to Cho Hyun Deock, assistant director at the Ministry of Knowledge Economy.

Overseas shipments, which made up about half of the economy's 0.8 percent expansion in the first quarter, jumped 26.9 percent in May from a year ago, a report by the Korea Customs Service showed this week.

“It's more bad news for the export-driven economy facing record oil and quickening inflation,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “This could hurt exports and factory output this month.''

Hyundai Motor Co., South Korea's biggest automaker, said this week that shipments of finished vehicles in the local market were only half the normal levels, though exports had been unaffected. Truckers have also blocked gates at plants operated by Posco, the nation's biggest steelmaker.

Lee may make a public address this week regarding the negative public sentiment over his administration. He may also announce a Cabinet reshuffle.

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Federal Reserve Chairman Ben Bernanke says the central bank must remain a "dynamic institution" to deal with economic and financial challenges.

The Fed, created in 1913 after a series of bank panics, is now fighting battles on multiple fronts. It is trying to shore up the fragile economy and financial markets, while at the same time trying to prevent inflation from flaring up.

Bernanke’s brief remarks, which dwelled on the history of the central bank, were delivered Thursday during a ceremony dedicating a new building at the Federal Reserve Bank of Kansas City. He didn’t talk about the current state of the economy or the Fed’s next move on interest rates.

The Fed chief and other central bank officials have strongly signaled that the Fed’s rate-cutting campaign, started last September to bolster the economy, is over given mounting concerns that soaring prices for energy and other commodities and the weakened value of the U.S. dollar is aggravating inflation.

Many economists predict the Fed policymakers will hold rates steady at 2%, a four year low, when they meet next on June 24-25.

However, Wall Street investors and others now believe the Fed could start to boost rates later this year if inflation flashes worrisome signs of taking off.

At a dinner on Wednesday night in Kansas City, Bernanke said there was some talk about the Fed’s "history, our current challenges and the future." He didn’t elaborate.

Bernanke, however, went on to say that the Fed has faced many challenges since its founding and has evolved in response freecreditreport. "Ours must be a dynamic institution if it is to successfully fulfill its mission in a changing financial and economic landscape," he said.

The economy has been badly bruised by housing, credit and financial crisis. Economic growth has skidded to a crawl and employers have cut jobs each month so far this year. The unemployment rate jumped to 5.5% in May, from 5% in April - the biggest one-month rise in two decades.

To deal with the crises, the Fed has ratcheted down interest rates aggressively and has taken a number of unconventional steps to help ease credit problems.

In the broadest use of the central bank’s lending power since the 1930s, the Fed in March scrambled to avert a market meltdown by giving investment houses a place to go for emergency overnight loans. The temporary program is similar to privileges long afforded to commercial banks.

In another controversial move, the Fed had helped to financially back JP Morgan’s (JPM, Fortune 500) takeover of Bear Stearns (BSC, Fortune 500), which in mid-March had faced near collapse after a run on the investment bank. 

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China's retail sales rose 21.6 percent in May, close to the fastest pace in nine years, as the strongest earthquake in half a century, a stock-market slump and the scrapping of a week-long holiday failed to cool demand.

Sales soared to 870.4 billion yuan ($126 billion) after gaining 22 percent in April, the statistics bureau said today. Last month's 7.7 percent inflation rate swelled the numbers.

Automobile sales jumped 32 percent from a year earlier as incomes surged. Retail sales grew seven times faster than the pace in the U.S. and followed a stronger-than-estimated gain in exports, underscoring the strength of the world's fourth-biggest economy as global growth slows.

“Domestic consumer demand is surely becoming an increasingly important growth driver,'' said Denise Yam, an economist at Morgan Stanley in Hong Kong. The pace was “despite the shortened Labor Day holiday, earthquake mourning and the stock-market correction,'' she said.

The yuan traded at 6.9041 versus the U.S. dollar as of 3:57 p.m. in Shanghai after closing at 6.9075 yesterday.

The CSI 300 Index of stocks fell 3.4 percent today, falling below 3000 for the first time since April 2007 and extending its decline this year to 44 percent.

The median estimate of 22 economists surveyed by Bloomberg News was for a 21.7 percent increase in retail sales.

Tents, Noodles

Sales of construction materials rose 9.3 percent in May after a decline in April, a rebound possibly connected with quake relief work, Yam said. Survivors have been supplied with 1.1 million quilts, 4.8 million beds and 14 million pieces of clothing, the government said yesterday. Citizens have also donated tents and noodles.

Growth moderated in sales of cosmetics, jewelry and household electronics. Japan's Sony Corp. and Sharp Corp. said this month that national mourning was likely to cool demand for some products. The gain in automobile sales was after a 25.7 increase in the previous month.

April's retail-sales increase was the fastest since Bloomberg data began in 1999. In May, the government replaced a week-long break, introduced in 2000 to boost tourism and consumption, with a three-day holiday.

“Robust income growth is supporting strong domestic demand,'' said David Cohen, director of Asian economic forecasting at Action Economics in Singapore. “Like consumers around the globe, the Chinese are seeing their household budgets pinched by inflation — that doesn't seem to be holding them back.''

Audi's Expansion

Urban disposable incomes for the first quarter climbed 11.5 percent from a year earlier to 4,386 yuan ($635).

Audi AG, the luxury-car brand of Volkswagen AG, said this month that it will build a production line at a VW factory in China as it seeks to double sales in the nation within seven years.

Tingyi (Cayman Islands) Holding Corp., China's biggest maker of packaged food and producer of the “Master Kong'' brand of instant noodles, reported a 44 percent jump in first-quarter sales from a year earlier.

The retail sales data came two days after statistics showing exports surged 28 percent in May after a 22 percent gain in April. In a June 3 statement, the central bank played down the threat that overseas shipments will collapse, causing an economic hard landing. A “drastic'' export slowdown won't come soon, it said.

The Organization for Economic Cooperation and Development cut on June 4 its forecast for global growth this year to 1.8 percent. It said China's economy will slow to a 10 percent expansion after growing 11.9 percent in 2007.

China's retail-sales growth compares with the 3 percent increase in the U.S. in May from a year earlier, reported by the Commerce Department yesterday.

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